209 F.3d 998 (7th Cir. 2000)
Michelle SANDERS, individually and on behalf  of all others similarly situated,    Plaintiff-Appellant,v.John Lee JACKSON and Universal Fidelity  Corporation, a Texas Corporation,    Defendant-Appellees.
No. 99-1673
In the  United States Court of Appeals  For the Seventh Circuit
Argued November 30, 1999Decided April 20, 2000

Appeal from the United States District Court  for the Northern District of Illinois, Eastern Division.  No. 98 C 0209--Morton Denlow, Magistrate Judge.
Before Manion, Kanne, and Rovner, Circuit Judges.
Manion, Circuit Judge.


1
When Michelle Sanders  failed to pay a small debt she received a  collection letter from Universal Fidelity  Corporation. She claims that as an  "unsophisticated debtor" she found the letter  confusing and misleading. Despite her  unsophistication, she quickly contacted a lawyer  and initiated a class action lawsuit under the  Fair Debt Collection Practices Act (FDCPA or the  Act). The parties eventually settled, but they  did so without agreeing on a specific sum of  compensation. Rather, they merely agreed that  Universal Fidelity would pay the class the  maximum damages to which it would be entitled  under the Act. The FDCPA makes class action  damages dependent upon the "net worth" of the  defendant. The parties disagreed as to the  meaning of this term, but the district court held  on summary judgment that net worth means book  value net worth, as opposed to fair market net  worth. We affirm.

I.

2
The Fair Debt Collection Practices Act provides  that "in the case of a class action the total  recovery shall not exceed the lesser of $500,000  or 1 per centum of net worth of the debt  collector . . . ." 15 U.S.C. sec. 1692k(a)(2)(B)  (emphasis added). Since the parties have settled  the liability phase of the litigation, the  remaining issue involves the calculation of  damages. This appeal arises out of the parties'  dispute over the meaning of the term "net worth"  which is not defined by the Act. The district  court agreed with Universal Fidelity's argument  that net worth means the book value of the  company, that is, assets listed on the company's  balance sheet minus liabilities, which is also  sometimes called "balance sheet net worth." See  Sanders v. Jackson, 33 F. Supp.2d 693 (N.D. Ill.  1998). But another district court in a nearly  identical case reached a different conclusion.  See Scott v. Universal Fidelity Corp., 42 F.  Supp.2d 837 (N.D. Ill. 1999). Scott held, as  Sanders argues, that net worth includes Universal  Fidelity's goodwill, i.e., the value of the  company beyond the book value of its net tangible  assets.1 In other words, the court believed  that net worth means "fair market net worth." In  this case the different interpretations result in  substantially different recoveries because the  book value of Universal Fidelity is about  $100,000, while Sanders alleges that its fair  market value is around $1,800,000. Therefore we  must decide whether the FDCPA uses the term net  worth to denote fair market net worth, which  includes goodwill, or balance sheet net worth,  which does not.


3
The FDCPA does not define net worth and so we  must address this question using our rules of  statutory interpretation. The cardinal rule is  that words used in statutes must be given their  ordinary and plain meaning. United States v.  Wilson, 159 F.3d 280, 291 (7th Cir. 1998). We  frequently look to dictionaries to determine the  plain meaning of words, and in particular we look  at how a phrase was defined at the time the  statute was drafted and enacted. See Molzof v.  United States, 502 U.S. 301, 307 (1992); Newsom  v. Friedman, 76 F.3d 813, 817 (7th Cir. 1996).  But in this case we see that the dictionary  simply confirms the root problem: the term net  worth has more than one meaning. The fourth  edition of Black's Law Dictionary, which was the  current edition in 1977 when the FDCPA was  enacted, defines net worth as simply the  difference between assets and liabilities.  Black's Law Dictionary 1192 (4th ed., 1968).  Assets are defined as anything available for the  payment of debts, which in the case of an ongoing  business does not include goodwill. Id. at 151.  Thus the edition of Black's that was current when  the Act became law generally supports Fidelity's  position. The latest edition, the seventh,  similarly defines net worth as assets minus  liabilities. Its primary definition of "asset" is  an "item that is owned and has value." Black's  Law Dictionary 112 (7th ed., 1999). Assuming the  term "item" denotes tangibility and specific  identity, two attributes not usually ascribed to  goodwill, this definition suggests that goodwill  should not be a factor in the calculation of net  worth. Thus, this first definition supports  Universal Fidelity's position. Predictably,  Sanders advises us to ignore the first definition  and suggests instead that we look to the second  definition, which specifically includes goodwill  among several examples of assets.2 But aside  from the fact that there is no cogent reason for  adopting the second definition over the first,  all that the second definition demonstrates is  that in some contexts goodwill should be  considered an asset. This proposition is of  course true, but when interpreting this statute  our task is to find the ordinary and usual  meaning of the term net worth, not the broadest  possible meaning of the term asset. Neither party  provides us with a dispositive reason for  adopting one dictionary definition over another.  Thus we find that these varying definitions are  not particularly helpful.


