SDNY Holds Lodestar Multiplier of Two Is Sufficient Compensation for FLSA Cases

Practical Law Legal Update 0-588-5405 (Approx. 4 pages)

SDNY Holds Lodestar Multiplier of Two Is Sufficient Compensation for FLSA Cases

by Practical Law Labor & Employment

Background

Sushi Yasuda is a three-star New York City Japanese restaurant. In December 2012, a group of current and former wait staff employees filed an action against the restaurant and its owners alleging several FLSA violations. Soon thereafter, three other employees (together with former and current staff plaintiffs) joined the suit as FLSA opt-in plaintiffs. In September 2013, the plaintiffs moved for class certification of their New York Labor Law claims. In April 2014, before the restaurant filed any opposition, the parties settled the matter. On May 14, 2014, the court authorized notice to the class.

Sushi Yasuda paid $2.4 million to settle the case on a class-wide basis. The parties proposed the $2.4 million settlement be distributed as follows:

$20,000 service award to each of the six class representatives.
$800,000 in fees and costs to the plaintiffs' counsel.
$100,000 to create an Administration and Errors fund.
The remainder ("Net Settlement Fund") to be distributed among class members.

The settlement agreement also contained a confidentiality agreement applicable to the named plaintiffs and their counsel.

After the court questioned the enormity of the proposed attorney's fees, the plaintiffs' counsel:

Lowered its request to $600,000.
Argued that "[c]ourts often awarded lodestar multipliers of up to eight times lodestar, and in some cases, even higher multipliers."
Submitted caselaw demonstrating high lodestar multipliers to buttress its fee application.

In response to the authority cited by plaintiffs' counsel, the Southern District noted that:

The plaintiffs' counsel cited authorities in support of its lofty lodestars that were unconvincing, as there is little consensus in the Second Circuit on the appropriate range for lodestar multipliers.
Many of the authorities cited by plaintiffs' counsel in support of its fee application were proposed orders authored by the counsel's cohorts and entered with little, if any, judges' edits.
Proposed orders drafted by the plaintiffs' counsel, making findings of fact and conclusions of law that reward counsel their requested fees, should be given little weight.
The class bar unjustly creates its own caselaw by citing to its own proposed orders in fee applications.
Attorneys practicing in this area of law work entirely on contingency, so prevailing rates are untested by the marketplace.

Outcome

The Southern District approved the settlement but made the following modifications:

The Plaintiffs' counsel was awarded:
- $480,000, as the court used a lodestar multiplier of two and held that this was "sufficient compensation for the risk associated with contingent fees in FLSA cases"; and
- an additional $20,020.18 in litigation costs, primarily for mediation costs.
Removed the confidentiality requirements applicable to class representatives and class members because:
- "nondisclosure agreements in FLSA settlements contravene public policy"; and
- the agreement arguably applied to absent class members who did not agree to this provision and may unknowingly violate the agreement.
Denied the service awards to class representatives beyond the 50% increase in their share allotment because:
- the increase amounted to a "backdoor" service award; and
- the increase was adequate compensation for their time and for any risk they faced in the lawsuit.

Practical Implications

In light of Sushi Yasuda and the lack of guidance from the Second Circuit on what constitutes a reasonable lodestar multiplier, prevailing plaintiffs seeking attorney's fees under a cost-shifting statute, such as the FLSA, should be prepared to support their fee applications with authority other than uncontested proposed orders that have been drafted by their cohorts. Plaintiffs' counsel in the Southern District should expect that a lodestar multiplier of two will be deemed sufficient compensation for their risk associated with contingent fees in FLSA cases.

SDNY Holds Lodestar Multiplier of Two Is Sufficient Compensation for FLSA Cases | Practical Law