JURY: JOHNSON V. EATON: $4,000, PLUS

[David A. Szwak]

United States Court of Appeals,
Fifth Circuit.
No. 95-30613.

Ruth E. JOHNSON, Plaintiff-Appellee,
v.
Gregory M. EATON and Kay White, Defendants-Appellants.
April 11, 1996.
Appeal from the United States District Court for the Middle
District of Louisiana.

Before KING, DAVIS and BARKSDALE, Circuit Judges.
W. EUGENE DAVIS, Circuit Judge:

Defendants Eaton and White assert that the district court
erred by (1) awarding "additional" damages under the Fair Debt
Collection Practices Act (FDCPA), 15 U.S.C. 1692k, where no
actual damages were found, (2) requiring White to pay plaintiff
Johnson's attorney's fees and costs even though no damages were
assessed against her, (3) awarding an unreasonably high attorney's
fee in light of the nominal damages received by Johnson and (4)
failing to assess attorney's fees against Johnson because Johnson
brought the action in bad faith. We AFFIRM in part, REVERSE in
part and REMAND.

I.
Ruth Johnson purchased furniture on credit from Kornmeyer's
Furniture Company. When she defaulted on payment, Kornmeyer's
enlisted the help of attorney Greg Eaton to collect the remaining
principal balance--approximately $3,500. Through his legal
assistant, Kay White, Eaton sent a demand letter to Johnson in
March 1993. Eaton also sent Johnson a second letter that included
a questionnaire and a proposed consent judgment.

On December 16, 1993, Johnson filed a complaint against Eaton
and White in district court. She alleged that the two letters
violated various provisions of the Fair Debt Collection Practices
Act (the "FDCPA"), 15 U.S.C. 1692-1692o. Johnson alleged that
the two letters caused her actual damages and injury, including
stress, humiliation, extreme mental anguish and suffering, and
emotional distress, and that, therefore, Eaton and White were
liable for actual and additional damages, as well as attorney's
fees and costs under 1692k(a).

The district court denied a motion for summary judgment filed
by Eaton and White on the issue of their status as debt collectors
under the FDCPA. The district court granted Johnson's motion for
partial summary judgment, finding that Eaton had violated four
provisions of the FDCPA and White had violated two provisions,(1) and
reserved the issue of damages for determination by the jury. The
pretrial order noted a stipulation by Johnson that she had suffered
no actual damages as a result of receiving the demand letter--the
only communication to which White was a party.

A jury trial was held on March 8, 1995. The jury returned a
verdict finding that the conduct of Eaton was not a legal cause of
any actual damage to Johnson. The jury further determined that
Johnson was not entitled to an award of additional damages against
White, but that she was entitled to additional damages against
Eaton in the amount of $125 for each of his violations--a total of
$500.

After the verdict, Eaton and White moved for attorney's fees
and costs under 1692k(a)(3), claiming that Johnson brought this
action in bad faith and for the purpose of harassment. The
district court denied all of defendants' post-trial motions. After
reducing the number of hours claimed by Johnson's attorney from
146.3 to 106.3, the district court granted Johnson attorney's fees
in the amount of $10,830 and costs in the amount of $556.56, to be
assessed against both defendants. Johnson v. Eaton, 884 F.Supp.
1068, 1073 (M.D.La.1995). This appeal followed.

II.
Eaton and White argue first that the court erred by allowing
the jury to award "additional" damages under the FDCPA in the
absence of a finding that the plaintiff suffered actual damage. We
do not decide this issue because neither defendant preserved this
issue for appeal by objecting to the jury charge. See Fed.R.Civ.P.
51 ("No party may assign as error the giving or the failure to give
an instruction unless that party objects thereto before the jury
retires to consider its verdict....").

III.
White next complains that she should not be liable to Johnson
for attorney's fees and costs because Johnson won no damages from
her. According to White, a judgment without damages is not a
"successful" action which would support the award of attorney's
fees under the FDCPA. Johnson responds that she won a partial
summary judgment stating that White had violated the FDCPA in two
instances and that this success entitles her to attorney's fees.

The relevant portion of the FDCPA reads:
Amount of damages
(a) Except as otherwise provided by this section, any 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--(1) any actual damage sustained by such person as a
result of such failure; (2)(A) in the case of any action by an individual, such
additional damages as the court may allow, but not
exceeding $1,000; or..... (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. On a finding by the court that an action under
this section was brought in bad faith and for the purpose
of harassment, the court may award to the defendant
attorney's fees reasonable in relation to the work
expended and costs. 15 U.S.C. 1692k (emphasis added).

