Thursday, July 14, 2022

FYI: 11th Cir Affirms Over 75% Reduction in Attorney's Fees Requested By Prevailing Plaintiff

The U.S. Court of Appeals for the Eleventh Circuit recently affirmed a trial court's attorney fee award that reduced the prevailing plaintiff's requested fees by over 75%, ruling that the trial court did not abuse its discretion.

 

A copy of the opinion is available at: Link to Opinion

 

Plaintiff ("Consumer"), a self-avowed "tester" of businesses compliance with the Americans with Disabilities Act ("ADA") sued an autobody repair shop and its landlord (referred to jointly as "Business") after visiting the shop and observing various ADA violations. The trial court granted injunctive relief and ordered Business to pay reasonable attorney's fees and costs under 42 U.S.C. § 12205.

 

Consumer subsequently filed a motion for attorney's fees requesting $41,260.30 for attorney's fees, litigation expenses, expert witness fees, and costs. $38,014.50 of the requested amount was for attorney and paralegal fees.

 

The trial court granted the motion in part and denied in part finding the requested fees and expenses were "grossly disproportionate to the context and circumstances of the case" and noting that "[w]hile the ADA permits attorneys to recover fees, it does not give attorneys license to over-litigate cases at the expense of defendants who are willing to modify their property to comply with the ADA."

 

The trial court ultimately determined an across-the-board reduction was warranted as the result "could have been achieved much more efficiently and far less extensively," awarding a total of $8,579.80 in fees and expenses, $7,500 of which were for attorney's fees. Consumer appealed.

 

Under the ADA, a court "in its discretion, may allow the prevailing party, other than the United States, a reasonable attorney's fee, including litigation expenses, and costs." 42 U.S.C. § 12205. The fee is calculated "by multiplying the number of hours reasonably expended on the litigation times a reasonable hourly rate." Blum v. Stenson, 465 U.S. 886, 888 (1984). This sum is often referred to as the "lodestar." Ass'n of Disabled Ams. V. Neptune Designs, Inc., 469 F.3d 1357, 1359 (11th Cir. 2006).

 

Consumer argued that the trial court erred in finding the hours claimed in the fee request were excessive and unnecessary. The Eleventh Circuit noted that a trial court should deduct time for hours which are excessive or unnecessary as the purpose of attorney's fees is "to compensate attorneys for work reasonably done actually to secure for clients the benefits to which they are entitled." Norman v. Hous. Auth. of Montgomery, 836 F.2d 1292, 1302, 1305 (11th Cir. 1988).  The Appellate Court also noted any exclusions for unnecessary or excessive work are left to the discretion of the trial court. Id. at 1301.

 

The Eleventh Circuit found the trial court's explanation as to why it found some work unnecessary and excessive sufficient.

 

The trial court explained that Consumer's attorney's claim that he spent 88 hours litigating the case was unreasonable, as he had at least 140 other ADA lawsuits during the subject period. The trial court further explained why it found specific categories of hours unnecessary and excessive, for example finding that Consumer's counsel billed excessively for "boilerplate…legal tasks," and for "clerical work or work that could have been performed by [his] paralegal." Finally, the trial court referenced Consumer's attorney's billing for unnecessary motions and found that "much of the time expended was of minimal value to the ultimate result" as the same result could have been achieved "by engaging in [an] early settlement." 

 

Consumer made several arguments against the trial court's findings. First, Consumer argued that the trial court abused its discretion in finding the lawsuit routine and that Consumer's counsel billed excessively in litigating the claims, arguing that courts have lauded the policy interest served by litigating ADA cases. See., e.g. Dowdell v. City of Apopka, 698 F.2d 1181, 1190-91 (11th Cir. 1983).

 

The Eleventh Circuit rejected this argument noting that despite any recognized policy interest, attorneys are not authorized by § 12205 to expend unreasonable hours to achieve it. See Norman, 836 F.2d at 1301-02. In addition, the Eleventh Circuit agreed with the trial court's finding that the case was a straightforward ADA case in which the defendant agreed to correct the violations, Consumer's counsel had extensive experience in the area, and many of the filings involved "boilerplate" motions and pleadings.

 

Consumer next argued that the trial court abused its discretion by finding that Consumer prolonged the litigation. In support of this finding, the trial court referenced Consumer's counsel's actions at mediation, where despite being shown a proposal for corrections of the remaining violations, counsel filed a motion for sanctions because the owner of the autobody shop who was elderly and ill was not able to attend mediation. The trial court further noted that counsel's approach to the litigation was overly aggressive as Business had agreed to fix the violations. Thus, the Eleventh Circuit found the trial court did not abuse its discretion in finding Consumer's counsel prolonged the litigation resulting in unnecessarily increased attorney's fees.

