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U.S. Supreme Court

Student debtor who lost fair debt case loses again in Supreme Court

Posted Feb 26, 2013 12:46 PM CDT
By Debra Cassens Weiss

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Corrected: A collection agency that wins dismissal of a federal fair debt collection case can collect costs without a showing of bad faith or harassment by the plaintiff, the U.S. Supreme Court has ruled in a 7-2 decision.

The decision is a loss for student debtor Olivea Marx, who had contended that the General Revenue Corp. violated the Fair Debt Collection Practices Act through harassing phone calls and threats to garnish up to half of her wages. In a bench trial, a judge found that Marx did not prove her case and ordered her to pay $4,500 in court costs.

Justice Clarence Thomas wrote the majority opinion (PDF). He agreed with General Revenue’s interpretation that a provision in the debt collection law “does not displace the background rule that a court has discretion to award costs.”

The case involved the interplay between two measures. The Federal Rules of Civil Procedure give federal courts discretion to award costs to prevailing defendants “unless a federal statute … provides otherwise.” The Fair Debt Collection Practices Act, on the other hand, provides that “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.”

The fair debt provision "does not displace a district court’s discretion to award costs," Thomas said.

Justice Sonia Sotomayor dissented in an opinion joined by Justice Elena Kagan. The case is Marx v. General Revenue Corp.

Corrected on March 1 to state that Justice Elena Kagan joined the dissent.

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