Tuesday, May 30, 2017
The United States Court of Appeals for the District of Columbia Circuit remanded a dispute over fee-shifting in a case where a law firm that collected on student loans got sued
In order to pursue a Master’s degree in Computer Graphics, Demetra Baylor (“Appellant”) took out six student loans. Several years after her graduation, Mitchell Rubenstein & Associates, P.C. (“Appellee”) came calling to collect. At the heart of this case are a number of inconsistencies in letters that Appellee sent Appellant over the course of several months regarding her loans and the amounts that she owed on them, as well as Appellee’s failure to direct all of its communications to Appellant’s attorney after she retained counsel. In response, Appellant filed suit on December 17, 2013, alleging that Appellee had violated the Fair Debt Collection Practices Act (“FDCPA”), the District of Columbia Consumer Protections Procedures Act (“CPPA”), and the District of Columbia Debt Collection Law (“DCDCL”), statutes which target abusive debt collection and improper trade practices. See 15 U.S.C. § 1692(e); D.C. CODE §§ 28-3904, -3814.
Over the course of the next few years, the parties engaged in what the District Court termed a “particularly striking expenditure of effort and resources,” generating “excessive, repetitive, and unnecessarily sharp pleadings.” Order, Dkt. No. 41, at 2. Nonetheless, all of Appellant’s statutory claims were eventually resolved. Appellant accepted Appellee’s offer of judgment regarding her FDCPA claim and the District Court, with the aid of a Magistrate Judge, determined the attorney’s fees to which she was entitled for this success. Appellee, meanwhile, prevailed in its Motion to Dismiss all of Appellant’s CPPA claims and some of her DCDCL claims, the remainder of which were rejected when the District Court subsequently granted Appellee’s Motion for Summary Judgment.
A number of orders from this “clutter[ed]…docket” are challenged on appeal. Id. First, the parties dispute the District Court’s decision to adopt a Magistrate Judge’s recommendation that Appellant receive approximately twenty percent of the attorney’s fees that she requested. Second, Appellant asserts that the District Court erred in finding that Appellee’s conduct does not fall within the aegis of the CPPA. Third, Appellant also contends that the District Court abused its discretion in failing to credit her objections to a different Magistrate Judge’s denial of her Motion to Compel the disclosure of communications between Appellee and an agent of Appellant’s creditor on the grounds that these documents were protected by attorney-client privilege. Appellant additionally disputes the District Court’s refusal to award her attorney’s fees for her efforts in litigating this issue. Finally, Appellant argues that the District Court improperly granted Appellee’s Motion for Summary Judgment on her DCDCL claims. On this last point, Appellant contends that the District Court failed to appropriately account for evidence demonstrating that Appellee had “willfully violated” the DCDCL and was therefore subject to liability under the statute.
We do not reach the question of whether the District Court abused its discretion in awarding Appellant only a percentage of the attorney’s fees she sought in connection with her FDCPA claim. In addressing this issue, the District Court relied on the standard set forth in Local Civil Rule 72.2 in finding that the Magistrate Judge’s proposed disposition was not “clearly erroneous or contrary to law.” This was error. Federal Rules of Civil Procedure 54(d)(2)(D) and 72(b)(3) foreclose the District Court from using a “clearly erroneous or contrary to law” standard when evaluating a Magistrate Judge’s proposed disposition of a fee request. The correct standard of review is de novo. We therefore reverse and remand to allow the trial judge to reconsider this matter in the first instance applying de novo review to assess the Magistrate Judge’s recommendation. We affirm all of the remaining Orders challenged on appeal.
Circuit Judge Henderson concurred with harsh words over the fee request
It is a time-honored bargaining tactic: make an unreasonable opening offer in an effort to “anchor” the ensuing give-and - take to an artificially high (or low) range of prices. Russell Korobkin, Aspirations and Settlement, 88 CORNELL L. REV. 1, 32 (2002). Even if the offer has no basis in reality and is rejected out of hand, it may for psychological reasons yield an artificially high (or low) final price. Id. at 32 & nn.151-53 (citing evidence that people “often begin [a negotiation] with a reference value . . . and then adjust from that point to arrive at their final determination,” even if starting point does “not bear a rational relationship to the item subject to valuation”). That may be fine for selling a car or conducting a business negotiation. But a request for attorney’s fees is not a negotiation.
Federal fee-shifting statutes typically authorize the recovery of a reasonable attorney’s fee. If a party seeks more than that—making an excessive demand in hopes that the award, although short of the demand, will be artificially high— a district court can impose a sanction to deter future violations and to protect the integrity of its proceedings. In particular, the court has discretion to deny an award altogether or “impose a lesser sanction, such as awarding a fee below what a ‘reasonable’ fee would have been.” Envtl. Defense Fund, Inc. v. Reilly, 1 F.3d 1254, 1258 (D.C. Cir. 1993).
I say all this because Radi Dennis, counsel for plaintiff Demetra Baylor, made what I consider a grossly excessive fee request. In Baylor’s name, Dennis sought a total of $221,155 for her work on Baylor’s $1,001 settlement and on the fee request itself. The $221,155 demand was more than five times the $41,990 that a magistrate judge determined to be reasonable. Reviewing for clear error, the district court overruled objections from both sides and awarded Baylor $41,990. The Court today holds, and I agree, that a remand is in order because the district court erred by not reviewing the magistrate’s recommendation de novo. The Court is careful not to dictate the outcome on remand, and rightly so because of the district court’s discretion in fee matters, I write separately only because, on reviewing the fee order, I am uncertain whether the district court recognizes just how broad its discretion is. On the extreme facts of this case—and because Dennis is a repeat offender, see Jones v. Dufek, 830 F.3d 523, 529 & n.6 (D.C. Cir. 2016) (affirming denial of excessive fee request Dennis made on behalf of another client)—I believe the court’s discretion includes awarding a fee substantially below an otherwise reasonable one. (citations to record omitted)...
Indeed, I do not think it would be an abuse of discretion to award Dennis the same amount she won for Baylor: $1,001. Steep overbilling ought to come at a steep price.
Senior Judge Edwards authored the opinion. (Mike Frisch)