$200 Debt Turns into $500 Jury Verdict …and $36,000 in Attorney Fees

A $200 debt turned into a $500 jury verdict against a debt collector for violating the Fair Debt Collection Practices Act (FDCPA). Then that $500 jury verdict morphed into a request for over $73,000 in attorney’s fees for the prevailing party. Finally, that request translated into an award of $36,000. 

The case is Heling v. Creditors Collection Service Inc. (Case No. 5-CV-1274, U.S.D.C., Eastern District of Wisconsin). 

Background 

The plaintiff, Lori Heling, filed her complaint in this case on October 26, 2015. She alleged that the defendant, Creditors Collection Service Inc. (CREDITORS), violated the terms of the FDCPA, 15 U.S.C. § 1692, et seq.  

In her complaint Heling alleged that in April of 2015, CREDITORS sued her in Sheboygan County Circuit Court for an unpaid debt. Ms. Heling also alleged that she never received actual service of summons in that case, so CREDITORS served her by publication and, ultimately, the Circuit Court entered default judgment against her in the amount of $390.09, which included a $50.00 attorney fee, a $44.46 service fee, and a $94.50 filing fee. CREDITORS then attempted to collect on that judgment by garnishing Ms. Heling’s wages. 

At one point, CREDITORS sent a Garnishment Notice to Ms. Heling’s employers; that notice listed $396.14 as the outstanding judgment, $22.00 in post-judgment interest, and $122.50 as “[e]stimated costs of this earnings garnishment.” 

This notice prompted Ms. Heling to contact CREDITORS and its attorneys. During a phone call with CREDITORS, Ms. Heling was informed that she owed $538.94, which was allegedly more than she actually owed.  At that point, Ms. Heling informed CREDITORS that she was prepared to pay the judgment against her but would like to have the judgment against her vacated. CREDITORS informed Ms. Heling “that it could not have the judgment vacated.” Ms. Heling claims that, in taking these actions, CREDITORS violated the FDCPA by misrepresenting the amount, character, and status of the debt she owed and incorrectly stating that CREDITORS could not have the judgment vacated.

In December of 2015 CREDITORS filed a motion to dismiss the case. On February 2, 2016, the court denied that motion to dismiss. 

Several other motions were filed and orders entered in response thereto, including a motion for summary judgment that was denied by the court. The case proceeded to trial. 

In October 2016, after a two day trial, a jury awarded plaintiff $500 in damages. CREDITORS filed post-trial motions that were denied by the court. 

On February 6, 2017, the attorney for the plaintiff filed a Petition for Attorney’s Fees pursuant to the FDCPA’s fee-shifting provision.  

On June 12, 2017, the court filed an order awarding Attorney Fees. It is the details of the “ask” and the “award” that are interesting. 

The plaintiff’s motion for attorney’s fees 

Plaintiff’s attorney sought over $77,000 in attorney’s fees and costs for their work in this case. Defendant argued that she is entitled to no more than $1,500. 

Per the plaintiff’s motion:

“Plaintiff anticipates that Defendant will suggest that this was a simple FDCPA case that did not warrant the time and effort required to prosecute this matter to its ultimate conclusion. But the assertion that this was a simple FDCPA case is not a reasonable argument that can be posited given the considerable procedural history of this matter – a history driven almost exclusively by Defendant. 

In response to Plaintiff’s complaint, Defendant filed a motion to dismiss pursuant to Rule 12(b)(6), based on the Rooker-Feldman doctrine, and to dismiss pursuant to Rule 12(b)(6) for failure to state a claim. Defendant’s motion was denied in its entirety. Defendant subsequently filed its answer to Plaintiff’s complaint and asserted three (3) separate affirmative defenses, though it proceeded without pursuing any of the three (3) defenses at trial. 

In addition to the filing of its motion to dismiss, Defendant subsequently filed a motion for summary judgment, which resulted in the taking of four (4) depositions, three (3) witnesses for the Defendant and the deposition of the Plaintiff. Ultimately, Defendant’s motion for summary judgment was denied and this case proceeded to trial before a jury.  At the conclusion of the trial, the jury entered a verdict in favor of Plaintiff and against Defendant and awarded Plaintiff statutory damages. 

