FYI: 9th Cir Affirms 25% Reduction in Plaintiff's Attorneys Fee Award

The U.S. Court of Appeals for the Ninth Circuit recently affirmed a trial court's order reducing the amount of attorneys' fees requested by class counsel by cutting the number of hours expended by class counsel by 25%.

 

In so ruling, the Ninth Circuit concluded that the trial court's order explanation of the lodestar calculation it conducted and application of the percentage-of-recovery analysis as a cross-check for reasonableness adequately explained its reasoning and did not abuse its discretion.

 

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

 

A plaintiff consumer ("Plaintiff") filed a putative class action lawsuit against an entertainment studio and distributor ("Defendants") who marketed James Bond DVD and Blu-ray boxsets purportedly containing "all the Bond films," but did not include two such films.  The suit alleged violations of Washington's Consumer Protection Act, breach of express warranties, and breach of the implied warranty of merchantability on behalf of a nationwide class of consumers.

 

The parties settled, and as part of the settlement,  Defendants agreed to pay attorneys' fees and costs to class counsel ("Class Counsel") as determined by the trial court and in an amount not exceeding $350,000 an incentive award to $5,000 to the named class plaintiff. 

 

Plaintiff moved, unopposed, for fees and costs and an incentive award consistent with the agreement.  However, the trial court awarded only $184,655 in attorneys' fees after conducting its own lodestar calculation, and applying a 25% across the board cut to class counsel's requested hours to "reflect a more reasonable representation of the work required."  Class counsel appealed.

 

Reviewing an award of attorney's fees, an appellate court's abuse of discretion standard affirms a trial court's award unless the trial court "applied the wrong legal standard or its findings were illogical, implausible, or without support in the record." Gonzalez v. City of Maywood, 729 F.3d 1196, 1201–02 (9th Cir. 2013) (quoting TrafficSchool.com v. Edriver Inc., 653 F.3d 820, 832 (9th Cir. 2011)). 

 

To determine the reasonableness of the award at issue, the Ninth Circuit cited its ruling In re Bluetooth Headset Prods. Liab. Litig., 654 F.3d 935 (9th Cir. 2011), which reversed and remanded the fee award where the trial court provided "(1) no explicit calculation of a reasonable lodestar amount; (2) no comparison between the settlement's attorneys' fees award and the benefit to the class or degree of success in the litigation; and (3) no comparison between the lodestar amount and a reasonable percentage award."  In re Bluetooth, 654 F.3d at 943.

 

On appeal, Plaintiff argued that the entire award was arbitrary because the trial court failed to provide an explanation as to why it chose a 25% cut, primarily relying on the Ninth Circuit's opinion in Gonzalez v. City of Maywood, 729 F.3d 1196 (9th Cir. 2013) which reversed and remanded the trial court's reduced fee award in a civil rights case, where the lodestar method is typically used.

 

Following the procedures it established in In re Bluetooth, the Ninth Circuit observed that in this case, the trial court provided an explicit lodestar calculation in determining the reasonable hourly rate and number of reasonable hours expended by class counsel and six reasons why a 25% reduction was appropriate. 

 

In addition, the Ninth Circuit noted, the trial court performed a percentage-of-recovery analysis as a cross-check, and observed that its lodestar calculation ($184,665) exceeded its 25% benchmark for percentage-of-recovery awards of the benefit achieved for the class ($138,600).  See In re Bluetooth, 654 F.3d at 945 quoting  In re Gen. Motors Corp. Pick-up Truck Fuel Tank Prods. Liab. Litig., 55 F.3d 768, 821 n.40 (3d Cir. 1995) (percentage-of-recovery method can be used to ensure that "counsel's fee does not dwarf class recovery."). 

 

Because the trial provided a clear explanation for its lodestar calculation and reasonableness cross-check allowing the appellate court to determine that the fee award was reasonable based on the record before it, its case law required nothing more. See, e.g., McCown v. City of Fontana, 565 F.3d 1097, 1102 (9th Cir. 2009)( ("[The district court] must explain how it arrived at its determination with sufficient specificity to permit an appellate court to determine whether the district court abused its discretion in the way the analysis was undertaken.").

