Compliance Corner – Court Finds Fee Award More Than 25 Times Damages No Abuse of Discretion


A federal district court did not abuse its discretion by awarding almost $698,000 in attorneys’ fees and costs to a former United Parcel Service Inc. employee who won a $27,280 sex discrimination verdict under California law, but did not prevail on age discrimination, retaliation or state tort claims and who submitted an inflated fees request after trial, a divided U.S. Court of Appeals for the Ninth Circuit ruled December 5, 2013.

(Muniz v. UPS, Inc., 9th Cir., 12/5/13)
Factual Background
On appeal, UPS argued the federal district court had abused its discretion under California state law by not reducing to a greater extent the employee’s request for more than $1.9 million in attorneys’ fees to reflect her limited success and her submission of an inflated fees request. In this case the employer had prevailed on the employee’s claims of age bias, retaliation and negligent hiring and supervision claims.

In a split decision, however, the Ninth Circuit majority said the balance of the attorneys’ fees award could stand. The district court’s handling of the employee’s original fee request, which included reducing the claimed hourly billing rates for two attorneys and a paralegal, shaving the hours claimed by 20 percent and reducing the lodestar amount by 10 percent to reflect the employee’s limited success, indicated that the lower court properly exercised its discretion under California state law.

UPS argued the lower court should have assumed the employee’s lawyers spent as much time developing her age discrimination claim, which she abandoned at the summary judgment stage, as on the sex discrimination claims that went to trial. According to the employer, the lower court therefore should have cut more sharply the employee’s attorneys claimed hours. The Ninth Circuit held that the district court properly rejected the employer’s contention that because the jury sustained a mixed-motive defense, this precluded an award of attorney fees for that claim.

UPS argued the district court abused its discretion by declining further to reduce Muniz’s fee request, as her original request for $1.3 million in attorneys’ fees, enhanced by a 1.5 multiplier for a total award of $1.945 million, was “unreasonably inflated.” But the Ninth Circuit said a district court has “broad discretion” to determine whether an inflated fee request warrants reduction and, if so, by what amount.

The court held that in this case the district court concluded that the fee request was inflated, but concluded that a total denial of fees or limiting the award to a nominal amount would be too severe a sanction.

1. As we have discussed many times at the Breakfast Briefings and as part of my Legal Updates, when an employee prevails on a claim under California’s Fair Employment And Housing Act they are entitled to recover attorney’s fees. The California legislature determined that plaintiffs successful in prosecuting such claims should be entitled to attorney fees. See California Government Code §12965(b).

2. The California Supreme Court has instructed that when considering an award of attorney fees and costs, the court must attempt to fairly compensate attorneys for the work performed, and that the court must exercise its discretion with an eye to the public policy behind the statutory attorney fee entitlement – that is to encourage quality attorneys to take on complex and hard fought cases to protect the rights of victims. To achieve this end, the fee is determined through an approach called the “lodestar analysis.”

3. In the legal realm, the “lodestar method” refers to a method of computing attorney’s fees whereby a trial court must multiply the number of hours reasonably spent by trial counsel by a reasonable hourly rate. This figure can then be adjusted upward or downward for certain factors known as multipliers, such as contingency and the quality of the work performed, to arrive at a final attorney fee figure. Under the lodestar method, the most heavily weighted multipliers are the time and labor required.

4. As defined in California case law the “lodestar” method involves a five step process:

Step one: Determine the number of hours reasonably worked on the matter.

Step two: Determine a reasonable hourly rate to apply to the hours worked on the matter.

Step three: Multiply the number reached in Step one by the number reached in Step two, the sum being what is termed the “lodestar number.”

Step four: Consider a number of factors to determine if an enhancement or reduction of the lodestar number is appropriate, and if so, what that multiplier is.

Step five: Multiply the lodestar number times the multiplier (if any) and that number is the attorney fee award.

5. This is very scary process for employers and can result in types of attorneys’ fees awarded in this case where the award to the employee from the jury is very low, but the attorneys’ fees awarded are very, very high. All employers need to take the awarding of attorneys’ fees in employment cases under California law very seriously in making a decision as to what strategy to take in addressing a threat of litigation in the employment context. You need discuss strategy with experienced employment law counsel at the beginning of the problem, not at the end when you may be very unpleasantly surprised!

If you have any questions concerning this email or any other employment law related issues please do not hesitate
to contact me by either replying to this email or by telephone at either 559-244-7500 or 805-934-5770 or my assistant
Ms. Nanci Berry at this number.

This update is provided by Gary W. Bethel and Littler Mendelson in order to review the latest developments in employment law.
This update is designed to provide accurate and informative information and should not be considered legal advice.

© 2013 Littler Mendelson. All rights reserved.


About Littler Mendelson
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