Attorney’s fees sought
by debt collectors:
How much is too much?
How much is too much?
There is no
straightforward answer to this question. Suffice it to say that, as a matter of
empirical observation, the range of amounts claimed is broad. A number of debt collection firms do not
claim attorney’s fees at all (or have stopped doing so), while some individual collection
attorneys swear under oath that similar efforts on behalf of a plaintiff that
engages in industrial-scale debt litigation merits thousands of dollars for a
single case. Some members of the creditors rights bar are clearly greedier than
others.
A distinction
can also be drawn between amounts requested in pleadings (or disclosed in
discovery responses) and amounts actually sought by fee affidavit attached to a
motion for summary judgment, or attested to by the attorney for the Plaintiff
at trial. Some debt collection firms qualify the amount stated in the petition
with the words “at least”, leaving open the possibility that they might eventually
claim more, others state a dollar figure, but regularly file a fee affidavit later
that seeks less. Some plaintiffs or lawfirms drop or lower the fees they
previously pleaded for so as to induce a settlement or agreed judgment.
Attorney’s fees incurred in a civil case are inherently unliquidated. Therefore the judge (rarely, the jury, since there is hardly ever a jury in a debt collection case), must hear evidence, and the evidence regarding amount sought is evaluated based on the criteria of reasonableness and necessity. What is reasonable in one debt collection case that is virtually identical to most others – hundreds, if not thousands of others -- is highly debatable. It provides fodder for a swearing match among members of the bar all claiming expert status with respect to the question of how much their work is worth.
This blog post
focuses on the amount(s) of attorney’s fees claimed by debt collection lawyers.
Others explore the legal basis for a fee award in a collection case; the applicability
of Texas law vs. the law of the creditor’s home state; and the other
fee-related matters.
REASONABLENESS AND NECESSITY ARE
EMINENTLY DEBATABLE IN COLLECTION CASES
The principal evidentiary
requirements for a viable fee claim under Chapter 38 (and likely on any other
basis) encompass the elements of reasonableness and necessity of the amount
claimed. Chapter 38 of the Texas Civil Practice and Remedies Code is the
statute upon which most debt collection attorneys rely as authority for
attorney fee recovery as an exception to The American Rule (under which
parties are otherwise responsible for their own legal fees). Many also plead
that the underlying contract authorizes legal fees; sometimes even the summary
judgment affidavits signed by non-attorney employees of debt-buyers include an
averment to that effect along with other boiler-plate verbiage.
Reasonableness is a fact issue
because attorney effort and time expended vary greatly across the broad
spectrum of civil cases and, as such, require evidence. Reasonableness, of course,
also depends on comparison with what other attorneys charge for similar efforts
in similar cases, and thus requires a certain level of familiarity with the
practice of law and the relevant market for legal services.
Reasonableness figures more
prominently in disputes over attorney's fees than necessity.
Disputes over necessity typically
involve part of a fee claim specifically attributed to certain activities that
were arguably superfluous, redundant, or of marginal relevance (busywork to
drive up fees); or should not have been performed by an attorney; or not by a
senior attorney at the highest hourly rate. But all this presupposes that
detailed information is presented to the court.
A typical fee affidavit in a routine
debt collection case does not meticulously itemize activities, not to mention
incorporate by reference an attached timekeeper or billing sheet. Some
affidavits mention specific tasks, but only in a very general fashion that is
not case-specific. The reason for is the premium placed on economy and
efficiency of mass debt collection litigation in order to maximize profitability
for the lawfirm and, more generally, return on investment for debtbuyers.
A generally-phrased affidavit can be
used and reused in numerous cases time and again. It just needs to be customized
with the appropriate case style, dated, and signed by an attorney before a
notary.
The fee affidavits of many debt
collection firms are based on templates with standardized verbiage just as
pleadings and motions and are part of computerized document production systems.
The amount of the attorney's fee is either identical for all cases involving a
particular plaintiff ($400 or $500), or computed as a percentage of the amount
of the amount in controversy (e.g., 20%, 25%, or a third of amount of the
debt).
Because the paperwork is automated
(handled with computers and litigation software packages), a standard
debt-collection case typically receives a minimum amount of attorney attention
as long as no court appearances are involved. Even if an attorney appearance is
involved, the same attorney will often make appearance in several cases on the
same day in the same local courthouse. Trials may be as short as five minutes,
particularly when the Defendant defaults, or appears without attorney and is at
a loss what to do, and merely has to be told what to do, like answering questions
under oath and help prove the plaintiff’s case.
Nor would it make sense for the law firms
to try to account of attorney effort to the purpose of proving a fee claim.
Given the high volume of cases, the amount of attorney time attributable to any
particular case would be minimal. Nor would much of the management of the paper
flow (or, increasingly, of the e-filing routine) even involve attorneys.
Arguably, claims for attorneys fees
for such things as “preparing” a case, “drafting” a pleading and “arranging for
service” are dubious because most of the process is performed by computers and
low-level operatives who may not even have training as paralegals.
Data from a spreadsheet (or
equivalent data file) is merged with standard litigation templates. All petitions
look alike except for case-specific information such as defendant’s name,
address, SSN digits, amount of the debt, and – perhaps, but not always –
identity of the original creditor (if not the plaintiff). No need for attorneys
to do any “drafting”. Some standard petitions and motions even use either/or phrasing to cover alternative fact scenarios and use both singular and plural versions of nouns and proverbs so they don't have to customize the pleadings when there are two defendants rather than merely one (which is the common situation).
