U.S. Supreme Court Finds that Prevailing FDCPA Defendants May Recover Costs Without Showing of Bad Faith

Marx v. General Revenue Corp.

United States Supreme Court

Opinion Date: February 26, 2013

On Tuesday, the Supreme Court of the United States issued an opinion in Marx v. General Revenue Corp., 568 U.S. ___, 2013 WL 673254 (February 26, 2013), holding that "a district court may award costs to prevailing defendants in Fair Debt Collection Practices Act ("FDCPA") cases without finding that the plaintiff brought the case in bad faith and for the purpose of harassment." Id. at 2. 15 U.S.C. § 1692k(a)(3) of the FDCPA allows for the recovery of attorney's fees and costs by a defendant in an FDCPA action brought in bad faith and for the purpose to harass. Federal Rule of Civil Procedure 54(d)(1) gives the court discretion in awarding costs to prevailing parties, except where a federal statute "provides otherwise." In construing these two provisions together, the Supreme Court ruled that section 1692k(a)(3) does not "provide otherwise" and, thus, a court is free to award costs to a prevailing defendant in an FDCPA action, even when the Plaintiff's claims were brought in good faith. Marx, 2013 WL 673254 at 2. The Petitioner, Olivea Marx ("Marx"), filed an FDCPA action against the General Revenue Corporation ("GRC") for alleged violations of the FDCPA. Id. at 3. The case went to trial, and the district court found that Marx had failed to prove that GRC violated the FDCPA. Consequently, GRC submitted a bill for costs as the prevailing party, and the district court ordered Marx to pay GRC's allowed costs, pursuant to Rule 54(d)(1). Id. Marx appealed the award of costs to the United States Court of Appeals for the Tenth Circuit, which affirmed the district court's award pursuant to Rule 54(d)(1). Id. The Supreme Court granted certiorari. Id. Marx, and the U.S. Consumer Financial Protection Bureau ("CFPB") as amicus curiae, argued that the limitation on awarding costs is implied in section 1692k(a)(3). Id. at 6. Relying on the expressio unius canon of statutory construction, Marx and the CFPB asserted that by expressly providing for the recovery of attorney's fees and costs in cases brought in bad faith and with the purpose of harassment, Congress's silence as to the recovery of attorney's fees and costs in cases brought in good faith acts to preclude awarding fees and costs in such cases. Id. Conversely, GRC argued that the FDCPA expressly addresses costs and fees in bad faith cases, but it does not address the issue of fees and costs in cases in which the plaintiff brings a claim in good faith, but loses. Id. at 5. As a result, GRC contended that Congress' silence on the issue cannot displace Rule 54(d)(1). In an opinion delivered by Justice Thomas, the Supreme Court held that Congress did not intend for Section 1692k(a)(3) to preclude courts from awarding costs pursuant to Rule 54(d)(1) to a prevailing defendant in good faith FDCPA cases. Id. at 6. In construing Rule 54(d)(1), the Court explained that a statute "provides otherwise" if it is contrary to Rule 54(d)(1). Id. at 4. First, a statute is contrary if it limits a court's discretion to award costs. Id. The Court provided examples of statutes that use language that specifically prohibit, or limit, the recovery of costs, making those statutes contrary to the Rule. Id. Because the FDCPA is silent on the issue of awarding costs to a prevailing defendant in FDCPA cases where the plaintiff brought claim(s) in good faith, the statute is not contrary to Rule 54(d)(1). Id. at 5. The Supreme Court further explained that section 1692k(a)(3) codifies the "background rule" for attorney's fees - that federal courts have the inherent power to award attorney's fees under specific circumstances, including when a party brings an action in bad faith. Id. at 6. Similarly, section 1692k(a)(3) also codifies the background rule with respect to costs - a court has discretion to award costs to a prevailing party. See id. at 6-7. Additionally, the Court reasoned that if Congress had excluded "and costs" in the second sentence of Section 1692k(a)(3), the statute may have been read to preclude recovery of costs in cases brought in bad faith because the first sentence in the of section 1692k(a)(3) includes "and costs" for the plaintiff's recovery when he or she prevails. Id. at 7. Finally, the Court explained that language in section 1692k(a)(3) is much different from statutes in which Congress has restricted or precluded awarding costs to prevailing defendants. Id. While no exact language stating that the statute displaces Rule 54(d)(1) is required, other statutes use language that specifically states that no costs will be awarded under the given circumstances. Id. The Court reasoned that Congress knows how to draft language limiting recovery of costs, and such language is not included in the FDCPA. Id. at 8. As a result of the foregoing, the Court concluded that section 1692k(a)(3) is not contrary to Rule 54(d)(1), and so, the force of Rule 54(d)(1) is not displaced, leaving an award of costs in a FDCPA action where defendant is the prevailing party in a suit brought in good faith within the discretion of the court. Id. at 10. Justice Sotomayor wrote a dissent in which Justice Kagan joined, asserting that Rule 54(d)(1) is a default provision to be used when there is not statutory scheme provided for costs. Id. The dissent interprets Section 1692k(a)(3) as "providing otherwise" for the recovery of costs and, thus, would have reversed the Tenth Circuit's holding that costs were recoverable under Rule 54(d)(1). Id. at 14. For more information on consumer finance litigation topics, please contact one of the Burr & Forman team members for assistance. We are happy to answer any questions or concerns you may have.
Posted in: FDCPA
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