On November 16, the United States Court of Appeals for the Fifth Circuit issued a memorandum opinion in Crystal Davis v. Credit Bureau of the South denying counsel's statutory attorney's fees for a successful Fair Debt Collection Practices Act claim. The opinion—which is well worth the read—can be accessed here.
The appellant consumer, Crystal Davis, filed a complaint in the U.S. District Court for the Eastern District of Texas alleging that Credit Bureau of the South ("CBOTS"), a debt collector, violated the FDCPA and the Texas Debt Collection Act ("TDCA") by using the words "credit bureau" in its name and misrepresenting itself as a credit bureau in an attempt to collect a debt. Through a report and recommendation to the District Court, the magistrate judge concluded that summary judgment for Davis was warranted based on the evidence that CBOTS used the term "credit bureau" in its name, even though it ceased being a consumer reporting agency years ago. Upon the recommendation of the magistrate judge, the District Court awarded Davis statutory damages of $1,000. However, it rejected all other claims made by Davis, including her state TDCA claim.
Davis subsequently moved for an award of attorneys' fees in the amount of $130,410. The motion was referred to the magistrate judge who denied Davis's motion, finding that the case involved "special circumstances" which made an award of attorneys' fees unjust. The magistrate judge found that there was evidence of apparent collusion between Davis and her counsel to create the claim, and the requested $130,410 in attorney's fees was "excessive by orders of magnitude." After Davis filed objections, the District Court adopted the magistrate judge's order as its final judgment and Davis appealed.
Applying Fifth Circuit precedent, and in line with decisions from the Third and Fourth circuits, the Court of Appeals stated that in limited "special circumstances" a district court may deny an award of fees in circumstances where it would be unjust. Accordingly, the Fifth Circuit found that a denial of attorney's fees was proper given the extenuating circumstances before it.
First, the Fifth Circuit highlighted the fact that Davis's counsel's hourly rate of $450 was unreasonable given the record before it, including the quality of work. The Court noted that Davis's brief on appeal was replete with grammatical errors, formatting issues, and improper citations, and was not of the caliber of work calling for such a rate. The Court also addressed the fact that much of the work was duplicative among the multiple attorneys representing Davis in addition to the amount of work done being excessive given the simple nature of the case.
Next, the Fifth Circuit found that there was an air of collusion between Davis and her counsel to create the claim, including facts showing that despite alleging in the complaint that Davis was a citizen of Harrison County, Texas, the overwhelming evidence showed that she was a citizen of Louisiana, and her only ties to Texas were based on the fact that her parents both resided there. Davis's counsel knew or should have known of this fact since she was an employee of her counsel's firm in the summer of 2015, which was shortly before the alleged conduct of CBOTS.
Based on these facts, the Fifth Circuit found that because Davis could not and did not prove that there were any actual damages, and as a means to disincentivize her counsel and others from bringing mere technical violations in a scheme to generate attorney's fees, it upheld and affirmed the District Court's decision.
Generally, a successful judgment for a violation of the FDCPA allows for an award of attorney's fees for the consumer's counsel. This case is emblematic of the fact that there are special circumstances where a purely manufactured technical claim will prevent consumer counsel from successfully obtaining fees even for a meritorious case. While the Fifth Circuit—in addition to the Third and Fourth circuits—has adopted the "special circumstances" exception, others have concluded that an award of attorneys' fees for a successful FDCPA claim is mandatory.
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