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Baylor v. Mitchell Rubenstein & Associates, P.C.

United States Court of Appeals, District of Columbia Circuit

May 30, 2017

Demetra Baylor, Appellant
v.
Mitchell Rubenstein & Associates, P.C., Appellee

          Argued February 7, 2017

         On Appeals from the United States District Court for the District of Columbia (No. 1:13-cv-01995)

          Radi Dennis argued the cause and filed the briefs for appellant/cross-appellee.

          Ronald S. Canter argued the cause and filed the briefs for appellee/cross-appellant.

          Before: Henderson, Circuit Judge, and Edwards and Sentelle, Senior Circuit Judges.

          OPINION

          Edwards, Senior Circuit Judge

         In order to pursue a Master's degree in Computer Graphics, Demetra Baylor ("Appellant") took out six student loans. Several years after her graduation, Mitchell Rubenstein & Associates, P.C. ("Appellee") came calling to collect. At the heart of this case are a number of inconsistencies in letters that Appellee sent Appellant over the course of several months regarding her loans and the amounts that she owed on them, as well as Appellee's failure to direct all of its communications to Appellant's attorney after she retained counsel. In response, Appellant filed suit on December 17, 2013, alleging that Appellee had violated the Fair Debt Collection Practices Act ("FDCPA"), the District of Columbia Consumer Protections Procedures Act ("CPPA"), and the District of Columbia Debt Collection Law ("DCDCL"), statutes which target abusive debt collection and improper trade practices. See 15 U.S.C. § 1692(e); D.C. Code §§ 28-3904, -3814.

         Over the course of the next few years, the parties engaged in what the District Court termed a "particularly striking expenditure of effort and resources, " generating "excessive, repetitive, and unnecessarily sharp pleadings." Order, Dkt. No. 41, at 2. Nonetheless, all of Appellant's statutory claims were eventually resolved. Appellant accepted Appellee's offer of judgment regarding her FDCPA claim and the District Court, with the aid of a Magistrate Judge, determined the attorney's fees to which she was entitled for this success. Appellee, meanwhile, prevailed in its Motion to Dismiss all of Appellant's CPPA claims and some of her DCDCL claims, the remainder of which were rejected when the District Court subsequently granted Appellee's Motion for Summary Judgment.

         A number of orders from this "clutter[ed]…docket" are challenged on appeal. Id. First, the parties dispute the District Court's decision to adopt a Magistrate Judge's recommendation that Appellant receive approximately twenty percent of the attorney's fees that she requested. Second, Appellant asserts that the District Court erred in finding that Appellee's conduct does not fall within the aegis of the CPPA. Third, Appellant also contends that the District Court abused its discretion in failing to credit her objections to a different Magistrate Judge's denial of her Motion to Compel the disclosure of communications between Appellee and an agent of Appellant's creditor on the grounds that these documents were protected by attorney-client privilege. Appellant additionally disputes the District Court's refusal to award her attorney's fees for her efforts in litigating this issue. Finally, Appellant argues that the District Court improperly granted Appellee's Motion for Summary Judgment on her DCDCL claims. On this last point, Appellant contends that the District Court failed to appropriately account for evidence demonstrating that Appellee had "willfully violated" the DCDCL and was therefore subject to liability under the statute.

         We do not reach the question of whether the District Court abused its discretion in awarding Appellant only a percentage of the attorney's fees she sought in connection with her FDCPA claim. In addressing this issue, the District Court relied on the standard set forth in Local Civil Rule 72.2 in finding that the Magistrate Judge's proposed disposition was not "clearly erroneous or contrary to law." This was error. Federal Rules of Civil Procedure 54(d)(2)(D) and 72(b)(3) foreclose the District Court from using a "clearly erroneous or contrary to law" standard when evaluating a Magistrate Judge's proposed disposition of a fee request. The correct standard of review is de novo. We therefore reverse and remand to allow the trial judge to reconsider this matter in the first instance applying de novo review to assess the Magistrate Judge's recommendation. We affirm all of the remaining Orders challenged on appeal.