4
Another guide to interpretation is found in the  construction of similar terms in other statutes.  United States v. Bates, 96 F.3d 964, 968 (7th  Cir. 1996); see Liberty Lincoln-Mercury, Inc. v.  Ford Motor Co., 171 F.3d 818, 823 (3d Cir. 1999);  Veiga v. McGee, 26 F.3d 1206, 1211 (1st Cir.  1994). There are many statutes which use the term  net worth. Some, like the FDCPA, limit class  recoveries to a certain percentage of a  defendant's net worth. See, e.g., Real Estate  Settlement Procedure Act, 12 U.S.C. sec.  2605(f)(2)(B)(ii); Expedited Funds Availability  Act, 12 U.S.C. sec. 4010(a)(2)(B)(ii); Truth in  Savings Act, 12 U.S.C. sec. 4310(a)(2)(B)(ii);  Homeowners Protection Act, 12 U.S.C. sec.  4907(a)(2)(B)(i); Truth in Lending Act, 15 U.S.C.  sec. 1640(a)(2)(B); Equal Credit Opportunity Act,  15 U.S.C. sec. 1691e(b); Electronic Funds  Transfer Act, 15 U.S.C. sec. 1693m(a)(2)(B)(ii).  Others limit recovery to plaintiffs whose net  worth is below a certain threshold amount. See,  e.g., Securities and Exchange Act, 15 U.S.C. sec.  78u-4(g)(4)(A)(i)(II); Y2K Act, 15 U.S.C. sec.  6605(d)(1)(A)(i)(II). But both types of statutes  use the term net worth in the same sense and are  therefore instructive in the present case.


5
One of these latter types of statutes is the  Equal Access to Justice Act, which permits  parties that prevail against the government to  obtain the costs of litigation, but only if the  individual's "net worth does not exceed  $2,000,000." 5 U.S.C. sec. 504(b)(1)(B). In  Continental Webb Press Inc. v. N.L.R.B., we  examined the term "net worth" in the context of  this EAJA provision. 767 F.2d 321, 323 (7th Cir.  1985). There the NLRB argued that in calculating  net worth, Continental's assets should be valued  at cost rather than cost minus depreciation. We  held that the proper valuation entails a  depreciation of the assets because that is the  procedure prescribed by generally accepted  accounting principles.


6
Congress did not define the statutory term "net  worth." It seems a fair guess that if it had  thought about the question, it would have wanted  the courts to refer to generally accepted  accounting principles. What other guideline could  there be? Congress would not have wanted us to  create a whole new set of accounting principles  just for use in cases under the Equal Access to  Justice Act.


7
Id. This holding is consistent with our prior  holding in Telegraph Savings and Loan Association  v. Schilling that GAAP should also be used to  determine a bank's net worth as that term is  defined by federal banking statutes. 703 F.2d  1019, 1027-28 (7th Cir. 1983). Not surprisingly,  when the Ninth Circuit was asked to define net  worth for purposes of the EAJA, it also held that  GAAP should govern. American Pac. Concrete Pipe  Co., Inc. v. N.L.R.B., 788 F.2d 586, 591 (9th  Cir. 1986) (adopting this reasoning and holding  of Continental Webb Press).


8
Implicit in these holdings is the conclusion  that the statutory term net worth means book net  worth or balance sheet net worth, because GAAP  has meaning only in the context of financial  statement reporting--GAAP dictate the standards  for reporting and disclosing information on an  entity's financial statements.3 While those  cases involved different statutes, we believe  their reasoning applies equally to the FDCPA.  Accordingly, because there is no indication in  the FDCPA that the term net worth should be used  in anything but its normal sense, we also look to  book net worth or balance sheet net worth as  reported consistently with GAAP.