 

Finally, Consumer argued that the trial court erred in classifying certain tasks as administrative, finding the entries for reviewing the docket excessive and finding the time Consumer's counsel spent on drafting the motion for fees as not compensable. The Eleventh Circuit once again found Consumer failed to show the trial court abused its discretion.

 

Consumer next argued that the trial court abused its discretion in failing to hold an evidentiary hearing to determine if the case could have been settled earlier. Consumer relied on the ruling in Love v. Deal, 5 F.3d 1406, 1409 (11th Cir. 1993) where the court held "[i]t is not necessary for a plaintiff to request an evidentiary hearing. Rather, the essential factor is whether there is a dispute of material fact that cannot be resolved from the record." Id.

 

The Eleventh Circuit noted this statement in Love conflicted with its earlier holding in Norman v. Hous. Auth. of Montgomery, 836 F.2d 1292, 1302 (11th.  Cir. 1988) which held that making an award without an evidentiary hearing was an abuse of discretion "where an evidentiary hearing was requested, where there were disputes of facts, and where the written record was not sufficiently clear to allow the trial court to resolve the disputes of fact." Norman, 836 F.2d at 1302-03 (11th Cir. 1988).

 

The Eleventh Circuit held it was bound by the precedent set forth in Norman, as the "earliest precedent that reached a binding decision on the issue." Washington v. Howard, 25 F. 4thh 891, 900 (11thh Cir. 2022). As the record showed that Consumer never requested an evidentiary hearing, the Appellate Court ruled that the trial court did not err in failing to hold such a hearing as consumer had "failed to meet the first prerequisite for obtaining a hearing." Thompson v. Pharmacy Corp. of Am., Inc., 334 F.3d at 1245-46.

 

Finally, Consumer argued that the trial court erred in applying a 75% across-the-board reduction.  A court may apply an across-the-board cut where the fee application is voluminous and the "number of hours claimed is unreasonably high." Bivins v. Wrap It Up, Inc., 548 F.3d 1348, 1350. When an across-the-board cut is applied the court must "concisely and clearly articulate [its] reasons for selecting specific percentage reductions" so there can be "meaningful review." Loranger v. Stierheim, 10 F.3d at 783 (11th Cir. 1994).

 

The Eleventh Circuit rejected Consumer's argument that the across-the-board reduction was conclusory as the trial court explained in detail the reasons why it found the hours excessive, unnecessary and thus, unreasonable.

 

Thus, the Appellate Court found the trial court's order "articulate[d] the decisions it made, [gave] principled reasons for those decisions, and show[ed] its calculation" to allow for "meaningful review." Loranger, 10 F.3d at 781.

 

Thus, the Eleventh Circuit found the trial court did not abuse its discretion and affirmed the order.

 

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 6th Floor
Chicago, Illinois 60602
Direct:  (312) 551-9320
Fax: (312) 284-4751

Mobile:  (312) 493-0874
Email: rwutscher@MauriceWutscher.com

 

Admitted to practice law in Illinois

 

 

 

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Monday, July 11, 2022

FYI: 11th Cir Reiterates That TILA Periodic Statements May Violate FDCPA

The U.S. Court of Appeals for the Eleventh Circuit recently held that periodic statements required by the federal Truth in Lending Act (TILA) may violate the federal Fair Debt Collection Practices Act (FDCPA) if they are not truthful and fair.

 

A copy of the opinion is available at:  Link to Opinion

 

The appeal arose from a lawsuit brought by two home owners ("Debtors") against their home loan servicer ("Servicer") for alleged violations of the FDCPA and Florida's Consumer Collection Practices Act.

 

After defaulting on their home loan, a foreclosure suit was instituted. While the foreclosure was pending, Servicer took over the servicing of the loan. Debtors sued Servicer during the foreclosure after a disagreement arose, which resulted in a settlement of both lawsuits wherein the parties agreed that Debtors owed $85,790.99 to be paid in one year.

 

Four months later, Servicer began sending mortgage statements to Debtors, notifying them the loan had "been accelerated" as they were "late on [their] monthly payments." The mortgage statements included a loan balance of $92,789.55 which increased each month. The statements also warned that failure to pay may result in the loss of Debtors' home and provided options for payment.

 

The trial court held that Debtors failed to state a FDCPA claim reasoning that the periodic statements were unrelated to debt collection because the periodic statement are required under TILA. The trial court declined to exercise supplemental jurisdiction over the Florida law claims and dismissed the complaint. Debtors appealed.

 

While the appeal was pending, the Eleventh Circuit issued its ruling in Daniels v. Select Portfolio Servicing, holding that courts "must try to give meaning to both" the FDCPA and TILA. 34 F.4th 1260, 1269 (11th Cir. 2022).

 

In the instant matter, the Eleventh Circuit addressed whether Debtors plausibly alleged that the periodic statements constituted "attempts to collect or induce payment on a debt." Id. at 1263.

