U.S. Supreme Court to Hear Case Regarding FDCPA's Fee Shifting Provision

On May 29, 2012, the U.S. Supreme Court granted certiorari in Marx v. General Revenue Corporation, ___ F.3d ___, 2011 WL 6396478 (10th Cir. 2011), agreeing to hear argument on only one of two questions presented in the appellant's Petition for Certiorari, as set forth below:

"The Fair Debt Collection Practices Act (FDCPA) provides that "on a finding by the court that an action under this section was brought in bad faith and for the purpose of harassment, the court may award to the defendant attorney's fees reasonable in relation to the work extended, and costs. 15 U.S.C. 1692k(a)(3). Fed. R. Civ. P. 54(d) provides that, "unless a federal statute, these rules, or a court order provides otherwise, costs – other than attorney's fees – should be allowed to the prevailing party.

The first question presented is whether a prevailing defendant in an FDCPA case may be awarded costs where the lawsuit was not "brought in bad faith and for the purposes of harassment."

In the Marx case (full text available here), Ms. Marx, the petitioner and plaintiff below, had defaulted on a student loan, and General Revenue Corporation (GRC), the respondent and defendant below, was the debt collector hired to collect from her. Ms. Marx sued in federal court claiming that a fax sent by GRC to her employer to verify her employment violated the FDCPA provision against communicating with third parties. (See more on this in our blog at US Supreme Court Declines to Reconsider 10th Circuit Decision). At trial, the court found in favor of GRC, and awarded it costs pursuant to Rule 54(d)(1), making no finding that Ms. Marx had acted in bad faith.

The Tenth Circuit affirmed, stating that the FDCPA did not prevent the application of Rule 54(d). It stated that nothing in the FDCPA's language itself, or its legislative history indicated "that the FDCPA's cost provision was intended to displace this long-standing rule of civil procedure. The fact that the FDCPA postdates Rule 54, or that the FDCPA should be construed 'liberally' does not change this result." The court concluded that, 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 Supreme Court has extended respondent's time to file briefs to September 10, 2012. Various amici have already weighed in, including the Consumer Fairness Protection Board (CFPB), which argued strongly in its brief that the FDCPA rule must take precedence over the Rule 54. The CFPB's brief pointed out that:

  • 30 million individuals, or 14 % of the US population is subject to the collection process annually; complaints against debt collectors have risen from 13,962 in 2000 to 142,742 in 2011, an astronomical increase of over 1000% -- consumers need more protection, not less.
  • The lower court's ruling is contrary to the plain language and purpose of the FDCPA.
  • Congress designed the FDCPA to be primarily "self-enforcing."
  • To encourage self-enforcement, Congress made the FDCPA a strict liability statute and included the fee shifting provision.
  • The statutory limit on awarding costs to prevailing defendants reassures already economically vulnerable consumers.
  • Forcing consumer plaintiff's to pay costs if they lose would chill the bringing of private suits by consumers.
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