Rejection Of FRCP 68 Offers And Unnecessary Running Up Of Fees Sustained The District Judge’s Conclusion Below.
This next case is a cautionary warning for all litigants and their attorneys—settlement is sometimes the only reasonable option when the defense makes every effort to do so. Here are the beginning two sentences of the opinion we now post on: “Sometimes settling a case is the only course that makes sense. This case provides a good example.”
Paz v. Portfolio Recovery Associates, LLC, No. 17-3259 (7th Cir. May 15, 2019) (published) was a Fair Debt Collection Practices Act and Fair Credit Reporting Act case brought by plaintiff defaulting on a $69 credit card debt as against defendant debt collector which purchased the debt and attempted to collect. Defendant made a FRCP 68 offer to settle for $1,001, plus reasonable attorney’s fees, with the parties eventually agreeing to $4,500. However, because defendant continued to report the debt to credit reporting agencies, plaintiff filed a second lawsuit under the FDCPA and the FCRA. Defendant again attempted to resolve the second case by making Rule 68 offers of $1,500, $2,500, and $3,501, with each including reasonable attorney’s fees and costs up through the date of acceptance. You can guess what happened—plaintiff never responded to any of these offers.
Except for one violation of FDCPA and FCRA, plaintiff’s case got gutted on a defense summary judgment motion such that the case was worth a maximum of $6,000 in actual and statutory damages under the two statutory schemes (although plaintiff claimed emotional distress damages). On the eve of trial, defendant offered to resolve all of plaintiff’s claims for $25,000 plus his attorney’s fees and costs to date. Plaintiff rejected that offer, with a jury awarding just $1,000 in statutory damages on his FDCPA claim. Plaintiff then sought $187,410 in fees and $2,744 in costs relying on FDCA’s fee-shifting provision (15 U.S.C. § 1692(k)(a)(3)). The district judge awarded him fees of $10,875, which was the amount of his attorney’s work up to the point at which the $3,501 settlement offer was made. In doing so, the district judge underscored that plaintiff’s rejection of meaningful settlement offers precluded a fee award in such disproportion to his trial recovery (put another way, plaintiff only had limited success). Plaintiff also received costs totaling $3,500.
The Seventh Circuit saw no abuse of discretion in the challenged fee award. The defense was reasonable along the way, attempting to settle at most junctures of the case. Although the defense settlement offers disclaimed liability, they also allowed for a judgment to be entered so that the liability disclaimer effectively was a “dead letter.” The $187,410 fee request was wildly disproportional to the eventual $1,000 damages award, with there being very little chance plaintiff would obtain much of a “bigger payoff.” Reduced fee award affirmed.
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