Champion v. ADT Sec. Services, Inc.

The case was before the court on Plaintiffs’ motions for attorneys fees and costs, following the settlement of their FLSA claims.  The Defendant argued that Plaintiffs were not entitled to recover attorneys fees and/or costs, because the settlement agreement contained language stating that Plaintiffs were not the “prevailing party,” despite the fact that they had successfully resolved their case by settlement.

Rejecting Defendant’s argument, the court reasoned:

“The Court concludes that Plaintiffs are prevailing parties, for the purposes of the fee-shifting statute, and are thus entitled to attorney’s fees. Under the FLSA, the court may award reasonable attorney’s fees to the prevailing party. Saizan, 448 F.3d at 799. “A typical formulation is that plaintiffs may be considered prevailing parties’ for attorney’s fees purposes if they succeed on any significant issue in litigation which achieves some of the benefit the parties sought in bringing suit.” Hensley v. Eckerhart, 461 U.S. 424, 433, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983) (internal quotes omitted); see also Abner v. Kansas City S. Ry. Co., 541 F.3d 372, 379 (5th Cir.2008). The Court holds that the plaintiffs are prevailing parties for these purposes because the plaintiffs succeeded in procuring a favorable settlement. ADT initially made payments for the owed overtime to seven of the named plaintiffs that totalled $11,324.48, and the settlement obtained for those seven plaintiffs totalled $48,500.00. (See P’s Reply Br., Dkt. No. 57 at 13-14.) Thus, the plaintiffs have certainly “achiev[ed] some of the benefit the parties sought in bringing suit.” Hensley, 461 U.S. at 433. In the present case, however, Defendant ADT argues Plaintiffs are not prevailing parties for two reasons: (1) this case was resolved by settlement; and (2) the settlement agreement signed by the parties states that Plaintiffs shall not be deemed a prevailing party. For the following reasons, the Court disagrees with Defendant on both points and concludes that Plaintiffs are prevailing parties.

First, settlement does not preclude Plaintiffs from being considered prevailing parties. The Supreme Court has held that settlement agreements enforced through a consent decree may serve as the basis for an award of attorney’s fees. Maher v. Gagne, 448 U.S. 122, 129-30, 100 S.Ct. 2570, 65 L.Ed.2d 653 (1980). “Although a consent decree does not always include an admission of liability by the defendant … it nonetheless is a court-ordered change in the legal relationship between the plaintiff and the defendant.”   Buckhannon Bd. & Care Home, Inc. v. +West Virg. Dep’t of Health & Human Resources, 532 U.S. 598, 604, 121 S.Ct. 1835, 149 L.Ed.2d 855 (2001) (internal quotes omitted). In the present case, the Court entered a consent decree in the Court’s Order approving the settlement as a fair and reasonable compromise of the dispute under the FLSA. (Dkt. No. 50.) Therefore, the settlement does not limit Plaintiffs’ ability to be prevailing parties.

Second, regarding the settlement agreement signed by both parties and submitted to this Court, the agreement states in one part:

No Admission of Liability. The Parties agree and acknowledge this Agreement is the result of a compromise and shall not be construed as an admission of liability, responsibility, or wrongdoing as alleged in the Lawsuit. It is expressly understood by the Parties that [plaintiffs] shall not be deemed a “prevailing party” for any purpose, including any fee shifting statute, rule, or agreement.  (Plaintiff’s Unopposed Motion to Approve FLSA Settlement, Settlement Agreement, Dkt. No. 48, Ex. 1, ¶ E.) Defendant argues this settlement agreement, which was signed by the parties and submitted to the Court, means the plaintiffs are not prevailing parties because the settlement agreement acknowledges that they are not prevailing parties. The Court disagrees.

