Jack Cooper v. Retrieval Masters Creditors ( 2022 )

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 18‐2358
JACK W. COOPER,
Plaintiff‐Appellant,
v.
RETRIEVAL‐MASTERS CREDITORS BUREAU, INC.,
Defendant‐Appellee.
____________________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 1:16‐cv‐02827 — Gary Feinerman, Judge.
____________________
ARGUED JANUARY 19, 2022 — DECIDED JULY 29, 2022
____________________
Before WOOD, HAMILTON, and JACKSON‐AKIWUMI, Circuit
Judges.
HAMILTON, Circuit Judge. This appeal addresses attorney
fee awards to prevailing plaintiffs under consumer‐protection
statutes where damages are usually modest and the plaintiff
has rejected what hindsight shows to have been a substantial
early settlement offer. Plaintiff Jack Cooper sued defendant
Retrieval‐Masters Creditors Bureau for violating provisions
of the Fair Debt Collection Practices Act in trying to collect a
2 No. 18‐2358
debt. See 15 U.S.C. § 1692 et seq. Shortly after the defendant
filed its answer, a magistrate judge tried to mediate a settle‐
ment. During the meeting, the defendant made and plaintiff
rejected an oral settlement offer of $500 in damages plus rea‐
sonable attorney fees and costs incurred to that point. The
meeting ended without an agreement. The next day, the de‐
fendant made a written offer of judgment under Federal Rule
of Civil Procedure 68 for $4,600 including attorney fees and
costs. Cooper did not accept the offered judgment, and the
lawsuit proceeded.
The district court eventually granted summary judgment
to Cooper on liability. Damages were tried to a jury, which
awarded Cooper $500. Cooper and his attorneys then sought
an award of attorney fees and costs totaling more than
$66,000. The district court awarded fees and costs of less than
$8,000, effectively limiting the fee award to fees incurred up
to the time when Cooper rejected the oral settlement offer in
the early mediation session, as if defendant had made a Rule
68 offer more favorable than the final verdict. Cooper v. Re‐
trieval‐Masters Creditors Bureau, Inc., 338 F. Supp. 3d 729 (N.D.
Ill. 2018). Cooper has appealed the attorney fee award as in‐
sufficient. We vacate the district court’s fee award and remand
for proceedings consistent with this opinion.
I. Factual and Procedural Background
A. The Case on the Merits
In February 2016, defendant Retrieval‐Masters Creditors
Bureau (RMCB) sent plaintiff Jack Cooper a letter seeking to
collect a consumer debt of a little over $300. The letter directed
Cooper to include certain information with his payment so
that RMCB could update the credit bureau. Cooper
No. 18‐2358 3
responded the next month by suing RMCB for violating 15
U.S.C. § 1692e(5) & (10). Cooper alleged that RMCB’s letter
falsely threatened to report his debt to credit bureaus even
though RMCB had no actual intention to do so.
After Cooper filed his complaint, defendant asked his law‐
yer for a settlement demand. Cooper replied that he would
settle for $7,600 including attorney fees and costs. Defendant
rejected the demand and answered the complaint. The district
court referred the matter to a magistrate judge for a settlement
conference that was held in July 2016.
During the settlement conference, RMCB made an oral of‐
fer to pay Cooper $500 in damages, plus reasonable attorney
fees and costs incurred to date. Cooper rejected the oral offer.
Later in the session, RMCB actually backtracked. It reduced
its oral offer to $250 in damages, plus reasonable attorney fees
and costs to date. Not surprisingly, Cooper rejected that offer
as well, and no settlement was reached. The next day, defend‐
ant made a written offer of judgment pursuant to Federal Rule
of Civil Procedure 68, proposing to pay $4,600 including at‐
torney fees and costs and to allow the court to enter judgment
against it. Cooper also rejected that offer.
Cooper later filed a motion for summary judgment as to
liability. RMCB filed several motions seeking more time to re‐
spond, all of which the district court granted. In the end,
though, RMCB failed to submit any brief or evidence to op‐
pose Cooper’s motion. The court granted summary judgment
for Cooper as to liability and scheduled a jury trial for the
damages. Cooper v. Retrieval‐Masters Creditors Bureau, Inc., No.