 

The Ninth Circuit further distinguished the case at bar with its opinion in Gonzalez, noting that the trial court in that case provided an explanation that seemed arbitrary and "irreconcilable" with some of its conclusions,  Gonzalez, 729 F.3d 1196 at 1204-1205 (9th Cir. 2013).  By contrast here, the trial court provided a detailed explanation of the lodestar calculation and a percentage cross-check that demonstrated that even with the 25% cut to class counsel's hours, the fee award was higher than the percentage-of-recovery benchmark amount of 25% of the recovery to the class.

 

Accordingly, the trial court's substantially reduced attorneys' fee award was affirmed.

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th 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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FYI: 7th Cir Holds Collection Letter Properly Identified "Original" and "Current" Creditors Under FDCPA

The U.S. Court of Appeals for the Seventh Circuit recently affirmed judgment in favor of a debt buyer and debt collector against a consumer debtor alleging that the collector's debt collection letter violated the federal Fair Debt Collection Practices Act, 15 U.S.C. § 1692 ("FDCPA").

 

In so ruling, the Seventh Circuit rejected the debtor's argument that the letter's identification of both the "original creditor" and "current creditor" was likely to confuse consumers, and held that the letter accurately and clearly identified the creditor to whom the debt was owed, in compliance with subsection 1692g(a)(2) of the FDCPA.

 

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

 

A consumer ("Debtor") defaulted on debt owed to a bank.  The debt was sold to a subsequent creditor (the "Debt Buyer"), who retained a debt collector (the "Debt Collector") to send a form collection letter (the "Collection Letter"). 

 

The Collection Letter advised that the Debtor's account had been "placed with our collection agency on 9-14-17," and that the Debt Collector's "client" had authorized it to offer a payment plan or a settlement of the debt in full.  The Collection Letter further identified the bank as the 'original creditor,' and the Debt Buyer as the 'current creditor,' along with the last four digits of the Debtor's account number and principal and interest balances due on the debt.

 

The Debtor filed a putative class action complaint against the Debt Buyer and Debt Collector alleging that the Collection Letter violated § 1692g(a)(2) of the FDCPA by "fail[ing] to identify clearly and effectively the name of the creditor to whom the debt was owed." 

 

The trial court entered judgment on the pleadings in the Debt Buyer and Debt Collector's favor, holding that the Collection Letter adequately identified the current creditor.  The instant appeal ensued.

 

The Seventh Circuit referenced prior rulings that "[t]o satisfy § 1692g(a), the debt collector's notice must state the required information 'clearly enough that the recipient is likely to understand it.'" Janetos v. Fulton Friedman & Gullace, LLP, 825 F.3d 317, 321 (7th Cir. 2016) (quoting Chuway v. Nat'l Action Fin. Servs., Inc., 362 F.3d 944, 948 (7th Cir. 2004)). 

 

In addition, potential FDCPA violations are viewed "through the objective lens of an unsophisticated consumer who, while 'uninformed, naïve, or trusting,' possesses at least 'reasonable intelligence, and is capable of making basic logical deductions and inferences.'" Smith v. Simm Assocs., Inc., 926 F.3d 377, 380 (7th Cir. 2019) (quoting Pettit v. Retrieval Masters Creditor Bureau, Inc., 211 F.3d 1057, 1060 (7th Cir. 2000)).

 

On appeal, the Debtor argued that listing two separate entities as "creditor" without explaining the difference between the two, and stating that the Debt Collector was authorized to make settlement offers on behalf of the Debt Buyer (an entity that was previously unlikely known to the customer) could confuse its recipients as to whom the debt was actually owed. 

 

Citing the Seventh Circuit's ruling in Smith v. Simm Assocs., Inc., the Debtor argued that in that case, dismissal was affirmed because the letters in question did "not identify any creditor other than Comenity Capital Bank, which might have led to consumer confusion," and that here the Debt Collection's identification of an original and current creditor violated Smith.

 

The Seventh Circuit disagreed.  It held that the Collection Letter clearly identified the Debt Buyer as the current creditor, thus meeting the requirement under 1692g(a) that the written notice contain "the name of the creditor to whom the debt is owed."  15 U.S.C. § 1692g(a)(2). 

