Philipps v. SC Capital Ventures, Inc.

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF FLORIDA

CASE NO. 19-62555-CIV-ALTMAN

JASON PHILLIPS,

Plaintiff,

vs.

SC CAPITAL VENTURES, INC. and

SCOTT RENNINGER.,

Defendants.

_________________________/

ORDER

Before the Hon. Roy K. Altman:

The Plaintiff sued the Defendants for failing to pay him the overtime wages he was owed.

Before even hiring a lawyer, the Defendants offered to resolve the case by paying the Plaintiff

the full amount of his damages. But, hoping to prolong the litigation—and to pad his hours—the

Plaintiff’s lawyer rejected the Defendants’ offer. The Defendants responded by hiring a lawyer

solely for the purpose of filing a motion for judgment in the Plaintiff’s favor. Having thus

“prevailed,” the Plaintiff’s lawyer now seeks compensation for time he spent negotiating the

amount of his attorneys’ fees after he spurned the Defendants’ offer of full compensation. This

Order follows.

THE FACTS

The Plaintiff’s Complaint alleged violations of the Fair Labor Standards Act (the

“FLSA”). See generally Complaint [ECF No. 1]. In “such action[s],” the Court shall, “in addition

to the judgment awarded to the plaintiff or plaintiffs, allow a reasonable attorney’s fee to be paid

by the defendant, and costs of the action.” 29 U.S.C. § 216(b).

The Plaintiff, Jason Philipps, is represented by attorney Elliot Kozolchyk. See Report and

Recommendation (the “Report”) [ECF No. 25] at 5. Kozolchyk filed this lawsuit on behalf of

Mr. Philipps on October 14, 2019. See generally Compl. Just one month later, on November 15,

2019, the Defendants, Scott Renninger and SC Capital Ventures, made the Plaintiff a settlement

offer, in which they agreed to pay the full amount of his actual and liquidated damages—

$1,898.82—as well as $1,000 in attorney’s fees and costs. See Defs.’ Response (the “Response”)

[ECF No. 14] at 1; Pl.’s Reply (the “Reply”) [ECF No. 19] Ex. 1 (the “Emails”) at 1–2; Pl.’s

Objections to Report (the “Objections”) [ECF No. 26] at 2. From the time the Complaint was

filed to the time he rejected the settlement offer, Kozolchyk says he incurred $2,160 in attorney’s

fees and $672 in costs. See Objections at 2.

But Kozolchyk rejected the Defendants’ attempt to settle the case for the full amount of

the Plaintiff’s damages and refused to submit a counteroffer. See Report at 6–7; Objections at 2;

Emails at 1–5. He now repeatedly condemns that settlement offer—which, again, promised his

client every cent he was seeking—as “unreasonable.” See Objections at 2, 3, 4. Faced with

Kozolchyk’s intransigence, the Defendants took a bold, but clever, stand: they promptly moved

for judgment in the Plaintiff’s favor. See Motion for Judgment on the Pleadings [ECF No. 5].

After the Court granted that motion—which, it goes without saying, was unopposed—the

Plaintiff filed (1) a Motion for Bill of Costs (“Motion for Costs”) [ECF No. 9] and (2) a Motion

for Attorneys’ Fees (“Motion for Fees”) [ECF No. 10].1 By then, however, Kozolchyk’s fees had

ballooned from $2,160 (the amount as of the day of the settlement offer) to $3,040. Mot. for Fees

¶ 5. Somehow, in other words, Kozolchyk managed to bill $880—or almost 30% of all his work

on the case—after the Defendants had already offered to settle the case for the full amount of the

1 The Defendant opposes only the Motion for Fees.

Plaintiff’s damages.

In his Report, Magistrate Judge Hunt recommended that both the Motion for Fees and the

Motion for Costs be granted in part and denied in part, and that the Plaintiff be awarded $2,025

in fees and $465 in costs. See Report at 10. The Report arrived at these figures by concluding

that Kozolchyk’s hourly rate should be reduced from $400/hr to $375/hr,2 see id. at 5, and that

Kozolchyk should be awarded no fees for time billed after he rejected the settlement offer

because “lawyers should not be compensated for turning the litigation about attorneys’ fees into

a ‘second major litigation,’” id. at 7 (quoting Ford v. Navika Capital Grp., LLC, 2017 WL

1381668, at *11 (S.D. Ala. Apr. 17, 2017)). The Report also recommended reducing the

Plaintiff’s costs from $672 to $465, because the Plaintiff had provided no justification for

charging more than the U.S. Marshals Service would have charged to serve the pleadings. See id.

at 9.