16‐c‐2827, 2017 WL 2404952 (N.D. Ill. June 2, 2017). At trial,
Cooper’s attorneys argued that he was entitled to between
$6,000 and $600,000 in actual damages, plus the maximum
4 No. 18‐2358
$1,000 in statutory damages. The jury awarded Cooper $500
in statutory damages and no actual damages. The court en‐
tered final judgment for Cooper for $500. Cooper v. Retrieval‐
Masters Creditors Bureau, Inc., 338 F. Supp. 3d at 736. RMCB
did not appeal and, at the time of oral argument in this matter,
had not yet paid the judgment.
B. The Attorney Fee Award
The Fair Debt Collection Practices Act relies primarily on
its private right of action to enforce compliance. See 15 U.S.C.
§ 1692k; S. Rep. No. 95‐382 at 5–6 (1977), as reprinted in 1977
U.S.C.C.A.N. 1695, 1699–1700 (new law expected to be “pri‐
marily self‐enforcing; consumers who have been subjected to
collection abuses will be enforcing compliance,” and legisla‐
tion provided no new personnel or budget for agency enforce‐
ment). Damages are usually modest, however. The statute al‐
lows awards of actual damages plus a maximum of $1,000 in
statutory damages in individual cases. The Act allows a pre‐
vailing plaintiff to recover reasonable attorney fees and costs
from the defendant. § 1692k(a).
After winning the judgment on the merits, Cooper sought
an award of $65,357.90 as an attorney fee and $1,042.37 in
costs. Cooper, 338 F. Supp. 3d at 732. The district court
awarded all of the requested costs but only about one tenth of
the fees sought. The court first found that all the hours
Cooper’s attorneys spent working on the case after he rejected
RMCB’s oral offer of five hundred dollars plus fees and costs
were unreasonable. Id. at 734. The court reasoned that
Cooper’s attorneys knew or should have known that he was
unlikely to win any actual damages or even the maximum
$1,000 in statutory damages, so they should have recognized
that there would have been no benefit in proceeding to trial.
No. 18‐2358 5
Id. at 733–34. The court then calculated the lodestar amount
for the time spent until the settlement offer was rejected and
reduced that amount by twenty percent. (The lodestar
amount is determined by multiplying the attorney’s reasona‐
ble hourly rate by the number of hours the attorney reasona‐
bly expended. Schlacher v. Law Offices of Phillip J. Rotche & As‐
sociates, P.C., 574 F.3d 852, 856 (7th Cir. 2009).) The court rea‐
soned that Cooper received a “meager verdict,” noting that he
recovered only $500 in statutory damages after seeking as
much as $600,000 in actual damages, plus the maximum
$1,000 in statutory damages. 338 F. Supp. 3d at 736. The final
award was for $6,845.76 in attorney fees and $1,042.37 in costs.
Id. at 737.
II. Analysis
A. Subject‐Matter Jurisdiction
Before reaching the merits of this appeal, we first address
defendant’s contention that Cooper lacked standing to sue, so
that the district court lacked subject‐matter jurisdiction to
award fees and costs. Defendant argues for the first time in
this appeal by Cooper that he failed to prove a concrete injury
resulting from defendant’s letter.
Article III of the Constitution limits the jurisdiction of fed‐
eral courts to cases and controversies, one essential element
of which is the plaintiff’s standing to bring the case. TransUn‐
ion LLC v. Ramirez, 141 S. Ct. 2190, 2203 (2021). Standing re‐
quires a plaintiff to plead sufficiently and eventually to prove
“(i) that he suffered an injury in fact that is concrete, particu‐
larized, and actual or imminent; (ii) that the injury was likely
caused by the defendant; and (iii) that the injury would likely
be redressed by judicial relief.” Id., citing Lujan v. Defenders of
6 No. 18‐2358
Wildlife, 504 U.S. 555, 560–61 (1992). After the district court is‐
sued its judgment on the merits in this case, this court issued
several opinions restricting standing in cases under the
FDCPA. See, e.g., Wadsworth v. Kross, Lieberman & Stone, Inc.,
12 F.4th 665, 668–69 (7th Cir. 2021); Larkin v. Finance System of
Green Bay, Inc., 982 F.3d 1060, 1066 (7th Cir. 2020); Casillas v.
