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Tampa District Court Breathes Life into “Catalyst Theory,” Challenging Eleventh Circuit

By Mark Beutler

On this blog, my colleague Kevin Vance previously reported the July 28, 2011 decision of the Eleventh Circuit in Dionne v. Floormasters Enterprises, Inc., ___ F.3d. ___, 2011 WL 318977 (11th Cir. July 28, 2011).  That case involved a claim for unpaid overtime under the FLSA.  During the litigation, the employer tendered full payment of the amount sought by the plaintiff for unpaid overtime and for liquidated damages and interest.  The employer thereafter moved to dismiss the case for lack of subject matter jurisdiction under the theory that the tender mooted the above-stated claims, and there was no longer a case or controversy.  The Plaintiff admitted that the overtime claim was moot and should be dismissed, but filed a motion for prevailing party attorney’s fees.  The court rejected the fee motion and awarded the Plaintiff’s counsel no attorney’s fees.  The Plaintiff appealed, arguing that filing the lawsuit served as a “catalyst” for the employer’s eventual payment, and that the plaintiff was the “prevailing party” entitled to attorney’s fees. 

The Supreme Court in Buckhannon Board and Care Home, Inc. v. West Virginia Dep’t of Health and Human Resources, 532 U.S. 598 (2001), had previously rejected the “catalyst theory” for prevailing party status, albeit in the context of the Fair Housing Authority Act (FHAA) and the public accommodations provisions of the Americans with Disabilities Act (ADA).  The Buckhannon Court held that, once the accessibility deficiencies had been corrected and the claims under those statutes were moot, the plaintiff could not recover attorney’s fees.  The Court reasoned that, without a judgment on the now mooted claims, the plaintiff was not a “prevailing party” under the fee shifting statute (42 U.S.C. § 1988).  That fee shifting statute provides for plaintiffs to recover attorney’s fees for violations of several civil rights statutes, but only if the plaintiff is a “prevailing party.”  Prior to Buckhannon, all circuits other than the Fourth Circuit permitted plaintiffs to recover attorney’s fees under the catalyst theory.  The Buckhannon Court resolved the conflict among the circuits and made the law of the Fourth Circuit the law of the land. 

The issue for the Eleventh Circuit in Dionne was whether the logic of Buckhannon applied in the FLSA context.  The FLSA, unlike Section 1988, does not use the “prevailing party” language but permits recovery of attorney’s fees “in addition to any judgment awarded to the plaintiff.”  The Eleventh Circuit affirmed the district court and held that “[t]he FLSA plainly requires that the plaintiff receive a judgment in his favor to be entitled to attorney’s fees and costs.”  The Dionne Court held that, if the underlying claim for FLSA violations was satisfied by tender of amounts owed, the claims were moot, there would be no judgment on those claims, the plaintiff therefore was not a prevailing party, and the plaintiff could not recover attorney’s fees. (Subsequent to Dionne, the Seventh Circuit reached the same conclusion under the FMLA, which uses the identical fee shifting language as the FLSA. See Breneisen v. Motorola, Inc., ___ F.3d ___ , 2011 WL 3873771 (7th Cir. September 2, 2011)).  

It did not take long for an employer involved in FLSA litigation to attempt to replicate the successful tactic used by the employer in Dionne.  In Klinger v. Phil Mook Enterprises, No. 11-1586 (M.D. Fla. September 14, 2011), the employer tendered the full payment owed to the plaintiff and promptly moved to dismiss the case as moot.  In its motion, the employer curiously did not mention Dionne, but the parallel to Dionne was unmistakable. 

The plaintiff, Stephanie Klinger, opposed the employer’s motion to dismiss on several grounds.  Klinger argued that tender of the backpay, liquidated damages and interest did not provide her with all the relief she sought.  Specifically, she also sought an enforceable judgment on the backpay and liquidated damages claims, and also sought attorney’s fees to which she contended she was statutorily entitled.  In addition, Klinger argued that settlement of FLSA claims requires court approval. 

Klinger also advanced a policy argument.  The FLSA, by providing for the payment of plaintiff’s attorney’s fees, was designed to remove the economic bar to litigation where the employee’s rights were being violated.  By permitting the employer to dismiss a case and escape liability for plaintiff’s attorney’s fees merely by tendering payment of only backpay, liquidated damages and interest, the plaintiff would have to pay her own lawyer, and recovery of small amounts of backpay through litigation would be economically infeasible.  To permit the employer to escape liability for attorney’s fees would thus subvert the FLSA policy of removing that economic bar. 

Klinger weaved through these broad positions various bases on which to distinguish Dionne.  Klinger argued that (a) the Plaintiff in Dionne did not seek court approval of the “settlement” (settlements of FLSA cases ordinarily require court approval) whereas she intended to petition the court for approval of the “settlement”; (b) the plaintiff in Dionne agreed that the case had been mooted whereas she did not agree that the case was mooted;  and (c) the plaintiff in Dionne was not seeking a judgment whereas she was seeking a judgment. 

