Employees entitled to fees under Wage Act settlement

Via Massachusetts Lawyers Weekly  

Liz Soltan J.D. ’19

Employees who obtained a favorable settlement of their Wage Act claim were considered “prevailing parties” entitled to attorneys’ fees under the statute’s fee-shifting provisions, the Supreme Judicial Court has determined.

The defendant employers argued that the plaintiff employees were not eligible for a fee award because they were not prevailing parties under the U.S. Supreme Court’s 2001 decision in Buckhannon Bd. & Care Home, Inc. v. West Virginia Dep’t of Health & Human Resources. In Buckhannon, the Supreme Court found that under federal fee-shifting statutes, a litigant must obtain judicial approval or “imprimatur” of a private settlement to be deemed a prevailing party.

But the SJC disagreed, emphasizing that it had previously found Buckhannoninapplicable to Massachusetts state law fee-shifting statutes and determining that the “catalyst test” was the applicable standard. The catalyst test requires only that the plaintiff’s suit be a “necessary and important” factor behind the favorable settlement result.

“We hold that the catalyst test applies to Wage Act claims and that the trial judge correctly found that the plaintiffs satisfied that test in the instant case, and we therefore affirm the award of attorney’s fees to the plaintiffs under the fee-shifting provisions of the Wage Act,” Justice Scott L. Kafker wrote for the court.

The 16-page decision is Ferman, et al. v. Sturgis Cleaners, Inc., et al., Lawyers Weekly No. 10-036-19. The full text of the ruling can be found here.

Small dollars, big impact?

Harvard Law School student Elizabeth Soltan, who argued on the plaintiffs’ behalf, said she hopes the decision enables more attorneys to take on Wage Act cases.

“The real impact will be on cases involving small dollar amounts which are more likely to involve workers who make a lower wage to begin with,” said Soltan, who became involved in the case through the Harvard Legal Aid Bureau clinical program (see sidebar).

HLAB clinical instructor Patricio S. Rossi, plaintiffs’ counsel of record, noted that it is difficult for low-wage workers to get representation for Wage Act claims because such cases typically do not involve enough money to be worthwhile for lawyers to take on contingency.

“A decision like this makes attorneys more confident they can get their fees without having to take the case all the way to trial,” he said.

Liliana Ibara, managing director of the Center for Public Interest Advocacy and Collaboration at Northeastern University School of Law, co-authored an amicus brief on behalf of the Immigrant Worker Center Collaborative. She called Ferman “a great decision.”

“Because of the way treble damages awards are structured, the idea is that if the worker has more income, it’s a bigger case with higher damages,” she said. “For a minimum wage worker, even if they’ve worked a lot of hours, it’s still a really low amount of money [at issue] overall. So those attorneys’ fees become incredibly important.”

Meanwhile, Ibara said, parties can still agree on counsel fees as part of the settlement as opposed to having a judge issue a fee award. That creates more options going forward, she said.

Ibara’s co-author, Joseph J. Michalakes of Greater Boston Legal Services, said the decision will have a particularly important impact on immigrant workers.

“They’re the most powerless workers in society, but this gives them power to enforce their rights under wage and hour law,” he said.

Swampscott trial attorney Andrew F. Caplan called the decision a “big deal,” commenting that it could have broad applicability beyond the Wage Act.

“The SJC’s expansive approach to awarding attorneys’ fees to plaintiffs under the Wage Act might be applied in future cases to other statutes that award attorneys’ fees to the prevailing or successful party, such as employment discrimination statutes,” he said.

Margaret E. Monsell of the Massachusetts Law Reform Institute also submitted an amicus brief and said her organization was gratified that the SJC continues to recognize the importance of ensuring access to the courts for all.

“The court’s ruling affirms that the long-standing catalyst test for measuring the success of litigation is the best way to advance that goal,” Monsell said.

The defendants’ attorney, John J. McGlone III of Quincy, could not be reached for comment prior to deadline, but Daniel S. Field of Boston, who represents employers, said the ruling would have limited ramifications from a management perspective.

“It’s really unusual to settle a case — whether it’s a single plaintiff case, a multi-plaintiff case like this one, or a collective or class-action — without accounting for attorneys’ fees in the settlement agreement,” he said.

“A decision like this makes attorneys more confident they can get their fees without having to take the case all the way to trial.”

— Patricio S. Rossi, Harvard Legal Aid Bureau

Wage Act claim

Plaintiffs Belky Ferman and Veronica Guillen worked for defendant Sturgis Cleaners, a dry cleaning business in Boston.

The plaintiffs sued the defendant and its owner, defendant Peter Triantos, in Suffolk Superior Court in November 2014, alleging non-payment of $28,000 in regular and overtime wages in violation of the Wage Act. In their complaint, the plaintiffs claimed treble damages, costs and attorneys’ fees.

After a nearly two-year period that included entry and lifting of a default judgment against the defendants as well as discovery and the filing of several pre-trial motions, the case was scheduled for a November 2016 trial.

Several weeks before trial, the case went to mediation, where the parties agreed to settle the case for $20,500 while reserving the issue of attorneys’ fees for resolution by the court.

The settlement also included language stating that it was the result of a compromise and did not constitute an admission of liability or wrongdoing. The parties then filed a stipulation with the court stating that the case would be dismissed with prejudice and waiver of all rights of appeal once the court made a fee determination.

In their motion for attorneys’ fees, the plaintiffs claimed roughly $40,000 in fees and $1,000 in costs.

Judge Karen F. Green, in rejecting the defendants’ argument that Buckhannongoverned the case, found the plaintiffs to be “prevailing parties” according to the catalyst test, reasoning that they obtained 70 percent of their initial demand, resulting in a “practical benefit” from their attorneys’ efforts.

After Green entered a fee award of $16,153 and the entire amount of costs, the defendants appealed and the SJC granted their motion for direct review.

Catalyst test

The SJC found that the catalyst test was indeed applicable to the fee dispute in the case.

“Although we have never expressly applied the catalyst test to determine prevailing party status under a State fee-shifting statute, we have, as previously stated, expressly rejected the alternative,” Kafker wrote, referring to Buckhannon. “In this case, we take the logical next step and conclude that the catalyst test applies in the context of determining prevailing parties under the Wage Act.”

The court also stated that that finding was rooted in the two major purposes behind fee-shifting provisions: to deter unlawful conduct and to incentivize attorneys to accept cases that otherwise would not be financially prudent to take, leaving clients that lacked either resources or a high-value case without access to justice.

Kafker further stated that the catalyst test would promote the prompt settlement of meritorious cases, avoiding the need for protracted litigation or unnecessary court involvement solely to “prevail” in a formalistic sense to ensure a fee award.

Accordingly, the SJC concluded, Judge Green’s award should be affirmed.

Ferman, et al. v. Sturgis Cleaners, Inc., et al.

THE ISSUE: Were employees who obtained a favorable settlement of their Wage Act claim considered a “prevailing party” entitled to an attorneys’ fee award under the statute’s fee-shifting provisions?

DECISION: Yes (Supreme Judicial Court)

LAWYERS: Elizabeth Soltan and Patricio S. Rossi, of Harvard Legal Aid Bureau, Cambridge (plaintiffs)

John J. McGlone III of Giarrusso, Norton, Cooley & McGlone, Quincy; David T. Norton of Quincy (defense)