Is Good Faith More Important Than Being Right? - Injury and Tort Law - U.S. Supreme Court
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Is Good Faith More Important Than Being Right?

How many people would file Fair Debt Collection Practices Act (FDCPA) claims if they feared that losing their lawsuits meant paying litigation costs?

The FDCPA provides that consumers who win lawsuits against debt collectors may recover their litigation costs from the defendants, but that consumers who lose these cases must pay defendants’ litigation costs only if the consumers sued in bad faith or for purposes of harassment.

This term, the Supreme Court will decide whether a plaintiff’s good faith cuts off the defendant’s right to fees, and how the FDCPA and Federal Rule of Civil Procedure (FRCP) 54(d) cost-awarding provisions interact with one another.

After Olivea Marx defaulted on her student loan, her guarantor hired General Revenue Corporation (GRC) to collect on the account. Marx later sued GRC, alleging that GRC violated the FDCPA by making abusive and threatening phone calls and sending a facsimile to her workplace requesting information about her employment status.

The district court, after a one-day trial, found that the challenged collection practices were neither abusive nor threatening, and ordered Marx to pay $4,500 in costs to GRC.

Marx appealed with regard to the employment verification fax -- which she maintained was an improper third-party communication -- and the fees. The Tenth Circuit Court of Appeals, however, concluded that the fax was not a "communication" under the FDCPA because it didn't specifically convey information regarding a debt.

The appellate court was unconcerned with Marx's argument that she brought her losing claim in good faith, and affirmed the costs award. The court noted that the idea that "bad faith should obligate a litigant to pay his opponent's attorney's fees hardly suggests that his good faith should relieve him of paying his opponent's costs."

Now before the Supreme Court, Marx insists that FRCP 54(d) provides for costs to "the prevailing party" unless a statute "provides otherwise." She argues that the FDCPA allows costs for bad faith and harassment, and the difference between the bad faith and harassment standard in the FDCPA and the prevailing party standard in Rule 54 amounts to "providing otherwise." Thus, the rules preclude costs in her case.

GRC counters that it would defy logic adopt Marx's reading because the FDCPA costs provision was added to protect defendants from harassment. GRC also notes that the more common way to bar costs is through explicit statutory language, and that using explicit language to take a case out of Rule 54 undermines the idea that the bad-faith/harassment language of the FDCPA rejects the Rule 54 standard, SCOTUSblog reports.

GRC seems to have the stronger argument, but -- as the Federal Trade Commission point out in an amicus brief -- the Tenth Circuit's ruling serves as disincentive to private FDCPA enforcement actions. How should the court resolve these competing interests?

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