In a brief Order, the district court in Klinger denied the motion to dismiss.  The court’s reasoning, like the arguments of the plaintiff, is at times abstruse. 

The court accepted the argument that Dionne was distinguishable because “[i]n Dionne, the plaintiff agreed that his FLSA claim was moot and should be dismissed.  As a result, the Eleventh Circuit was not required to address the district court’s ruling that the action was rendered moot by the defendant’s tender.”  As a factual matter, the court’s premise is simply untrue.  The plaintiff in Dionne conceded that the overtime claim was moot.  The plaintiff did not concede that the case was moot (to the contrary, the plaintiff had appealed the district court’s ruling).  In Klinger (as in Dionne), it was undisputed that all amounts owed, other than attorney’s fees and costs, had been fully tendered.  In this respect, Dionne and Klinger were identical. 

The court also accepted the plaintiff’s argument that permitting the employer to escape liability for the plaintiff’s attorney’s fees after litigation commenced would run afoul of the FLSA’s goal of fully compensating the wronged employee.”  That precise argument was advanced to no effect by the plaintiff in Dionne (and Buckhannon in a non-FLSA context). 

Finally, the Klinger court reasoned that the employer’s tender effectively circumvents the requirements of Fed. R. Civ. P. 68, which deals with offers of judgment.  This position too is wrong.  Rule 68 deals with offers of judgments which are, in essence, settlements where the parties agree on entry of a judgment in exchange for release of a claim.  Nothing in Rule 68 prevents an employer from unconditionally tendering money owed to its employee, and that is true even if the amount is disputed in whole or in part.  (The same rebuttal would apply to plaintiff’s argument regarding the requirement that settlements of FLSA claims be approved by the court.  That rule applies only to settlements, not unconditional tenders.)           

The court accepted the plaintiff’s argument that “mere tender of payment does not provide plaintiff with all the relief she seeks and would be entitled to as a prevailing party in this action, to wit: an enforceable judgment, attorney’s fees, and costs.”  The court’s rationale places the cart before the horse.  Dionne and Buckhannon both hold that a plaintiff is not a prevailing party unless the plaintiff first obtains an enforceable judgment on the underlying fee shifting claim, which the plaintiff cannot do if the underlying claim becomes moot.  The preliminary inquiry is whether the fee shifting claim is moot as a consequence of the tender.  The Klinger Court turned the inquiry on its head and held that, because the plaintiff will not obtain an enforceable judgment and thereby recover her attorney’s fees, the underlying claim cannot be dismissed as moot. 

The mootness doctrine arises from the Constitution’s limitation on federal judicial power.  Federal courts have no subject matter jurisdiction to adjudicate claims that have become moot.  Mootness, like all jurisdictional inquiries, are resolved prior to addressing other issues.  If a federal court lacks jurisdiction over a claim, it cannot resolve the claim and, hence, cannot determine which party prevailed on the claim.  Thus, if a claim becomes moot, that will necessarily eliminate the plaintiff’s ability to turn the claim into a judgment.  Mootness, by its very nature, is always an obstacle to obtaining a judgment.  The court’s refusal to dismiss the backpay-related claims for mootness – on the reason that doing so would bar the plaintiff from obtaining a judgment on those claims – is contrary to logic. 

In many contexts, tender of all amounts owed on a claim moots the claim. E.g., Rothe Dev. Corp. v. Dep't of Def., 413 F.3d 1327, 1331 (Fed. Cir. 2005).  A plaintiff cannot avoid mootness by rejecting of the tender. E.g., Holstein v. City of Chicago, 29 F.3d 1145, 1147 (7th Cir. 1994).  A plaintiff must demonstrate standing separately for each form of relief sought. E.g., Friends of the Earth, Inc. v. Laidlaw Environmental Services (TOC), Inc., 528 U.S. 167, 185 (2000).  Thus, the fact that the plaintiff seeks relief (e.g., attorney’s fees) in addition to backpay will not prevent the backpay claim from being rendered moot by a tender of all disputed backpay.  For these reasons, many cases – including Buckhannon and Dionne -- have held that a claim for attorney’s fees will not cure the mootness or other jurisdictional defect in an underlying fee shifting claim and thereby permit the court to award attorney’s fees. E.g.Lewis v. Continental Bank Corp., 494 U.S. 472, 480 (1990). 

The Klinger Court’s decision is best understood as a rejection of Dionne and Buckhannon.  Employers should not quickly abandon the successful approach used by the defendant in Dionne as a better reasoned decision may go the other way. 

