In MARX v. GENERAL REVENUE CORP., 668 F. 3d 1174 (2013), the United States Supreme Court affirmed a decision that was upheld by the Tenth Circuit. The District Court had ordered the losing plaintiff, Marx (who had defaulted on her student loans) to pay the defendant’s partial court and attorneys fees. In this case Marx had claimed that her creditor, General Revenue Corporation (GRC) was harassing her via phone calls and letters to her employer, and falsely claiming to garnish half of her wages. The decision, which was a matter of statutory interpretation, will help to provide other circuits with guidance, however, it has sparked an interesting policy concern.
The FDCPA is a consumer protection statute that prohibits certain abusive, deceptive, and unfair debt collection practices. The FDCPA’s private-enforcement provision, §1692k, authorizes any aggrieved person to recover damages from “any debt collector who fails to comply with any provision” of the FDCPA. (§1692k(a)). Here, after Marx lost her case, the District Court found that, although the plaintiff did not act in bad faith or for the purpose of harrassment, that Marx was partially responsible for GRC’s court costs and attorneys fees. This decision was granted pursuant to FRCP 54(d)(1), which gives the court discretion to award prevailing defendants costs “unless a federal statute … provides otherwise.” Marx appealled the decision, arguing that the Courts discretion under Rule 54 was diplaced in FDCPA cases by 15 USC 1692k(a)(3) which provides that a court may award the defendant reasonable fees after a finding that the action was brought in bad faith and for the purpose of harrassment.
Statutory analysis hinges on whether 1692’s allowance for costs creates a negative implication that costs are unavailable under any other circumstances. The context of 1692 indicates that Congress did not intend for 1692 to forcelose courts from awarding costs under Rule 54. The Court also commented on the long recognition of judicial power to award attorneys fees. In addition, the language of the statute indicates that costs may be recovered if the court finds bad faith, but makes no explicit mention to remove the ability to recover under other circumstances or to limit the ability to recover for only bad faith claims. Therefore, 1692 does not displace Rule 54, and both can be viewed as working together. In one instance, 1692 gives authority to award fees for FRCPA actions brought in bad faith, and alternatively, Rule 54 gives judges the general authority to award fees in any circumstance that they see fit.
Is this interpretation fair? The language of the rules clearly state that the court has discretion to award costs to litigants, and there is no explicit wording that 1692 overrides Rule 54. But because the section was written only for credit fraud, doesn’t it seem reasonable that Congress intended to limit court fees for harrassment claims in this context, recognizing that the type of plaintiff is generally always financially at risk?
The decision highlights the importance of gathering good facts and presenting them in a favorable manner. Prior to bringing a suit, even if no bad faith exists, a plaintiff must engage in a cost-benefit analysis to determine whether the risk of losing will come with the risk of facing a monetary penalty. Will the courts discretion have an unpleasant chilling effect? Should Section 1692 displace Rule 54 in the context of creditors since the plaintiff is likely already in financial woes? In practice, Rule 54 is designed to ferret out unmeritorious claims, so that individuals will not use the legal system as a sword to harass and attack others. Conversely, Section 1692 is designed to protect debtors from the abusive and unfair practices of debt collectors, and assumes that the individual filing a claim is already low-income and, thus, lacks the ability to otherwise bring actions.
The effect of this decision forces plaintiffs who are already poor to choose between bringing a claim that they believe has merit, and being punished for their good faith claims. In effect, one may feel as if their avenues to relief are being closed from bringing claims that have a fair chance of being successful. In this arena where the courts are awarded expansive discretion, the best approach one can take is simply hightening their pleading requirements and portraying the plaintiff as financially drained in order to avoid being further penalized.