Where plaintiffs or their counsel refuse to reasonably settle a matter, a Rule 68 offer of judgment is a tool at the defendant’s disposal to keep the plaintiff’s attorney fees manageable. In the Seventh Circuit, a regular offer to settle the matter outside of the Rule 68 context might have the same benefit. This is illustrated in Cooper v. Retrieval-Masters Creditors Bureau, Inc., No. 16-CV-2827 (N.D. Ill. May 21, 2018).


Factual and Procedural Background

Retrieval-Masters Creditors Bureau, Inc. (RMCB) sent a collection letter to plaintiff. This letter was the subject of a Fair Debt Collection Practices Act (FDCPA) suit filed by plaintiff in March 2016.

On July 28, 2016, RMCB presented a settlement offer to plaintiff consisting of $500 in statutory damages and reasonable attorney fees and costs up until that point. Plaintiff rejected this offer and the litigation continued for almost two years.

Ultimately, the court granted summary judgment in favor of plaintiff and found that RMCB’s letter violated the FDCPA. The suit proceeded to trial on the issue of damages. The jury awarded plaintiff $500 in damages and no actual damages.

Plaintiff then filed a motion for $65,357.90 in attorney fees and $1,042.37 in costs.

The Decision

The court awarded plaintiff all of the requested costs, but only awarded $6,845.76 in attorney fees. In determining appropriate fees, the court used the lodestar analysis, primarily focusing on the issue of hours reasonably expended.

Citing a Seventh Circuit decision, the court noted that absent a Rule 68 offer of judgment, “[s]ubstantial settlement offers should be considered by the district court as a factor in determining an award of reasonable attorneys’ fees.” A settlement offer is considered substantial if “the offered amount appears to be roughly equal to or more than the total damages recovered by the prevailing party.”

In this case, the jury awarded plaintiff $500 in statutory damages, which is equal to the settlement offer presented by RMCB. The court stated that plaintiff and his counsel knew, or should have reasonably known, that this was the likely result and that the jury was unlikely to award plaintiff any actual damages.

Regarding statutory damages, the court cited cases within its jurisdiction that showed plaintiffs receiving awards of less than the full statutory limit ($1,000 in the FDCPA context) where the violations were not repeated. Since the violation against plaintiff involved one sentence in a single letter, plaintiff’s counsel should have known that the final statutory damages award would be around the $500 offered by RMCB.

Plaintiff sought actual damages for distress allegedly caused by the letter. The court shot this assertion down. At trial, plaintiff testified that at the time he received the collection letter, “he was experiencing numerous personal difficulties” including the deaths of multiple family members, the loss of his 28-year job, and his inability to cover expenses for the apartment he lived in for 23 years. According to the court:

From the point of view of a reasonable juror, the distress Cooper experienced in the aftermath of receiving RMCB’s letter was almost certainly attributable solely to those tragic and unfortunate family- and employment-related circumstances, not to the letter’s single FDCPA-violative sentence. Consequently, from the outset of this case, Cooper and his lawyers knew (or absolutely should have known) that the jury would be highly unlikely to award any actual damages.

(internal citations omitted.)

Based on the above, the court found that proceeding to trial would provide plaintiff no benefit above what was offered in July 2016 and that the hours expended by plaintiff’s counsel after the reasonable review of the offer of settlement were not reasonable.

This decision is currently on appeal before the Seventh Circuit.

insideARM Perspective

Litigation defense and settlement costs are an unavoidable expense in the debt collection world. As previously written by insideARM, even if a debt collection agency or firm is in the right and no FDCPA violation occurred, it is still on the hook for at least its own defense fees. If the debt collection agency or firm loses, it is on the hook for the whole thing: plaintiff’s damages award, plaintiff’s attorney fees and costs, and its own defense fees. In the context of a class action, this also includes the class award and class administration fees.

This case illustrates that plaintiffs counsel cannot continue litigating cases solely for the sake of drumming up their fees. Since the post-offer litigation did not -- and reasonably would not -- provide the consumer with any added benefit, the court found that the post-offer fees were not reasonable. While the primary reason for this is likely to prevent the court’s docket from getting clogged, it also puts the onus on plaintiffs’ counsel to act reasonably in respect to resolving cases.