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Attorney Fees Award 25 Times Greater than Damages Upheld

By David A. Scott  1/17/2014

The trial court properly awarded almost $700,000 in attorney fees even though the jury awarded the employee only $27,280 in damages on a single successful discrimination claim, according to the 9th U.S. Circuit Court of Appeals.

After years of working at UPS, Kim Muniz was promoted to division manager. She was later demoted two levels down, to a supervisor position. Muniz blamed her demotion on a male manager, claiming that he persuaded her female district manager to take the action against her. UPS countered that Muniz had been promoted beyond her level of competence and that the male manager was simply the first to recognize her performance deficiencies.

Muniz challenged the demotion by filing suit under California’s employment discrimination law. She asserted that UPS’ decision was improperly motivated by her gender and age and that the company retaliated against her. The trial court dismissed Muniz’s claims for age discrimination, retaliation and punitive damages before trial. The plaintiff also dropped her state law claims for negligent supervision and training before trial.

At trial, the jury found that UPS’ decision to demote Muniz was motivated by her gender. During closing arguments, Muniz’s attorney asked the jury to award more than $700,000 in damages. The jury awarded a total of $27,280, including $9,990 for lost earnings, $7,300 for past medical expenses and $9,990 for past noneconomic losses.

After the trial both Muniz and UPS claimed victory, and both sought attorney fees. The trial court determined that Muniz was the prevailing party and, therefore, was entitled to recover fees.

In discrimination cases, courts typically award attorney fees according to a formula. The trial court determines a reasonable hourly rate for the attorney’s time based on the particular legal community; that rate is then multiplied by the number of hours reasonably spent in achieving the plaintiff’s victory. The court has discretion to adjust the amount up or down depending on the case’s circumstances.

A “reasonable” amount in Muniz’s case was hotly contested, given the plaintiff’s limited success at trial. Muniz claimed that a fee award of more than $1.9 million was reasonable. UPS argued that the hourly rates and the hours claimed by Muniz’s attorneys were excessive and unreasonable.

The trial court reduced the hourly rates that three of Muniz’s four attorneys claimed by at least 20 percent, cut the number of hours that two of the attorneys claimed by 20 percent, and applied a further overall reduction of 10 percent, to reflect Muniz’s limited success in recovering only $27,280 at trial. The adjusted fee award equaled $696,162.78.

On appeal, UPS argued that the district court abused its discretion in determining the amount of fees. It said the trial court should have reduced the award even further because many of Muniz’s claims were unsuccessful. The 9th Circuit disagreed, explaining that although the fee award should be reasonable in relation to the degree of success obtained, a further reduction was not warranted because the attorneys could not separate the hours they spent pursuing the unsuccessful claims. The 9th Circuit also observed that, while Muniz’s monetary recovery was relatively low, the plaintiff had achieved a significant result: She successfully proved that the two-level demotion was motivated by gender bias. The 9th Circuit sent the case back to the trial court to determine an additional award of attorney fees to Muniz for successfully defending the appeal.

This case highlights the inherent struggle courts often face in determining a “reasonable” fee award. On the one hand, an employee with limited resources should not be discouraged from seeking relief in the courts for perceived employment discrimination; on the other hand, an employee and her attorneys should not enjoy a windfall for pursuing marginal claims and achieving only modest success.

Muniz v. United Parcel Service Inc., 9th Cir., No. 11-17282 (Dec. 5, 2013).

Professional Pointer: The employer should not overlook attorney fees when evaluating a discrimination claim. When it decides to defend a management decision in court, it should be prepared to evaluate all possible strategies for reducing or limiting the employee’s potential recovery of attorney fees. Potential cost-shifting strategies, such as offers of judgment and mixed-motive defenses, may be appropriate in some cases.

David A. Scott is an attorney at Key Harrington Barnes PC, the Worklaw® Network member firm in Dallas.

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