Robert Johnson v. G.D.F., Incorpora , 668 F.3d 927 ( 2012 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 11-1934
R OBERT S. JOHNSON,
Plaintiff-Appellant,
v.
GDF, INC. d/b/a D OMINO’S P IZZA,
Defendant-Appellee.
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 07 CV 3996—Ronald A. Guzman, Judge.
A RGUED O CTOBER 21, 2011—D ECIDED F EBRUARY 13, 2012
Before B AUER and T INDER, Circuit Judges and M AGNUS-
S TINSON, District Judge.Œ
T INDER, Circuit Judge. When a prevailing party is
entitled to “a reasonable attorney’s fee,” see, e.g., 42 U.S.C.
§ 1988; 29 U.S.C. § 216(b), the district court must make
Œ
The Honorable Jane E. Magnus-Stinson, District Judge for
the United States District Court for the Southern District of
Indiana, sitting by designation.
2 No. 11-1934
that assessment, at least initially, based on a calculation
of the “lodestar”—the hours reasonably expended multi-
plied by the reasonable hourly rate—and nothing else.
See Pickett v. Sheridan Health Care, ___ F.3d ___, No. 11-2146,
2011 WL 6287923, *4-*5 (7th Cir. Dec. 15, 2011). In limited
circumstances, once calculated, the lodestar amount
may be adjusted. See Perdue v. Kenny A. ex rel. Winn, 130
S. Ct. 1662, 1673-74 (2010); Hensley v. Eckerhart, 461 U.S.
424, 430, 436 (1983); Robinson v. City of Harvey, 489 F.3d
864, 871-72 (7th Cir. 2007). This case, however, does not
involve the acceptability of an adjustment but only the
correct calculation of the lodestar (plus costs). And al-
though a district court has significant discretion in de-
termining the lodestar, it cannot base its decision on an
irrelevant consideration or reach an unreasonable con-
clusion. See Pickett, 2011 WL 6287923, at *8 (abuse of
discretion to determine attorney’s fee based on an irrele-
vant consideration); United States v. Thouvenot, Wade &
Moerschen, Inc., 596 F.3d 378, 386 (7th Cir. 2010)
(“The concept of ‘abuse of discretion’ recognizes the
possibility that a judge will at times reach a result that
persuades the appellate court that he made an unreason-
able ruling. . . .”). In this case, as we will see, the
district court did both. So, despite our support for the
idea that “[a] request for attorney’s fees should not
result in a second major litigation,” Hensley, 461 U.S.
at 437, we must reverse and remand this case for a
new calculation of fees.
To understand this fee dispute, we have to go back to
2005 when Robert S. Johnson was a pizza maker at GDF’s
Domino’s Pizza franchise in Oak Park, Illinois. In May
No. 11-1934 3
of that year, Johnson filed a class-action complaint in
state court seeking overtime wages for himself and
sim ilarly-situated em ployees under the Illinois
Minimum Wage Law, 820 ILCS § 105/4a, and the Fair
Labor Standards Act, 29 U.S.C. § 207(a)(1). In July 2005,
Johnson stopped working at Domino’s. (According to
Johnson—and the jury in the subsequent federal trial
agreed—he was fired in retaliation for his overtime law-
suit. GDF sees things differently and has argued that
he quit voluntarily or was terminated for violating Dom-
ino’s sexual harassment policy.) In April 2006, GDF
deposed Johnson and learned at least two important
things: First, Johnson was reemployed as of August 2005
by two cab companies and a bakery and, second, Johnson
had criminal convictions that he did not disclose when
he applied to work at Domino’s.
Class certification in the state suit was denied in
July 2006. One year later, in July 2007, Johnson filed this
suit in federal court, alleging that he was fired in retalia-
tion for his overtime claim in violation of the FLSA, 29
U.S.C. § 215(a)(3). As trial in the state suit approached,
GDF offered to settle “everything”—the state and federal
suits—for $25,000. Johnson rejected the offer. The state
suit was resolved by a consent judgment a month later
and GDF paid Johnson $4,328.77 in overtime wages plus
interest and attorney’s fees. Meanwhile the federal suit
rolled on. The Final Pretrial Order states that “[t]he
possibility of settlement of this case was considered”
but the parties concede that other than the early offer to
“settle everything” there was no settlement talk or even
a request for a settlement conference, nor was there a
4 No. 11-1934
Rule 68(a) offer of judgment, not even one limited to the
issue of liability. There was, however, a three-day trial. On
the third day, the jury returned a verdict for Johnson,
awarding him $1,000 in back pay and $4,000 in punitive
damages. Johnson filed a motion to amend the judgment
to include liquidated damages and GDF filed a motion
for judgment as a matter of law. The district court denied
both motions and the parties appealed. After mediation
the appeals were dismissed with GDF paying Johnson
an additional $5,455. The only remaining matter was
attorney’s fees and the case was remanded on that issue
alone.