         I. BACKGROUND

         On February 21, 2013, Appellee, a law firm whose primary focus is the recovery of consumer debts, sent the first of several letters to Appellant notifying her that her account, which had been assigned file number R80465, "ha[d] been referred to [its] office for collection." Complaint, Dkt. No. 1, Ex. E; see Answer, Dkt. No. 28, at 2. It listed the creditor for her debt as Arrowood Indemnity Company and stated that she currently owed $26, 471.07, though cautioned that, "[b]ecause of interest, late charges and other charges that may vary from day to day, the amount due on the day you pay may be greater." Complaint, Dkt. No. 1, Ex. E. Following a request for more information regarding both the ownership and amount of this debt from Appellant, Appellee sent a second letter. It provided a new total for the amount that Appellant owed, $31, 268, a slight reformulation of the name of Appellant's creditor, Arrowood Indemnity Company/Tuition Guard, and identified her original creditor as Citibank (South Dakota) N.A. Complaint, Dkt. No. 1, Ex. D; Baylor v. Mitchell Rubenstein & Assocs., P.C., 55 F.Supp.3d 43, 46 (D.D.C. 2014).

         Appellant retained counsel, who contacted Appellee regarding the provenance of this debt and advised that any "future communication regarding this matter should be directed to [her] firm" rather than to Appellant. Complaint, Dkt. No. 1, Ex. B. The parties then entered into settlement negotiations, during which Appellant informed Appellee that she had additional outstanding loans not referenced in its second letter. Appellee's client referred these new loans to Appellee so that Appellant could settle all of her debt at once. See Baylor v. Mitchell Rubenstein & Assocs., P.C., 174 F.Supp.3d 146, 150 (D.D.C. 2016); Appellee's Statement of Undisputed Facts, Dkt. No. 96 ⁋⁋ 12-13. On August 22, 2013, Appellee sent another letter to Appellant's home, albeit addressed to her attorney, regarding this second set of loans. Complaint, Dkt. No. 1, Ex. A. It provided a new file number for this debt, R83798, which totaled $27, 459.48, and noted that her creditor was Tuitionguard Arrowood Indemnity. Id. After Appellant's counsel requested additional information regarding these loans, Appellee stated that Appellant owed "$27, 459.48 plus interest from 10/21/11 at the rate of 3.75% until paid" and listed Tuitionguard/Arrowood Indemnity and Student Loan Corp. as the creditor and original creditor, respectively, of this debt. Complaint, Dkt. No. 1, Ex. C.

         On December 17, 2013, Appellant filed suit in the District Court. She claimed that the inconsistencies in the communications she had received from Appellee, including, most notably, the variance in the "character and amount" of Appellant's alleged debt and the creditors associated with these loans, as well as Appellee's failure to direct all of its communications to Appellant's counsel after she had retained legal representation, constituted violations of both the FDCPA and CPPA. Complaint, Joint Appendix ("JA") 26-28, 31-33. She also asserted that these actions were proof that Appellee had both violated various provisions of the DCDCL and "knowingly maintained policies, practices and procedures that were intentionally and willfully inadequate" to meet its obligations under this statute. Id. at 29-31.

         Appellee moved to dismiss the Complaint. However, while this motion was pending, Appellee extended, and Appellant accepted, an offer of judgment regarding her FDCPA claims. See Baylor v. Mitchell Rubenstein & Assocs., P.C., 77 F.Supp.3d 113, 115 (D.D.C. 2015). A judgment was then entered "in the amount of $1, 001.00 plus costs and expenses together with reasonable attorney fees for all claims under the [FDCPA]" by the Clerk of Court. Id. Appellant thereafter filed a motion seeking $155, 700 in attorney's fees for 346 hours of work at a rate of $450 an hour. Id. She was later permitted to amend her requested fees due to subsequent filings in this case. Id. at 115-16.