 

Moreover, the Debtor's argument under Smith was soundly rejected, as the original and current creditors in Smith were the same.  Here, the Collection Letter's identification of the original creditor (who the consumer is likely to recognize based on their past business relationship) and the current creditor (the Debt Buyer, which the consumer may not recognize and is required to be identified under the FDCPA) "provide[d] clarity for consumers" and an unsophisticated consumer would understand that his debt has been purchased by the creditor.  Smith, 926 F.3d at 381. 

 

Acknowledging the trial court's suggestion that the letter could have better clarified the parties' relationship by spelling out that the Debt Buyer purchased the debt from the original creditor, and that the Debt Buyer was the Debt Collector's client, the Seventh Circuit held that section 1692g(a)(2) only requires clear identification of the current creditor -— not a detailed explanation of transactions leading to the Debt Collector's notice.

 

Accordingly, the trial court's judgment in favor of the Debt Buyer and Debt Collector was affirmed.

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th 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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FYI: 5th Cir Holds Class Members Not Entitled to Tolling Under Florida Statute of Limitations

The U.S. Court of Appeals for the Fifth Circuit recently held that putative class members were not entitled to tolling under Florida's statute of limitations because the federal rule of tolling for putative class members did not override the Florida statute.

 

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

 

Investors "purchased what they thought were low-risk CDs" from an offshore bank controlled by "Allen Stanford, now serving a 110-year prison term, [who] sold billions of dollars worth of bogus CDs to unwitting investors, many of them retirees seeking 'safe' investments for their life savings, paying each new investor-victim 'profits' out of funds solicited from newly-duped investor-victims."

 

In 2009, a group of these "swindled investors" filed a class action in the U.S. District Court for the Northern District of Texas against the company that "provided clearing services" for one of Stanford's companies that in turn referred investors to Stanford's bank. This case "had a putative class of all persons who bought Stanford CDs. But counsel … eventually offered to narrow its Florida subclass to exclude plaintiffs who did not transfer money directly through [the clearing services company]."

 

On November 20, 2013, the investors that were excluded from the Texas class action filed the first of six cases against the clearing company in the U.S. District Court for the Southern District of Florida. "The cases were transferred to the Northern District of Texas, home of the Stanford multidistrict litigation."

 

The plaintiffs alleged that the clearing company "committed indirect fraud under Florida law … [and] aided and abetted Stanford's breaches of fiduciary duty under Florida law."

 

The defendant moved for summary judgment, arguing that the claims were barred by Florida's 4-year statute of limitations. The trial court granted the motion, reasoning that plaintiffs "should have known of their claims, at the latest, by November 18, 2009, when the [Texas] class action was filed. Because the Investors filed the first of these cases on November 20, 2013—four years and two days later—these cases were untimely. The trial court rejected the argument that the limitations period tolled while the Investors were putative members" of the Texas class action.

 

On appeal, the Fifth Circuit began by discussing Florida law, noting that "[t]he Florida Supreme Court has not decided whether a statute of limitations is tolled during a putative class action." Thus, the Court "must make 'an Erie guess as to what the [Florida] Supreme Court would most likely decide."

 

Turning to the applicable Florida statute, the Court explained that "Florida law happens to provide a statutory list of grounds for tolling its statutes of limitations." However, "putative class actions are not on the list." In addition, the statute provides that the "list is exclusive—explicitly disclaiming any other grounds for tolling[.]" Florida's Supreme Court has also "held that 'the tolling statute specifically precludes application of any tolling provision not specifically provided therein."

 

The plaintiff investors argued that despite the statute's "clear language … and the Florida Supreme Court's insistence that all other tolling provisions are excluded," "two Florida Supreme Court cases—Lance v. Wade and Engle v. Liggett Group, Inc.—have essentially added class actions to the statutory list."