Summary judgment motions are no
different. Some law firms do not even have a variable data field for the
amount of the judgment they seek in their standard PMSJ template itself; -- not even in the prayer or conclusion. The
amount of the claimed debt instead appears only in the attached Affidavit of Debt (or similarly denominated
summary judgment affidavit), or in a summary judgment exhibit. Of course the amount is not
omitted from the proposed order granting the summary judgment. That's where it counts, if a judgment is granted.
That said, if the amount of attorney’s
fees claimed in a summary judgment affidavit does not exceed a few hundred
dollars, it may not be worth the trouble challenging it, unless the fee affidavit is
patently defective in and of itself.
If the fee affidavit is in proper form, but the amount claimed is excessive, however, it should be challenged by counter-affidavit. Since the reasonableness of attorney's fees requires expertise, the affidavit must be by an attorney with experience in the relevant jurisdiction, i.e. local market for legal services.
I DO AS YOU DO, AND I AM AN EXPERT TOO: CHALLENGING A FEE AFFIDAVIT WITH A COUNTER-AFFIDAVIT
A counter-affidavit by the
Defendant's own attorney is the most obvious method to challenge the
Plaintiff's fee claim; but it may also be accomplished through another
attorney, whether or not affiliated with the same law firm.
It is important to make sure that
the counter-affidavit does not involve the same weaknesses that could provide a
basis to attack the plaintiff’s affidavit as deficient, such as not providing
any factual detail; not establishing the affiant’s qualifications to testify on
fees; or omitting any mention of reasonableness and necessity.
The counter-affidavit should do more
than deny that the fee attested to by the opposing counsel is reasonable. It
should explain why it is not reasonable, and offer competent testimony as to
what (lower) amount would be reasonable, considering the nature and complexity
of the case (or rather lack of complexity).
If the defendant is himself an
attorney, he can create and file his own counter-affidavit. A current member of the Texas Supreme Court did just that in response to a motion for summary judgment by American Express when sued on a credit card debt. The trial judge granted the motion anyhow, but the court of appeals reversed on the attorney's fee issue.
CONTROVERTING FEE AFFIDAVIT FOUND WANTING
Here is an example for the Dallas Court of Appeals that illustrates of how an attempt to controvert a fee affidavit can go wrong for lack of care in preparing it.
CONTROVERTING FEE AFFIDAVIT FOUND WANTING
Here is an example for the Dallas Court of Appeals that illustrates of how an attempt to controvert a fee affidavit can go wrong for lack of care in preparing it.
We cannot agree with [COMPANY] that it presented controverting evidence on the issue of fees. The affidavit submitted by [COMPANY']s attorney recites that the attorney is "familiar with the work that has been done in this case" and that the reasonable and necessary attorney's fees "for handling the Plaintiff's case in this lawsuit based upon the quality of the work done by the Plaintiff's attorney through the summary judgment hearing is a good deal less than [DOLLAR AMOUNT OF ATTORNEYS FEES]."
The affidavit, however, does not address what was described by CSX's lawyer as the work that was done, what is customarily charged in similar cases, why the time expended was excessive to accomplish the work provided, or that the work performed was unnecessary. [case cite in support] The affidavit submitted by Pegasus did not sufficiently controvert CSX's attorney's affidavit or raise a fact issue.
FEE AFFIDAVIT OF A COLLECTION ATTORNEY FROM ANOTHER CASE
A less common approach is to offer a
fee affidavit filed by a different debt collection lawyer (of a different firm)
in a similar case, preferably a case involving the same plaintiff in the same
local jurisdiction. This would be done for comparison purposes. If one debt
collection attorney (e.g., Stephanie Briggs Donaho or James Hull) testifies
that $3,500 is reasonable in a $10K case, and another one (say, Christopher
Osborn) testifies that the reasonable amount of a fee in a case of this nature
is $400, that should be sufficient to create a fact issue on fees, and thus
prevent an award of fees by way of summary judgment. It may also have the beneficial effect of reigning in attorneys who leave the mainstream with testimony on the supposed value of their work because their credibility will be placed in question by presentation of a "comparable" fee affidavit executed and filed by a colleague in a similar case.
RELATED TOPICS AND POSTS ON ATTORNEY FEE ISSUES
Chapter 38 of the CPRC: Fee Recovery
under Texas law as exception to The American Rule
EXAMPLES OF FEE AMOUNTS IN MASS DEBT LITIGATION PER ATTORNEY AFFIDAVIT
$400 fee affiadvit of Attorney Joel H. Klein in a PHARIA debt suit in Bexar County District Court
$400 fee affidavit of Attorney Benjamin K. Sanchez in debt collection suit by debt buyer in San Antonio
$400 fee affidavit of Attorney Ben Sanchez in debt suit by Pharia L.L.C. in county court at law of Bexar County
$500 fee affidavit of Christopher D. Osborn in original creditor suit by Discover Bank in Bexar Cty District Court
$500 fee affidavit of Christopher Osborn in a lawsuit by American Express Centurion Bank in Bexar County District Court
CASE LAW SNIPPET: ATTORNEY'S FEES ARE NOT A LIQUIDATED CLAIM AND REQUIRE EVIDENCE EVEN IN THE DEFAULT JUDGMENT CONTEXT
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| Liquidated vs. unliquidated; Attorneys fees not a liquidated claim |
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