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7th Cir.: District Court Erred In Dismissing FLSA Claims; Court Was Required To Consider Most Efficient Way To Adjudicate Claims and Subclaims; Plaintiffs Have Right To Pursue Claims Individually
Alvarez v. City of Chicago
In this case a collective action had previously been consolidated with a multiple-Plaintiff non-collective action. Each of the Plaintiffs presented a variety of claims and between the hundreds of plaintiffs there were 10 different types of claims. The Court below granted the Defendant’s motion for summary judgment against all plaintiffs, reasoning that the plaintiffs were not similarly situated because each plaintiff raised a different combination of the ten subclaims, such that the plaintiffs could not be readily divided into homogenous subgroups. The district court also noted that arbitration pursuant to the collective bargaining agreement, while not mandatory, might be a more efficient way to resolve the paramedics’ claims. The court did not reach the merits of the ten subclaims raised by the plaintiffs. Instead, it dismissed the claims of all plaintiffs, without prejudice, and directed them to pursue arbitration. The Seventh Circuit reversed however, noting that, the Court failed to consider the efficiency of adjudicating the claims as a collective action, and, that the named Plaintiffs in each of the consolidated cases had the right to proceed with their individual claims, regardless of whether they were similarly situated to the other class members.
The Court reasoned:
“The Fair Labor Standards Act gives employees the right to bring their FLSA claims through a “collective action” on behalf of themselves and other “similarly situated” employees. 29 U.S.C. § 216(b) (2006). A collective action is similar to, but distinct from, the typical class action brought pursuant to Fed.R.Civ.P. 23. The principle difference is that plaintiffs who wish to be included in a collective action must affirmatively opt-in to the suit by filing a written consent with the court, while the typical class action includes all potential plaintiffs that meet the class definition and do not opt-out.
The City-and the district court’s opinion-relies heavily on our decision in Jonites v. Exelon Corp., 522 F.3d 721 (7th Cir.2008). In Jonites, we affirmed the dismissal of a collective action brought on behalf of more than a thousand lineman and other hourly workers employed by Commonwealth Edison. The Jonites plaintiffs alleged that two types of purportedly off-duty time were really compensable work. The first involved Com Ed’s “call-out” policy, which required off-duty workers to respond to at least 35% of the calls from their employer for additional manpower on an emergency basis. The frequency of these call-outs varied widely among workers; some were called as often as once every five and a half days on average, and others no more than once a month. The employees took the position that they were entitled to be paid for “some of the time” during which they were subject to call, with the amount to be determined by the trier of fact. The second challenge was to the lunch policy, which required workers at job sites to remain awake and be alert for trespassing and the theft of tools. However, only part of the class worked the daytime shift, to which the lunch policy applied. We held that as to both of these claims, the purported class was “hopelessly heterogenous” because liability would require significant individual fact-finding and many of the workers had no conceivable claim at all. Id. at 725-26. We further held that the individual plaintiffs must either file individual suits, create homogenous classes, or ask the union to file grievance proceedings under the collective bargaining agreement. Id. at 726. Because the purported class here is made up of plaintiffs who each have a different combination of subclaims, defendants argue that it is similarly heterogenous and was properly dismissed in favor of arbitration.
Appellants argue that this case is different from Jonites because the plaintiffs here appear to be similarly situated with regard to individual subclaims, but are heterogenous only because there are several different combinations of those subclaims. For example, whether any given paramedic is entitled to recover on the uniform pay theory depends on the legal question of whether such pay should have been included in the base rate, and the simple factual question of whether the particular paramedic received uniform pay. Instead of dismissing their claims as heterogenous, plaintiffs argue, the district court should have allowed them to split their claims into homogenous subclasses. See, e.g., Fravel v. County of Lake, No. 2:07-cv-253, 2008 WL 2704744 (N.D.Ind. July 7, 2008) (allowing plaintiffs to proceed collectively and grouping the plaintiffs into four distinct subclasses depending on which theory of liability applied to them). Plaintiffs suggest that here, as in Fravel, “[r]esolving common questions as a class, even through the additional mechanism of sub-classes, remains inherently more efficient” than splitting the action into four separate collective actions or allowing individual claims by each plaintiff. Id. at *3.
The district court appeared to agree with the plaintiffs’ characterization of their subclaims, noting that the City’s liability to any particular plaintiff on any given subclaim turns only upon a single uniform policy and whether that policy impacted that particular plaintiff. However, the district court refused to adopt the Fravel approach, concluding that the number of subclaims made the plaintiffs “hopelessly heterogenous” and that arbitration would be more efficient.
A district court has wide discretion to manage collective actions. See Hoffmann-La Roche v. Sperling, 493 U.S. 165, 171 (1989). However, it appears that here the district court may have mistakenly read Jonites to forbid it from adopting a subclaim approach merely because the variety of subclaims renders the class “heterogenous.” The problem with the Jonites class, however, was not that the plaintiffs had different subclaims, but rather that determining whether any given plaintiff had a viable claim depended on a detailed, fact-specific inquiry, and many plaintiffs lacked any conceivably viable claim altogether. Jonites, 522 F.3d at 723, 725-26; see also Mooney v. Aramco Services Co., 54 F.3d 1207, 1214-15 (5th Cir.1995), overruled on other grounds by Desert Palace, Inc. v. Costa, 539 U.S. 90 (2003) (affirming decertification of collective action where employees who brought ADEA claim were subject to “vastly disparate employment situations” and defense was likely to center on purported reasonable factors other than age specific to each employee). If common questions predominate, the plaintiffs may be similarly situated even though the recovery of any given plaintiff may be determined by only a subset of those common questions.
Similarly, the district court mistakenly compared the efficiency of proceeding through subclaims only to the perceived efficiency of arbitration. Plaintiffs have the right to proceed individually and may be able to form more tailored classes. See Jonites, 522 F.3d at 725 (noting that a collective bargaining agreement cannot preempt or waive a worker’s right to a judicial remedy for FLSA violations). Thus, if it appears plaintiffs are prepared to proceed individually or through separate classes, the district court must consider whether these other mechanisms for judicial resolution of their claims are more or less efficient than a collective action comprised of various subclaims. Cf. Fravel, supra. In Jonites, the circumstances suggested that plaintiffs had “no stomach for proceeding case by case.” Id. at 726. Here, the twelve Caraballo plaintiffs filed their complaint as individuals and moved for summary judgment as individuals. Indeed, there is nothing apparent from the record to indicate that the fifty-four named plaintiffs in Alvarez were unwilling to proceed individually. Yet the district court dismissed their claims in favor of arbitration without considering whether it was better to address sixty-five individual claims or one collective action comprised of ten subclaims.
Finally, the district court erred when it dismissed the claims of the named plaintiffs. When a collective action is decertified, it reverts to one or more individual actions on behalf of the named plaintiffs. See Hipp v. Liberty Nat’l Life Ins. Co., 252 F.3d 1208, 1218 (11th Cir.2001) (citing Mooney, 54 F.3d at 1213-14); see also Fox v. Tyson Foods, Inc., 519 F.3d 1298, 1301 (11th Cir .2008) (affirming decertification of an FLSA collective action, dismissal of the opt-in plaintiffs, and severance of each of the named plaintiffs into separate individual actions). Defendants do not argue that arbitration under the collective bargaining agreement preempts litigating these issues in federal court. Plaintiffs are entitled, at minimum, to pursue their claims individually. Whether they are permitted to do so in one action or several is committed to the sound discretion of the district court, but misjoinder of parties is never a ground for dismissing an action. See Fed.R.Civ.P. 21. We therefore reverse the district court’s dismissal of the named plaintiffs’ claims in both the Alvarez and Caraballo actions.
Sifting through the subclaims of each of the myriad plaintiffs is an unenviable task. But plaintiffs are nonetheless entitled to their day in court. Moreover, it appears that here, common questions predominate with regard to each theory of liability. The parties have already filed cross-motions for summary judgment on the merits of these common questions. After the district court determines the validity of these subclaims, calculation of each plaintiff’s award (if any) will be largely mechanical. On remand, given that the claims of the named plaintiffs will still be before it, the district court should consider whether a collective action might be the most efficient judicial resolution of this matter after all.”
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N.D.W.Va.: An FLSA Employer Held Liable For FLSA Violations Has No Right To Contribution Or Indemnification; Allowing Same Would Contravene The Purposes Of The FLSA
McDougal v. G & S Tobacco Dealers, L.L.C.
This case was before the Court on the Defendant/Third-Party Plaintiff’s (and current owner of the employer) and the Third-Party Defendant’s (former employer) cross motions for summary judgment. In a nutshell, what started as a simple FLSA claim, “expanded into contract claims for indemnification and contribution by the [current] employer [Woodward] against the former owner [Oliverios] of the company that employed Plaintiff.”
Among other issues, the Court discussed whether there was any pleaded theory that could impose a duty of indemnity or contribution on the previous owner [Oliveros] for the current owner’s [Woodward’s] non-payment of Plaintiff for the time Plaintiff worked for Defendant, subsequent to the time Woodward took ownership of the company that employed Plaintiff. Holding that no such duty of indemnity or contribution existed, the Court explained:
“1. With respect to Woodward’s claim for indemnification, contribution and breach of statutory or agency duties, the doctrine of conflict or obstacle preemption is dispositive.
Woodward’s state common law claims of contractual and implied indemnification and contribution against Oliverios for wages and benefits damages not paid to McDougal after July 17, 2007 in violation of FLSA and WPCA are preempted by the doctrine of conflict or obstacle preemption.
On the same date the parties argued the instant cross-motions for summary judgment before this Court, the Fourth Circuit Court of Appeals published its decision in Equal Rights Center, et al v. Archstone Multifamily Series I Trust, et al, 09-1453.
