A federal judge issued a blistering order this week denying a Little Rock law firm's request for $96,000 in fees in a labor dispute it won for 234 employees, instead awarding $1.
And that, according to U.S. District Judge Billy Roy Wilson, was only because the statute said attorneys' fees "shall" be paid to the winning party.
Wilson's order was immediately appealed to the 8th U.S. Circuit Court of Appeals, whose earlier decision governing the negotiation of attorney's fees in collective-action cases, like the one at issue, was cited in the order.
Meanwhile, the firm's managing partner, Josh Sanford, said he found the order "flabbergasting."
"We often don't get every dollar we ask for," Sanford said, "but we never have judges attack the legitimacy of our request."
The case stemmed from a lawsuit the firm filed in 2018 on behalf of Anthony Vines and Dominique Lewis, who represented a class of workers at Welspun Pipes Inc., which was accused of underpaying the workers for overtime hours they worked.
Wilson called it a "run of the mill" case filed under the Fair Labor Standards Act -- the type of case the firm specializes in.
In April, after Welspun agreed to a settlement of the claims, and it and the Sanford firm jointly sought the judge's approval of the settlement and the associated agreement on attorneys' fees, Wilson balked at the amount of fees sought and refused to approve the agreement. He sent the parties back to the negotiating table, with orders to "start from scratch" and keep attorneys' fees out of the negotiations, which he says the 8th Circuit has declared must be decided separately.
Wilson complained then, citing court documents, that the Sanford firm was trying to "squeeze excessive fees" out of the company by tying the resolution of the claims to an agreement on fees, which is forbidden.
After the parties renegotiated the same settlement on liability, Wilson approved the agreement, which requires the company to pay $269,339 to two classes of workers to reimburse them for unpaid overtime. The parties then separately negotiated fees, but didn't agree, prompting the Sanford firm to file a new request for the same amount of fees it had originally sought.
In a strongly worded order issued Tuesday, Wilson accused the firm of "extortion."
He said the Fair Labor Standards Act allows for "reasonable" attorneys' fees upon successfully litigating a claim, adding, "While that concept is good in theory, it has become apparent that, in practice, lawyers' fees are the driving force in many [fair labor] cases. Unfortunately, this often results in abuse, as seen in this case."
Sanford said Tuesday, after reading the order, "The lawyers of the Sanford Law Firm, and in particular Daniel Ford, did a wonderful, even an amazing job, for the plaintiffs and the many opt-ins in this case. We have secured a recovery for them in excess of a quarter of a million dollars and, on top of that, Welspun, which has been quite cooperative during this case, has cured the compensation error which resulted in the overtime violation."
Sanford also said, "I am very proud of Mr. Ford and the others. For the Court to interfere in the agreement between the parties and insult our fine work and our amazing results with the award of just one dollar is not acceptable. We ... are confident that our right to privately resolve attorney's fees will be vindicated."
Wilson said that when seeking fees, attorneys for the prevailing party shouldn't bill for excessive, redundant or unnecessary activities, and noted that "no reasonable, efficient law firm" would operate as the Sanford firm indicates it has in handling the overtime case.
"What's more troubling," the judge added, is that the firm "continues the practice after repeatedly being called out for it."
While acknowledging that Sanford and another member of the firm have 20 years' experience, Wilson complained that Sanford's hourly fee of $325 was too high and said another judge had determined that $250 an hour was more reasonable.
"Mr. Sanford also ignores the fact that his request for $325 an hour has repeatedly been rejected by judges in both the Eastern and Western districts of Arkansas. Yet, here he is again seeking $325 an hour, as if it is an opening bid in a negotiation," Wilson wrote in the order.
He said the firm has "repeatedly been scolded for overstaffing cases, which results in incessant, intra-office memos and conferences designed to unreasonably increase fees." Wilson cited parts of rulings from other courts criticizing the firm for having too many lawyers involved in a single case, billing for overseeing and educating new attorneys, and billing for duplicative work and excessive in-house conferences.
One of the rulings noted the use of 12 attorneys in "a one-attorney case."
Wilson said the Sanford firm "has been on notice" about overstaffing of cases since 2012, "yet, eight years later, [the Sanford Law Firm] unabashedly continues to run up fees through overstaffing and asks that defendants pay the bill."
" [The firm] involved 17 lawyers, 1 law clerk, and several assistants in this case," the order said. "There were over 250 intra-office conferences regarding a simple [fair labor] case. Why? The answer is obvious: more fees."
The order accused the firm of using senior attorneys to "micro-manage" the work of junior attorneys simply so the time could be billed at the senior attorney's rate. And it said that Sanford had "repeatedly billed to read a motion that he filed."
"The fact is, very little 'legal' work was performed in this case, which is true of most [fair labor] cases," Wilson wrote.
He said the company initially offered to pay the Sanford firm $25,000 in fees, in addition to the settlement of the claims, and then raised the fee offer to $45,000, but the Sanford firm refused to settle the dispute until the fees were increased significantly. He said the Sanford firm sought $115,00 in fees but eventually agreed to $96,000, although at that point it had performed "only $22,000 of work."
The firm "essentially extorted the higher fees," he said, calling the tactic "evidence of bad faith, and possibly in violation of the Rules of Professional Ethics.'
" [Fair Labor Standards Act] cases are not conduits for funneling unearned fees into lawyers' pockets," Wilson wrote.
Wilson did approve payment of $2,790.87 in costs to the firm, out of $3,512.87 requested, denying requested reimbursement of $722 for "online research."
He said that if the 8th Circuit finds he lacks authority to award the nominal fee of $1, he would award $25,000 in fees -- "the amount unreasonably rejected by [the firm] in 2019."