Johnson v. Eaton - Case Law

United States Court of Appeals,

Fifth Circuit.

No. 95-30613.

Ruth E. JOHNSON, Plaintiff-Appellee,

Gregory M. EATON and Kay White, Defendants-Appellants.

April 11, 1996.

Appeal from the United States District Court for the Middle
District of Louisiana.

Before KING, DAVIS and BARKSDALE, Circuit Judges.

W. EUGENE DAVIS, Circuit Judge:

Defendants Eaton and White assert that the district court

erred by (1) awarding "additional" damages under the Fair Debt

Collection Practices Act (FDCPA), 15 U.S.C. § 1692k, where no

actual damages were found, (2) requiring White to pay plaintiff

Johnson's attorney's fees and costs even though no damages were

assessed against her, (3) awarding an unreasonably high attorney's

fee in light of the nominal damages received by Johnson and (4)

failing to assess attorney's fees against Johnson because Johnson

brought the action in bad faith. We AFFIRM in part, REVERSE in

part and REMAND.

Ruth Johnson purchased furniture on credit from Kornmeyer's

Furniture Company. When she defaulted on payment, Kornmeyer's

enlisted the help of attorney Greg Eaton to collect the remaining

principal balance—approximately $3,500. Through his legal

assistant, Kay White, Eaton sent a demand letter to Johnson in

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March 1993. Eaton also sent Johnson a second letter that included

a questionnaire and a proposed consent judgment.

On December 16, 1993, Johnson filed a complaint against Eaton

and White in district court. She alleged that the two letters

violated various provisions of the Fair Debt Collection Practices

Act (the "FDCPA"), 15 U.S.C. §§ 1692-1692o. Johnson alleged that

the two letters caused her actual damages and injury, including

stress, humiliation, extreme mental anguish and suffering, and

emotional distress, and that, therefore, Eaton and White were

liable for actual and additional damages, as well as attorney's

fees and costs under § 1692k(a).

The district court denied a motion for summary judgment filed

by Eaton and White on the issue of their status as debt collectors

under the FDCPA. The district court granted Johnson's motion for

partial summary judgment, finding that Eaton had violated four

provisions of the FDCPA and White had violated two provisions,1 and

reserved the issue of damages for determination by the jury. The

pretrial order noted a stipulation by Johnson that she had suffered

no actual damages as a result of receiving the demand letter—the

only communication to which White was a party.

A jury trial was held on March 8, 1995. The jury returned a

verdict finding that the conduct of Eaton was not a legal cause of

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The district court ruled that Eaton and White violated the
FDCPA by misrepresenting the amount of the debt to Johnson and by
contradicting the required disclosure of the 30-day validation
period in the demand letter. Eaton also was found to have
violated the FDCPA by omitting a required notice and by
simulating a court document.

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any actual damage to Johnson. The jury further determined that

Johnson was not entitled to an award of additional damages against

White, but that she was entitled to additional damages against

Eaton in the amount of $125 for each of his violations—a total of

$500.

After the verdict, Eaton and White moved for attorney's fees

and costs under § 1692k(a)(3), claiming that Johnson brought this

action in bad faith and for the purpose of harassment. The

district court denied all of defendants' post-trial motions. After

reducing the number of hours claimed by Johnson's attorney from

146.3 to 106.3, the district court granted Johnson attorney's fees

in the amount of $10,830 and costs in the amount of $556.56, to be

assessed against both defendants. Johnson v. Eaton, 884 F.Supp.

1068, 1073 (M.D.La.1995). This appeal followed.

II.

Eaton and White argue first that the court erred by allowing

the jury to award "additional" damages under the FDCPA in the

absence of a finding that the plaintiff suffered actual damage. We

do not decide this issue because neither defendant preserved this

issue for appeal by objecting to the jury charge. See Fed.R.Civ.P.

51 ("No party may assign as error the giving or the failure to give

an instruction unless that party objects thereto before the jury

retires to consider its verdict....").

III.

White next complains that she should not be liable to Johnson

for attorney's fees and costs because Johnson won no damages from

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her. According to White, a judgment without damages is not a

"successful" action which would support the award of attorney's

fees under the FDCPA. Johnson responds that she won a partial

summary judgment stating that White had violated the FDCPA in two

instances and that this success entitles her to attorney's fees.