In his Objections, the Plaintiff argues that the Report incorrectly deducted the time he

billed after receiving the settlement offer because, he insists, that settlement offer was

“unreasonable,” Objections at 3, and because the hours he spent litigating the case after receiving

the settlement offer were “reasonably incurred and properly compensable,” id. at 5.

THE LAW

A district court “may refer a motion for attorney’s fees to a magistrate judge under Rule

72(b) as if it were a dispositive pretrial matter.” FED. R. CIV. P. 54(d). When a magistrate judge’s

2 This Court routinely refuses to award Kozolchyk more than $375/hr. See, e.g., Mehta v. IQlogg,

Inc., No. 19-CIV-61823-ALTMAN/HUNT, ECF No. 15 (S.D. Fla. Oct. 11, 2019) (“The Court

finds [Kozolchyk’s requested] hourly rate of [$400/hr] somewhat excessive and concludes that a

rate of $375.00 is more appropriate here.” (citing Echavarria v. Am. Valet Parking, 2015 WL

12746113, at *2 (S.D. Fla. July 1, 2015) (finding that $375/hr is “at the high end of the range of

rates charged in the Southern District of Florida for . . . FLSA lawyers”))).

“disposition” has been properly objected to, district courts must review that disposition de novo.

FED. R. CIV. P. 72(b)(3). But when no party has timely objected, “the court need only satisfy

itself that there is no clear error on the face of the record in order to accept the recommendation.”

FED. R. CIV. P. 72 advisory committee’s notes (citation omitted). Although Rule 72 itself is silent

on the standard of review, the Supreme Court has acknowledged that Congress’ intent was to

require de novo review only where objections have been properly filed—and not when neither

party objects. See Thomas v. Arn, 474 U.S. 140, 150 (1985) (“It does not appear that Congress

intended to require district court review of a magistrate [judge]’s factual or legal conclusions,

under a de novo or any other standard, when neither party objects to those findings.”). In any

event, the “[f]ailure to object to the magistrate [judge]’s factual findings after notice precludes a

later attack on these findings.” Lewis v. Smith, 855 F.2d 736, 738 (11th Cir. 1988) (citing Nettles

v. Wainwright, 677 F.2d 404, 410 (5th Cir. 1982)).

ANALYSIS

Because the Plaintiff objects only to the Report’s calculation of his “reasonable hours

incurred,” this Court must review that portion of the Report de novo—and the balance for clear

error. The parties’ dispute raises two questions. First, is the Plaintiff’s attorney entitled to any

fees he incurred after the Defendant promised to pay the full amount of the Plaintiff’s damages?

Second, what portion of the fees the Plaintiff’s lawyer incurred before that settlement offer are

compensable?

I. Attorney’s Fees

In his Report, the Magistrate judge correctly employed the lodestar method to compute

the Plaintiff’s “reasonable” attorney’s fees. See Report at 3 (citing Norman v. Hous. Auth. of

Montgomery, 836 F.2d 1292, 1299 (11th Cir. 1988)). The Magistrate Judge thus multiplied

Kozolchyk’s reasonable hourly rate by the number of hours Kozolchyk reasonably expended on

the case. See, e.g., Loranger v. Stierheimi, 10 F.3d 776, 781 (11th Cir. 1994).3 The Court now

undertakes that two-step analysis here.

a. Reasonable Hourly Rate

“A reasonable hourly rate is the prevailing market rate in the relevant legal community

for similar services by lawyers of reasonably comparable skills, experience, and reputation.”

Norman, 836 F.2d at 1299 (citing Blum v. Stenson, 465 U.S. 886, 895 n.11 (1984)). “[T]he

applicant bears the burden of producing satisfactory evidence, in addition to the attorney’s own

affidavits, that the requested rates are in line with those prevailing in the community for similar

services by lawyers of reasonably comparable skill, experience, and reputation.” N.A.A.C.P. v.

City of Evergreen, Ala., 812 F.2d 1332, 1338 (11th Cir. 1987). Courts in this District have noted

that FLSA “cases are generally not complicated or highly risk-intensive.” Silva v. Miller, 547 F.

3 Before the “lodestar method” rose to prominence, courts used a “balancing approach” that

applied the following twelve factors to determine a requested fee’s reasonableness:

(1) the time and labor required; (2) the novelty and difficulty of the questions; (3)

the skill requisite to perform the legal service properly; (4) the preclusion of

employment by the attorney due to acceptance of the case; (5) the customary fee;

(6) whether the fee is fixed or contingent; (7) time limitations imposed by the

client or the circumstances; (8) the amount involved and the results obtained; (9)

the experience, reputation, and ability of the attorneys; (10) the “undesirability” of

the case; (11) the nature and length of the professional relationship with the client;

and (12) awards in similar cases.

