February 26, 2013

Supreme Court Decides Marx v. General Revenue Corp.

On February 26, 2013, the Supreme Court decided Marx v. General Revenue Corp., No. 11-1175, holding that the attorney fee provision of the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692k(a)(3), is not contrary to and does not displace a court's discretion to award costs to prevailing defendants under Federal Rules of Civil Procedure Rule 54(d)(1).

After Olivea Marx defaulted on a student loan, the loan's guarantor hired General Revenue Corporation (GRC) to collect the debt. One month later, Marx filed an FDCPA enforcement action against GRC alleging that GRC had harassed her with numerous phone calls and falsely threatened to garnish up to 50 percent of her wages and to take the money owed directly from her bank account. Shortly after the complaint was filed, GRC made an offer of judgment to pay Marx $1,500 plus reasonable attorney's fees and costs, but Marx did not respond. Following a one-day bench trial, the District Court found that Marx had failed to prove any FDCPA violation. As the prevailing party, GRC submitted a bill of costs and the court ordered Marx to pay $4,543.03 pursuant to Rule 54(d)(1).

Marx filed a motion to vacate the award of costs, arguing that the court lacked authority to award costs under Rules 54(d)(1) and 68(d) because 15 U.S.C. § 1692k(a)(3) sets forth the exclusive basis for awarding costs in FDCPA cases, and that section 1692k(a)(3) required a showing that suit was brought in bad faith and for the purpose of harassment. The District Court rejected her argument and awarded costs against her. The Tenth Circuit affirmed, holding that Rule 68(d) did not permit a cost award because judgment had not been entered in favor of the plaintiff, but agreeing with the lower court that Rule 54(d)(1) permitted the cost award.

The Supreme Court granted certiorari to resolve a conflict among the Circuits and affirmed the Tenth Circuit's decision. Construing Rule 54(d)(1), the Court concluded that the rule codifies a venerable presumption that prevailing parties are entitled to costs, but that such award is within the sound discretion of the district court. This discretion can only be displaced by a federal statute or rule of civil procedure that "provides otherwise," i.e., that is contrary to the rule. A statute is contrary to Rule 54(d)(1) if it limits the discretion of the district court. Statutes that merely permit a court to award costs do not displace Rule 54(d)(1). 

The Court then concluded that section 1692k(a)(3) does not "provide otherwise." The second sentence of section 1692k(a)(3) states: "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 expended and costs." Congress intended this provision to deter plaintiffs from bringing nuisance lawsuits, and the statute does not address cases where bad faith and purpose of harassment are absent. In contrast to other statutes, the statutory language creates no negative implication that costs are unavailable in any other circumstances, but codifies a court's existing authority to award both attorney's fees and costs. Had Congress intended section 1692k(a)(3) to displace Rule 54(d)(1), it could have easily done so by using 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 ..." The Court also rejected Marx's objection that its interpretation renders the phrase "and costs" superfluous. 

Justice Thomas delivered the opinion of the Court, in which Chief Justice Roberts and Justices Scalia, Kennedy, Ginsburg, Breyer and Alito joined. Justice Sotomayor filed a dissenting opinion in which Justice Kagan joined.

Download Opinion of the Court

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