12

‐ 3757

‐ cv

Cabala v. Crowley

UNITED STATES COURT OF APPEALS

F OR THE S ECOND C IRCUIT

August Term, 2013

(Submitted: August 30, 2013 Decided: November 19, 2013)

Docket No. 12

‐ 3757

‐ cv

J OEL J. C ABALA

,

Plaintiff

‐ Appellee,

— v.

—

T IMOTHY W. C ROWLEY

, K IM A. M ORRIS

,

Defendants

‐ Appellants. *

B e f o r e:

R AGGI

, L YNCH

, and L OHIER

, Circuit Judges

.

__________________

* The Clerk of Court is respectfully directed to amend the official caption in

this case to conform with the caption above.Defendants

‐ appellants appeal from a decision by the United States District

Court of the District of Connecticut (Vanessa L. Bryant, Judge ) awarding

$32,489.29 in attorney’s fees and costs to plaintiff

‐ appellee. The fee award follows

a stipulated judgment awarding plaintiff maximum statutory damages of $1,001

for their decedent’s alleged violation of the Fair Debt Collection Practices Act

(“FDCPA”), 15 U.S.C. § 1692. Appellants argue that the award unreasonably

includes plaintiff’s attorney’s fees incurred after defendant offered a settlement

including the full amount of statutory damages, and that plaintiff’s counsel

committed ethical violations that defeat the fee award

. Because defendants’

settlement offer did not include an offer of judgment, it did not fully resolve the

case and did not moot further litigation by plaintiff. We therefore conclude that

the district court did not abuse its discretion in finding that defendants remain

liable for additional attorney’s fees accrued by plaintiff.

A FFIRMED

.

D EEPAK G UPTA

, Gupta Beck PLLC, Washington, DC, for the Plaintiff

‐ Appellee.

A NDREW J. S OLTES

, J R

., Law Offices of David W. Rubin, Stamford,

Connecticut, for the Defendants

‐ Appellants.

2P ER C URIAM :

Defendants

‐ appellants appeal from a judgment of the United States District

Court of the District of Connecticut (Vanessa L. Bryant, Judge ) awarding

$32,489.29 in attorney’s fees and costs to plaintiff

‐ appellee. The issue presented by

this case is whether a defendant remains liable for plaintiff’s attorney’s fees

accrued after defendant offered a settlement that included the maximum available

damages and, as mandated by statute, plaintiff’s fees and costs, but that did not

include an offer of judgment. Because a settlement offer without an offer of

judgment does not fully resolve the case, such a settlement offer does not moot the

dispute, and defendants remain liable for any reasonable attorney’s fees accrued

by plaintiff during further litigation.

BACKGROUND

Plaintiff

‐ appellee Joel J. Cabala began this action on April 21, 2009, seeking

damages for an alleged violation of the Fair Debt Collection Practices Act

(“FDCPA”), 15 U.S.C. § 1692, by defendant Benjamin Morris, an attorney. 1 Morris

1 Following the initial entry of judgment in the case, but before the award of

attorney’s fees, Benjamin Morris died, and the co

‐ executors of his estate were

3did not and does not contest his substantive liability for violating the FDCPA;

Morris contends that, precisely because he promptly offered to pay Cabala the

maximum damages he could have been entitled to under the FDCPA, he should

not be held liable for attorney’s fees incurred by Cabala during a protracted

dispute between the parties concerning the form of the settlement.

Less than two months after the complaint was filed, on June 25, 2009, David

W. Rubin, counsel for Morris, contacted counsel for Cabala, Joanne S. Faulkner,

and offered to settle for $1000, the maximum statutory damages mandated by the

FDCPA, and also offered, as mandated by the statute, to pay Cabala’s attorney’s

fees and costs, with the amount of such fees to be determined by the court. Rubin

indicated that in his view, as Morris’s offer included maximum recoverable

damages for the underlying violation, Morris would not be liable for any further

fees accrued by Cabala in the dispute. Faulkner’s reply requested a lump sum

settlement including attorney’s fees, to which Rubin responded by again

requesting that any dispute over the amount of the fees be resolved by the court.

