The 11th Circuit Court of Appeals, which controls Florida, Georgia, and Alabama, recently ruled that plaintiffs may not recover attorney fees, as they normally would be entitled to under the Fair Labor Standards Act (FLSA), in situations where the defendant-employer pays plaintiffs all the actual damages, liquidated damages, and interest owed to them outside of a negotiated settlement. In Dionne v. Floormasters Enterprises, Inc., the plaintiff filed a lawsuit alleging overtime violations by the defendant. The total amount of damages sought by the plaintiff, including liquidated damages as provided under the FLSA and interest, amounted to $3,000. After the plaintiffs filed the suit, the defendant tendered a payment to the plaintiff for the full amount they were seeking, “in the interests of expeditious resolution of Plaintiff’s claim and efficient use of this Court’s time and resources.” After tendering this payment, the defendant moved to dismiss the claim as moot, since even if the employer was found to be liable, the employer would not have to pay any additional amount to the plaintiff. The court granted the defendant’s motion, dismissing the case with prejudice. However, the employer did not compensate the plaintiff for attorney’s fees and costs, and the court’s dismissal of the case means that the employer’s liability for its illegal conduct was never established.
On appeal, the plaintiff argued that it was owed attorney’s fees, which go above and beyond the $3,000 that the defendant tendered. The FLSA provides attorney fees for the plaintiff, if the plaintiff proves that the employer violated the FLSA wage and overtime laws in his or her suit. Since the only reason that the defendant paid any amount to the plaintiff is that the plaintiff brought a lawsuit, the plaintiff felt he was entitled to the reasonable attorney’s fees that he incurred in bringing the suit and facilitating the payment.
The 11th Circuit Court of Appeals decided that this is a classic application of “catalyst” test, which states that “a plaintiff should be found as prevailing if its ends are accomplished as a result of the litigation even without formal judicial recognition, there is a causal connection between the plaintiff’s lawsuit and the defendant’s actions provided relief to the plaintiff, and the defendant’s actions were required by law.” However, the Court notes, the Supreme Court rejected the “catalyst” test in 2001 in Buckhannon Board & Care Home, Inc. v. West Virginia Department of Health & Human Resources, which requires that plaintiffs demonstrate that such a payment alters the legal relationship between the party’s in order for the plaintiff to be considered the “prevailing party.”
Since the plaintiff is not considered the “prevailing party” as decided in a court of law, it reasons that the plaintiff is not entitled to attorney’s fees as provided by statute.
Even though the 11th Circuit here seems to break new ground, the facts of this case may limit its applicability going forward. For example, the Court distinguishes cases in which plaintiffs are awarded lawyer’s fees and costs following the court’s dismissal of the plaintiff’s claims, where the dismissals incorporate the terms of a settlement between the parties. It is very likely that where there is a settlement between the parties that has been incorporated into a court order, Dionne may not apply. This is supported by the Supreme Court in Buckhannon, which states that judicial imprimatur, or the court’s seal of approval, is a necessary part of establishing a prevailing party in a lawsuit.
Importantly, in this case, the defendant never admitted liability, paid the full amount of damages sought by plaintiffs (including unpaid wages, liquidated damages, and interest), and never entered into a settlement agreement, let alone a settlement agreement that was entered as a court order. For this holding to be applied against plaintiffs in the future, a defendant would have to provide the full amount of unpaid wages, liquidated damages, and interest sought by the plaintiff. While in this case that amount was only $3,000, in many cases that amount may be much higher, and many defendants may be unwilling to pay the entire amount of the damages that plaintiffs seek in lieu of a negotiated settlement.