FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

MARTIN D. ROUSE, JR., 

Plaintiff-Appellant, No. 09-55146

v. D.C. No.

LAW OFFICES OF RORY CLARK;  3:06-cv-0006-

RORY WILLIAM CLARK; JAN LAB (RBB)

SHAPIRO; WORLDWIDE ASSET OPINION PURCHASING, LLP,

Defendants-Appellees. 

Appeal from the United States District Court

for the Southern District of California

Larry Alan Burns, District Judge, Presiding

Argued and Submitted

April 5, 2010—Pasadena, California

Filed May 3, 2010

Before: Harry Pregerson and Robert R. Beezer,

Circuit Judges, and James L. Graham,* District Judge.

Opinion by Judge Graham

*The Honorable James L. Graham, United States District Judge for the

Southern District of Ohio, sitting by designation. 

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COUNSEL

Ian Chowdhury, Law Office of Ian Chowdhury, Winnetka,

California, for the plaintiff-appellant.

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Mark E. Ellis and June D. Coleman, Ellis, Coleman, Poirier,

LaVoie & Steinheimer, LLP, Sacramento, California, for the

defendants-appellees.

OPINION

GRAHAM, District Judge:

This appeal presents the issue of whether a prevailing

defendant in a Fair Debt Collection Practices Act (the

“FDCPA”) case can be awarded costs without a finding that

the plaintiff brought the action in bad faith and for the purpose of harassment. The FDCPA’s provision on damages

states in part: “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.”

15 U.S.C. § 1692k(a)(3). The district court construed this provision to mean that costs are a factor in determining the reasonableness of attorneys’ fees. We have jurisdiction under 28

U.S.C. § 1291, and we reverse, holding that a prevailing

defendant cannot be awarded costs under the FDCPA unless

the plaintiff brought the action in bad faith and for the purpose of harassment.

I.

Martin D. Rouse, Jr. filed this action alleging unfair debt

collection practices against Worldwide Asset Purchasing and

its legal representatives, Rory Clark, Jan Shapiro, and the Law

Offices of Rory Clark. The complaint asserted claims under

the FDCPA, as well as state law claims under the California

Consumers Legal Remedies Act, Cal. Civ. Code § 1770, California Fair Debt Collection Practices Act, Cal. Civ. Code

§ 1788.30, and California Unfair Business Practices Act, Cal.

Bus. & Prof. Code § 17200. The complaint additionally

6616 ROUSE v. LAW OFFICES OF RORY CLARK
asserted claims for intentional and negligent infliction of emotional distress.

Rouse moved for partial summary judgment on his federal

FDCPA claim. The motion was denied and the case proceeded to a jury trial.

After the second day of trial had concluded, counsel met

outside the presence of the district judge to discuss jury

instructions. During this meeting, plaintiff’s counsel proposed

that he would pursue only his FDCPA claim and dismiss all

other claims. Plaintiff’s counsel contends that defendants’

counsel promised in return to not argue that defendants were

the prevailing party on the dismissed claims, but nothing on

the record memorializes such an agreement. According to

defendants’ counsel, plaintiff’s counsel circulated a stipulation to that effect, which defendants’ counsel did not sign.

It is undisputed that only the FDCPA claim was submitted

to the jury, which returned a verdict for defendants. The court

awarded costs in the amount of $6511.46 under Federal Rule

of Civil Procedure 54(d). Plaintiff moved to re-tax costs,

arguing that the FDCPA required a finding of bad faith and

harassment on plaintiff’s part before costs could be awarded.

The district court denied the motion to re-tax costs. It held

that the FDCPA requires a finding of bad faith and harassment only before awarding attorneys’ fees. “This court construes the FDCPA as instructing the court to determine the

‘reasonableness’ of any attorney’s fees to be awarded to a prevailing defendant, after a finding of bad faith and harassment

on plaintiff’s part, in consideration of the work counsel

expended and the costs incurred to defend the action. In that

light, it has no effect on a prevailing defendant’s Rule 54

costs recovery entitlement.” Dec. 31, 2008 District Court

Order, p. 3 (emphasis in original). The court expressly

declined to consider the issue of whether the defendants were

the prevailing party as to the dismissed claims.

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II.

We review de novo the district court’s interpretation of a

statute. United States v. Forrester, 592 F.3d 972, 976 (9th Cir.

2010). Whether the district court has the authority to award

costs is a question of law reviewed de novo. Hunt v. Imperial

Merchant Servs., Inc., 560 F.3d 1137, 1140 (9th Cir. 2009);

United States ex rel. Newsham v. Lockheed Missiles & Space

Co., Inc., 190 F.3d 963, 968 (9th Cir. 1999).

III.