Faulkner in turn replied that a fee application to the court would not be

substituted as defendants. See Cabala v. Morris

, No. 3:09

‐ cv

‐ 651 (VLB), 2012 WL

3656364, at *1 n.1 (D. Conn. Aug. 24, 2012). For purposes of this appeal, we refer to

defendants simply as “Morris.”

4cognizable without a judgment, an outcome which Rubin had stated he wished to

avoid. The parties also disagreed over Faulkner’s refusal to provide an

accounting of the hours she had thus far spent on the case.

After several months of fruitless settlement discussions, the parties finally

jointly stipulated for judgment in favor of Cabala, with damages set at the

statutory maximum as provided in Morris’s initial settlement offer. The

stipulation requested judicial determination of attorney’s fees and costs.

In the subsequent discovery and litigation over the amount of the fee award

to which Cabala was entitled, Morris alleged that Faulkner had behaved

improperly by failing to communicate Morris’s original settlement offer to Cabala.

The district court, observing that there was a sincere dispute over the “nature and

form” of the settlement

– specifically about whether the settlement would include

a judgment that would make the attorney’s fee award judicially enforceable

–

concluded that Morris’s original offer did not moot the action. Thus, the district

court concluded, any reasonable attorney’s fees incurred by Cabala during the

continuing litigation should be borne by Morris. Following a lodestar analysis of

Faulkner’s hourly rate and the time spent on the matter, the district court found

her fee request reasonable. Accordingly, the district court ordered Morris to pay

Cabala the full amount of fees requested.

5DISCUSSION

I. Attorney’s Fees Under the FDCPA

As a prevailing party under the FDCPA, Cabala is presumptively entitled to

an award of reasonable attorney’s fees. See 15 U.S.C. § 1692k(a)(3); Savino v.

Computer Credit, Inc.

, 164 F.3d 81, 87 (2d Cir. 1998).

Morris does not challenge the district court’s conclusions that the hourly

rate charged and the number of hours billed by Cabala’s attorney were reasonable

for the work actually done by Faulkner. Rather, he argues that the district court’s

award should not have included any fees for work done by Faulkner after

Morris’s June 25, 2009 settlement offer. Morris submits that his initial offer for the

maximum recovery available under the FDCPA (1) rendered the underlying

action moot, or (2) was entitled to the same treatment as an offer of judgment

under Rule 68, see Fed. R. Civ. P. 68 (providing that party who rejects “offer of

judgment,” and then fails to obtain greater relief cannot recover any costs

accruing after date of rejection).

In McCauley v. Trans Union, L.L.C.

, 402 F.3d 340 (2d Cir. 2005), we rejected

the argument that an unaccepted offer of settlement for the full amount of

damages owed “moots” a case such that the case should be dismissed for lack of

6jurisdiction if the plaintiff desires to continue the action. Rather, we held, the

typically proper disposition in such a situation is for the district court to enter

judgment against the defendant for the proffered amount and to direct payment

to the plaintiff consistent with the offer. Id

. at 342. Only after such a disposition

is the controversy resolved such that the court lacks further jurisdiction. 2 Id

.

Morris’s settlement offer, however, specifically sought to avoid entry of

judgment. Upon Faulkner’s rejection of his proposal, Morris neither offered a

Rule 68 entry of judgment (which under the terms of the rule would have

imposed further costs incurred in the case on plaintiff, see Fed. R. Civ. P. 68(d)),

nor sought entry of judgment as authorized by McCauley

, which under the terms

of that case would have ended the litigation. Indeed, although Morris contends

that his offer rendered the case moot, he never moved for dismissal of the case on

that ground, nor did he challenge the propriety of the substantive judgment of

2 Not every circuit agrees with this approach. See Genesis Healthcare Corp.

v. Symczyk

, 133 S. Ct. 1523, 1528

‐ 29 & n.3 (2013) (noting and declining to resolve

conflict and citing cases); id

. at 1533 (Kagan, J., dissenting) (stating that view that an

unaccepted settlement offer moots a case “is wrong, wrong, and wrong again”);

