In Paz v. Portfolio Recovery Associates, LLC, No. 17-3259 (4/2/19) the U.S. Court of Appeals for the 7th Circuit upheld the district court’s award of $10,875 in attorney fees to the plaintiff’s attorney, Mario Kasalo, despite his petition for $187,410 in fees after prevailing at trial in a lawsuit brought under the Fair Debt Collection Practices Act and Fair Credit Reporting Act. The 7th Circuit criticized Mr. Kasalo for not settling the case early on, stating “Sometimes settling a case is the only course that makes sense. This case provides a good example.” At trial plaintiff was awarded only $1,000 in damages on a single FDCPA claim while defendants had prevailed in lion's share of plaintiff's other claims. Importantly, the Court noted that plaintiff had disregarded multiple offers to settle the lawsuit both at outset of action and after defendant had prevailed on summary judgment. The 7th Circuit held that when determining the reasonableness of the fee request it was appropriate for the district court to consider the fact that plaintiff had rejected the defendant’s Rule 68 Offer of Judgment and series of settlement offers, the last one of which if accepted would have settled case for $3,501 plus reasonable fees. The 7th Circuit further held that the $3,501 plus fees offer was reasonable, where it was more than three times maximum statutory damages that plaintiff could receive, and the district court could conclude that vast majority of fees requested by plaintiff's counsel was for time spent on pursuing unsuccessful and ill-advised efforts to win a much bigger payoff than what was remotely possible.
Moral of the Story
This decision illustrates the importance of making and documenting a good faith offer to settle a lawsuit where liability is likely, and to do so early in the litigation before plaintiff’s counsel racks up substantial fees. If plaintiff’s counsel persists and ultimately wins, the offer can be extremely helpful in reducing their fee award.