         The District Court referred this request to a Magistrate Judge pursuant to Local Civil Rule 72.2. After reviewing the matter, the Magistrate Judge recommended that the hours included in Appellant's initial fee request be reduced by 85% because they were significantly higher than reasonable. Baylor v. Mitchell Rubenstein & Assocs., P.C., 2014 WL 7014280, at *4 (D.D.C. Oct. 24, 2014). She found that certain tasks were not eligible for attorney's fees under the statute; some of the hours requested were expended on Appellant's unsuccessful state law claims or occurred after Appellant had already accepted Appellee's offer of judgment; and Appellant's counsel had failed to "heed the Court's admonition" to moderate the tenor of her filings. Id. at *4-5. The Magistrate Judge also determined that a 50% reduction should be applied to Appellant's additional request for fees because Appellant had "again engaged in the tactics against which the Court cautioned, thus expending considerable unproductive activity." Id. at *5. The District Court reviewed the Magistrate Judge's Report and Recommendation to determine if it was "clearly erroneous or contrary to law" and, after determining that it was not, adopted it in its entirety. Baylor, 77 F.Supp.3d at 124.

         In July 2014, the District Court granted Appellee's Motion to Dismiss all of Appellant's claims under the CPPA and some of her DCDCL claims. Following a contentious discovery process, in which the District Court affirmed a Magistrate Judge's Memorandum Opinion granting in part and denying in part Appellant's Motion to Compel production of certain communications between Appellee and an agent of its client, Appellant's creditor, Appellee filed a Motion for Summary Judgment and Appellant filed a cross-Motion for Partial Summary Judgment. The District Court granted the former and denied the latter.

         II. ANALYSIS

         A. Standard of Review

         This court reviews de novo the District Court's decision to grant a motion to dismiss or motion for summary judgment and the "legal question" of whether it "improperly applied [a local rule] in place of the standards prescribed by [the Federal Rules of Civil Procedure]." Winston & Strawn, LLP v. McLean, 843 F.3d 503, 506 (D.C. Cir. 2016); see Nat'l Wildlife Fed'n v. Browner, 127 F.3d 1126, 1128 (D.C. Cir. 1997). We will, however, generally review discovery orders only for abuse of discretion, unless the District Court applied the wrong legal standard. United States v. Deloitte LLP, 610 F.3d 129, 134 (D.C. Cir. 2010).

         B. Appellant's Fee Request

         Local Civil Rule 72.2(a) permits the District Court to refer "any pretrial motion or matter, " with the exception of certain motions and petitions set forth in Local Civil Rule 72.3, to a Magistrate Judge. If any party files written objections to a Magistrate Judge's ruling on such a matter, the District Court "may modify or set aside any portion of [the] order … found to be clearly erroneous or contrary to law." Local Civil Rule 72.2(c). Because Local Civil Rule 72.3 makes no specific mention of motions for attorney's fees, the District Court assumed that a Magistrate Judge's recommendation on a fee award could be reviewed according to the deferential "clearly erroneous or contrary to law" standard. This was error.

         Federal Rule of Civil Procedure 54(d)(2)(D) states that a court "may refer a motion for attorney's fees to a magistrate judge under Rule 72(b) as if it were a dispositive pretrial matter, " a process which requires that a district judge "determine de novo any part of the magistrate judge's disposition that has been properly objected to, " Fed.R.Civ.P. 72(b)(3). The permissive language of Rule 54(d)(2)(D), specifically its use of the word "may, " appears to have led the District Court to believe that referral via Local Civil Rule 72.2, with its attendant "clearly erroneous or contrary to law" standard of review, provided a legitimate alternative to the de novo review standard set forth in Federal Rules of Civil Procedure 54(d)(2)(D) and 72(b)(3). See Baylor, 77 F.Supp.3d at 117 & n.2. This was not an unreasonable mistake, but it was a mistake.