The following facts and claims of Archstone are analogous to the facts and claims of the instant case: Archstone hired architect Bolton to design multi-family apartment buildings which Archstone then had various contractors build. Of the units constructed, Equal Rights Center, et al alleged 71 failed to be constructed so that they were accessible to persons with disabilities in violation of FHA and ADA. Archstone and the Equal Rights Plaintiffs entered into a Consent Decree which required Archstone to retro-fit the 71 units to make them ADA and FHA compliant and to pay 1.4 million in damages and attorneys fees and expenses. Bolton did not join in the settlement but later entered into a separate consent decree with the Equal Rights Plaintiffs which did not include any admission of liability. Archstone cross-claimed against Bolton seeking damages based on state law causes of action: express indemnity; implied indemnity; breach of contract; and professional negligence. After lengthy discovery and immediately prior to the dispositive motions deadline, Archstone sought leave to amend its cross-claim against Bolton to include a claim for contribution. Bolton objected. The District Court denied leave to amend. Thereafter the District Court granted Bolton summary judgment reasoning that Archstone’s causes of action were indemnity and de facto indemnity claims for violations of the FHA and ADA and, because no right to indemnification exists under the ADA or FHA, the state law claims asserted by Archstone would be antithetical to the purposes of the FHA and ADA and therefore preempted under the doctrine of conflict or obstacle preemption. Archstone appealed. The Court of Appeals affirmed holding:
Obstacle preemption applies “where state law; stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.’ “ …. where a state-law claim “interferes with the methods by which the federal statute was designed to reach [its] goal.” (internal citations omitted).
Obstacle preemption has been extended to state tort claims as well as positive enactments of state law. Id. citing Geier v. Am. Honda Motor Co., 529 U.S. 861, 120 S.Ct. 1913, 146 L.Ed.2d 914 (2000).
Finding Archstone’s indemnification claims were preempted, the Court held:
Here, Archstone sought to allocate the full risk of loss to Niles Bolton for the apartment buildings at issue. Allowing an owner to completely insulate itself from liability for an ADA or FHA violation through contract diminishes its incentive to ensure compliance with discrimination laws. If a developer of apartment housing, who concededly has a non-delegable duty to comply with the ADA and FHA, can be indemnified under state law for its ADA and FHA violations, then the developer will not be accountable for discriminatory practices in building apartment housing. Such a result is antithetical to the purposes of the FHA and ADA.
The Court further held Archstone’s last minute attempt to amend its cross-claim was properly denied as prejudicial to Bolton. Moreover, the Court held: “As presented on appeal, the claim which Archstone presents in its amended complaint is a de facto indemnification claim, and such a claim is preempted under federal law. Therefore, allowing Archstone to amend under these circumstances to include a so-called contribution claim is, in any event, futile.”
A number of cases have addressed the issue of whether there is a right to contribution or indemnification for employers held liable under the FLSA and have held there is none. Herman v. R.S.R. Security Servs. Ltd., 172 F.3d 132, 143 (2nd Cir.1999). Relying on the rationale expressed in Northwest Airlines, Inc. v. Transport Workers Union of America, AFL-CIO, 451 U.S. 77, 101 S.Ct. 1571, 67 L.Ed.2d 750 (1981), the Herman Court held:
There is no right of contribution or indemnification for employers found liable under the FLSA. The reasons are readily apparent. First, the text of the FLSA makes no provision for contribution or indemnification. Second, the statute was designed to regulate the conduct of employers for the benefit of employees, and it cannot therefore be said that employers are members of the class for whose benefit the FLSA was enacted. Third, the FLSA has a comprehensive remedial scheme as shown by the express provision for private enforcement in certain carefully defined circumstances. Such a comprehensive statute strongly counsels against judicially engrafting additional remedies. Fourth, the Act’s legislative history is silent on the right to contribution or indemnification. Accordingly, we hold that there is no right to contribution or indemnification for employers held liable under the FLSA.
In Herman, Portnoy contended that even if the FLSA did not permit contribution or indemnification, those claims could be prosecuted under New York law in much the same way Woodward contends she should be permitted to prosecute claims for indemnification against Oliverios under West Virginia law. The Herman Court held: “This view of the law is flawed because the FLSA’s remedial scheme is sufficiently comprehensive as to preempt state law in this respect.” Herman v. R.S.R. Security Servs. Ltd., supra at 144.
The Fourth Circuit held in the 1992 case of Lyle v. Food Lion, Inc. 954 F.2d 984, 987: “In effect, Food Lion sought to indemnify itself against Tew for its own violation of the FLSA, which the district court found, and we agree, is something the FLSA simply will not allow. As the fifth Circuit has noted, ‘[t]o engraft an indemnity action upon this otherwise comprehensive federal statute would run afoul of the Supremacy Clause of the Constitution’ and ‘would undermine employers’ incentives to abide by the Act. LeCompt v. Chrysler Credit Corp., 780 S.2d 1260, 1264 (5th Cir.1986).’ “
In the instant suit, Oliverios were the employers of McDougal prior to July 17, 2007 and therefore responsible for any FLSA and WPCA claims arising for work performed by McDougal up to July 17th. However, Woodward uses the warranty and indemnification clauses of the 2007 contract in an attempt to hold Oliverios liable for Woodward’s failure to pay McDougal FLSA wages after July 17, 2007. In the alternative to the contract indemnification claim, Woodward attempts to shift ultimate responsibility for payment of post July 17, 2007 FLSA wages to Oliverios using equitable principles. In every event, Woodward seeks to delegate her duty to comply with the FLSA to Oliverio for all wages and damages owed including those starting with the contract closing on July 17, 2007. This she cannot do. The FLSA does not contain language that provides for such indemnification or contribution. Woodward is not a member of the class protected by the FLSA. The FLSA is a comprehensive remedial statute designed to give employees the right to sue their employers for violations of the act. This is precisely what McDougal did in bringing his action against Woodward. Herman, supra at 144. This court cannot and will not engraft an indemnity clause on the FLSA where there is none. LeCompt, supra at 1264.
Accordingly, the Court concludes that Woodward’s Third Party Plaintiff claims against Oliverios for indemnification or contribution to McDougal’s FLSA claims arising post July 17, 2007 whether the same are based on contractual or equitable contribution, indemnification, breach of contract, breach of warranty, agency, or another state contract or equity claim, are preempted by the provisions of the FLSA; are antithetical to the purpose of the FLSA; undermine the public policy established by the FLSA; and are barred by the doctrines of Conflict and Obstacle Preemption.
Even if Woodward, in light of the absence of the availability of contribution and/or indemnification for the FLSA claims of McDougal, contends that she is entitled to contribution from Oliverios solely for WVPA damages claimed by McDougal, that contention also fails. The federal court only recognizes a right to contribution under state law “in cases in which state law supplie[s] the appropriate rule of decision.” Northwest Airlines, Inc. v. Transport Workers Union of America, AFL-CIO, supra at 97. The West Virginia’s Wage Payment and Collection Act (W.Va.Code, § 21-5-1 et seq.) provides a comprehensive method for employees forcing their immediate or ultimate employer to timely pay them in accord with law. It does not provide authorization or a method or a rule of decision for allocating claims of contribution toward the liability of the employer to timely pay his employee’s wages. Nor does it provide or recognize any method, contractual or equitable, for shifting the burden of paying wages in accord with law from the employer to a third person.”
Not discussed here, the Court held that language from the contract of sale of the employer from Oliverios to Woodward was binding, to the extent that Oliverios was required to pay the cost of Woodward’s legal defense arising from the lawsuit.
To read the entire decision, click here.
W.D.Va.: Motion For Approval Of Settlement Agreement Denied, In Part, Because Of Impermissible Confidentiality Language
Poulin v. General Dynamics Shared Resources, Inc.
In a continuing trend, the Court, on the parties’ Joint Motion for approval of settlement, denied same, in part, due to the inclusion of confidentiality language in the proposed settlement agreement. Initially, the Court denied the Motion due to the parties failure to lay out the basis for Plaintiff’s attorney’s fees. However, the Court went on to add an alternative ground for its denial, citing to recent case law, as discussed here:
“Finally, the Settlement Agreement, as presently drafted, contains a confidentiality agreement. This, in pertinent part, provides that “Plaintiff agrees that he shall not disclose the fact of, and/or the terms and conditions of this Settlement Agreement and General Release except that Plaintiff may state that the Poulin action has been dismissed and may disclose the terms and conditions of this Settlement Agreement” under limited enumerated circumstances. Under the Settlement Agreement, “Plaintiff further agrees and acknowledges that confidentiality is a material term of this Agreement and any breach of the confidentiality provisions herein will be considered a material breach of the terms of this Agreement and he will be required to reimburse Defendant for any and all compensation and benefits paid to him or for his benefit under the terms of this Agreement.” Settlement Agreement and General Release, ¶ 13. Further, it provides that the Settlement Agreement, “as executed by the Parties, will be filed under seal.” Id. at ¶ 5.
The Court cannot approve these terms of the Settlement Agreement. The provision that “confidentiality is a material term of [the] Agreement” is in conflict with the Court’s opinions dated March 26, 2010 (docket no. 20) and April 23, 2010 (docket no. 23), which held that the parties had not identified significant interests to outweigh the public interest in access to judicial records, and required the proposed Settlement Agreement be made publicly available on the docket. Furthermore, a confidentiality provision in an FLSA settlement agreement undermines the purposes of the Act, for the same reasons that compelled the Court to deny the parties’ motion to seal their Settlement Agreement. See e.g., Valdez v. T.A.S. O. Prop., Inc., No. 8:09-cv-2250, 2010 WL 1730700, at *1 (M .D.Fla. Apr. 28, 2010); Dees v. Hydradry, Inc., — F.Supp.2d —-, 2010 WL 1539813, at *9 (M.D.Fla.2010) (“A confidentiality provision in an FLSA settlement agreement both contravenes the legislative purpose of the FLSA and undermines the Department of Labor’s regulatory effort to notify employees of their FLSA rights.”). Finally, the confidentiality provisions are likely unenforceable in light of the public filing of the Settlement Agreement. See e.g., Head v. v. & L Services III, Inc., No. 6:08-cv-917, 2009 WL 3582133, at *3 (M.D.Fla. Oct. 27, 2009) (noting that “the settlement agreements contain terms that this Court would not approve, such as the confidentiality provisions, which are partially unenforceable in light of the public filing of the agreements”). The Court cannot approve of a settlement agreement which includes these terms.”
It appears that the public policy grounds behind disallowing confidential settlement agreements in FLSA cases is beginning to pick up speed.
E.D.Pa.: Where Plaintiff Received Partial Liquidated Damages, Prejudgment Interest Due On The Remaining Unpaid Wages
Gonzalez v. Bustleton Services, Inc.
