### In the 

# United States Court of Appeals For the Seventh Circuit

____________________ No. 17-3259
I SAAC P AZ, Plaintiff-Appellant,

v.

P ORTFOLIO R ECOVERY A SSOCIATES, LLC, Defendant-Appellee

.

____________________ Appeal from the United States District Court for the Northern District of Illinois, Eastern Division.

No. 1:14-cv-9751 — Jorge L. Alonso , Judge

.

____________________
A RGUED A PRIL 2, 2019

— D ECIDED M AY 15, 2019

____________________

Before H AMILTON, B ARRETT, and S CUDDER , Circuit Judges

. S CUDDER , Circuit Judge . Sometimes se tt ling a case is theonly course that makes sense. This case provides a good example. Isaac Paz sued PortfolioRecovery Associates, LLC for violations of the Fair Debt Collection Practices Act and Fair Credit Reporting Act, and the ca se dragged on for years, with the district court then enteri ng summary judgment for PRA on the lion’s share of Paz’s claims. Paz disregarded multiple

o ff ers to se tt le—both at the outset ofthe litigation and after2 No. 17-3259

summary judgment—and proceede d to trial, where he wonbut recovered only $1,000 in damages. He then sought to recover a tt orneys’ fees of $187,410. The district court awarded fees of $10,875, underscoring thatPaz’s rejection of meaningful se tt lement o ff ers precluded a fee award in such disproportion to his trial recovery. Seeing no abuse of discretion, we affi rm. I
A After Isaac Paz defaulted on a credit card debt of $695, PRA, a debt collector, purchased the debt and a tt empted to collect. Alongside these collection e ff orts, however, PRA violated the Fair Debt Collection P ractices Act by failing to report to credit reporting agencies that Paz disputed the debt. Paz responded by suing PRA in June 2014. PRA promptly o ffered to se tt le by invoking Federal Rule of Civil Procedure 68 and o ffering to eliminate the debt and pay Paz $1,001 plus reasonable a tt orneys’ fees and costs “through the date of Plainti ff’s acceptance of this o ff er, in an amount agreed upon by the parties, and if no agreement can be made, to be determined by the Court.” By its terms, the

o ff er also provided not only that PRA would “allow judgment to be entered against it,” but also that “[t]his o ffer of judgment is made solely for the purposes speci fi ed in Rule 68 of the Federal Rules of Civil Procedure and is not to be construed as an admission that Defendant is liable in this action, that Plainti ff has su ff ered any damage, or for any other reason.” Paz accepted PRA’s o ff er, and counsel then traded e-mails and agreed to reasonable a tt orneys’ fees of $4,500.No. 17-3259 3

Despite the se tt lement, PRA continued to report Paz’s debt to credit reporting agencies, even con fi rming the validity ofthe debt in response to inquiries from the agencies. This continued reporting violated the FDCPA, and Paz, upon learning of it, fi led a second lawsuit against PRA in December 2014. The second lawsuit alleged violations of the FDCPA and the Fair Credit Reporting Act. Paz later a tt empted to add class claims but was unsuccessful. PRA answered the second lawsuit by admi tt ing that, due to an oversight, it both a tt empted to collect Paz’s debt after the prior se tt lement and continued to report the debt to credit agencies. PRA a tt empted to resolve the case by once again invokingRule 68 and making a series of se tt lement o ff ers— fi rst in January 2015 for $1,500, then in February 2016 for $2,500, and later in March 2015 for $3,501. The terms of PRA’s o ffers mirrored those Paz accepted in the fi rst lawsuit: PRA would allow judgment to be entered against it; the judgment wo uld include reasonable a tt orneys’ fees and costs through the da te of acceptance of the o ffer in an amount agreed upon by the part ies, or (as necessary) by the district court; and the o ffer otherwise should not be construed as an admission of liability. Paz never responded to PRA’s se tt lement o ffers. The parties eventually cross-moved for summary judgment, with the district court’s ensuing ruling dealing a substantial blow to Paz’s case. The court permi tt ed Paz to proceed to trial on only one of his alleged violations of the FDCPA, 15 U.S.C. § 1692e(8) (communicating false information, including the failure to communicate that a debt is disputed), fi nding there was a question of fact as to whether PRA could avoid liabilityunder the FDCPA by demonstrating that its violation was unintentional, the result of a bona fi de error, and occurred4 No. 17-3259

