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.

While the wait continues for a California Supreme Court decision in the Brinker case that will establish exactly what constitutes meal and rest break violations, the Second Appellate District has issued an important, pro-worker ruling regarding the Labor Code’s requirement (under § 226.7(b)) that employers compensate employees with an additional hour of pay for meal and rest break violations.  See United Parcel Serv. v. Super. Ct., No. B227190 (Cal. Ct. App. Feb. 16, 2011) (order denying petition for writ of mandate) (available here).

At issue in Allen v. UPS, pending in L.A. Superior Court’s Complex Division, before Judge Carl J. West, was the defendant’s contention that Section 226.7(b) provides for only one penalty, or “premium,” payment per employee per day, irrespective of the total number of meal and rest break violations.  Thus, by UPS’s conception of the statute, if both meal and rest break violations occur for the same employee, during the same workday, the employer would owe only one extra hour of pay pursuant to Section 226.7(b).  Judge West disagreed, and denied the UPS motion.

UPS filed their writ petition, which Division Eight of the Second Appellate District denied, thereby sustaining Judge West’s ruling.  The extensively-reasoned written decision is expected to have influence beyond the somewhat limited realm in which California intermediate appellate opinions are formally binding.  Foremost, federal courts, which increasingly preside over wage-and-hour class actions concerning questions of California law, are likely to consult and rely on the UPS ruling.  Additionally, the valuation of meal and rest break claims settled in mediations now have a definite reference point, and a non-speculative basis for countering defendants who insist that Section 226.7 payments are limited to one per day, per employee. 

In an important articulation of the standing requirements under California’s Unfair Competition Law (UCL) and Rule 23’s requirement that common questions of law or fact predominate in certified class actions, the Ninth Circuit has reversed Central District Judge Dale Fischer’s 2008 denial of class certification in three consolidated cases alleging that Ticketmaster deceived plaintiffs into registering for a coupon program that resulted in nearly $60 million in unintended charges triggered by a website “click through.”  See Stearns v. Ticketmaster Corp., No. 08-56065, No. 09-56126, No. 10-55341, 2011 U.S. App. LEXIS 17454 (9th Cir. Aug 22, 2011) (available here).   

Judge Fischer had denied certification of the UCL action, reasoning that all class members—the named plaintiffs as well as the absent class members—must identically prove the requisite injury to establish standing and thereby be eligible to seek remedies for the allegedly deceptive practice.  Stearns at *11-12.  The necessity of those individual determinations, Judge Fischer concluded, gave rise to individual issues, thus precluding certification.  Id.  The Ninth Circuit reversed.  

Writing for a unanimous three-judge panel, Circuit Judge Ferdinand F. Fernandez explained that the California Supreme Court’s In re Tobacco II requires only that the named plaintiff in a UCL action demonstrate actual injury and that Ninth Circuit precedent holds the same, as do class actions generally, stating: “At least one named plaintiff must satisfy the actual injury component of standing in order to seek relief on behalf of himself or the class.  The inquiry is whether any named plaintiff has demonstrated that he has sustained or is imminently in danger of sustaining a direct injury as the result of the challenged conduct.”  Id., citing Casey v. Lewis, 4 F.3d 1516, 1519 (9th Cir. 1993).  He also underscored that “our law keys on the representative party, not all of the class members, and has done so for many years.”  Stearns at *15.

An Ohio court has ordered Ford Motor Co. to pay $2 billion to a class of more than 3,000 Ford-franchised truck dealers who allege that Ford unfairly concealed wholesale price discounts from certain dealers, causing them to overpay for large commercial trucks.  See Westgate Ford Truck Sales, Inc. v. Ford Motor Co., No. CV-02-483526 (Ohio Ct. Common Pleas June 10, 2011) (ruling re: motions for summary judgment) (available here).

The dealers sued Ford in 2002, alleging that the company breached its agreement to sell trucks at published prices, which forced them to overpay for the trucks from 1987 through 1998 and resulted in lost profits.  Following a trial that adjudicated the claims of only the named plaintiff, Ford attempted to revive ten separate summary judgment motions and to decertify the class represented by the named plaintiff.  Judge Peter J. Corrigan rejected all of Ford’s post-trial motions; upheld a $4.5 million verdict awarded to the named plaintiff; and ordered Ford to pay similar damages, plus interest, to a class of approximately 3,000 other dealers, resulting in the roughly $2 billion total judgment.

In arguing for decertification, Ford contended that the named plaintiff had abandoned the damages model that had been the basis for class certification, and that the damages model actually used created conflicts within the certified class (thus warranting decertification).  See Id. at 5.  The court rejected both arguments, holding that the damages model proffered by plaintiffs was based upon the same methodology as the one relied upon at the certification stage, and in any event was not a source of conflict.  See Id. at 5-6. 

The damages model employed was quite straightforward, and likely has considerable application to consumer class actions alleging misrepresentations or omissions.  The court described a dealer’s damages as simply “the total of the differences between the discounts he should have received and the discounts he actually received.”  Id. at 6.  Likewise, where a consumer alleges that a manufacturer or retailer has omitted material information about a product, the determination of damages is easily amenable to class treatment as the difference between the amount that consumers paid and the amount by which the omitted information would have diminished the price of the at-issue product for a reasonable consumer.