This case was before the Court on Plaintiffs’ Motion for an Award of Prejudgment Interest, subsequent to the Court’s holding that Defendant had violated the FLSA. In its Order regarding liability, the Court awarded liquidated damages as to one aspect of Plaintiffs’ claim and denied liquidated damages as to a second component. The Plaintiffs’ Motion sought prejudgment interest solely on the unpaid wages that the Court had not awarded liquidated damages upon. The Court held that Plaintiffs were entitled to prejudgment interest on the unpaid wages for which they were not awarded liquidated damages.
After discussing the general presumption in favor of prejudgment interest, the Court addressed each of the Defendant’s arguments in turn:
“In response to Plaintiffs’ motion for prejudgment interest, Defendant first argues that Plaintiffs are not entitled to prejudgment interest because they have already received liquidated damages. It is well-settled in FLSA jurisprudence that a plaintiff cannot recover both liquidated damages and prejudgment interest because both serve the same purpose, namely to compensate employees for losses caused by delayed receipt of wages they are due. See Brooklyn Sav. Bank v. O’Neil, 324 U.S. 697, 715, 65 S.Ct. 895, 89 L.Ed. 1296 (1945) (recovery of liquidated damages and prejudgment interest is “double compensation for damages arising from delay in the payment of the basic minimum wages”); see also Martin v. Cooper Elec. Supply Co., 940 F.2d 896, 910 (3d Cir.1991) (describing similar purpose of liquidated damages and prejudgment interest); Starceski v. Westinghouse Elec. Corp., 54 F.3d 1089, 1102 (3d Cir.1995) (contrasting punitive nature of liquidated damages in ADEA case with non-punitive liquidated damages in FLSA case). Thus, there is no dispute that the court cannot award prejudgment interest on wages for which liquidated damages have been awarded.
Defendant takes the argument a step further and asserts that any award of liquidated damages prohibits any award of prejudgment interest, I disagree. The cases upon which Defendant relies merely stand for the proposition that the court cannot award both liquidated damages and prejudgment interest on the same unpaid wages. See Bowers v. Foto-Wear, Inc., No. 03-1137, 2007 WL 4086339, at *6 (M.D.Pa. Nov.15, 2007) (declining to award prejudgment interest where court awarded liquidated damages on all unpaid wages); Friedrich, 1995 WL 412385, at *4 (awarding prejudgment interest when liquidated damages were denied); Signora v. Liberty Travel, Inc., 886 A.2d 284, 286-87 (Pa.Super.2005) (finding award of liquidated damages would be duplicative where prejudgment interest was granted on same award of unpaid wages).
As previously discussed, the purpose of prejudgment interest is to compensate the plaintiff for losses resulting from the delayed payment of wages. See Brooklyn, 324 U.S. at 715; Martin, 940 F.2d at 910. Here, Plaintiffs received an award of liquidated damages under the FLSA for two years of unpaid wages owed for the credited overtime for which they had not been properly compensated. They have not received any compensation for the delayed payment of the third year of credited overtime or any of the uncompensated morning and evening time. The equities favor an award of prejudgment interest for these unpaid wages. See Brock v. Richardson, 812 F.2d 121, 127 (3d Cir.1987) (explaining the “usual equities favor” award of prejudgment interest in FLSA case).
Defendant also argues that the court’s denial of liquidated damages for the uncompensated morning and evening time under the FLSA precludes an award of prejudgment interest. See Def.’s Memo. at 4. This is incorrect. Although liquidated damages and prejudgment interest both seek to compensate the plaintiff for the delay in receiving his wages in the FLSA context, the denial of liquidated damages does not dictate the denial of prejudgment interest. In fact, in some of the cases cited by Defendant, the court awarded prejudgment interest while denying liquidated damages. See, e.g., Frie drich. In order to avoid liquidated damages, the burden is on the defendant to show that it was acting in good faith and “had reasonable grounds for believing that his act or omission was not a violation of the [FLSA].” 29 U.S.C. § 260. With respect to prejudgment interest, the Third Circuit has said that prejudgment interest is presumed unless the “usual equities in favor of such interest are not applicable.” Pignataro, 593 F.3d at 273 (citing Brock, 812 F.2d at 126). Here, although I find that Defendant had a reasonable basis for failing to compensate Plaintiffs for the morning and evening time, this does not change the fact that Plaintiffs were denied wages they were owed. The purpose of prejudgment interest is served by such an award in this case.
Defendant also seems to argue that because the court did not award liquidated damages on the additional year of credited overtime damages provided by PMWA, Plaintiffs’ are not entitled to now seek prejudgment interest on these additional unpaid wages because it gives Plaintiffs “a second bite at the apple.” See Def.’s Memo. at 9. The main problem with Defendant’s argument is that PMWA does not provide for liquidated damages and caselaw has not extended this remedy to PMWA cases. See 43 P.S. § 333.113 (damages available as civil remedy do not include liquidated damages). Accordingly, Plaintiffs properly did not seek liquidated damages under PMWA, see Pls.’ Proposed Findings and Conclusions at ¶ 96 n. 14, and the court did not award them. There is no bar to Plaintiffs’ request for prejudgment interest.
Next, Defendant argues that Plaintiff’s failure to request prejudgment interest prior to the filing of the current motion precludes such recovery. See Def.’s Memo. at 8. I disagree. In their Complaint, Plaintiffs seek “[c]ompensatory and back pay damages to the fullest extent permitted under federal and state law.” Compl. at Prayer for Relief. At the final pretrial conference, counsel agreed that submissions concerning the calculation of damages would follow the court’s findings and conclusions. In their Proposed Findings and Conclusions, Plaintiffs specifically reference prejudgment interest as an alternative to liquidated damages. See Pls.’ Proposed Findings and Conclusions at ¶ 99 n. 15. I also note that Defendant has suffered no prejudice based on the Plaintiffs’ request for prejudgment interest at this time.
In addition, Defendant argues that the court should decline to award prejudgment interest on the uncompensated morning and evening time because this is not an easily calculable fixed sum, particularly because “it was the Plaintiffs’ lack of credibility which led to the uncertainty.” Def.’s Memo. at 10. Defendant relies on Pennsylvania easel aw which states that interest is due “[w]henever a fixed sum of money is wrongfully withheld from a party to whom it is properly due.” Id. at 9 (quoting Friedrich, 1995 WL 412385, at *3). Here, Defendant argues that the calculation of prejudgment interest is made uncertain by Plaintiffs’ lack of credibility, itself. Thus, the award of prejudgment interest would be inequitable.
At trial, Plaintiffs testified that they arrived at the shop before work and performed work prior to leaving for the jobsite every workday. Defendant presented credible evidence that Plaintiffs left from the shop only 35% of the time and went directly to the jobsite from their homes 65% of the time. In fact, Defendant presented evidence identifying specific jobs for which Plaintiffs traveled directly to the jobsite. Therefore, I found that Plaintiffs were entitled to 35% of the total uncompensated morning and evening time. Although I agree that Plaintiffs are partially to blame for any uncertainty in the calculation of prejudgment interest, Defendant lost the Plaintiffs’ timesheets, see N.T. 10/13/09 at 87-88, and thereby contributed to the uncertainty.
Moreover, considering the purpose of prejudgment interest, I believe the equities favor such an award for the uncompensated morning and evening time. Plaintiffs were not paid the wages they were owed and have not had the use of that money. Thus, an award of prejudgment interest is appropriate.”
M.D.Fla.: Approval Of Confidential Settlement In FLSA Case Rejected; Confidentiality Frustrates Remedial Purposes Of The FLSA
Dees v. Hydradry, Inc.
This case was before the Court on the parties’ Joint Stipulation of Dismissal. Although, the Court noted that, “a private settlement and stipulation for dismissal ends the typical case without judicial intervention, the Eleventh Circuit requires the district court to review the settlement of an FLSA claim. See Lynn’s Food Stores, Inc. v. United States, 679 F.2d 1350 (11th Cir.1982).”
As part of a lengthy discussion of the remedial purposes behind the FLSA, the history of the FLSA and the applicable case law regarding waiver and settlements, and the role of the Court in the settlement process, the Court reasoned that no such resolutions of FLSA cases should involve confidentiality provisions, because such provisions contravene the public policy behind the FLSA’s implementation.
“ii. A Confidentiality Provision Contravenes FLSA Policy
Because of worry that settling with one employee will encourage other employees to assert FLSA rights, the employer may seek to maintain the confidentiality of the settlement agreement. But a confidentiality provision furthers resolution of no bona fide dispute between the parties; rather, compelled silence unreasonably frustrates implementation of the “private-public” rights granted by the FLSA and thwarts Congress’s intent to ensure widespread compliance with the statute. To further Congress’s intent, the Department of Labor requires the employer of an employee covered by the FLSA to display conspicuously in the workplace a detailed notice of the employee’s FLSA rights. By including a confidentiality provision, the employer thwarts the informational objective of the notice requirement by silencing the employee who has vindicated a disputed FLSA right.
Furthermore, Section 15(a)(3) of the FLSA proscribes an employer’s retaliating against an employee for asserting rights under the FLSA. If an employee covered by a confidentiality agreement discusses the FLSA with fellow employees or otherwise asserts FLSA rights, the employer might sue the employee for breach of contract. The employer’s most proximate damages from the employee’s breach are the unpaid FLSA wages due other employees who learned of their FLSA rights from the employee who breached the confidentiality agreement. A confidentiality agreement, if enforced, (1) empowers an employer to retaliate against an employee for exercising FLSA rights, (2) effects a judicial confiscation of the employee’s right to be free from retaliation for asserting FLSA rights, and (3) transfers to the wronged employee a duty to pay his fellow employees for the FLSA wages unlawfully withheld by the employer. This unseemly prospect vividly displays the inherent impropriety of a confidentiality agreement in settlement of an FLSA dispute.
A confidentiality provision in an FLSA settlement agreement both contravenes the legislative purpose of the FLSA and undermines the Department of Labor’s regulatory effort to notify employees of their FLSA rights. “The statute was a recognition of the fact that due to the unequal bargaining power as between employer and employee, certain segments of the population required federal compulsory legislation to prevent private contracts on their part which endangered the national health and efficiency and as a result the free movement of goods in interstate commerce.” Brooklyn Savings Bank v. O’Neil, 324 U.S. 697, 706-07 (1945). The district court should reject as unreasonable a compromise that contains a confidentiality provision, which is unenforceable and operates in contravention of the FLSA.”