Madison Avenue Associates, Inc., 926 F.3d 329, 333–34 (7th Cir.
2019).
If this were a direct appeal from a final judgment on the
merits, we would of course entertain such a challenge to sub‐
ject‐matter jurisdiction even if the issue were being raised for
the first time on appeal. E.g., Perez v. K & B Transportation, Inc.,
967 F.3d 651, 654 (7th Cir. 2020). The problem here is that de‐
fendant did not appeal the judgment against it on the merits.
That judgment was entered in 2017 and was not appealed. It
is final. Defendant is attempting in this appeal to raise a col‐
lateral challenge to subject‐matter jurisdiction after it had a
fair opportunity to raise such a challenge in a direct appeal.
Between these parties, the district court’s subject‐matter juris‐
diction is now res judicata. See Travelers Indemnity Co. v. Bai‐
ley, 557 U.S. 137, 152−53 (2009), citing Insurance Corp. of Ireland,
Ltd. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 702 n.9
(1982) (“A party that has had an opportunity to litigate the
question of subject‐matter jurisdiction may not … reopen that
question in a collateral attack upon an adverse judgment.”);
Chicot County Drainage District v. Baxter State Bank, 308 U.S.
371, 376 (1940) (federal courts’ determinations of jurisdiction
are “open to direct review [but] may not be assailed collater‐
ally”); see also Dexia Crédit Local v. Rogan, 602 F.3d 879, 883
(7th Cir. 2010) (rejecting collateral challenge to subject‐matter
jurisdiction for judgment that had become final); 18A Charles
Alan Wright & Arthur R. Miller, Federal Practice and
No. 18‐2358 7
Procedure § 4428 (3d ed.) (explaining general rule against col‐
lateral challenges to subject‐matter jurisdiction and noting a
few exceptions that do not apply here). Res judicata defeats
defendant’s challenge to Cooper’s standing.1
B. The Attorney Fee Award
We now turn to the merits of the fee award. We review an
award of attorney fees for abuse of discretion, though we re‐
view de novo the district court’s legal conclusions and meth‐
ods for calculating the award. Anderson v. AB Painting & Sand‐
blasting Inc., 578 F.3d 542, 544 (7th Cir. 2009).
A person who prevails on an FDCPA claim against a debt
collector is entitled to recover the costs of the action and rea‐
sonable attorney fees. 15 U.S.C. § 1692k(a)(3). No precise for‐
mula establishes a reasonable attorney fee, but the starting
point is usually the lodestar method. Schlacher v. Law Offices of
Phillip J. Rotche & Associates, P.C., 574 F.3d 852, 856 (7th Cir.
2009). As mentioned previously, the lodestar method multi‐
plies the attorney’s reasonable hourly rate by the hours the
attorney reasonably expended. Id. After calculating the lode‐
star, the court may adjust the figure “to reflect various factors
including the complexity of the legal issues involved, the de‐
gree of success obtained, and the public interest advanced by
the litigation.” Id. at 856–57. The controversy here focuses on
1 Defendant’s effort to vacate the entire fee award faces another obsta‐
cle. Defendant did not file a cross‐appeal. The longstanding rule requiring
a cross‐appeal would prevent us from modifying a judgment in favor of
an appellee who did not file its own cross‐appeal. See, e.g., Greenlaw v.
United States, 554 U.S. 237 (2008) (reversing appellate court’s increase in
defendant’s sentence where government filed no cross‐appeal); Richardson
v. City of Chicago, 740 F.3d 1099, 1101 (7th Cir. 2014) (applying Greenlaw in
civil case).
8 No. 18‐2358
the dramatic reduction in the requested fee by applying these
factors to Cooper’s rejection of the oral settlement offer in the
early settlement conference. The district court held that all the
hours spent by Cooper’s counsel after rejecting that settle‐
ment offer were unreasonable.
1. Substantial Settlement Offer
The role of rejected settlement offers in reducing statutory
attorney fee awards is a difficult and recurring subject, espe‐
cially under consumer‐protection statutes, employment and
civil‐rights statutes, and other statutes under which damages
awarded to successful plaintiffs may often be modest as com‐
pared to the attorney efforts needed to prevail. Since Marek v.