[1] Rule 54 allows a court to award costs to a prevailing

party unless a federal statute, the Federal Rules of Civil Procedure, or a court order provides otherwise. Fed. R. Civ. P.

54(d)(1). Thus, “[w]hen the federal statute forming the basis

for the action has an express provision governing costs . . .

that provision controls over the federal rules.” Brown v. Lucky

Stores, Inc., 246 F.3d 1182, 1190 (9th Cir. 2001).

The parties dispute how to interpret the mention of costs in

§ 1692k(a)(3). “The starting point for resolving a dispute over

the meaning of a statute begins with the language of the statute itself.” In re Kagenveama, 541 F.3d 868, 872 (9th Cir.

2008) (citing United States v. Ron Pair Enters., Inc., 489 U.S.

235, 241 (1989)). “Where statutory language is plain, ‘the

sole function of the courts — at least where the disposition

required by the text is not absurd — is to enforce it according

to its terms.’ ” Id. (quoting Lamie v. United States Tr., 540

U.S. 526, 534 (2004)).

[2] Section 1692k(a)(3) is susceptible of more than one

meaning. “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.” 15

U.S.C. § 1692k(a)(3). The district court interpreted the coordinating conjunction “and” as linking “work expended” with

6618 ROUSE v. LAW OFFICES OF RORY CLARK
“costs” in identifying what factors to consider in determining

the reasonableness of attorneys’ fees. The statute could also

be interpreted as connecting “attorney’s fees” with “costs” in

identifying the items that may be awarded to a prevailing

defendant.

[3] The Ninth Circuit has not directly addressed whether

§ 1692k(a)(3) of the FDCPA supersedes Rule 54(d) by requiring a finding of bad faith and harassment on plaintiff’s part

before costs are awarded to a prevailing defendant. Rouse

cites two decisions, yet he acknowledges that neither is

directly on point. See Guerrero v. RJM Acquisitions LLC, 499

F.3d 926, 940 (9th Cir. 2007) (“When defending against a

claim under the Act, a debt collector may recover attorneys’

fees and costs upon a district court’s finding that the consumer brought the action in bad faith and for purposes of

harassment.”); Swanson v. Southern Oregon Credit Serv.,

Inc., 869 F.2d 1222, 1229 (9th Cir. 1988) (“Under section

1692k(a)(3), a debt collector may recover attorneys’ fees and

costs upon the district court’s finding that an action under the

Federal Act was brought in bad faith and for purposes of

harassment.”). The court in both cases was not answering the

issue presented in this case but was paraphrasing

§ 1692k(a)(3) before reviewing the bad faith determinations

made by the district courts.

In dicta, a Second Circuit decision similarly paraphrased

the provision as follows: “[S]ection 1692k(a)(3) permits a

court to award reasonable attorney’s fees and costs only upon

a finding ‘that an action under this section was brought in bad

faith and for the purpose of harassment.’ ” Emanuel v. Am.

Credit Exch., 870 F.2d 805, 809 (2d Cir. 1989). Again,

though, the court was not presented with the issue before us.

Both parties cite numerous district court decisions, many of

them unpublished, but those decisions are not helpful because

the courts did not engage in a statutory analysis of

§ 1692k(a)(3). Compare Pavone v. Citicorp Credit Servs.,

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Inc., 60 F.Supp.2d 1040, 1049 (S.D. Cal. 1997) (denying

request for costs by prevailing FDCPA defendants upon finding that the suit was not brought in bad faith, but not explaining its interpretation of § 1692k(a)(3)), with Young v. Capital

One Bank, No. 07-60731-CIV, 2007 WL 2273669, at *1 (S.D.

Fla. Aug. 7, 2007) (awarding costs under Rule 54(d) to a prevailing FDCPA defendant as a matter of course, without considering whether a bad faith finding was required).

The district court, in holding that costs is a factor in determining the reasonableness of attorneys’ fees, explained that

the statutory provision is “primarily concerned with the recovery of attorney’s fees,” but this is not so. Section 1692k(a) is

entitled “Amount of damages” and it expressly deals with

actual damages, statutory damages, costs, and attorneys’ fees.

We find no binding or persuasive authority on the issue of

statutory interpretation presented in this appeal. In an effort to

help resolve the ambiguity, the parties direct our attention to

the rules of grammar. With conflicting results, the parties

invoke Strunk and White’s imperative to keep related words

together. William Strunk, Jr. & E.B. White, The Elements of

Style 30 (4th ed. 2000) (“Modifiers should come, if possible,

next to the words they modify.”); see also Barnhart v.

