It’s OK. The Attorneys Still Get More Than $1,000 Per Hour

One of the drivers of the increased number of wage and hour cases is the prospect of handsome attorney fee awards. But while percentage fee awards may indeed result in large payoffs, courts are increasingly looking at whether such large amounts are reasonable under the circumstances. We’ve seen this trend in courts questioning attorney fee awards in addition to other settlement terms, particularly in states such as California, Florida and New York. But a recent case suggests a thoughtful look at the concept of percentage awards to reduce a windfall in a large wage and hour class matter.

In Ibarra v. Wells Fargo Bank, N.A., Case No. CV 17-4344 PA (ASx) (C.D. Cal. Sept. 28, 2018), the plaintiffs brought a class action challenging the employer’s compensation scheme as it applied to rest and meal periods required under California law. The claims did not require extensive discovery, and the district court resolved the matter by way of cross motions for summary judgment. The plaintiffs prevailed on both liability and damages, for a total of nearly $100 million, an impressive result. Buoyed by this victory, the plaintiffs’ attorneys submitted a petition for $24,321,204 in fees (25 percent of the judgment), some $64,214.50 in expenses and a service award of $100,000 to the named plaintiff.

The court noted the general guidepost in the Ninth Circuit in common fund cases of 25 percent of the total, but also noted that it was just that – a guidepost. It thus examined the time spent by the attorneys to obtain that award. It found that the attorneys had spent approximately 1,800 hours on the case, with rates ranging up to $725 per hour. Incidentally, at that rate, the requested award would have resulted in a blended rate to the attorneys of $13,474 per hour. It also found, however, that the time spent was excessive given the streamlined case handling and that a reasonable fee based on a lodestar calculation (reasonable hours times a reasonable rate) was $983,627. The court doubled the amount in light of the size of the result and the fact that the matter was taken on a contingency fee basis, for a total of $1,967,254. That’s still almost $1,500 per hour (or $1,100 per hour, if you include the time the court refused to allow).

The court also looked at the outsized $100,000 proposed service award for the named plaintiff. While it recognized that the lead plaintiff took some risk, it found that this request was excessive too, and reduced it to $10,000, in accord with the higher awards given in some cases.

It’s easy to view these cases cynically, and requests such as these are at odds with the general notion that the wage and hour laws are designed to protect employees, not to enrich their attorneys. The Ibarra case is an example of a court taking the purposes of the wage and hour laws seriously and awarding appropriate awards for even successful results.

The bottom line:

Percentage fee awards in wage and hour class or collective action litigation must still bear some resemblance to a reasonable fee.