As the prevailing party, Johnson is entitled to “a rea-
sonable attorney’s fee to be paid by defendant, and
the costs of the action.” 29 U.S.C. § 216(b). Johnson’s
attorney, Earnest T. Rossiello, moved for $112,566.87 in
fees and expenses, billing 182.66 hours at $600 per
hour for himself and 8.33 hours at $275 per hour for his
associates. His motion included, among other supporting
documents, affidavits from employment attorneys prac-
ticing in the same market. In response, GDF argued
that Johnson wasn’t actually the prevailing party, and
so wasn’t entitled to any fees, because Rossiello’s contin-
gent fee agreement with Johnson—33.33% of any settle-
ment, with guaranteed payment of the first $8,500, plus
any attorney’s fees awarded under 29 U.S.C. § 216(b)—left
Johnson with nothing. In the alternative, GDF argued
that Rossiello should be compensated for 47.08 hours, at
most, at no more than $375 per hour. GDF’s response
concluded with a pages-long discussion of court opin-
ions criticizing Rossiello’s litigation tactics in other cases
No. 11-1934 5
and discussing his history with the Illinois Attorney
Registration and Disciplinary Commission.
The fee dispute was referred to a magistrate judge,
who described this case as “yet another example of
Ernest T. Rossiello’s self-serving litigation tactics, where
he places his own financial interests ahead of his client.”
He went on to criticize the contingent fee arrangement
and concluded that the only reason the case lasted as
long as it did was because Rossiello consistently over-
represented Johnson’s damages. The case would have
settled quickly, he surmised, if Rossiello would have
been honest about his client’s damages. Relying on
Spegon v. Catholic Bishop of Chicago, 175 F.3d 544 (7th
Cir. 1999), a case in which Rossiello’s fees were cut sig-
nificantly because he unnecessarily delayed a settle-
ment, the magistrate judge concluded that a settlement
should have been reached within three hours. As for
Rossiello’s hourly rate, the magistrate judge rejected
Rossiello’s submissions and settled on $375 per hour,
“the highest rate awarded to Rossiello by a Northern
District court in an FLSA case where his fees have been
challenged.” All associate time was cut. For costs, the
magistrate judge recommended $364.20—$350 for the
filing fee and $14.20 for copies. All told, he recom-
mended an award of $1,864.20. The district court
adopted the magistrate judge’s Report and Recommen-
dation in full. In particular, the district court agreed
that if Johnson’s damages had been candidly dis-
closed—if Rossiello hadn’t misrepresented his damages
until the start of trial—the case would have settled
quickly. On Rossiello’s hourly rate, the district court
6 No. 11-1934
agreed that the relevant measure is Rossiello’s rate in
cases where his fee had been challenged and so agreed
that $375 per hour was correct.
We review the district court’s award of attorney’s fees
for abuse of discretion and its legal analysis and meth-
odology de novo. Pickett, 2011 WL 6287923, at *2-*3;
Anderson v. AB Painting & Sandblasting Inc., 578 F.3d 542,
544 (7th Cir. 2009). Because this is a dispute about the
correct calculation of plaintiff’s “reasonable attorney’s
fee” as set by the lodestar, “plus costs,” 29 U.S.C. § 216(b),
our review will follow the three determinations required
to set that figure: (1) the number of hours reasonably
expended by plaintiff’s counsel, (2) the reasonable
hourly rate for those services, and (3) costs. See Anderson,
578 F.3d at 544 (citing Hensley, 461 U.S. at 433).
Hours Reasonably Expended. GDF must pay for hours
reasonably expended by Rossiello and his associates.
That means GDF is not required to pay for hours that
are “excessive, redundant, or otherwise unnecessary.”
Hensley, 461 U.S. at 434; Spegon, 175 F.3d at 552. Applying
Spegon, the district court concluded that all but
four of the one hundred and ninety billed hours were
unnecessary.
