Tejero v. Portfolio Recovery Assoc ( 2021 )

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United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
FILED
No. 20-50543 April 7, 2021
Lyle W. Cayce
Clerk
Luis Tejero,
Plaintiff—Appellant,
versus
Portfolio Recovery Associates, L.L.C.; Western Surety
Company,
Defendants—Appellees.
Appeal from the United States District Court
for the Western District of Texas
USDC No. 1:16-CV-767
Before Higginbotham, Costa, and Oldham, Circuit Judges.
Andrew S. Oldham, Circuit Judge:
The question presented is whether a private settlement constitutes a
“successful action to enforce . . . liability” under the fee-shifting provision of
the Fair Debt Collection Practices Act (“FDCPA”). It does not. We
therefore affirm the district court’s denial of attorney’s fees.
I.
We recounted the facts in detail in our previous decision in this case.
See Tejero v. Portfolio Recovery Assocs., L.L.C., 955 F.3d 453, 456–57 (5th Cir.
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No. 20-50543
2020) (“Tejero I”). Here we restate only those facts that are relevant to this
appeal.
Luis Tejero sued Portfolio Recovery Associates under the FDCPA
and parallel provisions of Texas state law for unlawful debt-collection
practices. On cross-motions for summary judgment, the district court
identified triable issues of fact and set the case for trial. Ibid. Before trial, the
parties reached a settlement. Id. at 457. In the settlement, Portfolio Recovery
disclaimed any liability—but it nonetheless agreed to pay Tejero $1,000 in
damages and to forgive his underlying debt of approximately $2,100. Ibid.When the parties notified the district court of the settlement, however, the
district court reported Tejero’s lawyers to the disciplinary committee of the
Western District of Texas, sanctioned them, and ordered thousands of
dollars in costs and fees against Tejero. Ibid. The district court premised this
extraordinary discipline on its conclusion that Tejero brought the case in bad
faith—notwithstanding the fact that his claims were apparently meritorious
enough to warrant a trial. Ibid.We reversed for abuse of discretion. Id. at 458–61. We then remanded
so the district court could determine in the first instance whether Tejero’s
favorable settlement entitled him to attorney’s fees under the FDCPA. Id. at
462–63. The district court said no. Tejero again timely appealed.
II.
The only question presented here is whether the district court
committed reversible error in refusing Tejero’s fee application under the
FDCPA. We review the district court’s denial of “attorney[’s] fees for abuse
of discretion, reviewing factual findings for clear error and legal conclusions
de novo.” LifeCare Mgmt. Servs. L.L.C. v. Ins. Mgmt. Adm’rs Inc., 703 F.3d
835, 846 (5th Cir. 2013).
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A.
As a general matter in the United States,“[e]ach litigant pays his own
attorney’s fees, win or lose.” Hardt v. Reliance Standard Life Ins. Co., 560
U.S. 242, 253 (2010). This background principle, known as the “American
Rule,” can be altered or amended by statute or contract. Ibid. In creating
exceptions to the American Rule, Congress employs varying statutory
language. Some statutes permit an award where “appropriate,” see, e.g., 42
U.S.C. § 7607(f), or in the “discretion” of the district court, see, e.g., 15
U.S.C. § 77k(e). Other statutes allow the district court to award attorney’s
fees to the “prevailing party,” see, e.g., 42 U.S.C. § 1988(b), or to the litigant
who brings a “successful action,” see, e.g., 12 U.S.C. § 3417(a)(4).
Tejero’s request for attorney’s fees is premised on the FDCPA, which
authorizes fee shifting in a successful action. Its statutory text provides:
[A]ny debt collector who fails to comply with any provision of
[the FDCPA] with respect to any person is liable to such person
in an amount equal to the sum of—
....
(3) in the case of any successful action to enforce the foregoing
liability, the costs of the action, together with a reasonable
attorney’s fee as determined by the court.
15 U.S.C. § 1692k(a)(3) (emphasis added).
The first key word is “successful.” As a matter of common usage,
“successful” means obtaining a “favorable outcome.” Successful,
American Heritage Dictionary 1740 (5th ed. 2011). And
“outcome” means an “end result”—it connotes finality. Id. at 1251. Perhaps
if read in isolation, the word “successful” could extend to cover a private
settlement that awards a litigant a favorable end result.
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But the word “successful” does not stand alone in the statute;
instead, it modifies the word “action.” Action, in turn, means an “action at
law” or a “lawsuit”—that is, “an ordinary proceeding in a court of justice,
by which one party prosecutes another party for the enforcement or
protection of a right.” Action, Black’s Law Dictionary 32–33 (9th ed.
