When faced with a lawsuit, many companies choose to settle the case outside of court if at all possible. This is because lengthy legal battles have gotten increasingly expensive over the years. If the company does not at least attempt to settle the case outside of court, then it could potentially find itself having to pay hundreds of thousands of dollars in attorney’s fees for the plaintiff in addition to the plaintiff’s award for damages.
This happened in a recent court battle between UPS and a former employee. The plaintiff, Kim Muniz, worked as a UPS Division Manager until she was demoted two levels to Supervisor. She sued UPS for discrimination and violation of California’s Fair Employment and Housing Act. According to Muniz’s complaint, UPS allegedly demoted Muniz, denied her a stock bonus, and placed her on a performance plan as a result of her gender and her age. Muniz alleged that the discrimination was traceable in part to UPS’s negligence in hiring and training its employees.
The jury ruled in Muniz’s favor and awarded her $27,280 in damages for her lost earnings, past medical expenses, and past non-economic loss. Because UPS managed to defeat all but one of Muniz’s claims, the jury awarded her only about 36% of the damages she had originally sought.
Under California’s Fair Employment and Housing Act, Muniz, as the “prevailing party” was entitled to an award of “reasonable attorney’s fees”. The surprise to UPS came when Muniz sought $1.95 million in attorney’s fees. The fee request consisted of the number of hours spent multiplied by the hourly rates, which brought the total to $1.3 million. That number was then multiplied by a 1.5 enhancement, bringing the total to $1.95 million.
The district court reduced the award of attorney’s fees by 20% because Muniz’s attorneys could not prove that they actually spent as many hours on the case as they claim to have spent. Because Muniz’s attorneys were unsuccessful in attaining an award of damages for their client for her age discrimination and retaliation claims, the court deducted another 10% from the attorney’s fees, bringing the total award to just under $700,000.
UPS appealed the fee award, claiming that Muniz’s claims for attorney’s fees were highly inflated. The case went to the Ninth Circuit Court of Appeals, which upheld the lower court’s initial award of attorney’s fees at almost $700,000. Although the appellate court could have further reduced the award, it chose not to based on the fact that neither Muniz’s attorneys nor UPS could differentiate between the hours that had been spent on Muniz’s unsuccessful claims and the time spent on her successful claims. Instead, the court remanded the case back to the trial court to reconsider the award of attorney’s fees.
The court’s decision in this case is not the only one to make an award for attorney’s fees which is substantially larger than the award for damages. Because of decisions like this one, companies facing a lawsuit would be advised to settle a case rather than run up fees. Doing so can benefit both parties to the lawsuit and avoid a situation where the plaintiff later obtains an attorney fee award which greatly exceeds the damages award.
You can view the Appellate Court’s decision here.