The Supreme Court today took a case for next Term that raises an issue under Fair Debt Collection Practices Act. (Disclosure: I am Supreme Court counsel for the petitioner.) That Act generally prohibits debt collections from communicating with third parties about a consumer’s debt. Plaintiff Marx sued GRC, a debt collector, for sending a fax to her employer that included information concerning a debt. A panel of the Tenth Circuit Court of Appeals held that the fax did not constitute a communication within the meaning of the FDCPA because the fax did not indicate that it related to a debt. The court also upheld an award of costs against Marx.
The cert petition raised two questions. First, FDCPA provides that, “[o]n 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.” 15 U.S.C. § 1692k(a)(3). Federal Rule of Civil Procedure 54(d) provides that, “[u]nless a federal statute, these rules, or a court order provides otherwise, costs—other than attorney’s fees—should be allowed to the prevailing party.” The question presented in the petition is whether a prevailing defendant in an FDCPA case may be awarded costs where the lawsuit was not “brought in bad faith and for the purpose of harassment.” Second, the petition sought certiorari on the question whether the FDCPA’s strict limits on communications with third parties cease to apply when a debt collector, contacting a third party in connection with the collection of a debt, does not indicate the reason for the communication.
The Supreme Court granted the petition only as to the first question. The question is more "cert-worthy" than the second one because the Ninth and Tenth Circuits are split on the answer. At the appellate level, in support of a petition for rehearing en banc (which was denied), the Consumer Financial Protection Bureau filed an amicus brief supporting the plaintiff's view, and we hope that the government will file again at the merits stage of the case. The grant provides a chance to correct an appellate decision that may deter debtors from bringing cases to challenge abusive debt collection practices, because many debtors will not be able to risk having to pay the defendant's costs if the defendant prevails in the suit although the debtor brought the case in good faith.
At the same time, I am disappointed that the Court denied the petition as to the second question, regarding the scope of "communications." On that question, the Tenth Circuit's decision undermines many important FDCPA protections.