US-CourtOfAppeals-8thCircuit-SealIn a big win for employers, on June 2, 2016, in Lochridge v. Lindsey Management Co., Inc., the Eighth Circuit Court of Appeals held that a prevailing defendant (employer) can, and should, recover its costs of Fair Labor Standards Act (FLSA) litigation.  The Eighth Circuit encompasses the states of Minnesota, Iowa, Missouri, Arkansas (where the case originated), North Dakota, South Dakota and Nebraska.

In this case, a group of employees challenged their exempt classification by suing their employer, Lindsey Management. The jury returned a verdict for the employer (simple terms = the employees lost), finding that the employees were properly classified.  Had the employee’s won, they would have been entitled to, and indeed would have sought, reimbursement for their attorneys’ fees and their costs of bringing the lawsuit.   Costs usually include deposition transcripts (which can be $500 – $2,500 depending on the exhibits, whether it is videotaped, etc.), witness fees, court reporter transcript fees, and clerk of court filing fees.  Accordingly, in a collective action or class action, as is often the case in FLSA litigation, the costs can get extremely high as multiple parties are involved which means numerous witnesses and depositions.

Anyway, following the verdict, Lindsey filed a Bill of Costs, asking the court to award it’s costs to defend the lawsuit – here it was $22,687.51.  The district court denied the Bill of Costs, reasoning that the FLSA is “remedial in nature” and thus defendants should never recover costs.  In an awesome move for employer-defendants, Lindsey actually “took one for the team”, and appealed the decision (keep in mind the appeal likely cost as much as, or more than, the Bill of Costs).

The Eighth Circuit Court of Appeals determined that neither the Federal Rules of Civil Procedure, Rule 54(d)(1), nor the FLSA at Section 216(b), preclude the award of costs to a prevailing defendant.  The Court held that just because the FLSA only addresses costs to a prevailing plaintiff does not mean that an employer can’t collect its costs:

The fact that a prevailing party prosecutes its rights under the Federal Rules of Civil Procedure to an award of costs cannot be seen as chilling the flow of litigation.  ‘Indeed, the very possibility that a losing party will be required to reimburse the prevailing party for its costs should cause parties to litigation to pause and calculate the risks of pursuing meritless or marginal claims.  After all, the Rules presume that the prevailing party is entitled to costs.  It is incumbent on an attorney to explain the risks of litigation to his or her client – including the risk that under Rule 54(d)(1) they may have to pay costs should their litigation ultimately prove unsuccessful.”

In other words, the Court basically affirmed that FLSA plaintiffs should have some skin in the game.  Plaintiffs must understand that there are risks to litigation, including not only losing, but actually having to pay significant costs if they lose. Perhaps this will encourage more early settlement, more productive settlement negotiations, and desire to participate in mediation in good faith.  While some may argue this will “chill” litigation – I say not so. What it will do is encourage attorneys to have frank discussions (or not take a case) with a prospective client when the facts are not there to support bringing the litigation.  Further, it is not unusual for parties to settle a case post-district court decision, by agreeing to dismiss the case and not appeal, in exchange for not seeking an award of costs.  Thus, that bargaining chip has now rightfully been provided to both parties – a big win for employers.