Opinion ID: 2140651
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Heading: The Lodestar Amount

Text: We have approved the use of the lodestar method for determining reasonable attorney fees. See Specialized Tours, Inc. v. Hagen, 392 N.W.2d 520, 542 (Minn. 1986) (characterizing the procedure set forth by the Supreme Court in Hensley v. Eckerhart, 461 U.S. 424, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983), as a sensible and fair approach). The lodestar method requires the court to determine the number of hours `reasonably expended' on the litigation multiplied by `a reasonable hourly rate.' Anderson v. Hunter, Keith, Marshall & Co., 417 N.W.2d 619, 628 (Minn.1988) (quoting Hensley, 461 U.S. at 433, 103 S.Ct. 1933). In determining the reasonableness of the hours and the reasonableness of the hourly rates, the court considers all relevant circumstances. State v. Paulson, 290 Minn. 371, 373, 188 N.W.2d 424, 426 (1971). Factors considered in determining reasonableness include the time and labor required; the nature and difficulty of the responsibility assumed; the amount involved and the results obtained; the fees customarily charged for similar legal services; the experience, reputation, and ability of counsel; and the fee arrangement existing between counsel and the client. Id. at 373, 188 N.W.2d at 426; see also Hensley, 461 U.S. at 430 n. 3, 103 S.Ct. 1933 (listing additional factors relevant to the determination of reasonable attorney fees). [9] When the reasonableness of the requested attorney fees is challenged, the district court must provide a `concise but clear explanation of its reasons for the fee award.' Anderson, 417 N.W.2d at 629-30 (quoting Hensley, 461 U.S. at 437, 103 S.Ct. 1933). In this case, the district court determined that the total number of hours submitted by the plaintiffs' attorneys, reduced by 10 percent, as well as the rates charged by the Plaintiffs' attorneys are reasonable. Applying the Paulson factors, the district court found that (1) the time and labor necessary to prosecute this class action was substantial and warranted; (2) the case was a significant and complex one; (3) the Plaintiffs' attorneys secured substantial benefits not only for the Class, but also for all future [Farmers] claims representatives in Minnesota; and (4) the hourly rates normally charged by the plaintiffs' attorneys and paralegals are reasonable and are comparable to those charged by equally competent attorneys and paralegals in their respective communities. The district court did not make specific findings on the experience, reputation, and ability of counsel; or the fee arrangement between counsel and the plaintiffs. In challenging the attorney fees award, Farmers claims that the district court failed to scrutinize the reasonableness of the hours and rates submitted by the plaintiffs' attorneys and simply accepted them at face value. Farmers notes that at the district court level, it objected to the hours and rates submitted by the plaintiffs' attorneys on numerous grounds, including block billing, undocumented work, duplication of effort, and work unrelated to any claim or issue in the case. Furthermore, Farmers argues that most of the hours claimed by the plaintiffs' attorneys were expended attempting to prove that the class was entitled to damages for unpaid overtime hours worked, a claim which wholly failed. As an initial matter, we conclude that the district court did not abuse its discretion in determining that the hourly rates charged by the plaintiffs' attorneys are reasonable. The district court reached this conclusion after reviewing a detailed study, which, according to the district court, evidenc[ed] that their respective hourly rates are comparable to those charged by equally competent attorneys and paralegals in their respective communities. Our focus here is on the reasonableness of the hours expended by the plaintiffs' attorneys. Although we have observed that the district court is in a better position than this court to determine the reasonableness of the hours expended, we also have stated that when a party has challenged this component of an attorney fees claim, the district court must scrutinize the claim and either make findings or otherwise concisely explain why it felt the hours claimed are reasonable or unreasonable. Anderson, 417 N.W.2d at 629-30. In this case, the district court did not specifically address Farmers' challenge to the reasonableness of the hours expended, other than to note that, [d]espite Farmers' assertions, the Plaintiffs' attorneys did do a good job in this litigation and did obtain a successful result for their clients. The district court did not mention, let alone consider anywhere in its attorney fees analysis, the plaintiffs' complete failure to prove their claim for millions of dollars in unpaid overtime compensation. [10] The district court simply stated in a conclusory fashion that the time and labor necessary to prosecute this class action was substantial and warranted, and that after review[ing] all the documents submitted, the court has determined that the total number of hours worked submitted by the [plaintiffs' attorneys] (reduced by 10%) are reasonable. The district court did not give any reason for reducing the hours by 10 percent and did not give a clear explanation as