Uphoff v. Elegant Bath, Ltd.

Decision Date29 April 1999
Docket Number98-1332,Nos. 97-2409,s. 97-2409
Citation176 F.3d 399
Parties138 Lab.Cas. P 33,869, 5 Wage & Hour Cas.2d (BNA) 467 Brian UPHOFF and David Damon, individually and on behalf of a class of employees, Plaintiffs-Appellants, v. ELEGANT BATH, LTD., Chuck Does It All, Inc., and Charles L. Crosby, Defendants-Appellees.
CourtU.S. Court of Appeals — Seventh Circuit

Ernest T. Rossiello (argued), Rossiello & Associates, Chicago, IL, for Plaintiffs-Appellants.

Bruce M. Bozich, Kenneth M. Soldat (argued), Bozich & Beran, Palos Heights, IL, for Defendants-Appellees.

Before CUMMINGS, BAUER, and KANNE, Circuit Judges.

BAUER, Circuit Judge.

Brian Uphoff ("Uphoff") and David Damon ("Damon") (collectively the "Plaintiffs") filed an action against Chuck Does It All ("CDIA") and Charles Crosby ("Crosby") (collectively the "Defendants" 1), alleging that the Defendants were liable for unpaid overtime wages pursuant to the Fair Labor Standards Act of 1938 (the "FLSA"), 29 U.S.C. §§ 207(a), 215(a)(2), and 216(b). The Plaintiffs moved for summary judgment on the FLSA claim, arguing that: 1) the Defendants owed the Plaintiffs overtime wages; and 2) the Plaintiffs were entitled to liquidated damages under the FLSA. On May 15, 1997, the district court granted summary judgment with respect to the Plaintiffs' overtime wage claim, but denied summary judgment as to the liquidated damages claim.

On May 27, 1997, the Plaintiffs filed a motion seeking $30,388.05 in attorneys' fees and costs, pursuant to the FLSA, 29 U.S.C. § 216(b). On January 22, 1998, the district court awarded $17,119.20 in fees and costs, reducing the requested amount because: 1) the Plaintiffs' attorneys' billing rates were unreasonable; 2) a significant portion of the Plaintiffs' attorneys' billable hours were unnecessary and 3) the Plaintiffs' expert witness fees were not recoverable.

On June 10, 1997, the Plaintiffs filed a motion to amend the district court's judgment, pursuant to Fed.R.Civ.P. 59(e), seeking an award of prejudgment interest and a punitive penalty under Illinois law. The district court denied the Plaintiffs' motion, concluding that the request should have been made prior to judgment. We affirm in part and reverse in part.

I. BACKGROUND

Crosby owned and operated a company, CDIA, that installed and renovated kitchen and bathroom fixtures. The Plaintiffs were employed as kitchen and bathroom renovators for CDIA. Uphoff and Damon were hired to work for CDIA in 1993 but were both terminated on July 1, 1996. While employed at CDIA, the Plaintiffs frequently were asked to and did work in excess of 40 hours per week. For each hour actually worked by the Plaintiffs, the Defendants paid the Plaintiffs "straight time" (i.e., their current hourly wage). The paychecks from the Defendants never included "overtime" pay (i.e., time-and-a-half) for hours worked by the Plaintiffs in excess of 40 per week. The actual number of hours worked by the Plaintiffs was recorded by Crosby on "sign-in" sheets, which was then transferred to the Plaintiffs' pay stubs.

According to the Plaintiffs' audit of CDIA's payroll records, Uphoff was owed $4,066.50 and Damon was owed $2,126.07 in overtime wages. The Defendants did not dispute that the payroll records reflected an underpayment of overtime wages to the Plaintiffs in the amounts calculated in the Plaintiffs' audit. But the Defendants asserted that they were not subject to FLSA liability or a liquidated damages penalty because they had adequately compensated the Plaintiffs for their overtime work through numerous cash payments and permissive use of company vehicles, materials, and supplies. The district court rejected the Defendants' argument and held them liable for the entire amount of the overtime wages. However, the district court did not award liquidated damages under the FLSA because it found that the Defendants acted in good faith and with a reasonable belief that they were compensating the Plaintiffs for their overtime hours.

Following the court's judgment, the Plaintiffs moved for $30,338.05 in attorney's fees. The fees were based on a rate of $320 per hour for Rossiello (the Plaintiffs' lead counsel), $220 per hour for Dimopoulos (an associate), $190 per hour for Higgins-Brom and Quello (associates), and $102.50 per hour for paralegal time. In support of the request, the Plaintiffs submitted affidavits from their attorneys, who stated that they worked solely on a contingency basis, but that the rates sought were market rates for each respective attorney based on fee awards that they had received in previous Title VII and FLSA cases. The Defendants did not file affidavits contesting counsels' assertion of their market rate. Instead, the Defendants submitted cases in which Plaintiffs' counsel had received lower hourly rates than those requested in the immediate case.

