Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 71 C 3134 - Joseph Sam Perry, Judge.
Swygert, Sprecher, and Wood, Circuit Judges. Swygert, Circuit Judge, dissenting.
The issue presented in this appeal is whether the district court abused its discretion in determining that petitioner, attorney for plaintiffs, was entitled to $2,000 in attorney's fees and $690.10 in costs.
Plaintiffs purchased a new car in 1971 from Ed Murphy Buick-Opel for which the cash price was $4,497.65. This purchase was financed in the amount of $2,460 through General Motors Acceptance Corporation (GMAC) on a 36-month installment contract. Defendants understated the annual percentage rate applicable to the transaction in the installment contract and GMAC sent a letter to plaintiffs informing them of this error, which letter plaintiffs denied receiving.
Plaintiffs filed an action charging violations of the Truth in Lending Act, 15 U.S.C. § 1601 et seq., and two Illinois statutes. The district court found seven violations of the Truth in Lending Act and awarded $1,000 to plaintiffs for each violation. The district court also found violations of both Illinois statutes and awarded damages in excess of $1,000, bringing the total to over $8,000. On appeal, this court held that multiple recovery for multiple errors in a single disclosure statement was impermissible and that defendants had not violated the two Illinois statutes. Mirabal v. General Motors Corp., 537 F.2d 871 (7th Cir. 1976). The judgment was reduced to a total of $2,000 "plus costs and attorney's fees . . ." 537 F.2d at 885.
On remand petitioner alleged that he had expended 350 hours on the case, 120 at the trial level and 230 on the appeal. He also alleged that GMAC's attorneys were paid over $30,000 for handling the case. The district court awarded petitioner the total costs requested and attorney's fees in the amount of $2,000. Petitioner appeals from the attorney's fee award.
The district court has broad discretion in making an award of attorney's fees because of the advantage of close observation of the work product of an attorney and an understanding of the skill and time required in the suit. Lea v. Cone Mills Corporation, 467 F.2d 277, 279 (4th Cir. 1972). Our review is limited to the determination of whether the district court abused this discretion. Waters v. Wisconsin Steel Works, 502 F.2d 1309, 1322 (7th Cir. 1974).
The instant case involves a car costing less than $5,000 and a loan of less than $2,500. Plaintiffs ultimately prevailed to the extent of $2,000 after getting somewhat over $8,000 at the original trial. Petitioner has thus received in attorney's fees an amount equal to that which his clients recovered in total.
Although the determination of hours necessary to effectively handle a case is not subject to exact determination, the amount which petitioner claims to have spent on the present case seems clearly out of proportion with the amount in controversy. Moreover, Congress has limited the liability of Truth in Lending Act violators to $1,000 per violation. 15 U.S.C. § 1640(a). To grant attorney's fees greatly in excess of a client's recovery requires strong support from the circumstances of the particular case. The instant case involved a one-time individual claim based mainly on a bona fide arithmetical error. As this court declared in Sprogis v. United Air Lines, Inc., 517 F.2d 387, 391 (7th Cir. 1975), when it balked at the fee request presented there:
First, this case does not represent the typical . . . claim envisioned by Congress and in the past sponsored by various public interest organizations. Second, the claim for attorneys' fees is not proportionate to the recovery of damages by plaintiff. Third, the precedential value of this decision is not controlling in light of [its reliance on an admitted arithmetical error].
Additionally, to grant large attorney's fee awards on the basis of relatively small injury would encourage suits which do not further the client's interest or the public's interest. The costs of these suits already forces many claims to settlement. See Landers, Some Reflections on Truth in Lending, 1977 Ill. L.F. 660, 680-81. Indeed, petitioner himself has inadvertently provided this court with an example of the questionable results in such suits. See Plaintiffs' Reply Memorandum (Document 16), page 4, and the letter attached to it. There petitioner made a settlement in a Truth in Lending case in which his client received $400 while petitioner was paid $12,000 as attorney's fees for the settlement. While such disproportionate sums may be exacted in settlement agreements, we should be loathe to automatically provide judicial approval for such results when these cases reach the courts.
Petitioner also claims that the attorneys for GMAC were paid over $30,000 and that this amount is indicative of what he should be paid (Petitioner's Brief, page 20). This contention was repeated at oral argument. This circuit has held that it is an abuse of discretion to determine attorney's fees solely on the basis of hours spent times billing rate. Waters, supra, at 1322. Petitioner wants us to go a step further and award him a fee based on what the opposing side spent in time and money. This ignores the fact that a given case may have greater precedential value for one side than the other. Also, a plaintiff's attorney, by pressing questionable claims and refusing to settle except on outrageous terms, could force a defendant to incur substantial fees which he later uses as a basis for his own fee claim. Moreover, the amount of fees which one side is ...