Yesterday, the court denied Weltman, Weinberg & Reis Co., L.P.A.’s (Weltman) request for attorneys’ fees and partially granted its request for costs associated with its defense against the Bureau of Consumer Financial Protection's (BCFP or Bureau) claims. As previously reported by insideARM, Weltman sought $1.2 million for the attorneys' fees it incurred while defending itself against the litigation filed by the Bureau as well as the Bureau's pre-litigation investigation. Weltman also sought $67,379.08 in costs. The court denied Weltman’s request for fees in its entirety, and partially granted Weltman $10,845.65 in costs associated with the litigation.
In its reasoning behind its denial of the motion for attorneys’ fees, the court stated that the Bureau’s claims were not meritless. While Weltman ultimately succeeded in the litigation, the court found that an advisory jury did make a determination that Weltman’s communications were false, deceptive, and misleading. The court noted that there was some evidence of this, but the court ultimately did not adopt the jury’s findings because the court did not deem the expert who presented evidence to be credible. The court went on to state:
The fact that the Court did not find [the expert] credible, does not suggest that his testimony was false, or that the [BCFP] did not have a good faith belief in the validity of his testimony.” *3
Of note, the court also mentioned that “there is no accepted specific test for determining when a lawyer is ‘meaningfully involved’ in the process of debt collection.” *3
Ultimately, the court found that the Bureau’s claims had some merit and that there was no evidence to suggest that the Bureau brought the claims in bad faith.
E-Discovery: As for costs, the bulk of the request -- about $50,000 -- related to e-discovery in the case. Weltman utilized e-discovery software to streamline the discovery process. With e-discovery, documents are exchanged electronically in an effort to save time and paper. The court found that the need for the e-discovery system was not created by the Bureau and that no evidence was presented to infer that e-discovery was more cost effective than copying and delivering the documents. The court also stated that if the benefits of e-discovery are more widely accepted, then Congress should amend the federal statute for taxation of costs in litigation to permit such costs.
The court cited case law that stated e-discovery costs are limited to the costs of actually copying and delivery of the materials. The court said, “[a]lthough the information contained in the system was undoubtedly necessary for use in this case, there is nothing to support a finding that the licensing and hosting costs included, or were limited to, the actual copying of materials necessary to the litigation in the case.” *7
Transcription of Call Recordings: The court granted Weltman’s request for costs associated with the transcription of consumer call recordings. The court was unswayed by the Bureau’s argument that the call recordings were not necessary to the case because they were not used at trial. Instead, the court sided with Weltman saying that the transcripts were limited to the 140 calls specifically requested by the Bureau.
Editor’s Note: As stated in Weltman’s motion, the Bureau dismissed half of its claims on the eve of trial, so the argument that costs should only be reimbursed if they are associated with items presented at trial falls a little flat.
Transcription of Pre-Complaint Hearing: The court likewise granted Weltman request for costs associated with the transcription of the pre-complaint hearing of Eileen Bitterman. The Bureau argued that investigation expenses are not chargeable as costs and that they were not necessary for litigation. However, the court pointed out that it was foreseeable that Weltman would need to rely on the information from the hearing in its defense since the Bureau relied on the hearing at other phases of the litigation, such as its motion for summary judgment.
In the end, the court granted Weltman $10,845.65 in costs.
$1.2 million spent by Weltman in its successful defense against the Bureau’s claims, yet it only recovers a little less that $11,000. The result might be hard to stomach, but what is more disheartening is that this case is exemplary of what collection agencies and firms deal with on a daily basis in FDCPA litigation. Due to the strict liability nature of the FDCPA and the statute's one-sided allowance for recovery of fees and costs, the consumer bar has created a cottage industry out of suing debt collectors. Sometimes the claims hold some water, but frequently the claims are far fetched or so hyper-technical that it makes one wonder if a consumer -- even the least sophisticated one -- would notice the difference. As shown in the Weltman case, the debt collector is out a substantial amount of money even if they did not violate the FDCPA. It doesn't matter whether the debt collector chooses to defend itself or enter into a settlement agreement/consent order -- the debt collector loses even if it wins.
The most interesting point in this decision is this: there is no specific test for determining whether an attorney is meaningfully involved. Debt collectors are to follow the law, but how are they to do so if the court doesn’t even know the rule that debt collectors are supposed to follow? Debt collectors are left trying to shoot compliance arrows in the dark, hoping that they hit the target. This is in direct conflict with Acting Director Mick Mulvaney’s stance that “regulation by enforcement is dead.” While the investigation into Weltman began prior to Mulvaney ascending to the Bureau’s top role, the court’s final ruling in favor of Weltman and this request for fees was issued well into Mulvaney’s tenure.