Holick v. Cellular Sales of N.Y., LLC

48 F.4th 101

Jan P. HOLICK, Jr., on behalf of themselves and all others similarly situated, Steven Moffitt, on behalf of themselves and all others similarly situated, Justin Moffitt, on behalf of themselves and all others similarly situated, Gurwinder Singh, on behalf of themselves and all others similarly situated, Jason Mack, on behalf of themselves and all others similarly situated, Timothy M. Pratt, on behalf of themselves and all others similarly situated, William Burrell, Plaintiffs-Appellees,

v.CELLULAR SALES OF NEW YORK, LLC, Cellular Sales of Knoxville, Inc., Defendants-Appellants.

Docket No. 21-948-cv

August Term, 2021

United States Court of Appeals, Second Circuit.

Argued: April 25, 2022

Decided: September 7, 2022

C. LARRY CARBO, III, Chamberlain, Hrdlicka, White, Williams & Aughtry, P.C. (Julie R. Offerman, on the brief), Houston, TX, for Appellants.

RONALD G. DUNN, Gleason, Dunn, Walsh & O'Shea, Albany, NY, for Appellees.

Before: POOLER, WESLEY, and CARNEY, Circuit Judges.

POOLER, Circuit Judge:

Cellular Sales of New York, LLC and Cellular Sales of Knoxville, Inc. (collectively "Cellular") appeal from the March 15, 2021 order of the United States District Court for the Northern District of New York (Stewart, M.J. ) granting attorney's fees of $576,870.30 to name plaintiffs Jan Holick, Steven Moffitt, Justin Moffitt, Gurwinder Singh, Jason Mack, William Burrell, and Timothy Pratt ("Plaintiffs"). The parties reached a settlement on the merits claims, leaving only the issue of the attorney's fee award to be settled on appeal. See Holick v. Cellular Sales of N.Y., LLC , No. 1:12-CV-584 (DJS), 2021 WL 964206 (N.D.N.Y. Mar. 15, 2021) (" Holick III ").

Cellular argues that (1) the district court abused its discretion in finding that Plaintiffs’ successful minimum wage and overtime claims were sufficiently intertwined with their unsuccessful unfair wage deduction, unpaid compensable work, and untimely commissions claims under the Fair Labor Standards Act ("FLSA") and New York Labor Law; and (2) regardless of whether the claims were intertwined, that the district court abused its discretion in reducing the attorney's fees award by only 40 percent given Plaintiffs’ relative lack of success. We disagree, and affirm for the reasons set forth below.

BACKGROUND

Plaintiffs were owners of companies that sold cellular service plans and devices to customers through contracts with Cellular, an authorized Verizon Wireless dealer that operates retail stores in upstate New York. Holick v. Cellular Sales of N.Y., LLC , No. 1:12-CV-584 (DJS), 2019 WL 1877176, at *1 (N.D.N.Y. April 26, 2019) (" Holick I ").

The specifics of the compensation model between Plaintiffs and Cellular are complex and not relevant to this appeal, but in broad strokes Cellular paid Plaintiffs commissions for every cellular service plan they sold. However, if a customer canceled their cell service plan within 180 days of purchasing it, then Cellular would deduct the sale from its following check to the Plaintiffs. Id. at *1-2 ; J. App'x at 336 ¶¶ 22-23. Plaintiffs were not paid an hourly wage or a salary. Holick I , 2019 WL 1877176, at *2.

Plaintiffs brought a class action complaint against Cellular for unfair wage deductions, unpaid compensable work, untimely commissions, unjust enrichment, and failure to pay minimum wage and overtime under the FLSA and New York Labor Law. "Essentially, Plaintiffs claim that Defendants misclassified them as independent contractors instead of employees as defined by the FLSA and [New York Labor Law], thus depriving them of employee benefits required by law." Id . at *2 (internal quotation marks omitted). Plaintiffs sought more than $4 million in class damages, and roughly $700,000 in damages for the name Plaintiffs. Holick III , 2021 WL 964206, at *4.

In April 2019, the district court denied Plaintiffs’ motion for class certification, finding that:

Plaintiffs have failed to demonstrate that they are similarly situated to the degree necessary to maintain an FLSA collective action, or to certify a Rule 23 class action. The Court finds that Plaintiffs’ disparate and highly individualized experiences with the Defendants are not conducive to the production of representative evidence required to proceed collectively. Plaintiffs’ inability to present common proof demonstrating the nature of their employment relationship with Defendants frustrates the possibility of collective resolution and militates against considerations of fairness and procedure.

Holick I, 2019 WL 1877176, at *1. Plaintiffs appealed the district court's decision.

