Cooper v. Retrieval-Masters Creditors Bureau, Inc.

• Decision Date: 29 July 2022
• Docket Number: 18-2358
• Citation: 42 F.4th 675
• Parties: Jack W. COOPER, Plaintiff-Appellant, v. RETRIEVAL-MASTERS CREDITORS BUREAU, INC., Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

42 F.4th 675

Jack W. COOPER, Plaintiff-Appellant,

v.RETRIEVAL-MASTERS CREDITORS BUREAU, INC., Defendant-Appellee.

No. 18-2358

United States Court of Appeals, Seventh Circuit.

Argued January 19, 2022

Decided July 29, 2022

Celetha Chatman, Attorney, Community Lawyers LLC, Chicago, IL, Seth McCormick, Attorney, Great Lakes Consumer Law Firm, LLC, Chicago, IL, for Plaintiff-Appellant.

Nick Reck, David Spears, Attorneys, Spears & Imes, New York, NY, for Defendant-Appellee.

Before Wood, Hamilton, and Jackson-Akiwumi, Circuit Judges.

Hamilton, Circuit Judge.

This appeal addresses attorney fee awards to prevailing plaintiffs under consumer-protection statutes where damages are usually modest and the plaintiff has rejected what hindsight shows to have been a substantial early settlement offer. Plaintiff Jack Cooper sued defendant Retrieval-Masters Creditors Bureau for violating provisions of the Fair Debt Collection Practices Act in trying to collect a debt. See 15 U.S.C. § 1692 et seq. Shortly after the defendant filed its answer, a magistrate judge tried to mediate a settlement. During the meeting, the defendant made and plaintiff rejected an oral settlement offer of $500 in damages plus reasonable attorney fees and costs incurred to that point. The meeting ended without an agreement. The next day, the defendant made a written offer of judgment under Federal Rule of Civil Procedure 68 for $4,600 including attorney fees and costs. Cooper did not accept the offered judgment, and the lawsuit proceeded.

The district court eventually granted summary judgment to Cooper on liability. Damages were tried to a jury, which awarded Cooper $500. Cooper and his attorneys then sought an award of attorney fees and costs totaling more than $66,000. The district court awarded fees and costs of less than $8,000, effectively limiting the fee award to fees incurred up to the time when Cooper rejected the oral settlement offer in the early mediation session, as if defendant had made a Rule 68 offer more favorable than the final verdict. Cooper v. Retrieval-Masters Creditors Bureau, Inc. , 338 F. Supp. 3d 729 (N.D. Ill. 2018). Cooper has appealed the attorney fee award as insufficient. We vacate the district court's fee award and remand for proceedings consistent with this opinion.

I. Factual and Procedural Background

A. The Case on the Merits

In February 2016, defendant Retrieval-Masters Creditors Bureau (RMCB) sent plaintiff Jack Cooper a letter seeking to collect a consumer debt of a little over $300. The letter directed Cooper to include certain information with his payment so that RMCB could update the credit bureau. Cooper responded the next month by suing RMCB for violating 15 U.S.C. § 1692e(5) & (10). Cooper alleged that RMCB's letter falsely threatened to report his debt to credit bureaus even though RMCB had no actual intention to do so.

After Cooper filed his complaint, defendant asked his lawyer for a settlement demand. Cooper replied that he would settle for $7,600 including attorney fees and costs. Defendant rejected the demand and answered the complaint. The district court referred the matter to a magistrate judge for a settlement conference that was held in July 2016.

During the settlement conference, RMCB made an oral offer to pay Cooper $500 in damages, plus reasonable attorney fees and costs incurred to date. Cooper rejected the oral offer. Later in the session, RMCB actually backtracked. It reduced its oral offer to $250 in damages, plus reasonable attorney fees and costs to date. Not surprisingly, Cooper rejected that offer as well, and no settlement was reached. The next day, defendant made a written offer of judgment pursuant to Federal Rule of Civil Procedure 68, proposing to pay $4,600 including attorney fees and costs and to allow the court to enter judgment against it. Cooper also rejected that offer.

Cooper later filed a motion for summary judgment as to liability. RMCB filed several motions seeking more time to respond, all of which the district court granted. In the end, though, RMCB failed to submit any brief or evidence to oppose Cooper's motion. The court granted summary judgment for Cooper as to liability and scheduled a jury trial for the damages. Cooper v. Retrieval-Masters Creditors Bureau, Inc. , No. 16-c-2827, 2017 WL 2404952 (N.D. Ill. June 2, 2017). At trial, Cooper's attorneys argued that he was entitled to between $6,000 and $600,000 in actual damages, plus the maximum $1,000 in statutory damages. The jury awarded Cooper $500 in statutory damages and no actual damages. The court entered final judgment for Cooper for $500. Cooper v. Retrieval-Masters Creditors Bureau, Inc. , 338 F. Supp. 3d at 736. RMCB did not appeal and, at the time of oral argument in this matter, had not yet paid the judgment.

