33% Attorney’s Fee Award Reduced to Lodestar Calculation in FLSA Settlement

Marshall v. Deutsche Post DHL, decided September 21, 2015 involved a collective action against DHL and DHL Express (USA) Inc. The plaintiffs represented a class of DHL agents working at airports in New York, Miami and Los Angeles who were “undercompensated through defendants’ alleged unlawful rounding of time, automatic deductions for meals, and requests that employees work off-the-clock.” Plaintiffs, through class counsel, obtained a settlement of $1,500,000 for the 242 class members involved. In approving the settlement, the district court stated that it had no issues with the settlement amount for the class members, but took issue with the calculation of class counsel’s attorney’s fees pursuant to that settlement. Although class counsel appeared to have billed a total of 1,325 hours on the case for a total lodestar figure of $591,571.25, class counsel requested $500,000 in fees, or one third of the settlement amount, and sought to be reimbursed for $33,371.39 for costs. The magistrate judge approved the proposed settlement and no class member or other interested party made any objection. Fast forward to the settlement approval by the district court – as stated above, the court took no issue with the settlement amount as to the class stating “the settlement is substantively fair and adequate and therefore is approved.” The court next evaluated class counsels’ request for an award equal to 1/3 of the total settlement amount. The court stated a “court may calculate a reasonable attorneys’ fee either by determining the so-called “lodestar” amount or by awarding a percentage of the settlement. “See McDaniel v. Cnty. Of Schenectady, 595 F.3d 411, 417 (2d Cir. 2010). The court also acknowledged that “the trend in this Circuit is toward the percentage method,” but either approach is appropriate. McDaniel, 595 F.3d at 417 (quoting Wal-Mart Stores, Inc. v. Visa U.S.A., Inc., 396 F.3d 96, 121(2d Cir. 2005). Even so, the court, citing to McDaniel, 595 F.3d at 417, stated “the percentage-of-the fund method”…“create[s] perverse incentives of its own, potentially encouraging counsel to settle a case prematurely once their opportunity costs begin to rise.”

The district court ultimately disagreed with the magistrate’s finding that the 1/3 award was reasonable stating that “there is reason to be wary of much of the case law awarding attorney’s fees in FLSA cases in this circuit” citing to Fujiwara v. Sushi Yasuda Ltd., 58 F.Supp. 3d 424, 436 (S.D.N.Y. 2014). Therefore, the district court followed several other New York federal district judges partial to Fujiwara and applied the lodestar method but refused to apply a multiplier. In doing so, the court reduced the award to $370,236.50, approximately 25 percent of the total settlement, stating “[w]hile counsel urge the use of a lodestar multiplier, the various considerations that might justify a multiplier have already been factored into the determination of counsel’s reasonable hourly rate. I decline to add a multiplier to the fee award.” See Goldberger v. Integrated Res., Inc., 209 F.3d 43, 51-57 (2d Cir. 2000).

The Marshall decision could present a concern for mid-size or larger firms, who generally bill at much higher rates, who are considering taking on the risk of employment common fund class or collective actions.

For more information on the FLSA, class or collective actions or any other employment law issue, please contact Dana Perminas at 312-334-3474 or dperminas@messerstrickler.com.

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