Court Slashes $25K From $30K Attorneys Fees Request Where Plaintiff Loses Most Claims (ND IL)

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After winning one out of nine claims, the plaintiff – a recently fired loan officer – sued to recover about $30K in attorneys’ fees under the Illinois Wage Payment and Collection Act (IWPCA) from his former employer. 

Awarding the plaintiff just a fraction (just over $5K) of his claimed fees, the Northern District in Palar v. Blackhawk Bancorporation, 2014 WL 4087436 (N.D.Ill. 2014), provides a gloss on the factors a court considers when assessing attorneys’ fees.  The key principles:

 – the lodestar method (hours worked times the hourly rate) is the proper framework for analyzing fees in a IWPCA claim;

– a court may increase or decrease a lodestar figure to reflect multiple factors including (i) the complexity of the legal issues involved, (ii) the degree of success obtained, (iii) the public interest advanced by the suit);

– the key inquiry is whether the fees are reasonable in relation to the difficulty, stakes and outcome of the case;

– a court shouldn’t eyeball a fee request and chop it down based on arbitrary decisions though: the court must provide a clear, concise explanation for any fee reduction;

– an attorneys’ reasonable hourly rate should reflect the market rate: the rate lawyers of similar ability and experience charge in a given community;

– “market rate” is presumably the attorney’s actual billing rate for comparable work;

– if the attorney has no bills for comparable work to show the court, the attorney may instead (a) submit supporting affidavits from similarly experienced attorneys attesting to the rates they charge clients for similar work, or (b) submit evidence of fee awards the attorney has received in similar cases;

– once the fee-seeking attorney makes this market rate showing, the burden shifts to the opponent to demonstrate why the Court should lower the rate;

(**4-5).

The Court then set down the governing rules that apply when a plaintiff wins some claims and loses others; and how that impacts the fee award calculus:

– a party may not recover fees for hours spent on unsuccessful claims;

– where the successful and unsuccessful claims involve a common core of facts and are based on related legal theories, time spent on losing claims may be compensable: litigants should be penalized for pursuing multiple and alternative avenues of relief;

– when reducing a fee award based on certain unsuccessful claims, the court should identify specific hours to be eliminated;

– attorneys can recover fees incurred in litigating the fee award those fee petition fees must not be disproportionate to the fees spent on litigating the merits;

– the Court should consider whether hours spent on the fee request bear a rational relationship to the hours spent on the merits of the case;

– the Seventh Circuit recognizes 15 minutes per hour ratio of fee hours vs. merits hours as excessive (so 1 hour on fee issue for 4 hours on merits would be disproportionate).

(*5).

With these guideposts in mind,  the Court reduced plaintiff’s claimed fees by deducting (a) fees spent on unsuccessful and unrelated (to the IWPCA count) claims; and (b) fees incurred litigating the fees dispute. 

The combined reductions amounted to almost $25K out of the $30K plaintiff claimed in his fee petition.  The Court held that a $5K fee award on final compensation of about $1,500 was justified given the IWPCA’s mandatory fee provision and stated policy of deterring employers from refusing to pay separated employees’ wages.

Afterwords:

There is no precise formula governing fee awards.   The court will consider the amount claimed versus the fees sought and whether they are congruent with those figures. 

This case also illustrates that a court will look at how many claims the plaintiff won and lost in the same case when fashioning a fee award.

Illinois Wage Payment Act Applies to Ohio Resident -IL 2d Dist.

Elsener v. Brown, 2013 IL App (2d) 120209 (Sept. 2013) examines when personal liability will attach to a corporate officer under Section 13 of the Illinois Wage Payment and Collection Act, 820 ILCS 115/1 et seq. (the “Wage Act”) where that corporate officer lives out-of-state.

Facts: After plaintiff sold the business journal he founded to an Ohio corporation, plaintiff signed a three-year employment contract the Ohio company’s Illinois subsidiary to stay on as the journal’s publisher.  The contract paid plaintiff an annual salary of $85,000 and provided that if he was terminated without cause, he was entitled to a severance payment equal to the amounts owed through the contract’s expiration.  Defendant signed the employment contract as president of the Illinois subsidiary that became plaintiff’s employer.

After plaintiff was fired just 14 months into the three-year term, he sued the Illinois entity and the company president under the Wage Act.  At trial, plaintiff was awarded over $200,000 against the corporate officer who then appealed.

Held: Affirmed

 Rules/Reasoning:

 The Court found that defendant, an Ohio resident, was subject to Illinois’ long-arm jurisdiction since he was a corporate officer of an Illinois business entity.  See 735 ILCS 5/2-209(12).  The court rejected defendant’s “fiduciary shield” doctrine, which immunizes an out-of-state defendant for taking actions in a state that are required by his employer.  The court found that the defendant purposely availed himself of Illinois courts by voluntarily agreeing to serve as corporate president of the Illinois publishing subsidiary.  ¶¶ 41-47.

