Banking and Finance Law Daily FDCPA time limit includes no discovery rule, starts on violation
Tuesday, December 10, 2019

FDCPA time limit includes no discovery rule, starts on violation

By Richard A. Roth, J.D.

The Fair Debt Collection Practices Act one-year statute of limitations begins to run when the Act is violated, not when the violation is discovered, the Supreme Court has decided.

In an eight-to-one decision, the Supreme Court has determined that the one-year statute of limitations set by the Fair Debt Collection Practices Act begins to run when the Act is violated. A consumer’s argument that in the case of a "self-concealing violation" the clock does not start running until the violation is discovered has been rejected (Rotkiske v. Klemm, Dec. 10, 2019, Thomas, C.).

According to the consumer, the law firm of Klemm & Associates 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. He also claimed the law firm knew this had happened and filed a false affidavit of service.

The consumer said he 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 six years after the default judgment was entered—long after the FDCPA one-year time limit.

Suit dismissed. The consumer’s suit was dismissed by the U.S. district judge, and the dismissal was affirmed by the U.S. Court of Appeals for the Third Circuit. In a unanimous en banc opinion, the Third Circuit declared that "the Act says what it means and means what it says: the statute of limitations runs from ‘the date on which the violation occurs’" (see Banking and Finance Law Daily, May 16, 2018).

No "atextual judicial supplementation." Justice Thomas’s majority opinion, joined by seven other justices, pointed out that the FDCPA says a cause of action may be brought "within one year from the date on which the violation occurs" (15 U.S.C. 1692k(d)). "That language unambiguously sets the date of the violation as the event that starts the one-year limitations period," Justice Thomas wrote. Adding a discovery rule would be inappropriate atextual judicial supplementation given that Congress knew how to include a discovery rule if it was desired.

Equitable tolling. The Supreme Court, like the Third Circuit before it, was careful to make clear that it was not rejecting the possibility of equitable tolling of the FDCPA statue of limitations. The majority opinion characterized the consumer’s fall-back argument as claiming the existence of "an equitable, fraud-specific discover rule." In fact, a similar rule has been recognized before, Justice Thomas pointed out.

However, in this case, the consumer had not raised the argument before the Third Circuit or in his petition for certiorari, the majority opinion said. That meant that the Court would not consider whether equitable tolling was available under the FDCPA.

Sotomayor’s concurrence. Justice Sotomayor agreed with both the result and the reasoning of the majority opinion. The point of her concurring opinion was to emphasize that fraud-specific equitable tolling was a long-standing principle and that the majority opinion should not be seen as casting doubt on it.

Ginsburg’s dissent. Justice Ginsburg dissented partially from the majority opinion and from the judgment. She believed that a fraud-based discovery rule should have allowed the consumer to assert his otherwise stale claim and that the suit should have been remanded to allow that position to be considered.

Justice Ginsburg conceded that the FDCPA one-year statute of limitations did not include an implied discovery rule. However, the time limit should not be triggered when the debt collector’s fraud delays the consumer’s ability to sue within that one year, she said.

The consumer claimed that due to the law firm’s actions, he had no knowledge of the collection suit and no knowledge of the default judgment, Justice Ginsburg wrote. In those circumstances, the time limit should not have started to run until the consumer learned of the judgment against him.

She also disagreed that the consumer waived his fraud-based discovery rule argument. In her opinion, he had adequately asserted it both before the Third Circuit and in his petition for certiorari. The briefs filed with the Court made clear that the argument was under consideration.

The case is No. 18-328.

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

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