Certification as a Collective Action Doesn’t Justify More than 40% Difference in Attorneys’ Hourly Rate Charged

Posted on May 7th, 2014 by Legal Fee Advisors

In January 2014 decision, in the case of Beauford v ActionLink, LLC, 2014 WL 183904 [ED Ark Jan. 15, 2014], the United States District Court for the Eastern District of Arkansas, Western Division, awarded plaintiffs’ attorneys fees in the amount of $193,473.50. In determining reasonable fees to be awarded, the court conducted a detailed analysis of the attorneys’ fee request, resulting in multiple reductions, including almost 50 percent reduction of the fees sought.

In this case, plaintiffs commenced a collective action for unpaid overtime wages against defendant, under the Fair Labor Standards Act. The court granted summary judgment in favor of defendant against 28 of the 67 plaintiffs.  Due to the various individual settlements, their claims were barred under the doctrine of res judicata. Two weeks before trial, the defendant offered settlements to the remaining plaintiffs totaling $359,455.77, with an express condition that each of the remaining 39 plaintiffs must accept the offer. The offer also included award of reasonable attorneys’ fees determined by the court.

Following acceptance of the offer, plaintiffs submitted attorneys’ fee request in the amount of $332,110 plus costs. In determining reasonable attorneys’ fees to be awarded, the court excluded 147.8 hours from the 1,014 hours sought, because those hours were expanded on claims not included in the settlement, were secretarial in nature or were expanded after the settlement was accepted by plaintiffs.  The bigger issue for this court was the hourly rate claimed by plaintiffs’ attorneys. It is a settled rule that reasonable hourly rate to be awarded is “the prevailing market rate” in the community for “similar work.” Beauford, 2014 WL 183904 (quoting Moysis v. DTG Datanet, 278 F.3d 819, 828 (8th Cir.2002); Emery v. Hunt, 272 F.3d 1042, 1047 (8th Cir.2001))

The attorneys in this case made the court’s job in determining “the prevailing market rate” in the community even easier, because they were already awarded fees for the work performed in a different case, in the same year, where they represented 3 plaintiffs.  In that case, the attorneys sought $200 less for the hour of the main partner, $150 less for the hour of the main associate and between $100 and $50 for hours of other associates and paralegals. The substantial difference in hourly rate could not be justified by the fact that this case was certified as a collective action. The court concluded that “this action entailed much more time and labor than Madden, but that complexity, if complexity is the right word, is considered in determination of the time and labor involved, rather than in the appropriate hourly rate.” Beauford, 2014 WL 183904. The reduction in the hourly rate applied by the court, together with hours excluded by the court, resulted in lodestar totaling $175,885. Lodestar is determined by multiplying “the number of hours reasonably expended by a reasonable hourly rate. Beauford, 2014 WL 183904 (quoting Hensley v. Eckerhart, 461 U.S. 424, 433, 103 S.Ct. 1933, 1939, 76 L.Ed.2d 40 (1983)). Upon determining the lodestar, this court encountered one more challenge, the rare risk following settlement, that defendants won’t be able to satisfy the judgment, what encouraged them to enhance the lodestar by 10 percent, or $17,588.50.

The lesson to be learned here is that complexity of the case and classification as a collective action are not a reason for increases in hourly rates charged by the attorneys. Complexity of a case can be a reason for an increase in number of hours worked or number of attorneys, but not in the rates charged. Courts will only award reasonable hourly rates, and those are rates prevailing in the community.

Enisa Tutovic