Supreme Court Decision May Reduce Debtor Claims Brought Under The FDCPA

Yesterday (2/27/2013), the U.S. Supreme Court issued an opinion that may reduce the number of claims brought by debtors under the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. §§ 1692 et seq., or at least cause plaintiffs' counsel to think twice about bringing such claims. In Marx v. General Revenue Corp., No. 11-1175, 2013 U.S. LEXIS 1859 (U.S. Feb. 26, 2013), the Court held that a district court's authority to award costs to prevailing defendants on a claim under the FDCPA, pursuant to Federal Rule of Civil Procedure ("FRCP") 54(d)(1), is not displaced by §1692k(a)(3) of the FDCPA. The Court therefore concluded that a district court may award costs to prevailing defendants in FDCPA cases without a threshold finding that the plaintiff brought the case in bad faith or with the intent to harass. Thus, a finding that the claim was frivolous is not required to entitle a defendant to an award of costs against the debtor/plaintiff. Prior to the Court's decision in Marx, there was a split among the circuits concerning whether 15 U.S.C. § 1692k(a)(3) provided the exclusive basis for awarding costs in FDCPA actions. Compare Marx v. Gen. Revenue Corp., 668 F.3d 1174, 1182 (10th Cir. 2011) with Rouse v. Law Offices of Rory Clark, 603 F.3d 699, 701 (9th Cir. 2010). FRCP 54(d)(1) provides in part that "[u]nless a federal statute...provides otherwise, costs -- other than attorney's fees -- should be allowed to the prevailing party." Section 1692k(a)(3) of the FDCPA provides that "[o]n 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." The issue before the Court, therefore, was whether § 1692k(a)(3) was a federal statute that "provide[d] otherwise," thereby displacing the district courts' authority pursuant to FRCP 54(d)(1). Background of Case Petitioner Olivea Marx defaulted on a student loan, and the creditor hired respondent General Revenue Corp. ("GRC") to collect the debt. Gen. Revenue Corp., 2013 U.S. LEXIS 1859, at *6. Marx filed a claim against GRC under the FDCPA, alleging that GRC harassed her with phone calls and falsely threatened to garnish her wages and bank account. Id. at *6-7. The district court found Marx had failed to prove any violation of the FDCPA. GRC subsequently submitted a bill of costs seeking an award of its witness fees, witness travel expenses...