00-money-bagBy Christopher M. Cascino and Gerald L. Maatman, Jr.

In Montgomery v. Kraft Foods Global, Inc., No. 1:12-CV-00149 (W.D. Mich. March 2, 2015), Judge Gordon J. Quist of the U.S. District Court For The Western District of Michigan cut the attorneys’ fee award of the plaintiff’s counsel from a requested $183,168.50 to $6,417 in a decertified class action in which the plaintiff recovered only individual damages. While not a workplace class action, this case provides employers with a tool to dramatically reduce their liability for attorneys’ fees when they defeat class or collective action certification. It also serves as a reminder of the importance of seeking to bifurcate class discovery from merits discovery, as this can eliminate exposure for the fee request of plaintiff’s counsel incurred in discovery if a class is not certified.

Case Background

Pamela Montgomery filed a putative class action complaint against Kraft Foods and Starbucks for alleged violations of the Michigan Consumer Protection Act.  Montgomery, 1:12-CV-00149, at 1.  Montgomery alleged that she purchased a Kraft single-serving coffee maker for the purpose of brewing Starbucks coffee. Id. She alleged that Kraft and Starbucks misled consumers like her by convincing them that Starbucks would continue to produce the single-serving component of the Kraft single-serving brewing system “for a reasonable amount of time into the future, although Defendants knew that their business relationship would soon be at an end.” Id. at 1-2.

After class discovery, the Court denied Montgomery’s motion for class certification. Id. at 2. As a result, the only remaining claim in the case was Montgomery’s individual claim that had a maximum recovery of $250 in statutory damages. Id. at 3. Because continued litigation would result in attorneys’ fees that would far exceed any potential recovery, the Court ordered Defendants to show cause as to why the Court should not order Defendants to submit an offer of judgment to Montgomery for $250 plus costs and reasonable attorneys’ fees. Id. The Defendants then submitted the proposed offer of judgment, which Montgomery accepted. Id.

Because attorneys’ fees and costs are awarded to successful plaintiffs in Michigan Consumer Protection Act litigation, Montgomery moved for an award of $174,786 in attorneys’ fees, plus costs, which she later supplemented with an additional request for $8,382.50 in fees for work performed after the offer of judgment was accepted. Id. at 8. After Defendants objected, Montgomery asked the Court to compel Defendants to produce their own billing records “to measure the legitimacy of Defendants’ objections,” and for a hearing on her fee request. Id. at 4.

The Court’s Opinion 

The Court began by addressing Montgomery’s request for discovery of Defendants’ billing records. The Court found that Defendants’ billing records would not be relevant to Defendants’ objections to the fee award because Defendants’ objections were based on the sufficiency and accuracy of the billing records of Montgomery’s counsel, Montgomery’s request for fees related to Montgomery’s failed attempt at class certification, and the proposed billing rate of $350 per hour for an attorney who was in his first year of practice. Id. at *6. The Court thus denied Montgomery’s request for Defendants’ billing records. Id.

The Court also denied Montgomery’s request for an evidentiary hearing. Id at 8. Applying Michigan law, the Court found that only a party opposing a fee award has the right to an evidentiary hearing, and that it could decide the reasonableness of the fee award based on the parties’ submissions alone. Id. at 7-8.

The Court also addressed Montgomery’s fee request.  It began by finding that Montgomery’s proposed $350 hourly rate was excessive, concluding that a $155 hourly rate was appropriate because it was the mean rate for first year attorneys in Michigan.  Id. at 11.

The Court then turned to the most significant part of its decision – Montgomery’s request for fees for 523.34 hours of work.  Id.  The Court first deducted all 330.83 hours Montgomery’s counsel billed for discovery.  Id. at 12.  While Plaintiff’s counsel claimed that this work was “exclusive of work related to Plaintiffs’ Request for Class Certification,” the Court found that this was “not true.” Id. The Court pointed out that the case, being worth only $250 if a class was not certified, was “largely, if not exclusively, driven by Montgomery’s request for class certification,” and that therefore discovery was, as a practical matter, solely about class certification. Id. The Court then went on to point out that if Montgomery’s counsel engaged in merits discovery, he would have done so in violation of the Court’s order limiting initial discovery to class certification issues, and thus could not recover any fees for discovery even if he engaged in discovery about Plaintiff’s individual claim. Id. at 12 n.7.

The Court went on to deduct hours Montgomery’s counsel spend on other tasks to reflect Montgomery’s lack of success on her class claims. The Court cut the time Montgomery’s counsel spent on pre-complaint research from 9.9 hours to 4 hours and the time spent on drafting the complaint from 38.1 hours to 10 hours.  Id. at 13.  The Court went on to remove all but one of the 59.8 hours Montgomery’s counsel spent on the case after the denial of class certification because after the denial of class certification “it should have been immediately apparent to Montgomery and [her counsel] that continuing the litigation on Montgomery’s individual claim made no sense.” Id. at 14.  Finally, the Court denied Montgomery’s request for fees for time spent litigating the fee petition, finding that a plaintiff’s counsel is not entitled to any fees incurred after a plaintiff accepts an offer of judgment. Id. at 14-15.

After cutting the hourly rate and hours purportedly spent litigating Montgomery’s claim, the Court awarded Montgomery’s counsel $6,417 instead of the requested  $183,168.50. Id. at 16.

Lessons For Employers

While not a workplace class action, employers who are sued in workplace class actions can use this case to support dramatic reductions in requested fee awards for plaintiff’s counsel in cases in which class or collective action certification is denied. Employers can rely on this case to show that the time spent litigating a plaintiff’s individual claims in purported workplace class actions pales in comparison to the time spent attempting to achieve class or collective action certification. It also reminds employers that they should also be sure to request to limit initial discovery in most workplace class actions to the class or collective action certification issue. Discovery is almost always the most expensive and time-consuming part of any workplace class action, and by securing a court order limiting initial discovery to class certification issues, employers can leave no doubt that class counsel should not receive any fees for time spent on discovery prior to the resolution of class certification in any case in which class certification is denied.