Spegon involved FLSA claims made by Kenneth Spegon,
a church maintenance man, for overtime and retaliatory
dismissal. 175 F.3d at 549. From the start, the Diocese
accepted responsibility for its failure to pay overtime,
characterizing it as a simple mistake. The parties
disagreed, however, about the amount of overtime due.
Spegon made an initial settlement demand for $6,600 that
No. 11-1934 7
included more than $3,600 in fees. After a hearing, the
Diocese made an offer of judgment for “$1,100 plus court
costs and a reasonable attorney’s fee to be determined
by the court.” Id. Spegon accepted. For attorney’s fees,
Spegon initially requested $7,280.70. That, unsurprisingly,
didn’t go over too well. The district court cut all but
4.6 hours of Rossiello’s time, and then cut those hours
in half due to Spegon’s limited success (he didn’t
prevail on the retaliation claim). The district court con-
cluded that “within three hours, an attorney of
Rossiello’s experience and skill could have met with
Spegon, assessed his claim, called the Bishop and negoti-
ated a settlement.” Id. at 551. We affirmed, explaining
that the only issue in dispute was overtime and that
involved a simple calculation. Id. The many hours
Rossiello wanted to charge were unnecessary given
that the Diocese “admitted from the outset of the litiga-
tion that it had inadvertently failed to pay overtime.” Id.
at 553.
Critical differences between this case and Spegon make
it unreasonable to apply Spegon here as a quick-settle-
ment rule. Importantly, in Spegon, unlike this case,
liability was uncontested, the parties made formal settle-
ment offers, and, most obviously, Spegon involved a
pretrial settlement, not a trial.
GDF insists, and the district court agreed, if Johnson
would have only revealed the true value of his claim
for back pay—if he would have disclosed that it was
$1,000 and not $10,000—this case would have settled
quickly. Johnson’s dissembling, GDF argues, left it in
8 No. 11-1934
the dark; how could GDF possibly settle? GDF, however,
was not in the dark. The district court did not mention
that GDF knew (based on Johnson’s April 2006 deposi-
tion in the state case) that Johnson was employed within
ten weeks of his termination by Domino’s. In fact, GDF
knew he had three jobs. Moreover, GDF knew that the
period during which Johnson would have had any
claim for back pay could go no further than the date of
his deposition, when he admitted lying on his applica-
tion to work at Domino’s. That after-acquired evidence
cut off Johnson’s potential recovery, according to the
district court’s summary judgment ruling.
GDF objects that it didn’t know Johnson’s wages at his
new jobs and so knowing he was employed wasn’t
enough to accurately measure Johnson’s claim. But de-
fendant is charged with having some common sense.
Johnson went from being a pizza maker to driving a cab
and his claim for any back pay could span only a few
months. The record simply does not support the asser-
tion that Johnson’s small back pay claim caught GDF
unawares.
And even if GDF was surprised by the small back pay
claim, this case is still a world apart from Spegon, where,
critically, liability had been conceded. GDF conceded
nothing. This was not a dispute about the amount of
back pay and liquidated damages Johnson was entitled
to, it was about whether Johnson was fired at all. GDF
flatly denied it. As mentioned above, in the district
court GDF maintained (both) that Johnson walked off
the job and that he was fired for violating a sexual harass-
No. 11-1934 9
ment policy. And even after GDF lost at trial, it con-
tinued its fight with a post-verdict motion for judgment
as a matter of law and an appeal.
GDF, it’s true, did offer to “settle everything” for $25,000
just before the state court trial was scheduled to begin.
And substantial settlement offers should be considered
in determining reasonable attorney’s fees. Moriarty v. Svec,
233 F.3d 955, 967 (7th Cir. 2000). But Johnson rejected
that offer and that was reasonable enough given the
possibility that he might (and did) recover liquidated
and punitive damages in the federal case. The case then
continued without mention of settlement other than
the passing reference in the Final Pretrial Order. Again,
unlike Spegon, there was no offer of judgment and no
settlement, but instead a three-day trial and an appeal.
In short, given the fundamental differences between
this case and Spegon, it was unreasonable, and therefore
an abuse of discretion, for the district court to deny
nearly all of Rossiello’s hours “[f]or the same reasons
articulated in Spegon.” GDF knew (approximately) what
it was up against and proceeded to trial, without an
offer of judgment or any concession of liability. GDF
tested its luck and lost. Now it must pay for the attorney
hours reasonably required to see the case through trial,
to appeal, and for the collection of fees.
