Articles from September 2011

In the latest action that will define the reach of the Supreme Court’s April ruling in AT&T Mobillity v. Concepcion, 131 S.Ct. 1740 (2011), the National Labor Relations Board (NLRB) will determine whether class action waivers in arbitration agreements violate the guarantee under the National Labor Relations Act (NLRA) that all non-government workers—union and non-union alike—must be permitted to engage in “concerted activities for the purpose of collective bargaining or other mutual aid and protection.”  29 U.S.C. § 157 (2011).  The case, D.R. Horton, Inc. (NLRB Case No. 12-CA-25764), has been fully briefed, and the NLRB may issue its ruling at any time.  Irrespective of the outcome, the losing party is expected to file an appeal, most likely in the Ninth Circuit.

At stake is whether Concepcion, which concerned a consumer contract, is properly applied to employment contracts.  If so, employers could insulate themselves from virtually all class actions seeking the enforcement of workplace laws by inserting arbitration clauses and class action waivers among the stacks of documents new employees sign.  Such a result could lead to the elimination of class actions in the employment context, since few workplace laws carry significant enough damages and penalties to justify individual lawsuits.  This could, in turn, result in the non-enforcement of a broad swath of employment laws.  By contrast, if the NLRB rules that Concepcion is inapplicable to employment contracts, workers’ long-standing ability to seek redress for violations of labor and employment laws, such as unpaid overtime or minimum wages, will remain intact.

Like Concepcion, the D.R. Horton case has its roots in California, as employees of homebuilder D.R. Horton, Inc. seek unpaid overtime by way of class-wide arbitration.  When the company invoked the class action waiver contained in the employees’ arbitration agreements, the employees responded by filing an NLRB complaint, alleging a violation of the NLRA’s “concerted activities” guarantee.  By making the NLRA guarantee the key issue of this case, the D.R. Horton plaintiffs will force the NLRB (and eventually, the Ninth Circuit) to address the tension between the federal government’s purportedly strong preference for arbitration, embodied in the Federal Arbitration Act, and the NLRA’s express protection of collective action by workers.  D.R. Horton is expected to be the second significant decision defining the application of Concepcion to workplace-protection statutes; this past July, in Brown v. Ralph’s Grocery Co., the California Court of Appeal held that Concepcion does not apply to the California Labor Code’s Private Attorneys General Act (PAGA).

The Second Circuit has recently issued a decision with important guidance for trial courts assessing attorney fee applications under a fee-shifting statute. In Millea v. Metro-North Railroad, the plaintiff successfully brought claims against his former employer under the federal Family Medical Leave Act (FMLA), but was awarded only $204 in attorneys’ fees (one-third of the approximately $612 he recovered). See Millea v. Metro-North R.R. Co., 10-409-cv, 2011 U.S. App. LEXIS 16354 (2d Cir. Aug. 8, 2011) (available here).

Because the FMLA contains a fee-shifting provision, the Second Circuit began its analysis with the observation that both it and the U. S. Supreme Court have held that the lodestar method sets a presumptively reasonable fee in actions where a fee-shifting statute applies. See id. at *24. There was no express indication in the district court record of whether a lodestar analysis was conducted, though it does state that Millea requested fees totaling $144,792. Although downward adjustments to a lodestar are sometimes appropriate, the Second Circuit notes that such adjustments should be limited only to “rare circumstances.”  Id.

In assessing the district court’s stated reasons for reducing the fee request, the Second Circuit’s decision took up and rejected each in succession. The decision first addressed the district court’s reliance on the case’s supposed lack of novelty and complexity as one factor in reducing the fee request. The appellate panel reasoned that it is inappropriate to use such reasoning, since novelty and complexity are already embodied in a lodestar, which is based on the total hours billed. More complex or novel cases will naturally require expending a greater number of hours, while less complex issues require fewer hours.  See id. at *25. The panel also rejected the district court’s analysis that the plaintiff’s FMLA claim lacked public policy significance, reasoning that since Congress enacted the fee-shifting provision for FMLA claims, the public policy significance of such claims is not in dispute.  See id. at *26. As to the district court’s conclusion that the fee request should be reduced on the basis of the plaintiff losing on his intentional infliction of emotional distress (IIED) claim, the appellate panel pointed out that, again, this is already incorporated into a lodestar calculation, which excludes claims not eligible for fee shifting (such as the plaintiff’s IIED claim).  Id. at *27.

Finally, as a general statement of principal as to the rules for determining attorney fee awards under fee-shifting statutes, the appellate panel held that it was “legal error” for the district court to have “calculated its final fee award as a proportion of the damages” awarded to the plaintiff.  Id. at *30. The plaintiff’s FMLA-related award was $612.50, and the district court determined the $204 fee award in relation to those damages. The unanimous panel took issue with the implicit premise that the fees must be a fraction of the recovery, irrespective of the amount of the recovery or the significance of the legal issue, stating: “The whole purpose of fee-shifting statutes is to generate attorneys’ fees that are disproportionate to the plaintiff’s recovery.”  Id. at *31.