ISAAC PAZ, Plaintiff-Appellant, v. PORTFOLIO RECOVERY ASSOCIATES, LLC, Defendant-Appellee.
No. 17-3259
United States Court of Appeals For the Seventh Circuit
ARGUED APRIL 2, 2019 — DECIDED MAY 15, 2019
Before HAMILTON, BARRETT, and SCUDDER, Circuit Judges.
I
A
After Isaac Paz defaulted on a credit card debt of $695, PRA, a debt collector, purchased the debt and attempted to collect.
PRA promptly offered to settle by invoking
Despite the settlement, PRA continued to report Paz‘s debt to credit reporting agencies, even confirming the validity of the debt in response to inquiries from the agencies. This continued reporting violated the FDCPA, and Paz, upon learning of it, filed a second lawsuit against PRA in December 2014.
The second lawsuit alleged violations of the FDCPA and the Fair Credit Reporting Act. Paz later attempted to add class claims but was unsuccessful. PRA answered the second lawsuit by admitting that, due to an oversight, it both attempted to collect Paz‘s debt after the prior settlement and continued to report the debt to credit agencies. PRA attempted to resolve the case by once again invoking Rule 68 and making a series of settlement offers—first in January 2015 for $1,500, then in February 2016 for $2,500, and later in March 2015 for $3,501. The terms of PRA‘s offers mirrored those Paz accepted in the first lawsuit: PRA would allow judgment to be entered against it; the judgment would include reasonable attorneys’ fees and costs through the date of acceptance of the offer in an amount agreed upon by the parties, or (as necessary) by the district court; and the offer otherwise should not be construed as an admission of liability.
Paz never responded to PRA‘s settlement offers. The parties eventually cross-moved for summary judgment, with the district court‘s ensuing ruling dealing a substantial blow to Paz‘s case. The court permitted Paz to proceed to trial on only one of his alleged violations of the FDCPA,
As for Paz‘s alleged violations of the Fair Credit Reporting Act, the district court determined that the evidence could not support a finding that PRA had acted willfully in its continued reporting to the credit agencies. This conclusion had the effect of allowing Paz to proceed to trial only on his claim that PRA‘s actions amount to negligence violations of the FCRA. See
The upshot heading into trial, then, was that Paz was able to pursue a recovery of any actual damages but not punitive damages.
A week before trial, PRA made a final effort to settle, offering Paz $25,000 to resolve all remaining claims and to cover his attorneys’ fees and costs. Paz rejected the offer and proceeded to trial, enlisting the aid of two more attorneys to help prepare for and conduct the trial.
The trial did not take long. Presentation of the evidence began and ended the same day, September 7, 2016. The next day the jury found for Paz on both claims. In doing so, however, the jury determined that Paz had sustained no actual damages, so his total recovery was limited to $1,000 in statutory damages based on his FDCPA claim.
Paz later sought to recover $187,410 in attorneys’ fees and $2,744 in costs, relying on the FDCPA‘s provision entitling a successful plaintiff to “the costs of the action, together with a reasonable attorney‘s fee as determined by the Court.”
B
By its terms, a settlement offer made pursuant to Rule 68 limits a plaintiff‘s ability to recover costs incurred after the date of the offer. See
In determining what amount of fees was reasonable, the district court underscored that one relevant consideration was Paz‘s decision to reject PRA‘s Rule 68 offer of $3,501 and instead to proceed to trial. This reasoning, too, is on all fours with our caselaw. In Moriarty, for example, we explained that “[s]ubstantial settlement offers should be considered by the district court as a factor in determining an award of reasonable attorney‘s fees, even where Rule 68 does not apply.” 233 F.3d at 967.
In assessing a proper fee award, the district court emphasized that Paz had obtained only limited success at trial. And this was especially so when viewed against the backdrop of the settlement offer—more than three times the amount of his ultimate recovery—that Paz declined. Paz was free to proceed to trial, the district
In the end, the district court awarded Paz $10,875 in attorneys’ fees. Applying the lodestar method, the district court used $375 as the hourly rate of Paz‘s main attorney, Mario Kasalo, but recognized that only 29 hours of his total work—the hours he worked before PRA‘s final Rule 68 offer on March 27, 2015 for $3,501—were reasonable. The district court concluded that all other hours, including those spent preparing for and conducting the trial, including by the two attorneys Kasalo enlisted to help him at trial, were unreasonable.