Chesny, 473 U.S. 1 (1985), Rule 68 has provided a clear path for
a defendant who wants to reduce the risk of a high fee award,
at least under some fee‐shifting statutes. Rule 68 limits the
costs that a prevailing party may recover if the party rejected
the defendant’s pre‐trial offer of judgment and ultimately re‐
ceived a less favorable award at trial. Fed. R. Civ. P. 68(d); see
also Cole v. Wodziak, 169 F.3d 486, 487–88 (7th Cir. 1999), citing
Marek, 473 U.S. at 11.
To obtain the benefit of Rule 68, a defendant’s offer must
be made in writing and presented to the plaintiff at least 14
days before the date set for trial. Fed. R. Civ. P. 68(a);
Grosvenor v. Brienen, 801 F.2d 944, 948 (7th Cir. 1986). Once
those requirements are met, Rule 68 applies to bar the prevail‐
ing party from recovering any costs incurred after the party
rejected the defendant’s offer. Fed. R. Civ. P. 68(d).
Rule 68 was created to encourage settlements, but recov‐
erable “costs” are usually a small part of litigation expenses.
Under fee‐shifting statutes that treat attorney fees as part of
No. 18‐2358 9
the costs subject to Rule 68, however, the rule’s power is mag‐
nified exponentially. Under such statutes, a plaintiff who re‐
ceives a Rule 68 offer of judgment must “think very hard”
about whether to continue with the litigation. Marek, 473 U.S.
at 11. A plaintiff who rejects an early offer of judgment that
includes attorney fees and costs incurred to date runs the risk
of forfeiting fees for all later work unless the final verdict is
more favorable than the early offer.
Imposing such a difficult decision on plaintiffs has been
justified because Rule 68 strikes a balance by including sev‐
eral important protections for the plaintiff. The Rule 68 offer
must be in writing, the plaintiff must have 14 days to respond,
and the offering party may not revoke or amend the offer dur‐
ing that time. The offering party also bears the risk of any si‐
lence or ambiguity, especially related to attorney fees. Sanchez
v. Prudential Pizza, Inc., 709 F.3d 689, 692 (7th Cir. 2013);
Grosvenor, 801 F.2d at 948.
Rule 68’s limit on “costs” does not apply, however, to at‐
torney fees when the statute providing for recovery, like the
FDCPA, was drafted to treat attorney fees as separate from
costs. Paz v. Portfolio Recovery Associates, LLC, 924 F.3d 949, 953
(7th Cir. 2019). The FDCPA entitles plaintiffs to an award of
“costs of the action, together with a reasonable attorney’s fee
as determined by the court.” 15 U.S.C. § 1692k(a)(3). Because
of this language separating costs and attorney fees in the stat‐
ute, we have held that Rule 68 does not apply by its terms to
attorney fee awards under the FDCPA. Paz, 924 F.3d at 953. At
the same time, nothing prevents an FDCPA defendant from
making a formal Rule 68 offer of judgment that includes at‐
torney fees and costs, as occurred here.
10 No. 18‐2358
Even though Rule 68 is not directly applicable to this case
because the district court did not base its fee award on
RMCB’s later Rule 68 offer of judgment, the rule’s procedures
and protections for plaintiffs are still relevant to our review of
the district court’s attorney fee award here. They provide
guidance for a district court considering whether and how a
rejected settlement offer should affect an attorney fee award
to a prevailing plaintiff. As we explain below, a district court
should not impose what amounts to the harshest conse‐
quences of a rejected Rule 68 offer when the offering party has
not also complied with the procedural protections that Rule
68 itself provides.
The principal question in this appeal is whether the dis‐
trict court abused its discretion when it relied on Cooper’s re‐
jection of RMCB’s oral settlement offer to deny fees for the
post‐offer work his attorneys did. The district court referred
to the mandate in Moriarty v. Svec, 233 F.3d 955 (7th Cir. 2000),
as its guide for deciding the fee award but did not factor in
the procedural differences between a Rule 68 offer of judg‐
ment and RMCB’s oral offer here.
To explain, we first summarize Moriarty and its directive
to courts to consider substantial settlement offers. Next, we
clarify how Moriarty’s directive should be used to ensure we
maintain the key distinction between Rule 68 and non‐Rule 68
offers. We then apply these general principles to the facts of
this case and find that the district court abused its discretion
when it denied Cooper fees for all post‐offer work by his at‐
torneys.