An approach employers may want to consider is to separate the mootness issue from the attorney’s fees issue.  The employer, after tendering all backpay and liquidated damages, can move to dismiss as moot only the backpay and liquidated damages claims, and leave for another day the fight over attorney’s fees.  The plaintiff will have a difficult time arguing that the claims are not mooted by the tender.  Once the court dismisses the backpay and liquidated damages claims as moot, in light of Dionne, the plaintiff will have a difficult time arguing that he is a prevailing party entitled to attorney’s fees.    



Watch Where You're Pointing that Counterclaim

Suppose a former officer of a company sues the company after being discharged for alleged wrongdoing.  Should the company fight back and file a counterclaim for damages incurred from the executive's alleged wrongdoing?  What are the risks of doing so?

One of the risks is that if the counterclaim fails, the company could be liable for the former officer's attorney's fees.  That's because the bylaws of many corporations require that the company indemnify officers and directors for the defense of any claim that arises because of the officer or director's role as an officer or director. Florida law, specifically section 607.0850, Florida Statutes, empowers corporations to indemnify officers, directors, employees, and agents in such cases "if he or she acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful." 

SunTrust Banks has an indemnification provision in its bylaws.  Plaintiff Sandra Jansky served as the company's Chief Credit Officer.  Following her discharge in 2004, the company undertook an investigation and made certain public statements that prompted Jansky to file suit against SunTrust for libel and slander. The company struck back by filing a counterclaim against Janksy, seeking approximately $9 million for costs associated with a restatement of earnings in 2004, and the cost of the investigation itself.

Ultimately both the company's and Jansky's claims failed.  The trial court granted both parties' motions for summary judgment and dismissed all pending claims. 

A "wash"?  Not exactly. Jansky sought reimbursement of over $200,000 in attorney's incurred in defense of the counterclaim under the company's bylaws and Georgia law (which has an indemnification statute similar to Florida's).  Although Jansky never actually paid her attorney, the original claim having been taken under a contingency fee agreement, the court found that Jansky and her attorney both had an "expectation of payment" for the defense of the counterclaim if her indemnification claim was unsuccessful.  Under these facts, the court ruled that Jansky had a right to recover her attorney's fees under the company's bylaws.  Last week, the Eleventh Circuit Court of Appeals affirmed the trial court's ruling.  The company's counterclaim backfired.  

Which proves the old adage, sometimes the best defense is... a good defense.


FLSA Fee Claim Denied by 5th DCA

A trial court's award of $72,000 in attorney's fees to the successful plaintiffs in a Fair Labor Standards Act (FLSA) overtime case was in error and must be vacated, according to a recent decision by Florida's Fifth District Court of Appeals, Van Diepen v. Brown (Fla. 5th DCA, January 28, 2011).   

The problem with the fee claim was that plaintiffs' counsel was unable to separate the fees he incurred in prosecution of the successful FLSA claims from the fees incurred in the unsuccessful prosecution of numerous state law claims in the same case. Plaintiffs argued that all  the claims were intertwined and that it was impossible for their counsel to identify the time spent on the overtime claims.  But the court rejected this argument, holding that "[w]here the claims are as distinct from each other as overtime is from fraud or negligent misrepresentation, no attorney's fees are awardable if the attorney billing records do not support the fee." 

The Van Diepen case serves as a reminder to plaintiffs' attorneys that their fee records must be sufficiently detailed to allow the court to distinguish fees incurred on successful claims from those incurred on unsuccessful claims, or at least those claims that are not intertwined with successful ones.  A failure to do so can be an expensive lesson in record keeping -- and a boon to the defense.



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Michael W. Casey III, Kevin E. Vance, Mark J. Beutler, and Teresa M. Maestrelli practice labor and employment law, with a particular focus on labor and employment litigation, including Title VII, ADEA, ADA, Florida Civil Rights Act, and whistleblower claims, as well as non-compete litigation, in state and federal trial and appellate courts in Florida and throughout the United States. They also represent employers before the National Labor Relations Board (NLRB), the National Mediation Board (NMB), the U.S. Department of Labor, including the Wage and Hour Division and the Occupational Safety and Health Administration (OSHA), the Equal Employment Opportunity Commission (EEOC), and various state and local agencies, as well as in arbitrations, collective-bargaining negotiations and union representation elections. Hector A. Chichoni practices in the area of US and global immigration law. He chairs Duane Morris's Florida Immigration Practice. The editors of Chambers USA 2010 also selected Mr. Chichoni as a "Leader in the Immigration Field." He has represented a vast number of corporate and individual clients throughout his career ranging from premier US health care organizations, Fortune 100 and Fortune 500 companies, multinational corporations and universities to doctors, professors, researchers and students. His international experience includes handling matters relating to export controls and global corporate compliance and business transactions. He has represented clients in a wide variety of cases before the US Immigration Court.
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The opinions expressed on this blog are those of the author and are not to be construed as legal advice.