In Grove v. Wells Fargo, the lender reported to the credit bureaus that Kenneth Grove was behind on his car loan payments. Grove disputed that his payments were delinquent and requested that Wells Fargo correct the inaccurate marks on his credit reports, according to court documents. When Wells reportedly refused, Grove filed a lawsuit against Wells under the Fair Credit Reporting Act (FCRA).

After a court-ordered mediation, depositions and document production, Wells and Grove agreed upon a settlement. The settlement was rendered a stipulated judgment, whereby Wells would instruct the credit bureaus to delete the disputed delinquency reports and would pay Grove $20,000 "plus (Grove’s) costs incurred to date and recoverable attorney’s fees."

The judgment also deemed Grove the prevailing party, and allowed Grove to request fees and costs via filing a motion, which Wells could contest only as to the amount of the fees and costs to be covered.

Grove requested $154,578 in attorney’s fees, $7,468.41 in costs deemed taxable under 28 U.S.C. Section 1920, and $6,770.60 in nontaxable costs, like faxes, postage and deposition video conferencing. Wells argued that it should not be ordered to pay any nontaxable costs.

The district court awarded Grove $85,289.25 in attorney’s fees, denied Grove’s request for taxable costs, and agreed with Wells that the court lacked authority to order Wells to cover Grove’s nontaxable costs.

The Ninth Circuit Court of Appeals reversed the trial court’s ruling regarding nontaxable costs, and found that the lower court was in fact authorized to consider and order Wells to pay Grove’s nontaxable costs to the extent that it was a local standard practice for attorneys to bill nontaxable costs separately from their hourly fee.

In explaining its ruling, the appellate court first offered a primer on the "American rule," under which litigants bear their own attorney’s fees and costs unless a contrary law or agreement between the parties applies. Two different statutory exceptions to the American rule applied to Grove’s request, the court explained.

First, federal courts have the power to shift costs defined as taxable under 28 U.S.C. Section 1920, to the nonprevailing party in a case. These costs include "fees of the clerk and marshal; certain fees for transcripts; certain fees for printing and witnesses; the costs of copies needed for use in the case; docketing fees; and compensation of court appointed experts and interpreters."

Secondly, the FCRA also contains a fee-shifting provision that allows the prevailing party to recover "the costs of the action together with reasonable attorney’s fees as determined by the court."

After analyzing precedential opinions, the Court of Appeals concluded that the limitations placed on "taxable" costs in 28 U.S.C. Section 1920 do not preclude the "reasonable attorney’s fees" allowed under the FCRA from including reasonable out-of-pocket expenses incurred by the prevailing party’s attorney, like travel and copies.

As a result, the court explained, the lower court does possess the authority to include in the FCRA award of reasonable attorney’s fees litigation expenses that are not listed in 28 U.S.C. Section 1920. The appeals court reversed this element of the district court’s finding and remanded the case to the lower court for it to consider the amount of Grove’s nontaxable costs that should be awarded.

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