Yesterday, the First Circuit Court of Appeals affirmed a lower court’s ruling that slashed a request for legal fees sought by counsel representing plaintiffs in a Fair Debt Collection Practices Act matter. The FDCPA allows attorney fees on successful claims, and the plaintiffs in this case were successful, but for a variety of reasons, attorneys fee award ended up being a little more than 10% of what was sought. The case should serve as a wake-up call for consumers, attorneys and Congress.
The plaintiffs, a married couple, sued Corporate Receivables, Inc. and one of its employees for abusive debt collection practices (the husband owed the debt). They took their case to a jury and presumably did so with the hopes of getting a significant award of actual damages.
The Trial
The husband testified that he had trouble concentrating at work, and had some sleepless nights. While the details of the wife’s testimony were not set out in the ruling, the Court of Appeals saw her testimony as “even less compelling” than the husband’s. There was no evidence that either plaintiff incurred out of pocket expenses, or suffered such extreme emotional distress that it was reasonable for them to expect they would receive a large damage award. Notwithstanding this testimony and the lack of evidence, a jury found in favor of the couple. The husband was awarded $1,000 in statutory damages, but the wife received nothing. The court then concluded that the defendants had violated c. 93 of the Massachusetts General Laws (the Commonwealth’s Consumer Protection Statute). The husband was awarded an additional $1,000 and the wife was awarded $25. While successful at trial, the plaintiffs’ success was limited.
Complicating the fact a bit more: the defendants made two offers of judgment. The first was for $2,500, and the second was for $3,900. Under the Federal Rules of Civil Procedure (no. 68), if an offer of judgment is rejected, and the award obtained is not more favorable than the offer of judgment, the rejecting party (i.e., the Plaintiff) may be responsible for the opposing parties costs incurred after the offer was made.
The court found that proceeding to trial on the claims, in light of the award ultimately obtained, was wasteful. It was “clear from the trial testimony that the possibility of …obtaining such a [large] recovery was minuscule.” Since $3,900 had been offered, and the plaintiffs were awarded a total of only $2,025, the request for over $20,000 in legal fees was found to be unjustified. The fee request was reduced to $2,500.
For consumers contemplating claims under the FDCPA, the message should be clear: you are not going to get rich from filing and pursuing a FDCPA claim. The FDCPA provides for statutory damages of $1,000 in the event of a violation. Actual damages are recoverable, but the value of actual damages is based on the loss actually incurred, and not merely the fact that the consumer has been wronged.
For attorneys contemplating claims under the FDCPA, the message should be also clear: while the FDCPA provides for attorneys fees for successful plaintiffs, a court is not going to award big damages absent a showing of actual losses. Lost concentration and difficult sleeping should not be viewed as being enough to justify taking a case through a federal jury trial.
For Congress, the message should also be a clear: the statutory damages amount of $1,000 may not be enough to deter collection companies from abusive debt collection practices. While I cannot credibly advocate that consumers should hit a jackpot if targeted by an abusive debt collector, the statutory damage amount cannot be so low that it could easily be viewed as a cost of doing business by a ruthless debt collector.
Related posts:
- FDCPA Violation Case Brief: Failing to Identify Creditor
- Woulda, Shoulda, Coulda: A Creditor Loses Big in the Bankruptcy Court
- Housing Discrimination Judgment: Non Dischargeable
- FDCPA Amendment under Consideration
Tags: attorneys, Fair Debt Collection Practices, FDCPA, First Circuit
