Keywords: fair debt collection practices act,
FDCPA, awards of costs
Today the Supreme Court granted certiorari in one case
of interest to the business community:
Fair Debt Collection Practices Act—Awards of Costs to
Prevailing Defendants
Federal Rule of Civil Procedure 54(d)(1) states that,
"[u]nless a federal statute . . . provides otherwise,
costs—other than attorney's fees—should be
allowed to the prevailing party." Today the Supreme Court
granted certiorari in Marx v. General Revenue Corp., No.
11-1175, to determine whether the Fair Debt Collection Practices
Act ("FDCPA"), which provides that prevailing defendants
in FDCPA litigation "may" recover reasonable
attorney's fees and costs upon "a finding by the
court that an action under this section was brought in bad faith
and for the purpose of harassment," prohibits the awarding of
costs under Rule 54(d)(1) to a prevailing FDCPA defendant absent
proof that the plaintiff acted in bad faith.
Because the Court's decision will determine whether
prevailing defendants can recover costs in routine FDCPA cases
without having to show that the plaintiff acted in bad faith, it
will be of interest to businesses that are engaged in the
collection of consumer debt and therefore potentially subject to
suit under the FDCPA.
Petitioner, the plaintiff below, defaulted on a student loan.
Respondent, the defendant below, was hired to collect on the
outstanding balance. When attempts by respondent to settle the
account proved unsuccessful, petitioner sued in federal district
court, alleging that she had received threatening and abusive
telephone calls, and that a facsimile sent by respondent to her
employer was a "communication" regarding the debt, all in
violation of the FDCPA. After a bench trial, the district court
found in favor of respondent and awarded it costs pursuant to Rule
54(d)(1). The court did not, however, enter a finding that
petitioner had acted in bad faith or with an improper motive.
The Tenth Circuit affirmed both on the merits and on the issue
of costs. As to the latter, the court of appeals held that the
reference to "costs" in the FDCPA's fee-shifting
provision "merely recognizes that the prevailing party is
entitled to receive the costs of suit as a matter of course."
668 F.3d 1174, 1179. Accordingly, the court held, while the FDCPA
requires a showing of bad faith and improper motive before a
defendant may recover attorney's fees, it does not supplant the
ordinary rule that costs should be awarded to the prevailing party
regardless of whether such a showing can be made. The Tenth Circuit
disagreed with the contrary conclusion of the Ninth Circuit, which
has held that the provision's express mention of
"costs" evidences an intent "to condition an award
of costs to a prevailing defendant upon a finding of bad faith and
harassment on plaintiff's part." Rouse v. Law Offices
of Rory Clark, 603 F. 3d 699, 706 (9th Cir. 2010).
Absent extensions, which are likely, amicus briefs in support of
the petitioner will be due on July 20, 2012, and amicus briefs in
support of the respondent will be due on August 20,
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A discussion on some practical tools lawyers can use, or consider using, in order to decrease defense costs and to increase the chance of concluding a case sooner rather than later.
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A financial services organization is a party to a litigation in which plaintiffs are seeking information concerning business practices that impacts a number of the organization's customers.
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