The opinion of the court was delivered by: JONES
This Court heretofore found for the class plaintiffs on their claim that defendant did not comply with the timely disclosure requirement of the Truth in Lending Act (15 U.S.C. sec. 1639(b)).
Thereafter on November 3, 1977, this Court found that class plaintiffs were entitled to $ 22,350.42 statutory damages.
Since then class plaintiffs have petitioned for an award of attorneys' fees and costs, which defendant opposes. In addition to the question of attorneys' fees, class plaintiffs seek a review by the Court of the Clerk of Court's disallowance of certain claimed costs and defendant's opposition to such a review as well as its contention that class plaintiffs are not entitled to any costs.
Class plaintiffs' claim to an award of attorneys' fees and costs is based on the following provision in the Truth in Lending Act:
(a) Except as otherwise provided in this section any creditor who fails to comply with any requirement imposed under this part or part D or E of this subchapter with respect to any person is liable to such person in an amount equal to the sum of
(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. 15 U.S.C. § 1640.
Plaintiffs have petitioned for attorneys' fees calculated at $ 75.00 an hour for approximately 270 hours' work and for a matching bonus award to compensate them for the risks involved in litigation prosecuted for a fee contingent on success. Plaintiffs have also petitioned for attorneys' fees for the services of "law clerks" calculated at $ 30.00 an hour for approximately 40 hours. Finally, plaintiffs seek costs which were denied by the Clerk of the Court for a $ 1,414.20 fee charged by plaintiffs' expert witness and for $ 452.82 spent by the attorneys in out-of-pocket disbursements and in taking depositions.
While the statute authorizes the Court to award reasonable fees, in determining what is reasonable the Court must consider the twelve factors delineated in Evans v. Sheraton Park Hotel, 164 U.S.App.D.C. 86, 503 F.2d 177 (1974). In structuring their memoranda to the Court on this determination, the parties have treated with those factors. Defendant has additionally asserted two threshold challenges to the award of any fees in this case: first, it attacks the constitutionality of the statutory provision for fees to prevailing plaintiffs and not to prevailing defendants as denial of due process to and equal protection for defendants in Truth in Lending litigation; second, it asserts that plaintiffs were not "successful" in this action as required by the express language of the provision.
Defendant's constitutional challenge raises what may either be phrased a due process or an equal protection issue by its contention that the unilateral award of attorneys' fees to successful plaintiffs impairs creditors' access to the courts to defend themselves against allegations of violating the Truth in Lending laws. Defendant states that this discrimination presents creditors with a no-win alternative in going to court: if they succeed in their defense, they are still out the cost of litigation which may exceed the penalty for the alleged violation; if they fail, they are then liable for the cost of the plaintiffs' prosecution in addition to their own litigation expenses and any damages that may be awarded.
The defendant cites Boddie v. Connecticut, 401 U.S. 371, 91 S. Ct. 780, 28 L. Ed. 2d 113 (1971) as support for its constitutional position. There the Supreme Court held that it was a violation of due process for a state to deny access to indigents to the state's divorce courts because of a filing fee that such indigents were unable to pay. Justice Brennan concurred on the ground that denial of judicial process to persons on the basis of wealth was a denial of equal protection of the laws. Boddie was subsequently elaborated upon and clarified by the Court in United States v. Kras, 409 U.S. 434, 93 S. Ct. 631, 34 L. Ed. 2d 626 (1973). In Kras, the Court noted that the Boddie case involved the absolute denial to the indigent-plaintiffs of the only legal avenue to adjust the marital relationship and the fundamental associational interests that surround the establishment, maintenance, and dissolution of that relationship. The Court strongly emphasized the basic importance of marriage to society and the state's monopolization of the divorce process, noting that the holding in Boddie was expressly restricted to the constitutional concerns evoked by this particular combination. In Kras, the Court refused to extend this limited holding to the similar denial of access to federal bankruptcy courts to indigents unable to pay a filing fee. The Court dismissed due process concerns because it noted that the adjustment of the creditor-debtor relationship at issue in Kras was not in the exclusive control of the government, but that the parties had the option of private settlement "however unrealistic (that) remedy may be in a particular situation." 409 U.S. at 445, 93 S. Ct. at 638. Nor did the Court find in Kras that the creditor-debtor relationship and its adjustment through federal bankruptcy proceedings concerned a fundamental interest or that debtors were a suspect class such that the Court must scrutinize the filing fee requirement for a "compelling governmental interest" necessary to sustain its constitutionality under either due process or equal protection analysis. Rather, the Court found that this financial bar to the bankruptcy courts concerned matters of economics and social welfare for which the applicable standard in determining the propriety of Congress' action is that of "rational justification." The Court found a rational justification for the fee requirement to be readily apparent: a self-sufficient system paid for by its users rather than by the general taxpayer. 409 U.S. 434 at 446, 93 S. Ct. 631, 34 L. Ed. 2d 626.