9
Universal Fidelity's 1997 balance sheet includes  assets of $1,729,802.00 and liabilities of  $1,628,449.00, for a book net worth of  $101,353.00. The balance sheet does not report  goodwill. While Sanders contends that we should  increase Universal Fidelity's listed assets by  the value of its goodwill, which at this point is  unknown, that would be inconsistent with GAAP.  GAAP provides that internally developed goodwill  is not reported on a company's financial  statements; rather, goodwill is only reported at  the time a business is sold for more than its  book value net worth. Thus, applying GAAP, as we  believe Congress would have wanted, c.f.,  Continental Webb Press Inc., Universal Fidelity's  balance sheet valuation should not include  goodwill.


10
The rationale underlying the GAAP treatment of  goodwill also supports our conclusion that the  statutory term net worth means balance sheet net  worth. As the Accounting Principles Board has  explained, goodwill is not reported absent a  business combination because "its lack of  physical qualities makes evidence of its  existence elusive, [and] its value . . . often  difficult to estimate, and its useful life . . .  indeterminable." Accounting Principles Board,  Opinion. No. 17, para. 17.02 (1970). The Board  also recognizes that the value of goodwill often  fluctuates widely for innumerable reasons and  that estimates of its value are often unreliable.  Based in part on these concerns, the Accounting  Principles Board has adopted its rule concerning  goodwill--absent a business combination, it is  not reported as an asset of the company.


11
We also must consider whether this definition of  net worth is consistent with the purposes of the  FDCPA's net worth provision, because a statute  must be interpreted in accordance with its object  and policy. See Holloway v. United States, 119 S.  Ct. 966, 969 (1999); Grammatico v. United States,  109 F.3d 1198, 1204 (7th Cir. 1997). Here, the  net worth clause is designed to address a problem  often associated with fixed monetary penalties:  they sometimes penalize smaller companies too  harshly but are also insufficiently punitive for  larger businesses. See Kemezy v. Peters, 79 F.3d  33, 35 (7th Cir. 1996). Thus, by making the  extent of the penalty directly proportional to a  percentage of the defendant's net worth, Congress  hoped that punishment might be meted out  according to a business's ability to absorb the  penalty. See id.; Zaz Designs v. L'Oreal, S.A.,  979 F.2d 499, 508 (7th Cir. 1992) (discussing the  rationale behind fixing monetary penalties  according to the defendant's wealth or lack  thereof). The key aspect of this net worth  provision is not its punitive nature, as Sanders  argues, but a recognition that an award of  statutory punitive damages may exceed a company's  ability to pay and thereby force it into  bankruptcy. Kemezy, 79 F.3d at 35. Thus, we agree  with the Fifth Circuit that the primary purpose  of the net worth provision is a protective one.  It ensures that defendants are not forced to  liquidate their companies in order to satisfy an  award of punitive damages. Boggs v. Alto Trailer  Sales, Inc., 511 F.2d 114, 118 (5th Cir. 1975)  (identical provision in TILA was designed to  protect businesses from catastrophic damage  awards).


12
With this purpose in mind, we see that Universal  Fidelity's interpretation of net worth makes more  sense than Sanders's does. Since the 1% of net  worth limitation was designed to identify that  portion of a company's assets which safely could  be liquidated to satisfy an award of damages  without forcing the breakup of that company,  factoring goodwill into the calculation of net  worth defeats the purpose of the provision  because ordinarily goodwill "cannot be disposed  of apart from the enterprise as a whole." ABP Op.  No. 17, para. 17.32. Since goodwill cannot be  severed from the company, and thus is not readily  available for the payment of judgments, it should  not influence the calculation of net worth. A  contrary holding would contradict the key purpose  of the net worth provision. The text of the FDCPA  and cases interpreting it clearly indicate that  de minimis violations should not be punished with  such severity that the companies are deprived of  existence. Furthermore, there is no provision  that limits defendants being exposed to more than  one FDCPA class action lawsuit, which is exactly  what happened to the defendant in this case. See  also Mace v. Van Ru Credit Corp., 109 F.3d 338,  344 (7th Cir. 1997) (discussing the possibility  of serial FDCPA suits). When this possibility is  factored in, Sanders's interpretation of "net  worth" proves even more onerous and thus, highly  implausible.


