Lee v. Thomas & Thomas, 94-4274

• Decision Date: 24 March 1997
• Docket Number: No. 94-4274,94-4274
• Citation: 109 F.3d 302
• Parties: Cynthia LEE, Plaintiff-Appellant, v. THOMAS & THOMAS, Timothy K. Gibson, Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 302

109 F.3d 302

Cynthia LEE, Plaintiff-Appellant, v. THOMAS & THOMAS, Timothy K. Gibson, Defendants-Appellees.

No. 94-4274.

United States Court of Appeals Sixth Circuit.

Argued Jan. 25, 1996.

Decided March 24, 1997.

Jason D. Fregeau (argued and briefed), Yellow Springs, OH, for plaintiff-appellant.

Michael Joseph Bergmann (argued and briefed), Benjamin, Yocum & Heather, Cincinnati, OH, for defendants-appellees.

Before: NELSON and BATCHELDER, Circuit Judges; KATZ, District Judge. ^*

DAVID A. NELSON, Circuit Judge.

This is a Fair Debt Collection Practices Act case in which the plaintiff appeals from an attorney fee award that she contends was inadequate.

The magistrate judge who issued the award found, expressly or implicitly, that the defendants' violation of the Act was purely technical in nature; that the plaintiff had suffered no actual damages; that fee considerations led to the rejection of an offer to confess judgment in an amount which would have paid all statutory damages that the plaintiff had any hope of recovering, plus a reasonable estimate of accrued attorney fees; ¹ and that it was unreasonable for the plaintiff's attorney to expend further time and effort on the case after receipt of the offer to confess judgment.

We conclude that there was no reversible error in the magistrate's factual findings or legal analysis. There was an error in the dollar amount of the award, but the error benefitted the plaintiff, not the defendants. The defendants not having cross-appealed, the award will be affirmed.

I

The plaintiff, Cynthia Lee, incurred a $260 debt to a company called Retinal Consultants, Inc. Ms. Lee experienced difficulty in paying this and other bills, a lengthy illness having kept her from working, and her creditors agreed to accept payment in installments.

Ms. Lee sometimes fell behind in making the agreed installment payments. By March of 1993 the balance due Retinal Consultants had been reduced to $36.42, but Ms. Lee was apparently slow in making her payment that month.

On March 31, 1993, defendant Thomas & Thomas--a Cincinnati law firm that had been representing Retinal Consultants in its collection efforts--sent Ms. Lee a two-sentence letter that was eventually to precipitate the filing of this lawsuit. Prepared on the Thomas & Thomas letterhead, and prefaced with a reference to Retinal Consultants, $36.42, and a file number, the letter read as follows:

"Per our recent phone conversation, we had expected your check by now. Since it has not arrived as yet, we are enclosing a self-addressed envelope for your remittance of $20.00."

The letter was signed for Thomas & Thomas by an individual identified as "Timothy K. Gibson, Legal Assistant."

Under § 807 of the Fair Debt Collection Practices Act, 15 U.S.C. § 1692e, a debt collector such as Thomas & Thomas "may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt." The section goes on to list a number of different types of conduct falling within this prohibition. Among them is "the failure to disclose clearly in all communications made to collect a debt or to obtain information about a consumer, that the debt collector is attempting to collect a debt and that any information obtained will be used for that purpose." 15 U.S.C. § 1692e(11) (1982).

On October 29, 1993, Attorney Jason David Fregeau, who said that he represented Ms. Lee, wrote the legal assistant at Thomas & Thomas to complain that the March 31 letter--and a similar letter sent some months earlier, when the outstanding balance had been $151.78--contained "serious violations" of 15 U.S.C. § 1692e(11). (It is worth mentioning here that the debt had been paid in full by the time Mr. Fregeau appeared on the scene, and there has never been any suggestion that Ms. Lee did not owe the money.)

Although the March 31 collection letter had not asked Ms. Lee for any "information about a consumer," other than the information that would be contained in a $20 check, and although one might have thought that the letter disclosed clearly enough that Thomas & Thomas was attempting to collect a debt, Attorney Fregeau suggested that the letter was in violation of § 1692e(11) because it failed to state in haec verba that "the debt collector is attempting to collect a debt and ... any information obtained will be used for that purpose." In this connection Mr. Fregeau cited two appellate court decisions, Frey v. Gangwish, 970 F.2d 1516 (6th Cir.1992), and Carroll v. Wolpoff & Abramson, 961 F.2d 459 (4th Cir.), cert. denied, 506 U.S. 905, 113 S.Ct. 298, 121 L.Ed.2d 222 (1992).