to why those reduced hours are reasonable. We conclude that, given Farmers' challenge to the reasonableness of the charges, the district court did not provide the clear explanation required to support the reasonableness of the attorney fees award. In particular, the district court did not account for the failure of the plaintiffs to achieve their primary objectivecompensatory damages for unpaid overtime hours worked. As the Eighth Circuit has observed, Minnesota courts consider the results obtained critical to the award. First State Bank of Floodwood v. Jubie, 86 F.3d 755, 761 (8th Cir.1996) (citing Specialized Tours, 392 N.W.2d at 542). [T]he results obtained factor is particularly crucial where a plaintiff is deemed `prevailing' even though he succeeded on only some of the claims for relief. Anderson, 417 N.W.2d at 630 (internal quotation marks omitted); see also Hensley, 461 U.S. at 436, 103 S.Ct. 1933 (commenting that even when a case involves interrelated claims, using the hours expended on the litigation as a whole may result in an attorney fees award that is excessive). [11] In this case, the district court found that the plaintiffs' attorneys obtained a successful result for their clients because they established that Farmers violated the MFLSA and Farmers was assessed a large civil penalty and is now paying its claims representatives in Minnesota overtime pay. Although these achievements did not result in any monetary relief for the plaintiffs, they are properly considered in assessing the plaintiffs' success in this litigation. For example, several federal circuits measure success not only by looking at the difference between the judgment recovered and the recovery sought, but also by looking at the significance of the legal issues on which the plaintiff prevailed and the public purpose served by the litigation. See, e.g., Brandau v. Kansas, 168 F.3d 1179, 1181 (10th Cir.1999) (citing Farrar v. Hobby, 506 U.S. 103, 121-22, 113 S.Ct. 566, 121 L.Ed.2d 494 (O'Connor, J., concurring)); Scott v. Sunrise Healthcare Corp., No. 95 C 1277, 1999 WL 787624, at  (N.D.Ill. Sept. 23, 1999) (recognizing that FLSA cases are affected with the public interest, and the value of such a suit to the public may exceed its limited monetary value to the plaintiffs). The achievement of some success, however, does not necessarily support a significant attorney fees award. The attorney fees award must reflect the degree of success obtained. Hensley, 461 U.S. at 436, 103 S.Ct. 1933 (emphasis added). A reduced fee award is appropriate if the relief, however significant, is limited in comparison to the scope of the litigation as a whole. Id. at 440, 103 S.Ct. 1933. The court should focus on whether the hours expended are reasonable in relation to the overall relief obtained. See id. at 435-36, 103 S.Ct. 1933; see also Farrar, 506 U.S. at 114, 113 S.Ct. 566 (stating that when recovery of private damages is the purpose of the litigation, a district court, in fixing fees, is obligated to give primary consideration to the amount of damages awarded as compared to the amount sought (internal quotation marks omitted)). Applying these standards here, we conclude that while the plaintiffs are entitled to reasonable attorney fees for proving that Farmers violated the MFLSA by failing to keep the required records, the plaintiffs' failure to recover any compensatory damages on their primary claim must be taken into account in determining the reasonableness of the hours expended on this litigation. At trial, the plaintiffs sought millions of dollars in damages for unpaid overtime compensation, but the jury found they were entitled to nothing. The claim for unpaid overtime compensation was the central issue at trial. Because it is not clear that the district court gave any consideration to the plaintiffs' failure to recover compensatory damages in determining the hours reasonably expended on the litigation, we conclude that the district court's lodestar calculation, resulting in an award of over $1 million in attorney fees (without the enhancement), is excessive. See Wales v. Jack M. Berry, Inc., 192 F.Supp.2d 1313, 1326-27 (M.D.Fla.2001) (recognizing in a case involving limited monetary recovery that although the FLSA is an important piece of social legislation, the public benefit cannot support an attorney fees award of more than $1 million); cf. Saizan v. Delta Concrete Prods. Co., 448 F.3d 795, 801 (5th Cir.2006) (affirming a reduction in attorney fees in a FLSA action, commenting that vindication is not as weighty of a factor as monetary success). Accordingly, we remand to the district court for recalculation of the lodestar amount. See Anderson, 417 N.W.2d at 630 (remanding attorney fees award where it was not clear the district court took into consideration the fees incurred on unsuccessful claims); Specialized Tours, 392 N.W.2d at 542-43 (remanding attorney fees award for the district court to weigh the results obtained). On remand, the district court should limit the attorney fee award to an amount that is reasonable in relation to the results obtained. Hensley, 461 U.S at 440, 103 S.Ct. 1933. The district court may identify specific hours that should be eliminated or the district court may simply reduce the award to account for the limited success. Id. at 436-37, 103 S.Ct. 1933.