United States District Court, D. Arizona
A. TEILBORG SENIOR UNITED STATES DISTRICT JUDGE
issue is Plaintiff Michael Gary's Motion for
Attorneys' Fees and Costs (Doc. 50) to which Defendants
Jerald F. Kovacich, Tom Mulholland, Samuel W. Grossman,
Carbon Cycle Energy, LLC, Carbon Cycle Arizona, LLC, and
Carbon Cycle Holdings, LLC filed a Response (Doc. 51), and
Plaintiff filed a Reply (Doc. 57). The Court now rules on
September 5, 2018, Plaintiff brought this action against
Defendants Carbon Cycle Arizona, LLC, Carbon Cycle Energy,
LLC, Carbon Cycle Holdings, LLC, Samuel W. Grossman, Jerry
Kovacich, Carlos E. Sala,  and Tom Mulholland. (Doc. 1 at 1). In
his Complaint, Plaintiff asserted claims for failure to pay
minimum wage in violation of the Fair Labor Standards Act
(“FLSA”), 29 U.S.C. §§ 201-219 and the
Arizona Minimum Wage Statute, A.R.S. §§
23-362-23-364, and failure to make timely and reasonable
payment of wages in violation of the Arizona Wage Statute,
A.R.S. §§ 23-351, 23-353, and 23-355. (Id.
at 1-2). Plaintiff sought to recover unpaid minimum wage
compensation, liquidated damages, and statutory penalties for
Defendants' alleged violations of the FLSA, as well as
unpaid wages, treble damages, and statutory penalties for
Defendants' alleged violations of the Arizona Wage
Statute. (Id. at 2).
asserts that on November 26, 2018, Defendants Carbon Cycle
Arizona, LLC, Carbon Cycle Energy, LLC, Carbon Cycle
Holdings, LLC, Jerry Kovacich, and Tom Mulholland transferred
a gross amount of $11, 490.64, less applicable taxes to equal
a net amount of $8, 492.33, via direct deposit into
Plaintiff's bank account. (Doc. 50 at 2). On January 14,
2019, these Defendants sent a Rule 68 Offer of Judgment to
Plaintiff, which stated:
Defendants Jerry Kovacich, Tom Mulholland, Carbon Cycle
Energy, LLC, Carbon Cycle Arizona, LLC, Carbon Cycle
Holdings, LLC (“Defendants”) hereby offer to
allow judgment to be entered in favor of Plaintiff Michael
Gary and against these Defendants, in full resolution of all
claims raised in the Complaint, as follows:
In addition to all sums previously paid, Defendants will pay
to Plaintiff the sum of five thousand dollars ($5, 000),
exclusive of taxable court costs and attorney's fees, for
all claims sought in Plaintiff's complaint. Defendants
reserve the right to object to any costs and fees sought by
Plaintiff if this offer is accepted.
(Doc. 46-1 at 1). Plaintiff accepted Defendants' Jerry
Kovacich, Tom Mulholland, Carbon Cycle Energy, LLC, Carbon
Cycle Arizona, LLC, Carbon Cycle Holdings, LLC Rule 68 Offer
of Judgment on January 16, 2019. (Doc. 46-2 at 1).
Thereafter, these Defendants filed a Notice of Acceptance of
Rule 68 Offer of Judgment on January 22, 2019. (Doc. 46). On
January 23, 2019, the Clerk of the Court entered judgment
against Carbon Cycle Arizona LLC, Carbon Cycle Energy LLC,
Carbon Cycle Holdings LLC, Jerry Kovacich, and Tom Mulholland
in the amount of $5, 000.00, exclusive of taxable court costs
and attorney's fees. (Doc. 48).
January 28, 2019, Plaintiff filed the Motion for
Attorneys' Fees and Costs (hereinafter,
“Motion”) at issue, seeking recovery of his
attorneys' fees in the amount of $13, 487.50 and $1,
072.90 in costs. (Doc. 50 at 9). Plaintiff specifies that his
Motion is directed at Carbon Cycle Arizona, LLC, Carbon Cycle
Energy, LLC, Carbon Cycle Holdings, LLC, Jerry Kovacich, and
Tom Mulholland. (Id. at 2 n.1). Defendants, as well
as Defendant Samuel Grossman, filed a Response (Doc. 51) on
February 12, 2019. Also on February 12, 2019, Plaintiff filed
its Reply (Doc. 57).