 

The relevant FDCPA provisions prohibit false or misleading representations "in connection with the collection of any debt," and from using "unfair or unconscionable means" of debt collection. 15 U.S.C. §§ 1692e, 1692f. The question at issue was whether the periodic statements which contained information that suggested Servicer was ignoring the settlement agreement in telling Debtors they owed a larger amount of money sooner were "in connection with" or a "means" of debt collection even though they came in periodic statements which are required under TILA.

 

Under the FDCPA, if a communication "conveys information about a debt and its aim is at least in part to induce the debtor to pay", it has the necessary nexus to debt collection. Caceres v. McCalla Raymer, LLC, 755 F.3d 1299, 1302 (11th Cir. 2014). In determining whether a communication contains these traits, the Court views it "holistically." Daniels, 34 F.4th at 1268.

 

Here, the Eleventh Circuit found that Servicer's monthly statements had both traits. The statements contained the remaining principal balance of the loan, the interest rate, the amount owed, the payment due date, and the delinquency on the account.  In addition, the statements advised Debtors to pay. The statements further contained warnings of the consequences of Debtors' failure to pay.

 

The Court also noted a detachable payment coupon was included, presumably with the hope the warnings would persuade Debtors to pay. Additionally, the back of the statements listed additional methods of payment and the statement stated "[Servicer] is a debt-collector, and information you provide to use will be used for that purpose."

 

The Eleventh Circuit recited that to survive a motion to dismiss, Debtors' complaint needed only to allege that the statements plausibly "aim[ed]," "at least in part," to induce them to pay. Caceres, 755 F.3d at 1302. The Court found the statements easily satisfied the standard. See Daniels, 34 F.4th at 1268.

 

Servicer argued that the statements were not constrained by the FDCPA's limitations because they were required to be sent by TILA. The Eleventh Circuit disagreed, noting that the goal of the TILA requirements is "to assure a meaningful disclosure of credit terms" to consumers. 15 U.S.C. § 1601(a).

 

Consistent with its prior ruling in Daniels v. Select Portfolio Servicing, the Eleventh Circuit found both the FDCPA and TILA applied to the periodic statements at issue here. The Court found there was nothing in TILA which said periodic statements could not serve as a means of debt collection. 

 

The Court further noted that nothing in the two acts irreconcilably conflicted in their operation. See Tug Allie-B, Inc. v. United States, 273 F.3d 936, 944 (11th Cir. 2001). Instead, the Court found the statutes reinforce each other in that TILA requires the sending of periodic statements by a servicer and the FDCPA requires those statements be fair and accurate when containing language that would induce payment by a debtor.

 

Servicer also argued that the purpose of the statements was to inform. See U.S.C. § 1601(a). However, the Eleventh Circuit previously recognized "a communication can have more than one purpose." Caceres, 755 F.3d at 1302; see also Daniels, 34 F.4th at 1268. The Court went on to rule that the purposes of notification and collection can exist even when the statement resembles the template provided by the Consumer Financial Protection Bureau ("CFPB"). The Court further noted that following the format of the CFBP did not give servicer's license to include incorrect information.

 

Finally, Servicer argued it was exempt from liability under the FDCPA because a CFPB bulletin carved out periodic statements from the FDCPA altogether. See 15 U.S.C. § 1692k(e). The Eleventh Circuit easily rejected this argument as the CFPB Bulletin at issue only addressed a provision of the FDCPA that limits when debt collectors can contact debtors rather than how. See Consumer Fin. Prot. Bureau, CFPB Bulletin 2013-12, Implementation Guidance for Certain Mortgage Servicing Rules 6-7 (2013).

 

The Court found that the information that TILA encourages lenders to give about their loan is only useful if it is accurate and fair, as required by the FDCPA.  The Eleventh Circuit held that, if a servicer uses the periodic statements to collect a debt, they can be held liable if they make unconscionable or misleading representations in the statements.

 

Thus, the Eleventh Circuit held that Servicer was required to comply with both the FDCPA and TILA as they did not irredeemably conflict and reversed the trial court's dismissal of Debtors' complaint.

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 6th Floor
Chicago, Illinois 60602
Direct:  (312) 551-9320
Fax: (312) 284-4751

Mobile:  (312) 493-0874
Email: rwutscher@MauriceWutscher.com

 

Admitted to practice law in Illinois

 

 

 

Alabama   |   California   |   Florida   |   Illinois   |   Massachusetts   |   New Jersey   |   New York   |   Ohio   |   Pennsylvania   |   Tennessee   |   Texas   |   Washington, DC

 

 

NOTICE: We do not send unsolicited emails. If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention. Thank you.


Our updates and webinar presentations are available on the internet, in searchable format, at:

 

Financial Services Law Updates

 

and

 

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and

 

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