Plaintiffs then moved for partial summary judgment and Cellular cross-moved for summary judgment. The district court denied Plaintiffs’ motion in full, and granted Cellular's motion as to Plaintiffs’ claims for wage deductions, untimely commissions, and unpaid compensable work. Holick v. Cellular Sales of N.Y., LLC , No. 1:12-CV-584 (DJS), 2019 WL 3253941, at *1 (N.D.N.Y. July 19, 2019) (" Holick II "). It found questions of material fact as to whether the Plaintiffs were employees or independent contractors under the FLSA and New York Labor Law, as well as on the minimum wage and overtime claims. Id .

The case proceeded to a bench trial. The district court determined that the Plaintiffs were employees of Cellular and granted them judgment of $11,121 for unpaid minimum wages and overtime, plus liquidated damages and prejudgment interest. Holick III , 2021 WL 964206, at *1. Cellular appealed from the district court's decision.

While the merits appeals were pending, the district court proceeded to the issue of fees and costs, to which Plaintiffs were entitled as the prevailing party. Plaintiffs sought $961,450 in attorney's fees and costs of $46,065. Id. at *2. The district court noted that "the degree of success obtained by the plaintiff" was "the most critical factor" in determining reasonable attorney's fees. Id . at *2-3 (internal quotation marks omitted). Cellular argued that the fee needed to be drastically reduced, in relevant part, because Plaintiffs were unsuccessful on their unlawful wage deduction, untimely commission and compensable work claims. Id. at *4. The district court disagreed, finding that the unsuccessful claims were inextricably intertwined with the successful claims:

Plaintiffs’ claims were all based upon the terms of the contracts between Plaintiffs and Defendants, the circumstances under which commissions were earned, and the formula by which Plaintiffs were paid. These claims would largely require similar discovery and proof and would be difficult to sever in the billing records. These claims are, generally, sufficiently intertwined with Plaintiffs’ claims that were ultimately successful – their overtime claims and minimum wage claims – that a further reduction is not needed to account for the dismissed claims.

Id. The district court agreed with Cellular that the unjust enrichment claim voluntarily dismissed by Plaintiffs was not intertwined, and deducted the time billed for that claim. Id. at *5. The district court granted Plaintiffs $576,870.30 in attorney's fees to Plaintiffs—a roughly 40 percent deduction from the amount Plaintiffs initially sought. Id . This appeal followed.

Shortly before oral argument took place in this appeal, the parties, with the help of the Second Circuit mediation program, reached an agreement to settle the pending merits appeals. The parties stipulated to conditional certification of collective actions, and provided for payments to 41 opt-in plaintiffs. Cellular agreed to pay the Plaintiffs and opt-in plaintiffs a maximum of $89,710.61. [Settlement Agreement Pg. 4 ¶ 1.10] The parties were unable to settle their dispute as to the attorney's fee award.

DISCUSSION

We review a district court's decision to grant attorney's fees for abuse of discretion. Gortat v. Capala Bros., Inc. , 795 F.3d 292, 295 (2d Cir. 2015). "We afford a district court considerable discretion in determining what constitutes reasonable attorney's fees in a given case, mindful of the court's ‘superior understanding of the litigation and the desirability of avoiding frequent appellate review of what essentially are factual matters.’ " Barfield v. N.Y.C. Health & Hosps. Corp. , 537 F.3d 132, 151 (2d Cir. 2008) (quoting Hensley v. Eckerhart , 461 U.S. 424, 437, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983) ).

I. Intertwining

"In addition to providing for liquidated damages, the FLSA directs courts to award prevailing plaintiffs reasonable attorney's fees and costs." Barfield , 537 F.3d at 151 ; see also 29 U.S.C. § 216(b) ("The court in such action shall, in addition to any judgment awarded to the plaintiff or plaintiffs, allow a reasonable attorney's fee to be paid by the defendant, and costs of the action."). What constitutes "reasonable attorney's fees" is the subject of much litigation, as it involves far more than determining whether the rate charged and hours billed are fair and appropriate.

"The most useful starting point for determining the amount of a reasonable fee is the number of hours reasonably expended on the litigation multiplied by a reasonable hourly rate." Hensley , 461 U.S. at 433, 103 S.Ct. 1933. A court determines whether the hours claimed by the prevailing side were "reasonably expended," and adjusts the award accordingly. Id. District courts are then charged with factoring in "other considerations that may lead the district court to adjust the fee upward or downward, including the important factor of the results obtained." Id. at 434, 103 S.Ct. 1933 (internal quotation marks omitted).

"Where a plaintiff has obtained excellent results, his attorney should recover a fully compensatory fee." Id. at 435, 103 S.Ct. 1933. Conversely, "where the plaintiff achieved only limited success, the district court should award only that amount of fees that is reasonable in relation to the results obtained." Id. at 440, 103 S.Ct. 1933. Courts look to "[b]oth ‘the quantity and quality of relief...