Later in the opinion the Court discussed the issue of confidentiality in greater detail, reasoning that beyond evaluating a settlement for “reasonableness,” the Court has other functions when reviewing FLSA settlements, specifically to ensure that such settlements and records of same are available for public review:
“B. External Factors: Does the Compromise, Although Reasonable, Otherwise Frustrate Implementation of the FLSA
In evaluating a compromise, the district court should also consider an array of “external” or contextual factors pertinent to the statutory purpose of the FLSA. Compromise of a retrospective dispute may be permissible if, for example, the FLSA issue in a case is unresolvably close on the facts or the law or some extraordinary circumstance (say, a suddenly disabled claimant or an employer in liquidation) commends a speedy or certain resolution. On the other hand, several factors may commend rejecting a proposed compromise, including the presence of other employees situated similarly to the claimant, a likelihood that the claimant’s circumstance will recur, a history of FLSA non-compliance by the same employer or others in the same industry or geographic region, or the requirement for a mature record and a pointed determination of the governing factual or legal issue to further the development of the law either in general or in an industry or in a workplace. In all instances, the district court should faithfully execute the congressional mandate for “minimum wages, promptly paid … for the lowest paid segment of the nation’s workers.” D.A. Schulte v. Gangi, 328 U .S. 108, 116 (1946).
IV. The Effect of Judicial Review: “Confidential” FLSA Settlement Agreements and Public Access to Court Records
“Parties who settle a legal dispute rather than pressing it to resolution by the court often do so, in part anyway, because they do not want the terms of the resolution to be made public.” Jessup v. Luther, 277 F.3d 926, 928 (7th Cir.2002). See generally Laurie Kratzky Dore, Secrecy by Consent: The Use and Limits of Confidentiality in the Pursuit of Settlement, 74 Notre Dame L.Rev. 283 (1999). In an FLSA action, the employer worries that compromise with an employee who has vindicated a valuable FLSA right will inform and encourage other employees, who will vindicate their FLSA rights (or who will wrongly, but expensively for the employer, conclude that additional wages are due). Although perhaps both uncomfortable and expensive to an employer, vindication of FLSA rights throughout the workplace is precisely the object Congress chose to preserve and foster through the FLSA.
In the typical settled case, the district judge remains unaware of the terms of compromise, and the parties enforce the settlement agreement, if necessary, only through a separate action. The parties maintain the confidentiality of their compromise by submitting a stipulation for dismissal under Rule 41, Federal Rules of Civil Procedure. In an FLSA case, however, Lynn’s Food requires the parties to obtain judicial approval of the compromise. Forced to submit the agreement to the court after filing a motion for approval, the parties often seek to preserve the confidentiality of the compromise either by moving to submit the agreement under seal or by requesting an “in camera review” of the agreement.
In the typical FLSA case, however, neither attempt to conceal the compromise comports with the public’s right of access to a judicial proceeding, which right is “an essential component of our system of justice [and] instrumental in securing the integrity of the process.” Chicago Tribune Co. v. Bridgestone/Firestone, Inc., 263 F.3d 1304, 1311 (11th Cir.2001). The judge’s “approving” a settlement constitutes a “public act,” and the public “has an interest in knowing what terms of settlement a federal judge would approve.” Jessup, 277 F.3d at 929. As an active component of the judge’s decision, the settlement agreement is presumptively a public record. See Brown v. Advantage Eng’g, Inc., 960 F.2d 1013, 1016 (11th Cir.1992) (“Once a matter is brought before a court for resolution, it is no longer solely the parties’ case, but also the public’s case.”); Bank of Am. Nat’l Trust & Sav. Ass’n v. Hotel Rittenhouse Assocs., 800 F.2d 339, 343 (3d Cir.1986) (“[T]he common law presumption of access applies to motions filed in court proceedings and to the settlement agreement … filed and submitted to the district court for approval.”). The public enjoys the right both to attend a trial or hearing and to inspect and copy a judicial record.
The presumption that the record of a judicial proceeding remains public “is surely most strong when the ‘right at issue is of a ‘private-public character,’ as the Supreme Court has described employee rights under the FLSA.” Stalnaker, 293 F.Supp.2d at 1264 (quoting Brooklyn Savings Bank v. O’Neil, 324 U.S. 697, 708 (1945)). Sealing an FLSA settlement agreement between an employer and employee, reviewing the agreement in camera, or reviewing the agreement at a hearing without the agreement’s appearing in the record (in any event precluding other employees’ and the public’s access to, and knowledge of, the agreement) thwarts Congress’s intent both to advance employees’ awareness of their FLSA rights and to ensure pervasive implementation of the FLSA in the workplace.
Furthermore, before sealing a document, the district court must identify and articulate “an overriding interest based on findings that [a seal] is essential to preserve higher values and is narrowly tailored to serve that interest. The interest is to be articulated along with findings specific enough that a reviewing court can determine whether the [sealing] order was properly entered.” Press-Enterprise Co. v. Superior Court of California, 464 U.S. 501, 510 (1984). Preventing the employee’s co-workers or the public from discovering the existence or value of their FLSA rights is an objective unworthy of implementation by a judicial seal, which is warranted only under “extraordinary circumstances” typically absent in an FLSA case. Absent an “overriding interest” in the preservation of some “higher value,” the court should not abide the parties’ request for a seal
The parties’ stipulation to seal the agreement (and the absence of a third-party objection to sealing the compromise agreement) fails to justify a seal. In Citizens First National Bank of Princeton v. Cincinnati Insurance Co., 178 F.3d 943, 944-45 (7th Cir.1999), Judge Posner states:
The parties to a lawsuit are not the only people who have a legitimate interest in the record compiled in a legal proceeding…. [T]he public at large pays for the courts and therefore has an interest in what goes on at all stages of a judicial proceeding. That interest does not always trump the property and privacy interests of the litigants, but it can be overridden only if the latter interests predominate in the particular case, that is, only if there is good cause for sealing a part or the whole of the record in that case. The determination of good cause cannot be elided by allowing the parties to seal whatever they want, for then the interest in publicity will go unprotected unless the media are interested in the case and move to unseal. The judge is the primary representative of the public interest in the judicial process and is duty-bound therefore to review any request to seal the record (or part of it). He may not rubber stamp a stipulation to seal the record. See also Wilson v. American Motors Corp., 759 F.2d 1568, 1571 (11th Cir.1985) (“[I]t is the rights of the public, an absent third party, which are preserved by prohibiting closure of public records….”).
Reviewing an FLSA settlement agreement under seal conflicts with the public’s access to judicial records, frustrates appellate review of a judge’s decision to approve (or reject) an FLSA compromise, contravenes congressional policy encouraging widespread compliance with the FLSA, and furthers no judicially cognizable interest of the parties. A proper consideration of the intent of Congress and the public’s interest in judicial transparency permits only one method to obtain judicial review of a compromise of an FLSA claim. The parties must file the settlement agreement in the public docket. See Stalnaker, 293 F.Supp. at 1262-64; see also Hanson v. Wells Fargo Bank, No. 08-80182-CIV, 2009 WL 1490582 (S.D.Fla. May 26, 2009) (requiring the parties to submit an unsealed copy of their settlement agreement).
V. Conclusion
To ensure that “all our able-bodied working men and women [receive] a fair day’s pay for a fair day’s work,” the FLSA requires a covered employer to pay each employee a minimum wage and overtime. To combat the typically unequal bargaining power between employer and employee, Congress prohibits a private agreement altering FLSA rights. An employee entitled to FLSA wages may compromise his claim only under the supervision of either the Department of Labor or the district court.
If presented in an FLSA action with a notice of settlement, a stipulation for dismissal, an offer of judgment, or the like, the judicial approval required by Lynn’s Food and the public’s right of access to a judicial proceeding compel the parties to file their agreement in the public docket of the district court. As an initial matter, the district court must determine whether the employee purports to compromise an FLSA right. If judicial scrutiny confirms that the parties’ settlement involves no compromise, the district court should approve the settlement and dismiss the case (if the employer has paid) or enter judgment for the employee (if the employer has not paid). If the parties’ proposed resolution requires the employee to compromise an FLSA right, the district court must scrutinize the compromise for “fairness.”
An employee’s right to a minimum wage and overtime is unconditional, and the district court should countenance the creation of no condition, whether confidentiality or any other construct, that offends the purpose of the FLSA. An employer is obligated unconditionally to pay a minimum wage and overtime to the complainant and his fellow employees; the district court should not become complicit in any scheme or mechanism designed to confine or frustrate every employee’s knowledge and realization of FLSA rights. Accordingly, the district court evaluating an FLSA compromise should examine first the “internal” fairness of the compromise, including the existence of a bona fide dispute and the absence of a prospective waiver, confidentiality agreement, or other provision antithetical to the FLSA. If the proposed compromise is fair and reasonable to the employee, the court should consider whether any other external factor, such as the need to resolve definitively an issue affecting similarly situated employees, recommends rejecting the compromise. If the compromise is fair and reasonable to the employee and furthers the implementation of FLSA rights in the workplace, the court should approve the compromise.
For the reasons stated in this order, the parties’ stipulation of dismissal is rejected.”
Needless to say, it will be interesting to see if other court’s follow the Court’s reasoning.
EDITOR’S NOTE: Less than a week after this opinion, Judge Merryday, who authored the opinion, went a step further in another case, holding that settlement agreements in FLSA cases that prohibit an employee from disparaging his or her employer are equally inappropriate. See McGowan v. CSPS Hotel, Inc., 8:09-cv-02311-SDM-MAP (M.D.Fla. Apr.29, 2010).
9th Cir.: Complaint That Failed To Allege Entity Exercised Control Over Nature And Structure Of The Employment Relationship Did Not Properly Allege Defendant Was “Employer”
Dianda v. PDEI, Inc.