Hourly Rate. On remand, the hours reasonably expended
should be multiplied by “a reasonable hourly rate . . .
derived from the market rate[.]” Pickett, 2011 WL 6287923,
at *3 (quoting Denius v. Dunlap, 330 F.3d 919, 930 (7th Cir.
10 No. 11-1934
2003)); see also People Who Care v. Rockford Bd. of Educ. Sch.
Dist. No. 205, 90 F.3d 1307, 1310 (7th Cir. 1996). The best
evidence of an attorney’s market rate is his or her
actual billing rate for similar work. Pickett, 2011 WL
6287923, at *3. In this case, the district court concluded
that Rossiello didn’t establish his actual billing rate
(which he claims is $600 per hour) because the evidence
he presented didn’t show how much he was actually
paid and for what kind of work. That was within the
district court’s discretion. The district court then
properly turned to “the next best evidence” of the market
rate for an attorney, like Rossiello, who maintains a
contingent fee, namely, “evidence of rates similarly
experienced attorneys in the community charge
paying clients for similar work and evidence of fee
awards the attorney has received in similar cases.” Id.(quoting Spegon, 175 F.3d at 555). It is the fee applicant’s
burden to establish his or her market rate; if the ap-
plicant fails, the district court may make its own rate
determination. Id. at *3 (citing Uphoff v. Elegant Bath Lim-
ited, 176 F.3d 399, 409 (7th Cir. 1999)).
In considering the next best evidence, the district court
disregarded Rossiello’s third-party affidavits because
the affiants declared that they do not bill at different
rates for FLSA and Title VII cases. The district court
decided that billing rates for FLSA and Title VII cases
must be different—other Northern District of Illinois
judges have said that FLSA cases are less complex than
Title VII cases and we’ve mentioned this observation
too. Small v. Richard Wolf Med. Instruments Corp., 264 F.3d
702, 707-08 (7th Cir. 2001). Rossiello, however, is entitled
No. 11-1934 11
to the prevailing market rate for his services. It was an
abuse of discretion for the district court to decide that
the market must distinguish between FLSA and Title VII
cases. Either it does or it doesn’t, but it is not the court’s
job to say that it should. If the market does distinguish
FLSA and Title VII retaliation cases, then, presumably,
defendants could submit affidavits saying so. It is not
enough to say that courts have distinguished these types
of cases (much less, straight overtime cases like Small)
and, therefore, any affidavits to the contrary will be
unpersuasive. On remand, it is possible that Rossiello’s
affidavits could be unpersuasive for some other rea-
son—in other words, we do not deny that “the district
court is entitled to determine the probative value of
each submission,” Batt v. Micro Warehouse, Inc., 241 F.3d
891, 895 (7th Cir. 2001)—but the district court cannot
make a priori declarations about prevailing market
rates. That’s what the affidavits are for.
Once the affidavits were set aside, the district court
considered evidence of Rossiello’s fee awards in similar
cases. The court concluded that Rossiello did not
establish “that he was ever awarded a $600 rate in any
FLSA case where his fee was challenged.” The highest
challenged rate he had recovered was $375, so the court
decided that was reasonable and what he should receive
in this case. But as we reemphasized in Pickett (another
case involving Rossiello, incidentally), “[n]othing in the
case law requires that a party show that the hourly rate
they have requested has previously been disputed and
upheld . . . . Indeed, a previous attorneys’ fee award
is useful for establishing a reasonable market rate for
12 No. 11-1934
similar work whether it is disputed or not.” 2011 WL
6287923, at *9 (quoting Jeffboat, LLC v. Dir., Office of Workers’
Comp. Programs, 553 F.3d 487, 491 (7th Cir. 2009)). It
was therefore an abuse of discretion for the district court
to set Rossiello’s rate by considering only cases where
his fees were challenged.
Costs. Under 29 U.S.C. § 216(b), Johnson is also entitled
to “the costs of the action.” Because the district court
concluded that it was unreasonable for Johnson’s case
to go to trial, it refused to award Johnson costs
associated with trial. For the reasons just explained,
that was incorrect. Accordingly, on remand, Johnson
should be awarded trial costs.
As we said at the outset, this opinion addresses only
the district court’s lodestar and costs calculations. That
process will need to be undertaken anew for the reasons
indicated. A determination of the hours reasonably ex-
pended and the reasonable hourly rate is a matter ad-
dressed, in the first instance, to the district court’s dis-
cretion.
The judgment of the district court is R EVERSED and the
case is R EMANDED for calculation of fees and costs con-
sistent with this opinion.
2-13-12