The relevant portion of the FDCPA reads:

Amount of damages

(a) Except as otherwise provided by this section, any debt
collector who fails to comply with any provision of this
subchapter with respect to any person is liable to such person
in an amount equal to the sum of—

(1) any actual damage sustained by such person as a
result of such failure;

(2)(A) in the case of any action by an individual, such
additional damages as the court may allow, but not
exceeding $1,000; or

....

(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. On a finding by the court that an action under
this section was brought in bad faith and for the purpose
of harassment, the court may award to the defendant
attorney's fees reasonable in relation to the work
expended and costs.

15 U.S.C. § 1692k (emphasis added).

Johnson demonstrated that White had violated the FDCPA but

failed to enforce any liability for actual or additional damages

against White. As a result, Johnson does not meet the explicit

requirement of § 1692k(a)(3) that she bring a "successful action to

enforce the foregoing liability," in order to receive attorney's

fees and costs. Johnson's argument that her success in

establishing that White violated the FDCPA is enough ignores the

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plain language of the FDCPA.

Johnson responds by citing cases from other circuits which

allowed attorney's fees even though plaintiffs failed to prove

actual or additional damages or received only nominal damages. See

Emanuel v. American Credit Exchange, 870 F.2d 805, 809 (2d

Cir.1989); Graziano v. Harrison, 950 F.2d 107 (3d Cir.1991). In

Emanuel, the Second Circuit, noted that the plaintiff had proven no

actual damages and was not entitled to any additional damages and

then stated "... Emanuel should be awarded costs and attorney's

fees; the statute mandates such an award "in the case of any

successful action.' " 870 F.2d at 809. The court found that any

plaintiff who proves a violation of the FDCPA is "successful" even

if that plaintiff is unable to prevail on his claims for actual and

additional damages and fails to prove an essential element of a

claim for damages: injury. This approach takes the language of

the statute out of context and fails to give any meaning to the

limiting phrase "to enforce the foregoing liability."

In Graziano, the Third Circuit found an additional violation

of the FDCPA and reversed an award of nominal damages for

reconsideration in light of the additional violation. It then

noted that the district court had declined to award any attorney's

fees and stated "[b]ecause we have determined that Graziano has

demonstrated two violations of the Act, rather than the one

identified by the district court, we vacate the denial of

attorney's fees and remand for reconsideration." In dicta, the

court then interpreted the FDCPA as requiring that any debt

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collector who violates the act is liable for (1) actual damages (2)

additional damages and (3) attorney's fees. The court reasoned

that the structure of § 1692k(a) suggested that any violation of

the Act makes the offender liable for all three of these items.

However, the court, by focusing exclusively on the structure of §

1692k(a) failed to give meaning to the language in § 1692k(a)(3)

which requires success in enforcing liability for actual or

additional damages before a plaintiff may be cast for attorney's

fees. A more plausible reading of the FDCPA which accounts for the

statute's structure and its language is that the most a plaintiff

can win is actual damages, additional damages and attorney's fees

and costs. However, this does not mean that every time a violation

occurs, a plaintiff will win all three. The language of the

statute places explicit conditions on an award of additional

damages which must be approved by the court and attorney's fees

which are only available where the plaintiff has succeeded in

establishing that the defendant is liable for actual and/or

additional damages.

Also, our reading of the statute will not frustrate the

objectives Congress sought to achieve in enacting the FDCPA.

Reading the FDCPA as requiring attorney's fees to be paid in

actions where the plaintiff fails to prove damages, rewards lawyers

for bringing suits to stop behavior that, by definition, has caused

legal injury to no one. Our interpretation of the statute will

require attorneys to look for more than a technical violation of

the FDCPA before bringing suit and will deter suits brought only as

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a means of generating attorney's fees.

Concerns that this decision will allow debt collectors to

disregard the rights of debtors ignore two important facts: (1)

debt collectors do not know which of their targets will be injured

by their actions and thus able to obtain attorney's fees and (2)

the FDCPA as we read it today is adequate to deter debt collectors

from choosing to violate it. Under our interpretation of the

statute, the FDCPA will still punish errant debt collectors in

excess of the legal injury they impose on debtors. It does this by

mandating that the debt collector not only compensate the debtor

fully for any monetary damage, emotional distress or other injury

that the debtor can prove the debt collector caused but also by

allowing courts to assess additional, punitive damages and

requiring the debt collector to pay the debtor's attorney's fees in

addition to his own attorney's fees. We believe it entirely

reasonable to assume that Congress considered risk of such

punishment adequate to deter economic actors such as debt

collectors from violating the act intentionally.