2009) (quotation omitted). The word connotes a formal adjudication or “a
judicial proceeding, which . . . will result in a judgment.” Id. at 32 (quotation
omitted); see also Buckhannon Bd. & Care Home, Inc. v. W. Va. Dep’t of Health
& Hum. Res., 532 U.S. 598, 619 (2001) (Scalia, J., concurring) (“[F]ee-
shifting statutes require that there be an ‘action’ . . . which in legal parlance
(though not in more general usage) means a lawsuit.”(emphasis omitted)).
The phrase “successful action” thus requires a favorable end or result from
a lawsuit—not merely success in vacuo.
Next, consider the infinitive phrase “to enforce the foregoing
liability.” An infinitive phrase expresses purpose. See The Chicago
Manual of Style ¶ 5.107 (17th ed. 2017). Here, “to enforce” expresses
the purpose of the “successful action.” Thus, the action must succeed in its
purpose of enforcing FDCPA liability. And like the word “action,” the word
“enforce” connotes a formal command or decree. See Enforcement,
Black’s Law Dictionary 608 (“The act or process of compelling
compliance with a law, mandate, command, decree or agreement.”).
“Liability” means “[t]he quality or state of being legally obligated or
accountable.” Liability, Black’s Law Dictionary 997.
Putting this all together, a “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. Tejero won no such relief because he settled before his lawsuit
reached any end result, let alone a favorable one. And by settling, Portfolio
Recovery avoided a formal legal command or decree from Tejero’s lawsuit.
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Tejero’s alternative interpretation requires rewriting the FDCPA’s
fee-shifting provision. In Tejero’s telling, his “action” was “successful”
because he settled for $1,000, which are the statutory damages allowed by
the FDCPA. See 15 U.S.C. § 1692k(a)(2)(A). That might mean that Tejero
was “successful,” but it does not mean that his “action” was “successful.”
Nor does it mean that Tejero used his “action” “to enforce the foregoing
[FDCPA] liability.” Id. § 1692k(a)(3). Rather, he used a settlement
agreement. And that settlement agreement did not “enforce” FDCPA
“liability” because it did not compel Portfolio Recovery to do anything.
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. 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. See Nielsen v. Preap, 139 S. Ct. 954, 969 (2019) (noting we must give effect
to the words Congress used); Antonin Scalia & Brian A. Garner,
Reading Law: The Interpretation of Legal Texts 174 (2012)
(same).
B.
Nor are we persuaded that we should apply the catalyst theory to the
FDCPA’s fee-shifting provision. The catalyst theory posits that a plaintiff
succeeds “if it achieves the desired result because the lawsuit brought about
*
As we explained in Tejero I, it is unclear that the settlement in this case was purely
voluntary because prior to summary judgment, the district court ordered the parties to
exchange settlement offers and then sanctioned Tejero for failing to do so. See 955 F.3d at
459 (“We take this opportunity to reiterate the rule that has (or at least should have)
applied in our Circuit for the last twenty-five years: If a party is forced to make a settlement
offer because of the threat of sanctions, and the offer is accepted, a settlement has been
achieved through coercion. Such a result cannot be tolerated.” (quotation omitted)). But
neither side has asked us (or the district court) to set aside the settlement as involuntary.
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a voluntary change in the defendant’s conduct.” Buckhannon, 532 U.S. at
601. That is, the lawsuit itself might not have succeeded—but it incentivized
the defendant to give the plaintiff something. A win’s a win, right?
Not here. In Buckhannon, the Supreme Court held that the catalyst
theory cannot justify fee shifting under “prevailing party” statutes. See 532
U.S. at 601 (quoting the Fair Housing Amendments Act, 42 U.S.C
§ 3613(c)(2)). To qualify as a “prevailing party,” the Court held that a
litigant must obtain some sort of judicially sanctioned relief that materially
alters the relationship between the parties. Id. at 604–05. Private settlements
lacking “judicial approval and oversight” therefore fall outside the scope of
the statute. Id. at 604 n.7. Buckhannon says that relief bearing the necessary
“judicial imprimatur” to qualify a litigant as a prevailing party includes a
judgment on the merits or a judicially sanctioned consent decree. Id. at 604–
05.
After Buckhannon, our court applied the same rationale to other
“prevailing party” statutes, like 42 U.S.C. § 1988. We have explained that a
plaintiff must “obtain actual relief, such as an enforceable judgment or a
consent decree” that “materially alters the legal relationship between the
parties” and “modifies the defendant’s behavior in a way that directly
benefits the plaintiff at the time of the judgment.” Energy Mgmt. Corp. v. City
of Shreveport, 467 F.3d 471, 482 (5th Cir. 2006) (quotation omitted). Private
settlements without judicial endorsement don’t count. Davis v. Abbott, 781
F.3d 207, 214 (5th Cir. 2015). Nor do “purely technical or de minimis”
victories—even when they carry judicial imprimaturs. Jenevein v. Willing, 605
F.3d 268, 271 (5th Cir. 2010) (quotation omitted).
