Feb. 12, 2013 – A jury awarded compensation to Shawn Johnson for her employer’s failure to pay her a minimum wage. Recently, a state appeals court ruled the lower court must reconsider the amount of attorney's fees that should be awarded.
Johnson asked for $112,000 in attorney fees. The court awarded $10,000. In Johnson v. Roma II-Waterford LLC, 2012AP1028 (Feb. 7, 2013), a three-judge panel for the District II Appeals Court reversed for a reconsideration of the attorney’s fees.
“Johnson argues the court erroneously exercised its discretion because the court’s decision fails to demonstrate a reasonable basis for this greater than ninety percent reduction in her request. We agree,” wrote Appeals Court Judge Brian Blanchard.
The appeals panel also reversed to determine whether Johnson should receive liquidated damages under federal wage law and a penalty under state law.
Johnson was working as a waitress and became a manager of a Roma Pizza II restaurant. After quitting, she claimed the restaurant violated federal and state wage laws by inadequately compensating her for a period of employment.
The Wisconsin Department of Workforce Development determined that Roma II owed Johnson nearly $8,200. Johnson filed a complaint in circuit court when Roma II refused to pay. Ultimately, a jury found that Roma II owed $3,648 for failing to pay Johnson a minimum wage rate. Johnson filed a post-verdict motion for additional relief.
She asked for liquidated damages under federal law, which would double the amount of the verdict. She also asked the court to impose a penalty allowed under Wis. Stat. section 109.11(2)(b) for “increased wages of not more than 100% of the amount of those wages due and unpaid,” in addition to the amount of wages due and unpaid.
She also asked for $112,000 in attorney fees under the fee-shifting provisions of both federal and state laws, 29 U.S.C. § 216(b) and Wis. Stat. § 109.03(6).
Fee-shifting statutes allow plaintiffs to recover attorney’s fees from defendants if the plaintiff prevails. In Wisconsin, fee-shifting statutes presumptively limit the amount of attorney fees to three times the amount of compensatory damages awarded.
The Racine County Circuit Court denied Johnson’s additional relief request for liquidated damages and penalty amounts, and awarded a substantially reduced amount of $10,000 for attorney fees. Johnson appealed on all three points.
Records showed that the employment law attorneys for Johnson worked 480 hours between April 2006 and December 2010 at rates ranging from $160 to $250 per hour. An outside employment lawyer testified that the work performed was necessary and reasonable to pursue the case, and the rates and hours worked were reasonable.
But the circuit court ruled that litigation was emotionally-driven as a result of a prior romantic relationship between Johnson and Roma II owner Mark Galluzzo. That is, the requested $112,000 in attorney’s fees was the result of mutual over-litigation.
In reducing the request, the court also noted that Johnson and Galluzzo dealt loosely in financial aspects of the business, as both could remove cash from the register at will.
The appeals panel ruled that both “over-litigation” rationales were an appropriate basis to reduce an award of attorney’s fees under the lodestar approach, which is the starting point that courts must use to determine whether attorney fees are reasonable.
“Both rationales describe a type of over-litigation, which clearly constitutes a legitimate basis, under the lodestar approach, to reduce the amount of hours for which attorney’s fees should be awarded,” Judge Blanchard wrote.
The problem, the panel noted, “is that we lack an explanation or pertinent record evidence to support the particular substantial reduction made by the circuit court.”
It said the circuit court’s fact findings were insufficient to explain how the court arrived at the $10,000 amount. “[T]he court appeared to ‘eyeball’ a figure of $10,000 in light of its findings that the parties over-litigated their case,” Blanchard wrote.
The panel noted that the $10,000 award effectively placed all blame for over-litigation on Johnson, contrary to the purpose of fee-shifting statutes. “The purpose of the fee-shifting provisions at issue is to encourage wage claimants to bring meritorious claims and to help ensure that successful claimants are made whole,” Judge Blanchard wrote.
The panel ordered the circuit court to reexamine the determination of reasonable attorney’s fees consistent with the appeals panel’s decision.
Liquidated Damages and Penalty
The panel also reversed on the issue of liquidated damages and the state law penalty under section 109.11(2)(b), ruling the court erroneously exercised its discretion.
“Here, the circuit court provided essentially no rationale for denying liquidated damages under the federal statute or for denying the penalty under the state statute,” Blanchard wrote. ”We thus have no way of knowing whether the circuit court applied the legal standards above to the relevant facts of record in a logical manner.”
It remanded the case on these issues for reexamination, noting that the court may not deny liquidated damages unless it finds Roma II acted in good faith. It may impose the state law penalty if Roma II’s conduct was “dilatory or otherwise unjust,” it noted.