WASHINGTON, D.C. - (Mealey's) Section 1692k(a)(3) of the
Fair Debt Collection Practices Act (FDCPA) "is not contrary to, and, thus, does
not displace a district court's discretion to award costs under" Federal Rule
of Civil Procedure 54(d)(1), a divided U.S. Supreme Court ruled today (Olivea
Marx v. General Revenue Corporation and Kevin Cobb, No. 11-1175, U.S. Sup.;
See November 2012, Page 13) (lexis.com subscribers may access Supreme Court briefs and the opinion for this case).
In a 7-2 ruling, the majority held that "Rule 54(d)(1)
gives courts discretion to award costs to prevailing parties, but this
discretion can be displaced by a federal statute or FRCP [Federal Rule of Civil
Procedure] that 'provides otherwise,' i.e., is 'contrary' to Rule 54(d)(1)."
"Contrary to the argument of [petitioner Olivea] Marx and
the United States, as amicus, language of the original 1937 version of the Rule
does not suggest that any 'express provision' for costs should displace Rule
54(d)(1), regardless of whether it is contrary to the Rule," the majority said.
The majority also found that "Section 1692k(a)(3)'s
language and context demonstrate that the provision is not contrary to Rule
In particular, the majority agreed with Marx and the United States,
ruling that "context indicates that Congress did not intend § 1692k(a)(3) to
foreclose courts from awarding costs under the Rule."
"First, under the American Rule, each litigant generally
pays his own attorney's fees, but the Court has long recognized that federal
courts have inherent power to award attorney's fees in a narrow set of
circumstances, e.g., when a party brings an action in bad faith.
The statute is thus best read as codifying a court's pre-existing authority to
award both attorney's fees and costs. Next, §1692k(a)(3)'s second
sentence must be understood in light of its first, which provides an award of
attorney's fees and costs, but to prevailing plaintiffs. By adding 'and
costs' to the second sentence, Congress foreclosed the argument that
defendants can only recover attorney's fees when plaintiffs bring an action in
bad faith and removed any doubt that defendants may recover costs as well as attorney's
fees in such cases. Finally, §1692k(a)(3)'s language sharply contrasts
with that of other statutes in which Congress has placed conditions on awarding
costs to prevailing defendants," the majority stated.
Moreover, the majority ruled that "[e]ven assuming that
their surplusage argument is correct, the canon against surplusage is not
"First, the canon 'assists only where a competing
interpretation gives effect to every clause and word of a statute.' Here,
no interpretation of §1692k(a)(3) gives effect to every word. Second,
redundancy is not unusual in statutes addressing costs. Finally, the
canon is strongest when an interpretation would render superfluous another part
of the same statutory scheme. Because §1692k(a)(3) is not part of Rule
54(d)(1), the force of this canon is diminished," the majority explained,
citing its previous ruling in Microsoft Corp. v. i4i Ltd. Partnership
(No. 10-290, U.S. Sup.; 2011 U.S. LEXIS 4376).
"Lastly, contrary to the United States' claim that specific
cost shifting standards displace general ones, the context of the statute
indicates that Congress was simply confirming the background presumption that
courts may award to defendants attorney's fees and costs when the plaintiff
brings an action in bad faith. Because Marx did not bring this suit in
bad faith, the specific provision is not applicable."
Justice Clarence Thomas wrote the majority's opinion and
was joined by Chief Justice John G. Roberts Jr. and Justices Antonin Scalia,
Anthony Kennedy, Ruth Bader Ginsburg, Stephen G. Breyer and Samuel A. Alito Jr.
In a dissenting opinion, Justice Sonia Sotomayor said, "Federal
Rule of Civil Procedure 54(d)(1) is a default standard that grants district
courts discretion to award litigation costs to a prevailing party. This
default, however, gives way when a federal statute includes a costs provision
that 'provides otherwise.' The Fair Debt Collection Practices Act
(FDCPA), 91 Stat. 874, 15 U.
S. C. §1692 et seq., contains a costs
provision, §1692k(a)(3), and it 'provides otherwise.' That is apparent
from the statute's plain language, which limits a court's discretion to award
costs to prevailing defendants to cases 'brought in bad faith and for the
purpose of harassment.' In reaching the opposite conclusion, the Court
ignores the plain meaning of both the FDCPA and Rule 54(d)(1) and renders the
statutory language at issue in this case meaningless. I respectfully
Justice Elena Kagan joined in the dissenting opinion.
After Marx defaulted on her student loan, her guarantor,
EdFund, a division of the California Student Aid Commission, hired General
Revenue Corp. (GRC) to collect on the account. In 2008, she sued GRC in
the U.S. District Court for the District of Colorado, alleging abusive and
threatening phone calls in violation of the FDCPA.
She amended her complaint to add a claim that GRC
violated the FDCPA by sending a fax to her workplace that requested information
about her employment status. The District Court found that the challenged
debt collection practices were not abusive and threatening.
On appeal to the 10th Circuit U.S Court of Appeals, Marx
contested the District Court's finding that GRC did not violate the FDCPA's
provision against debt-collector communications with their parties. She
argued that the District Court erred in finding that a fax sent by GRC did not
constitute a "communication" under the FDCPA, awarding GRC costs pursuant to
Federal Rule of Civil Procedure 54(d) and permitting, in the alternative, an
award of costs following GRC's offer of judgment pursuant to Federal Rule of Civil
On Dec. 21, 2011, the 10th Circuit affirmed the District
Court's dismissal of the lawsuit. In particular, it agreed with the
District Court that the fax in question is not a "communication" under the
FDCPA. A "communication" under the FDCPA must indicate to the recipient
that the message relates to the collection of debt. The panel said the
fax cannot be construed as "conveying" information "regarding a debt" because
the fax does not reference debt and speaks only of verifying employment.
The 10th Circuit also found that the District Court
properly awarded costs to GRC.
Marx filed a petition for writ of certiorari with
the Supreme Court on March 23.
The question presented was: "Whether a prevailing
defendant in a Fair Debt Collection Practices Act (FDCPA) case may be awarded
costs for a lawsuit that was not 'brought in bad faith and for the purpose of
harassment,' when 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' and Federal Rule of Civil Procedure
54(d) provides that '[u]nless a federal statute, these rules, or a court order
provides otherwise, costs - other than attorney's fees - should be allowed to
the prevailing party.'"
Marx is represented by Allison M. Zieve of the Public
Citizen Litigation Group. The defendants are represented by Lisa S. Blatt
of Arnold & Porter. Amicus United States is represented by
Assistant to the Solicitor General Eric J. Feigin of the Department of
Justice. All are in Washington.
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