The question therefore is whether the catalyst theory should apply to
“successful action[s]” under 15 U.S.C. § 1692k(a)(3) notwithstanding its
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inapplicability to “prevailing party” statutes. We think not. That’s for two
reasons.
First the text. It’s true that the texts in the two provisions are
different. But they’re not meaningfully different. Black’s entry for
“prevailing party” lists “successful party” as a synonymous phrase carrying
similar legal salience. Prevailing Party, Black’s Law Dictionary 1232.
And as we explained in our textual analysis above, 15 U.S.C. § 1692k(a)(3)—
like the “prevailing party” statute in Buckhannon—requires a formal lawsuit,
success in that lawsuit, and some form of judicial relief (as opposed to private
relief ) that enforces the winner’s rights.
Second the precedent. The Supreme Court has been clear that similar
fee-shifting statutes must be interpreted consistently. In Buckhannon, for
example, the Supreme Court held that various “prevailing party” provisions
found throughout the U.S. Code are “nearly identical” and must bear a
common meaning. 532 U.S. at 603 n.4; see also Ruckelshaus v. Sierra Club, 463
U.S. 680, 691 (1983) (explaining that “similar attorney’s fee provisions
should be interpreted pari passu”). And the Court has not distinguished fee-
shifting provisions that require a “prevailing party” from those that require
a “successful action.” To the contrary, the Court discussed those phrases
interchangeably in Marx v. General Revenue Corp., 568 U.S. 371, 385–86
(2013). And in Buckhannon, the Court cited a compendium of 120 attorney’s
fee statutes—including both “prevailing party” and “successful action”
provisions—without suggesting any difference between them. See 532 U.S.
at 603. Moreover, the Court has described a “prevailing party” under § 1988
as one who “filed a successful action,” Kay v. Ehrlel, 499 U.S. 432, 434
(1991), or as “one who has succeeded on any significant claim,” Tex. State
Tchrs. Ass’n v. Garland Indep. Sch. Dist., 489 U.S. 782, 791 (1989).
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Prior to Buckhannon, we held that a favorable settlement could merit
the award of attorney’s fees under a “successful action” provision. See Gram
v. Bank of La., 691 F.2d 728, 729–30 (5th Cir. 1982) (interpreting 15 U.S.C.
§ 1640(a)(3)). In Gram, we recognized that “prevailing party” and
“successful action” should be interpreted interchangeably. Id. at 730. And
because pre-Buckhannon Supreme Court precedent held that a “prevailing
party” included a litigant who achieved a meaningful settlement, we
reasoned that a “successful action” provision must encompass favorable
settlements too. See id. at 729–30 (“It is inconceivable that Congress
intended that we give the two statutes opposite constructions.”). But
Buckhannon overruled all of this. See 532 U.S. at 603 & n.4. Therefore, we
follow Buckhannon not Gram. See Gahagan v. U.S. Citizenship & Immigr.
Servs., 911 F.3d 298, 302 (5th Cir. 2018) (“Three judge panels . . . abide by a
prior Fifth Circuit decision until the decision is overruled, expressly or
implicitly, by either the United States Supreme Court or by the Fifth Circuit
sitting en banc.” (quotation omitted)).
Recent circuit precedent is in accord. In Flecha v. Medicredit, Inc., 946
F.3d 762, 770 n.1 (5th Cir. 2020), we described attorney’s fees under the
“successful action” provision of 15 U.S.C. § 1692k(a)(3) as a benefit awarded
to “prevailing parties.” The Fourth Circuit has explained that “there is little
reason to suppose that a successful action is anything more or less than an
action brought by a prevailing party.” Nigh v. Koons Buick Pontiac GMC, Inc.,
478 F.3d 183, 186 (4th Cir. 2007) (quotation omitted). In considering fee
shifting under the Fair Credit Reporting Act (“FCRA”), which is the “sister
of the FDCPA,” the Seventh Circuit could not “find anything in the text,
structure, or legislative history of the Act to suggest that its [successful-
action] attorney[’s] fee provision has a different meaning from the
[prevailing-party] provision at issue in Buckhannon.” Crabill v. Trans Union
L.L.C., 259 F.3d 662, 667 (7th Cir. 2001); see also Dechert v. Cadle Co., 441
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F.3d 474, 475 (7th Cir. 2006) (explaining that “a ‘successful action’ is . . .
one in which the plaintiff was a prevailing party”). And the Eleventh Circuit
relied on Crabill to equate a “successful action” under the FCRA with a
“prevailing party” under other fee-shifting statutes. Nagel v. Experian Info.
Sols., Inc., 297 F.3d 1305, 1307 (11th Cir. 2002).
At most, Tejero’s FDCPA suit was the catalyst that spurred Portfolio
Recovery to settle. The catalyst theory does not make Tejero’s action a
successful one under 15 U.S.C. § 1692k(a)(3). Therefore, Tejero is not
entitled to fees.
AFFIRMED.
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