Wednesday, April 23, 2008
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Ninth Circuit Vacates Fee Award in Debt Collection Practices Case
Rules District Court Abused Its Discretion in Calculating Lodestar
By SHERRI M. OKAMOTO, Staff Writer
A district court abused its discretion in calculating the reasonable rate for fees in an action brought for a violation of the Fair Debt Collection Practices Act based on FDCPA cases from across the country over the past 10 years, the United States Court of Appeals ruled yesterday.
The Ninth Circuit vacated the fee award entered by U.S. District Judge Charles R. Breyer of the Northern District of California, premised upon the judge’s conclusion that a reasonable rate for purposes of calculating the lodestar amount was $200 per hour.
The plaintiff in the underlying case, Rita Camacho, brought a class action accusing Bridgeport Financial Inc. of violating the FDCPA by informing debtors that disputes had to be stated in writing. Breyer denied Bridgeport’s motion to dismiss, ruling that the act did not imply that a collection agency may require debtors to dispute debts in writing, and the Ninth Circuit affirmed on interlocutory appeal.
Litigation Settled
On remand, the judge certified a statewide class, and the litigation was settled, with Camacho receiving $1,000 in damages, Legal Services of Northern California receiving a $341.50 cy pres award for consumer education, and the amount of costs and attorney fees being left to be decided by the court.
Camacho’s attorneys requested over $160,000 in fees, based on the number of hours worked by three lawyers at the requested hourly rates of $425, $465, and $500. Breyer specifically found that the number of hours spent on the case by the three attorneys was reasonable, but that their hourly rates were not.
In a single footnote, Breyer cited 11 cases from as far back as 1998 to support his finding that an hourly rate of $200 was in “rough accord” with existing precedent. Based on the number of hours worked by each attorney, Breyer awarded the plaintiff $69,760 in attorney fees.
Breyer further found that it would be inappropriate to award fees-on-fees on an hourly basis because plaintiff’s counsel regularly represented litigants in FDCPA cases and the materials submitted in the case were virtually identical to those submitted by the attorneys in other cases. Therefore, Breyer awarded a “flat” fees-on-fees award of $500.
Facts Not Identified
Writing for the appellate court, Senior Judge Melvin Brunetti acknowledged that district courts have a great deal of discretion in setting a fee amount, but faulted Breyer for failing to identify which facts made the plaintiffs’ attorney’s requested fees unreasonable.
For purposes of determining a reasonable hourly rate, Brunetti wrote, district courts must identify the relevant community and prevailing hourly rate in that community for similar services by lawyers of reasonably comparable skill, experience and reputation for purposes of calculating a lodestar amount. In addition, he held that district court should not restrict its analysis to FDCPA cases because the fee award should be commensurate with those which an attorney could obtain by taking other types of cases.
Brunetti explained that a district court must always calculate a lodestar amount and then assess whether upward or downward adjustments are warranted. For this reason, Brunetti held the district court had erred in purportedly awarding a “flat award.”
Further, Brunetti wrote, a district court should only consider current prevailing rates, and not rely on decisions issued prior to the attorneys’ rendering of services. He remanded the matter for the district court to recalculate the fee award.
Judges Stephen Reinhardt and Raymond C. Fisher joined Brunetti in his opinion.
Richard M. Pearl, who represented the plaintiff, said:
“We are very happy with [the opinion] because there really had been a lot of scattered decisions regarding the act. The court said it wanted to clarify things, and it did.”
Mark E. Ellis, who represented Bridgeport, said his client was “not really unhappy with the ruling, per se” and called it “not really a loss, we’re just going to go back for further findings of fact.” He emphasized that the appellate court had not concluded the $200 hourly rate was wrong, but “they just wanted to see [the lower court’s] work, like in high school math.”
Ellis said he was hopeful that Breyer would rule the same way on remand.
The case is Camacho v. Bridgeport Financial Inc,. 07-15297.
Copyright 2008, Metropolitan News Company