Johnson demonstrated that White had violated the FDCPA but
failed to enforce any liability for actual or additional damages
against White. As a result, Johnson does not meet the explicit
requirement of 1692k(a)(3) that she bring a "successful action to
enforce the foregoing liability," in order to receive attorney's
fees and costs. Johnson's argument that her success in
establishing that White violated the FDCPA is enough ignores the
plain language of the FDCPA.

Johnson responds by citing cases from other circuits which
allowed attorney's fees even though plaintiffs failed to prove
actual or additional damages or received only nominal damages. See
Emanuel v. American Credit Exchange, 870 F.2d 805, 809 (2d
Cir.1989); Graziano v. Harrison, 950 F.2d 107 (3d Cir.1991). In
Emanuel, the Second Circuit, noted that the plaintiff had proven no
actual damages and was not entitled to any additional damages and
then stated "... Emanuel should be awarded costs and attorney's
fees; the statute mandates such an award "in the case of any
successful action.' " 870 F.2d at 809. The court found that any
plaintiff who proves a violation of the FDCPA is "successful" even
if that plaintiff is unable to prevail on his claims for actual and
additional damages and fails to prove an essential element of a
claim for damages: injury. This approach takes the language of
the statute out of context and fails to give any meaning to the
limiting phrase "to enforce the foregoing liability."

In Graziano, the Third Circuit found an additional violation
of the FDCPA and reversed an award of nominal damages for
reconsideration in light of the additional violation. It then
noted that the district court had declined to award any attorney's
fees and stated "ecause we have determined that Graziano has
demonstrated two violations of the Act, rather than the one
identified by the district court, we vacate the denial of
attorney's fees and remand for reconsideration." In dicta, the
court then interpreted the FDCPA as requiring that any debt
collector who violates the act is liable for (1) actual damages (2)
additional damages and (3) attorney's fees. The court reasoned
that the structure of 1692k(a) suggested that any violation of
the Act makes the offender liable for all three of these items.
However, the court, by focusing exclusively on the structure of
1692k(a) failed to give meaning to the language in 1692k(a)(3)
which requires success in enforcing liability for actual or
additional damages before a plaintiff may be cast for attorney's
fees. A more plausible reading of the FDCPA which accounts for the
statute's structure and its language is that the most a plaintiff
can win is actual damages, additional damages and attorney's fees
and costs. However, this does not mean that every time a violation
occurs, a plaintiff will win all three. The language of the
statute places explicit conditions on an award of additional
damages which must be approved by the court and attorney's fees
which are only available where the plaintiff has succeeded in
establishing that the defendant is liable for actual and/or
additional damages.

Also, our reading of the statute will not frustrate the
objectives Congress sought to achieve in enacting the FDCPA.
Reading the FDCPA as requiring attorney's fees to be paid in
actions where the plaintiff fails to prove damages, rewards lawyers
for bringing suits to stop behavior that, by definition, has caused
legal injury to no one. Our interpretation of the statute will
require attorneys to look for more than a technical violation of
the FDCPA before bringing suit and will deter suits brought only as
a means of generating attorney's fees.

Concerns that this decision will allow debt collectors to
disregard the rights of debtors ignore two important facts: (1)
debt collectors do not know which of their targets will be injured
by their actions and thus able to obtain attorney's fees and (2)
the FDCPA as we read it today is adequate to deter debt collectors
from choosing to violate it. Under our interpretation of the
statute, the FDCPA will still punish errant debt collectors in
excess of the legal injury they impose on debtors. It does this by
mandating that the debt collector not only compensate the debtor
fully for any monetary damage, emotional distress or other injury
that the debtor can prove the debt collector caused but also by
allowing courts to assess additional, punitive damages and
requiring the debt collector to pay the debtor's attorney's fees in
addition to his own attorney's fees. We believe it entirely
reasonable to assume that Congress considered risk of such
punishment adequate to deter economic actors such as debt
collectors from violating the act intentionally.