After explaining why he thought there had been a violation of the Fair Debt Collection Practices Act, Mr. Fregeau went on to propose a settlement:

"This letter is meant to give you and your firm the opportunity to resolve this matter without litigation. Should you and your firm desire a settlement, please remit $2000.00, payable to me, before November 19, 1993. Otherwise, I have been instructed by Ms. Lee to file suit in federal court in Dayton, Ohio, on that date."

Thomas & Thomas declined to pay the $2,000, noting that although the firm's collection letters had subsequently been changed to incorporate a notice tracking the statutory language, it was still open to debate whether the March 31 letter had been in violation of the statute. Mr. Fregeau evidently remained of the view that a violation had occurred. On November 18, 1993, he commenced the present action by filing a complaint on behalf of Ms. Lee against Thomas & Thomas and its legal assistant, Timothy K. Gibson. (Mr. Fregeau has said that he was paid a non-refundable retainer of $25 and that the case was otherwise taken on a contingency basis.)

The complaint, which was subsequently amended to delete some rather puzzling references to a "Defendant Ross" and a "Defendant Main Accounts," ² averred that like the earlier collection letter--as to which the complaint acknowledged the statute of limitations had run--the March 31 letter violated 15 U.S.C. § 1692e(11) by reason of its failure to give the required notice. While not asserting that Ms. Lee had suffered any actual damages, the complaint sought a maximum of $1000 in statutory damages under 15 U.S.C. § 1692k, plus reasonable attorney fees and costs under the same statutory section. ³

In addition to asserting a claim under the federal statute, the complaint introduced a claim based on the Ohio Consumer Sales Practices Act. In this connection the complaint cited Ohio Rev.Code §§ 1345.02 and 1345.03. (Neither of these sections appears, on its face, to have any application to the facts complained of here; as far as we know, however, Mr. Fregeau was never asked to explain the theory on which the Ohio claim rested.) Pursuant to Ohio Rev.Code § 1345.09, the complaint sought statutory damages of $200 for the alleged violation of state law. The total damages claimed thus came to no more than $1,200.

A few days after filing the lawsuit, Mr. Fregeau advised Thomas & Thomas that the settlement demand had increased to $4,000. ⁴ In late January of 1994, about two weeks after the defendants had been served with process, the defendants' lawyer, Michael J. Bergmann, made a settlement offer of $750. The offer was rejected. On or about February 23, 1994, Mr. Bergmann offered $1,250 and hinted that he might go as high as $1,750. Mr. Fregeau replied that the case could not be settled for anything close to $1,750. He reiterated that even though his client was claiming only statutory damages, as opposed to actual damages, she wanted $4,000.

Mr. Bergmann requested a breakdown of the dollar amounts claimed for (a) damages, (b) court costs, and (c) attorney fees. With respect to the fee component of Ms. Lee's claim, Mr. Bergmann asked for the number of attorney-hours expended on the case and the hourly rate being claimed. Mr. Fregeau refused to give this information. ⁵

Pointing out to Mr. Fregeau that the statutory damages were fixed, Mr. Bergmann remarked that the attorney fees seemed to be "the engine which was powering the case." Mr. Fregeau's response, according to unchallenged evidence accepted by the magistrate judge as true, was, "Yes, that's right."

On the day following this conversation, Mr. Fregeau advised Mr. Bergmann that the settlement demand had gone up to $5,000. Mr. Bergmann then prepared and signed a written offer of judgment in which, pursuant to Rule 68, Fed.R.Civ.P., the defendants offered to allow judgment to be taken against them for $2,000. The offer of judgment was tendered to Mr. Fregeau on March 3, 1994. As of that time, insofar as the district court's docket sheet discloses, there had been relatively little activity in the case.

If the March 3 offer of judgment had been accepted, Ms. Lee could have recovered damages of up to $1,200 (the statutory maximum, by her lawyer's own account) and at least $800 would have been available for court costs and attorney fees. The offer was rejected, however, and the litigation went on for several more months. During that time the parties filed additional pleadings and briefs of various kinds, and there was limited discovery. By consent of the parties, the matter was referred to a magistrate judge for final disposition.

Late in May of 1994 the defendants made a new offer of judgment. This time the defendants proposed to confess judgment for $1,200 plus whatever attorney fees and costs the court determined the plaintiff to be entitled to. Ms. Lee accepted this offer, and the judgment was entered on June 2.

On June 15, 1994, Mr. Fregeau filed an application on Ms. Lee's behalf for attorney fees and costs totaling $8,279.79. Affidavits and briefs were filed on both sides. By October 31, 1994, when the fee application came on for oral argument before the magistrate judge, the total amount sought had risen to $12,759.

The magistrate filed a decision and order in which he found, among other...