Post-Judgment Collection of Unawarded Attorneys’ Fees Violates the Fair Debt Collection Practices Act

The United States District Court for the District of Arizona has ruled in a case brought under the Fair Debt Collection Practices Act (“FDCPA”) that a law firm that submits a demand for payment of unawarded post-judgment attorneys’ fees in a judgment-debtor’s refinance violates the FDCPA.

In March 2016, the law firm representing a homeowners’ association obtained a judgment against the debtor for $7,373.57. Although the law firm had included language in the judgment purporting to entitle the judgment-creditor to post-judgment attorneys’ fees and costs, the justice court that entered the judgment specified that any fees and costs would only be awarded “after submission and approval by the court.” In April 2016, less than one month later, the law firm claimed that the amount owed under the judgment was $8,760.09, which included an additional $1,053.88 in post-judgment attorneys’ fees and costs incurred after entry of the judgment. In May 2016, the law firm claimed that the post-judgment fees and costs had grown to $1,655.88 and that the total amount of the judgment was $9,162.26. And in June 2016, the law firm wrote the lender refinancing the debtor’s property (so that the debtor could pay off the judgment) that the balance due was $9,476.21. The law firm collected the full $9,476.21 out of the refinance proceeds, including approximately $2,000.00 in post-judgment attorneys' fees and costs. 

The debtor filed an FDCPA action, claiming that the law firm violated the FDCPA because its representations in collecting the judgment were “false, deceptive, or misleading” and the firm had used “unfair and unconscionable means to collect or attempt to collect [a] debt.” The District Court ruled that the law firm violated the FDCPA by demanding and collecting almost $2,000.00 of post-judgment attorneys’ fees without ever submitting those fees to the court for approval.” The Court explained:

Essentially, [the law firm] saw an opportunity to recover all the fees they wanted without the trouble of justifying the amounts to a court, and they took it. This is precisely the type of exploitative behavior the FDCPA was enacted to prohibit. Therefore, the Court concludes that Defendants violated [the FDCPA] by misrepresenting to Quicken Loans that these feeds were legally due and owing... The Court also concludes that Defendants violated [the FDCPA] by collecting an amount that was not expressly authorized by law because the Judgment specifically required approval by the justice court of additional attorneys’ fees. 

The case is Jason v. Maxwell & Morgan PC. DLG represented the Plaintiff.