B. The Attorney Fee Award

The Fair Debt Collection Practices Act relies primarily on its private right of action to enforce compliance. See 15 U.S.C. § 1692k ; S. Rep. No. 95-382 at 5–6 (1977), as reprinted in 1977 U.S.C.C.A.N. 1695, 1699–1700 (new law expected to be "primarily self-enforcing; consumers who have been subjected to collection abuses will be enforcing compliance," and legislation provided no new personnel or budget for agency enforcement). Damages are usually modest, however. The statute allows awards of actual damages plus a maximum of $1,000 in statutory damages in individual cases. The Act allows a prevailing plaintiff to recover reasonable attorney fees and costs from the defendant. § 1692k(a).

After winning the judgment on the merits, Cooper sought an award of $65,357.90 as an attorney fee and $1,042.37 in costs. Cooper , 338 F. Supp. 3d at 732. The district court awarded all of the requested costs but only about one tenth of the fees sought. The court first found that all the hours Cooper's attorneys spent working on the case after he rejected RMCB's oral offer of five hundred dollars plus fees and costs were unreasonable. Id. at 734. The court reasoned that Cooper's attorneys knew or should have known that he was unlikely to win any actual damages or even the maximum $1,000 in statutory damages, so they should have recognized that there would have been no benefit in proceeding to trial. Id. at 733–34. The court then calculated the lodestar amount for the time spent until the settlement offer was rejected and reduced that amount by twenty percent. (The lodestar amount is determined by multiplying the attorney's reasonable hourly rate by the number of hours the attorney reasonably expended. Schlacher v. Law Offices of Phillip J. Rotche & Associates, P.C. , 574 F.3d 852, 856 (7th Cir. 2009).) The court reasoned that Cooper received a "meager verdict," noting that he recovered only $500 in statutory damages after seeking as much as $600,000 in actual damages, plus the maximum $1,000 in statutory damages. 338 F. Supp. 3d at 736. The final award was for $6,845.76 in attorney fees and $1,042.37 in costs. Id. at 737.

II. Analysis

A. Subject-Matter Jurisdiction

Before reaching the merits of this appeal, we first address defendant's contention that Cooper lacked standing to sue, so that the district court lacked subject-matter jurisdiction to award fees and costs. Defendant argues for the first time in this appeal by Cooper that he failed to prove a concrete injury resulting from defendant's letter.

Article III of the Constitution limits the jurisdiction of federal courts to cases and controversies, one essential element of which is the plaintiff's standing to bring the case. TransUnion LLC v. Ramirez , ––– U.S. ––––, 141 S. Ct. 2190, 2203, 210 L.Ed.2d 568 (2021). Standing requires a plaintiff to plead sufficiently and eventually to prove "(i) that he suffered an injury in fact that is concrete, particularized, and actual or imminent; (ii) that the injury was likely caused by the defendant; and (iii) that the injury would likely be redressed by judicial relief." Id. , citing Lujan v. Defenders of Wildlife , 504 U.S. 555, 560–61, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992). After the district court issued its judgment on the merits in this case, this court issued several opinions restricting standing in cases under the FDCPA. See, e.g., Wadsworth v. Kross, Lieberman & Stone, Inc. , 12 F.4th 665, 668–69 (7th Cir. 2021) ; Larkin v. Finance System of Green Bay, Inc. , 982 F.3d 1060, 1066 (7th Cir. 2020) ; Casillas v. Madison Avenue Associates, Inc. , 926 F.3d 329, 333–34 (7th Cir. 2019).

If this were a direct appeal from a final judgment on the merits, we would of course entertain such a challenge to subject-matter jurisdiction even if the issue were being raised for the first time on appeal. E.g., Perez v. K & B Transportation, Inc. , 967 F.3d 651, 654 (7th Cir. 2020). The problem here is that defendant did not appeal the judgment against it on the merits. That judgment was entered in 2017 and was not appealed. It is final. Defendant is attempting in this appeal to raise a collateral challenge to subject-matter jurisdiction after it had a fair opportunity to raise such a challenge in a direct appeal. Between these parties, the district court's subject-matter jurisdiction is now res judicata. See Travelers Indemnity Co. v. Bailey , 557 U.S. 137, 152-53, 129 S.Ct. 2195, 174 L.Ed.2d 99 (2009), citing Insurance Corp. of Ireland, Ltd. v. Compagnie des Bauxites de Guinee , 456 U.S. 694, 702 n.9, 102 S.Ct. 2099, 72 L.Ed.2d 492 (1982) ("A party that has had an opportunity to litigate the question of subject-matter jurisdiction may not ... reopen that question in a collateral attack upon an adverse judgment."); Chicot County Drainage District v. Baxter State Bank , 308 U.S. 371, 376, 60 S.Ct. 317, 84 L.Ed. 329 (1940) (federal courts' determinations of jurisdiction are "open to direct review [but] may not be assailed collaterally"); see also Dexia Crédit Local v. Rogan , 602 F.3d 879, 883 (7th Cir. 2010) (rejecting collateral challenge to subject-matter jurisdiction for judgment that had become final); 18A Charles Alan Wright...