Today’s post touches upon an important procedural aspect of Fair Labor Standards Act (“FLSA”) case law. This is a good read for my colleagues who are labor and employment lawyers.
As many people know, I am quite critical of the FLSA and many of the FLSA mills that exist throughout the country. That’s right: FLSA mills. That’s what we call law firms whose entire business model consists of filing high volume, low quality, an often frivolous FLSA cases. The problem is particularly bad in Miami, Fort Lauderdale and other parts of Florida. I once defended a group FLSA action where (1) paralegals and legal assistants were running the plaintiff’s case; (2) the plaintiff’s filings where boilerplate and often inapplicable to the actual facts of the case; and (3) the law firm’s office was in a building that probably could have been condemned. But make no mistake about it: This law firm would swear that at least two lawyers worked on the case, spent an incredible number of hours on the litigation, and had rates of at least $300 per hour. This is a big part of why people hate the FLSA: Unscrupulous FLSA mills.
So yes, lots of plaintiff-side FLSA lawyers are questionable. And the FLSA itself is a quagmire. It’s a depression era statute filled with grey areas and gotchas. Personally, I would never take an FLSA case where the law is confusing and the company made an innocent mistake. But if a corrupt company is blatantly stealing wages from poor and working-class people? That’s a different story. It just so happens that we recently filed such a case.
The Saga of CIS, Security Guard Non-Compete Agreements, & FLSA Wage Theft
Those of you who have followed our battles with the Florida-based private security company Critical Intervention Services (CIS) may already be familiar with the factual background. Michael Kenny worked as a security guard at CIS for all of three weeks. He spent much of that time in training. CIS assigned Mr. Kenny to work the night-shift. Mr. Kenny, who is a single father, could not find overnight childcare for his daughter. Mr. Kenny asked CIS to change his schedule. CIS refused. Mr. Kenny found another job, working as a security guard at a local bank. CIS found out and sent his new employer a cease & desist letter. The new employer fired him. We sued CIS to declare the non-compete agreement unenforceable. Rather than admit that its non-compete agreement was clearly unenforceable against a low-wage security guard who had worked for the company for three weeks, CIS doubled down. CIS countersued Mr. Kenny for violating of the non-compete agreement and $50,000 in liquidated damages. During discovery in the non-compete litigation, it came to light that CIS had failed to pay Mr. Kenny minimum wages for training time. Our firm filed a federal lawsuit against CIS and its principal Karl Poulin for violations of the FLSA. That brings us to today’s procedural lesson.
Shortly after we launched the FLSA case, CIS’s attorney made a settlement offer. CIS tendered checks in the amount of the unpaid wages and liquidated damages that we had claimed. They offered $6,000 in attorneys’ fees. We rejected that offer and advised that we would settle the matter for the claimed damages and $15,000 in attorneys’ fees. CIS refused and insisted the case was moot because they had tendered the wages demanded.
Let’s unpack this:
- CIS is refusing to admit liability and refusing to pay the attorneys’ fees we have demanded. That’s a non-starter. They have no leverage here. CIS’s position: Because they have tendered payment of the demanded wages, our FLSA claim is “mooted/concluded.” That is simply not true. Contrary to CIS’s assertion, payment of demanded wages and liquidated damages does not moot an FLSA claim. This is where lots of FLSA defendants get themselves into trouble: They have the opportunity early in the case to accept a very reasonable settlement. Here, that settlement was roughly $2,000 in damages and $15,000 in fees. So let’s be clear: CIS could have gotten out of a federal unpaid wage case for $17,000. In the vast scheme of things, that is de minimis. You take that offer, period. Defending the case for even a short amount of time will result in paying your own lawyers much more than that. Inexplicably, CIS and its lawyers rejected that offer and insisted that either (A) we accept their offer or (B) they would file a motion to stay the litigation and ask the Court to rule on attorneys’ fees. In my entire career, I have never before seen anyone do anything remotely like this in federal court.
- To clarify the law: Perhaps ten years ago, Defendants in FLSA cases could moot claims by payment of the damages alone (without attorneys’ fees). But the United States Court of Appeals for the Eleventh Circuit definitely resolved that issue in Wolff v. Royal Am. Mgmt., 545 F. App’x 791 (11th Cir. 2013) (employee’s acceptance of settlement check in the amount of claimed wages did not moot claim because of entitlement to attorneys’ fees). Attorneys’ fees are part of an FLSA claim. If the plaintiff rejects a settlement offer, the only way to get out of dodge is to make a Rule 68 offer of judgment and as part of that offer indicate that the Plaintiff is entitled to fees to be determined by the Court. The risk there is that you are (1) admitting to liability and (2) admitting to fee entitlement. But on the plus side, you can stop the bleeding.
- In response to the Defendants’ argument that our claims were somehow mooted, we naturally had to research this particular point of law and attempt to convince opposing counsel to see the light. Not surprisingly, this time spent researching the law and negotiating with opposing counsel just increased our fees by several thousand dollars. Our response to opposing counsel, in relevant part, is laid out below:
First, I understand your latest suggestion as follows: Absent our acceptance of your most recent offer, you will move the Court to stay the case and ask the Court for a procedure through which the court can adjudicate the amount of attorneys’ fees appropriate in any fee award. As a preliminary matter, I consider it curious that you would spend several thousand dollars of attorney time to brief that issue rather than just allocate those funds to an increased settlement offer. But, after all, that is more time you can bill on the matter and more revenue for your law firm. Putting that absurdity aside, your latest suggestion is at odds with your earlier contention that the Defendants are not admitting to any violations of the FLSA. Your email of today explicitly references the Court adjudicating a “fee award.” As we are all aware, courts do not adjudicate the matter of fee entitlement unless and until the party with a legal entitlement to fees has prevailed in the litigation.