April 12, 2019, Plaintiff accepted Defendant Samuel W.
Grossman's Rule 68 Offer of Judgment for “the sum
of two hundred fifty dollars ($250.00), exclusive of taxable
court costs and attorney's fees, for all claims sought in
Plaintiff's complaint.” (Docs. 64;
64-1). In accordance with Plaintiff's Notice
of Acceptance of Offer of Judgment (Doc. 64), the Clerk of
Court entered judgment against Defendant Samuel Grossman in
the amount of $250.00, exclusive of taxable court costs and
attorney's fees. (Doc. 65).
specified otherwise, the Court uses the phrase
“Defendants” in this Order to refer to Carbon
Cycle Arizona, LLC, Carbon Cycle Energy, LLC, Carbon Cycle
Holdings, LLC, Jerry Kovacich, and Tom Mulholland.
ELIGIBILITY AND ENTITLEMENT TO FEES
requests $13, 487.50 in attorneys' fees and $1, 072.90 in
costs in accordance with Fed.R.Civ.P. 54(d), LRCiv 54.2, and
29 U.S.C. § 216(b), the FLSA fee-shifting statute which
“provides for attorney fees and costs to a successful
plaintiff.” Haworth v. State of Nev., 56 F.3d
1048, 1050 n.1 (9th Cir. 1995); (see Doc. 50 at 1,
9). For the reasons that follow, the Court concludes that
Plaintiff is eligible for, and entitled to, attorneys'
fees and non-taxable costs.
Whether Plaintiff was the Prevailing Party
argues that it is the prevailing party-and therefore entitled
to attorneys' fees-because the filing of this action
caused Defendants to pay unpaid wages to Plaintiff and
because Plaintiff accepted Defendants' Rule 68 Offer of
Judgment. (Doc. 50 at 3). Defendants do not contest that
Plaintiff is the prevailing party. (See Doc. 51).
may be considered ‘prevailing parties' for
attorney's fees purposes if they succeed on any
significant issue in litigation which achieves some of the
benefit the parties sought in bringing suit.”
Hensley v. Eckerhart, 461 U.S. 424, 433 (1983). In
Farrar v. Hobby, the Supreme Court clarified that
“a plaintiff ‘prevails' when actual relief on
the merits of his claim materially alters the legal
relationship between the parties by modifying the
defendant's behavior in a way that directly benefits the
plaintiff.” Farrar v. Hobby, 506 U.S. 103,
111-12 (1992). Notably, “[a] judgment for damages in
any amount, whether compensatory or nominal, modifies the
defendant's behavior for the plaintiff's benefit by
forcing the defendant to pay an amount of money he otherwise
would not pay.” Id. at 113.
case, Plaintiff accepted Defendants' Rule 68 Offer of
Judgment, (Doc. 46-2 at 1), and the Court thereafter entered
judgment against Defendants “in the amount of $5,
000.00, exclusive of taxable court costs and attorney's
fees[, ]” (Doc. 48). Accordingly, Plaintiff is the
“prevailing party” under the standard set forth
in Farrar v. Hobby. Farrar, 506 U.S. at
111-13; see also Delta Air Lines, Inc. v. Aug., 450
U.S. 346, 376 (1981) (“[A] Rule 68 offer of judgment is
a proposal which by definition stipulates that the plaintiff
shall be treated as the prevailing party[.]”);
Rother v. Lupenko, 691 Fed.Appx. 350, 351 (9th Cir.
2017) (affirming district court's award of attorneys'
fees to plaintiffs who accepted defendants' Rule 68 Offer
of Judgment in FLSA action and noting that it was
“undisputed that Plaintiffs were the prevailing
party”); Flores v. Fergiss Inc., No.