Bivins v. Wrap It Up, Inc., 548 F.3d 1348, 1350 (11th Cir. 2008); see also City of Riverside v.

Rivera, 477 U.S. 561, 574 (1986) (“The amount of damages a plaintiff recovers is certainly

relevant to the amount of attorney’s fees to be awarded . . . . It is, however, only one of many

factors that a court should consider in calculating an award of attorney’s fees.”); Goss v. Killian

Oaks House of Learning, 248 F. Supp. 2d 1162, 1168 (S.D. Fla. 2003) (denying award of fees

where counsel “leveraged a small sum [of damages] as a stepping-stone to a disproportionately

large award of attorney’s fees”). While the “lodestar method” has effectively replaced the

“balancing approach,” the Eleventh Circuit has held that the latter’s factors “might be considered

in terms of their influence on the lodestar amount.” Norman, 836 F.2d at 1299.

Supp. 2d 1299, 1305 (S.D. Fla. 2008), aff’d, 307 F. App’x 349 (11th Cir. 2009).

Kozolchyk seeks $400/hr for his work in this case. See Mot. for Fees at 1. But the

Magistrate Judge conducted an exhaustive review of the “balancing approach” factors—

including Kozolchyk’s experience in litigating FLSA actions, Kozolchyk’s past fee awards in

FLSA cases, Kozolchyk’s own affidavit, and the nature and complexity of this case—before

concluding that Kozolchyk’s rate should be $375/hr. See Report at 5. This rate is in line with

previous awards Kozolchyk has received in FLSA cases and matches precisely the most recent

hourly rate this Court has ascribed to Kozolchyk. See Mehta, No. 19-61823-CIV at ECF No. 15.

And, in fact, Kozolchyk does not object to the Report’s recommendation with respect to this

lower hourly rate. See Objections at 5.

This Court agrees that Kozolchyk’s hourly rate should be $375/hr. This was, after all, a

garden-variety FLSA case in which, less than a month after the Complaint was filed, the

Defendants agreed to pay the Plaintiff’s full damages. After that attempt at an early resolution

proved fruitless, the Defendants admitted their liability in open Court and immediately moved

for judgment in the Plaintiff’s favor. For this reason, over the life of this entire case, Kozolchyk

has filed only two motions: the motion for his fees and the motion for his costs. The Court, in

short, has little trouble using $375/hr as Kozolchyk’s reasonable hourly rate.

b. Reasonable Hours Expended

In determining the “hours reasonably expended” on a case, a district court should exclude

hours that were “excessive, redundant or otherwise unnecessary.” Norman, 836 F.2d at 1301

(citing Hensley v. Eckerhart, 461 U.S. 424, 434 (1983)). “This must necessarily mean that the

hours excluded are those that would be unreasonable to bill to a client and therefore to one’s

adversary irrespective of the skill, reputation or experience of counsel.” Id. “When a district

court finds the number of hours claimed is unreasonably high, the court has two choices: it may

conduct an hour-by-hour analysis or it may reduce the requested hours with an across-the-board

cut.” Bivins, 548 F.3d at 1350.

The Report concluded that Kozolchyk is entitled to compensation for each of the 5.4

hours he billed before he rejected the settlement offer. See Report at 9. The only portion of the

Report to which the Plaintiff now objects—and, thus, the only portion this Court must review de

novo—is its determination that Kozolchyk should receive no fees for the two hours he billed

after he rejected the settlement offer. See Report at 8; Objections at 5.

As a general rule, the Eleventh Circuit has “said that an attorney may recover fees for

time spent litigating the award of [his fees].” Thompson v. Pharmacy Corp. of Am., 334 F.3d

1242, 1245 (11th Cir. 2003); see also Villano v. City of Boynton Beach, 254 F.3d 1302, 1309

(11th Cir. 2001) (“A prevailing party is entitled to reasonable compensation for litigating a [fee]

award. Additionally, post-judgment advocacy may generally be included in a [fee] award.”). At

the same time, however, “[l]awyers should not be compensated for turning the litigation about

attorneys’ fees into a ‘second major litigation.’” Thompson, 334 F.3d at 1245 (quoting Hensley,

461 U.S. at 437). Applying these rules, a district court “may not entirely deny [litigants] the

recovery of statutory fees (which we have said includes fees for litigating fees).” Id. Indeed, a

“district court abuse[s] its discretion—as a matter of law—when it deduct[s] all the time

attributed to [an attorney’s] efforts to recover a fee.” Id.; see also Norman, 836 F.2d at 1305–06.

