Inherent Power Sanctions — Egregious Overstatement of Time in Fee Application Meets 11th Circuit’s Objective Recklessness Standard for Bad Faith — 85% Reduction of Requested Award Is a Reasonable Sanction

Reyes v. Aqua Life Corp., 2015 U.S. App. LEXIS 20462 (11th Cir. Nov. 25, 2015):

This matter arises out of several post-verdict motions filed by appellant Humberto Reyes ("Mr. Reyes") and appellee Aqua Life Corp. ("Aqua Life"), after a jury found in favor of Mr. Reyes in his suit to recover unpaid overtime wages under the Fair Labor Standards Act ("FLSA"). Mr. Reyes appeals the district court's omnibus order denying liquidated damages, granting partial costs, and reducing his attorney's fees award by 85% as a sanction. After careful review, and with the benefit of oral argument, we reverse the denial of liquidated damages, vacate and remand the costs award, and affirm the attorney's fees award.

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After the hearing, the district court issued an omnibus order denying liquidated damages and awarding partial costs and attorney's fees. The omnibus order was not accompanied by an opinion and did not explain the reason for denying liquidated damages. The order also granted Mr. Reyes's costs award in part, reducing the requested award from $13,372.17 to $10,452.12 without explanation. The district court also granted in part, and denied in part, Mr. Reyes's motion for attorney's fees and Aqua Life's motion for sanctions, and imposed an 85% reduction upon Mr. Reyes's attorney's fees award. Mr. Reyes's attorney's fees request was thus reduced from $393,802.50 to $59,070.38. Finally, the court did not grant Aqua Life a new trial.

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III. Attorney's Fees

The FLSA provides that a court "shall, in addition to any judgment awarded to the plaintiff or plaintiffs, allow a reasonable attorney's fee to be paid by the defendant." 29 U.S.C. § 216(b). The Supreme Court has explained that the "starting point for determining . . . a reasonable fee is the number of hours reasonably expended on the litigation multiplied by a reasonable hourly rate." Hensley v. Eckerhart, 461 U.S. 424, 433 (1983). The "applicant bears the burden of establishing entitlement and documenting" reasonable hours expended and reasonable hourly rates. See ACLU v. Barnes, 168 F.3d 423, 427 (11th Cir. 1999). If "applicants do not exercise billing judgment, courts are obligated to . . . cut the amount of hours for which payment is sought, pruning out those that are 'excessive, redundant, or otherwise unnecessary.'" See id. at 428 (quoting Hensley, 461 U.S. at 434).

Courts have the inherent power to impose sanctions when a party acts in bad faith. See Chambers v. NASCO, Inc., 501 U.S. 32, 45-46 (1991); Barnes v. Dalton, 158 F.3d 1212, 1214 (11th Cir. 1998). The bad faith standard is an objective one. Norelus v. Denny's, Inc., 628 F.3d 1270, 1282 (11th Cir. 2010) ("[O]bjectively reckless conduct is enough to warrant sanctions even if the attorney [*10]  does not act knowingly and malevolently." (quoting Amlong & Amlong, P.A. v. Denny's, Inc., 500 F.3d 1230, 1241 (11th Cir. 2006)). A review of bad faith is a comparison of "the conduct at issue with how a reasonable attorney would have acted under the circumstances." Id.

Analysis of the district court's actions must begin with the finding of bad faith on the part of the attorney for Mr. Reyes. On the discussion of possible sanctions, the court stated:

   I am unprepared to say that what you put down were mere clerical mistakes. They can't be . . . . [T]here are many of your entries that are three and four times [the amount] . . . . [T]his conduct was egregious. There is just no place for this. It just really was no place for this.

Appellant's App. Tab 11 at 57-58. Although the court did not specifically state that the attorney for Mr. Reyes acted in "bad faith," on this record the court's determination that the attorney's errors were "egregious"5 suffices. A contrary conclusion would exalt form over substance. C.f. Cogan v. Allianz Life Ins. Co. of N. Am., 592 F. Supp. 2d. 1349, 1355 (N.D. Ala. 2008) (holding that the effect of a district court's dismissal is "determined by its substance, and not by the incantation of any particular magic words" (quoting Schal Bovis, Inc. v. Cas. Ins. Co., 732 N.E.2d 1082, 1087 (Ill. App. Ct. 1999)). The egregious conduct here, namely, the repeated and inexcusable improper billing entries, meets the objective [*11]  recklessness standard for bad faith.

5   Black's Law Dictionary defines egregious as, "[e]xtremely or remarkably bad; flagrant." Egregious, Black's Law Dictionary (9th ed. 2014).

Specifically, in its analysis of the fee request, the court mentioned the egregious nature of improperly filing a fee request for an easily calculable time entry, and that the attorney for Mr. Reyes asserted in his fee application that he had spent "three to four times" the actual time spent on tasks. The court noted the errors were numerous, and could not be "mere clerical mistakes." Appellant's App. Tab 11 at 57-58.

Mr. Reyes argues that even in the light of a finding of bad faith, the district court must show its calculation in a fee award reduction. We have stated that "when hours are disallowed the court should identify the hours disallowed and explain why they are disallowed." Loranger v. Stierheim, 10 F.3d 776, 783 (11th Cir. 1994). We have recognized, however, that in cases "[w]here fee documentation is voluminous," it is not feasible to require a court to "engage in such a precise review." Id. Such is the case here, as Mr. Reyes's fee application totaled eighty-eight pages, contained 729 time entries, and requested fees for over 1,000 hours of attorney time. The district court's [*12]  decision not to detail its calculation in this case was thus reasonable. See, e.g., Villano v. City of Boynton Beach, 254 F.3d 1302, 1311 (11th Cir. 2001) (noting that 569 hours were extensive enough not to expect district court to conduct an hour-by-hour analysis). The court properly used its inherent power to determine the appropriate sanction in the light of Mr. Reyes's attorney's conduct. Mr. Reyes's attorney's fees request contained over fifty significant time entry errors, forty-six of which Mr. Reyes's attorney admitted to after the fact, explaining them as "misplacement of decimal." DE-262-2. Given the severity of the time-keeping errors, the 85% reduction was a reasonable sanction and does not constitute an abuse of discretion. Accordingly, we AFFIRM the attorney's fees award.

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