Plaintiff-appellant Joseph Dianda worked for two days as a “best boy” in the production of a television commercial, but was allegedly paid three days late. Dianda sued the production company and PDEI, Inc. (“PDEI”) for various violations under the Fair Labor Standards Act (“FLSA”) and California law. In the case below, all defendants moved to dismiss the action. The district court denied the motion as to the production company, but granted the motion as to PDEI after determining that PDEI was not Dianda’s “employer” under the FLSA or California law. Dianda appealed and the 9th Circuit affirmed, discussing the requirements for an “employer” under both the FLSA and California law. Here, because the Complaint failed to adequately allege that PDEI exercised control over the nature and structure of the Plaintiff’s employment, the Court affirmed the dismissal as to PDEI.
“I. ‘Employer’ Status Under California’s Labor Code and FLSA
The essence of the test for “employer” status under the California Labor Code is “whether the principal has the right to control the manner and means by which the worker accomplishes the work.” Estrada v. FedEx Ground Package Sys., Inc., 64 Cal.Rptr.3d 327, 335 (Cal.Ct.App.2007). FLSA’s test is broader, asking whether the “individual [here, PDEI] exercises control over the nature and structure of the employment relationship.” Boucher v. Shaw, 572 F.3d 1087, 1090-91 (9th Cir.2009) (quotation marks omitted).
Dianda has not shown that PDEI had the right to control the details of his work or that PDEI exercised control over his employment relationship. In his deposition, Dianda admitted that PDEI did not tell him how to do his job, PDEI did not hire him, PDEI did not terminate him, PDEI never communicated with him in any way, and Dianda never took instructions or directions from PDEI concerning the commercial. Nonetheless, Dianda argues that his pay stub and W-2 form identify PDEI as the “employer.” However, “[t]he parties’ label is not dispositive and will be ignored if their actual conduct establishes a different relationship.” Estrada, 64 Cal.Rptr.3d at 335-36. See also Real v. Driscoll Strawberry Assocs., Inc., 603 F.2d 748, 755 (9th Cir.1979) (“Economic realities, not contractual labels, determine employment status for the remedial purposes of the FLSA.”). Furthermore, PDEI’s alleged use of its own account to pay wages and PDEI’s maintenance of payroll records are explainable as part of the service it provides as a payroll company. See, e.g., Moreau v. Air France, 356 F.3d 942, 950-52 (9th Cir.2004) (determining that Air France was not a joint employer of contracted service workers where Air France’s involvement was to ensure compliance with regulatory requirements).”
D.N.J.: Defendants’ Purported Use Of Fluctuating Workweek (FWW) Violated FLSA, Because There Was No “Fixed” Amount As Straight Time Pay; Docking Of Pay, Although Infrequent Violated FLSA; Time And A Half Damages Due
Brumley v. Camin Cargo Control, Inc.
This matter was before the Court on the cross-motions for summary judgment filed by Defendant and Plaintiffs, on a variety of issues arising from Defendant’s purported use of the Fluctuating Workweek (FWW), to calculate Plaintiffs’ overtime compensation. As discussed partially herein, Defendant’s motion was denied in its entirety and Plaintiffs’ motion was granted in part and denied in part. Significantly, the Court held that Defendant’s purported use of the FWW violated the FLSA for a variety of reasons, and under such circumstances, Plaintiffs’ damages were to be calculated using the FLSA’s default time and a half method not the FWW, as Defendant’s had proposed.
After outlining the applicable law, the Court first discussed the Defendant’s infrequent docking of Plaintiffs’ pay, ruling that same necessarily resulted in a failure to comply with the stringent requirements of 29 C.F.R. 778.114, and thus Defendant was not entitled to summary judgment.
“With respect to decreases in the fixed salary, regulation calls for a fixed salary regardless of the length of the workweek. 29 C.F .R. § 778.114 (“An employee employed on a salary basis may have hours of work which fluctuate from week to week and the salary may be paid him pursuant to an understanding with his employer that he will receive such fixed amount as straight time pay for whatever hours he is called upon to work in a workweek, whether few or many.”). An employer may deduct from an FWW employee’s vacation time bank for workdays missed, but may not deduct from the fixed salary for time an FWW employee misses from work. DOL Opinion Letter, 1999 WL 1002399 (May 10, 1999). Similarly, the DOL stated that “it is the longstanding position of the Wage and Hour Division that an employer utilizing the fluctuating workweek method of payment may not make deductions from an employee’s salary for absences occasioned by the employee[,]” unless the deductions are of a nonroutine disciplinary nature “for willful absences or tardiness or for infractions of major work rules.” DOL Opinion Letter, 2006 WL 1488849 (May 12, 2006).
Several of the cases cited by the parties are not on point with respect to the issue of salary decreases under the FWW. Although Aiken v. County of Hampton discusses the FWW, its ruling on the fixed salary requirement relates to deductions from accrued vacation banks and the effect of legal holidays that are not at issue in the instant matter. 977 F.Supp. 390, 395-97 (D.S.C.1997). Lance v. Scotts Co. addresses the effect of commissions on FWW calculations, something governed by 29 C.F.R. § 778.118, a regulation not at issue here. No. 04-5270, 2005 WL 1785315, at *4-7 (N.D.Ill. Jul. 21, 2005) (Keys, M.J.). Rau v. Darling’s Drug Stores, Inc. addresses not the existence of a fixed weekly payment, but the correct calculation of damages for a non-exempt, salaried employee. 388 F.Supp. 877, 883-86 (E.D.Pa.1977). In Spring v. Washington Glass Co. the parties stipulated to the use of the FWW to calculate overtime pay damages, so the issue of whether it applied was never contested before that court. 153 F.Supp. 312, 318-19 (W.D.Pa.1957).
Defendant does, however, cite Cash v. Conn Appliances, Inc., 2 F. Supp 2d 884, 906 (E.D.Tx.1997), which supports the proposition that it did not violate the FWW when it docked inspectors for missing work. Cash read the regulation as permitting an employer to dock pay when an employee failed to show up for scheduled work. 2. F. Supp 2d at 906 (“The docking policy only called for a loss of pay for absences during scheduled time; it in no way sanctioned reducing pay because of a failure to assign a coefficient employee forty hours of work for a week.”). Cash also holds that occasional violations of FWW requirements do not result in a broad invalidation of the method when calculating damages. Id. This Court fails to find the Cash interpretation of the regulation persuasive as to docking of employees’ pay. First, the regulation itself specifies that the fixed salary must be paid regardless of hours worked without reference to which party is responsible for the shortfall. 29 C.F.R. § 778.114 (“The ‘fluctuating workweek’ method of overtime payment may not be used unless … the employer pays the salary even though the workweek is one in which a full schedule of hours is not worked.”). Second, the DOL’s interpretation of the regulation denies employers the ability to routinely dock the fixed FWW salary. DOL Opinion Letter, 2006 WL 1488849 (May 12, 2006); DOL Opinion Letter, 1999 WL 1002399 (May 10, 1999).
Here, Defendant concedes that on at least one occasion, it docked a Plaintiff inspector’s fixed salary for an impermissible reason. (Def. Reply Br. at 6.) Although it characterizes such an event as statistically insignificant, such an argument goes to weight. This Court, therefore, denies summary judgment to Defendants on the issue of whether they complied with the FWW method of paying the Plaintiff inspectors.”
Next, the Court held that the addition of certain premium pay into Plaintiffs’ straight time pay each week resulted in non-fixed straight time pay, and thus violated the requirements for use of the FWW, in lieu of the default time and a half methodology required by the FLSA.
“The relevant language in the regulation regarding additional payments to FWW employees reads as follows: “[w]here all the legal prerequisites for use of the ‘fluctuating workweek’ method of overtime payment are present, the Act, in requiring that ‘not less than’ the prescribed premium of 50 percent for overtime hours worked be paid, does not prohibit paying more.” 29 C.F.R. § 778.114(c). Department of Labor (“DOL”) Opinion Letters interpreting the FWW regulation have weighed in on the issue of additional payments. The DOL has stated that an employer can make additional payments to an FWW employee for a holiday occurring in a given week. DOL Opinion Letter, 1999 WL 1002399 (May 10, 1999). An employer may also pay employees more than the minimum calculated rate under the FWW method for overtime. DOL Opinion Letter, 2002 WL 32255314 (Oct. 31, 2002).
Courts interpreting the FWW, however, have emphasized that additional payments can result in the finding that there is no fixed salary. Although the court in O’Brien v. Town of Agawam found that variations in the weekly pay of law enforcement officers for other reasons prevented the finding of a fixed FWW salary, it used this reasoning with regard to incentive payments:
The officers’ compensation varies from week to week even without reference to the number of hours worked. Any officer required to work a nighttime shift receives money-expressly termed “additional compensation” under the CBA-in the form of a $10 shift-differential payment added to his check for the week. The Supreme Court has specifically held that such shift differentials, when paid, are part of the worker’s regular rate of pay. Bay Ridge Operating Co. v. Aaron, 334 U.S. 446, 468-69 (1948). So while the shift differential itself may be small, it requires the larger conclusion that most officers do not receive a “fixed amount” for their straight-time labor each week. 350 F.3d 279, 288-89 (1st Cir.2003). See also Dooley v. Liberty Mut. Ins. Co., 369 F. Supp 2d 81, 86 (D.Mass.2005) (following O’Brien ). Similarly, Ayers v. SGS Control Servs., Inc. found that employees performing similar work to the inspector Plaintiffs in this case did not receive a fixed salary because they received lump-sum “day-off pay” and “sea pay” for working on their days off and on offshore vessels. No. 03-9077, 2007 WL 646326, at *8-10 (S.D.N.Y. Feb. 27, 2007). Finally, a case in this District, Adeva v. Intertek USA, Inc., stands for the proposition that shift premiums preclude application of the FWW. No. 09-1096, 2010 WL 97991, at *2-3 (D.N.J. Jan. 11, 2010) (Chesler, J.). “The record demonstrates that Plaintiffs’ compensation for non-overtime hours varied, depending upon earned offshore pay, holiday pay or day-off pay. The Court is convinced that due to such payments, Plaintiffs cannot receive the fixed salary required to apply the FWW.” Id.
