Hoenninger v. Lsng Enterprises ( 2022 )

Case: 21-50301 Document: 00516192522 Page: 1 Date Filed: 02/04/2022
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
FILED
February 4, 2022
No. 21-50301
Lyle W. Cayce
Clerk
Joel Hoenninger; Michael Kivitz; Hayden Hyde; Robert
Romano; Samuel Caskey; Et Al,
Plaintiffs—Appellees,
versus
Leasing Enterprises, Limited, doing business as Perry's
Restaurant, L.L.C.,
Defendant—Appellant.
Appeal from the United States District Court
for the Western District of Texas
USDC No. 1:14-CV-798
Before Davis, Higginson, and Engelhardt, Circuit Judges.
Stephen A. Higginson, Circuit Judge:*
This is an appeal of an award of attorney’s fees stemming from a
collective action brought in the United States District Court for the Western
District of Texas under the Fair Labor Standards Act. The underlying
*
Pursuant to 5th Circuit Rule 47.5, the court has determined that this
opinion should not be published and is not precedent except under the limited
circumstances set forth in 5th Circuit Rule 47.5.4.
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dispute centers around a payment scheme developed by employer Leasing
Enterprises, d/b/a Perry’s Restaurant (hereinafter “Perry’s”), for
compensating employees at Perry’s Restaurant. Id. Perry’s payment policy
was found to violate the FLSA. The plaintiff employees sought attorney’s
fees, pursuant to the FLSA, and were granted an award of fees by the district
court. On appeal, Perry’s challenges the fee award recommended by the
Magistrate Judge and adopted by the district court. We VACATE the
district court’s fee order and REMAND the case for a recalculation of the
award.
I.
In August 2014, 350 plaintiffs (hereinafter “Plaintiffs”) brought a
collective action against Perry’s under the FLSA. Perry’s is a restaurant
company operating throughout Texas. Until the present litigation
commenced, Perry’s paid its servers’ credit-card tips daily, instead of
requiring them to wait for their bi-weekly paycheck.1 To provide employees
with the daily payments without keeping large volumes of cash on restaurant
premises, Perry’s had armored vehicles deliver cash to each of its restaurants
three times per week. However, to offset the costs of the cash delivery
services and credit card processing fees, Perry’s “deducted 3.25% from its
servers’ credit-card tips before paying out those tips in cash.” “That choice
produced two FLSA cases challenging whether it was proper for Perry’s to
offset the cash-delivery costs.”
The Magistrate Judge recounted the procedural history of the
pertinent FLSA case as follows, which is largely undisputed on appeal:
The case was originally filed on August 20, 2014. The original
complaint noted that prior to this case being filed, “a lawsuit
was filed in the Southern District of Texas [Houston]. . .
1
Perry’s discontinued its “credit card offset policy” roughly six weeks after a trial
court concluded, in a related suit, that the policy violated the FLSA.
2
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against the Defendant for the same practices alleged in this
Complaint for the time period of December 15, 2010 through
January 17, 2013.” Perry’s first response to the suit was a
motion to dismiss, which Judge Yeakel denied on the
recommendation of the undersigned. The Plaintiffs then
moved forward, seeking conditional certification of the case as
a collective action. At the same time, a final judgment was
entered in the Houston case, which Perry’s had appealed to the
Fifth Circuit. Because the question on that appeal—whether a
credit card tip fee was permitted by the FLSA—was also in
question in this case, Perry’s requested that the Court abate
this case pending the Fifth Circuit’s decision. The Plaintiffs
were not opposed to a stay so long as they were permitted in
the meantime to get notice to potential plaintiffs and it was
clear that no plaintiff’s period of potential recovery was
shortened by virtue of the stay. After a hearing at which the
parties presented their respective positions on a stay to Judge
Yeakel, he directed the parties to prepare an order consistent
with those discussions. The parties were unable to agree to an
order, however, and filed a “motion for help” asking for
further direction on the logistics of a stay and sending out
notice. Another hearing ensued and further direction by the
Court was given, and the parties were once again instructed to
submit an order consistent with the discussions. Once again,
the parties could not agree on that order, and ultimately, on
August 27, 2015, Judge Yeakel entered his own order
conditionally certifying the class, and abating the case pending
the outcome of the appeal of the Houston litigation.