No. 18‐2358 11
a. Moriarty’s Directive and Settlement Offer Types
In Moriarty, we said that district courts must consider
“substantial” settlement offers when determining a reasona‐
ble attorney fee award. 233 F.3d at 967. A substantial settle‐
ment offer is one that is equal to or more than the damages
that the prevailing party ultimately won. Id. We explained in
Moriarty that such offers are relevant because the fees a party
incurs after rejecting the offer often provide little benefit to the
party. Id. Because of the limited benefit of proceeding with the
litigation, we stated that courts “should reflect on whether to
award only a percentage (including zero percent) of the attor‐
ney’s fees that were incurred after the date of the settlement
offer.” Id. We also cautioned, however, that the existence of a
substantial settlement offer “is only one of the factors that a
district court should evaluate in making an attorney’s fee
award, and (absent an offer complying with Rule 68 where
that Rule applies) is not necessarily determinative.” Id.District courts applying Moriarty’s mandate should con‐
sider the important differences between Rule 68 offers of
judgment and non‐Rule 68 settlement offers. As noted, Rule
68 offers of judgment must be in writing and be served on the
opposing party at least 14 days before trial. Fed. R. Civ. P.
68(a); Grosvenor, 801 F.2d at 948. If accepted, the terms of the
offer will be binding on both parties. Webb v. James, 147 F.3d
617, 621 (7th Cir. 1998). In contrast, a non‐Rule 68 offer need
not be in writing, need not be left open for any particular time,
and may be amended at will. Grosvenor, 801 F.2d at 948–49. In
fact, plaintiffs may tentatively accept an oral offer during ne‐
gotiations and reconsider that decision once the offer is actu‐
ally put in writing, giving all parties a chance to change the
terms of their prior or tentative agreement. Id. The finality of
12 No. 18‐2358
the agreement that exists when a Rule 68 offer is accepted is
simply absent for many non‐Rule 68 offers. Also, in contrast
to a Rule 68 offer, rejection of a non‐Rule 68 offer does not
necessarily result in a limit on the recovery of attorney fees
and costs. Id.Because of these differences between Rule 68 offers of
judgment and non‐Rule 68 settlement offers, we have empha‐
sized that courts should not treat them as interchangeable.
See, e.g., Cole, 169 F.3d at 487 (district court legally erred when
it refused to grant fees for post‐offer work based on offer
made during oral settlement negotiations that were not even
transcribed); Grosvenor, 801 F.2d at 948–49 (explaining that
plaintiff’s post‐offer fees could not be cut off because defend‐
ant’s offer had been only oral and thus did not satisfy require‐
ments of Rule 68). Moriarty did not discuss or cite these cases
when discussing the effect of substantial settlement offers, but
its direction for courts to consider such offers must be read
through the lens of our cases cautioning against imposing
Rule 68’s harsh consequences on rejected offers that do not
satisfy its requirements for protecting their recipients.
b. Clarification of Moriarty’s Mandate
Before we address Cooper’s main argument challenging
the district court’s fee award, we take this opportunity to clar‐
ify Moriarty’s mandate to courts and to ensure it is applied in
a manner consistent with the teachings of Grosvenor and Cole.
Moriarty was a prolonged suit to collect an employer’s de‐
linquent contributions to employee benefit plans adminis‐
tered by a union. In the first appeal, 164 F.3d 323 (7th Cir.
1998), we vacated on the merits the district court’s grant of
summary judgment to the plan’s trustee. On remand, the
No. 18‐2358 13
district court again granted summary judgment to the plans’
trustee and awarded attorney fees. In the second trip to this
court, on cross‐appeals, we affirmed in part and vacated in
part on the merits. 233 F.3d at 962–63. On attorney fees, we
affirmed what we called the “Phase I” award but vacated and
remanded the “Phase II” award. We vacated because the dis‐
trict court had not evidently considered a non‐Rule 68 sub‐
stantial settlement offer that the defendant had made. We
wrote that the district court was required to consider the offer
as a factor but did not provide further guidance about what
weight it should receive. Id. at 967.