Thomas, 540 U.S. 20, 26 (2003) (noting the “grammatical

‘rule of the last antecedent,’ according to which a limiting

clause or phrase . . . should ordinarily be read as modifying

only the noun or phrase that it immediately follows.”). Rouse

targets the word “expended” and argues that had Congress

meant for costs to merely be a factor in determining the reasonableness of attorneys’ fees, it would have written, “the

court may award to the defendant attorney’s fees reasonable

in relation to the work and costs expended.”

Appellees argue that the word “costs” belongs to the phrase

“attorney’s fees reasonable in relation to” and not the more

remote phrase “the court may award.” Appellees also emphasize that in the sentence immediately preceding the statutory

6620 ROUSE v. LAW OFFICES OF RORY CLARK
language at issue, Congress provided that prevailing plaintiffs

receive “the costs of the action, together with a reasonable

attorney’s fee.” 15 U.S.C. § 1692k(a)(3). Had Congress

intended to require a finding of bad faith before a prevailing

defendant is awarded costs, appellees argue, then it would

have used the same sentence structure as the provision for

prevailing plaintiffs, with the result reading, “the court may

award to the defendant the costs of the action, together with

a reasonable attorney’s fee in relation to the work expended.”

[4] The problem with the interpretation espoused by appellees and the district court is that it would require courts to

consider costs in determining the reasonableness of attorneys’

fees. When a statute is ambiguous, a court should construe it

in a way to avoid an absurd result. Clinton v. City of New

York, 524 U.S. 417, 429 (1998); United States v. Middleton,

231 F.3d 1207, 1210 (9th Cir. 2000). Costs are not part of the

traditional methodology of determining the reasonableness of

attorneys’ fees, and for good reason. Costs, whether defined

as those taxable under 28 U.S.C. § 1920 or as broader litigation costs, are often fixed by statute or local rule and bear no

direct causal relationship to the reasonableness of attorneys’

fees. There may be a correlation, in that the complexity of the

case could be a common variable of both — the more complex the case, the greater the hours worked by attorneys and

perhaps the greater the total costs for court reporters, witnesses, copies, travel, etc. Even so, it is a logical fallacy to use

costs to determine the reasonableness of attorneys’ fees.

[5] Such an approach is also is contrary to attorneys’ fees

jurisprudence. The “lodestar method” is “the fundamental

starting point in determining a ‘reasonable attorney’s fee.’ ”

Christensen v. Stevedoring Servs. of Am., 557 F.3d 1049,

1053 (9th Cir. 2009) (citing City of Burlington v. Dague, 505

U.S. 557, 562 (1992)); see also Staton v. Boeing Co., 327

F.3d 938, 965 (9th Cir. 2003) (“Under a fee-shifting statute,

the court must calculate awards for attorneys’ fees using the

lodestar method . . . .”) (citation and internal quotation marks

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omitted). This method requires a court to multiply “the number of hours the prevailing party reasonably expended on the

litigation by a reasonable hourly rate.” Morales v. City of San

Rafael, 96 F.3d 359, 363 (9th Cir. 1996). The lodestar figure

is presumptively reasonable. Dague, 505 U.S. at 562; Crawford v. Astrue, 586 F.3d 1142, 1149 (9th Cir. 2009).

[6] Adjustments to the lodestar amount are allowed only

“if circumstances warrant,” Ferland v. Conrad Credit Corp.,

244 F.3d 1145, 1149 n. 4 (9th Cir. 2001), and are reserved for

“rare” or “exceptional” cases. Ballen v. City of Redmond, 466

F.3d 736, 746 (9th Cir. 2006); Cunningham v. County of Los

Angeles, 879 F.2d 481, 487 (9th Cir. 1988). Adjustments must

be carefully tailored, drawing from a finite pool of factors relevant to the reasonableness determination and only to the

extent a factor has not been subsumed within the lodestar calculation. See Camacho v. Bridgeport Fin., Inc., 523 F.3d 973,

982 (9th Cir. 2008) (citing the factors set out in Kerr v. Screen

Extras Guild, Inc., 526 F.2d 67, 70 (9th Cir. 1975)). Those

factors include the preclusion of other employment by the

attorney due to acceptance of the case; time limitations

imposed by the client or the circumstances; the amount

involved and the results obtained; the “undesirability” of the

case; the nature and length of the professional relationship

with the client; and awards in similar cases. Camacho, 523

F.3d at 982 n.1. Costs are not among the factors a court may

consider in adjusting the lodestar amount.

Mandating that costs be factored into the determination of

the reasonableness of attorneys’ fees would undermine judicial economy. It would require courts to engage in a fruitless

exercise of attempting to relate the lodestar figure to the

amount of costs. Courts would be left grasping to provide

some meaning to a variable that has no necessary bearing on

the reasonableness of attorneys’ fees.

