Appeals Court Upholds Lower Attorney Fee Award After Plaintiff Rejects Multiple Settlement Offers

When given multiple “meaningful” offers to settle a lawsuit, the Seventh Circuit Court of Appeals has sent up a warning flare to all plaintiffs and their attorneys that they should accept it, lest they lose the big payday they were hoping for.

A copy of the ruling in the case of Isaac Paz v. Portfolio Recovery Associates can be accessed by clicking here.

The plaintiff defaulted on a debt in which the defendant attempted to collect. The plaintiff disputed the debt, an action the defendant forgot to report to the credit bureaus. The plaintiff sued, and ultimately settled the case for $1,000, $4,500 in reasonable attorney fees, and extinguishing the debt itself. However, the defendant continued to report the debt to the credit bureaus, and the plaintiff sued again. The defendant made settlement offers of $1,500, $2,500, and $3,501 — with reasonable attorney’s fees attached to each offer. The plaintiff never responded to the offers. On the eve of the trial, the defendant made a final offer — $25,000 plus attorney’s fees. The offer was rejected.

A jury found for the plaintiff following a one-day trial. But limited the award to $1,000. The plaintiff attempted to recover $187,410 in attorney’s fees. The court awarded $10,875 in attorney’s fees, which represented the amount of work put in by the attorney up to the point the settlement offer of $3,501 was made. The plaintiff appealed the decision to the Seventh Circuit.

In affirming the lower court’s decision, Judge Michael Scudder of the Seventh Circuit, wrote the “vast majority of the fees Paz sought to recover were for time spent pursuing an unsuccessful and ill-advised effort to win a much bigger payoff than was even remotely possible in the circumstances giving rise to his claims.”

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