HOW TO (AND HOW NOT TO) CUT OFF ACCRUAL OF PLAINTIFFS’ ATTORNEYS’ FEES

It often happens that by the time the parties to a FLSA lawsuit discuss settlement, the claim for attorneys’ fees exceeds the backpay and liquidated damages that the plaintiff could recover if the claim prevailed. Knowing this, employers have tried to cut off accrual of plaintiffs’ attorneys’ fees by paying, or offering to pay, the amount the plaintiff could recover early in the case. Two recent decisions illustrate successful and unsuccessful ways of going about this.

In a case from Florida, the plaintiff filed a collective action complaint in federal court. The employer denied liability, but tendered full payment to the individual plaintiff of the amount it estimated as his backpay, liquidated damages and interest, totaling $638. The plaintiff opposed the tender, claiming that it underestimated the value of his claim, which he said was worth $3,000. Again denying liability, the employer tendered $3,000, split between backpay and liquidated damages. The plaintiff was forced to agree that his individual claim had become moot, but requested that the court award him attorney’s fees and costs, as a prevailing party. 

The district court denied that request. The Eleventh Circuit affirmed that denial, holding that under the statutory language, attorney’s fees and costs are allowed “in addition to any judgment awarded to the plaintiff or plaintiffs.” “The FLSA plainly requires that the plaintiff receive a judgment in his favor to be entitled to attorney’s fees and costs,” the court wrote. It went on, however, to hedge its ruling with a confusing footnote that seeks to limit the holding to situations in which the employee concedes that his claim should be dismissed before trial as moot. What the footnote means may be fleshed out in future rulings. For now, the lesson from this case is that it may be possible to avoid paying attorney’s fees and costs in their entirety, if the employer tenders the most the plaintiff could recover early in the case. Dionne v. Floormasters Enterprise, 2012 WL 104906 (11th Cir. Jan. 13, 2012). Of course, a tender is not a settlement agreement, and there is no possibility, under this scenario, of obtaining a confidentiality agreement from the employee.

A case from North Carolina illustrates how to fail to cut off accrual of attorney’s fees. In that case, defense counsel sent plaintiffs’ counsel offers of full relief to all plaintiffs including costs and attorneys fees to date. (The defense was not trying to avoid paying attorneys fees and costs in their entirety, but to cut off their future accrual). The offer did not specify amounts, but said that amounts would be based on affidavits to be provided by each plaintiff. The letter further stated that the offer was to enter into a settlement agreement including a confidentiality clause. The purpose of the offer was not to avoid paying attorney’s fees and costs in their entirety, but to cut off their continuing accrual.

Based on this offer, the district court dismissed the lawsuit as moot, on the grounds that the defense had offered everything that plaintiffs could possibly recover. On appeal, the Fourth Circuit reversed on several grounds. First, the defense did not offer to permit entry of a judgment, but only a contractual settlement agreement, which is more difficult to enforce than a judgment. Second, the offer was deficient because it was conditional. Instead of offering a sum certain, it offered to permit calculation of backpay and liquidated damages based on affidavits. Third, the offer was deficient because it contained a confidentiality clause. A judgment, the court wrote, would not be confidential. Simmons v. United Mortgage and Loan Investment, 634 F.3d 754 (4th Cir. Jan. 21, 2011). One lesson from this case is that if an employer wants to put an end to litigation by making an offer of full relief, it must bite the bullet and tender what the plaintiffs would receive if they won, with no strings attached.

Neither of these decisions addresses the related concern whether an offer of full relief to the named plaintiff can make a case moot, and require dismissal before the court certifies a collective action. For a discussion of how offers of judgment affect motions for collective action notice, see the September 25, 2011 posting in this blog.

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