[7] In defense of the district court’s interpretation, appellees cite the FDCPA’s legislative history. When an ambiguity

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exists in a statute, courts may look to legislative history, canons of construction, and the statute’s overall purpose to

resolve the matter. Ileto v. Glock, Inc., 565 F.3d 1126, 1133

(9th Cir. 2009); Jonah R. v. Carmona, 446 F.3d 1000, 1005

(9th Cir. 2006). The legislative history does not help appellees. In explaining civil liability, the Senate Report on the

FDCPA appears to contemplate that awards of both attorneys’

fees and costs to a prevailing defendant be conditioned on a

finding that plaintiff brought the action in bad faith and for

harassment: “In order to protect debt collectors from nuisance

lawsuits, if the court finds that an action was brought by a

consumer in bad faith and for harassment, the court may

award the debt collector reasonable attorney’s fees and costs.”

S. Rep. No. 95-382, at 5 (1977), as reprinted in 1977

U.S.C.C.A.N. 1695, 1700. It is true, as appellees point out,

that later in its summary of the relevant section (Section 813),

the Report fails to mention costs as being available to a prevailing defendant. Id. at 8, 1977 U.S.C.C.A.N. at 1702

(“Where a court finds that a suit was brought by a consumer

in bad faith and for harassment, the court may award reasonable attorney’s fees to the defendant.”). However, nowhere

does the Report state an intention that costs be a factor in

determining the reasonableness of attorneys’ fees.

[8] The FDCPA’s remedial purpose is served by interpreting § 1692k(a)(3) as authorizing an award of attorneys’ fees

and costs only upon a finding that plaintiff brought the action

in bad faith and for the purpose of harassment. See Donohue

v. Quick Collect, Inc., 592 F.3d 1027, 1033-34 (9th Cir. 2010)

(stating that the FDCPA should by construed liberally to

effect its remedial purpose); Clark v. Capital Credit & Collection Servs., Inc., 460 F.3d 1162, 1176 (9th Cir. 2006) (same).

The Act’s express purpose is to shield consumers from abusive debt collection practices. 15 U.S.C. § 1692(e) (“It is the

purpose of this subchapter to eliminate abusive debt collection

practices by debt collectors, to insure that those debt collectors who refrain from using abusive debt collection practices

are not competitively disadvantaged, and to promote consisROUSE v. LAW OFFICES OF RORY CLARK 6623
tent State action to protect consumers against debt collection

abuses.”). Thus, insulating consumers from the prospect of

paying defendants’ costs by requiring a finding that the action

was brought in bad faith and for harassment is consistent with

the stated intent of Congress.

The wording of § 1692k(a)(3) is unlike the provisions of

other consumer credit protection statutes. See United States v.

Nader, 542 F.3d 713, 717 (9th Cir. 2008) (court may look to

related statutes to resolve an ambiguity); Jonah R., 446 F.3d

at 1007 (same). The FDCPA is part of the larger statutory

scheme of the Consumer Credit Protection Act, 15 U.S.C.

§§ 1601-1693r, which includes the following: the Truth in

Lending Act, 15 U.S.C. §§ 1601-1665e; the Fair Credit Billing Act, 15 U.S.C. §§ 1666-1666j; the Consumer Leasing Act,

15 U.S.C. §§ 1667-1667f; the Credit Repair Organizations

Act, 15 U.S.C. §§ 1679-1679j; the Fair Credit Reporting Act,

15 U.S.C. §§ 1681-1681x; the Equal Credit Opportunity Act,

15 U.S.C. §§ 1691-1691f; and the Electronic Funds Transfer

Act, 15 U.S.C. §§ 1693-1693r.

[9] While these statutes expressly provide for an award of

costs and attorneys’ fees to prevailing plaintiffs, only the

FDCPA and the FCRA provide for prevailing defendants. The

FCRA states,

Upon a finding by the court that an unsuccessful

pleading, motion, or other paper filed in connection

with an action under this section was filed in bad

faith or for purposes of harassment, the court shall

award to the prevailing party attorney’s fees reasonable in relation to the work expended in responding

to the pleading, motion, or other paper.

15 U.S.C. § 1681n(c) (willful noncompliance); 15 U.S.C.

§ 1681o(b) (negligent noncompliance). In contrast to the

FCRA’s omission of the word “costs,” the FDCPA’s express

mention of costs further supports that Congress intended to

6624 ROUSE v. LAW OFFICES OF RORY CLARK
condition an award of costs to a prevailing defendant upon a

finding of bad faith and harassment on plaintiff’s part.

IV.

[10] We REVERSE the district court’s holding that costs

may be awarded under the FDCPA to a prevailing defendant

without a finding that plaintiff brought the action in bad faith

and for the purpose of harassment. We VACATE the award

of costs and REMAND for further proceedings consistent

with this opinion.

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