Tejero v. Portfolio Recovery Assocs., L.L.C.

• Decision Date: 07 April 2021
• Docket Number: No. 20-50543,20-50543
• Citation: 993 F.3d 393
• Parties: Luis TEJERO, Plaintiff—Appellant, v. PORTFOLIO RECOVERY ASSOCIATES, L.L.C.; Western Surety Company, Defendants—Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

993 F.3d 393

Luis TEJERO, Plaintiff—Appellant,

v.PORTFOLIO RECOVERY ASSOCIATES, L.L.C.; Western Surety Company, Defendants—Appellees.

No. 20-50543

United States Court of Appeals, Fifth Circuit.

FILED April 7, 2021

Daniel Brown, Main Street Attorney, L.L.C., Chicago, IL, Celetha Chatman, Community Lawyers, L.L.C., Chicago, IL, for Plaintiff-Appellant.

Robbie LuAnn Malone, Eugene Xerxes Martin, Esqs., Malone Frost Martin, P.L.L.C., Dallas, TX, for Defendants-Appellees.

Before Higginbotham, Costa, and Oldham, Circuit Judges.

Andrew S. Oldham, Circuit Judge:

The question presented is whether a private settlement constitutes a "successful action to enforce ... liability" under the fee-shifting provision of the Fair Debt Collection Practices Act ("FDCPA"). It does not. We therefore affirm the district court's denial of attorney's fees.

I.

We recounted the facts in detail in our previous decision in this case. See Tejero v. Portfolio Recovery Assocs., L.L.C. , 955 F.3d 453, 456–57 (5th Cir. 2020) (" Tejero I "). Here we restate only those facts that are relevant to this appeal.

Luis Tejero sued Portfolio Recovery Associates under the FDCPA and parallel provisions of Texas state law for unlawful debt-collection practices. On cross-motions for summary judgment, the district court identified triable issues of fact and set the case for trial. Ibid. Before trial, the parties reached a settlement. Id. at 457. In the settlement, Portfolio Recovery disclaimed any liability—but it nonetheless agreed to pay Tejero $1,000 in damages and to forgive his underlying debt of approximately $2,100. Ibid. When the parties notified the district court of the settlement, however, the district court reported Tejero's lawyers to the disciplinary committee of the Western District of Texas, sanctioned them, and ordered thousands of dollars in costs and fees against Tejero. Ibid. The district court premised this extraordinary discipline on its conclusion that Tejero brought the case in bad faith—notwithstanding the fact that his claims were apparently meritorious enough to warrant a trial. Ibid.

We reversed for abuse of discretion. Id. at 458–61. We then remanded so the district court could determine in the first instance whether Tejero's favorable settlement entitled him to attorney's fees under the FDCPA. Id. at 462–63. The district court said no. Tejero again timely appealed.

II.

The only question presented here is whether the district court committed reversible error in refusing Tejero's fee application under the FDCPA. We review the district court's denial of "attorney[’s] fees for abuse of discretion, reviewing factual findings for clear error and legal conclusions de novo ." LifeCare Mgmt. Servs. L.L.C. v. Ins. Mgmt. Adm'rs Inc. , 703 F.3d 835, 846 (5th Cir. 2013).

A.

As a general matter in the United States,"[e]ach litigant pays his own attorney's fees, win or lose." Hardt v. Reliance Standard Life Ins. Co. , 560 U.S. 242, 253, 130 S.Ct. 2149, 176 L.Ed.2d 998 (2010). This background principle, known as the "American Rule," can be altered or amended by statute or contract. Ibid . In creating exceptions to the American Rule, Congress employs varying statutory language. Some statutes permit an award where "appropriate," see, e.g. , 42 U.S.C. § 7607(f), or in the "discretion" of the district court, see, e.g. , 15 U.S.C. § 77k(e).

Other statutes allow the district court to award attorney's fees to the "prevailing party," see, e.g. , 42 U.S.C. § 1988(b), or to the litigant who brings a "successful action," see, e.g. , 12 U.S.C. § 3417(a)(4).

Tejero's request for attorney's fees is premised on the FDCPA, which authorizes fee shifting in a successful action. Its statutory text provides:

[A]ny debt collector who fails to comply with any provision of [the FDCPA] with respect to any person is liable to such person in an amount equal to the sum of—

....

(3) in the case of any successful action to enforce the foregoing liability , the costs of the action, together with a reasonable attorney's fee as determined by the court.

15 U.S.C. § 1692k(a)(3) (emphasis added).

The first key word is "successful." As a matter of common usage, "successful" means obtaining a "favorable outcome." Successful , AMERICAN HERITAGE DICTIONARY 1740 (5th ed. 2011). And "outcome" means an "end result"—it connotes finality. Id . at 1251. Perhaps if read in isolation, the word "successful" could extend to cover a private settlement that awards a litigant a favorable end result.