The Fifth Circuit released its opinion in the Houston
case on June 14, 2016, and on June 16, 2016, Judge Yeakel
ordered the parties to submit a joint status report. The parties
were unable to agree on a joint report, and instead submitted
opposing statements. After two ensuing status conferences, a
new scheduling order was entered, setting a bench trial for the
month of October 2017. The Plaintiffs filed a summary
judgment motion on the issues of willfulness and good faith,
which Judge Yeakel denied. The parties then filed pretrial
materials, including, the week before trial, a stipulation on the
3
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issues decided in the Houston case, and the bench trial took
place on October 23, 2017. Judge Yeakel issued his Findings of
Fact and Conclusions of Law on May 30, 2018, as noted above.
After several months of discussions between the parties to
apply the final legal conclusions to the various plaintiffs’
circumstances, the parties filed a status report of their actions.
A subsequent status report reflected that the parties intended
to mediate the issue of attorney’s fees, and requested that
Judge Yeakel postpone entry of judgment until the mediation
was completed. The mediation was unsuccessful, and after
being notified of this, Judge Yeakel entered a final judgment on
March 27, 2019.
The final judgment entered by the district court awarded a total of
$640,234.48 to 170 plaintiffs and found 176 others were not eligible for relief
based on when they were employed.
Following the final judgment order, Plaintiffs filed a motion seeking
an award of attorney’s fees and costs. Plaintiffs initially sought $759,479.15
for the “legal work performed by Steele Law Group PLLC and Sturm Law
PLLC in prosecuting and resolving this case.” However, Plaintiffs
subsequently amended their motion “to correct calculation errors.” Perry’s
responded to Plaintiffs’ amended motion and Plaintiffs replied.
Simultaneously, Plaintiffs filed a notice of appeal challenging the district
court’s findings in the final judgment order with respect to (1) “willfulness”
and (2) “good faith.” In response to the appeal, the district court dismissed
Plaintiffs’ original motion for fees without prejudice. Roughly one year later,
this court affirmed the district court’s final judgment order denying
Plaintiffs’ challenge to the two issues. Consequently, Plaintiffs re-urged their
motion for fees, asserting they were not requesting any additional fees beyond
those originally sought, and they would stand on their prior briefing.2 Perry’s
2
According to the Magistrate Judge, “[i]t [would be] an understatement to say the
billing records Plaintiff . . . . submitted with their fee application are ‘confusing.’” “[T]he
original document submitted—a 144-page spreadsheet in small font with minimal
explanatory content—was not the correct attachment, and had to be replaced. . . . The
4
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decided to rely on its prior briefing in response. At this point, the motion was
referred to a Magistrate Judge for review and resolution.
On February 12, 2021, the Magistrate Judge issued a Report and
Recommendation (hereinafter “R&R”) granting in part and denying in part
Plaintiffs’ renewed motion for attorney’s fees. The R&R specifically
recommended the district court grant Plaintiffs $623,785.25 in attorney’s
fees and $638.00 in costs and deny all other relief requested. Notably, the
R&R recommended reducing the Plaintiffs’ overall fees by 15% ($114,187.20)
to reflect Plaintiffs’ unsuccessful challenges to the district court’s “no
willfulness” and “good faith” findings.3
Shortly thereafter, the district court entered an order “accept[ing]
and adopt[ing] the report and recommendation filed in this case for
substantially the reasons stated therein.” The district court order overruled
Perry’s objections to the Magistrate Judge’s R&R on the ground that “the
objections d[id] not raise issues that were not adequately addressed in the
R&R.” Finally, the district court granted Plaintiffs an award of $623,785.25
in fees and $638.00 in costs, pursuant to the Magistrate Judge’s
determination in the R&R. Perry’s timely filed its notice of appeal on April
13, 2021.
(apparently) correct spreadsheet was then filed twice, and it is also a 144-page tiny-font
spreadsheet with minimal detail []. It includes the time entries of 34 employees who worked
on the case—attorneys, paralegals, and other support—undivided by name or job title [].
Within the massive document, the person responsible for a particular entry is often
identified only by a partial name or initials, making ascertaining who performed a task and
what role that person placed very hard.”
