The Fifth Circuit affirms Texas district court’s decision to award successful plaintiff in an FDCPA action $0 in attorney’s fees due to “special circumstances

In Davis v. Credit Bureau of the South, 908 F.3d 972 (5th Cir. Nov. 16, 2018) the debtor alleged that a debt collector violated the FDCPA by falsely representing that it was a credit bureau when it had lost its credit bureau designation some years earlier. The district court entered summary judgment for the consumer concluding that the debt collector falsely represented or implied that it was a consumer reporting agency in violation of the FDCPA, but rejected her other claims. It awarded the consumer statutory damages of $1000. The consumer’s attorneys then submitted a fee petition in the amount of $130,410. The petition was denied with the court finding that the case involved special circumstances which would render an award of fees unjust.

The district court was “stunned” by the request for $130,000 in attorney’s fees. Fees were charged by multiple counsel on a simple matter which was decided on summary judgment. The number of hours (nearly 300 hours), as well as the hourly rate of $450 demanded, was also “excessive by orders of magnitude.” In addition, the court believed the cause of action was created by counsel for the purpose of generating the high fee request. The consumer and her counsel essentially colluded to create her claim.

The Fifth Circuit on appeal noted that while some courts view the award of attorney’s fees as mandatory under the FDCPA, others have recognized an exception which permits outright denial of fees in “unusual circumstances.” The Fifth Circuit adopted the latter approach, noting it had recognized the viability of this approach in similar contexts. It also held that even assuming arguendo that some reasonable fee is always required, a reasonable fee in response to an exorbitant request is a nominal amount approaching zero.

The reviewing court found that the extreme facts of the case justified the district court’s decision. First, the Court agreed that the district court did not abuse its discretion in reducing the fees to $0. It shared the district court’s stunned reaction to the amount of the fees. The record reflected neither the quality of legal work necessary for the requested hourly billing rate nor the quantity of work to support the hours claimed. The pleadings, including the brief on appeal, were replete with grammatical errors, formatting issues, and improper citations, and were certainly not of the caliber to warrant such an extraordinary hourly rate. In addition, the lower court’s decision was based in part on the consumer’s limited success in that she failed to prove actual damages or liability under state law. The court assessed further reductions based on the unnecessary duplication of efforts by counsel finding that the case was not complex enough to require or justify multiple counsel. Moreover, there was only one deposition and the matter was decided on summary judgment. Finally, the $450 hourly rate request “exceeds by half the rate justified by the work performed for Plaintiff in this case.” $0 was unreasonable.

In addition to the substantial reductions, the Fifth Circuit agreed that there were “special circumstances” rendering an award of attorney’s fees unjust. There was bad faith conduct on the part of the consumer and her counsel in colluding to establish the cause of action and create the appearance that the debt collector, a Louisiana entity, engaged in debt collection activities in Texas. The consumer was employed by the law firm in Louisiana and retained the firm prior to the date of the first communication. It was also shown that the consumer asked the debt collector to send the bill to her parents’ house in Texas to create a cause of action in Texas. The Fifth Circuit concluded that the bottom-line: “the FDCPA does not support avaricious efforts of attorneys seeking a windfall. Because grossly excessive attorney’s fee requests directly contravene the purpose of the FDCPA, these tactics must be deterred.”

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