Practitioners know how difficult it is to obtain an award of fees against the government. However, in an opinion in which the Court states at the outset, “the government here chose to defend the indefensible in an indefensible manner,” the Fifth Circuit Court of Appeals has awarded attorneys’ fees to an employer in a wage-hour dispute based on the Department of Labor’s (“DOL”) bad faith– both in pursuing a legally indefensible case and in the conduct of the litigation.
The case, Gate Guard Services, L.P. v. Perez, 792 F.3d 554 (5th Cir. 2015), is an unusual one But in this case, the government’s conduct was found to be outrageous on two fronts. The DOL continued to litigate a case long after it became apparent the case was meritless, and it did so in an inappropriately aggressive fashion.
The DOL jumped into the fray when a drinking pal of a DOL investigator, who was inexperienced in classification issues, expressed concern that he had been underpaid by Gate Guard Services, which provided gate attendants for remote drilling sites and treated the attendants as independent contractors. After interviewing only three witnesses and destroying his original notes, the investigator concluded that the company owed $6 million in back wages, nearly its entire net worth. Even though there were several violations of the DOL’s internal policy in the conduct of the investigation, the DOL filed suit.
During the course of the ensuing litigation, the government opposed nearly every motion on spurious grounds, even a routine motion to transfer the case to a division where many of the gate attendants and the investigator lived or worked. During the investigator’s deposition, the DOL’s lead counsel objected 102 times and instructed the witness 18 times not to answer basic questions about his investigation.
To make matters worse for the government, the district court where the case was pending held that gate attendants in another case, with nearly identical facts, were not employees. The DOL also learned that the Army Corps of Engineers classified its gate attendants as independent contractors. Gate Guard won summary judgment at the district court level and was also awarded over $565,000 in attorneys’ fees. Both sides appealed.
The Fifth Circuit did not hesitate to send a message to the DOL and awarded fees for bad faith, noting “[t]he government’s intransigence in spite of its legally deteriorating case, combined with extreme penalty demands and outrageous tactics, together support a bad faith finding.”
While the circumstances presented in this case are certainly unique, it makes clear that employers should not hesitate to seek fees when the government oversteps its bounds—either in pursuing a case that lacks merit or engaging in unethical and spurious litigation tactics.