An appellate panel has ruled that when it comes to suits alleging violations of federal consumer protection law, small money verdicts awarded to plaintiffs should not always lead to small court-ordered fees for their attorneys, because the principle at stake can be more important than the cash.
The decision was penned by Judge David Hamilton of the U.S. Seventh Circuit Court of Appeals, in a dispute involving, on one side, the Chicago law firms Randolph & Holloway and Community Lawyers Group, and on the other, Retrieval Masters Creditors Bureau, of Elmsford, N.Y.
Seventh Circuit Judges Diane Wood and Candace Jackson-Akiwumi agreed with Hamilton's decision that was rendered July 29.
The two firms represented Jack W. Cooper in his suit against Retrieval, which was lodged in 2018 in U.S. District Court for the Northern District of Illinois. The lawyers are Celetha Chatman and Michael Wood, of Community Lawyers Group, and Philip S. Holloway, of Randolph & Holloway.
Retrieval sent a letter to Cooper in 2016 demanding payment of a $300 debt. Cooper then sued Retrieval for allegedly violating the U.S. Fair Debt Collection Practices Act (FDCPA), by allegedly threatening to report his debt to credit bureaus.
In settlement negotiations, Cooper said he wanted $7,600 and legal costs, but Retrieval refused. Later in the case, Retrieval orally offered $500, backtracked to $250, then went up to $4,600, with all offers to include legal fees. All offers were rejected. Cooper ended up asking Judge Gary Feinerman to find Retrieval breached the FDCPA, which Feinerman did. Trial then took place to determine damages, with the jury saying Cooper deserved $500.
Cooper's attorneys then asked Feinerman for $65,358 in fees and $1,042 in costs. Feinerman granted the costs, but only $6,846 in fees, explaining that Cooper only won a "meager verdict."
The law requires fee requests to be "reasonable." Feinerman said the hours the Cooper legal team spent after Cooper turned down the $500 settlement offer, were not reasonable. The lawyers should have known Cooper was unlikely to win much more at trial, and should not have proceeded farther, according to Feinerman.
Cooper's legal team appealed, arguing they deserved more.
On appeal, Circuit Judge Hamilton pointed to the Federal Rules of Civil Procedure, which limit fees if a plaintiff rejects a written settlement offer made at least 14 days before the trial date. When these conditions are met, a defendant who ends up losing cannot be ordered to pay plaintiff's attorney fees accrued after rejection of the offer.
However, Hamilton pointed out the initial $500 offer was not rendered in writing, but orally, and at any rate, was not presented at least 14 days before the scheduled trial. As a consequence, that offer was not a controlling offer under Rules of Civil Procedure.
Hamilton also determined that Feinerman's reasoning was faulty that Cooper only won $500, so the fees must be in proportion.
"[The] goal of using attorney fee awards as an incentive for plaintiffs to bring actions enforcing the rights of the public, like those under the FDCPA, is greatly undermined if courts apply a strict proportionality analysis that fails to account for the remedial policies that such fee awards to private attorneys general are designed to promote," Hamilton said.
Hamilton added that district court judges have been "warned" about using the "proportionality analysis."
Hamilton went on to quote from a 1997 ruling by the Seventh Circuit, which said, "Success must be measured not only in the amount of the recovery but also in terms of the
principle established and the harm checked.”
Hamilton further noted the alleged FDCPA violation by Retrieval may be trivial, but, quoting from another 1997 Seventh Circuit ruling, the "cumulative effect of petty violations . . . may not be petty." In Hamilton's eyes, this is another reason the amount of attorney fees should not be closely tied to the amount of money awarded to the plaintiff.
Hamilton directed the case go back to district court for further proceedings in regard to fees.
Cooper's attorneys were represented by one of their own, Celetha Chatman, as well as by Seth McCormick, of Great Lakes Consumer Law Firm, of Chicago.
Retrieval was defended by David Spears and Nick Reck, of Spears & Imes, of New York City.