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WBK Industry News - Litigation Developments

5th Circuit Affirms Denial of “Outrageous” Request for $130,000 in Attorney’s Fees Under FDCPA

In a case involving $1,000 in statutory damages, the Fifth Circuit ruled that it was proper to deny all attorney’s fees, where the plaintiff and her attorney apparently “colluded” to create an FDCPA claim in order to generate an “incredibly high” $130,000 fee request.

In Davis v. Credit Bureau of the South, the plaintiff alleged that the defendant falsely represented itself as a consumer reporting agency and/or credit bureau, when in fact it was a debt collector.  On summary judgment, the United States District Court for the Eastern District of Texas found that the defendant engaged in debt collection activities in Louisiana because it used the term “credit bureau” in its name, even though it ceased to be a consumer reporting agency years prior. Under Fifth Circuit authority, those facts constituted a false representation or implication that the defendant was a consumer reporting agency in violation of the FDCPA.  Based on that violation, the district court entered judgment for statutory damages amount of $1,000 against the defendant.  As for a separate claim under Texas Financial Code § 392.305, the record did not support the conclusion that the defendant, a Louisiana entity, engaged in debt collection activities in Texas.

The attorneys for the plaintiff then filed a fee request for $130,410.  But problems arose when it was revealed that the plaintiff was actually an employee of her attorney’s law firm in Shreveport, Louisiana.  The plaintiff apparently called the defendant from the Shreveport, Louisiana law office, and asked the defendant to send correspondence about an unpaid water bill to her parents’ home in Harrison County, Texas.  The plaintiff’s attorney was aware that this call took place because he recorded the conversation from his Shreveport law office. The plaintiff then used the letter mailed to her parents’ home as the basis for her choice of venue in the Texas district court, and the basis of the Texas state law cause of action.  It was also revealed that prior to the filing of the lawsuit, the plaintiff wrote an article on behalf of her law firm articulating that it was against the law for a debt collector to use the words “credit bureau” in the company name.  After the district court denied the request for attorney’s fees entirely, the plaintiff appealed.

The Fifth Circuit found it was proper to deny the fees based “on the outrageous facts in this case and the conduct of [plaintiff’s] attorneys.”  As explained by the Court, although several circuits have found that attorney fees under the FDCPA are mandatory, others have permitted the outright denial of fees in “unusual circumstances.”  Attorney fees need not be proportional under the FDCPA, but the Court emphasized that they still must be reasonable.  As explained by the Court, the request for $130,000 in fees, based on an hourly rate of $450, was not reasonable because the pleadings filed by plaintiff’s attorneys, including the brief on appeal, were “replete with grammatical errors, formatting issues, and improper citations, and [were] certainly not the caliber of work warranting such an extraordinary rate.”  Additionally, the Court noted that “the collusion between [plaintiff] and her counsel essentially created her claim.”  While the denial of otherwise mandatory fees is a rare and drastic outcome, the Fifth Circuit found that the district court did not abuse its discretion in determining that the “the reasonable attorney’s fee was $0.”

“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.”

The Fifth Circuit’s opinion is available here.