Winning the battle, losing the war: 2nd Circuit upholds huge attorneys’ fees

In a recent decision, the U.S. Court of Appeals for the 2nd Circuit (whose rulings apply to all New York employers) upheld the district court’s award of over $570,000 in attorneys’ fees to a law firm that recovered only $11,000 in unpaid wages and overtime. Although the employer’s law firm did a great job of beating back the employees’ claims, the attorney’s fees made this a painful “win” for the employer. Read on to understand the pitfalls of litigating a wage claim and the ways to avoid such an outcome.

Background

Jan P. Holick, Jr., and other employees filed a class action complaint against their employer Cellular Sales for a variety of wage claims including minimum wage and overtime claims, unfair wage deduction, and untimely commissions under the Fair Labor Standards Act (FLSA) and New York Labor Law (NYLL). The employees claimed over $4,000,000 in class damages and $700,000 in damages for the named plaintiffs.

After a bench trial, the district court granted judgment in favor of the employees for unpaid wages and overtime in the sum of $11,121 plus liquidated damages and prejudgment interest and awarded over $576,870.30 in attorneys’ fees, an amount that represented a 40% discount by the district court. Cellular settled the damages issue post-trial for the increased amount of $89,710.61 but appealed the award of attorneys’ fees to the 2nd Circuit, arguing the district court abused its discretion in finding the employees’ successful minimum wage and overtime claims were “sufficiently intertwined” with their unsuccessful other wage claims to justify the huge award of attorneys’ fee.