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Jernigan v. Protas, Spivok & Collins, LLC

United States District Court, D. Maryland

September 22, 2017

AMY JERNIGAN, et al. Plaintiffs,


         On September 15, 2017, the Court conducted a Class Action Fairness Hearing with respect to the proposed "Class Action Settlement Agreement And Release" ("Settlement Agreement"), docketed at ECF 18-1. By Final Order and Judgment of September 15, 2017 (ECF 29), this Court granted final approval of the Settlement Agreement, and dismissed all claims against defendant Protas, Spivok & Collins, LLC ("PSC"), for the reasons stated in open court. In the Order, the Court also approved three incentive awards of $4, 000 each (totaling $12, 000); designated the class of approximately 331 persons; appointed Class Counsel; awarded court costs of $884.23; approved pro rata payments from the Common Fund to the Class Members; and approved a cy pres award in accordance with the terms and designations in the Settlement Agreement.

         Class Counsel had also moved for attorneys' fees (ECF 26), supported by a memorandum (id.) and a supplement (ECF 27), which includes time records for counsel (collectively, "Motion"). Declarations of Class Counsel were also submitted. See ECF 18-3, Declaration of Scott Borison, Esquire and Declaration of Phillip Robinson, Esquire; ECF 25-2, Declaration of Phillip Robinson, Esquire. The matter of counsel fees was fully addressed at the hearing. But, for the reasons stated in open court, the Court held the matter of attorneys' fees under advisement.

         No additional hearing is needed as to the Motion. See Local Rule 105.6. For the reasons stated below, I shall grant the Motion and award the requested counsel fees of $42, 000.

         I. Background

         The background of this case is set forth in the parties' submissions and was also set forth at the hearing held on September 15, 2017. I need not restate it here. I note, however, that the case is rooted in the filing of two class action suits in July 2016, both initiated in the Circuit Court for Anne Arundel County. One was filed by Amy Jernigan and William Bonilla ("Named Plaintiffs") and the other by Leo Farber ("Class Member"). The Jernigan/Bonilla case was removed to this Court; the Farber case was not removed. Both cases arise under the Fair Debt Collection Practices Act, 15 U.S.C. § 1692, et seq. ("FDCPA") and include state law claims. Protas, Spivok & Collins, LLC, a law firm in Bethesda, Maryland, is the sole defendant.

         In particular, plaintiffs seek statutory damages arising from PSC's efforts on behalf of LVNV Funding, LLC ("LVNV") to collect debts from the Named Plaintiffs, the Class Member, and a class of similarly situated persons, all of whom are consumers. The debt collection activity was allegedly based on void and unenforceable judgments obtained by LVNV while it was not a licensed collection agency in Maryland. ECF 2, ¶ 2; ECF 25-1 at 3. Defendant denied liability.

         In the context of this case, the FDCPA caps the recovery of statutory damages at "the lesser of $500, 000 or 1 per centum of the net worth of the debt collector." 15 U.S.C. § 1692k(a)(2)(B). PSC's net worth was represented to be less than $1, 000, 000. ECF 25-1 at 3.

         Based on the 1% FDCPA cap, the total class recovery, if the case were to go to trial, would be no more than $10, 000.[1]

         Notably, Class Counsel obtained a settlement fund of $105, 000, which covers, inter alia, three incentive payments, counsel fees, and pro rata payments to class members. ECF 26 at 2. Of relevance here, Class Counsel seeks an award of attorneys' fees equal to 40% of the Common Fund, i.e., $42, 000. Id. at 8.

         II. Relevant Legal Principles

         The FDCA allows for the recovery of a "reasonable attorney's fee." See 15 U.S.C. § 1692k(a)(3). Section 1692k(a)(3) states:

[A]ny debt collector who fails to comply with any provision of this subchapter 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. . . .

Fed. R. Civ. P. 23(h) is also pertinent. It governs attorneys' fees in class actions and provides that a court may award "reasonable attorneys' fees . . . that are authorized by law or by the parties' agreement." Class Counsel represented at the hearing that their three original clients had agreed to a contingency fee of 40%.

