Thursday, October 31, 2013

Countering the opposing counsel's excessive fee claim in a credit card case

Attorney’s fees sought by debt collectors: 

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.


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.  


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.     


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.


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. 

Chapter 38 of the CPRC: Fee Recovery under Texas law as exception to The American Rule 


$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 


Liquidated vs. unliquidated; Attorneys fees not a liquidated claim


  1. Sub Rosa fee splitting also goes on--attys fees split with client.Can and have requested copies of fee agreements with clients where typical 25% recovery for attys fees-- no mention in contract for allowing atty to "pile on" a la Jody Junkins $1500 for every case-
    -Then how is that to be split as they recover the trickling payments? Jody gets paid up-front? first? last?not at all as a throw away--for pay-off on down the line?

    Many blue chippers specifically disallow addition of attys fees for the following reasons:

    The Servicer for the behind the scenes Trust e.g..Discover Card Master Trust 1 or Discover Card Note Execution Trust or American Express Card Trust etc.REQUIRES THAT ALL MONEY COLLECTED (less contingent fee to attys) BE PAID TO THE
    TRUST. This is a specific agreement signed by the servicer and the trustee in the Pooling and Servicing Agreement. See also SEC 8(k) and 10 (k) documents and the
    Amendments thereto. "Edgar" is a better search engine for finding the documents.
    So AFter charge-off,tax deduction and assignment of this account receivable to the
    trust; How does/is creditor harmed/disadvantaged/benefitted by collection of this account? via the 2% JUICE it charges the Investors of the Trust for servicing and collecting all accounts INCLUDING THOSE NOT IN DEFAULT.

    There is a wealth of information contained in these documents which include:

    The SERVICER shall bring the collection action on behalf of the Trust--BUT WITHOUT
    DISCLOSING THIS TO ANYONE--unless this violates state or federal law.

    When have you ever seen a collector action divulge for American Express or FIA or Discover that they are the servicer for the trust bringing the action on behalf of the trustee for CLASS. SERIES, And TRANCHE?

    Unlike Mortgage Foreclosures where HSBC and BOA have been busted on this, credit card collectors are completely oblivious to this unknown fact--as the servicer is given limited access to the bank's records via firewalls and security gates to the data.By admission collectors are only given bare bones information whether the account is "securitized" ON A NEED TO KNOW BASIS.

    So back to the fee -splitting, doesn't happen when trust involved behind the scenes, because industrial investors would have accounting action against Servicer and would cause Servicer a termination event--get fired and lose lucrative contract.

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