On September 19, 2014, the Seventh Circuit Court of Appeals issued a decision in Cuff v. Trans States Holdings, Inc. The case involved an employee who was discharged for taking leave covered by FMLA (Family Medical Leave Act) after his employer denied his FMLA request. The case involved issues concerning when an employer is considered a joint employer such that the employees of more than one company are counted to determine applicability of FMLA laws which apply to employers with 50 or more employees. The case also involved the After-acquired Evidence Doctrine under which an employer may seek to limit its liability by establishing that after discharging an employee the employer learned that the employee committed misconduct for which the employer would have discharged him anyway.
However, from the perspective of a Wisconsin employment lawyer, the most important part of the decision was that the Court upheld a $325,000 award of attorney’s fees when the Plaintiff recovered only $42,800 in damages. The Defendant employer argued that incurring $325,000 in attorney’s fees was not reasonable in light of the rather small recovery. The Seventh Circuit disagreed. In an analysis that warms the cockles of a Wisconsin employment attorney’s heart, the Court recognized that employee rights attorneys must often avoid the “sunk-cost fallacy.” The Court explained that after an attorney expends $25,000 in fees and is confronted with a defense that will cost an additional $30,000 to defeat, the attorney will not conclude that is irrational to spend $55,000 to recover $50,000 because the $25,000 in fees has already been sunk into the case.
The Court correctly recognized that the fee-shifting provision of the FMLA (and I presume other employee rights laws such as Title VII, the ADA and ADEA) were designed to prevent the high costs of litigation from stifling justified claims. Indeed, the Court recognized that unless hyperaggressive defendants who drive up the costs of litigation are required to pay full costs when they lose, they can brazenly violate the law and constrain employees from protecting their rights.
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