about the group
appellate attorneys
docket reports
oral arguments
news on

October Term, 2012

February 26, 2013

Today the Supreme Court issued one decision, described below, of interest to the business community.

Fair Debt Collection Practices Act—Awards Of Costs To Prevailing Defendants

Marx v. General Revenue Corp., No. 11-1175 (previously described in the May 29, 2012 Docket Report)

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.” Meanwhile, the Fair Debt Collection Practices Act provides that defendants “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.” 15 U.S.C. § 1692k(a)(3). Today in Marx v. General Revenue Corp., No. 11-1175, the Supreme Court held that the FDCA’s fee-shifting provision does not “provide[ ] otherwise” than Rule 54(d)(1). Accordingly, a court in FDCPA litigation is not required to make a finding of bad faith before awarding costs to a prevailing defendant. The Court’s decision overrules precedent from the United States Court of Appeals for the Ninth Circuit, which had held that the FDCPA evidences Congress’s 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).

In a 7-2 opinion authored by Justice Thomas, the Court held that “[a] statute ‘provides otherwise’ than Rule 54(d)(1)” only “if it is ‘contrary’ to the Rule.” Slip op. at 5. Because the FDCPA’s fee-shifting provision codifies a “background rule” within the common law that courts have discretion “to award attorney’s fees in a narrow set of circumstances, including when a party brings an action in bad faith,” the Court found it “dubious to infer congressional intent to override” the other “background rule” that costs should ordinarily be awarded to the prevailing party. Id. at 10. “Had Congress intended . . . to displace Rule 54(d)(1),” the Court reasoned, “it could have easily done so.” Id. at 12. The Court therefore concluded that the FDCPA “is not contrary to Rule 54(d)(1), and, thus, does not displace a district court’s discretion to award costs under the Rule.” Id. at 15-16.

Justice Sotomayor filed a dissenting opinion, in which Justice Kagan joined. Relying on the dictionary definition of “otherwise,” the dissent reasoned that, “to displace Rule 54(d)(1), a federal statute need only address costs in a way different from, but not necessarily inconsistent with, the default.” Slip op. at 3. And because the FDCPA’s cost-shifting provision “described with specificity a single circumstance in which costs may be awarded,” the dissent found it “readily apparent that this provision is different from the default Rule of 54(d)(1).” Id. at 5.

The Court’s decision in Marx establishes that prevailing defendants in FDCPA litigation are eligible to recover costs under Rule 54(d)(1) regardless of whether they can demonstrate that the suit was brought in bad faith. The ruling will thus be of interest to businesses that are engaged in the collection of consumer debt, and therefore are potentially subject to suit under the FDCPA. But the ruling also has broader implications, beyond the FDCA. It recognizes that although Rule 54(d)(1) “codifies a venerable presumption that prevailing parties are entitled to costs,” the “decision to award costs ultimately lies within the sound discretion of the district court.” Slip op. at 5. That aspect of the decision effectively forecloses the argument in any type of federal litigation that Rule 54(d)(1) permits a prevailing party to recover its costs as a matter of right.

Any questions about this case should be directed to Tim Bishop (+1 312 701 7829) in our Chicago office or Richard Katskee (+1 202 263 3222) in our Washington office

Mayer Brown's Supreme Court & Appellate practice ordinarily distributes a Docket Report when the Supreme Court grants certiorari in a case of interest to the business community and a Docket Report-Decision Alert when the Court decides such a case. We hope that you find the Docket Reports and Decision Alerts useful, and welcome feedback on them (which should be addressed to Richard B. Katskee, their general editor, at rkatskee@mayerbrown.com or +1 202 263 3222).

Feel free to forward this message to anyone who you believe might be interested in the Decision Alert.

Please visit us at appellate.net

Mayer Brown Supreme Court Docket Reports provide information and comments on legal issues and developments of interest to our clients and friends. They are not a comprehensive treatment of the subject matter covered and are not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed.

© 2015. The Mayer Brown Practices. All rights reserved. --  Legal Notices | Attorney Advertising

Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the “Mayer Brown Practices”). The Mayer Brown Practices are: Mayer Brown LLP and Mayer Brown Europe – Brussels LLP, both limited liability partnerships established in Illinois USA; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales (authorized and regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown, a SELAS established in France; Mayer Brown JSM, a Hong Kong partnership and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. “Mayer Brown” and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.