Diaz v. First Am. Home Buyers Prot. Corp

. , 732 F.3d 948, 952

‐ 55 (9th Cir. 2013)

(noting conflicting views in other circuits, holding that “an unaccepted Rule 68 offer

that would have fully satisfied a plaintiff ʹ s claim does not render that claim moot,”

and leaving open whether, as this Court held in McCauley

, a court may in such

circumstances enter a judgment for plaintiff and terminate the litigation).

7FDCPA liability ultimately entered in the case. Instead, the parties continued to

dispute a substantive issue relevant to the disposition of the case. Because the

parties continued to dispute the form and extent of the relief to which Cabala was

entitled, the case never became moot.

Morris’s remaining argument is that Cabala and his attorney acted

unreasonably in continuing to litigate after communication of the June 25, 2009

settlement offer. We review a district court’s award of attorney’s fees for abuse of

discretion. Townsend v. Benjamin Enters., Inc

. , 679 F.3d 41, 58 (2d Cir. 2012). The

district court observes the parties’ litigation directly and is thus best situated to

consider the case

‐ specific factors relevant to a reasonable fee assessment. See

Arbor Hill Concerned Citizens Neighborhood Ass’n v. County of Albany

, 522

F.3d 182, 194 (2d Cir. 2007). Thus, we accord “substantial deference” to a district

court’s fee determinations. Fox v. Vice

, 131 S. Ct. 2205, 2216 (2011); see also Ortiz

v. Regan

, 980 F.2d 138, 141 (2d Cir. 1992) (“A district court is in the best position to

determine the amount of work that was necessary to achieve the results in a

particular case and, therefore, is entitled to ample discretion in its decision.”). We

detect no abuse of that discretion here.

8The district court concluded that the parties continued to litigate, and

plaintiff’s attorney’s fees continued to accrue, because of a substantive dispute

over the “nature and form” of the settlement and due to poor communication by

both sides. As the district court noted, Faulkner’s insistence on an admission of

liability and her refusal to provide Rubin with her fee records “were not founded

in law,” and her posture may well have been unduly rigid. However, the district

court also noted that Faulkner “demonstrated a willingness to have the Court

determine reasonable attorney’s fees should [defendants] file an offer or

stipulation of judgment throughout the course of the litigation.” It takes two to

stage a useless litigation; Faulkner’s insistence on a judgment was no more rigid

than Morris’s and Rubin’s equally determined opposition to such a judgment.

Given the circumstances, and our deference to the district court’s judgment, we

identify no abuse of discretion in the district court’s conclusion that Cabala’s

attorney’s fees were reasonable.

As the district court also correctly noted, “[t]he availability of Rule 68 gives

additional weight to this conclusion.” Under that rule, when a plaintiff refuses an

offer that satisfies Rule 68 (by, inter alia

, making an offer of judgment ) and then

fails to win more than the offered amount at trial, costs are shifted to the plaintiff

9as part of the judgment. Morris could have at any time avoided liability for

further costs by making such an offer, but he persisted in declining to do so, thus

prolonging the litigation. 3

Like the district court, we reject Morris’s argument that his settlement offer

should be treated as equivalent to a Rule 68 offer of judgment. Morris consistently

declined a resolution that included a judgment. A settlement agreement between

parties by which the defendant agrees to make a payment in exchange for

dismissal of the plaintiff’s action only creates a contract between the parties that

must be interpreted and enforced by the state courts. See Kokkonen v. Guardian

Life Ins. Co. of Am.