Some of the cases brought forth by Defendant are inapposite. See, e.g., Clements v. Serco, Inc., 530 F.3d 1224, 1230-31 (10th Cir.2008) (commissions under the FWW); Lance, No. 04-5270, 2005 WL 1785315, at *4-7 (same). Two, however, are potentially instructive. In Cash, discussed supra, the court found that the defendant had failed to incorporate bonuses into its calculation of the regular rate, thereby decreasing plaintiffs’ overtime, but that such failure was considered insufficient to deny the defendant the benefit of the FWW. 2 F. Supp 2d at 893 n. 17, 896, 908. The court in Aiken found that an employer’s payment of holiday pay to a law enforcement officer who worked on a holiday did not result in the absence of a fixed salary. 977 F.Supp. at 399-400. The reasoning used in Aiken was that the employee would have received the holiday pay anyway, regardless of whether or not the employee worked the holiday, and that the holiday pay simply operated as a permissible increase in overtime pay under the circumstances. Id.
This Court finds that Cash and Aiken can be distinguished on their facts. Cash dealt with employees of an appliance store; Aiken dealt with law enforcement personnel. The only cases brought to this Court’s attention that deal with inspectors similar to Plaintiffs are Ayers and Aveda, and this Court finds their reasoning persuasive as to the applicability of the FWW to this case, not only because of the factual similarity, but because they give meaning to the plain language of 29 C.F.R. § 778.114. Plaintiffs were paid day off pay and holiday pay in addition to their regular salary and overtime. (Def. R. 56.1 Statement ¶¶ 15, 39, 41.) For example, Camin concedes that the use of day off and holiday pay resulted in the one inspector’s non-overtime earnings varying from $1,670 to $2,170 over two pay periods. (Def. Opp. R. 56.1 Statement § 23.) Such a scheme results in the absence of the “fixed salary” required by the regulation. 29 C.F.R. § 778.114(a); Aveda, No. 09-1096, 2010 WL 97991, at *2-3. This Court therefore grants Plaintiffs’ motion for summary judgment on the issue of whether Defendant’s policies and practices violated the FLSA due to the absence of the fixed salary requirement, and declines to reach the remaining arguments of the parties on the FWW. Adeva, No. 09-1096, 2010 WL 97991, at *3.”
Having held that the Defendant’s pay structure violated the FLSA, the Court next turned to the issue of how to calculate Plaintiffs’ damages, and held that the appropriate measure of damages was the FLSA’s default time and a half, not the FWW as Defendant had argued.
“Camin moves this Court to find that any liability it is subject to for violation of the FWW method of calculating pay be done so according to the FWW method. (Def. Br. at 24-27.) It maintains that such a measure of damages is permissible where the violation is computational as opposed to a violation of the clear understanding requirement or the minimum wage. (Id. at 24-25.) Plaintiffs argue that such a damages calculation is impermissible where a prerequisite to the FWW has not been met by the employer. (Pl. Opp. Br. at 24-26).
The primary case relied upon by Camin is Cash. The discussion of the FWW in Cash is quite broad, and describes the measure of damages available in FWW claims under many factual scenarios. 2 F. Supp 2d at 896-97. Cash noted that under the FWW, “[l]iability arises if the employer either miscomputes overtime pay or uses the fluctuating workweek method despite the absence of one or more of the criteria for doing so[,]” but differentiated between the types of violation in which damages were available. Id. at 896. The discussion of the available remedies breaks down into two broad categories: those where the measure of damages would be calculated under the FWW and those where overtime compensation would be adjusted so that it would be recalculated at the default FLSA rate of “time-and-a-half” overtime. Id. The following violations were permitted damages calculations under the FWW in Cash: “[e]mployer infrequently violated the minimum wage criterion and failed to cure its breaches fully[,]” “[e]mployer infrequently violated the minimum wage criterion and made no effort to cure its breaches[,]” and “[e]mployer made a computational mistake.” Id. at 896-97. Cash found that the following violations abrogated the FWW: “[e]mployer regularly violated the minimum wage criterion” and “[e]mployer violated the clear understanding criterion, full schedule criterion or both.” Id. at 896. The Cash court only considered failure of an employer to provide a fixed salary insofar as such a failure would lower overtime rates. Id. at 896.
Although this Court finds the discussion of damages in Cash useful, it is not entirely persuasive. This Court found supra that the fixed salary requirement of the FWW was violated. The regulation states that the fixed salary is a prerequisite to use of the FWW method. 29 C.F.R. § 778.114(c). The Cash court found that when other prerequisites of the FWW method were systematically violated, that the employer could not obtain the benefit of the FWW in calculating damages, but failed to reach the same conclusion concerning the fixed salary. Id. at 896. Instead, this Court finds the pre-trial motions opinion in Ayers v. SGS Control Servs., Inc. persuasive. No. 03-9078, 2007 WL 3171342, at *1-3 (S .D.N.Y. Oct. 9, 2007) (“Ayers II” ). In Ayers II, the Court found that as the defendant had violated the fixed salary requirement of the FWW method, it could not have damages calculated under the FWW method. No. 03-9078, 2007 WL 3171342, at *2. The Court held that the proper measure of damages was the default FSLA method: “time-and-a-half for all hours over 40.” Id. at *3. This Court finds that the default FSLA damages calculation, “time-and-a-half for all hours over 40,” will also apply to Plaintiffs who have suffered FWW violations in this case, and that summary judgment on this issue is denied to Defendant.”
Although not discussed here, the Court ruled that the factual issues precluded a finding regarding liquidated damages, and the length of the statute of limitations, at the summary judgment stage.
This case is one of several pending against Oil & Gas Inspection companies currently. To read more about a similar case, brought on behalf of OGC Inspectors at Inspectorate America, click here. You can also learn more about similar separate cases pending against Intertek Caleb Brett, Saybolt, Amspec and Inspectorate America by calling 1-888-OVERTIME.
U.S.Jud.Pan.Mult.Lit.: 12 Cases Against Bank of America For “Personal Bankers” Claiming Off-the-Clock Work Transferred to Kansas For Discovery, Because First-Filed There, Central Location, Lighter Docket And Capable Judge
In re Bank of America Wage and Hour Employment Practices Litigation
Defendants Bank of America moved, pursuant to 28 U.S.C. § 1407, for coordinated or consolidated pretrial proceedings of this litigation, consisting of 12 different related actions, in the Central District of California. Plaintiffs in two actions support the motion. Plaintiffs in five actions supported centralization of some actions, but suggest excluding certain actions from centralized proceedings. Plaintiffs in five other actions oppose centralization or inclusion of their actions in centralized proceedings. Plaintiffs, in the first instance or in the alternative, suggested the Central District of California, the Northern District of California, or the District of Kansas as transferee district.
Significantly, the Court noted:
“All of these cases contain allegations that Bank of America routinely fails to pay its employees for off-the-clock overtime work in violation of the Fair Labor Standards Act and/or state law. To be sure, there are differences among the cases. However, as a general rule the similarities seem to outweigh the differences. As we explain below more specifically, we believe that centralization under Section 1407 will eliminate duplicative discovery; prevent inconsistent pretrial rulings, including with respect to class certification; and conserve the resources of the parties, their counsel, and the judiciary.”
Additionally, the Court explained that Bank of America acknowledged its timekeeping policies were the same nationwide for the employees in question. Therefore, the Court concluded that the cases were ripe for centralization. Explaining that the discovery for all cases was most suitable to be centralized in Kansas, the Court reasoned:
“The parties have suggested a number of acceptable transferee districts. For instance, Bank of America makes a strong argument for the Central District of California as the central focus of the litigation. For the following reasons, however, we conclude that the District of Kansas would be the best forum. The first-filed Brawner action is pending in that district, with a motion for class certification currently pending. The district is centrally located for the parties and the likely discovery in this nationwide litigation. It has docket conditions that are significantly more favorable than the other primary contenders for this litigation. More specifically and of paramount importance, Judge John W. Lungstrum has the experience, energy and time to handle this litigation efficiently.”
11th Cir.: Rehearing En Banc Denied On Refusal To Award Prevailing FLSA Plaintiff Attorney’s Fees; Strong Dissents
Sahyers v. Prugh, Holliday & Karatinos, P.L.
In a decision discussed here previously, the 11th Circuit had affirmed the trial court’s decision to award no attorneys fees or costs, in a case where they reasoned that attorney civility towards one another trumped the mandatory fee provisions of the FLSA. The case was again before the 11th Circuit, this time on Plaintiff’s Motion for a Rehearing En Banc. Although the Court denied the Motion for Rehearing, significantly, there was very strong dissent, perhaps signaling that the case may be ripe for review at the United States Supreme Court, who just this week signaled they will begin hearing more cases than they have in recent years.
Citing legal principle, but little statutory authority for the Court’s position, in a concurring opinion, one Judge explained, in part:
“About this case, I have a few observations to make. Lawyers, as members of the Courts’ Bars (that is, as officers of the Courts) are often, and in a variety of ways, treated by the Courts better or worse than nonlawyers. I stress that I do not see the Courts’ inherent powers to supervise the members of their Bars as “overriding” (that is, cancelling) the FLSA statute’s treatment of fees. The statute is law, general law tied to the outcome of FLSA suits.
I see the Courts’ inherent powers over Bar members as a separate and pre-existing font of law and legal authority that specifically governs the conduct of lawyers as lawyers, regardless of the outcome of the case: the law of inherent powers supplements the FLSA statute to make up the whole of the applicable law in this case. Therefore, I see the whole applicable law to run this way: When the outcome favors the plaintiff, fees shall be awarded unless the District Court, in the reasonable exercise of its power to supervise lawyers in their practice in cases before the Court, determines that an award of fees (given the specific circumstances of a particular case) is not right-not right directly because of lawyer conduct related to the specific case. Thus, fees nearly always are to be awarded; but never are the Courts altogether stripped of the power to supervise lawyer conduct through the grant or withholding of fees.
That Courts have the inherent and main-if not exclusive-authority (along with the duty and responsibility) to supervise their Bar members is, I believe, no innovative idea. And that Courts can use the control of attorney fees as a means of exercising the inherent power to supervise lawyer conduct in particular cases seems uninnovative too. See Chambers v. NASCO, Inc., 111 S.Ct. 2123, 2133 (1991) (court may per inherent power assess attorneys fees when a party has acted in bad faith, vexatiously, wantonly, or for oppressive purposes); Roadway Express, Inc. v. Piper, 100 S.Ct. 2455, 2463 (1980) (federal courts have inherent powers to assess attorneys fees against counsel).”
