SCOTUS – Unsuccessful Plaintiffs in FDCPA Cases Can Be Liable for Costs Without Showing Bad Faith

In a seven to two opinion released this morning, the Supreme Court held that a plaintiff, who is unsuccessful in a claim under the Fair Debt Collection Practices Act (“FDCPA”) 15 U.S.C. 1692, et seq., can be liable for the defendant’s costs even if the lawsuit was not brought in bad faith. The opinion was delivered by Justice Thomas. Justices Sotomayor and Kagan dissented with Justice Sotomayor on the dissenting opinion.Scotus

Marx concerned whether the FDCPA’s section 1692k(a)(3), which provides for an award of attorneys fees and costs if an FDCPA suit is brought in “bad faith and the the purpose of harassment,” prevents the awarding of costs alone under Federal Rule of Civil Procedure 54(d), absent a showing of bad faith and harassment on the part of the unsuccessful litigant.

The decision provides some relief to defendants in FDCPA cases that are successfully defended.  It can be very difficult to satisfy the standard of “bad faith and for the purpose of harassment” when attempting to recover costs and attorneys fees. One of the primary obstacles is that several courts have interpreted bad faith under section 1692k(a)(3) as a “conscious doing of a wrong [and] contemplates a state of mind affirmatively operating with furtive design or ill will.” Silvious v. Midland Credit Mgmt., No. 07-145, 2010 WL 3491218, at *2 (N.D. W. Va. Sept. 1, 2010).

Under the Marx decision, the question of whether to tax costs is now left to the court’s discretion. An unsuccessful litigant remains exposed to costs, regardless of their intentions in bringing or maintaining the action.

The Marx decision is below. A link to the amicus brief I filed on behalf of the National Association of Retail Collection Attorneys is here. My analysis of the oral argument before the Court last December is here.

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Donald Maurice provides counsel to the financial services industry, successfully litigating matters in the state and federal courts in individual and class actions. He has successfully argued before the Third, Fourth and Eighth Circuit U.S. Courts of Appeals, and has represented the financial services industry before several courts including as counsel for amicus curiae before the United States Supreme Court. He counsels clients in regulatory actions before the CFPB, and other federal and state regulators and in the development and testing of debt collection compliance systems. Don is peer-rated AV by Martindale-Hubbell, the worldwide guide to lawyers. In addition to being a frequent speaker and author on consumer financial services law, he serves as legal counsel to DBA International and as chair of the ABA's Bankruptcy and Debt Collection Subcommittee. He serves on the governing Board of Regents of the American College of Consumer Financial Services Lawyers and on the Governing Committee of the Conference on Consumer Finance Law .