Michael R. Lied

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Not too many cases involving $4500 end up in the Supreme Court. This one did.

Olivea Marx defaulted on a student loan guaranteed by EdFund, a division of the California Student Aid Commission. In September 2008, EdFund hired General Revenue Corporation (GRC) to collect the debt. One month later, Marx filed a Fair Debt Collection Practices Act (“FDCPA”) Complaint against GRC.

Marx amended her complaint to add a claim that GRC unlawfully sent a fax to her workplace that requested information about her employment status.

Following a bench trial, the district court found that Marx had failed to prove any violation of the FDCPA. GRC submitted a bill of costs and, pursuant to Federal Rule of Civil Procedure 54(d)(1), the court ordered Marx to pay GRC $4,543.03. 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.

The district court rejected Marx’s argument, and the Tenth Circuit affirmed.  The United States Supreme Court granted certiorari.

Federal Rule of Civil Procedure 54(d)(1) gives district courts discretion to award costs to prevailing defendants unless a federal statute provides otherwise. The FDCPA, 15 U. S. C. § 1692k(a)(3), provides that, upon a finding by the court that an action under that section was brought in bad faith and for the purpose of harassment, the court may award to the defendant’s reasonable attorney’s fees and costs. The question was whether § 1692k(a)(3) “provides otherwise” than Rule 54(d)(1).

According to the Supreme Court, a statute “provides otherwise” than Rule 54(d)(1) if it is “contrary” to the rule.  Because the rule grants district courts discretion to award costs, a statute is “contrary” to the rule if it limits that discretion.

However, not all statutes that provide for costs are contrary to Rule 54(d)(1).  Marx and the amicus curiae argued that any statute that specifically provides for costs displaces Rule 54(d)(1), regardless of whether it is contrary to the Rule.

As noted above, the second sentence of § 1692k(a)(3) provides: “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.”

Marx’s argument depended on whether § 1692k(a)(3)’s allowance of costs created a negative implication that costs were unavailable in any other circumstances.

Context persuaded the Supreme Court that Congress did not intend § 1692k(a)(3) to foreclose courts from awarding costs under Rule 54(d)(1).

Initially, the background presumptions governing attorney’s fees and costs are a highly relevant contextual feature. Under the American Rule, each litigant pays his own attorney’s fees, win or lose, unless a statute or contract provides otherwise.

Section 1692k(a)(3) left the basic rules for attorney’s fees intact. The statute provides that when the plaintiff brings an action in bad faith, the court may award attorney’s fees to the defendant. But, a court has inherent power to award fees based on a litigant’s bad faith even without Section 1692k(a)(3).

The statute was best read as codifying a court’s pre-existing authority to award both attorney’s fees and costs.

Next, the second sentence of § 1692k(a)(3) had to be understood in light of the sentence that precedes it. If Congress had excluded “and costs” in the second sentence, Marx might have argued that the expression of costs in the first sentence and the exclusion of costs in the second meant that defendants could only recover attorney’s fees when plaintiffs bring an action in bad faith. By adding “and costs” to the second sentence, Congress foreclosed that argument, removing any doubt that defendants may recover costs as well as attorney’s fees when plaintiffs bring suits in bad faith.

Finally, § 1692k(a)(3) contrasted with other statutes in which Congress placed conditions on awarding costs to prevailing defendants. Such statutes confirmed that Congress knows how to limit a court’s discretion under Rule 54(d)(1) when it so desires.

The Supreme Court was not persuaded by Marx’s contention that this interpretation rendered the phrase “and costs” superfluous.

The Supreme Court observed that the canon against surplusage is strongest when an interpretation would render superfluous another part of the same statutory scheme.  Here, because § 1692k(a)(3) is not part of Rule 54(d)(1), the force of this canon was weakened.

The United States, as amicus, contended that § 1692k(a)(3) established explicit cost-shifting standards that displaced Rule 54(d)(1)’s more general default standard.

But the context of § 1692k(a)(3) indicated that Congress was simply confirming the background rule 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 her case in bad faith, the case did not fall within the ambit of the more specific provision. The judgment of the court of appeals was affirmed.

Marx v. General Revenue Corp., 133 S. Ct. 1166 (2013).

· Michael R. Lied
· Howard & Howard Attorneys PLLC
· One Technology Plaza, 211 Fulton Street, Suite 600, Peoria, IL 61602
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· MLied@howardandhoward.com