         Notably, a court bears the responsibility to determine that fees are reasonable, even in the absence of any objections. See Fed. R. Civ. P. 23(h), 1993 Advisory Committee notes. As the Advisory Committee notes indicate, "[t]he agreement by a settling party not to oppose a fee application up to a certain amount ... is worthy of consideration, but the court remains responsible to determine a reasonable fee." Id.

         In a class action, "[t]here are two methods commonly used for calculating an attorney's fee award: the lodestar method and the 'percentage of recovery' method." Decohen v. Abbasi, LLC, 299 F.R.D. 469, 481 (D. Md. 2014) (footnote omitted); see also Advisory Committee Notes to Rule 23(h) (indicating that a court may evaluate whether a fee award in a "common fund" case is reasonable based on either a percentage-of-recovery method or the lodestar method). "With either method, the goal is to make sure that counsel is fairly compensated." Singleton v. Domino's Pizza, LLC, 976 F.Supp.2d 665, 681 (D. Md. 2013).

         The United States Supreme Court has said that the "common-fund doctrine" entitles '"a litigant or a lawyer who recovers a common fund for the benefit of persons other than himself or his client ... to a reasonable attorney's fee from the fund as a whole."' U.S. Airways, Inc. v. McCutchen, __U.S.__, 133 S.Ct. 1537, 1545 (2013) (quoting Boeing Co. v. Van Gemert, 444 U.S. 472, 478 (1980) (emphasis added)). Conversely, "the percentage of recovery method" is an "inappropriate" method for determining attorneys' fees where "the attorneys' fees are not being deducted from the Plaintiffs' recovery." Cerrato v. All. Material Handling, Inc., WDQ-13-2774, 2014 WL 7190687, at *4 (D. Md. Dec. 16, 2014); see also Fangman v. Genuine Title, LLC, RDB-14-081, ECF 411 at 9 (filed Nov. 18, 2016); Durm v. American Honda Finance Corp., WDQ-13-223, 2015 WL 6756040 at *6 (D. Md. Nov. 4, 2015).

         Typically, in a common fund case, courts favor the percentage-of-recovery method. Decohen, 299 F.R.D. at 481. See, e.g., In re Diet Drugs, 582 F.3d 524 (3d Cir. 2009) (endorsing percentage-of-recovery method to calculate attorney fee award out of settlement fund in nationwide products liability class action); Durm, 2015 WL 6756040, at *6; see also The Manual for Complex Litigation § 14.231 (4th ed. 2011) (reporting that "the vast majority of courts of appeals now permit or direct district courts to use the percentage method in common-fund cases”). In particular, the “percentage of the recovery method involves an award based on a percentage of the class recovery, set by the weighing of a number of factors by the court.” Whitaker v. Navy Fed. Credit Union, RDB-09-2288, 2010 WL 3928616, at *4 (D. Md. Oct. 4, 2010). It “is designed to allow courts to award fees from the fund 'in a manner that rewards counsel for success' . . . .” In re Cendant Corp. PRIDES Litigation, 243 F.3d 722, 732 (3rd Cir. 2001).

         Of note, “the percentage method is more efficient and less burdensome than the traditional lodestar method, and offers a more reasonable measure of compensation for common fund cases.'” Singleton, 976 F.Supp.2d at 681 (citation omitted). “An attractive aspect of the 'percentage of recovery' method is its results-driven nature which 'ties the attorneys' award to the overall result achieved rather than the hours expended.” Id. (citing Jones v. Dominion Res. Servs., 601 F.Supp.2d 756, 759 (S.D. W.Va. 2009)).

         However, “because of the percentage of recovery method's limitations, courts often employ a lodestar multiplier cross-check to ensue the reasonableness of the award.” Decohen, 299 F.R.D. at 481. See, e.g., Goldberger v. Integrated Res., Inc., 209 F.3d 43, 50 (2d Cir. 2000) (“encourag[ing] the practice of requiring documentation of hours as a 'cross check' on the reasonableness of the requested percentage”); Domonoske v. Bank of Am., N.A., 790 F.Supp.2d 466, 475 (W. D. Va. 2011). Under the lodestar method, the appropriate fee award is determined by multiplying the reasonable hourly rate by the number ...

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