Via Law360 

Source: Pexels

By: Chris Villani

An employee suing an employer for unpaid wages can recover attorneys’ fees when winning a “favorable settlement,” even when a court does not sign off on the deal, according to a Massachusetts Supreme Judicial Court ruling Tuesday with potentially wide-ranging implications.

The appeals court affirmed a lower court ruling and sided with a pair of former employees of a Boston dry cleaner who claimed they were denied about $28,000 owed to them in wages and overtime and ultimately settled for more than 70 percent of that figure. The top court said the so-called catalyst test should apply when assessing whether to tack on attorneys’ fees.

Under this standard, fee-shifting can occur if a lawsuit is a “necessary and important factor” in causing a defendant to fork over a “material portion” of relief requested by a plaintiff through a settlement agreement, even if there is no judicial involvement in the accord. The bar, which is lower than federal fee-shifting standard, is necessary to avoid needlessly long and costly litigation, the top court said.

“The catalyst test best promotes the purposes of fee-shifting statutes by encouraging attorneys to take cases under such statutes to correct unlawful conduct and rewarding them accordingly when they do so,” Associate Justice Scott L. Kafker wrote in the unanimous opinion. “The catalyst test also promotes the prompt settlement of meritorious cases, avoiding the need for protracted litigation, superfluous process, or unnecessary court involvement solely to ‘prevail’ in a formalistic sense to ensure an award of attorney’s fees and costs.”

The dry cleaner, Sturgis Cleaners Inc., had sought to enforce the federal standard set in 2001 by the U.S. Supreme Court in Buckhannon Board and Care Home v. West Virginia Department of Health & Human Resources, which said a party is required to win an enforceable judgment or a consent decree before being eligible to be the “prevailing party” and having the chance to collect attorneys’ fees.

But the Massachusetts high court disagreed, seeing the catalyst test as a better method because it provides two crucial incentives related to all wage litigation: giving attorneys a reason to take cases where individual employees claim to have been denied wages, and adding, the opinion said, “a powerful disincentive for employers to withhold the wages in the first place.”

“If such settlements did not result in the obligation to pay attorney’s fees, there would be a disincentive to bring such cases in the first place, thereby leaving other unlawful conduct unaddressed and uncorrected,” Justice Kafker wrote.

The former employees, Belky Ferman and Veronica Guillen, filed suit in 2014. After two years of litigation, including the entry and lifting of a default judgment against the dry cleaner, the case settled through mediation for $20,500. The attorney fee issue was left to the court, and a Suffolk County Superior Court judge, applying the catalyst test, ruled in favor of the employees.

“The catalyst test thus recognizes that successful litigation may be reflected in settlements as well as court rulings,” Justice Kafker wrote, “as settlements are often ‘the products of pressure exerted by [a] lawsuit.'”

The employees’ case was presented to the high court by Liz Soltan, a Harvard Law School student arguing as a student practitioner with the Harvard Legal Aid Bureau. She told Law360 Tuesday the court’s decision might help combat wage theft, which studies have suggested may be problem costing workers in the Commonwealth $700 million annually.

“Wage theft is such an epidemic in Massachusetts, especially among low income and immigrant workers, this is the kind of ruling we needed for access to justice,” Soltan said. “I am hoping it’ll mean more lawyers are going to feel secure in taking these cases.”

Counsel for the dry cleaner did not immediately respond to a request for comment Tuesday.

The employees are represented by Liz Soltan and Patricio Rossi of the Harvard Legal Aid Bureau.

The dry cleaner is represented by John J. McGlone III and David T. Norton of Giarrusso Norton Cooley & McGlone PC.

The case is Belky Ferman & another vs. Sturgis Cleaners Inc. & another, case number 12602, in the Supreme Judicial Court of Massachusetts.