The United States Court of Appeals for the Fifth Circuit recently upheld a trial court’s denial of attorney fees to a debtor who settled his claims against a debt collector for alleged breaches of the Federal Fair Debt Collection Practices Act and parallel consumer protection laws. .
In that decision, the Fifth Circuit found that the fee transfer provision under the FDCPA for “successful action to enforce the above liability” requires that a lawsuit generate a favorable end result obliging the liability and the legal compliance with a formal order or decree under the FDCPA, 15 USC 1692, et seq., and that reaching a settlement prior to such a final result does not entitle a claimant to an award of fees. lawyer under the law.
A copy of the notice in Tejero v. Portfolio Recovery Assoc, et al is available at: Link to Opinion.
A consumer sued a debt collector for alleged violations of the FDCPA and parallel provisions of Texas state law. After the parties’ counterclaims for summary judgment were dismissed on the grounds that there were questions of fact subject to trial, the parties reached a pre-trial settlement in which the debt collector agreed to waive the unpaid debt (approximately $ 2,100) and pay $ 1,000 in damages.
After advising the trial court of the settlement, the court imposed penalties on the debtor’s attorneys, ordering thousands of dollars in costs and fees and reporting them to the Disciplinary Committee of the U.S. District Court for the Western District of Texas for having allegedly brought the case in bad faith. To see Tejero v. Portfolio Recovery Assocs., LLC, 955 F.3d 453, 457.
The debtor appealed and the Fifth Circuit overturned the imposition of penalties for abuse of discretion and returned the trial court to determine at first instance whether the debtor’s favorable settlement entitled him to legal fees in under the FDCPA. Identifier. at 462-463. The district court said no, which led to this appeal.
In that appeal, the only issue in the Fifth Circuit was whether the trial court erred in denying the debtor’s claim for fees under the FDCPA.
The United States generally employs the “American rule” in which “[e]each litigant pays his own legal fees, winner or loser ”, but this general rule can be altered or amended by law or contract. Hardt v. Reliance Standard Life Ins. Co., 560 US 242, 253 (2010).
As you may recall, the FDCPA allows the transfer of fees, allowing a claimant to recover reasonable attorney fees as determined by the court with costs “in the event of any successful enforcement action. the above liability “. 15 USC § 1692k (a) (3).
To determine whether such a reward was deserved here, the Fifth Circuit first turned to the dictionary definition of “pass” – a “favorable outcome” or a favorable end result. To success, American Heritage Dictionary 1740 (5th ed. 2011); Results, Identifier. to 1251. “Successful” modifies the word “action” in statutory language – the “procedure” in this case – thus requiring a favorable end or result of a lawsuit, and not just success in vacuo. Considering then the infinitive expression “to enforce the foregoing responsibility”, “to enforce” expresses the goal of “successful action”, and thus, the action must succeed in its objective of applying the FDCPA responsibility.
Read together, the Fifth Circuit stated that “successful action to enforce the above liability” means a lawsuit that generates a favorable end result obliging liability and legal compliance with a formal order or decree under the FDCPA.
Here, the appeals court determined that because a settlement had been reached before the trial reached a final result, let alone a favorable one, the debtor did not get any redress and the debt collector avoided a formal legal order or decree from the trial.
The debtor argued that his “action” was “successful” because he settled for $ 1,000, which is the statutory damages authorized by the FDCPA. The Fifth Circuit rejected this alternative interpretation because it was resolved by a settlement agreement that did not “enforce” the “liability” of the FDCPA because it did not force the debt collector to do anything. it would be. Adopting such a position would improperly rewrite the statute of Congress to allow the transfer of fees “in the case of any successful complainant”.
The Fifth Circuit also refused to apply the catalyst theory to the FDCPA’s fee transfer provision, as “successful action” under 15 USC § 1692k (a) (3), notwithstanding its inapplicability to “dominant party” laws.
As you may recall, the catalyst theory postulates that a plaintiff is successful “if he achieves the desired result because the trial resulted in a voluntary change in the defendant’s conduct” (Buckhannon Bd. & Care Home, Inc. v. W. Go. Dep’t of Health & Hum. Res., 532 US 598, 601 (2001)).
The Fifth Circuit declined to adopt this interpretation here because “dominant party” and “winning party” are synonymous terms with similar legal significance, requiring formal legal action, the success of that legal action, and some form. legal redress (as opposed to private redress) that enforces the rights of the winner (Dominant part, Black’s Law Dictionary 1232), and such an interpretation would also disrupt recent circuit case law and the Supreme Court’s mandate that transfer of rights laws must be interpreted consistently. Buckhannon, 532 US at 603.
Because the debtor’s trial was not a successful FDCPA action within the meaning of Section 1692k (a) (3), the Fifth Circuit held that the trial court had correctly determined that he was not entitled to fees, and his refusal to honor attorney fees was confirmed.
