Labor & Employment Law Daily Rejected Rule 68 offer’s adverse effect on prevailing FLSA plaintiff upheld
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Wednesday, December 2, 2020

Rejected Rule 68 offer’s adverse effect on prevailing FLSA plaintiff upheld

By Brandi O. Brown, J.D.

Even though the jury ruled in his favor on an unpaid wages claim, the plaintiff was awarded only 37 percent of his requested attorney’s fees and was taxed the costs incurred after the rejected settlement offer.

Affirming a district court order, the Eleventh Circuit ruled that it had correctly applied Rule 68 to tax the parties’ post-offer costs against an employee in a FLSA suit that had been tried before a jury. The offer had not been ambiguous and the judgment, which came out to less than $200, was not “more favorable” than the offer of judgment of $3,500 plus reasonable fees and costs. The lower court also had not abused its discretion in reducing the employee’s attorneys’ fees request. The appeal of the final judgment was dismissed and the fees and costs order was affirmed (Vasconcelo v. Miami Auto Max, Inc., November 25, 2020, Pryor, W.).

Ended up in the red. The employee worked as a sales associate with the employer, an automobile dealership, for less than one year and, when his employment ended, he owed his employer over $2,700. This was result occurred because the employer paid the employee a “draw against commission,” by which they earned commissions on cars sold and drew a weekly minimum hourly wage against those commissions based on the number of hours worked. When the draw exceeded earned commissions, the difference was carried forward and applied against future commissions. The employee struggled with sales and so, after his last month on the job, he was in arrears.

Rejected Rule 68 offer. He got an attorney and sued, alleging violations of the FLSA by his former employer. He alleged that the weekly draws were not wages, but were instead a debt. He also alleged that he was required to work off the clock and that his employer took unwarranted deductions from the time he logged. He estimated that he was owed nearly $6,400 in unpaid wages and that, with liquidated damages, the employer was liable for nearly $12,800. In late 2017 the employer made the employee an offer of judgment under Rule 68. It offered him $3,500 “inclusive of liquidated damages, plus a reasonable amount of attorney[‘s] fees and costs incurred to date.” The employee did not accept the offer and the case went to trial.

Jury trial and award. After two days, the jury found that the employer failed to pay him a minimum wage for all hours worked and awarded him $97.20 in damages, representing 12 hours of minimum-wage payments. The district court entered judgment in his favor for that amount. He moved to amend the judgment to include an equal amount in liquidated damages. That motion was granted, while other motions he filed were denied.

In the meantime, the employer moved to tax its $1,340 in post-offer costs against the employee, pursuant to Rule 68. The employee moved to tax all of his costs against the employer (just less than $4,000), as well as for $55,990 in attorneys’ fees. The motions were referred to a magistrate judge. The magistrate judge recommended, and the district court approved, taxing the employer’s post-offer costs against the employee, and reducing the employee’s fee request based on his limited success at trial. Ultimately, the district court awarded attorneys’ fees to the employee that represented a 63 percent reduction to the lodestar. The employee appealed.

Valid offer rejected. Below, the district court found that the employer made a valid offer of judgment when, prior to trial, it offered the employee $3,500 “inclusive of liquidated damages, plus a reasonable amount of attorney[’s] fees and costs incurred to date.” The lower court concluded that the offer was more favorable than the damages awarded. The appeals court agreed, rejecting all of the arguments raised by the employee.

With regard to the employee’s argument that the offer of judgment was ambiguous, the appeals court was not persuaded. Although the employee argued that the offer could have been interpreted to include a “reasonable amount” of attorney’s fees within the $3,500 total amount, the court explained that such an interpretation would only be reasonable if the wording were edited to exclude the comma after the word “damages” and “if the word ‘plus’ was used synonymously with the word ‘and.’” That reading, the appeals court explained, was not reasonable. The only reasonable reading was that the offer was for $3,500 plus reasonable fees and costs determined by the court.

The appeals court also rejected the employee’s argument that the $194.40 judgment and finding of liability were “more favorable” than the Rule 68 settlement offered, even though the latter included a denial of liability. The district court did not err, the appeals court explained, in implicitly finding that the employee’s non-pecuniary interest in establishing the employer’s liability was not worth more than the difference between the jury verdict and Rule 68 offer. Finally, with regard to the employee’s argument that Rule 68 could not prevent a mandatory award of costs to a prevailing plaintiff under the FLSA, appeals court noted that the Rules Enabling Act eschewed any such conflict argument.

Fees reduction not abusive. Additionally, the appeals court concluded that the district court had not abused its discretion in reducing the attorneys’ fees request in light of the employee’s limited success at trial. The employee demanded $12,795.30, but only recovered $194.40. According to the employee, the district court incorrectly reduced his fee award because of his rejection of the Rule 68 offer only. However, the magistrate judge made clear, the appeals court explained, that the employee had not only rejected that offer, but multiple other settlement efforts, both formally and informally. “The district court did not abuse its discretion by accounting for Vasconcelo’s refusal to settle the case before trial,” the court concluded. Moreover, the employee’s arguments against how the deductions were performed and his arguments regarding the public benefit of vindication did not demonstrate that the district court abused its discretion.

The appeals court also determined that the employee’s appeal of the final judgment was untimely and dismissed it.

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