If the Defendants are willing to stipulate to violating the FLSA, stipulate to liability, stipulate to Mr. Kenny’s damages (i.e. the unpaid wages at issue), stipulate that Mr. Kenny is the prevailing party, and stipulate that the only remaining issue to be resolved is the amount of attorneys’ fees to be awarded as part of a final consent judgment in Mr. Kenny’s favor, then we would agree to the same and leave it to the Court to award fees in an amount that the Court deems reasonable. I strongly urge you to review Wolf v. Royal American Management, 545 F. App’x 791 (11th Cir. 2013). The law is clear and clearly against your position.
- At this point, we demanded the full sum of attorney time billed ($21,000) plus a judgment in our favor or stipulation to liability. Once again, CIS and its lawyers rejected this offer.
- After several more emails back and forth wherein we advised CIS’s counsel that its suggested motion to stay was procedurally improper, CIS – yep, you guessed it – filed that motion anyway. Our Response in Opposition nicely lays out the framework:
“Defendants’ Motion, more simply stated, asks this Court, “Ignore the law and just let us have our way.” But that is not how the law works. Defendants want to end this litigation. They are willing to pay Mr. Kenny the liquidated damages he has demanded. But they are unwilling to accept liability in the form of a judgment against them. Likewise, they are unwilling to pay the attorneys’ fees that Mr. Kenny is entitled to recover. The undersigned counsel repeatedly has made Defendants the following offer: Agree to judgment against the Defendants as to liability and damages in the amount of liquidated damages demanded and we will agree that the issue of attorneys’ fees should be determined by the Court. Defendants repeatedly have rejected this offer. Instead, they have insisted upon filing the instant Motion.
Defendants’ Motion cites no legal authority whatsoever in support of the relief requested. That is because no such authority exists. Courts do not force plaintiffs to accept settlements and do not rule on attorneys’ fees as part of such settlements. Courts rule on entitlement to attorneys’ fees as part of a judgment. For Mr. Kenny to obtain a judgment, thereby bringing the issue of attorneys’ fees before the Court, one of two things must happen: Either (1) Mr. Kenny litigates this matter to its conclusion and establishes that the Defendants violated the Fair Labor Standards Act (“FLSA”), or (2) Defendants enter a consent judgment wherein they stipulate to violating the FLSA. To be clear: The Plaintiff has every right to insist upon pursuing this case unless and until he obtains an actual judgment in his favor.
Prior to Defendants filing the instant Motion, the undersigned counsel provided opposing counsel with citations to numerous cases that analyzed this issue. The undersigned counsel repeatedly explained its position and the relevant legal framework. Nevertheless, Defendants claim that Mr. Kenny has put them in an “untenable position” and that Mr. Kenny’s actions are simply not fair. Defendants fail to recognize that refusing to pay Mr. Kenny for seventy (70) hours of licensure training while subjecting him to a security guard non-compete agreement is not only unfair, but also illegal in multiple respects.
It strains credulity to suggest for Defendants’ counsel to suggest that they should be at liberty to rack up billable hours and cost the undersigned counsel more time, but do so with no further exposure or consequences. The Defendants can make a Rule 68 offer of judgment and end this case now. Or they can keep going. But if the Defendants are intent on litigating this case, particularly if they insist on filing motions like this one, they must be prepared to pay the price for that choice.”
- The Court’s ruling on CIS’s Motion to Stay is pending. The motion will be summarily denied. That’s simply not how the law works. And as it stands, we are now north of $35,000 in attorney time on the FLSA case. We will get every dollar of that and more (because CIS doesn’t know when to quit). Also, when it comes to the fee award, we have strong arguments as to why our fees should not be discounted like the fees of many plaintiff-side FLSA mills. Probably 50% of our revenue as a firm comes from billable hourly litigation. We have market-based evidence of what our time is worth. That’s bad news bears for the Defendants.
- The Takeaway: There are lots of frivolous FLSA cases out there and many unscrupulous FLSA lawyer. But that doesn’t mean that there are not legitimate FLSA cases and legitimate FLSA lawyers out there. We don’t have a large volume FLSA practice. But that doesn’t mean we won’t litigate a good FLSA case when one comes along. Perhaps because many companies and corporate lawyers are used to dealing with FLSA mills, these Defendants and defense lawyers do not take FLSA cases seriously. That is a very big and very costly mistake. Properly constructed and competently litigated, an FLSA case can be a vice grip. On the defense side, don’t be foolish. If you have the opportunity to resolve the case early for $10,000 or $20,000 in fees, then do so. If your real goal is to avoid any admission of liability or wrongdoing, then you can’t go the offer of judgment (Rule 68) route. That means you need a settlement. You have to convince the plaintiff to accept a settlement rather than an actual judgment. How do you do that? By offering more money. What’s the worst thing you can probably do? File a “Motion to Stay” like CIS did and cause the Plaintiff’s attorney to rack up more fees.
Jonathan Pollard is a competition lawyer and the principal of Pollard PLLC. Pollard has appeared in or on the New York Times, PBS News Hour, the Wall Street Journal, Bloomberg, The Guardian, and more. For more information, call 954-332-2380