But the word "successful" does not stand alone in the statute; instead, it modifies the word "action." Action, in turn, means an "action at law" or a "lawsuit"—that is, "an ordinary proceeding in a court of justice, by which one party prosecutes another party for the enforcement or protection of a right." Action , BLACK'S LAW DICTIONARY 32–33 (9th ed. 2009) (quotation omitted). The word connotes a formal adjudication or "a judicial proceeding, which ... will result in a judgment." Id. at 32 (quotation omitted); see also Buckhannon Bd. & Care Home, Inc. v. W. Va. Dep't of Health & Hum. Res. , 532 U.S. 598, 619, 121 S.Ct. 1835, 149 L.Ed.2d 855 (2001) (Scalia, J., concurring) ("[F]ee-shifting statutes require that there be an ‘action’ ... which in legal parlance (though not in more general usage) means a lawsuit."(emphasis omitted)). The phrase "successful action" thus requires a favorable end or result from a lawsuit— not merely success in vacuo .

Next, consider the infinitive phrase "to enforce the foregoing liability." An infinitive phrase expresses purpose. See THE CHICAGO MANUAL OF STYLE ¶ 5.107 (17th ed. 2017). Here, "to enforce" expresses the purpose of the "successful action." Thus, the action must succeed in its purpose of enforcing FDCPA liability. And like the word "action," the word "enforce" connotes a formal command or decree. See Enforcement , BLACK'S LAW DICTIONARY 608 ("The act or process of compelling compliance with a law, mandate, command, decree or agreement."). "Liability" means "[t]he quality or state of being legally obligated or accountable." Liability , BLACK'S LAW DICTIONARY 997.

Putting this all together, a "successful action to enforce the foregoing liability" means a lawsuit that generates a favorable end result compelling accountability and legal compliance with a formal command or decree under the FDCPA. Tejero won no such relief because he settled before his lawsuit reached any end result, let alone a favorable one. And by settling, Portfolio Recovery avoided a formal legal command or decree from Tejero's lawsuit.

Tejero's alternative interpretation requires rewriting the FDCPA's fee-shifting provision. In Tejero's telling, his "action" was "successful" because he settled for $1,000, which are the statutory damages allowed by the FDCPA. See 15 U.S.C. § 1692k(a)(2)(A). That might mean that Tejero was "successful," but it does not mean that his "action " was "successful." Nor does it mean that Tejero used his "action " "to enforce the foregoing [FDCPA] liability." Id. § 1692k(a)(3). Rather, he used a settlement agreement. And that settlement agreement did not "enforce" FDCPA "liability" because it did not compel Portfolio Recovery to do anything. Portfolio Recovery voluntarily^* settled outside of the action; it refused to admit liability for anything; and in the process, it avoided any judicial mandate of any kind. Thus, to embrace Tejero's position, we'd have to rewrite Congress's statute to authorize fee-shifting "in the case of any successful plaintiff action to enforce the foregoing liability." This we cannot do. See Nielsen v. Preap , ––– U.S. ––––, 139 S. Ct. 954, 969, 203 L.Ed.2d 333 (2019) (noting we must give effect to the words Congress used); ANTONIN SCALIA & BRIAN A. GARNER, READING LAW: THE INTERPRETATION OF LEGAL TEXTS 174 (2012) (same).

B.

Nor are we persuaded that we should apply the catalyst theory to the FDCPA's fee-shifting provision. The catalyst theory posits that a plaintiff succeeds "if it achieves the desired result because the lawsuit brought about a voluntary change in the defendant's conduct." Buckhannon , 532 U.S. at 601, 121 S.Ct. 1835. That is, the lawsuit itself might not have succeeded—but it incentivized the defendant to give the plaintiff something. A win's a win, right?

Not here. In Buckhannon , the Supreme Court held that the catalyst theory cannot justify fee shifting under "prevailing party" statutes. See 532 U.S. at 601, 121 S.Ct. 1835 (quoting the Fair Housing Amendments Act, 42 U.S.C § 3613(c)(2) ). To qualify as a "prevailing party," the Court held that a litigant must obtain some sort of judicially sanctioned relief that materially alters the relationship between the parties. Id. at 604–05, 121 S.Ct. 1835. Private settlements lacking "judicial approval and oversight" therefore fall outside the scope of the statute. Id. at 604 n.7, 121 S.Ct. 1835. Buckhannon says that relief bearing the necessary "judicial imprimatur " to qualify a litigant as a prevailing party includes a judgment on the merits or a judicially sanctioned consent decree. Id. at 604–05, 121 S.Ct. 1835.

After Buckhannon , our court applied the same rationale to other "prevailing party" statutes, like 42 U.S.C. § 1988. We have explained that a plaintiff must "obtain actual relief, such as an enforceable judgment or a consent decree" that "materially alters the legal relationship between the parties" and "modifies the defendant's behavior in a way that directly benefits the plaintiff at the time of the judgment." Energy Mgmt. Corp. v. City of Shreveport , 467 F.3d 471, 482 (5th Cir. 2006) (quotation omitted). Private settlements without judicial endorsement don't count. Davis v. Abbott , 781 F.3d 207, 214 (5th Cir. 2015). Nor do "purely technical or de minimis " victories—even when they carry judicial imprimaturs .

Jenevein v. Willing , 605 F.3d 268, 271 (5th Cir. 2010) (quotation omitted).

The question therefore is whether the catalyst theory should apply to "successful action[...