3
The R&R notes: “The parties have very different views of the case, and of what
an appropriate award of attorney’s fees should be.” While Plaintiffs suggest that “the case
included nearly 350 plaintiffs, and raised a number of complex logistical and other issues,
requiring a great deal of work,” Perry’s “views the case as much less complex, and claims
that the primary legal work in the case was accomplished in the related . . . litigation.”
5
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II.
“We review the district court’s award of attorney’s fees for abuse of
discretion and its factual findings for clear error.” Saizan v. Delta Concrete
Prod. Co., 448 F.3d 795, 800 (5th Cir. 2006) (quoting Singer v. City of Waco,
324 F.3d 813, 829 (5th Cir. 2003)); see also League of United Latin Am. Citizens
No. 4552 (LULAC) v. Roscoe Indep. Sch. Dist., 119 F.3d 1228, 1232 (5th Cir.
1997); Von Clark v. Butler, 916 F.2d 255, 258 (5th Cir. 1990).4 More
specifically, the district court’s lodestar analysis is reviewed for abuse of
discretion, “only to determine if the court sufficiently considered the
appropriate criteria.” La. Power & Light Co. v. Kellstrom, 50 F.3d 319, 329 (5th
Cir. 1995) (emphasis omitted).
“Due to the district court’s superior knowledge of the facts and the
desire to avoid appellate review of factual matters, the district court has broad
discretion in setting the appropriate award of attorneys’ fees.” Watkins v.
Fordice, 7 F.3d 453, 457 (5th Cir. 1993). Nevertheless, “[i]t remains
important . . . for the district court to provide a concise but clear explanation
of its reasons for the fee award.” Kellstrom, 50 F.3d at 329 (quotation
omitted).
III.
Under the Fair Labor Standards Act, the district court “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
4
Plaintiffs suggest that the proper standard of review to apply on appeal is the
“clear error” standard. Plaintiffs urges us not to apply an “abuse of discretion” standard
because “Perry’s sole complaint on appeal is that the district court erred in determining
the reasonable number of hours in the lodestar calculation,” and “‘[t]his Court reviews the
initial determination of reasonable hours and rates for clear error.’” Perry’s suggests—
rightfully—that the proper standard of review in this matter is “a hybrid legal approach,”
in which “the clearly erroneous standard specifically applies to factual determinations”
and “the District Court’s overall determination is reviewed . . . for an abuse of discretion .
. . .”. See Saizan, 448 F.3d at 799–800.
6
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action.” 29 U.S.C. § 216(b); see also Saizan, 448 F.3d at 799 & n.7. When
awarding attorney’s fees, the court generally begins by calculating the
lodestar. See Watkins, 7 F.3d at 457. “The lodestar is the product of the
number of hours reasonably expended on the litigation multiplied by a
reasonable hourly billing rate.” LULAC, 119 F.3d at 1232 (citing Hensley, 461
U.S. at 434). The lodestar is intended to reflect a reasonable attorney’s fee
award, but a district court “may adjust it upward or downward in exceptional
cases.” LULAC, 119 F.3d at 1232. Indeed, the Supreme Court has explained
“that the calculation of the lodestar does not end the inquiry and that other
considerations may persuade the district court to increase or decrease a fee
award.” Cobb v. Miller, 818 F.2d 1227, 1231 (5th Cir. 1987) (citing Hensley,
461 U.S. at 434).
After calculating the lodestar, the court may enhance or reduce the
amount based on the relative weight of twelve factors set forth by this court
in Johnson v. Georgia Highway Express, Inc., 488 F.2d 714, 717-19 (5th Cir.
1974), abrogated on other grounds by Blanchard v. Bergeron, 489 U.S. 87 (1989).5
“[O]f the Johnson factors, the court should give special heed to the time and
labor involved, the customary fee, the amount involved and the result
obtained, and the experience, reputation and ability of counsel.” Migis v.