In response, Defendant once again persisted in its attempts to have the current matter decided in its favor with the filing of post-trial motions for judgment in its favor or for a new trial. As with its motions to dismiss and for summary judgment, Defendant’s post-trial motions were denied in their entirety and on January 23, 2017, this Court entered judgment in favor of Plaintiff.” 

In the motion, plaintiff’s attorneys also outlined numerous attempts to settle the case. But claimed that CREDITORS never responded to any settlement offers. 

The defendant’s argument against an award of attorney’s fees 

CREDITORS filed a Brief Opposing an award of Attorney’s Fees.  They objected to the plaintiff’s request for nearly $74,000 in fees upon the basis that plaintiff was not “successful” in this action, i.e. though she “prevailed” by obtaining a statutory damage award for one-half ($500) of the nominal award allowed under the “additional” or statutory damages provision of the FDCPA. They argued that plaintiff did not succeed in obtaining an award that justifies an award of attorney fees. Finally, they argued that any such award as that sought by the plaintiff is excessive, unreasonable and unfair. 

They also noted in their brief that plaintiff was seeking attorneys’ fees in the amount of $73,429.50 from an agency that had at the time of trial three employees, including its owner. 

The Court’s Decision  

The court disagreed with defendant’s policy arguments about whether the plaintiff was entitled to an award of attorney’s fee. The court held that plaintiff was entitled to an award of attorney’s fees. 

The court then conducted the actual fee analysis using the “lodestar method.” The “lodestar” analysis involves setting a reasonable hourly rate and the number of hours which should have reasonably been expended to litigate the claims at issue. Those figures are multiplied to achieve the lodestar, which may then be adjusted for various reasons. 

HourlyrRate 

The Court first determined that plaintiff carried the burden to show appropriate market rates for her counsel’s time, and awarded her fees based on the hourly rates she proposed. 

Reasonableness of time spent 

The court then looked at the time spent on the case. The court wrote:

“Plaintiff’s initial demand is for $73,429.50 in fees for 203.8 hours of work.  The Court concludes that many of these hours were unreasonably expended in what can only be described as a mine-run FDCPA case. The complaint is a mere forty-five paragraphs.  Though a motion to dismiss was filed, the Rooker-Feldman issue it raised was not novel or particularly complex; the Court disposed of it in a ten-page order.

Given the limited claims that survived the motion, discovery was simple and short, with only a handful of depositions taken. Summary judgment was also relatively brief, and the Court addressed it in just seventeen pages. Trial itself took less than two full days, with five witnesses and less than thirty exhibits presented across barely six hours. 

The hours Plaintiff’s attorneys expended addressing each of these tasks were excessive. Plaintiff’s attorneys are experienced consumer rights litigators and are receiving an hourly rate commensurate with that experience. By the same token, they cannot charge their client, or Defendant by way of the instant motion, at the rate of a novice in addressing issues they have likely seen on numerous prior occasions. 

In the end, excessiveness pervades Plaintiff’s fee bill. The Court declines to waste its time by addressing this problem with respect to each individual line item of Plaintiff’s seventeen-page bill. Rather, in light of the nature and history of this case, and the experience of Plaintiff’s attorneys, the Court believes that no more than 120 hours could have been reasonably expended in litigating this matter.” 

Lodestar adjustment 

Finally, the court discussed a “lodestar” adjustment. The court made a further adjustment: 

“Overall, Plaintiff was partially successful in vindicating the claims and damages her lawsuit entailed. The Court concludes that an appropriate, across-the-board reduction for Plaintiff’s partial success is twenty percent, or $8,485.20.” 

The court closed the order with the following statement: 

“If a minor violation of the FDCPA necessitates discovery and a jury trial to resolve, it would offend Congress’ intent in passing the FDCPA to fail to reasonably compensate plaintiff’s counsel for the time and effort needed to obtain redress for the consumer. Plaintiff’s motion for attorney’s fees will be granted in the amount of $36,190.80.” 

insideARM Perspective 

This case defines the phrases “Monday Morning Quarterbacking,” and “Hindsight is 20/20.” An account with an initial balance of approximately $200 turns into litigation that lasts over 20 months! It is hard to not look back and suggest all parties would have been better off settling the case early. While plaintiff did receive an award of attorney’s fees, the final award was less than 50% of what was requested. Is there a “winner” in this case? 

This case is a warning to all ARM firms about the risks of trial and the FDCPA fee-shifting provisions. This result has to have a heavy impact on a 3-person company.