Guest Post: Ninth Circuit Expands Discovery Rule to All FDCPA Claims

By: Parker Dozier
June 15, 2016

The Ninth Circuit has expanded its application of the discovery rule to all claims made under the FDCPA.  Lyons v. Michael & Assoc., 2016 U.S. App. LEXIS 10363 (9th Cir. 2016).  The Court had previously limited its holdings on the issue to the facts of the particular case in front of it.  See Mangum v. Action Collection Serv., Inc., 575 F.3d 935 (9th Cir. 2009) (applied only to disclosure of information to third parties); Tourgeman v. Collins Fin. Serv., Inc., 755 F.3d 1109 (9th Cir. 2014)(applied to debt collection letters).    

In Lyons, the defendant debt collector filed suit in an improper venue under the FDCPA on December 7, 2011.  Lyons was served with the collection suit in mid-January 2012.  Lyons sued the defendant debt collector on January 3, 2013 for violating the FDCPA’s venue provision.  The plaintiff alleged that she did not know of the lawsuit until she was served, and the defendant did not offer any evidence to the contrary.  The District Court ruled that the FDCPA’s one year statute of limitations began to run the day the lawsuit was filed, which meant the plaintiff’s claim was time barred.  The timing in this case clearly illustrates how the application of the discovery rule can save a plaintiff’s case or the non-application can lead to summary judgment for the debt collector.  The Ninth Circuit reversed the District Court’s decision and held “that the discovery rule applies equally regardless of the nature of the FDCPA violation alleged by a plaintiff.”  Lyons, 2016 U.S. App. LEXIS 10363 at *7.  The defendant’s argument that the discovery rule should only apply to certain FDCPA claims did not resonate with the Court.  “Applying the discovery rule to some FDCPA claims but not others would be out of step with our general approach to the discovery rule, and would threaten to capriciously limit the broad, remedial scope of the FDCPA.”  Id. at *7-8.

The Court’s expansion of its application of the discovery rule only heightens the current split among the circuits.  The Fourth Circuit, like the Ninth Circuit, applies the discovery rule, however, the Eighth and Eleventh Circuits do not apply the discovery rule.  The other circuits have yet to rule on the issue. 

About the Author:  Parker Dozier is an associate with Smith Debnam and a member of the firm's Consumer Financial Services Litigation and Compliance team.