NY BigLaw Leader Scores $1 Million Fee in Pro Bono Case

By Mark Hamblett
New York Lawyer
New York Law Journal
May 15, 2007

A federal judge has awarded nearly $1 million to lawyers who successfully challenged the withholding of tips from waiters, busboys and captains at the 88 Palace Restaurant in Manhattan's Chinatown.

Although the fee award under the Fair Labor Standards Act and the New York Labor Law exceeded the amount of damages in the case, Southern District Judge Gerard Lynch said the fees sought by lawyers with Skadden, Arps, Slate, Meagher & Flom and the Urban Justice Center was "presumptively reasonable" given the complexity and difficulty of the case, and even taking into account that the lawyers initially represented the restaurant workers pro bono.

The judge made the fee ruling in Heng Chan v. Sung Yue Tung Corp, 03 Civ. 6048, a case that ended with the workers being awarded a total of $699,374 in damages.

Plaintiffs managed to prove that the defendants unlawfully retained tips, failed to pay overtime and expenses related to the waiters' uniforms, and failed to provide other extra pay to which they were entitled.

The court awarded plaintiffs $957,710 in attorney's fees, $59,732 in costs and $83,205 in prejudgment interest.

Skadden partner Mark Cheffo said the firm's share of the award will be used for "legal and social organizations to support efforts on behalf of Chinese Americans and low-wage workers."

The fee award was opposed by the defense, but Mr. Cheffo said the judge's opinion "really adopted everything we asked for, and it had some terrific language."

Judge Lynch presided over a bench trial last year and, on Feb. 1, issued an opinion finding for the plaintiffs. He also cited the "systematic destruction" of relevant business records and "extensive" and "pervasive" under-reporting of revenues in tax filings.

In his fee opinion issued last week, the judge said most of the factors in this case "point to a relatively high award of fees."

"The case was unusually difficult and complex, the resources required to prosecute it immense," he said. "Importantly, the damages sought were low compared to the likely expense of prosecuting the case, which would have been a significant disincentive for an attorney to take the case and therefore a reason to charge a higher fee."

The judge said a discount on fees might be appropriate because the market rate for civil rights litigation is lower than the rate charged to corporate clients.

But several elements of the case persuaded Judge Lynch that such a discount should not be applied.

One factor he considered was that the hourly rates requested by plaintiffs' attorneys "already reflect a substantial discount from the regular market rates charged by Skadden for the services of these attorneys."

Another was that the lawyers said they excluded some 4,100 hours from the total billable hours.

"Moreover, even when the relevant market is defined as civil rights litigators in Manhattan, the presumptively reasonable fee should still be quite high for a case of this size and complexity," he said. "The institutional resources of a large firm such as Skadden, with the higher overhead and other costs that go with them . . . were in all likelihood a necessary condition for the successful prosecution of this multi-year action involving a host of witnesses and parties, numerous boxes of documents, and depositions and interviews conducted in four languages."

The judge said it would have been "difficult, if not impossible," for a small firm or a non-profit to take the case.

Reasonable Rates

The judge found to be reasonable the $450 hourly rate submitted by Mr. Cheffo, and the $400 rate for Raymond Brescia, the associate director of the Urban Justice Center who has 15 years of experience in complex civil rights cases.

Sixth-year Skadden associate Rachel Passaretti, who served as co-lead counsel in the case, also submitted a reasonable rate, $300, the same amount submitted by two other Skadden associates who helped prepare the case.

The judge did reduce the rate requested by second-year Skadden associate Mara Cusker Gonzalez, who had asked for $250 per hour for the time spent after her admission to the bar and $150 for the time worked before her admission. Ms. Cusker received $200 for post-admission work and $100 for pre-admission work.

The lawyers for the defendants, Daniel Hochheiser and Michael Sande of Hochheiser & Hochheiser, had argued that the plaintiffs did not need three lawyers at trial, challenged 12.5 hours that Mr. Brescia billed for trial work and 90 hours billed by Skadden associate Erica Goodstein. They prevailed only on Mr. Brescia's hours.

The judge then set the presumptively reasonable fee award at $957,710 and turned aside arguments by the defense to reduce that amount, saying the plaintiffs "prevailed as to virtually all aspects of their case."

"Although the award is greater than the damages actually recovered by the plaintiffs, that fact illustrates the wisdom of a fee-shifting statute that accounts for an award's pro bono representation, because unprofitability is a significant disincentive for most attorneys to take cases like this one," Judge Lynch said.

"We're pleased the judge confirmed the rates we were asking for and recognized that public interest work should be valued as much as for-profit work," Mr. Brescia said. "We think that's sort of a bedrock principle of the American justice system."