As an initial matter, the settlement agreement is treated as a contract and will be interpreted under Texas law.  The Texas Supreme Court has recently explained the law:

In construing [a contract], we first determine whether it is possible to enforce the contract as written, without resort to parol evidence. Deciding whether a contract is ambiguous is a question of law for the court. Coker v. Coker, 650 S.W.2d 391, 394 (Tex.1983). In construing a written contract, the primary concern of the court is to ascertain the true intentions of the parties as expressed in the instrument. R & P Enters. v. LaGuarta, Gavrel & Kirk, Inc., 596 S.W.2d 517, 518 (Tex.1980); City of Pinehurst v. Spooner Addition Water Co., 432 S.W.2d 515, 518 (Tex.1968). To achieve this objective, we must examine and consider the entire writing in an effort to harmonize and give effect to all the provisions of the contract so that none will be rendered meaningless. Universal C.I.T. Credit Corp. v. Daniel, 150 Tex. 513, 243 S.W.2d 154, 158 (1951). No single provision taken alone will be given controlling effect; rather, all the provisions must be considered with reference to the whole instrument. Myers v. Gulf Coast Minerals Mgmt. Corp., 361 S.W.2d 193, 196 (Tex.1962); Citizens Nat’l Bank v. Tex. & P. Ry. Co., 136 Tex. 333, 150 S.W.2d 1003, 1006 (1941). A contract is unambiguous if it can be given a definite or certain legal meaning. Columbia Gas Transmission Corp. v. New Ulm Gas, Ltd., 940 S.W.2d 587, 589 (Tex.1996). On the other hand, if the contract is subject to two or more reasonable interpretations after applying the pertinent rules of construction, the contract is ambiguous, creating a fact issue on the parties’ intent. Id. J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 229 (Tex.2003). Further, under Texas law, “[c]ourts interpreting unambiguous contracts are confined to the four corners of the document, and cannot look to extrinsic evidence to create an ambiguity.” Texas v. Am. Tobacco Co., 463 F.3d 399, 407 (5th Cir.2006). Parol evidence may only be used if the contract is first found to be ambiguous. Id.

Keeping these principles in mind, the Court concludes that the contract is unambiguous and the plaintiffs are entitled to attorney’s fees, or in other words, the settlement agreement does not prevent the plaintiffs from being considered prevailing parties. The Court recognizes that the settlement agreement states that the plaintiffs “shall not be deemed a prevailing party’ for any purpose, including any fee shifting statute, rule, or agreement.” (Plaintiff’s Unopposed Motion to Approve FLSA Settlement, Settlement Agreement, Dkt. No. 48, Ex. 1, ¶ E.) But the agreement also states:

The parties have made no agreement regarding the payment of Champion’s attorney fees, court costs and a portion of the mediation fees, beyond that provided for in Paragraph A above. Champion’s counsel intends to apply to the Court for an award of attorney’s fees, and ADT reserves the right to contest this application.(Plaintiff’s Unopposed Motion to Approve FLSA Settlement, Settlement Agreement, Dkt. No. 48, Ex. 1, ¶ B.) The Court concludes the contract is unambiguous when considering only the four corners of the document and attempting to “harmonize and give effect to all the provisions of the contract so that none will be rendered meaningless.”  The parties agreed that there was “no agreement regarding the payment of [Plaintiffs’] attorney fees.” (Plaintiff’s Unopposed Motion to Approve FLSA Settlement, Settlement Agreement, Dkt. No. 48, Ex. 1, ¶ B.)

But on the other hand, the parties agreed that the plaintiffs shall not be “deemed” a prevailing party. (Id. at ¶ E.) In harmonizing these statements together, the Court concludes that when the agreement states that the plaintiffs shall not be “deemed” a prevailing party, the parties were agreeing that whether the plaintiffs are a prevailing party is to be determined by the Court. In other words, the parties were not deeming the plaintiffs as a prevailing party. Further, the specific language stating the plaintiffs “shall not be deemed a prevailing party” is located in the section of the agreement titled “No Admission of Liability,” which confirms the parties’ intention was merely to not admit the plaintiffs were the prevailing party. (Id.) Rather, the parties were confirming that “ADT reserves the right to contest this application” of awarding attorney’s fees. (Id. at ¶ B.)

Therefore, the Court interprets the settlement agreement as unambiguously allowing the Court to determine whether the plaintiffs are the prevailing parties and entitled to attorney’s fees. The Court concludes for the abovementioned reasons that the plaintiffs are prevailing parties for the purposes of the statute and are entitled to attorney’s fees.”

Not quoted here, the court noted that there were emails between counsel prior to the settlement agreement, wherein the parties made clear that they intended the settlement agreement to resolve the issue of damages only and not the issue of attorneys’ fees or costs.