With separate strongly worded dissents, Circuit Court Judges Barkett and Wilson, sternly warned that the Eleventh Circuit had exceeded their authority by attempting to ignore the FLSA, a federal statute, without any basis.
BARKETT, Circuit Judge, dissenting:
“En banc review is warranted in this case because district courts do not have the power, inherent or otherwise, to directly contravene a federal statute. The panel decision, holding that the district court could deny attorneys’ fees mandated by the Fair Labor Standards Act (“FLSA”), is contrary to settled United States Supreme Court precedent providing that the use of a district court’s inherent supervisory powers is invalid when it conflicts with a statutory command. See, e.g. Bank of Nova Scotia v. United States, 487 U.S. 250, 254 (1988); Thomas v. Arn, 474 U.S. 140, 148 (1985). As Judge Wilson notes in his dissent, there is no dispute that the language of the statute is mandatory, see29 U.S.C. § 216(b) (“The court in such action shall, in addition to any judgment awarded to plaintiff or plaintiffs, allow a reasonable attorney’s fee to be paid by the defendant, and costs of the action.”), and has been previously so construed by our court. Dale v. Comcast Corp., 498 F.3d 1216, 1223 n.12 (11th Cir.2007).
The panel characterizes the denial of attorneys’ fees as an informal sanction of Sahyers’ lawyer for suing fellow lawyers without first attempting to resolve the dispute through informal means. In his concurrence to the denial of rehearing, Judge Edmondson stresses that the district court based its decision on local litigation customs and practices, but the district court opinion references no such customs or practices. The district court simply says that, in its view, it is “reasonable” to call another lawyer prior to filing suit. That is not enough to give notice to Sahyers’ attorney. District courts do not have the authority to sanction lawyers for conduct not proscribed by law or rule-which is the case here-without first providing them with notice that their conduct may warrant sanctions. Fed.R.Civ.P. 83(b) (“No sanction or other disadvantage may be imposed for noncompliance with any requirement not in federal law, federal rules, or the local rules unless the alleged violator has been furnished in the particular case with actual notice of the requirement.”). Because Sahyers’ attorney was given no actual notice, the district court had no authority to sanction him for failing to contact the defendants or their lawyers before filing suit. See In re Mroz, 65 F.3d 1567, 1575 (11th Cir.1995) (“Due process requires that the attorney (or party) be given fair notice that his conduct may warrant sanctions and the reasons why.” (citation omitted)). Accordingly, there is no authority for disregarding the mandatory language of FLSA on this basis.
The panel’s only supporting authority for its contention that a court may deny an award of litigation expenses to which a client is otherwise entitled by law is Litton Syss., Inc. v. Am. Tel. & Tel. Co., 700 F.2d 785 (2d Cir.1983). However, that decision does not permit a district court to simply disregard the express language of a statute that mandates attorneys’ fees and costs. Rather, it affirms a sanction imposed under Federal Rule of Civil Procedure 37 for “gross negligence” and “willful misconduct” by the plaintiff’s lawyers. Id. at 826-28. The failure to notify an opposing lawyer prior to suit in the absence of any known requirement to do so can hardly qualify as negligence or willful misconduct.
Because the panel opinion disregards the express mandate of Congress, this case warrants en banc review.”
WILSON, Circuit Judge, dissenting:
“The Court affirms a decision by a district court that denies a prevailing plaintiff’s lawyer his entitlement to an attorney’s fee under the Fair Labor Standards Act (“FLSA”) on account of his failure to give the defendant, a lawyer, advance notice of the lawsuit. I am concerned about the precedent this case sets. First, an award of attorneys’ fees to a prevailing party is mandatory under the FLSA. Second, I have found no authority that requires plaintiff’s counsel to provide pre-suit notice when another lawyer is the defendant. Although well-intentioned, I doubt that the federal courts have the inherent authority to ignore and override a statutory mandate in the interest of promoting a professional courtesy. I also do not believe that Congress intended to single out lawyers for exclusive treatment under the FLSA. Since it is now within the inherent authority and discretion of the district courts in our Circuit to hold that no attorney’s fee is a reasonable fee when no pre-suit notice is extended to defendants who are lawyers, I would consider this case en banc before permitting this new Circuit precedent to stand.
The facts are these. Plaintiff Christine Sahyers worked as a paralegal for the defendant law firm Prugh, Holliday & Karatinos, P.L. On January 9, 2007, Sahyers filed a lawsuit against her former employer and its three owners and principals, Timothy F. Prugh, James W. Holliday, II, and Theodore Karatinos (collectively the “defendants”), pursuant to the FLSA to recover unpaid overtime compensation. The defendants filed an answer, denying liability. The case proceeded to discovery, and less than one month after a failed court-ordered mediation, the plaintiff accepted an offer of judgment pursuant to Federal Rule of Civil Procedure 68. The next day, the district court entered final judgment against the defendants in the amount of $3,500.
Thereafter, the plaintiff filed a motion for attorneys’ fees and expenses, in which she sought $15,640.70, comprised of $13,800 in attorneys’ fees and $1,840.70 in costs. The district court determined that the plaintiff was a prevailing party under the FLSA. However, recognizing that the FLSA provides for a mandatory award of reasonable attorneys’ fees, the district court was persuaded to conclude that this case presented “special circumstances” and decided that “a reasonable fee is no fee.” Sahyers v. Prugh, Holliday & Karatinos, P.L., No. 8:07-cv-52-T-30MAP, slip op. at 3 (M.D.Fla. Feb. 1, 2008) (“District Court Order”).
The district court found that the plaintiff subjected the defendants to “unnecessary litigation” and refused to reward such behavior because at no time prior to filing the lawsuit did the plaintiff or the plaintiff’s attorney make a written demand for payment of the overtime compensation. Id. at 3-5. Further, the district court stressed that the plaintiff’s attorney should have notified the defendant law firm, because prior to filing suit in the Middle District of Florida, “it is still reasonable to pick up the phone and call another lawyer so it won’t be necessary to file suit.” Id. at 4. The district court dismissed the plaintiff’s counsel’s claim that his client did not want him to make a pre-suit demand, “remind[ing] [plaintiff’s counsel] that the lawyer is the officer of the Court, not the client.” Id. at 5. The plaintiff appealed the denial of attorneys’ fees and costs, and defendant Karatinos cross-appealed the district court’s determination that the plaintiff was a prevailing party.
With the benefit of oral argument, the Sahyers opinion affirmed. The Sahyers opinion framed the issue in this way: “This appeal is about the power of a district court to supervise the work of the lawyers who practice before it.” Sahyers v. Prugh, Holliday & Karatinos, P.L., 560 F.3d 1241, 1243 (11th Cir.2009). The Sahyers opinion construed the District Court Order as creating an “exception” to the FLSA’s mandatory fee statute based on the district court’s “inherent powers to supervise the conduct of the lawyers who come before it and to keep in proper condition the legal community of which the courts are a leading part.” Id. at 1244. It explained that “at least in the absence of very clear words from Congress, we do not presume that a statute supersedes the customary powers of a court to govern the practice of lawyers in litigation before it.” Id. at 1245 n.6. I disagree-well-settled Supreme Court precedent rejects the Sahyers opinion’s “very clear words” standard.
“In the exercise of its supervisory authority, a federal court ‘may, within limits, formulate procedural rules not specifically required by the Constitution or the Congress.’ ” Bank of Nova Scotia v. United States, 487 U.S. 250, 254 (1988) (quoting United States v. Hasting, 461 U.S. 499, 505 (1983)) (emphasis added). One of those limits on a federal court is when Congress has spoken: “[e]ven a sensible and efficient use of [a court’s] supervisory power, however, is invalid if it conflicts with constitutional or statutory provisions.” Thomas v. Arn, 474 U.S. 140, 148 (1985). “A contrary result ‘would confer on the judiciary discretionary power to disregard the considered limitations of the law it is charged with enforcing.’ ” Id. (quoting United States v. Payner, 447 U.S. 727, 737 (1980)). Applied here, the Sahyers opinion’s denial of attorneys’ fees and costs as an exercise of its supervisory authority over the practice of lawyers conflicts with the plain language of the FLSA.
The FLSA is a mandatory fee statute, and we have not recognized any exception to it. “The court in such action shall, in addition to any judgment awarded to the plaintiff or plaintiffs, allow a reasonable attorney’s fee to be paid by the defendant, and costs of the action.” 29 U.S.C. § 216(b) (emphasis added). The Supreme Court, our Circuit, and our sister circuits have consistently interpreted § 216(b) as mandatory. FN1 We have gone so far as to declare expressly that “[p]revailing plaintiffs are automatically entitled to attorneys’ fees and costs under the FLSA.” Dale v. Comcast Corp., 498 F.3d 1216, 1223 n.12 (11th Cir.2007) (emphasis added).
FN1. See Christiansburg Garment Co. v. EEOC, 434 U.S. 412, 415 & n.5 (1978) (referring to § 216(b) of the FLSA as one of the “statutes [that] make fee awards mandatory for prevailing plaintiffs”); Singer v. City of Waco, 324 F.3d 813, 829 n.10 (5th Cir.2003) (“The FLSA requires an employer who violates the statute to pay attorney’s fees.”); Uphoff v. Elegant Bath, Ltd., 176 F.3d 399, 406 (7th Cir.1999) (“While the award of fees [under the FLSA] is mandatory, the district court has ‘wide latitude’ in determining the amount of the fee.”) (citation omitted); Fegley v. Higgins, 19 F.3d 1126, 1134 (6th Cir.1994) (“An award of attorney fees to a prevailing plaintiff under § 16(b) of the FLSA is mandatory, but the amount of the award is within the discretion of the judge.”) (citation omitted); Shelton v. Ervin, 830 F.2d 182, 184 (11th Cir.1987) (“Section 216 provides for an award of attorney’s fees, as opposed to granting the court discretion in awarding such fees, to the prevailing plaintiff in FLSA cases.”) (emphasis added); Kreager v. Solomon & Flanagan, P.A., 775 F.2d 1541, 1542 (11th Cir.1985) (“Section 216(b) of the Act makes fee awards mandatory for prevailing plaintiffs.”); Burnley v. Short, 730 F.2d 136, 141 (4th Cir.1984) (“The payment of attorney’s fees to employees prevailing in FLSA cases is mandatory. The amount of the attorney’s fees, however, is within the sound discretion of the trial court.”) (internal citation omitted); Graham v. Henegar, 640 F.2d 732, 736 n.8 (5th Cir. Unit A Mar. 1981) (“[A]n award of attorney’s fees to a prevailing plaintiff in an FLSA suit is mandatory.”); Wright v. Carrigg, 275 F.2d 448, 449 (4th Cir.1960) (“With respect to the counsel fee [pursuant to § 216(b) ], the court had no discretion to deny it; the law’s requirement of an award is mandatory and unconditional.”); Murray v. Playmaker Servs., LLC, 548 F.Supp.2d 1378, 1381 (S.D.Fla.2008) (Ryskamp, J.) (providing that the FLSA “directs district courts to award reasonable attorney’s fees and costs to a plaintiff, in addition to any judgment received”) (emphasis added).