         The Federal Magistrates Act permits district courts to draw upon the assistance of Magistrate Judges to resolve "any pretrial matter pending before the court." 28 U.S.C. § 636(b)(1)(A). The power vested in Magistrate Judges to dispose of issues referred to them under this provision depends upon the type of motion at issue. 28 U.S.C. § 636(b)(1)(A) lists eight pretrial motions, including motions for summary judgement and injunctive relief, for which Magistrate Judges may only provide "proposed findings of fact and recommendations for the disposition [of the matter]." Id. § 636(b)(1)(B). These recommendations must be reviewed de novo by a district court judge if properly objected to by one of the parties. See id. § 636(b)(1)(C). For all other pretrial motions, Magistrate Judges are permitted to "hear and determine" the matter, and a district court will only set aside their order where it has been shown that it is "clearly erroneous or contrary to law." Id. § 636(b)(1)(A); see Phinney v. Wentworth Douglas Hosp., 199 F.3d 1, 5-6 (1st Cir. 1999).

         This differentiation between the degree of authority a Magistrate Judge is permitted to wield over certain motions, and the standard of review which must be applied to the judge's proposed resolution of such matters, is rooted in "[c]onstitutional concerns, " specifically the "possible . . . objection that only an article III judge may ultimately determine the litigation." 12 Charles Alan Wright et al., Federal Practice and Procedure § 3068.2, p. 367 (3d ed. 2014); see PowerShare, Inc. v. Syntel, Inc., 597 F.3d 10, 13 (1st Cir. 2010).

         When Rule 72 was promulgated to "implement the legislative mandate of Section 636(b)(1), " it retained § 631(b)(1)'s basic structure - dividing pretrial motions between issues that a Magistrate Judge could determine and those for which the judge could simply provide recommendations for consideration by the district court. 12 Charles Alan Wright et al., Federal Practice and Procedure § 3068, p. 351 (3d ed. 2014). It adopted a slightly different organizing principle, however. Rather than relying on § 636(b)(1)(A)'s list of eight motions to identify the pretrial matters that a Magistrate Judge could not "determine, " Rule 72 distinguished between motions that were "not dispositive of a party's claim or defense" and those that were. Fed.R.Civ.P. 72(a)-(b); see 12 Charles

         Alan Wright et al., Federal Practice and Procedure § 3068.2, p. 366 (3d ed. 2014). Nondispositive matters would be referred to a Magistrate Judge pursuant to Rule 72(a) and a district court would be required to "consider timely objections and modify or set aside any part of [an order issued following such a referral] that [was] clearly erroneous or [was] contrary to law." Dispositive motions, meanwhile, would be referred to a Magistrate Judge via Rule 72(b) and the district court would be required to "determine de novo any part of [a] magistrate judge's [recommendation] that ha[d] been properly objected to." Fed.R.Civ.P. 72(b)(3).

         In spite of the legal significance of the distinction between dispositive and nondispositive motions it is not immediately apparent from the text of Rule 72 how, precisely, to determine whether a particular type of motion should be deemed to be "dispositive of a party's claim." While most courts agree that the eight motions set forth in § 636(b)(1)(A) are "dispositive, " this list has largely been deemed to be illustrative of the matters that could fall within the scope of Rule 72(b), rather than exhaustive. See Phinney, 199 F.3d at 5-6; Massey v. City of Ferndale, 7 F.3d 506, 508 (6th Cir. 1993).

         Prior to the promulgation of Rule 54(d)(2)(D), therefore, courts lacked any specific guidance regarding whether Magistrate Judges had the authority to provide a determination regarding a request for attorney's fees as if it was a nondispositive motion or were instead permitted only to provide a recommendation regarding the disposition of such matters. Faced with this uncertainty, three circuits held that motions for attorney's fees should be treated as dispositive motions and thus subject to de novo review by a district court judge if properly objected to. See Massey, 7 F.3d at 509-10; Estate of Conners by Meredith v. O'Connor, 6 F.3d 656, 659 (9th Cir. 1993); Ins. Co. of N. Am. v. Bath, 968 F.2d 20, 1992 WL 113746, at *2 (10th Cir. 1992) (Order and Judgment). Two of these courts also held that Magistrate Judges lacked the authority to "determine[]" a fee request because it was a "post-dismissal motion[]" and Rule 72, by its terms, applies only to "pretrial matters." Massey, 7 F.3d at 510 (quoting Bennett v. Gen. Caster Serv. of N. Gordon Co., 976 F.2d 995, 998 n.5 (6th Cir. 1992)); see Estate of Conners by Meredith, 6 F.3d at 659 n.2.

