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Aug 09 2012

Defending Wage Claims Gets More Complicated With NY Ruling

Federal courts are seeing a wave of Wage Claim Litigation under the Fair Labor Standards Act (FLSA) as lawyers for workers get more aggressive in light of stronger Federal and State wage and hour rules. Car washes, restaurants and supermarkets are particularly facing a barrage of challenges brought by their workers revolving around tip claims, overtime and meal breaks. But the old school adage of “fighting fire with fire” took a hit this week when Federal Judge Paul Crotty ruled that aggressive defense tactics drove up the plaintiffs’ legal fees and then further ruled that the defendant had to reimburse the plaintiffs for their legal fees to the tune of $3.8 Million ($400,00 of it was costs).

The case Torres v. Gristedes Operating Corp. was brought by employees of Gristedes, a high-end supermarket chain in New York City. It was a class action brought under the FLSA on behalf of all employees of the chain; two other lawsuits brought by individual employees who did not join the class were also part of the litigation. The parties settled the matter for approximately $3.5 Million on the eve of trial but left open for the court to determine the question of how much of plaintiffs’ legal fees should be paid by the defense.

Under the FLSA, a prevailing plaintiff is entitled to recover reasonable
attorneys’ fees and costs from the defendant. Due to the size and nature of the settlement there was no dispute that the plaintiffs were the “prevailing party.”
Courts traditionally determine a fee award based on what is called a “lodestar” calculation, which is the number of hours reasonably expended on the litigation multiplied by a reasonable hourly rate. The party seeking the fees bears the burden of establishing entitlement to an award and documenting the appropriate hours expended and hourly rates.

In a window into how complicated and expensive it can be to bring and defend this type of class action litigation, plaintiffs’ lawyers from the firm of Outten and Golden submitted time records for 6 partners, 2 Of Counsel attorneys, 13 Associate Attorneys, 19 Law Clerks, 67 paralegals (that’s not a typo), and 3 Technical Support Personnel for a total of 15,094 total hours expended on the case. The defendant sought a reduction of 67% saying most of the hours were excessive, unnecessary and duplicative. But the court noted that much of the work performed by plaintiffs was due to “defendants’ choice of litigation tactics” and that “given the Defendants’ vigorous approach to litigating this case, they cannot now complain as to the amount that Plaintiffs were forced to expend in response.”

A review of the electronic court record reveals that Gristede’s filed a pre-answer motion to dismiss which was denied; then opposed the plaintiff’s motion for class certification (which was granted); then battled plaintiffs a bit on some discovery issues over the records of Union Managers and department heads;then opposed plaintiffs’ motion for summary judgment (which was granted in most part); then opposed a second summary judgment motion by the plaintiff (which was never decided because the parties settled while it was pending). And that’s basically it. No letters to the court complaining about stonewalling discovery, no motions for protective orders because the defense was seeking intrusive or irrelevant information, in short nothing out of the ordinary can be seen from looking at the docket. It reads like a very generic, basic FLSA litigation docket.

Judge Crotty did not delineate what he believed constituted the vigorous defense that meant that defense counsel could not be heard to object to the hours plaintiffs’ counsel put in. This causes two problems for lawyers who regularly represent businesses facing FLSA claims. First, if other courts follow suit without guidelines as to how much of a defense is too much, defendants run the risk of paying whopping attorneys’ fees on top of settlement and judgment amounts for “vigorously” defending the action. Second, lawyers are required by the Code of Professional Responsibility to “zealously advocate on their clients’ behalf.” What happens when the client says “I got stuck with this legal bill (on top of your legal bill) because you didn’t tell me to settle sooner!” Counsel would be wise to review and size up plaintiffs’ claims as quickly and efficiently as possible and to make a reasonable settlement offer if liability appears clear. The client then must be made to understand that to fight “vigorously” could be detrimental to their bottom line.

What a difficult position for counsel to be in. Most clients expect their lawyers to “fight for me.” Recommending settlement early on can be seen by many clients as a sign of weakness and they will change lawyers faster than a baby’s diaper if they think you are not up to the battle. Not to generalize, but most car wash owners, restaurateurs and supermarket chain owners are not wallflowers or butterfly collectors. They are hardened businessmen who had to scrap and fight for every dollar they earned. Certainly, John Catsimitidis, the well-known, cantankerous owner of Gristede’s is someone who does not likely back down from a fight too often. I don’t know how he would take to being asked to sign a letter acknowledging that the law firm told him to settle before discovery was completed or a summary judgment motion was decided. I sense he would take his shopping cart and go elsewhere.

But lawyers must now walk this delicate tightrope of defending their clients’ interests but also making sure that the battle is worth fighting in the first place and that the client understands the risks of a fight to the end. Business owners must similarly become aware of how important it is make this assessment early on and make an objective, calm-minded decision on whether to settle or litigate.

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