Small Damages but Larger Litigation Costs: Recovery of Attorney Fees and Costs can Ruin Your Victory

A recent case from the United States District Court for the Southern District of Florida shows why a settlement is often the best result and how even a small claim can cost a party a substantial amount of money. Although the total amount of money that the magistrate judge awarded to the plaintiff in Roldan v. Pure Air Solutions, Inc., 2010 U.S. Dist. LEXIS 12779 (S.D. Fla. Jan. 29, 2010), may not seem all that impressive for a case in federal court, the result should give all litigators pause to ask if either the plaintiff or the defendants truly benefited from this trial.

The plaintiff was employed as an air conditioning technician for 10 weeks by defendants, a Miami, Florida incorporated air conditioning installation and repair business and the corporation's owner/manager. The plaintiff was paid $ 16.00 per hour, or $ 640.00 for a standard work week. His first week of pay was held back, so he did not receive a paycheck until the end of the second week of work. At the end of his last week of work, the plaintiff received a check for $ 300.00, although it was unclear that the check was for hours that he had worked. The owner claimed that the plaintiff was still owed for less than a full week of work for his last week. The week of pay that was held back was not paid to plaintiff.

The plaintiff filed an action under the Fair Labor Standards Act (FLSA), 29 U.S.C. S. § 201, et seq. in federal district court, alleging that the defendants failed to pay him for overtime pay for the weeks when he worked over 40 hours, and that the defendants failed to pay him the minimum wage rate for the hours that he worked during his final two weeks (one week representing the week of pay that had been held back at the beginning of his employment).

The district court found that although the defendants failed to maintain accurate records of the hours that the plaintiff worked, the plaintiff failed to show that he actually worked in excess of 40 hours in any week. The district court found that although the plaintiff sometimes worked on weekends, he often left work early during the week because of the lack of work. Thus, the district court declined to award the plaintiff any damages on his unpaid overtime claim.

In addition, the plaintiff claimed that the defendants failed to pay him for 110 hours that he worked during his last two weeks of work, and that he was entitled to be compensated under the minimum wage provisions of the FLSA. The district court concluded that the defendants failed to pay the plaintiff for the hours that he worked during his last two weeks and awarded him 80 hours of pay at the Florida minimum wage of $ 6.67. Thus, the plaintiff was awarded the monumental sum of $ 533.69.

The plaintiff then moved for an award of reasonable attorney's fees and costs, arguing that he had prevailed in the action and was entitled to a statutory award under 29 U.S.C.S. § 216 of the FLSA in the total amount of $ 18,010.50. This amount represented a 25% reduction by plaintiff in the total attorney's fees of $ 21,450.00 because he received a reduced recovery of only the unpaid minimum wage claim. The defendants responded that no attorney's fees should be awarded because of the very limited nature of the recovery. The defendants asserted that the entire litigation cost incurred in the case focused on the overtime claim and that that the unpaid minimum wage claim would have been settled had it been the only issue.

The district court held "that an attorney fee award is due in this case based upon the, albeit minimal, positive recovery obtained by counsel in this case." The district court pointed out, though, "That being said, a more traditional approach to a mandated award of fees does not leave the Court powerless to address the unfairness involved in a sledgehammer being used to crack a nut. An award under the FLSA still requires the Court to use the federal 'lodestar' method applicable to many other types of fee award statutes. The lodestar method consists of determining the reasonable hourly rate, then multiplying that number by the number of hours reasonably expended by counsel."

The district court found that the number of hours requested was reasonable, but that the award should be reduced to reflect the degree of success that was obtained by the plaintiff. "Upon analyzing the record in the case, the Court finds that the Plaintiff's proposed reduction to the number of hours expended, a 25% reduction, does not come close to recognizing the limited level of recovery that Plaintiff's counsel achieved in the case."

The court found that the unpaid minimum wage claim was incidental and hardly referenced in the trial. Thus, the district court reduced the lodestar by 85% to $ 3,217.50, an award that "far more accurately represents full value for legal representation incurred due to this claim. At the same time that amount still represents a reasonable financial penalty, in accord with the FLSA, to show Defendant that there is some consequence from putting himself in the position of having an unpaid wage claim remain outstanding for this period of time." The district court went on to state that the defendants should have tendered the entire amount of the unpaid minimum wage claim to the plaintiff or at least made an offer of judgment on that claim, which would have reduced the lodestar fee award substantially.

In addition, the district court made a slight downward adjustment in the plaintiff's claim for taxable costs to $ 983.00. Thus, the plaintiff was awarded attorney's fees and costs of $ 4,200.50 on an FLSA unpaid minimum wages award of $ 533.69. The award of attorney's fees and costs was almost eight times the amount of the award for the claim itself.

There were likely a variety of very sound reasons why the parties were unable to settle this case. But the result does serve to remind us that even a small dispute can incur disproportionate litigation costs, which are borne by our clients.