The Fair Debt Collection Practices Act (FDCPA) states that when a Plaintiff
brings a case in bad faith and with the purpose of harassment, that Plaintiff
will be liable for the Defendant's attorney's fees and costs.
The Federal Rules of Civil Procedure (FRCP) allow federal District Courts
to award costs to the winning party within Court's discretion.
In Marx v. General Revenue Corp., (case no. 11-1175, published cite not
yet available) the SCOTUS decided the question of whether a losing plaintiff
in an FDCPA case, where there is no evidence of bad faith or harassment,
can be charged the winning defendant's costs. In a 7-2 opinion, the
majority of the Court held that nothing in the FDCPA precluded the application
of FRCP 54's provisions regarding costs.
Marx had filed an FDCPA claim against GRC. She lost after a 1-day bench
trial. GRC sought the award of $7,779.16 in costs related to depositions,
witness travel, and witness fees. The District Court ultimately awarded
$4,543.03 in costs to GRC. Marx appealed, arguing that the FDCPA only
allowed for the assessment of costs against a losing plaintiff when there
was evidence of bad faith and the intent to harass. The Tenth Circuit
found that Rule 54 was not precluded by the FDCPA and that the cost award
The Supreme Court has affirmed the ruling of the Tenth Circuit.
In its opinion, the majority held that although the FDCPA imposes a specific
threshhold for the awarding of attorney's fees and costs to a successful
defendant, that requirement does not preclude the permissive nature of
Rule 54 and its provisions regarding the awarding of costs. As the law
now stands, a victorious defendant in an FDCPA case can recover its costs
regardless of whether there was bad faith on the part of the plaintiff.
The award of attorney's fees is not affected by this ruling.
The dissent, authored by Justice Sotomayor and joined by Justice Kagan,
argued that the majority's reading ignored the plain meaning of the
statute and rule in question. Rule 54(d) states that, "unless a federal
statute . . . provides otherwise," a district court may award costs
to the prevailing party. The dissent notes that "provides otherwise"
does not mean "contrary." The dissent takes Rule 54(d) to mean
that it is a default rule, and that if a statute speaks to costs in a
manner that is different than Rule 54, then the statute controls. The
dissent also looks at the way "otherwise" is defined in the
dictionary, which includes "different" as one of the definitions.
Requiring that something be "contrary" obviously raises the bar.
The dissent itself takes the majority to task for failing to follow its
own rules of stautory contstruction and is well-worth the read.
So what is the practical affect of this ruling for consumer rights attorneys
bringing FDCPA claims? Although the FDCPA is, at its core, a strict liability
statute, this ruling may have a chilling effect on some FDCPA lawsuits.
Statutory damages under the FDCPA are limited to $1,000 for a violation
of the act. In general, many of these cases never make it to trial --
they are either settled or dismissed. This means that many FDCPA cases
that are based solely on a statutory violation may never put the plaintiff
at risk of being saddled with a bill for the defendant's costs. However,
if a summary judgment was entered in the defendant's favor in this
type of case, then there may be costs that could be assessed against the
Where this ruling seems to create significant risk is when the case involves
something more than statutory damages. The FDCPA allows successful plaintiffs
to recover their actual damages as well. In cases where there are actual
damages, it is much more likely that the case will progress to trial or
that the case will progress much further towards trial (and incur more
costs). In these situations, a losing plaintiff may discover himself footing
a rather significant bill.
Hopefully, this ruling will not have much impact on FDCPA claims. However,
it is worth noting when developing cases and making determinations about
which cases to take. Some longshot cases may now create a greater risk
for a client than before. As with any other risk, always disclose the
risks to your client before moving forward.