3:13-CV-01480-KI, 2014 WL 1123638, at *3 (D. Or. Mar. 20,
2014) (noting that plaintiffs, who accepted defendant's
Offer of Judgment under Rule 68 in FLSA action, were
prevailing parties for purposes of attorneys' fees and
costs); Orozco v. Borenstein, No. CV-11-02305-
PHX-FJM, 2013 WL 4543836, at *2 (D. Ariz. Aug. 28, 2013)
(determining that plaintiff was the prevailing party where
the filing of the FLSA action caused the defendants to pay
plaintiff his unpaid wages). As the prevailing party,
Plaintiff is entitled to his attorneys' fees in this FLSA
action. See Christiansburg Garment Co. v. Equal
Employment Opportunity Comm'n, 434 U.S. 412, 415 n.5
(1978) (noting that a fee award is “mandatory for
prevailing plaintiffs” in actions brought under FLSA).
Whether Each Defendant was Plaintiff's
“Employer” For Purposes of the FLSA
216(b) of the FLSA states, in relevant part:
Any employer who violates the provisions of section
206 or section 207 of [the FLSA] shall be liable to the
employee or employees affected in the amount of their
unpaid minimum wages, or their unpaid overtime compensation,
as the case may be, and in an additional equal amount as
liquidated damages. . . . An action to recover the liability
prescribed in the preceding sentences may be maintained
against any employer[.] . . . The court in such
action shall, in addition to any judgment awarded to the
plaintiff or plaintiffs, allow a reasonable attorney's
fee to be paid by the defendant, and costs of the
29 U.S.C. § 216(b) (emphasis added). The Ninth Circuit
has held that this section allows recovery from an
employer who violates the FLSA, explaining that
“the word ‘defendant' is used to describe the
party who may be liable for the plaintiff's
attorney's fees[, ]” and “refers to the
employer against whom the charge of violation has been
brought.” Richardson v. Alaska Airlines, Inc.,
750 F.2d 763, 766 (9th Cir. 1984) (emphasis added).
Therefore, Plaintiff may not recover attorney's fees from
Defendants unless they were his employers at the time he
alleges he was not paid the required minimum wage. See
Id. (holding that the Age Discrimination in Employment
Act, which incorporates the remedial provisions of the FLSA
including the attorney's fee provision of 29 U.S.C.
§ 216(b), does not allow an award of attorney's fees
against a non-employer); Rueling v. MOBIT LLC, No.
CV-18-00568-PHX-BSB, 2018 WL 6047015, at *4 (D. Ariz. Nov.
The Definition of “Employer” Under the
FLSA defines an “employer” as “any person
acting directly or indirectly in the interest of an employer
in relation to an employee[.]” 29 U.S.C. § 203(d).
The statute defines “to employ” as “to
suffer or permit to work.” Id. § 203(g).
Whether a party is an “employer” within the
meaning of the FLSA is a question of law. Torres-Lopez v.
May, 111 F.3d 633, 638 (9th Cir. 1997); Bonnette v.
Cal. Health and Welfare Agency, 704 F.2d 1465, 1469 (9th
Cir. 1983), overruled on other grounds by Garcia v. San
Antonio Metro. Transit Auth., 469 U.S. 528, 538 (1985).
“Courts have adopted an expansive interpretation of the
definitions of ‘employer' and ‘employee'
under the FLSA, in order to effectuate the broad remedial
purposes of the Act.” Real v. Driscoll Strawberry
Assocs., Inc., 603 F.2d 748, 754 (9th Cir. 1979). Under
this expansive interpretation, “employees are those who
as a matter of economic reality are dependent upon
the business to which they render service.”
Id. (citing Bartels v. Birmingham, 332 U.S.
126, 130 (1947)); see also Goldberg v. Whitaker House
Coop., 366 U.S. 28, 33 (1961) (stating that
“economic reality” is the test of employment
under the FLSA).
analyzing “economic reality, ” courts must
“consider the totality of the circumstances of the
relationship, including whether the alleged employer has the
power to hire and fire the employees, supervises and controls
employee work schedules or conditions of employment,
determines the rate and method of payment, and maintains
employment records.” Hale v. State of Ariz.,
993 F.2d 1387, 1394 (9th Cir. 1993) (citing
Bonnette, 704 F.2d at 1470). Although these factors
“provide a useful framework for analysis . . ., they
are not etched in stone and will not be blindly
applied.” Id. (citing Bonnette, 704
F.2d at 1470). Rather, the ultimate determination must be
based “upon the circumstances of the whole
activity.” Rutherford Food Corp. v. McComb,
331 U.S. 722, 730 (1947). Two or more employers may be joint
employers of an employee, with each employer having
individual liability for compliance with the FLSA.
