High Court Hears Oral Arguments In Debt Collection Case Over Costs Awards

High Court Hears Oral Arguments In Debt Collection Case Over Costs Awards

WASHINGTON, D.C. - (Mealey's) The U.S. Supreme Court heard oral arguments Nov. 7 over whether a prevailing defendant in a Fair Debt Collection Practices Act (FDCPA) lawsuit may be awarded costs even though the lawsuit was not brought in bad faith or with an intent to harass (Olivea Marx v. General Revenue Corporation and Kevin Cobb, No. 11-1175, U.S. Sup.).

(Oral argument transcript available. Document #88-121126-062T.)


Arguing for petitioner Olivea Marx, attorney Allison M. Zieve of the Public Citizen Litigation Group in Washington stated that Federal Rule of Civil Procedure 54(d) is in direct conflict with provisions of the FDCPA because Rule 54(d) allows for an "award of costs to a prevailing party that, by the rule's express terms, does not apply where Federal statute provides otherwise."

"The Fair Debt Collection Practices Act provides otherwise because it states a different rule for awarding costs than does Rule 54(d). Whereas Rule 54(d) gives district courts wide discretion toward cost-prevailing defendants, the FDCPA limits courts' discretion to cases brought in bad faith and for the purpose of harassment," Zieve said.

Defendant Costs

Justice Ruth Bader Ginsburg questioned whether Rule 54(d) and the FDCPA were actually at odds with each other and explained that it appears as though the provisions in the FDCPA could be read to say that "[w]ell, we said we're dealing with the defendant costs. We want to put the same thing in a plaintiff."

Justice Sonia Sotomayor also questioned Zieve's argument, asking whether federal district courts "always have authority to award costs for sanctionable behavior like bad faith?"

"So this provision is duplicate no matter how we read it. It's either duplicative of a power the court already had to award costs for bad faith or it's duplicative of Rule 54," Justice Sotomayor stated.

Well-Established Principle

Assistant to the Solicitor General Eric J. Feign, arguing as amicus curiae on behalf of Marx, explained that "Rule 54(d) expressly codifies in absolute form the well-established principle that a specific provision displaces a more general one. And I think that principle is very helpful here in answering a couple of the questions that have come up."

Appearing on behalf of respondents General Revenue Corp. (GRC) and Kevin Cobb, attorney Lisa S. Blatt of Arnold & Porter in Washington argued that "[o]ur position is that the second sentence of section 1692k(a)(3) [of the FDCPA] is a pro-defendant provision that does not strip courts of their discretion under Rule 54 to award costs to prevailing defendants."

"We think that first because of the text and structure, and second because of the statutory history and purpose," Blatt stated.

On Dec. 21, the 10th Circuit U.S. Court of Appeals affirmed the U.S. District Court for the District of Colorado's dismissal of the suit filed by Marx against GRC and Cobb. Marx filed her petition for writ of certiorari on March 23.

Question Presented

The question presented is: "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.'"

After Marx defaulted on her student loan, her guarantor, EdFund, a division of the California Student Aid Commission, hired GRC to collect on the account. In 2008, she sued GRC in the District Court, 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, 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 Procedure 68.

Not A Communication

The 10th Circuit 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.


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