despite procedures reasonably adapted to avoid such error. See Ruth v. Triumph P’ships , 577 F.3d 790, 803 (7th Cir. 2009) (outlining the elements of a bona fi de error defense under the FDCPA). As for Paz’s alleged violations of the Fair Credit Reporting Act, the district court determin ed that the evidence could not support a fi nding that PRA had acted willfully in its continued reporting to the credit agencies. This conclusion had the

e ff ect of allowing Paz to proceed to trial only on his claim that PRA’s actions amount to neglig ence violations of the FCRA. See 15 U.S.C. § 1681o. The upshot heading into trial, then, was that Paz was able to pursue a recovery of any ac tual damages but not punitive damages. Even more speci fi cally, Paz sought the maximum $1,000 in statutory damages available to him based on his FDCPA claim and an additional $21,000 in actual damages for his alleged emotional distress caused by PRA’s misreporting his credit card debt. On his FCRA claim, Paz sought only $5,000 in actual damages. A week before trial, PRA made a fi nal e ff ort to se tt le, offering Paz $25,000 to resolve all remaining claims and to cover his a tt orneys’ fees and costs. Paz rejected the o ffer and proceeded to trial, enlisting the aid of two more a tt orneys to help prepare for and conduct the trial. The trial did not take long. Presentation of the evidence began and ended the same day, September 7, 2016. The nextday the jury found for Paz on both claims. In doing so, however, the jury determined that Paz had sustained no actualdamages, so his total recovery was limited to $1,000 in statutory damages based on his FDCPA claim.No. 17-3259 5

Paz later sought to recover $187,410 in a tt orneys’ fees and $2,744 in costs, relying on the FDCPA’s provision entitling a successful plainti ff to “the costs of the action, together with a reasonable a tt orney’s fee as determined by the Court.” 15 U.S.C. § 1692(k)(a)(3).

B By its terms, a se tt lement o ff er made pursuant to Rule 68 limits a plainti ff’s ability to recover costs incurred after the date of the o ff er. See F ED

. R. C IV

. P. 68(d) (“If the judgment that the o ff eree fi nally obtains is not more favorable than the unaccepted o ffer, the o fferee must pay the costs incurred after the o ffer was made.”). Rule 68’s limit on a plainti ff’s recovery of costs will often limit the recovery of a tt orneys’ fees as well, but the circumstances present here reveal an exception. Paz won at trial on his FDCPA claim and his doing so entitled him to an award of “the costs of th e action, together with a reasonable a tt orney’s fee as determined by the court.” 15 U.S.C. § 1692k(a)(3). Congress’s choice to de fi ne a tt orneys’ fees separately from costs in § 1692k(a)( 3) meant that Paz would be entitled to reasonable a tt orneys’ fees (by operation of the FDCPA) without regard to the more general limitation on costs in Rule 68. See Marek v. Chesny, 473 U.S. 1, 9 n.2 (1985) (explaining that Rule 68 incorporates the de fi nition of “costs” from the relevant fee-shiftingstatute and therefore cuts o ffattorneys’ fees only where the statute de fi nes “costs” to include

a tt orneys’ fees). In full alignmen t with our precedent, the district court reached this precise conclusion. See Moriarty v. Svec, 233 F.3d 955, 967 (7th Cir. 2000) (interpreting § 1692k(a)(3) of the FDCPA and concluding that a prevailing party is entitled to a tt orneys’ fees notwithstanding the limitation in Rule 68).6 No. 17-3259

