Banking and Finance Law Daily Court hears arguments on whether discovery or occurrence starts FDCPA time limit
Wednesday, October 16, 2019

Court hears arguments on whether discovery or occurrence starts FDCPA time limit

By Richard A. Roth, J.D.

Oral arguments in the Supreme Court posed the question of whether the Fair Debt Collection Practices Act one-year statute of limitations begins to run when the Act is violated or when the affected consumer learns of the violation.

A consumer’s attorney argued against both counsel for a debt collecting law firm and the U.S. government in an effort to convince the Supreme Court that the Fair Debt Collection Practices Act one-year statute of limitations does not begin to run until a consumer discovers that the Act was violated. According to the consumer, in the case of a "self-concealing" violation, the statute of limitations does not begin to run until the violation is discovered. The law firm, supported by the U.S. government, asserted that the time limit begins to run when the violation occurs unless the running of the time limit is equitable tolled.

According to the consumer, the law firm secured a state court default judgment for his unpaid credit card account balance. However, the default judgment was premised not on service of the summons and complaint on the consumer but rather on service on an individual who lived at the consumer’s former address and purported to accept service on his behalf. Arguing before the Supreme Court, the consumer’s attorney added that the complaint alleged the law firm knew this had happened and that a false affidavit of service had been filed.

The consumer did not learn of the default judgment until more than five years later when he applied for a mortgage loan, at which time he sued the firm for FDCPA violations. The suit was filed less than one year after the mortgage loan application but more than five years after the default judgment was entered. The district court judge dismissed the suit, saying that suing nearly six years after the judgment was entered was tardy under the FDCPA’s one-year statute of limitations.

Appellate court decision. The FDCPA says that a suit may be brought "within one year from the date on which the violation occurs" (15 U.S.C. §1692k(d)). In affirming the dismissal, the U.S. Court of Appeals for the Third Circuit pointed to that specific language, saying "In our view, the Act says what it means and means what it says: the statute of limitations runs from ‘the date on which the violation occurs’ " (Rotkiske v. KlemmBanking and Finance Law Daily, May 16, 2019).

Consumer’s argument. Summarizing the consumer’s argument, Scott E. Gant said that the FDCPA does not clearly say whether the statute of limitations is subject to a discovery rule. That being the case, traditional statutory interpretation rules, such as the consumer protection purpose of the Act, make clear that Congress had not intended to displace what Gant termed the common law discovery rule.

Questions by Justices Sotomayor, Kavanaugh, Breyer, and Ginsburg all pressed Gant to draw a clear distinction between the statutorily permitted discovery rule he was advocating and equitable tolling. Gant disclaimed any reliance on equitable tolling, clarifying that while a discovery rule might have equitable aspects, it still relied on congressional intent.

Debt collector’s argument. Shay Dvoretzky, arguing on behalf of the law firm, leaned heavily on the term "violation occurs," as the Third Circuit had done. Congress could have said "claim accrues" or "liability arises," which would be less clear, but it had not done so. " ‘[V]iolation occurs’ simply can’t be read any other way," he told the Court.

From his point of view, the question presented to the Court was whether there was an across-the-board discovery rule in the FDCPA. Arguments based on fraud were irrelevant, he asserted.

Moreover, the fraud cases the consumer’s arguments relied on actually were equitable tolling cases, he said, and equitable tolling had not been raised. The only question presented was the meaning of the words in the FDCPA, Dvoretzky explained, not whether the consumer should be given equitable relief from the FDCPA’s requirements.

Specifically addressing the consumer’s claims, Dvoretzky said that even if the process server had lied on his return of service, and the law firm knew he had lied, and had taken no action to collect the judgment until after the one-year time limit had passed, there would be no self-concealing fraud that would save the consumer’s suit. Those allegations might permit an equitable tolling claim but, again, equitable tolling had been waived. He also argued that the operative complaint in the case didn’t raise the self-concealing fraud argument.

Justice Kavanagh expressed doubt about the law firm’s argument against a discovery rule, terming it "a shakier argument" than the assertion that equitable tolling had been waived. He suggested that an equitable discovery rule might exist despite the "violation occurs" language.

Government’s argument. The federal government appeared at the argument as amicus curiae on the side of the law firm. Assistant to the Solicitor General Jonathan C. Bond worked to return focus to the words of the Act—"violation occurs." The FDCPA does not include a broad discovery rule, he told the Court.

A discovery rule is in principle an equitable rule, not a matter of statutory interpretation, according to Bond. The consumer had waived any claim for equitable relief.

Attorneys: Scott E. Gant (Boies Schiller Flexner LLP) for Kevin C. Rotkiske. Shay Dvoretzky (Jones Day) for Paul Klemm, Nudelman, Klemm & Golub, P.C., and Nudelman, Nudelman & Zeiring, P.C. Jonathan C. Bond, Assistant to the Solicitor General.

Companies: Klemm & Associates; Nudelman, Klemm & Golub, P.C.; Nudelman, Nudelman & Zeiring, P.C.

MainStory: TopStory DebtCollection SupremeCtNews

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