Pearle Vision, Inc., 135 F.3d 1041, 1047 (5th Cir. 1998). Previously, we have
stated that if there is “some assurance that the court has arrived at a just
compensation based upon appropriate standards,” “it will not always be
necessary for a district court to address each of the twelve [Johnson] factors
5
The twelve Johnson factors are as follows: (1) “the time and labor required”;
(2) “the novelty and difficulty of the [legal] questions”; (3) “the skill requisite to perform
the legal service properly”; (4) “the preclusion of other employment by the attorney due
to acceptance of the case”; (5) “the customary fee”; (6) “whether the fee is fixed or
contingent”; (7) “time limitations imposed by the client or the circumstances”; (8) “the
amount involved and the results obtained”; (9) “the experience, reputation, and ability of
the attorneys”; (10) “the ‘undesirability’ of the case”; (11) “the nature and length of the
professional relationship with the client”; and (12) “awards in similar cases.” Johnson, 488
F.2d at 717-19.
7
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in explaining the considerations affecting its decision.” Davis v. Fletcher, 598
F.2d 469, 471 (5th Cir. 1979).6
In the present litigation, the Magistrate Judge’s accurately R&R
recounted the steps a court must follow when calculating attorney’s fees.
However, the Magistrate Judge decided to “take [his] own path in
determining the appropriate fees to award in this case,” 7 asserting that “‘a
court need not explicitly calculate the lodestar to make a reasonable award’
and it has the discretion to instead reduce fees by an across-the-board
percentage when attorney’s fees are only due for a portion of the litigation.” 8
Ultimately, the Magistrate Judge recommended accepting the hours and
rates in Plaintiffs’ proposed billing schedule as a baseline and then reducing
that total by various amounts. Nowhere in the R&R did the Magistrate Judge
either calculate a lodestar or apply the Johnson factors.
On appeal, Perry’s argues that the district court’s failure to follow this
court’s framework for calculating attorney’s fees constitutes an abuse of
discretion. In response, Plaintiffs try to frame the R&R as providing a
“calculation of the lodestar.” However, Plaintiffs’ description of the R&R
includes no reference to a lodestar analysis performed by the court and,
indeed, the Magistrate Judge disclaimed making that effort.
“[T]rial courts are considered experts as to the reasonableness of
attorney’s fees.” Primrose Operating Co. v. Nat’l Am. Ins. Co., 382 F.3d 546,
6
We have been explicit that “a meaningless exercise in parroting and answering
each of Johnson’s twelve criteria,” is unnecessary when contemplating an attorney’s fee
award. Id. at 470-71.
7
The Magistrate Judge’s R&R repeatedly stressed the difficulty of assessing
appropriate fees in this case, due to the “confusing” nature of Plaintiffs’ billing records.
See also supra note 3. Accordingly, the R&R asserts that the court’s “essential goal” in
determining a fee award is “to do rough justice, not to achieve auditing perfection.”
8
The R&R quotes Jimenez v. Paw-Paw’s Camper City, Inc., 2002 WL 257691 at *23
(E.D. La. 2002), but fails to cite No Barriers, Inc. v. Brinker Chili's Texas, Inc., 262 F.3d 496,
501 (5th Cir. 2001).
8
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562 (5th Cir. 2004). Accordingly, while an award of fees under the FLSA is
nondiscretionary, the “district court has discretion to determine what is
reasonable.” Steele, 826 F.3d at 249. Furthermore, while “the district court
must utilize the Johnson factors . . . , we are not required to reverse summarily
a district court finding which omits discussion of one of the Johnson factors
so long as the record clearly indicates that the district court has utilized the
Johnson framework as the basis of its analysis.” Cobb, 818 F.2d at 1232.
Nonetheless, our cases have established that the lodestar calculation
is “[t]he linchpin of the reasonable fee.” McClain v. Lufkin Indus., Inc., 649
F.3d 374, 381 (5th Cir. 2011). We have previously ordered a limited remand
when a lower court “did not discuss the appropriate loadstar [sic] amount”
in its fee award, explaining that we had “no way of discerning from the
district court’s order how the specific award of fees was reached.” Lee v.
Coahoma Cty., 937 F.2d 220, 228 (5th Cir. 1991), amended, 986 F.2d 100 (5th
Cir. 1993). Though we acknowledged that “the amount the district court
awarded may ultimately prove to be . . . appropriate,” we concluded that the
order was “simply too vague to permit review.” Id. We have also vacated and
remanded a fee award where the district court provided “no legally justifiable
reason” for altering a lodestar fee. Moore v. U.S.D.A., 110 F.3d 794 (5th Cir.
