Gombos Leyton Blog

In Reducing an Award of Attorney's Fees, Fourth Circuit Emphasizes "Limited Success" of Settlement Relative to Damages Sought

Posted by Dave Obuchowicz on Aug 2, 2019 12:13:51 PM

The Fourth Circuit recently ordered a substantial cut to a District Court's award of attorney's fees in a Fair Labor Standards Act ("FLSA") class action lawsuit.  The court's analysis primarily focused on the relative success of plaintiff's claims when compared to the original damages sought.  

Plaintiff's in that case (Randoph v. PowerComm Construction, Inc., Case No. 18-1728) originally sought over $1.75 million for alleged failure to pay overtime.  Months later, plaintiffs reduced their demand to just under $790,000, and they eventually settled their claim for $100,000.   Attorneys for plaintiffs filed a motion for  fees, seeking $227,577--over double the settlement amount.  The district court awarded $183,764, and defendants appealed.  The Fourth Circuit ordered reconsideration of the award, and, on remand, the trial court reduced the award by $6,000.  Defendant's again appealed, and this time, the Fourth Circuit specifically ordered an additional 25% reduction in the award of attorney's fees.  

The Fourth Circuit found that the district court did not adequately account for the fact that "plaintiff's were categorically unsuccessful in their recovery," as the award  represented only 6% of what was originally sought at the outset of the litigation.  The court reasoned that, while a large reduction of attorney's fees could disincentive plaintiffs' counsel from reaching reasonable settlements, the inverse is also true.  Failing to properly reduce the award to could incentivize attorneys "to solicit clients with the promises of riches when they do not have sufficient proof to support their claims."  

The Fourth Circuit's analysis should serve as a caution to attorney's seeking inflated damages in claims with fee-shifting provisions (such as the FLSA).  While a large damages figure may project strength at the outset of a case, it could come back to bite plaintiff's counsel later when a more reasonable calculation of damages prevails.  

If you have any questions about this topic or other issues related to challenges to excessive claims for attorney's fees, contact David Obuchowicz at 703-934-9843 or dobuchowicz@glpclaw.com

Topics: FLSA, Litigation, Employment Law

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