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Business Litigation

Right To Recover Court Costs Under Fair Debt Collections Practices Act

The Supreme Court in Marx v. General Revenue Corp., 133 S.Ct. 1166 (2013), addressed the ability of district courts to award costs to a prevailing party when the Fair Debt Collections Practices Act (FDCPA), 15 U.S.C. § 1692k, governed the underlying claim.

The Petitioner, Marx, defaulted on a student loan. In response to the collection efforts of General Revenue Corp. (GRC), the Petitioner filed suit alleging that GRC violated the FDCPA by harassing and falsely threatening her in order to collect on a debt. Ultimately, the District Court ruled against Marx and awarded GRC costs pursuant to Federal Rule of Civil Procedure 54. This federal rule gives district courts discretion to award costs to prevailing parties.

FDCPA and Rule 54

Marx filed writs to the Supreme Court seeking to vacate the decision of the District Court awarding costs to GRC. Marx argued that the District Court’s discretion under Rule 54 was superseded by 15 U.S.C.A. 1692k(a)(3), which provides that district courts may award reasonable attorney’s fees to the defendant for claims brought in bad faith and for the purpose of harassment. The Supreme Court ultimately held that this provision under the FDCPA does not displace the court’s discretion under Rule 54 to award costs to the prevailing party.

FDCPA Not Contrary to Rule 54

In order to reach their decision, the Supreme Court assessed the statutory construction of the FDCPA provision and Rule 54. The Court’s sole focus was on the following phrase in Rule 54: “unless a federal statute, these rules, or a court order provides otherwise.” The Court interpreted this language to mean “another provision that was contrary to Rule 54.” The Court cited two examples of what would be considered contrary to Rule 54, which included statutes with an express statement that costs should not be awarded or a statute that provides a conditional recovery of costs to a prevailing party. The Court determined that the provision contained in the FDCPA was not “contrary to Rule 54.” The Court further explained that if the statute intended to displace Rule 54, the legislature would have used the word “only” before setting forth the condition “[o]n a finding by the court that an action…was brought in bad faith and for the purpose of harassment…” Thus, the majority concluded that the District Court had properly awarded costs to the prevailing party.

In dissent, Justice Sotomayor and Justice Kagan differed from the majority in their definition of “provide otherwise.” These Justices define the term, “provide otherwise,” not as “contrary,” but as “to make a stipulation that is different.” Thus, the dissenters concluded that the FDCPA provision superseded Rule 54 regarding the award of attorneys’ fees and costs to the Defendant.

Although the Court was divided regarding the statutory interpretation and relationship of the Federal Rules of Civil Procedure and the FDCPA, the Court reached a ruling that continues to allow prevailing parties to recover costs. Such a ruling favors litigation by defendants because these prevailing parties have a greater chance of recovering their costs, as opposed to restricting the recovery of costs to bad faith claims. Even though the ruling was based on statutory interpretation, the court endorsed a judicial policy that favors awarding costs to prevailing defendants.

Allen & Gooch is providing this legal update for informational purposes only. This article should not be construed as legal advice or a legal opinion as to any specific facts or circumstances. You should consult your own attorney concerning your particular situation and any specific legal questions you may have.