Knox v. John Varvatos Enterprises, Inc.

Background

Tessa Knox, on behalf of a certified class of female salespeople, and 13 other plaintiffs sued John Varvatos Enterprises Inc. They alleged that the company’s policy of giving clothing allowances to male salespeople but not female salespeople violated federal and state equal-pay and anti-discrimination laws.

After a six-day jury trial, the jury found for the plaintiffs on all claims and awarded compensatory and punitive damages. The court later denied Varvatos’s request for judgment as a matter of law but ordered a new trial on damages unless the plaintiffs accepted a 50% reduction, called a remittitur. The plaintiffs accepted, and an amended judgment of $1,758,025.61 was entered.

The plaintiffs then requested $1,730,304.50 in attorney’s fees, $14,287.21 in costs, a $300,000 service payment to Knox, and an additional attorney-fee award from the punitive-damages fund. Varvatos challenged the statutory fee request but took no position on the service payment or additional fee request.

Legal standard

The court applied the lodestar method, which generally calculates a reasonable fee by multiplying the reasonable hours worked by a reasonable hourly rate. The court considered the case’s complexity, the lawyers’ experience and performance, rates in comparable cases, the results obtained, and whether the hours were excessive, redundant, or unnecessary.

Degree of success

The court rejected Varvatos’s argument that the 50% reduction in damages required a corresponding reduction in fees. It concluded that the plaintiffs had completely succeeded on every claim and had received the maximum compensatory damages legally available, along with a significant punitive-damages award. The court also rejected an argument that the fees were excessive merely because they were close to or greater than the damages recovered; Second Circuit precedent did not limit fees to a proportion of damages.

Hourly rates

The court reduced some requested rates. It awarded William Dunnegan $450 per hour, Laura Scileppi $325 per hour, Richard Weiss $250 per hour, Andrew Chung $165 per hour, and paralegal Jennifer Rafuse $75 per hour. The court considered counsel’s lack of employment and class-action experience but gave substantial weight to their extraordinary courtroom performance and written work. It also considered the reputational benefits counsel could obtain from the litigation, which supported rates below the highest permissible levels.

Hours and statutory fees

The plaintiffs requested compensation for 5,035 hours. The court found that number substantially excessive compared with the hours awarded in similar employment-discrimination cases. Although the case involved novel legal issues and some defense conduct increased the plaintiffs’ work, the court found no experts, relatively simple factual issues, and little variation among class members. It therefore reduced each professional’s hours by 50%.

The resulting fee award was $734,036.00. The court awarded the full costs it identified as $14,285.21, producing $748,321.21 in statutory attorney’s fees and costs payable by Varvatos.

Service payment to Knox

The court concluded that it had authority to award a service payment to a class representative from a common fund created by a jury verdict. It found that Knox’s initiative was essential to bringing the case, but that her participation did not involve extraordinary contributions: she was deposed, assisted counsel, and faced possible reputational harm, but did not testify at trial or attend it.

The court rejected Knox’s requested $300,000 payment as disproportionately large. It awarded her $20,000 from the punitive-damages award. The payment was to be borne by each plaintiff receiving punitive damages, including Knox, in proportion to that plaintiff’s punitive-damages recovery.

Additional attorney’s fee from punitive damages

The court held that, in appropriate circumstances, it could award both statutory fees paid by the defendant and additional fees from a common fund. It found unusual risks in this case, including the novelty of the claims and Varvatos’s serious financial condition before trial. It also noted that punitive damages were intended to punish and deter rather than compensate the plaintiffs.

The court awarded counsel $105,880.21, equal to one-quarter of the available punitive-damages fund, in addition to the statutory fee award. That additional fee was to be paid from the punitive-damages fund and borne by all plaintiffs eligible for punitive damages. The court stated that the additional award increased the lodestar by 14.4%, equivalent to a 1.14 multiplier.

Disposition

The court granted the plaintiffs’ motion for attorney’s fees and the service payment. It awarded $748,321.21 in statutory attorney’s fees and costs payable by Varvatos, $105,880.21 in additional attorney’s fees from the punitive-damages award, and a $20,000 service payment to Knox from that award.