FDCPA Class Action Defense Cases–Camacho v. Bridgeport Financial: Ninth Circuit Vacates Fee Awarded FDCPA Class Action Plaintiff Lawyers Due To District Court’s Failure To Explain Hourly Rate Utilized And Failure To Use Lodestar To Award Fees-On-Fees

Jul 9, 2008 | By: Michael J. Hassen

Following Class Action Settlement Providing for Award of Reasonable Attorney Fees to Plaintiff’s Lawyers in FDCPA Class Action, District Court Failed to Explain Why $200 per hour was Reasonable for the Relevant Community and Failed to Determine Lodestar for Fees-on-Fees Request, thus Requiring that Fee Award be Vacated and Matter Remanded for Further Proceedings Ninth Circuit Holds

Plaintiff debtor filed a putative class action against Bridgeport Financial, a debt collector, alleging violations of the federal Fair Debt Collection Practices Act (FDCPA); the class action complaint alleged that defendant “misrepresented the rights of consumers in its initial collection letter by requiring her to dispute her debt in writing.” Camacho v. Bridgeport Financial, Inc., _\_F.3d __ (9th Cir. April 22, 2008) [Slip Opn., at 4242-43]. The district court granted class action certification of a statewide class, and the parties entered into a Class Action Settlement Agreement that the district court ultimately approved. Id., at 4243. The Ninth Circuit opinion identifies but a single benefit provided by the class action settlement for the 7,000 class members – a cy pres award of $341.50; the agreement provided that the named plaintiff receive $1,000 in actual and statutory damages. Id. The Class Action Settlement Agreement provided further that plaintiffs’ three law firms could file a motion for attorney fees and costs if the parties could not agree on the amount of such an award, id. Plaintiff’s lawyers sought almost $170,000 in attorney fees and costs, reflecting hourly rates ranging from $425 to $500 for the attorneys, and $115 to $200 for law clerks, id., at 4243-44. The district court found the hours spent by plaintiff’s lawyers to be reasonable, but reduced the reasonable hourly rate to $200 for all attorneys and awarded a flat fee of $500 for the motion seeking fees and costs, which the court found to be “virtually identical to the materials these attorneys have submitted in other cases.” Id., at 4245-46. In the end, the district court awarded approximately $77,000 in fees and costs, id., at 4246. The lawyers appealed, and the Ninth Circuit reversed and remanded for further proceedings.

The Circuit Court noted that under the terms of the Class Action Settlement Agreement defendant “agreed to pay reasonable and necessary attorneys’ fees and costs.” Camacho, at 4247. The Court stated that the FDCPA “makes an award of fees mandatory.” Id. The Ninth Circuit explained that the district court’s order would be reversed only for clear error, id., at 4246 (citation omitted), and that and that district courts are required to use the “lodestar” method for determining the amount of attorney fees to be awarded, id, at 4247 (citations omitted). The lodestar takes the reasonable hourly rate and multiplies it by the reasonable number of hours incurred by counsel, id.; because the district court found that the hours spent by plaintiff’s lawyers were reasonable, the only issue was whether the district abused its discretion in reducing the hourly rate for plaintiff’s lawyers to $200 per hour. Id., at 4247-48.

The district court set the reasonable hourly at $200 based on a series of cases, finding that this amount was in “rough accord” with rates set in those cases. Camacho, at 4248. While the lower court is afforded “‘a great deal of discretion in determining the reasonableness of the fee,’” only one of the cases cited by the district court was from within the district. Id. This fact played a key role in the Ninth Circuit’s conclusion that the district court failed to consider the “relevant community” in determining the reasonable hourly rate. See id., at 4248-53. The bottom line was that the district court failed to explain “why an hourly rate of $200 was ‘in line with those prevailing in the community for similar services by lawyers of reasonably comparable skill, experience and reputation.’” Id., at 4251 (citation omitted).

The Ninth Circuit also held that the district court erred in awarding a flat fee of $500 for the “fees-on-fees” request because the court was required to use the lodestar method in determining the appropriate fee and it failed to do so. Camacho, at 4253-56. Accordingly, the Circuit Court vacated the fee award and remanded the matter to the district court for further proceedings, id., at 4256.

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