In determining what amount of fees was reasonable, the district court underscored that one relevant consideration was Paz’s decision to reject PRA’s Rule 68 o ffer of $3,501 and instead to proceed to trial. This reasoning, too, is on all fours with our caselaw. In Moriarty, for example, we explained that “[s]ubstantial se tt lement o ffers should be considered by the district court as a factor in determining an award of reasonable a tt orney’s fees, even where Rule 68 does not apply.” 233 F.3d at 967.In assessing a proper fee award, the district court emphasized that Paz had obtained only limited success at trial. And this was especially so when viewed against the backdrop of the se tt lement o ff er—more than three times the amount of his ultimate recovery—that Paz declined. Paz was free to proceed to trial, the district court reas oned, but his doing so was a consideration that warranted a substantial reduction in the award of a tt orneys’ fees. See Hensley v. Eckerhart, 461 U.S. 424, 436– 37 (1983) (explaining that a plainti ff who achieves only limited success on the merits may be enti tled to only a limited award). The district court added that, although he insisted on going to trial, Paz established no new principles of law—nor did he check any ongoing harm (beyond the four corners of his own case) being perpetrated by PRA—by pu tt ing his case to a jury. See Zagorski v. Midwest Billing Servs. , 128 F.3d 1164, 1167 (7th Cir. 1997) (explaining that, in de termining the reasonable fee award, success may also be measured in terms of the principle established and the harm checked). In the end, the district court awarded Paz $10,875 in a tt orneys’ fees. Applying the lodestar method, the district court used $375 as the hourly rate of Paz’s main a tt orney, Mario Kasalo, but recognized that only 29 hours of his total work—No. 17-3259 7

the hours he worked before PRA’s fi nal Rule 68 o ffer on March 27, 2015 for $3,501—were reasonable. The district courtconcluded that all other hours, including those spent preparing for and conducting the trial, including by the two a tt orneys Kasalo enlisted to help him at trial, were unreasonable. When it came to costs, th e district court awarded PRA $3,064. This amount compensated PRA for expenses incurred after March 27, 2015, the date of its fi nal Rule 68 o ffer. Recognizing that Paz won at trial and thus was a prevailing party within the meaning of Federal Rule of Civil Procedure 54, the district court also awarded costs to Paz in the amount of $436.
II Section 1692k(a)(3) of the FDCPA entitles a prevailing party like Paz to an award of reasonable a tt orneys’ fees. 15 U.S.C. § 1692k(a)(3); Schlacher v. Law O ffi ces of Phillip J. Rotche & Assocs., P.C. , 574 F.3d 852, 856 (7th Cir. 2009). No precise formula exists for determining a reasonable fee. See Schlacher, 574 F.3d at 856; see also Hensley, 461 U.S. at 436. The proper approach typically starts with using the lodestar method (multiplying the a tt orney’s reasonable hourly rate by the number of hours reasonably expended) and then adjusting that fi gure to account for various factors, including the complexity of the legal issues invo lved, the degree of success obtained, and the public interest advanced by the litigation. See Schlacher, 574 F.3d at 856; see also Connolly v. Nat’l Sch. Bus Serv., Inc. , 177 F.3d 593, 597 (7th Ci r. 1999) (outlining similar fee award considerations). “District courts have wide discretion in determining the appropriate amount of a tt orneys’ fees and costs,” and therefore our review on appeal “is limited to a highly deferential8 No. 17-3259

abuse of discretion standard.” Spegon v. Catholic Bishop of Chicago , 175 F.3d 544, 550 (7th Cir. 1999).
Paz sees abuses of discretion on several fronts. He fi rst argues that PRA’s o ffer to se tt le for $3,501 plus reasonable a tt orneys’ fees and costs was not substantial and therefore should have been disregarded by the di strict court in determining the fee award. On this score, Paz co ntends that he did not understand what the o ff er meant—that its terms were so ambiguous and unfair as to render the o ffer worthless. Even more specifically, he points to the condition in the o ffer that he read as