The question, then, is whether the fees Kozolchyk charged for “litigating fees” were “reasonably

incurred.”

On November 14, 2019, after speaking over the phone with the then-unrepresented

Defendants, Kozolchyk emailed them a settlement demand. See Emails at 4–5. That settlement

demand was silent as to attorney’s fees. See id. Just five hours later, the (rather astute)

Defendants answered that they “can’t tell [Kozolchyk] whether this is a good deal without

knowing what happens with attorneys’ fees . . . . Nothing about attorney fees are mentioned in

the proposal.” Id. at 3. But, rather than attempt to resolve the question once and for all,

Kozolchyk responded by refusing to negotiate his fees:

Regarding attorney’s fees, after you settle Plaintiff’s claims, and the Court

approves the settlement, I’ll confer with you in good faith to resolve Plaintiff’s

fees and costs. If we are unable to resolve Plaintiff’s fees and costs without the

Court’s intervention, I’ll file a motion for the Court to determine and award

Plaintiff’s fees and costs.

Id. The Defendants (again, rather shrewdly) countered that they “can’t in good conscious [sic]

make any deal without know[ing] the all-in settlement amount.” Id. at 2. Parrying, Kozolchyk

again refused to negotiate his fees, adding that the “settlement agreement can either say nothing

about Plaintiff’s fees and costs, or state that the parties agree to confer in good faith.” Id. at 2.

The Defendants responded as follows:

Elliot – I know you can agree to fees now and when you submit to the courts they

can accept or not…make an offer for all-in asap so we can get this resolved. I do

not want to go past Monday with this still not resolved.

I will start the process…Your Plaintiff claim - $1,898.82 plus your fees ($400 for

filing and $600 for your time) – Total $2,898.82 would be my offer for all-in.

Id. at 1. Refusing (again) to negotiate in good faith, Kozolchyk wrote only that “Plaintiff does

not accept Defendants’ offer of $400 for costs and $600 for attorney’s fees.” Id.

Kozolchyk now asks the Court to reward him for this behavior. Despite unilaterally, and

on numerous occasions, refusing to negotiate the amount of his fee, Kozolchyk seeks

compensation for every hour he billed over the course of this entire litigation. But the Supreme

Court has suggested that, when fee disputes can be easily resolved, district courts should not

encourage litigants to fight it out:

Ideally, of course, litigants will settle the amount of a fee. Where settlement is not

possible, the fee applicant bears the burden of establishing entitlement to an

award and documenting the appropriate hours expended and hourly rates.

Hensley, 461 U.S. at 437 (emphasis added). And, contrary to Kozolchyk’s insinuations,

settlement was (very) possible here. The Defendants, after all, specifically and repeatedly sought

to resolve the “amount of [the] fee.” Id. Their entreaties failed, not for lack of trying—or because

the parties, in good faith, reached an impasse—but because Kozolchyk refused even to negotiate,

presumably in the hope that, after he “file[d] a motion for the Court to determine and award

Plaintiff’s fees and costs,” Emails at 3, the Court would award him a higher fee than he could

otherwise obtain by negotiating, see Report at 8.

This is not the first time Kozolchyk has played this game. See id. at 7 (collecting cases).

Quite to the contrary, in his exhaustive review of Kozolchyk’s prior cases, the Magistrate Judge

found several in which federal judges in this District have chastised Kozolchyk for attempting to

“run up his bill” and “refus[ing] to settle a lawsuit after receiving a defense offer to pay the entire

amount claimed by Plaintiff.” Id. (citations omitted).

As the Report correctly points out, rubberstamping Kozolchyk’s unreasonable fee-

campaigns would create perverse incentives in future FLSA cases:

The issue here is not the reasonableness of the hours expended, or even the

reasonableness of the full amount sought. Instead, the issue is the

unreasonableness of continued litigation when Plaintiff has been fully

compensated and Defendants have agreed that reasonable fees and costs are owed.

Counsel is now asking this Court to reward his unwillingness to negotiate by

awarding him a fee that far exceeds the maximum he could ever have hoped for

had he negotiated. To do so would discourage negotiation and encourage

litigation . . . .

Id. at 8. Put another way, if FLSA lawyers knew that they could reject full settlement offers, pad

their billing sheets by “litigating fees,” and then be compensated for every hour they billed after

the offer was rejected, what incentive would they have to settle any case?