On Moriarty’s third trip to this court, we considered cross‐
appeals of the district court’s attorney fee award of $41,045.13.
429 F.3d 710 (7th Cir. 2005). We vacated again and directed
the district court to clarify its treatment of several issues af‐
fecting the fee award, including the proportionality of fees to
damages, and we described the district court’s treatment of
the settlement offer issue as “perplexing.” Id. at 719. We wrote
that the district court had discretion, but was not required, to
cut off fees incurred after a substantial settlement offer was
rejected. Id. at 719–20. We did not address in the Moriarty
opinions any of the procedural aspects of the substantial set‐
tlement offers relevant to the ultimate fee award, though we
noted in the second Moriarty appeal that it was not clear
whether the most important offer was a Rule 68 offer of judg‐
ment. 233 F.3d at 967 n.5. (It appears likely the parties settled
after Moriarty III; there is no reported district court decision
after that third remand.)
The statement in Moriarty II that district courts could even
decide to award “zero percent” of the post‐offer fees and our
affirmance of that decision in Moriarty III have signaled to
14 No. 18‐2358
courts that they may apply a strict cut‐off for post‐offer fees.
The district court here cited both cases when it held that
Cooper was not entitled to recover fees for work his attorneys
did after he rejected RMCB’s oral settlement offer. Cooper, 338
F. Supp. 3d at 733. However, as applied to the facts here, the
district court’s conclusion goes too far and conflicts with
Grosvenor, Cole, and other cases that have insisted on strict
compliance with Rule 68 before imposing such harsh conse‐
quences. See Grosvenor, 801 F.2d at 948–49; see also Cole, 169
F.3d at 487.
The best way to clarify this tension in our caselaw is to fo‐
cus on the procedural aspects of a substantial settlement offer
that is being considered to reduce a fee award. We adhere to
the teachings of Moriarty II and III that a district court must
consider several factors when setting a reasonable attorney
fee, including the rejection of a substantial settlement offer.
But the rejection of that offer, especially if it is not a Rule 68
offer of judgment that qualifies for limited fees, should not be
the sole fact that determines the fee award. Rather, courts
should consider the totality of the circumstances and focus on
whether the lodestar reflects the unique facts of the case or
whether it should be adjusted up or down to better account
for those facts. E.g., Paz, 924 F.3d at 952, 955 (upholding denial
of post‐offer fees because district court dealt a “substantial
blow” to the plaintiff’s case before trial by dismissing several
of his claims, the settlement offer was three times the statutory
damages available, and “every indication from the record
[was] that [the plaintiff] had but the slimmest chances of re‐
ceiving” any more than the statutory damages). But see Capps
v. Drake, 894 F.3d 802, 806–07 (7th Cir. 2018) (rejecting district
court’s determination that plaintiff’s damages award was de
minimis and he was not entitled to post‐offer fees because the
No. 18‐2358 15
plaintiff’s primary goal from the litigation was to obtain a
judgment of liability, which none of the settlement offers pro‐
vided).
Most pertinent here, in considering the totality of the cir‐
cumstances, it is important for district courts to maintain and
respect the distinction between Rule 68 offers of judgment
and other settlement offers. Rule 68’s potentially powerful
consequences are justified by several protections that are not
available for plaintiffs considering non‐Rule 68 offers like the
one here. In this case, for example, RMCB made its initial oral
offer, had it rejected, and replaced it with a less favorable offer
all within the same meeting. Permitting courts to deny fees for
all post‐offer work solely because a party rejected a non‐Rule
68 offer without considering such circumstances of the case,
as seems to have happened here, would give defendants the
benefit of Rule 68 without providing any of the key safe‐
guards that protect a plaintiff considering a Rule 68 offer.
c. Application
Here, RMCB made a $500 oral offer during the settlement
conference in July 2016. Cooper rejected it on the spot, and
RMCB then lowered its offer to $250, which Cooper also re‐
jected. We agree with the district court’s initial determination
that RMCB’s $500 offer counts here as a “substantial” settle‐
ment offer because Cooper recovered exactly that amount in
damages from the jury. Nevertheless, we conclude that the
district court’s refusal to grant any post‐offer fees was an
abuse of discretion because its only justification was that
Cooper rejected that oral offer.
