SCOTUS Set to Decide whether FDCPA’s Statute of Limitations is Tolled by “Discovery Rule”

By: Zachary K. Dunn

The FDCPA requires that any lawsuit must be brought, if at all, “within one year from the date on which the violation” of the act occurs. 15 U.S.C. § 1692k(d). The US Supreme Court will hear argument this month in Rotkiske v. Klemm to decide whether this statute of limitations is paused until a plaintiff discovers the basis for his or her lawsuit.

The facts underlying the case are straightforward. Kevin Rotkiske accumulated credit card debt between 2003 and 2005, which was then referred to Klemm & Associates for collection. Klem sued Rotkiske in 2008 and attempted service at an address where Rotkiske no longer lived. The lawsuit was withdrawn, but Klemm tried again in 2009 and someone at the former residence accepted service on his behalf. Klemm obtained a default judgment for around $1,500.00.

Rotkiske did not discover the judgment until 2014 when he applied for a mortgage. In 2015, Rotkiske sued Klemm arguing that the collection efforts violated the FDCPA. Klemm moved to dismiss the suit, arguing that the suit was time-barred, as the alleged violations took place in 2008 and 2009. The district court agreed and dismissed the suit.  

In doing so, the district court rejected Rotkiske’s assertion that § 1692k(d) incorporates a discovery rule which “delays the beginning of a limitations period until the plaintiff knew of or should have known of his injury.” Rotkiske appealed the decision to the Third Circuit, which affirmed. Parsing the statutory text, the Third Circuit found that Congress did not include a discovery rule in the FDCPA, and that the remedial purposes underlying the act does not demand that courts interpret the FDCPA to include one. The court held that when drafting the FDCPA, Congress was most concerned about the “repetitive contacts” that debt collectors may make with debtors, not that debt collectors will conceal their actions to unscrupulously obtain judgments against unknowing consumers.

The Third Circuit’s en banc opinion created a split in the federal circuit courts of appeal, with the Third Circuit holding that § 1692k(d) does not contain a discovery rule, and the Fourth and Ninth Circuits holding that it does. Briefing is complete, and the case is set for oral argument at the court on October 16, 2019. Expect oral argument to encompass topics such as whether the FDCPA’s text clearly and unambiguously excludes a discovery rule, whether Congress presumed that a common law principle such as the discovery rule would be incorporated into the FDCPA, and whether an implied discovery rule fits with the act’s remedial purpose.

We will have a blog post after oral argument, and when an ultimate decision is made by the Court.  

Zachary Dunn is an attorney practicing in Smith Debnam’s Consumer Financial Services Litigation and Compliance Group