When it came to costs, the district court awarded PRA $3,064. This amount compensated PRA for expenses incurred after March 27, 2015, the date of its final Rule 68 offer. Recognizing that Paz won at trial and thus was a prevailing party within the meaning of
II
“District courts have wide discretion in determining the appropriate amount of attorneys’ fees and costs,” and therefore our review on appeal “is limited to a highly deferential abuse of discretion standard.” Spegon v. Catholic Bishop of Chicago, 175 F.3d 544, 550 (7th Cir. 1999).
Paz sees abuses of discretion on several fronts. He first argues that PRA‘s offer to settle for $3,501 plus reasonable attorneys’ fees and costs was not substantial and therefore should have been disregarded by the district court in determining the fee award. On this score, Paz contends that he did not understand what the offer meant—that its terms were so ambiguous and unfair as to render the offer worthless. Even more specifically, he points to the condition in the offer that he read as cutting off attorneys’ fees at the time of acceptance, a provision that Paz sees as exposing him to an unknown amount of fees for the time his counsel would spend doing
We disagree. Paz‘s position inheres with an air of unreality. He suggests he had little idea what the offer meant, yet his counsel—in this case and others—had previously accepted offers with identical terms and, in doing so, managed to negotiate and receive a reasonable amount to cover legal fees. All Paz‘s counsel had to do was request a fee award that would cover the time necessary to finalize the settlement. This would not have been difficult given the relative simplicity of the claims. By no means was this a scenario where a defendant conveyed an incomprehensible offer or acted in bad faith by setting a trap to preclude a plaintiff from recovering a reasonable amount in attorneys’ fees as part of a settlement.
Paz also contends that the district court abused its discretion in finding that he achieved only limited success on the merits of his claims. On this point, Paz highlights that PRA‘s settlement offer expressly disclaimed liability and from there argues that agreeing to settle would have prevented him from claiming prevailing party status and receiving attorneys’ fees. As Paz now sees things, the result he achieved at trial was much better because it yielded a judgment on the merits for the maximum amount of statutory damages available to him, $1,000. This position, too, misses the mark.
Settlement offers regularly disclaim liability, and PRA‘s having done so here was in no way out of the ordinary. What Paz overlooks is that his acceptance of the offer, by operation of Rule 68, would have resulted in a judgment being entered against PRA. The moment such a judgment hit the district court‘s docket, the prior disclaimer of liability would have been a dead letter. Furthermore, by the very terms of PRA‘s offer, the ensuing judgment would have been for $3,501 plus reasonable attorneys’ fees and costs. Paz‘s counsel had to know—from his prior experience in this case alone—that PRA‘s disclaimer of liability in its Rule 68 offer would not preclude an award of attorneys’ fees.
What happened here is clear. At the outset of the litigation, PRA conveyed a substantial settlement offer of $3,501—more than three times the statutory damages available to Paz—plus reasonable attorneys’ fees and costs. Paz disregarded the offer and proceeded to trial even after the district court‘s summary judgment ruling massively downsized his case. And every indication from the record is that Paz had but the slimmest of chances of receiving any more than $1,000 in statutory damages at trial. He nonetheless proceeded to incur $187,410 in attorneys’ fees, only to walk away with $1,000 in statutory damages.
Paz was free to make these choices. Like any other party, he was not required to accept the trial court‘s (or anyone else‘s) view of the best litigation strategy, including whether to accept a settlement offer. So, too, is it clear as a more general matter that a sound approach to litigation will often and inevitably entail the pursuit of what turn out to be dead ends, all of which will result in a party reasonably incurring fees and costs. See Kurowski v. Krajewski, 848 F.2d 767, 776 (7th Cir. 1988). Nothing about this appeal calls into question these common, practical realities of litigation.
In the circumstances before us here, however, we are confident that the district court did not abuse its discretion in rejecting Paz‘s request for $187,410 in fees and instead awarding him $10,875. The time associated with the $187,410 in attorneys’
For these reasons, we AFFIRM.