 

The Fifth Circuit rejected this argument because "the Florida Supreme Court did not actually announce this rule in either case, and we are not inclined to find innovative theories of state law while making an Erie guess." The Court explained that "[u]nlike the case before us, both Lance and Engle involved certified classes that were later decertified on appeal. And plaintiffs in both cases had already tried their cases to favorable jury verdicts. The Florida Supreme Court did not cite Florida's tolling statute or even use the word 'toll' in either case. That silence is not dispositive. But it is curious. If the court was creating a new tolling rule applicable to all future putative class actions, why not use the word 'toll'?"

 

"Neither Lance nor Engle announced a broadly applicable rule that putative class action claimants are entitled to tolling. The Florida Supreme Court's holding in each case appears, in the plain language of each opinion, to tailor the relief dispensed to the equitable needs of the particular plaintiffs. And nothing more. Nothing in Engle or Lance suggests that the Florida Supreme Court would depart from the plain language of § 95.051 when dealing with Plaintiffs here—who were never certified as a class by a lower court and never tried their case to a favorable jury verdict in reliance on a court's class certification."

 

Next, the Fifth Circuit pointed out that "we are not the first federal court to consider this question. The Second Circuit, the D.C. Circuit, and one federal district court in Florida have held unequivocally that Florida does not recognize class action tolling. One federal appellate court, the Eleventh Circuit, appears to differ, but its provocative statement is not actually a holding. In Raie v. Cheminova, Inc., the Eleventh Circuit observed: 'There is no dispute that American Pipe['s federal policy of tolling for class actions] has been followed in Florida state courts. But that proposition was not part of the holding in Raie. The court ultimately rejected tolling because the plaintiff was not a member of the class he relied on. So the weight of federal appellate authority is that Florida law does not recognize class action tolling."

 

Because "it is far from clear that Florida law recognizes class action tolling, and, as an Erie court, we decline to announce such a rule before the Florida Supreme Court has done so[,]" the Court found that "under Florida law, class action claimants are not entitled to tolling."

 

However, the plaintiffs argued that "even if Florida law rejects class action tolling, federal law should govern." The Fifth Circuit also rejected this argument because while "federal law does toll limitations during a putative class action[,] [i]n a diversity case, we apply federal procedural rules and states substantive law." And, the Court explained, we have already answered the question before us: whether to apply American Pipe tolling or state tolling rules. In Vaught v. Showa Denko K.K., we found that 'the Supreme Court has stated that generally, for diversity actions, a federal court should apply not only state statutes of limitation but also any accompanying tolling rules.'"

 

The Court explained that "the U.S. Supreme Court has made clear that American Pipe is not meant to displace statutes. In American Pipe, the Court held that its court-made rule would only function 'under certain circumstances not inconsistent with the legislative purpose.'" Thus, the Court concluded that "[f]ederal law is unavailing to the [plaintiff investors] because the only federal rule they can point to is one grounded on 'the traditional equitable powers of the judiciary.' But equity does not empower judge's to contravene the plain language of a statute."

 

Finally, the Fifth Circuit rejected the plaintiffs' argument that "if Florida law doesn't recognize class action tolling and if federal law is unavailing, they are still entitled to approximately eight months of 'equitable tolling' for a period when [the first Texas class action] was stayed."

 

The Court reasoned that "[f]irst, tolling due to a stay is not on the exclusive list in § 95.051. Second, the [plaintiffs'] state-court authority, [Machules v. Department of Administration] is distinguishable because it tolled an administrative rule—not a statute of limitations. Third, an adverse district court decision on appeal is not the kind of event that invokes equitable tolling. This was not a situation where a plaintiff 'ha[d] been misled or lulled into inaction, ha[d] in some extraordinary way been prevented from asserting his rights, or ha[d] timely asserted his rights mistakenly in the wrong forum.' Plus, even if adverse binding precedent could invoke equitable tolling, district court decisions are not binding precedent, even in the same district court."

 

The Fifth Circuit thus concluded that "equitable tolling is not available to the [plaintiff investors]" and affirmed the trial court's summary judgment ruling in favor of the defendant.

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th 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   |   Georgia   |   Illinois   |   Massachusetts   |   New Jersey   |   New York   |   Ohio   |   Pennsylvania   |   Texas   |   Washington, DC

 

 

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