In a perfect world, a lawyer who files a lawsuit against another lawyer would first attempt to resolve the matter outside the courthouse. Such a practice is both sensible and efficient. However, a procedural rule that in effect mandates pre-suit notice is invalid if it conflicts with a statutory provision. The Court’s opinion in effect reads a requirement of pre-suit notice into § 216(b) of the FLSA, at least where a law firm or lawyer is a defendant, thereby “confer[ring] on [itself] discretionary power to disregard the considered limitations of the law it is charged with enforcing.” Arn, 474 U.S. at 148 (quoting Payner, 447 U.S. at 737). Although a legislature can make pre-suit notice mandatory when it chooses, that circumstance does not apply here. See, e.g.,Fla. Stat. § 766.106(2)(a) (providing that “prior to filing a complaint for medical negligence, a claimant shall notify each prospective defendant”). While it is desirable to encourage lawyer collegiality and to discourage unnecessary litigation, I do not believe that we can rewrite a statute to conform with certain policy preferences. See Reeves v. Astrue, 526 F.3d 732, 738 (11th Cir.2008) (“The Supreme Court has advised that whatever merits … policy arguments may have, it is not the province of this Court to rewrite the statute to accommodate them.”) (quotation marks, alteration, and citation omitted). The Sahyers opinion provides binding precedent for a district court to ignore a clear Congressional mandate from a federal statute based on its “inherent powers.” Such precedent oversteps the boundaries of our proper duty as neutral arbiters and obviates the role of Congress. My discussion could end here, as the plaintiff was the prevailing party, and the FLSA’s plain language is controlling.
Moreover, I also disagree with the Court’s statement that “a lawyer’s duties as a member of the bar-an officer of the court-are generally greater than a lawyer’s duties to the client.” Sahyers, 560 F.3d at 1245 n.7. It bears repeating that the Sahyers opinion failed to cite any statute, rule, local rule, or case from this Circuit, the Middle District of Florida, or elsewhere that even arguably imposes a duty on an attorney to contact prospective opposing counsel where that counsel represents a law firm or a lawyer. I can find no rule of professional responsibility that would place Sahyers’ lawyer on notice that it is a breach of professional or ethical responsibility to file a lawsuit against a fellow lawyer without the courtesy of advance notice. Honorable though it may be, providing a lawyer-defendant with pre-suit notice in FLSA cases is neither a requirement, nor a breach of a lawyer’s ethical responsibility.
I recognize that the appropriate balance between duty to a client and duty of candor to the court is certainly a difficult one to strike. In certain circumstances, a lawyer’s duty to the court is “greater” than his or her duty to a client. However, while counsel owes a duty to the court, context matters. The plaintiff did not instruct her counsel to commit a crime, to perpetrate a fraud upon the court, or to file a frivolous lawsuit. Rather, the plaintiff merely instructed her counsel to file a lawsuit, which-considering the fact that defendants filed an answer as opposed to a motion to dismiss and ultimately offered judgment-appeared to have, at least, some merit. In fact, the Model Code of Professional Responsibility appears to require exactly what the plaintiff’s counsel did-follow his client’s instructions: “[T]he lawyer should always remember that the decision whether to forego legally available objectives or methods because of non-legal factors is ultimately for the client and not for himself.” Model Code of Prof’l Responsibility EC 7-8 (1983); see also id. at EC 7-7 (providing that, except in areas of legal representation not affecting the merits of the cause or substantially prejudicing the rights of a client, “the authority to make decisions is exclusively that of the client and, if made within the framework of the law, such decisions are binding on his lawyer”) (emphasis added). Hence, not only is there no rule requiring plaintiff’s counsel to give pre-suit notice to his fellow lawyers, plaintiff’s counsel had an ethical duty to follow his client’s instructions. In applying the Sahyers opinion’s reasoning, however, a plaintiff’s lawyer must ignore a client’s explicit instruction to file an arguably meritorious lawsuit and must first give “word” by way of a phone call, e-mail, or letter before “su[ing] his fellow lawyers.” This rule should not be the law.
The Sahyers opinion equated the conduct of the plaintiff’s counsel to bad faith: “the conscious indifference to lawyer-to-lawyer collegiality and civility exhibited by Plaintiff’s lawyer (per his client’s request) amounted to harassing Defendants’ lawyers by causing them unnecessary trouble and expense and satisfied the bad-faith standard.” 560 F.3d at 1246 n.9. It relies on Litton Systems, Inc. v. American Telephone & Telegraph Co., 700 F.2d 785 (2d Cir.1983), stating that “[a] court … may deny an award of litigation expenses to which a client is otherwise entitled.” Sahyers, 560 F.3d at 1245. As a threshold matter, Litton Systems, a Second Circuit opinion, is not binding precedent in this Circuit; it is merely persuasive authority. Additionally, Litton Systems does not stand for that broad proposition, and, even if it did, the facts of Litton Systems are so far removed from Sahyers that the former sheds no light on the latter. The Litton court merely affirmed a sanction pursuant to Federal Rule of Civil Procedure 37 finding “gross negligence” and “willful misconduct.” Here, the district court did not impose any sanction and did not invoke Rule 37. Instead, it carved out a “special circumstances” exception to the FLSA. See District Court Order at 3. The only reason relied upon by the district court to award Sahyers “nothing” as an attorney’s fee was the failure to extend the professional courtesy of pre-suit notice to a law firm. This conduct does not amount to bad faith.
Finally, I am troubled by the implication that lawyers are entitled to exclusive treatment under the FLSA. Although the Sahyers opinion states that it does not intend to create a new rule of pre-suit notice in FLSA cases where the defendant is a law firm or a lawyer, such language will surely fall on deaf ears in this Circuit (as it should) in light of the fact that Sahyers is a published opinion, which makes it binding precedent in this Circuit. See I.O.P. 2 to Fed. R.App. P. 36 (“Under the law of this circuit, published opinions are binding precedent.”). Section 216(b) pays no attention to the occupation of the defendants. Neither should we. The Sahyers opinion has unintentionally created a new rule that a plaintiff’s failure to give pre-suit notice to a lawyer-defendant in an FLSA case may forfeit the plaintiff’s otherwise statutory right to attorneys’ fees and costs. Courts within this Circuit will rely on Sahyers and will interpret it as creating a discretionary exception to a mandatory fee statute. In point of fact, courts both within this Circuit and outside of this Circuit have already followed suit, recognizing, but not yet applying, the proposition that no fee can be a reasonable fee under the FLSA when a plaintiff fails to give pre-suit notice to a lawyer-defendant. See Roldan v. Pure Air Solutions, Inc., S.D. Fla.2010.
Moreover, there is no indication in the record that plaintiff’s counsel filed this lawsuit in an attempt to “shake down” the defendants for attorneys’ fees and costs. The case settled after discovery ended, and the defendants made an offer of judgment only after they had the opportunity to look at the evidence. Any determination that the case would have settled if plaintiff’s counsel sent a pre-suit notice to the defendants (based on the record as it appears before us) is pure speculation. In other words, pre-suit notice may not have made a difference. Moreover, at the motion hearing before the district court, Sahyers’ counsel asserted that (1) Sahyers herself made a demand on the law firm prior to litigation, and (2) he lacked the records necessary to make a pre-suit demand before filing the lawsuit. Tr. of Jan. 24, 2008 Mot. Hr’g at 21:19-23 (arguing that had the defendants deposed Sahyers, “she would have testified that she did ask for her money”); id. at 22:12-18 (arguing that “[plaintiff’s counsel] did not have access to [Sahyers’] time records”).
While counsel’s arguments are not evidence, an evidentiary hearing would prove or disprove these assertions. The district court made no specific factual findings based on any evidence regarding, for example, bad faith on behalf of the plaintiff or the necessity of the litigation. The Sahyers opinion relied solely on plaintiff’s counsel’s failure to give pre-suit notice. Since we have held that “an inquiry into a party’s bad faith is best conducted by the district court,” Turlington v. Atlanta Gas Light Co., 135 F.3d 1428, 1438 (11th Cir.1998), I would at least have remanded this case back to the district court for an evidentiary hearing with instructions to engage in the lodestar analysis.
A district court retains the discretion to determine or to set a reasonable attorney’s fee under the FLSA, but the district courts, in my view, lack the discretion to deny all fees and costs by way of a “special circumstances” exception to promote collegiality. I agree completely with the efforts of the distinguished district judge to seek to promote professionalism and civility in the practice of law. It is an important component of judicial administration. I also agree that this Court was well-intentioned in deferring to the district court’s discretion; however, I fear that we went too far. My primary concern is with the precedent this case now creates: It is now within the discretion of district courts in our Circuit to deny attorney’s fees to lawyers who fail to extend professional courtesies to lawyer-defendants in FLSA and (presumably other) civil rights cases. This new law will undoubtedly discourage public interest lawyers from taking these cases. Although the plaintiff prevailed in her FLSA claim, her lawyer was unable to recover any fees or his client’s costs as mandated by Congress. I would prefer that the full Court consider this appeal before creating this new precedent.”
Many legal scholars have already voiced their opinion that this case is likely headed to the United States Supreme Court for ultimate decision. Stay tuned, because this one is likely not done yet.
Overtime Law Blog 