13
Another probable purpose of the provision is to  make the damage calculation easy for the parties  and trial judges. Examining the balance sheet of  a company and subtracting the liabilities from  the assets is a simple and accurate calculation.  Sanders argues that factoring goodwill into the  equation would not be so difficult, but as  mentioned above, due to its transitory nature,  goodwill is extremely difficult to quantify and  value with any certainty. APB Op. No. 17, para.  17.02. Goodwill can fluctuate significantly in  the marketplace. It has no value as a security  interest. Until there is a fair market value  sale, goodwill is speculative at best. In short,  the calculation of statutory damages should not  result in a mini trial; the statute seeks to  avoid a separate contest over damages by using  the term net worth to denote a company's book  value net worth. As with the EAJA, this statute  does not contemplate the layer of complexity  which Sanders's interpretation would require. See  United States v. 88.88 Acres of Land, 907 F.2d  106, 108 (9th Cir. 1990) (the determination of  net worth under the EAJA should not result in a  second major litigation).


14
Sanders also contends that a failure to include  goodwill in the equation will diminish  plaintiffs' recoveries and thereby destroy any  incentive for FDCPA class action litigation. But  from the plaintiffs' point of view, the primary  motivation for these suits is not and should not  be the plaintiffs' belief that the suit will  result in a substantial windfall. Plaintiffs in  FDCPA class actions who are not claiming actual  damages cannot reasonably expect large awards for  what are technical and de minimis violations of  the Act. Mace, 109 F.3d at 344. Moreover, the  "policy at the very core of the class action  mechanism is to overcome the problem that small  recoveries do not provide the incentive for any  individual to bring a solo action prosecuting his  or her rights. A class action solves this problem  by aggregating the relatively paltry potential  recoveries into something worth someone's  (usually an attorney's) labor." Id. Thus, it is  the plaintiffs' recognition that their claims are  relatively insignificant which induces them to  sue as one body. "Because the class action device  lowers plaintiffs' litigation costs below the  level that would be incurred by bringing  individual suits, the class action reduces the  level of damages necessary to produce  litigation." John C. Coffee, Jr., Understanding  the Plaintiff's Attorney: The Implications of  Economic Theory for Private Enforcement of Law  Through Class and Derivative Actions, 86 Colum.  L. Rev. 669, 684 (1986). While an increased  recovery might provide slightly greater incentive  for plaintiffs to sue and to monitor their  lawsuits, see Greisz v. Household Bank  (Illinois), N.A., 176 F.3d 1012, 1013 (7th Cir.  1999), monetary gain for the class members is  obviously not the main impetus for these class  actions.


15
Rather, the driving force behind these cases is  the class action attorneys. They have a strong  incentive to litigate these cases--oftentimes  despite their marginal impact--in the form of  attorneys' fees and costs they hope to recover.  The award of such fees is mandatory in FDCPA  cases. See Zagorski v. Midwest Billing Servs.,  Inc., 128 F.3d 1164, 1166 (7th Cir. 1997) (per  curiam); Tolentino v. Friedman, 46 F.3d 645, 651  (7th Cir. 1995). Not surprisingly, then, "FDCPA  litigation is a breeding ground for class  actions." Lawrence Young & Jeffrey Coulter, Class  Action Strategies in FDCPA Litigation, 52  Consumer Fin. L.Q. Rep. 61, 70 (1998). As this  court noted in Mace, it is these attorneys' fees  which are a significant inducement for FDCPA  class action lawsuits. 109 F.3d at 344; see  Goldberger v. Integrated Resources, Inc., 209 F.3d 43,--- (2d Cir. Mar. 28,  2000) (in many class action cases the plaintiffs  "are mere 'figureheads' and the real reason for  bringing such actions is 'the quest for  attorney's fees.'").4 Unfortunately, as Judge  Winter of the Second Circuit has noted, these  attorney fees strongly encourage class actions,  many of which are frivolous. See Ralph K. Winter,  Paying Lawyers, Empowering Prosecutors, and  Protecting Managers: Raising the Cost of Capital  in America, 42 Duke L. J. 945, 949 (1993). The  history of FDCPA litigation shows that most cases  have resulted in limited recoveries for  plaintiffs and hefty fees for their attorneys.  Consider the recent case of Crawford v. Equifax  Payment Servs., Inc., where a negotiated  settlement provided $2,000 to the class  representative, $78,000 to the plaintiff's  attorneys, and nothing for the rest of the class.  201 F.3d 877, 880 (7th Cir. 2000) (reversing the  approval of the settlement). The impetus of that  suit clearly was not the plaintiffs' share of the  award. See Winter, supra, at 949 (in derivative  class action settlements, plaintiffs recover only  50% of the time while their attorneys receive  fees in 90% of the cases). Crawford and similar  cases illustrate "the all-too-common abuse of the  class action as a device for forcing the  settlement of meritless claims and is thus a  mirror image of the abusive tactics of debt  collectors at which the statute is aimed." White  v. Goodman, 200 F.3d 1016, 1019 (7th Cir. 2000).  Assuming that Crawford is somewhat typical of  other FDCPA cases in this respect, our holding  today will not, as Sanders suggests, stem the  tide of FDCPA cases flooding this circuit. And if  the definition of net worth advocated by Sanders  were applied to the numerous statutes that use  that term as a measure of damages, the incentive  for more litigation would be explosive and  destructive. Most defendant corporations would be  valued well beyond their ability to pay short of  bankruptcy or liquidation.


