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Texas debt collector loses case, gets hit with a massive fee request

Phoenix Recovery Group, also known as Tolteca Enterprises, Inc., lost a class action lawsuit in  December of 2019. A district judge in ruled that Phoenix’s debt collection letters to consumers violated the Fair Debt Collection Practices Act (“FDCPA”) by omitting language required by law and by being misleading as to the amount of the debt.

            The judge ruled only as to liability and the parties continued to litigate as to the amount Phoenix would have to pay. Under the FDCPA, Phoenix would owe statutory damages, plus the a reasonable attorney fee and costs. In an FDCPA class action, the maximum statutory damages were 1% of the net worth of Phoenix. In February of 2021, the parties stipulated 1% of Phoenix’s net worth was $3,600. Two months later, the parties agreed Phoenix would pay statutory damages of $3,600 to the class and $1,000 to the lead plaintiff. The parties were unable to agree to the amount of attorney fees Phoenix would pay.

            The judge ordered plaintiff’s counsel to submit a fee request. This amount is now what the plaintiff paid her lawyers. Nearly all FDCPA cases are taken on contingency, meaning the lawyer gets paid if they win the case or settle. These fees almost always dwarf the statutory damages. This case was no exception.

            The plaintiff’s lawyers requested $101,995 in fees and $8,071.86 in costs (the cost of mailing the class notice to 13,844 consumers who received unlawful letters from Phoenix). Phoenix had earlier ignored the opportunity to settle for $20,000 and only offered to settle after 22 months of litigation, and then only for a nuisance value.

            The judge hasn’t ruled on the fee request.