In the present case the provision of attorneys' fees to successful plaintiffs and the denial of attorneys' fees to successful defendants does not bar the latter's access to the courts. It may encourage settlement, but it does not force it. Moreover, the very availability of settlement cuts against defendant's constitutional challenge because it removed the due process concern found in Boddie in the government's monopolization of the legal means to adjust a relationship. As in Kras, the creditor-debtor relationship present in the instant case involves no fundamental interest and the discrimination of plaintiffs over defendants effects no suspect classification that compels this Court to scrutinize the attorneys' fees provision for a compelling governmental interest.
The Court must therefore inquire only as to the existence of a rational justification for the discriminatory award of attorneys' fees provided by the Act. Such a justification is readily apparent: to provide for the supplementary enforcement of the Act by encouraging suits brought by injured consumers.
Numerous courts have recognized that the Congress intended such supplementary enforcement by these so-called "private attorneys general." E. g., McGowan v. Credit Center of North Jackson, Inc., 546 F.2d 73, 77 (5th Cir. 1977); Sosa v. Fite, 498 F.2d 114, 121-122 (5th Cir. 1974); Ratner v. Chemical Bank New York Trust Co., 329 F. Supp. 270, 280 (S.D.N.Y.1971). Alleged violations of the Act run into the thousands with over ten thousand law suits filed so far and more being filed each day at a rate of greater than two thousand suits a year.
Most of these suits are for statutory rather than actual damages, because of difficulties in proving the latter or the purely technical nature of the violation.
Statutory damages, however, have somewhat conservative maximum limits, making it not unusual for the costs of litigation to exceed the damages awarded.
Without fee awards, therefore, consumers would have little practical incentive and perhaps even less financial ability to bring suits under the Act.
It might be argued that discrimination could have been avoided by making fee awards available for both parties. There is no question that defendants can be awarded attorneys' fees when plaintiffs bring suits in bad faith. See Alyeska Pipeline Co. v. Wilderness Society, 421 U.S. 240, 258-259, 95 S. Ct. 1612, 44 L. Ed. 2d 141 (1975). But to provide attorneys' fees to successful defendants against plaintiffs who have acted in good faith would obviously retard, if not totally frustrate, the encouragement of supplementary private enforcement of the Act.
In a different legal context, the Supreme Court has identified two equitable considerations which support a finding of a rational justification for the discriminatory award of attorneys' fees to successful plaintiffs. In Christiansburg Garment Co. v. EEOC, 434 U.S. 412, 98 S. Ct. 694, 54 L. Ed. 2d 648 (1978), the Court outlined a judicially created discrimination between parties for courts to consider in the award of attorneys' fees to "prevailing parties" as provided by Title VII of the Civil Rights Act of 1964, as amended: 42 U.S.C. section 2000e-5(k). There, the Court ruled that prevailing plaintiffs should be awarded attorneys' fees in "all but special circumstances," and that prevailing defendants should be awarded fees only when plaintiffs' suits are "frivolous, unreasonable, or without foundation." The Court made this ruling despite the otherwise obvious inference of equal treatment in the phrase "prevailing parties," because it found that: (1) "the plaintiff is the chosen instrument of Congress to vindicate a policy that Congress considered of the highest priority" and (2) an award to a successful plaintiff is an award against "a violator of federal law."