16
Finally, Sanders and her class argue that our  interpretation of net worth will not result in  sufficient punishment of defendants. Again,  Sanders overlooks the fact that the FDCPA suits  usually entail significant awards of attorneys'  fees, above and beyond any damages awarded.  Although the attorneys' fees provision of the Act  may or may not have been designed to be punitive  per se, we have noted that attorneys' fees are  punitive in the broad sense of the term in that  they deprive the defendant of capital and thereby  provide a strong incentive not to violate the law  in the future. Mace, 109 F.3d at 344 (the  attorney's fee provision punishes by "helping to  deter future violations" by the defendant);  Marquart v. Lodge 837, Int'l Ass'n of Machinists  & Aerospace Workers, 26 F.3d 842, 848 (8th Cir.  1994). The Sixth Circuit is correct in noting  that, on top of the damages awarded, the costs  and attorneys' fees provisions in the FDCPA  provide a substantial punishment which  undoubtedly deters similar conduct. See Wright v.  Finance Serv. of Norwalk, Inc., 22 F.3d 647, 651  (6th Cir. 1994) (en banc). And let us not forget  that any egregious debt collection practices  which cause actual losses to debtors are fully  compensable according to the actual damages  provision of the FDCPA. 15 U.S.C. sec.  1692k(a)(1). Our interpretation of the net worth  provision has no effect on such suits by  individuals, and thus Sanders's suggestion that  our holding will result in insufficient  punishment of egregious conduct has no reasonable  foundation.


17
In sum, the words of the statute, an  understanding of its purposes, and cases  interpreting the term net worth indicate that  this term means balance sheet or book value net  worth. As such, goodwill should not be factored  into the calculation of the defendant's net  worth. Accordingly, we affirm the decision of the  district court and disapprove the contrary  position adopted by another district court in  Scott v. Universal Fidelity Corporation.


18
Affirmed.



Notes:


1
 We have previously defined "goodwill" as "an  intangible asset that represents the ability of a  company to generate earnings over and above the  operating value of the company's other tangible  and intangible assets. It often includes the  company's name recognition, consumer brand  loyalty, or special relationships with suppliers  or customers." In re Prince, 85 F.3d 314, 322  (7th Cir. 1996).


2
 Without giving a reason, Sanders also asks us to  ignore the third definition of asset found in  Black's latest edition. The third definition  tends to support Universal Fidelity's  interpretation by defining "asset" as any  property which a person can use to pay a debt. As  we discuss below, goodwill cannot be used to pay  a company's debts.


3
 The term "'generally accepted accounting  principles' is a technical accounting term that  encompasses the conventions, rules, and  procedures necessary to define accepted  accounting practices at a particular time. It  includes not only broad guidelines of general  application, but also detailed practices and  procedures. Those conventions, rules, and  procedures provide a standard by which to measure  financial presentations." American Institute of  Certified Public Accountants, Statement of  Auditing Standards No. 69, para. 69.02 (1992)  (emphasis added and citation omitted).


4
 In 1999, there were 417 class action lawsuits  pending in the district courts of the Seventh  Circuit. Of these, 311 were pending in the  Northern District of Illinois. Administrative  Office of the United States Courts, Judicial  Business of the United States Courts Table X-4  (2000).


