Source: http://www.insidearm.com/news/00046226-5th-cir-reverses-sanctions-against-consum/
Timestamp: 2020-06-01 06:07:46
Document Index: 391465002

Matched Legal Cases: ['§\u202f1692', '§ 1692', '§ 1692', '§ 144', '§ 144', '§ 455', '§ 455']

6 May 2020 at 11:00 a.m. ET
May 6, 2020, 11 a.m. May 6, 2020, 9:16 a.m. insideARM.com The iA Institute
http://www.insidearm.com/news/00046226-5th-cir-reverses-sanctions-against-consum/
In a September 2016 order, the trial court required the parties to exchange settlement offers by Oct. 19, 2016. In compliance with this order, the debt collector offered to settle for $1,101, plus reasonable attorneys’ fees and costs. The consumer’s lawyer never responded to the debt collector’s offer and did not issue a written settlement demand. Subsequently, at his deposition, the consumer testified that the offer would “make him whole and conclude the case.”
Fight for Attorney Fees and the Sanctions Order
Additionally, Rule 11 does not include the phrase “bad faith” and the trial court did not specify which part of Rule 11 the Attorney-Appellants supposedly violated. The trial court might have considered that the letter did not did not “have evidentiary support” under Rule 11(b)(3), but it found that a material fact dispute “exist[ed] on whether Plaintiff actually disputed the Debt” so the “lack of evidentiary foundation cannot be the problem here.” Moreover, a “claim that survives summary judgment” is not frivolous. See FED. R. CIV. P. 11(b)(2). Thus, the Fifth Circuit reversed the sanction award against the Attorney-Appellants.
The Fifth Circuit next examined the trial court’s fee award to the debt collector under 15 U.S.C. § 1692k(a)(3), which allows a court to “award to the defendant attorney’s fees” “[o]n a finding . . . that an action under this section was brought in bad faith and for the purpose of harassment.” As the Fifth Circuit already rejected the trial court’s bad faith finding, it also reversed this award.
The Fifth Circuit also reversed this fee award because the trial court improperly ordered the Attorney-Appellants to pay it when section “(a)(3) does not stretch that far.” Courts must strictly construe statutes awarding attorneys’ fees given the long-standing American Rule “against awarding costs and fees to the prevailing party.” Specifically, the Fifth Circuit held, courts must read statutes that depart from the American Rule “with a presumption favoring the retention of long established and familiar legal principles.” With these principles in mind, “when a statute awards fees to one party, but does not identify from whom they may be collected,” the Fifth Circuit declined to allow “recovery from the other party’s counsel.”
Although the Fifth Circuit reversed the sanction award against the Attorney-Appellants, it was not ready to order the debt collector to pay the consumer’s fees and costs. Such an order would require the consumer to prove that his action to enforce FDCPA liability was successful. 15 U.S.C. § 1692k(a)(3). The Fifth Circuit has not yet “decided whether a private settlement renders the action “successful” under § 1692k(a)(3)” and the trial court did not consider this issue. Thus, the Fifth Circuit remanded this issue to the trial court to decide whether the consumer may recover attorneys’ fees under the FDCPA.
Finally, the Fifth Circuit analyzed the consumer’s claim that the trial court erroneously denied his recusal motion under 28 U.S.C. §§ 144 and 455. Recusal is required under these sections when the court “has a personal bias” against a party, 28 U.S.C. §§ 144, 455(b)(1), if the court’s “impartiality might reasonably be questioned,” id. § 455(a), or if the court has “personal knowledge of disputed evidentiary facts concerning the proceeding,” id. § 455(b)(1). The key here is that the bias must be against a “party,” not their counsel. Bias against a non-party attorney alone does not require disqualification.
Another ground for disqualification would be if the court’s views are “extrajudicial.” A court’s views are not extrajudicial when the court formed its opinion “on the basis of facts introduced or events occurring in the course of the current proceedings, or of prior proceedings.” Here the trial court’s supposed bias was not derived from extrajudicial knowledge because the court presided over this case and three of the other cases referenced in the sanctions order.