These same equitable considerations are present in the attorneys' fees provision in the Truth in Lending Act and support a finding of a rational basis for the discriminatory effect of the provision. The express purpose of the Truth in Lending Act is "to assure the meaningful disclosure of credit terms so that consumers . . . (can) avoid the uninformed use of credit. . . ." 15 U.S.C. section 1601. The obvious beneficiaries of the Act are the consumers. If the 2,000 plus suits filed each year
represent even the majority of the alleged violations of the Act, the government has the option of creating a substantial bureaucracy to detect and prosecute these numerous alleged violations or to rely on the self interest of the injured consumer to perform these tasks.
The latter option is undoubtedly more cost efficient from the government's standpoint and is probably more efficient overall, assuming that consumers are in a better position to detect violations committed against them than some government agency would be. Because private litigation is as a supplement, rather than as an alternative to public enforcement of the Act, its encouragement through attorneys' fees and damages cannot help but effect a fuller compliance with the Act.
As to the second consideration expressed in Christianburg, unsuccessful defendants under the Truth in Lending Act are also violators of federal law. Tacking an award of attorneys' fees onto the actual and statutory damages available under the Act may well help to reduce the numbers of such violators by encouraging creditors to comply voluntarily with the Act.
Finally, the Court notes that the need for such equitable considerations is not as great in the present case, for here there is an express statutory provision establishing a discriminatory scheme, whereas in Christianburg a similar scheme was established by judicial inference. The courts' discretion in the area of attorneys' fees is limited.
As the Supreme Court noted in Alyeska, "the circumstances under which attorneys' fees are to be awarded and the range of discretion of the courts in making those awards are matters for Congress to determine." 421 U.S. at 262, 95 S. Ct. at 1624. In both Alyeska, supra, 421 U.S. at 264 n. 37, 95 S. Ct. 1612, and in Christianburg, supra, 98 S. Ct. at 697 & nn. 5 & 6, the Supreme Court has implicitly recognized that the discriminatory provision of attorneys' fees to only successful plaintiffs is a legitimate legislative option for Congress to adopt, and, in fact, expressly cites in both these cases the instant provision of the Truth in Lending Act as an example of Congress' exercise of its discretion in this area. 421 U.S. 240 at 261 n. 34, 95 S. Ct. 1612 n. 5., 44 L. Ed. 2d 141.
In view of the foregoing, the Court finds that the encouragement of the private enforcement of the Truth in Lending Act by injured consumers against alleged violators of federal law provides a rational basis for the Act's discriminatory attorneys' fee provision to sustain its constitutionality as it has been challenged by the defendant in this case.
Defendant's second threshold challenge asserts that plaintiffs were not "successful" in this action as required by the Act's provision for attorneys' fees. Specifically, defendant refers to the language of the provision which permits attorneys' fees "in the case of any successful action to enforce the foregoing liability. . . ." Defendant's challenge has two bases: (1) that the Court dismissed the more significant claim of the two asserted in plaintiffs' complaint, and (2) that the Court, not the plaintiffs' attorneys, developed the legal analysis upon which the Court granted judgment to the plaintiffs.
As a practical matter, plaintiffs were as successful as they could be in this particular action. The Act allows only one recovery per consumer credit transaction regardless of the number of separate violations of the Act committed. 15 U.S.C. section 1640(g). Nothing in the provision or in the rest of the Act justifies an inference that "success" means something other than being awarded judgment on the merits. Even judgments based on technical violations are successes, for the Act itself is highly technical and Congress has provided for such technical successes by the provision of statutory damages. In any case, the success of plaintiffs in the present case has substantial merit, even if it does lack the element of actual damages, because it pinpoints the proper time for disclosure in a common commercial transaction and thereby effects the express purpose of the Act of providing useful, timely disclosure of consumer credit terms. See 15 U.S.C. section 1601.
In Evans v. Sheraton Park Hotel, 164 U.S.App.D.C. 86, 503 F.2d 177 (1974), our Court of Appeals adopted the Fifth Circuit's delineation of the various factors for courts to consider in determining the reasonableness of attorneys' fees:
1. The time and labor required;
2. The novelty and difficulty of the questions ...