Appeals Court Rules Settlement Does Not Entitle Plaintiff to Attorney’s Fees

In a case that was defended by Robbie Malone and Xerxes Martin of Malone Frost Martin, the Fifth Circuit Court of Appeals has determined that a plaintiff in a Fair Debt Collection Practices Act case is not entitled to have his attorney’s fees paid by the defendant, because he settled his case before it could be ruled on by a judge or jury, affirming a lower court’s ruling.

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

This ruling marks the second time that the Fifth Circuit has addressed this suit, previously overturning a lower court’s ruling that placed sanctions on the plaintiff’s attorneys for not settling the case quickly enough. Remanded back to the District Court to determine whether the settlement that was entered into, in which the plaintiff was paid $1,000 and had a $2,100 debt forgiven, entitled him to attorney’s fees under the FDCPA.

In issuing its ruling, the Fifth Circuit parsed every word in the fee-shifting statute provision of the FDCPA, which authorizes a judge to be able to order a collector to cover the plaintiff’s attorney’s fees “in the case of any successful action to enforce the foregoing liability.” The key words, at least as far as the Fifth Circuit was concerned were “successful action.”

The whole phrase — in the case of any 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,” the Fifth Circuit wrote. In this case, the plaintiff settled before a judge could issue a formal legal command or a decree, thus ensuring that the relief required under the FDCPA was not meted out.

“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,” the Appeals Court wrote. “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.”

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