Reed Smith Client Alerts

In a decision that may increase the benefit to defendants of making an offer of judgment in cases involving claims under the Fair Labor Standards Act (FLSA), the Fifth Circuit recently held in Gurule v. Land Guardianthat a rejected offer of judgment can be used to significantly reduce the attorneys’ fees a prevailing plaintiff can recover in such cases. In so holding, the Fifth Circuit joined several other Circuits in finding that a rejected offer of judgment that is greater than the amount the plaintiff recovers at trial is an important factor in determining the degree of success achieved by a prevailing plaintiff. Thus, while the rejection of a more favorable offer of judgment does not preclude the recovery of attorneys’ fees by a prevailing FLSA plaintiff, it can nevertheless substantially reduce the amount of attorneys’ fees a court will award as reasonable.

Authors: Peter J. Stuhldreher Cheryl L. Blount

In many cases filed under the Fair Labor Standard Act (FLSA), in which former employees seek to recover alleged unpaid overtime or minimum wages, each individual plaintiff’s unpaid wage damages may be small. However, as the case goes on, the plaintiff’s attorneys’ fees can mount quickly and can become a significant part of any judgment, as the FLSA includes a fee shifting provision that allows a prevailing plaintiff to recover their fees from the defendant employer. A recent decision from the Fifth Circuit Court of Appeals, however, confirmed – for the first time in that Circuit – that an offer of judgment can be used to significantly reduce the attorneys’ fees a prevailing plaintiff can recover.

Under the “offer of judgment” mechanism detailed in Federal Rule of Civil Procedure 68 (Rule 68), a defendant makes a settlement offer to resolve the case. If accepted, the offer is filed at the courthouse and the case ends. However, if the receiving party rejects the offer, prevails at trial, and recovers an amount that is less than the offer, the rejecting party must pay the offeror’s costs incurred after the offer was made.