, 511 U.S. 375, 381

‐ 82 (1994) (observing that a settlement

agreement followed by dismissal of complaint before a federal court creates a

contract which, absent an independent basis for federal jurisdiction, is

appropriately enforced in state court). Failure to pay the negotiated settlement

amount gives rise to a breach of contract action, while a judgment may be

3 We assume without deciding, because it is not necessary to our resolution

of the case, that a Rule 68 offer forecloses fee awards even under “[s]tatutes that do

not refer to attorney’s fees as part of the costs,” such as § 1692k, noting that this view

is not universally accepted. See Marek v. Chesny

, 473 U.S. 1, 43

‐ 45 (1985) (Brennan,

J

., dissenting); see also Lee v. Thomas & Thomas

, 109 F.3d 302, 306, 307 n. 8 (6th Cir.

1997) (holding that compensation for attorney hours expended subsequent to

rejected Rule 68 offer were subject to lodestar calculation and “reasonableness test”).

10enforced using all the remedies available to a judgment creditor. We need not

determine whether this distinction is sufficiently significant that reasonable

parties would expend significant funds fighting over it. It is sufficient for us to

note that in the absence of any precedent holding that Morris’s settlement

proposals were equivalent to Rule 68 offers, it was not per se unreasonable for

Cabala to continue to litigate the case until Morris eventually capitulated and

stipulated to entry of judgment.

Our recent decision in Doyle v. Midland Credit Management, Inc

. , 722 F.3d

78, 80

‐ 81 (2d Cir. 2013), is not to the contrary. In Doyle

, we held that an offer of

judgment that fully satisfied a claim under the FDCPA need not conform to the

formal requirements of Rule 68 in order to moot a cause of action. In Doyle

,

however, the defendant offered judgment, rather than settlement without

judgment, resolving all points in dispute and leaving no conflict over the “nature

and form” of settlement. The only deviation from the formal attributes of a Rule

68 offer was that the defendant in Doyle made its offer orally. Id

. at 81. To hold

that an offer of judgment that fails to meet the technical procedural requirements

of Rule 68 is nevertheless an offer of judgment is not equivalent to holding that an

11offer of an informal settlement without judgment is equivalent to a Rule 68 offer

of judgment. 4

II. Alleged Ethical Violations

Morris contends that various alleged ethical lapses by Faulkner in dealing

with Cabala provide a further reason to deny attorney’s fees. We note that the

district court made no finding of an ethical violation, and we need not discuss the

merits of the alleged lapses to reject Morris’s fee argument. Any alleged

dereliction by Faulkner has no bearing on the reasonableness of the fees awarded

here because (1) attorney’s fees in an FDCPA action are awarded to the prevailing

party, not to his or her attorney, 15 U.S.C. § 1692k(a)(3); (2) the proper forum for

resolving the parties’ dispute regarding whether Faulkner had an obligation to

communicate defendants’ earlier settlement offers to Cabala, and whether her

alleged failure to do so was inappropriately self

‐ interested, is an attorney

4 Since Doyle in not inconsistent with our holding here, we need not address

whether it is inconsistent with McCauley

, which was not cited by the Doyle court.

It is sufficient for our purposes to note that in all of the cases in which this Court has

even considered finding a case moot, or treating a non

‐ conforming offer as satisfying

Rule 68, the argument was predicated upon the offer, or entry, of a judgment in favor

of plaintiff, something that defendants here refused to tender until after the fees in

question had already been incurred.

12disciplinary proceeding or a proceeding pursuant to 28 U.S.C. § 1927, not a fee

litigation; and (3) we identify no error in the district court’s factual determination

that Faulkner’s fees were reasonable for the work performed. We therefore find

no abuse of discretion in the district court’s conclusion that allegations of

unethical behavior by Faulkner do not preclude the award of fees to Cabala.

CONCLUSION

Because Morris’s initial offer to settle did not include an offer of judgment,

it did not fully resolve the dispute between the parties, and thus further litigation

by Cabala was not per se unreasonable. We find no abuse of discretion in the

district court’s award of full attorney’s fees to the plaintiff. Accordingly, the

judgment of the district court is AFFIRMED.

13