In Coleman v. Credit Management LP, 2011 WL 913210 (N.D.Tex. 2011), Judge Lynn held that a separate counter-claim for bad faith is not the proper way for an FDCPA defendant to challenge a Plaintiff’s FDCPA claim on bad faith grounds. Judge Lynn granted Plaintiff’s Motion to Dismiss, holding held that a Defendant has the right to allege bad faith in post-judgment proceedings, explaining:
Defendant, an alleged debt collector, placed collection calls to Plaintiff, who alleges that such calls were harassing and abusive. On November 14, 2010, Plaintiff filed a Complaint, alleging that Defendant violated the Fair Debt Collection Practices Act (“FDCPA”). Defendant answered the Complaint, asserting a counterclaim for bad faith and requesting attorney’s fees under 15 U.S.C. § 1692k(a)(3), which Plaintiff now moves to dismiss. ¶ . . . Under the FDCPA, in order to recover attorney’s fees, the prevailing defendant must show that the plaintiff brought the FDCPA claim in bad faith and for the purpose of harassment. Therefore, § 1692k contemplates a post-trial proceeding following a determination on the merits of a plaintiff’s complaint, and thus Defendant’s counterclaim is premature. However, the issue is an academic one, because Defendant may still move for attorney’s fees and conduct discovery after a finding, if any, that Defendant has prevailed on Plaintiff’s FDCPA claim. [FN — Spira v. Ashwood Financial, Inc., 358 F.Supp.2d 150, 161 (E.D.N.Y.2005) (“The issue is really an academic one, because even though the Court dismisses the coun-terclaim, [d]efendant is still entitled to move for attorney’s fees after entry of this Memorandum and Order if it believes that it satisfies the applicable standard.”); Crow v. Wolpoff & Abramson, No. Civ. 06 3228 PAM/JSM, 2007 WL 1247393, at *4-5 (D.Minn. Apr. 19, 2007) (denying request to treat a § 1692k affirmative defense as a counterclaim because a finding of bad faith could only take place after the resolution of plaintiff’s primary claim); Kirscher v. Messerli & Kramer, P.A., No. Civ. 05-1901PAMRLE, 2006 WL 145162, at *6-7 (D.Minn. Jan. 18, 2006) (in action where defendant asserted a bad faith counterclaim under the FDCPA, the court held that it “need not address the substantive arguments relating to this merely academic issue”); Young v. Reuben, No. 04-0113, 2005 WL 1484671, at *1-2 (S.D. Ind. June 21, 2005) (holding that defendants asserted a conditional claim, “contingent upon, and will not ripen unless and until the [c]ourt concludes that [p]laintiffs’ case against [d]efendants was the result of [p]laintiffs’ bad faith and intent to harass [d]efendants”); Stoddard v. Nationwide Recovery Service, Inc., Civil No. 03-334-JD, 2003 WL 25273708, at *1(D.N.H. Nov. 25, 2003) (“Whether brought as a counterclaim or by motion, a claim under that section is decided by the court only after the litigation has been resolved against the plaintiff. Therefore [defendant’s] counterclaim will be considered by the court after [plaintiff’s] claims are finally resolved, and no mention of or evidence pertaining to the counterclaim will be allowed at trial.”); Taylor v. Frost-Arnett Co. of Tenn., No. 98-0564, 1998 WL 472052, at *1 (E.D.La. Aug. 5, 1998) (determining that “[t]he bad faith and harassment allegations of the counterclaim, even if proved, afford neither a defense to the merits of the case nor provide the defendant with a cause of action under the FDCPA,” and dismissing the defendant’s counterclaim without prejudice to the defendant filing a motion for attorney’s fees later); Chlanda v. Wymard, No. 3-93-321, 1994 WL 583124, at *1 (S.D.Ohio Aug. 16, 1994) (holding that § 1692k did not create a cause of action but allowed for a motion for attorney’s fees).].
Judge Greer in the U.S.D.C. for the Eastern District of Tennessee made the same holding in Marcum v. Eastman Credit Union, 2011 WL 1225792 (E.D.Tenn. 2011), explaining:
The FDCPA allows a defendant sued under the Act to seek relief in the form of reasonable attorney’s fees”[o]n a finding by the court that an action under this section was brought in bad faith and for the pur-pose of harassment….” 15 U.S.C. § 1692k(a)(3). While some courts have found that a counterclaim for attorney’s fees under this section of the FDCPA is a valid cause of action, the purpose of section 1692k(a)(3) is not to provide defendants with a cause of action but rather to provide relief to a defendant subjected to litigation brought in bad faith. The plain language of the Act is indicative that a defendant may seek relief under the Act only after a finding by the court that the plaintiffs’ action was brought in bad faith. It necessarily flows that upon such a finding by the Court, the defendant would seek relief by filing a motion for attorney’s fees under the Act. This proposition is in accordance with the plain language of the Act and is consistent with Rule 54 of the Federal Rules of Civil Procedure, which dictates that claims for attorney’s fees are to be made by motion “unless the substantive law requires those fees to be proved at trial as an element of damages.” Fed.R.Civ.P. 54(d)(2)(A). While it is clear that under the FDCPA the defendants may be entitled to relief in the form of attorney’s fees, that relief is only avail-able to the defendants upon this Court’s finding that the plaintiffs’ allegations were made in bad faith and only upon motion of the defendant after such finding by the Court.