Bonnette, 704 F.2d at 1469 (citing Falk v.
Brennan, 414 U.S. 190, 195 (1973); 29 C.F.R. §
The Effect of Defendants' Rule 68 Offer, and the
Resulting Judgment Following Plaintiff's Acceptance
$11, 147.50 in attorneys' fees which Defendants
determined were reasonable, Defendants object to 6/7ths ($9,
555.00) of that amount because “Plaintiff was the
employee of, and received paychecks from, a single
entity-Carbon Cycle Energy, LLC.” (Doc. 51 at 2-3).
Thus, Defendants contend that the other six defendants-Carbon
Cycle Arizona, LLC, Carbon Cycle Holdings, LLC, Jerry
Kovacich, Tom Mulholland, Samuel Grossman, and Carlos
Sala-were not Plaintiff's “employers” under
the FLSA, barring the recovery of attorneys' fees under
29 U.S.C. § 216(b) from those defendants. (Id.
at 3). Accordingly, Defendants request an evidentiary hearing
pursuant to LRCiv 54.2(h) on the singular issue of
“who” was Plaintiff's “employer.”
(Id.). Defendants claim that some of the named
defendants do not have any connection to Plaintiff, and
appear to have been named solely to expand the litigation as
much as possible in the hopes of monetary gain.
Reply, Plaintiff disagrees that an evidentiary hearing is
needed to determine who was Plaintiff's employer,
It was Defendants' tactical decision to make an Offer of
Judgment on behalf of Carbon Cycle Arizona, LLC, Carbon Cycle
Energy, LLC, Carbon Cycle Holdings, LLC, Jerry Kovacich, and
Tom Mulholland. . . . If Defendants believed that only one
Defendant was Plaintiff's employer, they should have only
made the Offer of Judgment against only one employer
(Doc. 57 at 5-6).
Court agrees. Defendants' Offer of Judgment explicitly
states that it “offer[s] to allow judgment to be
entered in favor of Plaintiff Michael Gary and against these
Defendants” after listing Defendants Jerry Kovacich,
Tom Mulholland, Carbon Cycle Energy, LLC, Carbon Cycle
Arizona, LLC, Carbon Cycle Holdings, LLC. (Doc. 46-1 at 1).
Notably, Plaintiff alleged in his Complaint that each named
defendant was his “employer, ” as that term is
defined by the FLSA. (See Doc. 1 ¶¶
10-20). Thus, at issue is whether the entry of
judgment against Defendants (specifically, Carbon Cycle
Arizona, LLC, Carbon Cycle Energy, LLC, Carbon Cycle
Holdings, LLC, Jerry Kovacich, and Tom Mulholland) pursuant
to Plaintiff's acceptance of Defendants' Rule 68
Offer of Judgment constitutes an admission that the specific
Defendants listed in the Offer of Judgment are liable for
Plaintiff's attorneys' fees and, thus, deemed
“employers” from whom Plaintiff may recover.
See Richardson, 750 F.2d at 766. The Court concludes
discussed, supra, Plaintiff was the prevailing party
in this action, and Defendants do not contest this.
(See Doc. 51). Importantly, Title 29 U.S.C. section
216(b) provides that an award of attorneys' fees
“shall” be made to the successful plaintiff. 29
U.S.C. § 216(b). Therefore, “[t]he award of an
attorney's fee is mandatory” if a plaintiff
prevails in the FLSA action. Houser v. Matson, 447
F.2d 860, 863 (9th Cir. 1971) (citation omitted); see
also Christiansburg Garment Co., 434 U.S. at 415 n.5
(noting that a fee award is “mandatory for prevailing
plaintiffs” in actions brought under FLSA).
interpreting an Offer of Judgment under Rule 68, “a
court will ordinarily apply the usual rules of contract
construction.” Herrington v. Cty. of Sonoma,
12 F.3d 901, 907 (9th Cir. 1993) (citing Erdman v.
Cochise Cty., Ariz., 926 F.2d 877, 880 (9th Cir. 1991));
see also Guerrero v. Cummings, 70 F.3d 1111, 1113
(9th Cir.1995), cert. denied, 518 U.S. 1018 (1996).