Language in the Supreme Court decision Farrar v. Hobby, 506

U.S. 103, 120, 113 S.Ct. 566, 578, 121 L.Ed.2d 494 (1992), also

supports our decision. In Farrar, a civil rights action brought

under 42 U.S.C. § 1983, the plaintiff alleged $17 million in

damages. The jury found that Farrar's civil rights had been

violated but awarded him only $1 in damages. The Supreme Court

reversed the Fifth Circuit's holding that Farrar was not a

prevailing party under § 1988 but affirmed the Fifth Circuit's

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conclusion that the district court abused its discretion in

awarding attorney's fees to Farrar. Specifically, the Court noted

that one of the elements of a civil rights suit for damages is

proof of "actual, compensable injury" and that "[w]hen a plaintiff

recovers only nominal damages because of his failure to prove an

essential element of his claim for monetary relief, the only

reasonable fee is usually no fee at all." Id.

White argues convincingly that Johnson's claim against her is

virtually identical to the situation discussed in Farrar. Johnson

won a declaration that White had violated the law but was unable to

prove any damages, either actual or additional, under the statute.

As a result, the most appropriate award of attorney's fees against

White is $0.

Johnson responds that Eaton changed his standard form in

response to her suit so hers is not a mere technical victory of the

type discussed in Farrar and cites cases which define "prevailing

party" as including victories that change the defendant's behavior

or legal relationship with the plaintiff. This, of course, does

not help her against White, who did not change her behavior, and

ignores the fact that in Farrar, the Supreme Court found the

plaintiff to be a prevailing party and awarded him a reasonable

attorney's fee of $0.00. Accordingly, even if we did agree with

Johnson that she merits an award of a reasonable attorney's fee

against White for proving that White violated the FDCPA, we would

find that a reasonable attorney's fee in cases where no actual or

additional damages were awarded is $0.00.

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We agree with White that the district court erred when it

assessed attorney's fees against her because the FDCPA requires

that a plaintiff prove actual or additional damages in order to

receive attorney's fees and costs. Johnson did not meet this

requirement. However, even if Johnson's reading of the FDCPA was

correct and she was entitled to receive a reasonable attorney's fee

for her technical victory, Farrar makes it clear that a reasonable

fee would be $0.00.

IV.

Eaton similarly argues that the $500 Johnson recovered

against him is only nominal damages and is insufficient to support

an award of $10,830 in attorney's fees. However, Eaton's case is

much different than Farrar. In Farrar, the plaintiff demanded

$17,000,000 and "after 10 years of litigation and two trips to the

Court of Appeals, he got one dollar from one defendant." 506 U.S.

at 114, 113 S.Ct. at 575. By contrast, Johnson requested $4,000 in

damages and received $500. Also, the damages received by Johnson

were "additional" or punitive damages, designed to punish Eaton for

his wrongful acts.

In any event, we need not decide whether the district court

was within its discretion in awarding $10,000 in attorney's fees

because our reversal of the award against White requires that we

remand the award of attorney's fees for reconsideration. On

remand, the district court should reduce the award of fees against

Eaton by the amount of the fee, if any, attributable to the

preparation of the case against White.

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V.

Finally, White claims that Johnson should pay her attorney's

fees because Johnson brought the suit against her in bad faith. In

order to receive an award of attorney's fees under § 1692k(a)(3),

a "prevailing defendant must show affirmatively that the plaintiff

brought the FDCPA claim in bad faith and for the purposes of

harassment." Perry v. Stewart Title Co., 756 F.2d 1197, 1211 (5th

Cir.) modified on other grounds, 761 F.2d 237 (5th Cir.1985).

White violated two provisions of the FDCPA and cannot be said to

have prevailed in any sense other than the fact that she avoided a

monetary judgement. Johnson's victory was limited to a

determination that White had violated her rights but was a victory

nonetheless. Additionally, the district court's finding that

Johnson did not bring the claim in bad faith is supported by the

record and was not an abuse of discretion.

We AFFIRM the district court's determination that White is not

entitled to attorney's fees, REVERSE the court's award of fees

against White and REMAND the award of attorney's fees against Eaton

for the exclusion of fees, if any, attributable solely to

preparation of the case against White.

AFFIRMED in part, REVERSED in part and REMANDED.