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Melgar v. OK Foods

United States Court of Appeals, Eighth Circuit

August 29, 2018

Ana Melgar, individually and on behalf of all others similarly situated; Phaythoune Phengsouvanavong, individually and on behalf of all others similarly situated; Ruben Iraburo, individually and on behalf of all others similarly situated Plaintiffs - Appellants
v.
OK Foods; OK Industries, Inc. Defendants - Appellees

          Submitted: April 12, 2018

          Appeal from United States District Court for the Western District of Arkansas - Ft. Smith

          Before GRUENDER, MELLOY, and GRASZ, Circuit Judges.

          MELLOY, Circuit Judge.

         Employees of a chicken processing plant filed a lawsuit against their employer, OK Foods, Inc. and OK Industries, Inc. (collectively, "OK Foods"), alleging their employer failed to pay certain wages in violation of Arkansas state law and the Fair Labor Standards Act of 1938 ("FLSA"), 29 U.S.C. § 201 et seq. The parties eventually settled their dispute out-of-court for a confidential amount made known to the court. While the district court approved the parties' settlement agreement (the "Agreement"), the court declined to award the agreed-upon $87, 500.00 in attorneys' fees, costs, and expenses. Instead, the district court, sua sponte, reduced the fees awarded to $22, 500.00. We reverse in part and remand with instructions to award Appellants the agreed-upon fees.

         I. Background

         In May 2013, Ana Melgar, Phaythoune Phengsouvanavong, and Ruben Iraburo (together, the "Appellants") filed a class action lawsuit against OK Foods in state court alleging unjust enrichment, breach of implied contract, and violations of the Minimum Wage Act of the State of Arkansas. Ark. Code. Ann. § 11-4-201, et seq. In June 2013, OK Foods successfully removed the case to federal court. After the court denied Appellants' motion for remand, Appellants amended their complaint to include FLSA claims.

         In March 2015, the district court certified the case as a collective action under the FLSA, pursuant to 29 U.S.C. § 216(b). Over 1, 000 individuals opted in to the action. In November 2015, the court stayed the case, pending the Supreme Court's decision in Tyson Foods, Inc. v. Bouaphakeo, 136 S.Ct. 1036 (2016).

         In April 2016, the district court granted OK Foods' motion to decertify the collective action, in light of the Court's decision in Tyson Foods, reducing the case to the individual claims of Appellants. The district court also granted OK Foods' motion for partial summary judgment, subsequently limiting certain claims to a two-year limitations period under the FLSA.

         In late 2016, the parties engaged in settlement discussions, including a full-day conference with a magistrate judge. The parties eventually agreed to settle for a confidential amount made known to the court, which Appellants allege was higher than the parties could have expected to win at trial. The Agreement also included a provision requiring OK Foods to pay $87, 500.00 in attorneys' fees. The parties then filed a joint motion for dismissal with prejudice.

         The district court denied the joint motion and requested additional information to evaluate the fairness of the Agreement. The court expressed concern as to the amount OK Foods agreed to pay in attorneys' fees, noting there was "no information provided regarding the fee arrangement between the Plaintiffs and their counsel or the amount of time expended on the case." The court also expressed concern as to the relatively high ratio between the attorneys' fees and plaintiffs' recovery. The court noted that "[w]here a plaintiff's attorney receives a larger fee at the expense of his clients' wage claims" there could be a potential "conflict of interests between the attorney and his clients." The court recognized, however, that the case was "previously certified as a collective action and . . . ha[d] been zealously litigated."

         In response, the parties provided the district court with the requested information and filed a joint motion to approve the settlement. The district court granted the motion as to the settlement amount but declined to award the agreed-upon attorneys' fees. Instead, the district court instructed Appellants to "file a properly-supported motion . . . to recover fees and costs." The district court also expressed concern as to the possibility of double-recovery by Appellants' counsel, as counsel is also involved in an ongoing state-court class action against OK Foods.

         Accordingly, Appellants submitted documentation and filed a third, uncontested motion requesting that the court order OK Foods to pay the agreed-upon $87, 500.00. The documents included hour logs and rates accounting for $536, 810.00 in attorneys' fees and $94, 745.30 in incurred costs and expenses, to support fees and costs totaling $631, 555.30.

         The district court denied the motion to approve the attorneys' fees, identifying the attorneys' fees provision of the Agreement and noting the "provision was severable from the remainder of the settlement agreement." As such, the court determined Appellants were "entitled to reasonable fees and costs that reflect that success," noted the amount Appellants recovered was lower than the attorneys' fees, and awarded $22, 500.00 in attorneys' fees and costs without providing any additional explanation for the court's alternative calculation. Appellants filed a timely appeal of the district court's order with this court. OK Foods did not oppose ...


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