“Thus, ambiguities will be construed against the
offeror as the drafting party and, where such ambiguities are
found to exist, extrinsic evidence of the parties' actual
intentions will be examined to clarify those ambiguities and
arrive at the meaning of the offer's material
the explicit mandate in 29 U.S.C. § 216(b) that
attorneys' fees be awarded to the prevailing plaintiff,
Defendants chose to structure their Offer of Judgment such
that it was “exclusive of taxable court costs and
attorney's fees[.]” (Doc. 46-1). Further,
Defendants' Offer of Judgment contained no language
admitting or denying liability as to attorneys' fees
specifically. As the drafting party, Defendants could have
easily formulated the offer to signal Plaintiff that it was
inclusive of attorneys' fees. Therefore, as the
drafting party and offeror, Defendants “should bear the
burden of the ambiguity created” by their silence as to
liability for attorneys' fees in their Offer of Judgment.
Webb v. James, 147 F.3d 617, 623 (7th Cir. 1998).
Further, the FLSA provides for attorneys' fees for the
prevailing party and allows recovery of those fees from
“any employer who violates” the [FLSA], ”
Richardson, 750 F.2d at 766, but Defendants said
nothing in their Offer of Judgment which would terminate that
statutory liability. This is consistent with the rule of
contract construction requiring that ambiguities in a
contract be construed against the drafter.
Herrington, 12 F.3d at 907; see Nusom v. Comh
Woodburn, Inc., 122 F.3d 830, 833 (9th Cir. 1997)
(“We recognize that in general, defendants making a
Rule 68 offer contemplate a lump-sum judgment that represents
their total liability. . . . At the same time, defendants are
the master of what their Rule 68 offers offer. If there is
any room for doubt about what is included, or excluded, when
‘costs' are offered, the defendant can craft its
offer to make clear the total dollar amount that it will
the Ninth Circuit has also concluded that “Rule 68
offers differ from contracts with respect to attorney fees,
” because, as to them, any waiver or limitation must be
“clear and unambiguous.” Nusom, 122 F.3d
at 833 (citing Guerrero, 70 F.3d at 1113;
Erdman, 926 F.2d at 880). For example, in
Erdman, the defendant's offer of judgment did
not clearly exclude an award of attorneys' fees and,
therefore, the defendant was bound by the letter of the offer
and was obligated to pay reasonable attorneys' fees in
addition to the amount stated in the offer. Erdman,
926 F.2d at 880-81. Furthermore, Nusom extended
Erdman to non-section 1983 actions and to actions
resting on statutes which do not define attorneys' fees
as a component of costs, such as the FLSA. Nusom,
122 F.3d at 833 (holding that “the judgment does not
foreclose the [plaintiffs] from seeking attorney fees”
in action brought under Truth in Lending Act, which does not
include attorneys' fees as a component of “costs,
” because the judgment “does not clearly and
unambiguously waive or limit them”); see Gutierrez
v. Good Savior, LLC, No. CV 14-4595-AJW, 2016 WL
5661869, at *3 (C.D. Cal. Sept. 28, 2016).
these reasons, the Court concludes that Defendants cannot now
contest their liability as to attorneys' fees on the
basis that each party listed in the Offer of Judgment is not
Plaintiff's “employer, ” as that term is
defined under the FLSA. As master of the offer, Defendants
could have structured their Offer of Judgment in such a way
as to make clear that it was inclusive of attorneys'
fees, or only permitted recovery of attorneys' fees from
one specific, named employer Defendant. Defendants cannot
back-pedal now. Accordingly, the Court declines
Defendants' request for an evidentiary hearing under
LRCiv 54.2(h), and will not reduce Plaintiff's award of
attorneys' fees by 6/7th.
Whether Plaintiff May Recover Fees for Preparing the
Motion for Attorneys' Fees and Costs
states that he is entitled to his attorneys' fees for
preparing the Motion for Attorneys' Fees and Costs at
issue, (Doc. 50 at 3-4), and Defendants do not ...