To defend the minimal fee award, RMCB asserts that the
court did not use Cooper’s rejection of the $500 offer as the
16 No. 18‐2358
sole justification for denying the post‐offer fees. RMCB con‐
tends that the court also focused on the overall strength of the
case and the unlikelihood that Cooper would recover much
more than RMCB’s offer if he went to trial.
We read the district court’s decision differently. The
court’s reference to the weakness of Cooper’s case was simply
another explanation for why he should have accepted
RMCB’s offer. It was not a separate factor or consideration un‐
derlying the court’s decision. The court instead gave decisive
weight to one factor, the rejected oral offer. The district court
abused its discretion when it decided to exclude all the hours
Cooper’s attorneys worked after he rejected RMCB’s $500 of‐
fer from the lodestar calculation, effectively giving defendant
the benefit of Rule 68 without having complied with its pro‐
cedures to protect plaintiffs.
There was a way for defendant to obtain the benefits of
Rule 68 as to the $500 offer here: make a firm offer in writing,
leaving it open for 14 days. If defendant had done that, if
plaintiff had rejected that firm offer, and if the district court
had given decisive weight to that rejection, we would under‐
stand that denial of all post‐offer fees to be an appropriate ex‐
ercise of discretion. While Rule 68 does not apply to attorney
fee awards under the FDCPA, as noted above, that scenario
would be a permissible exercise of discretion. Giving such de‐
cisive weight to an oral offer of settlement, however, was not
fair.
2. Proportionality
In addition to denying Cooper post‐offer fees, the district
court also reduced the lodestar calculation of the remaining
pre‐offer hours by twenty percent because it found that
No. 18‐2358 17
Cooper had limited success at trial. Cooper, 338 F. Supp. 3d at
736. The court based its conclusion on the fact that Cooper’s
counsel had asked the jury to award between $6,000 and
$600,000 in actual damages, but the jury awarded only $500 in
statutory damages. Id.
Courts should consider the proportionality between the
amount of damages the plaintiff recovered and the fee award
as a factor when deciding to adjust the lodestar amount. Spe‐
gon v. Catholic Bishop of Chicago, 175 F.3d 544, 558 (7th Cir.
1999). However, the “fee awards ‘should not be linked me‐
chanically to a plaintiff’s [damages] award.’” Schlacher, 574
F.3d at 857, quoting Eddleman v. Switchcraft, Inc., 927 F.2d 316,
318 (7th Cir. 1991). A court should not deny a party its re‐
quested fees solely because they would exceed the damages
or automatically reduce the fees to make them equivalent to
the damages received. Deicher v. City of Evansville, 545 F.3d
537, 546 (7th Cir. 2008). The assumption in general should not
be that the fee award can never be larger than the damages.
Id.We have warned district courts against applying such a
mechanical proportionality analysis. Some cases involve “im‐
portant public interests which may not be reflected in the size
of a particular recovery.” Connolly v. National School Bus Ser‐
vice, Inc., 177 F.3d 593, 597 (7th Cir. 1999). For example, aside
from the possibility of receiving actual damages, plaintiffs
pursuing an action under the FDCPA can recover a maximum
of $1,000 in statutory damages. 15 U.S.C. § 1692k(a)(1)–(2)(A).
Despite the likelihood of small awards, Congress explicitly in‐
cluded a provision in the FDCPA allowing successful plain‐
tiffs to recover reasonable attorney fees. § 1692k(a)(3). We
have explained: “‘Unlike most private tort litigants, [an
18 No. 18‐2358
FDCPA plaintiff] seeks to vindicate important … rights that
cannot be valued solely in monetary terms,’” and “the public
as a whole has an interest in the vindication” of those rights.
Tolentino v. Friedman, 46 F.3d 645, 652 (7th Cir. 1995) (omission
in original), quoting City of Riverside v. Rivera, 477 U.S. 561, 574
(1986). This provision of reasonable attorney fees under the
FDCPA is particularly important for plaintiffs like Cooper,
who recovered only $500 in statutory damages but incurred
thousands of dollars in fees and costs. Congress’s goal of us‐
ing attorney fee awards as an incentive for plaintiffs to bring
actions enforcing the rights of the public, like those under the
FDCPA, is greatly undermined if courts apply a strict propor‐
tionality analysis that fails to account for the remedial policies
that such fee awards to private attorneys general are designed
to promote.
