ACA International’s latest Members Attorney Program analysis provides a deeper dive into the statute of limitations and the FDCPA. Editor’s note: this content is available for members only.
12/16/2019 9:00
By Nicole Strickler- President, Messer Strickler LTD
On Tuesday, Dec. 10, 2019, the Supreme Court released its long-awaited opinion in Rotkiske v. Klemm, a case examining the statute of limitations under the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq. (the “FDCPA.”) The facts involved in Rotkiske are straightforward. Kevin Rotkiske incurred a credit card debt to Capital One with a balance of $1,500. Paul Klemm’s law firm (“Klemm”) was engaged to collect the debt.The firm filed a lawsuit but ultimately withdrew it after unsuccessfully attempting service on Rotkiske at a previous known address. Thereafter, the firm brought a second suit and served Rotkiske through a person unknown at the prior address. Default judgment was granted against Rotkiske in early 2009.
Rotkiske claims he was unaware of the judgment against him until September 2014 when he applied for a mortgage. Shortly thereafter, he filed suit under the Fair Debt Collection Practices Act in the U.S. District Court for the Eastern District of Pennsylvania. Rotkiske contended that he was the victim of “sewer service,” which is the act of intentionally serving process in a manner designed to prevent the defendant from learning of the collection suit. Klemm moved to dismiss arguing that the claim was untimely under the FDCPA’s statute of limitations. That provision provides that any lawsuit must be brought “within one year from the date on which the violation” of the act occurs.
Rotkiske countered that the statute was tolled under the “discovery rule.” The “discovery rule” is a judicial doctrine which, when applicable, provides that a statute of limitations does not begin to run until the plaintiff discovers the violation. Since Rotkiske did not learn of the default judgment against him until 2014, he argued, his complaint should be deemed timely. The district court, and ultimately, the Third Circuit disagreed with Rotkiske’s position. In doing so, the Third Circuit created a circuit split with the Fourth and Ninth Circuits, which had previously rendered decisions finding the discovery rule applicable to FDCPA cases. The Supreme Court granted certiorari.
Writing for the majority, Justice Clarence Thomas explained that the court is required to begin and end its interpretation of the FDCPA’s statute of limitations with the text of the statute as long as the text is unambiguous. He then consulted Webster’s New International Dictionary (Second Edition) for definitions of the words “violation” and “to occur.” Finding no room for a blanket discovery rule in either definition, the Supreme Court held that “[t]he FDCPA limitations period begins to run on the date the alleged FDCPA violation actually happened.” In short, the discovery rule may not be applied to the FDCPA.
The dissenting opinion took an alternative approach. While recognizing that the discovery rule was not generally applicable to FDCPA claims, Justice Ruth Bader Ginsburg argued that the fraud alleged in Rotkiske’s complaint should serve to postpone the statute to run from the date Rotkiske learned of the default judgment. According to Ginsburg, “by knowingly arranging for service of the complaint against Rotkiske at an address where Rotkiske no longer lived and filing a false affidavit of service. . .Klemm engaged in fraud.” Such fraud, she contended, warrants application of the discovery rule. She also distinguished her proposed fraud-based discovery rule from general principles of equitable tolling, which would require a plaintiff to establish “(1) that he has been pursuing his rights diligently, and (2) that some extraordinary circumstance stood in his way and prevented timely filing.”
Notably, the majority’s opinion left open “whether the text of 15 U.S.C. § 1692k(d) permits the application of equitable doctrines or whether the claim raised in this case falls within the scope of the [such] doctrine[s]” because Rotkiske’s counsel failed to preserve the issue on appeal. Thus, while the “discovery rule” may no longer be used by FDCPA plaintiffs, they still may fashion arguments supporting the application of a longer statute due to equitable reasons, such as fraud. As such, arguments relevant to the FDCPA’s statute of limitations will likely continue.
The above article was contributed by a member of ACA International’s Member Attorney Program (MAP) committee. ACA Daily will publish future legal analyses and thought pieces written by members of this important committee.