1997) (unpublished). As we stated in Riley v. City of Jackson, “[i]f the Johnson
factors are not evaluated and explained by the district court with a reasonable
degree of specificity in making its fee award determination, the case will be
remanded, if necessary, for an explanation to facilitate appellate review.” 99
F.3d 757, 760 (5th Cir. 1996); see also Migis, 135 F.3d at 1047-48 (reversing
and remanding a district court’s award of attorney’s fees because the lower
court “did not give adequate consideration” to one of the Johnson factors).9
9
Cf. In re Cahill, 428 F.3d 536, 541 (5th Cir. 2005) (holding that “the bankruptcy
court did not abuse its discretion by using the precalculated lodestar amount . . . because it
properly applied the . . . Johnson factors to the specific facts of the case, setting forth a
9
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Other federal courts of appeals have similarly emphasized the
significance of the lodestar calculation in awarding attorney’s fees. The
Eleventh Circuit has stated that a “court’s order on attorney’s fees must
allow meaningful review” by “articulat[ing] the decisions it made, giv[ing]
principled reasons for those decisions, and show[ing] its calculation.”
Norman v. Hous. Auth. of Montgomery, 836 F.2d 1292, 1304 (11th Cir. 1988)
(reversing a district court’s award of attorney’s fees). The Eighth, Ninth,
and Tenth Circuits have all also reversed fee orders in which the lower court
did not adequately calculate or consider the lodestar amount. See Vines v.
Welspun Pipes Inc., 9 F.4th 849, 857-58 (8th Cir. 2021) (“Because the record
contains no lodestar calculation, we vacate the award of attorneys’ fees.”);
Staton v. Boeing Co., 327 F.3d 938, 965 (9th Cir. 2003) (“Under a fee-shifting
statute, the court must calculate awards for attorneys’ fees using the
‘lodestar’ method.”) (internal quotation marks omitted);10 D.A. Osguthorpe
Fam. P’ship v. ASC Utah, Inc., 576 F. App’x 759, 766 (10th Cir. 2014)
(recognizing that “[a] request for attorney’s fees should not result in a
second major litigation” but remanding a fee order because “[t]he district
court did not calculate a lodestar or provide any analysis concerning the
amount of the attorney’s fees to be awarded”) (first alteration in original).
In this case, the R&R did not follow the proper framework for
calculating attorney’s fees. Although the R&R details the reasons for various
adjustments to the fee award, it misses a critical first step by failing to explain
why it simply adopts the proposed fee award from Plaintiffs’ Application as
a baseline. Indeed, the R&R does not simply ignore the court’s obligation to
engage in lodestar analysis but rather openly disclaims it. Further, while the
reasoned analysis and providing reasons why the lodestar amount did not need to be
adjusted”).
10
See also Cruz v. Alhambra Sch. Dist., 282 F. App’x 578, 581 (9th Cir. 2008);
Morales v. City of San Rafael, 96 F.3d 359, 364 (9th Cir. 1996), opinion amended on denial of
reh'g, 108 F.3d 981 (9th Cir. 1997).
10
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Magistrate Judge may have alluded to the Johnson factors throughout the
R&R to justify decreasing Plaintiffs’ fee award in response to objections
raised by Perry’s, the R&R does not use the Johnson factors to evaluate the
fee award, or describe or discuss the application of Johnson in a manner that
would facilitate meaningful appellate review. See Harkless v. Sweeny Indep.
Sch. Dist., Sweeny, Tex., 608 F.2d 594, 596 (5th Cir. 1979) (“The purpose of
the requirement that the trial court articulate its analysis of the Johnson
factors is to insure meaningful appellate review of [its] discretion.”).
Because the Magistrate Judge’s R&R fails to either engage in a
loadstar analysis or apply the Johnson factors in a way that facilitates
meaningful review, the district court abused its discretion by adopting the
R&R in its fee order.
IV.
For the foregoing reasons, the district court’s order is VACATED,
and we REMAND the case for recalculation of the fee award using the
proper methodology.
11