We have acknowledged in the civil rights context that “the
cumulative effect of petty violations … may not be petty, and
if this is right then the mere fact that a suit does not result in
a large award of damages … is not a good ground for refusing
to award any attorneys’ fees.” Hyde v. Small, 123 F.3d 583, 585
(7th Cir. 1997). The same logic applies to FDCPA violations.
The minor nature of the violation or the limited damages re‐
covered should not have been major barriers to Cooper re‐
ceiving a reasonable attorney fee. “Success must be measured
not only in the amount of the recovery but also in terms of the
principle established and the harm checked.” Zagorski v. Mid‐
west Billing Services, Inc., 128 F.3d 1164, 1167 (7th Cir. 1997);
e.g., Capps, 894 F.3d at 806 (holding that the plaintiff’s smaller
damages award under 42 U.S.C. § 1983 was not de minimis
because the jury found that the officers were liable for using
excessive force against the plaintiff). Cooper was a successful
plaintiff furthering the goals of Congress when it enacted the
No. 18‐2358 19
FDCPA. At the same time, our case law also clearly allows
some consideration of proportionality, and we defer to the
district court’s exercise of discretion in choosing 20 percent as
a discount for the lack of proportionality. The problem that
calls for a remand, though, is that the district court erred in
denying all fees for post‐offer work.
3. Local Rule 83.5
In addition to his challenges to the court’s reasons for the
fee award, Cooper asserts that we should reverse the award
because the district court based its decision on privileged
statements. Cooper bases his argument on Northern District
of Illinois Local Rule 83.5, which states:
all non‐binding alternative dispute resolution
(“ADR”) proceedings referred or approved by
any judicial officer of this court in a case pend‐
ing before such judicial officer, including any
act or statement made by any party, attorney, or
other participant, shall, in all respects, be privi‐
leged and not reported, recorded, placed in evi‐
dence, made known to the trial court or jury
(without consent of all parties), or construed for
any purpose as an admission in the case re‐
ferred or in any case or proceeding.
Cooper argues that information from the settlement confer‐
ence proceedings, including RMCB’s $500 offer and his rejec‐
tion of it, falls squarely within the prohibition of Local Rule
83.5 and could not be used by the court, or even disclosed to
the court without his consent, to set the fee award.
RMCB counters that Cooper’s argument is waived and be‐
yond our consideration. Non‐jurisdictional arguments made
20 No. 18‐2358
for the first time on appeal are deemed waived or forfeited.
Mahran v. Advocate Christ Medical Center, 12 F.4th 708, 710 (7th
Cir. 2021). In particular, “a party has waived the ability to
make a specific argument for the first time on appeal when
the party failed to present that specific argument to the dis‐
trict court, even though the issue may have been before the
district court in more general terms.” Williams v. Dieball, 724
F.3d 957, 961 (7th Cir. 2013), quoting Fednav International Ltd.
v. Continental Insurance Co., 624 F.3d 834, 841 (7th Cir. 2010).
Cooper’s argument based on the Northern District’s Rule
83.5 raises an interesting question in light of our cases ad‐
dressing rejected settlement offers when setting fee awards.
E.g., Paz, 924 F.3d at 955–56; Moriarty, 233 F.3d at 967 (direct‐
ing courts to consider settlement offers). Nevertheless, we
agree with RMCB that this argument is waived. Cooper did
object to the defendant’s filing of confidential information
from the settlement negotiations at the first opportunity, in
his reply brief in support of his motion for attorney fees. The
legal basis for Cooper’s argument however was Federal Rule
of Evidence 408. He did not refer to Local Rule 83.5. Cooper’s
general discussion of the issue without a reference to his Local
Rule 83.5 theory was not sufficient to preserve the argument
he now makes. As a result, we will not consider the argument
for the first time in this appeal. If there is a debate to be had
about whether courts may consider such evidence from set‐
tlement conferences and the scope of Local Rule 83.5, it ought
to begin in the district court that established the rule.
For the reasons discussed above, we VACATE the district
court’s attorney fee award. This case is REMANDED for a de‐
termination of the amount of attorney fees consistent with this
opinion.