“Catalyst” Test Applicable to Awarding Attorney’s Fees for State Wage and Hour Claims, Massachusetts Supreme Judicial Court Holds
Rejecting the federal standard for determining whether a party has “prevailed” on his or her claim under the Massachusetts Wage Act, Mass. Gen. Laws ch. 149, §§ 148 & 150, the Massachusetts Supreme Judicial Court has held instead that the less-stringent “catalyst” test applies. As a result, plaintiffs who received $20,500 in a settlement under the Act were entitled to an award of attorney’s fees. Ferman v. Sturgis Cleaners, Inc., 481 Mass. 488, 2019 Mass. LEXIS 96 (Feb. 19, 2019).
Nearly twenty years ago, the U.S. Supreme Court held that to be considered a “prevailing” party in a private settlement of a lawsuit, a plaintiff would have to obtain judicial approval, or “imprimatur,” of the settlement. Buckhannon Bd. & Care Home, Inc. v. West Virginia Dep‘t of Health & Human Resources, 532 U.S. 598 (2001). In so holding, the Court rejected application of the “catalyst” test, which requires a plaintiff only to show that his or her lawsuit was a necessary and important factor in causing the defendant to grant a material portion of the plaintiff’s requested relief.
In the instant case, the plaintiffs originally sought approximately $28,000 in regular and overtime wages, plus treble damages and attorney’s fees and costs, under the Massachusetts Wage Act. Following a two-year period of discovery and pretrial motions, the parties mediated the case and agreed to settle for $20,500, leaving the issue of attorney’s fees for the court. Applying the catalyst test, the trial court awarded about $16,000 in fees to the plaintiffs, finding that a recovery in settlement of nearly 70% of the actual damages sought sufficiently satisfied that test so as to render the plaintiffs prevailing parties.
On appeal, the Massachusetts Supreme Judicial Court agreed that the catalyst test was the proper test to be used with respect to the State’s Wage Act, finding that it better promotes the purposes of the Act – creating a powerful disincentive against unlawful conduct and establishing an incentive for plaintiff’s attorneys to undertake cases they might not otherwise deem financially prudent – than does the judicial imprimatur test set forth in Buckhannon. The Supreme Judicial Court added that the catalyst test also promotes prompt settlements, as it removes an incentive to employers to engage in protracted litigation as a tactic, when the amount of actual damages sought might be readily ascertainable and discrete, and prolonging litigation would result in nothing more than additional legal fees. Given that the Wage Act itself includes fee-shifting provisions – “deemed necessary ‘to prevent the unreasonable detention of wages’ by ‘unscrupulous employers,’” the Supreme Judicial Court found no difficulty in concluding that the catalyst test was the appropriate standard under the Wage Act.