In determining the appropriate hourly rates for Plaintiffs' counsel, the district court did not adopt the Plaintiffs' requested rates, but instead, applied hourly rates that the court had awarded Plaintiffs' counsel in another recent FLSA case with similar issues. Moreover, after reducing the hourly rates, the district court deducted 8.3 hours of billed time as "unreasonable," thereby reducing the Plaintiffs' requested fee amount from $30,338.05 to $17,119.20.

In addition to legal fees, the Plaintiffs also sought to recover the costs of an accountant employed by the Plaintiffs' counsel to calculate the Plaintiffs' unpaid overtime wages. The district court denied recovery of the accountant's cost, finding that there was no statutory basis to award the cost and that, in any event, the accountant's fees were unnecessary in light of the simplistic nature of the overtime wage calculation.

On appeal, the Plaintiffs argue that the district court erred in: 1) entering summary judgment in favor of the Defendants on the liquidated damages claim; 2) denying their motion to amend the district court's judgment to include prejudgment interest and a state law punitive penalty; 3) reducing the requested attorney's fees from $30,338.05 to $17,119.20; and 4) disallowing other litigation costs.

II. DISCUSSION
A. Liquidated Damages and Prejudgment Interest

We consider concurrently Plaintiffs' first two arguments. Section 216(b) of the FLSA provides that the payment of liquidated damages is mandatory if an employer fails to compensate the employee for overtime wages. The statute sets the amount of liquidated damages as the amount of unpaid overtime compensation owed to the employee, plus an additional equal (doubled) amount. See 29 U.S.C. § 216(b). However, the statute also provides:

if the employer shows to the satisfaction of the court that the act or omission giving rise to such action was in good faith and had reasonable grounds for believing that his act or omission was not a violation of the [FLSA] ... the court may, in its sound discretion, award no liquidated damages or award any amount thereof not to exceed the amount specified in section 216 of this title.

29 U.S.C. § 260. The employer bears the burden of proving both good faith and reasonable belief. Shea v. Galaxie Lumber & Constr. Co., 152 F.3d 729, 733 (7th Cir.1998) (citing Bankston v. State of Ill., 60 F.3d 1249, 1254 (7th Cir.1995)). "Although in the final analysis we review a district court's decision on liquidated damages for abuse of discretion, that discretion must be exercised consistently with the strong presumption under the statute in favor of doubling." Shea, 152 F.3d at 733. Doubling is the norm, not the exception. Id.; Avitia v. Metropolitan Club of Chicago, Inc., 49 F.3d 1219, 1223 (7th Cir.1995).

In this case, the district court found that the Defendants satisfied their burden of acting with good faith and with a reasonable belief, noting:

It is undisputed by the parties that Defendants gave Uphoff and Damon numerous cash payments as well as access to CDIA vehicles and materials for personal use; Defendants assert that these "facilities" were given to Plaintiffs as compensation for their overtime hours, and, indeed, Uphoff and Damon both admitted in their depositions that the cash payments received from Defendants were "bonuses" for extra work and that they were permitted to use CDIA trucks for their own purposes.

Thus, although Defendants cannot document the amount and/or the value of the cash and "other facilities" provided to Plaintiffs and are therefore subject to FLSA liability, the Court is confident that Defendants attempted, in good faith, to compensate Uphoff and Damon for their overtime hours and to comply with the FLSA's overtime wage standards. Accordingly, the Court exercises its discretion and awards Plaintiffs single damages.

Uphoff, No. 96 C 4645, 1997 WL 285859, at * 3.

We do not agree with the district court's conclusion on this issue. Even if we credit the district court's finding of good faith, we have not been presented with sufficient evidence that supports the equally necessary finding of reasonableness of the Defendants' actions.

Liability for liquidated damages follows, unless the employer has a certain kind of excuse--a reasonable belief that its acts or omissions did not violate the law. A court cannot evaluate the "reasonableness" of an employer's belief that its "act or omission was not a violation" without first identifying the "act or omission." Then, and only then, is the court in a position to ascertain what the employer believed about its acts or omissions, and to evaluate the employer's reasons for so believing.

Thomas v. Howard Univ. Hosp., 39 F.3d 370, 373 (D.C.Cir.1994). Here, the "act" was the Defendants' use of cash payments and "other facilities" to satisfy the Plaintiffs' overtime compensation. What did the Defendants believe about this act? Did they think that the cash payments and "other facilities" would serve as overtime compensation to the extent the Defendants deemed sufficient as measured...

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