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Low Attorneys’ Fees Justified When Settlement Offers Rejected

May 16, 2019, 5:42 PM

A man who recovered less in damages after a trial than the defendant offered him to settle his debt collection practices claims isn’t entitled to a large attorneys’ fee award, the Seventh Circuit said May 15.

“Sometimes settling a case is the only course that makes sense. This case provides a good example,” Judge Michael Y. Scudder Jr. wrote for the U.S. Court of Appeals for the Seventh Circuit.

Isaac Paz filed a class action against Portfolio Recovery Associates LLC for violating the Fair Debt Collection Practices Act and Fair Credit Reporting Act by failing to report to credit reporting agencies that Paz disputed the debt. The class was never certified.

The case dragged on for years and Paz rejected multiple offers to settle under Federal Rule of Civil Procedure 68, including one for $3,500. After an eventual trial, Paz was awarded only $1,000 in damages.

He sought $187,000 in attorneys’ fees but the trial court awarded him only $11,000 because he rejected meaningful settlement offers.

“The time associated with the $187,410 in attorneys’ fees did not reflect the sort of reasonable attorney work that is often inevitable as part of traveling a diligent litigation course,” the court said.

Paz was free to go to trial, but doing so warranted a substantial reduction in attorneys’ fees, the court said.

Judges David F. Hamilton and Amy C. Barrett joined the opinion.

Mario Kris Kasalo and Daniel Richard Brown, both of Chicago, represented Paz.

Hinshaw & Culbertson LLP represented PRA.

The case is Paz v. Portfolio Recovery Assocs., 2019 BL 176718, 7th Cir., No. 17-3259, 5/15/19.

To contact the reporter on this story: Perry Cooper in Washington at pcooper@bloomberglaw.com

To contact the editors responsible for this story: Jo-el J. Meyer at jmeyer@bloomberglaw.com; C. Reilly Larson at rlarson@bloomberglaw.com