In an impactful employment-related decision issued today, Ferman v. Sturgis Cleaners Inc., SJC-12602, the Massachusetts Supreme Judicial Court adopted the “catalyst test” to determine whether employees, whose claims against their employers under the Wage Act, G. L. c. 149, §§ 148, 150, resulted in a favorable settlement agreement and stipulation of dismissal, "prevailed" in their suit for purposes of an award of attorney's fees and costs under the Wage Act's fee-shifting provisions. Under the catalyst test, if the plaintiff's lawsuit is a necessary and important factor in causing the defendant to grant a material portion of the requested relief, a settlement agreement, even without any judicial involvement, may qualify the plaintiff as a prevailing party for fee-shifting purposes.
In the ruling, the SJC therefore expressly rejected the harder-to-establish Buckhannon test for federal feeshifting statutes established by Buckhannon Bd. & Care Home, Inc. v. West Virginia Dep't of Health & Human Resources, 532 U.S. 598 (2001), which requires a prevailing litigant to prove there was a "material alteration of the legal relationship of the parties" (citation omitted) and a "judicial imprimatur on the change."
The plaintiffs in the case were former employees of the defendants' dry cleaning business who sued claiming that the defendants failed to pay them approximately $28,000 in regular and overtime wages as required by G. L. c. 149, §§ 148 and 150, and G. L. c. 151, §§ 1A and 1B. These statutes provide that "[a]n employee so aggrieved who prevails in such an action shall be awarded treble damages . . . and shall also be awarded the costs of the litigation and reasonable attorneys' fees." G. L. c. 149, § 150; G. L. c. 151, § 1B.
As a result of mediation, the parties executed a memorandum of understanding in which they agreed to settle the case for $20,500, but reserved the issue of the plaintiffs' entitlement to attorney's fees for resolution by the court. The plaintiffs claimed approximately $40,000 in attorney's fees and $1,000 in costs. The trial judge concluded that the catalyst test and not the Buckhannon test applied to Massachusetts fee-shifting statutes. In applying the catalyst test, the trial court determined that the parties' agreement, which amounted to nearly seventy percent of the plaintiffs' initially demanded monetary relief, resulted "in a practical benefit as a result of their attorneys' efforts." As such, the plaintiffs were "prevailing parties" for purposes of an award of attorney's fees and costs and the trial court awarded the plaintiffs a reduced figure of approximately $17,000 in attorney’s fees and costs.
The SJC affirmed. It began its analysis by noting that although the Buckhannon test applies to federal feeshifting statutes, "we are not . . . bound by interpretations of the Federal statute in construing our own State statute." The SJC then expressly adopted the catalyst test to determine prevailing parties under the Wage Act. The SJC reasoned that doing so provides a disincentive against unlawful conduct and also incentivizes attorneys to provide representation in cases that otherwise would not be financially prudent for them to take on.
Further, the SJC recognized that “successful litigation may be reflected in settlements as well as court rulings, as settlements are often ‘the products of pressure exerted by [a] lawsuit.’" And the catalyst test “provides a disincentive for defendants to stretch out cases and delay settlement for strategic advantage, as they would only be increasing the legal fees they would ultimately be required to pay.”
For all the foregoing reasons, the SJC determined that “a plaintiff prevails for purposes of an award of attorney's fees under the Wage Act when his or her suit satisfies the catalyst test by acting as a necessary and important factor in causing the defendant to provide a material portion of the relief demanded in the plaintiff's complaint.” In applying the test to the present case, like the trial court before it, the SJC concluded that the criteria of the catalyst test were met because the plaintiffs' lawsuit caused the defendants to provide approximately seventy percent of the plaintiffs' monetary demands—a material portion.