cu tt ing o ff a tt orneys’ fees at the time of acceptance, a provision that Paz sees as exposinghim to an unknown amount of fees for the time his counse l would spend doing the paperwork necessary to fi nalize the se tt lement and enter the Rule 68 judgment against PRA. We disagree. Paz’s position i nheres with an air of unreality. He suggests he had li tt le idea what the o ffer meant, yet his counsel—in this case and others—had previously accepted

o ff ers with identical terms and, in doing so, managed to negotiate and receive a reasonable amount to cover legal fees. All Paz’s counsel had to do was request a fee award that would cover the time necessary to fi nalize the se tt lement. This would not have been di ffi cult given the relative simplicity of the claims. By no means was th is a scenario where a defendant conveyed an incomprehensible o ffer or acted in bad faith by

se tt ing a trap to preclude a plainti fffrom recovering a reasonable amount in a tt orneys’ fees as part of a se tt lement.
Paz also contends that the di strict court abused its discretion in fi nding that he achieved on ly limited success on the merits of his claims. On this po int, Paz highlights that PRA’s

se tt lement o ff er expressly disclaimed liability and from thereNo. 17-3259 9

argues that agreeing to se tt le would have prevented him from claiming prevailing party status and receiving a tt orneys’ fees. As Paz now sees things, the result he achieved at trial was much be tt er because it yielded a judgment on the merits for the maximum amount of statutory damages available to him, $1,000. This position, too, misses the mark.
Se tt lement o ff ers regularly disclaim liability, and PRA’s having done so here was in no way out of the ordinary. What Paz overlooks is that his acceptance of the o ffer, by operation of Rule 68, would have resulted in a judgment being entered against PRA. The moment such a judgment hit the district court’s docket, the prior disclaimer of liability would have been a dead le tt er. Furthermore, by the very terms of PRA’s

o ff er, the ensuing judgment would have been for $3,501 plus reasonable a tt orneys’ fees and costs. Paz’s counsel had to know—from his prior experience in this case alone—that PRA’s disclaimer of liability in its Rule 68 o ffer would not preclude an award of a tt orneys’ fees. What happened here is clear. At the outset of the litigation, PRA conveyed a substantial se tt lement o ffer of $3,501—more than three times the statutory damages available to Paz—plus reasonable a tt orneys’ fees and costs. Paz disregarded the o ffer and proceeded to trial even after the district court’s summaryjudgment ruling massively downsized his case. And every indication from the record is that Paz had but the slimmest ofchances of receiving any more than $1,000 in statutory damages at trial. He nonethele ss proceeded to incur $187,410 in

a tt orneys’ fees, only to walk away with $1,000 in statutory damages. Paz was free to make these choices. Like any other party, he was not required to accept the trial court’s (or anyone10 No. 17-3259

else’s) view of the best litigat ion strategy, including whether to accept a se tt lement o ffer. So, too, is it clear as a more general

ma tt er that a sound approach to litigation will often and inevitably entail the pursuit of what turn out to be dead ends, all of which will result in a party reasonably incurring fees and costs. See Kurowski v. Krajewski, 848 F.2d 767, 776 (7th Cir. 1988). Nothing about this appeal calls into question these common, practical realities of litigation.
In the circumstances before us here, however, we are confi dent that the district court di d not abuse its discretion in rejecting Paz’s request for $187,410 in fees and instead awarding him $10,875. The time associat ed with the $187,410 in a tt orneys’ fees did not re fl ect the sort of reasonable a tt orney work that is often inevitable as partof traveling a diligent litigation course. To the contrary, the vast majority of the fees Pazsought to recover were for time spent pursuing an unsuccessful and ill-advised e ff ort to win a much bigger payo ff than was even remotely possible in the circumstances giving riseto his claims. This observation is precisely what led the district court to conclude that$10,875 was a reasonable fee award. Paz and his counsel cannot now force PRA to pay the legal expenses for their failure, so the reduced fee award in this case was appropriate and far from an abuse of discretion. For these reasons, we AFFIRM.