Substantively, the Second District noted that Section 5 of the Wage Act requires an employer to pay final compensation to a separated employee no later than the next regularly scheduled payday.  820 ILCS 115/5,  ¶ 49-50.  Here, the plaintiff was fired in August 2009 and the next payday was in September 2009.  Under Section 5 of the Wage Act, plaintiff became entitled to the full amount of his salary through the contract expiration date (about 22 months worth of payments) on the next payday.  ¶ 70.

The Court also affirmed the defendant knowingly permitted a Wage Act violation and was personally liable under Wage Act Section 13.  Under Wage Act Section 13, personal liability attaches only if the corporate employer has the ability to pay.  So, if an employer goes out of business, the employee normally can’t sue the corporate officer under the Wage Act since there’s no willful violation by the corporate officer.  ¶¶ 66-67.

Here, though, the chronology was that plaintiff was fired in August, 2009 and the corporate employer didn’t file bankruptcy until several months later in March 2010.  At the next payday – September 2009 – the corporate employer had the ability to pay plaintiff’s contractual severance based on evidence submitted in the employer’s bankruptcy case.  Defendant’s intentional conduct was also established by the multiple emails from plaintiff to defendant requesting his severance payment and defendant’s refusal to pay.  ¶ 77.

Take-awaysElsener’s glaring unanswered question is whether a corporate officer can be liable where there is no underlying finding that the corporate employer violated the Wage Act.  Elsener, ¶ 54.  Here, plaintiff only went to trial against the individual officer and so there was no judgment entered against the corporate employer (due to its bankruptcy).  But since the defendant failed to raise this argument at trial, the Court held that the argument was waived.  The answer would seem to be “no” – an officer cannot be liable without a parallel liability finding against the corporate employer.

Other key holdings from the case include (1) a corporate employer’s agent can still be considered “in this state” under the Wage Act even if he lacks a physical presence in Illinois; (2) a corporate officer’s knowledge of a separated employee’s wage claim can be shown by plaintiff’s unanswered written requests for payment.

Illinois Wage Payment Act Doesn’t Apply to Future Payments – Ill. 1st Dist.

moneyIt’s likely a sign of the economic times that there seems to be an uptick* in published cases involving the Illinois Wage Payment and Collection Act, 820 ILCS 115/1 (IWPCA).

The IWPCA offers a powerful remedy for unpaid wages allowing a separated employee to recover money damages from his ex-employer.  Specifically, the IWPCA plaintiff can recover unpaid wages, plus monthly interest at 2%  and attorneys’ fees incurred in enforcing his employment contract rights.

Majmudar v. House of Spices (India), Inc., 2013 IL App (1st) 130292 examines whether a Wage Act claim applies to unpaid future payments under a multi-year employment contract.  The answer? No, it doesn’t.

In Majmudar, the plaintiff and defendant entered into a five-year written employment contract totaling about $625K plus some additional benefits.  The defendant fired the plaintiff just 15 months into the 60-month term and plaintiff sued under the IWPCA.

After a bench trial, the trial court entered judgment for the plaintiff on his breach of contract count but found for the defendant employer on the Wage Act claim.

On the breach of contract count, the court found that the employer defendant prematurely breached the 5-year contract by firing the plaintiff with 45 months left on the contract. But the court only awarded the plaintiff $173K, less than two years’ worth of payments.

The court found the plaintiff failed to make reasonable efforts to find substitute employment and so didn’t mitigate his damages.

On the IWPCA count, the trial court sided with the defendant on the basis that the statute doesn’t allow recovery for future payments.  Plaintiff appealed.

Affirming the trial court, the First District focused on the IWPCA language allowing a plaintiff to recover earned wages or final compensation.  Wages” are broadly defined as any compensation owed by an employer to an employee pursuant to an employment contract.

  “Final compensation” means wages, salaries, commissions, bonuses, and the monetary equivalent of unused vacation pay, holiday pay and any other contractual compensation owed to a separated (as opposed to current) employee  ¶¶ 11-12, 820 ILCS 115/2. 

The IWPCA requires an employer to pay final compensation to the separated employee by the next scheduled payday and to pay current employees (bi-weekly or semi-monthly) no later than 13 days after the end of the last pay period.  820 ILCS 115/4, 5.

In rejecting plaintiff’s claim for 45 months of future payments, the Court looked to dictionary (Black’s and Merriam-Webster’s) definitions of “compensation” (payment received in return for service rendered) and “owe” (to be obligated to pay for something received) for guidance.

Applying these definitions, the Court held that once the defendant terminated the employment contract, the defendant no longer received anything of value from the plaintiff.

This led the Court to squarely hold that unpaid future wages under a terminated contract are not “final compensation” and cannot be recovered under the Wage Act.  ¶ 15.

Comments: For such a high-dollar contract, the details were surprisingly sparse.

The plaintiff could have pressed for a contract term that said if the employer untimely terminated the contract, plaintiff could accelerate the remaining payments under thr contract.

Majmudar gives the IWPCA a narrow reading – applying it to wages previously earned by a separated employee; not to future payments owed on a terminated contract.