         Rule 54(d)(2)(D) thus took effect at a time when it was by no means certain what, if any, authority Magistrate Judges could wield when evaluating motions for attorney's fees and the degree of oversight district courts were required to provide over such matters. Its purpose, as described by the accompanying Advisory Committee Note, was to "eliminate[] any controversy" regarding a court's ability to treat "motions for attorneys' fees . . . as the equivalent of a dispositive pretrial matter that can be referred to a magistrate judge." Advisory Comm. Notes 1993 Amend. The statutory and legal backdrop against which this amendment took place make clear that this Rule was not intended to permit courts to rely upon the standards and procedures associated with dispositive motions in addition to those for nondispositive motions. Indeed, providing district courts with the ability to alternate between these different standards would be anathema to the constitutional concerns that underlie the structure of § 636(b)(1) and Rule 72. Rather, Rule 54(d)(2)(D) provided that if a district court wished to refer a motion for attorney's fees to a Magistrate Judge it could do so pursuant to the procedures laid out in Rule 72(b), which include a requirement that the district court review a Magistrate Judge's recommendation regarding a fee award de novo if properly objected to. Thus, in context, it is clear that Rule 54(d)(2)(D)'s use of the permissive verb "may" refers to the permissive nature of the district judge's authority to refer the case to a magistrate, with no effect on the standard of review to be applied if the reference is made.

         It is no response that Local Civil Rule 72.2 provides an "alternative[]" to Rule 54(d). Baylor, 77 F.Supp.3d at 117 n.2. While Rule 54(d)(2)(D) permits courts to establish by local rule "special procedures to resolve fee-related issues without extensive evidentiary hearings, " there is no indication this language was intended to loosen the standard that should be applied to a Magistrate Judge's recommendation after such hearings have been conducted. Therefore, because district courts may not "circumvent the Federal Rules of Civil Procedure by implementing local rules or 'procedures' which do not afford parties rights that they are afforded under the Federal Rules, " we join a number of our sister circuits in requiring that motions for attorney's fees be reviewed de novo if referred to a Magistrate Judge and properly objected to. Jackson v. Finnegan, Henderson, Farabow, Garrett & Dunner, 101 F.3d 145, 151 n.4 (D.C. Cir. 1996) (quoting Brown v. Crawford Cty., 960 F.2d 1002, 1008 (11th Cir. 1992)); see McCombs v. Meijer, Inc., 395 F.3d 346, 360 (6th Cir. 2005); ClearOne Commc'ns, Inc. v. Bowers, 509 F.App'x 798, 804- 05 (10th Cir. 2013); McConnell v. ABC-Amega, Inc., 338 F.App'x 24, 26 (2d Cir. 2009); cf. Rajaratnam v. Moyer, 47 F.3d 922, 924 & nn.5, 8 (7th Cir. 1995) (finding that motion for attorney's fees referred via 28 U.S.C. § 636(b)(3) required de novo review). To the extent that Local Civil Rule 72.2 can be understood to suggest anything to the contrary, it is overruled.

         Because we find that the District Court applied the wrong standard when reviewing the Magistrate Judge's Report and Recommendation, we will not reach the parties' claims that the District Court erred in adopting the Magistrate Judge's proposal to award Appellant approximately twenty percent of her requested attorney's fees. Instead, we remand this matter to the District Court so that it can review the Magistrate Judge's Report and Recommendation anew, and de novo.

         C. Appellant's CPPA Claims

         Appellant contends that the District Court erred in dismissing her claim that Appellee's conduct violated the CPPA, which creates an "enforceable right to truthful information from merchants about consumer goods and services that are or would be purchased, leased, or received in the District of Columbia." D.C. Code § 28-3901(c). We disagree. "In answering questions involving the proper interpretation of D.C. statutes, [we rely] on the construction of these laws by the D.C. Court of Appeals." Poole v. Kelly, 954 F.2d 760, 761 (D.C. Cir. 1992) (per curiam). The D.C. Court of Appeals' precedents ...


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