The Court will not reward Plaintiff’s counsel for refusing to negotiate his fees in good

faith, for wasting judicial resources, or for running up the score, as it were, on defendants who

had done precisely what the system encourages them to do: resolve their disputes out of court.

Lawyers in this District should “not be compensated for turning the litigation about attorneys’

fees into a ‘second major litigation.’” Thompson, 334 F.3d at 1245 (quoting Hensley, 461 U.S. at

437). Indeed, it is a “fundamental tenet” of the Southern District of Florida that counsel “be

governed at all times by a spirit of cooperation, professionalism, and civility” and “work to

eliminate disputes by reasonable agreement to the fullest extent permitted by the bounds of

zealous representation and ethical practice.” S.D. Fla. L.R. Introductory Statement. By failing

even to negotiate his fees, Plaintiff’s counsel has fallen woefully short of this standard.

***

Having found that the hours Plaintiff’s counsel incurred were excessive, the Court must

conduct a line-by-line, de novo review of the Plaintiff’s billing sheet. Again, a “district court

abuse[s] its discretion—as a matter of law—when it deduct[s] all the time attributed to [an

attorney’s] efforts to recover a fee.” Thompson, 334 F.3d at 1245; see also Norman, 836 F.2d at

1305–06.

The settlement negotiations began with a phone call between Kozolchyk and the

unrepresented Defendants on November 14, 2019. The Court will accept Plaintiff’s counsel’s

representation that the call lasted 0.6 hours—and Kozolchyk will be compensated for that time.

The Court will likewise compensate Plaintiff’s counsel for the 0.8 hours he spent negotiating

with the Defendants on the next day, November 15, 2019.

But the Court will not award Kozolchyk any fees for settlement negotiations that took

place after November 15, 2019. After that day, Plaintiff’s counsel did nothing but attempt to turn

the issues regarding “attorneys’ fees into a ‘second major litigation.’” Thompson, 334 F.3d at

1245 (quoting Hensley, 461 U.S. at 437). As of 4:00 p.m. on November 15, 2019, Plaintiff’s

counsel had an offer to settle this case for the full amount of his client’s damages. All that

remained was for him to engage the Defendants’ request to parley on the amount of his fees.

Instead, he ran to the courthouse to get what he hoped would be a bigger reward. The Court will

not encourage that kind of behavior.

The Court, in sum, will compensate Plaintiff’s counsel for 5.4 hours of time, which

includes every hour he billed from the start of the case through his final rejection of the

Defendants’ settlement offer.

II. Costs

The Plaintiff originally sought $672 in costs. See Motion for Costs at 6. Of these,

however, $272 were for service of process. The Eleventh Circuit has been clear that, as a general

rule, a Plaintiff may not recover process server fees that exceed the costs of having a U.S.

Marshal effectuate service. See EEOC v. W&O, Inc., 213 F.3d 600, 624 (11th Cir. 2000) (finding

that “a district court does not abuse its discretion in taxing private process server fees that do not

exceed the statutory fees authorized in § 1921” (emphasis added)). The current rate for a U.S.

Marshal to effectuate service is “$65 per hour (or portion thereof) for each item served.” 28

C.F.R. § 0.114(a)(3).

Relying on this principle, the Magistrate Judge reduced the cost of service from $272 to

$65—reasoning that the Plaintiff has provided no evidence that service took longer than one hour

or that a deviation from the $65/hr rate was otherwise justified. See Report at 9. The Plaintiff

does not object to this reduction, and the Court finds no clear error in the Magistrate Judge’s

analysis. The Plaintiff shall therefore receive $465 in costs—$400 for the filing fee and $65 for

service.

TK

Accordingly, the Court hereby

ORDERS AND ADJUDGES that the Report and Recommendation [ECF No. 25] is

AFFIRMED AND ADOPTED in full and as follows:

1. The Motion for Bill of Costs [ECF No. 9] is GRANTED IN PART and

DENIED IN PART. The Plaintiff shall recover $465 in costs.

2. The Motion for Attorneys’ Fees [ECF No. 10] is GRANTED IN PART and

DENIED IN PART. The Plaintiff shall recover $2,025 in fees.

3. The Plaintiff shall thus recover a total award of $2,490, for which sum let

execution issue.

DONE AND ORDERED in Fort Lauderdale, Flopfda this 3rd day une 2020.

ROY K. ALTMAN

UNITED STATES DISTRICT JUDGE

cc: counsel of record

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