I'm currently being sued for credit card debt that's not my debt. Collection agency is suing me because I happen to be the only person in this area listed in phone book with that name. After responding to summons there law firm sent me stipulation to sign saying they would drop action but neither party can recover cost. I'm not signing. They are located appox. 100 miles from me . What are my chances of recovering my costs 325.00 as of right now, by taking them to small claims court in there area.

You should find out what the rules of the small claims court are where the action was filed. In most jurisdictions you cannot withdraw a claim without the consent of the opposing party. And from what you stated you will not consent unless they pay your costs.

Rather than bringing a separate action for your costs perhaps you could file a motion as part of the existing file to have the claim dismissed and that your costs be paid.

Alternately, perhaps you can have the matter set down for trial in order to clear your name. If you have some written admission from the creditor that you were indeed wrongly identified then rest assured the creditor will not want to go to trial and you may find that suddenly they are prepared to pay your costs.

You can go to court and defend yourself, demand they prove their claim,
1. Produce the original contract.
2. Demand they produce anything with you signature on it.
3. When they cannot produce anything linking you to their claim, ask the court to dismiss their action against you, an that a judgment be award to you for you costs incurred in the matter.