Language in the Supreme Court decision Farrar v. Hobby, 506
U.S. 103, 120, 113 S.Ct. 566, 578, 121 L.Ed.2d 494 (1992), also
supports our decision. In Farrar, a civil rights action brought
under 42 U.S.C. 1983, the plaintiff alleged $17 million in
damages. The jury found that Farrar's civil rights had been
violated but awarded him only $1 in damages. The Supreme Court
reversed the Fifth Circuit's holding that Farrar was not a
prevailing party under 1988 but affirmed the Fifth Circuit's
conclusion that the district court abused its discretion in
awarding attorney's fees to Farrar. Specifically, the Court noted
that one of the elements of a civil rights suit for damages is
proof of "actual, compensable injury" and that "[w]hen a plaintiff
recovers only nominal damages because of his failure to prove an
essential element of his claim for monetary relief, the only
reasonable fee is usually no fee at all." Id.

White argues convincingly that Johnson's claim against her is
virtually identical to the situation discussed in Farrar. Johnson
won a declaration that White had violated the law but was unable to
prove any damages, either actual or additional, under the statute.
As a result, the most appropriate award of attorney's fees against
White is $0.

Johnson responds that Eaton changed his standard form in
response to her suit so hers is not a mere technical victory of the
type discussed in Farrar and cites cases which define "prevailing
party" as including victories that change the defendant's behavior
or legal relationship with the plaintiff. This, of course, does
not help her against White, who did not change her behavior, and
ignores the fact that in Farrar, the Supreme Court found the
plaintiff to be a prevailing party and awarded him a reasonable
attorney's fee of $0.00. Accordingly, even if we did agree with
Johnson that she merits an award of a reasonable attorney's fee
against White for proving that White violated the FDCPA, we would
find that a reasonable attorney's fee in cases where no actual or
additional damages were awarded is $0.00.

We agree with White that the district court erred when it
assessed attorney's fees against her because the FDCPA requires
that a plaintiff prove actual or additional damages in order to
receive attorney's fees and costs. Johnson did not meet this
requirement. However, even if Johnson's reading of the FDCPA was
correct and she was entitled to receive a reasonable attorney's fee
for her technical victory, Farrar makes it clear that a reasonable
fee would be $0.00.

IV.
Eaton similarly argues that the $500 Johnson recovered
against him is only nominal damages and is insufficient to support
an award of $10,830 in attorney's fees. However, Eaton's case is
much different than Farrar. In Farrar, the plaintiff demanded
$17,000,000 and "after 10 years of litigation and two trips to the
Court of Appeals, he got one dollar from one defendant." 506 U.S.
at 114, 113 S.Ct. at 575. By contrast, Johnson requested $4,000 in
damages and received $500. Also, the damages received by Johnson
were "additional" or punitive damages, designed to punish Eaton for
his wrongful acts.

In any event, we need not decide whether the district court
was within its discretion in awarding $10,000 in attorney's fees
because our reversal of the award against White requires that we
remand the award of attorney's fees for reconsideration. On
remand, the district court should reduce the award of fees against
Eaton by the amount of the fee, if any, attributable to the
preparation of the case against White.

V.
Finally, White claims that Johnson should pay her attorney's
fees because Johnson brought the suit against her in bad faith. In
order to receive an award of attorney's fees under 1692k(a)(3),
a "prevailing defendant must show affirmatively that the plaintiff
brought the FDCPA claim in bad faith and for the purposes of
harassment." Perry v. Stewart Title Co., 756 F.2d 1197, 1211 (5th
Cir.) modified on other grounds, 761 F.2d 237 (5th Cir.1985).
White violated two provisions of the FDCPA and cannot be said to
have prevailed in any sense other than the fact that she avoided a
monetary judgement. Johnson's victory was limited to a
determination that White had violated her rights but was a victory
nonetheless. Additionally, the district court's finding that
Johnson did not bring the claim in bad faith is supported by the
record and was not an abuse of discretion.

We AFFIRM the district court's determination that White is not
entitled to attorney's fees, REVERSE the court's award of fees
against White and REMAND the award of attorney's fees against Eaton
for the exclusion of fees, if any, attributable solely to
preparation of the case against White.

AFFIRMED in part, REVERSED in part and REMANDED.

1. 1The district court ruled that Eaton and White violated the
FDCPA by misrepresenting the amount of the debt to Johnson and by
contradicting the required disclosure of the 30-day validation
period in the demand letter. Eaton also was found to have
violated the FDCPA by omitting a required notice and by
simulating a court document.