Supreme Court to Resolve Circuit Split on FDCPA Statute of Limitations

The U.S. Supreme Court recently granted certiorari to resolve a split among the federal circuit courts of appeal as to when the statute of limitations begins to run for the Fair Debt Collection Practices Act. The Supreme Court’s anticipated decision on this issue will add clarity to an issue where certainty and consistency among the federal circuits is essential. The issue of whether the one-year statute of limitations for the FDCPA begins to run when an alleged violation occurs or when it is discovered has divided the circuits, with the Fourth and Ninth Circuits applying a discovery rule, and the Third Circuit instead adopting an occurrence rule.

The Supreme Court will hear a consumer’s appeal from the Third Circuit’s unanimous en banc ruling that his FDCPA claim is time-barred because it was brought approximately six years after the alleged FDCPA violation, even though he only discovered the violation less than a year before initiating the lawsuit. See Rotkiske v. Klemm, 890 F.3d 422 (3d Cir. 2019). Typically, a statute of limitations will run from either the date an injury occurs, or alternatively, the date when a plaintiff discovers or should have discovered the existence of a cause of action.

In Rotkiske v. Klemm, the plaintiff Rotkiske accumulated credit card debt between 2003 and 2005, which his bank referred to defendant Klemm for collection. Klemm sued Rotkiske for payment in March 2008 and attempted service at an address where Rotkiske no longer lived; it eventually withdrew its suit because it was unable to locate Rotkiske. Klemm refiled its suit in 2009, and again attempted service at the same address. This time, unbeknownst to Rotkiske, someone at the residence accepted service on his behalf. Klemm obtained a default judgment for approximately $1,500, which Rotkiske did not discover until 2014 when he applied for a mortgage. Rotkiske sued Klemm for violating the FDCPA, by obtaining a default judgment upon a debt against an individual knowingly served at the wrong address. Because Rotkiske sued Klemm within a year of discovering the default judgment, he argued that his suit was timely.

The Third Circuit took a plain language interpretive approach and concluded, “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, 890 F.3d at 424 (quoting 15 U.S.C. § 1692k(d)). Based on the clear language of the statute, it concluded that “Congress’s explicit choice of an occurrence rule implicitly excludes a discovery rule.” Id. at 426. Nevertheless, after rejecting the discovery rule, the Third Circuit left open the possibility that equitable tolling may apply to FDCPA violations that involve “fraudulent, misleading, or self-concealing conduct,” in order to avoid “patent unfairness” in such cases Id. at 427-28.

If the Supreme Court sides with the Third Circuit and adopts an occurrence rule for the FDCPA, it would provide much needed certainty. Under an occurrence rule, courts need not determine, each time a statute of limitations defense is raised, when a particular plaintiff discovered or should have discovered an alleged FDCPA violation. However, creditors should still be wary of the possibility of equitable tolling extending the statute of limitations in cases of alleged fraudulent or self-concealing conduct.

Krista Bolles

Krista Bolles

Krista works with clients to resolve their commercial and employment disputes.

David Scheffel

David Scheffel

David has extensive experience in consumer financial services litigation and co-chairs Dorsey’s Consumer Financial Services practice. He defends financial institutions against individual and class action claims alleging discrimination, predatory lending, violations of the Truth in Lending Act, the Real Estate Settlement Procedures Act, the Fair Housing Act, the Equal Credit Opportunity Act, and disputes between lenders and securitization trusts.

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