Class Action, Employment: Eighth Circuit Court Of Appeals Reverses $1 Fee Award To Class Counsel Where Some Work Was Done Despite Failing to Segregate Compensatory/Fee Negotiations And Despite Billing Problems

Dissenting Circuit Judge Would Have Affirmed District Judge Fee Award.

            Vines v. Welspun Pipes Inc., No. 20-2168 (8^th Cir. Aug. 18, 2021) is an interesting case which shows how appellate circuit judges can have differing perspectives on approaching class action fee awards.

            What happened in this one is that class action counsel on federal/state wage hour claims, after not much litigation and after limited success on some defendants, had to take three swings at a class action settlement of the wage/hour claims against the main defendant, failing to heed the Eighth Circuit’s prohibition of not settling the merits claims and fees award issue in FLSA cases in tandem.  For purposes of forging a settlement, class counsel basically insinuated to the defense that they would be subject to exposure in much more in unearned fees if the defense did not capitulate, which it did.  The settlement valuation eventually came to around $308,000 (but at least $270,000), with class counsel wanting $96,000 in fees.  The district judge granted only $1 in fees due to certain billing practices and class counsel’s conduct in not segregating merits/fees negotiations.  (If $1 was not the correct amount, the district judge indicated that it would only award $25,000.) 

            The Eighth Circuit, in a 2-1 opinion, reversed.  The majority found that reversal was required because the district judge failed to determine the lodestar (although ruling on the appropriate hourly rates, but not calculating the rest of the equation) and to opine that some amount over $1 was likely due based on class counsel’s efforts.   However, the majority did not hamstring the district judge as far as discounting for unprofessional conduct on the merits/fees negotiations snafu.

            The dissenting judge found the $1 award was no abuse of discretion based on the conduct of class counsel, not condoning those attorneys squeezing extra fees based on the leverage of obtaining future unearned fees from the defense and failing to segregate merits/fees negotiations.

            However, the appeals court refused a reassignment to a different district judge request, such that it will be interesting to see if this is little more than a pyrrhic victory for the plaintiffs’ side.