It’s hard not to express cynicism when discussing attorney fee awards in overtime class and collective actions. Courts have adopted wildly different tests and benchmarks, and different jurisdictions apply very different levels of scrutiny. The availability of fees has fueled the epic growth in Fair Labor Standards Act (FLSA) class and collective litigation. Many of these cases at present carry relatively little risk for the plaintiffs, given the frequency with which courts will conditionally certify classes and the resulting pressure on the defendant to settle.
We’ve noted in the past the questions various courts have raised when they actually begin to examine the fees claimed by some plaintiff firms (See our blogs from 10/7/2014, 10/19/2018 & 2/7/2018), but a recent case from a district court in Arkansas details issues with a significant fee award request in what it described as a “run-of-the-mill FLSA collective action.” Vines v. Welspun Pipes, Inc., Case No. 4:18-CV-00509-BRW (E.D. Ark. June 9, 2020). The Vines case involved the settlement of a collective action with approximately 100 opt-ins. The parties initially settled the case for approximately $300,000, with $89,000 – or just short of 30 percent – going for attorney fees. When the court was presented with a motion to approve the settlement, it chose to review the attorney fee award and requested information such as a better breakdown of the two classes involved, the attorneys’ billing records and sample copies of the contingency fee agreements signed by the representative parties. That request sparked extensive motion practice, roughly nine months of litigation and further negotiation over the attorney fee issues, which culminated in the court awarding only $1 (yes, one dollar) in fees, plus roughly $2,800 in costs.
So what happened? It was a combination of things.
First, the court rejected the pragmatic argument that allowing the attorneys to agree on the fee award was “the reality of the negotiation process.” To the contrary, the court found that “it has become apparent that, in practice, lawyers’ fees are the driving force in many FLSA cases.”
Second, the court reviewed the purpose of FLSA fee awards, and fee awards in general, and noted that the plaintiffs’ FLSA lawyers were taking on less risk than for other types of cases, such as civil rights litigation, as the cases can generally be evaluated quickly and tend to settle fairly quickly. The desirability of taking on such cases was reflected in the hundreds of cases filed in that district alone, most of which essentially involve form pleadings and most of the discovery work being undertaken by the defendant.
Third, the court was plainly irritated by the focus on fees as a goal of the litigation, noting that the case had dragged on at length on the attorney fee issues, the case was grossly overstaffed (including 15 timekeepers) and there were various inadequacies in billing records. The court specifically called out as excessive a provision in the contingency agreements that the attorneys would receive both 40 percent of the overtime recovery but also any court-directed fee award.
While much of the court’s criticism was directed at the specific plaintiff’s counsel, the points it raised apply with some frequency in wage and hour litigation generally. While contingency-fee awards have become common, a more careful review of the traditional lode-star analysis and consideration of risks and downsides might yield a much different result. Successful FLSA plaintiffs, by statute, are entitled to a reasonable fee award, and many plaintiffs’ attorneys earn that fee, but the lack of uniformity and large sums involved all make these waters difficult to navigate.
The bottom line: Fee awards under the FLSA can get messy if the court delves into the merits.