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Legal Update

US Supreme Court Grants Certiorari in Marx v. General Revenue Corp.

29 May 2012
Mayer Brown Legal Update

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.” On May 29, 2012, 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, 2012. Any questions about the case should be directed to (+1 202 263 3035) in our Washington, DC office.

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