Supreme Court to Decide Whether “Discovery Rule” Applies to Toll FDCPA Limitations Period

September 23, 2019

In October, the Supreme Court is scheduled to hear oral arguments on the issue of whether the “discovery rule” applies to toll the one-year statute of limitations under the Fair Debt Collection Practices Act, 15 U.S.C. §§ 1692, et seq.. U.S. Courts of Appeals for the Fourth and Ninth Circuits have held that the discovery rule does apply to toll the FDCPA statute of limitations, but the Third Circuit has held the contrary in Rotkiske v. Klemm. In this case, the debtor brought an action against a debt collector, alleging violations of the FDCPA when the collector attempted service at an address the debtor no longer lived.


Appellant Kevin Rotkiske accumulated credit card debt in the early 2000s, which his bank referred to Klemm for collection. In 2008, Klemm sued for payment, and attempted service at an address where the debtor no longer lived. Klemm withdrew this case after failure to locate Rotkiske, but tried again in 2009 and attempted effectuating service at the same address. Unknown to Rotkiske, someone who lived at the address accepted service on his behalf and Klemm was able to obtain a default judgment. Rotkiske only discovered the judgment when he applied for a mortgage in 2014.


In 2015, Rotkiske brought his FDCPA claim against Klemm, but the District Court dismissed it as untimely. The United States District Court for the Eastern District of Pennsylvania and The Third Circuit Court of Appeals rejected Rotkiske’s argument that the FDCPA’s statute of limitations incorporates a discovery rule that delays the limitations period from starting until “the plaintiff knew of or should have known of his injury.”

The text of the FDCPA at issue in the appeal reads: “An action to enforce any liability created by this subchapter may be brought in any appropriate United States district court ... within one year from the date on which the violation occurs.” 15 U.S.C. § 1692k(d). Judge Hardiman, agreeing with the District Court, found the statutory language to be clear that the clock begins to run when the Defendant has the last opportunity to comply with the stature – in other words, the date of the occurrence of the violation is controlling.


If the language of the FDCPA is as clear as Judge Hardiman suggests, how is it that the Fourth Circuit’s decision in Lembach v. Bierman, 528 F. App’x 297 (4th Cir. 2013) and the Ninth Circuits’ decision in Mangum v. Action Collection Service, Inc., 575 F.3d 935 (9th Cir. 2009) implied a discovery rule in the Act’s statute of limitations? Judge Hardiman suggests it is because neither opinion analyzed the FDCPA’s “violation occurs” language. Further, the Third Circuit did not agree with Ninth Circuit’s position that the discovery rule is generally applicable to statutes of limitations in federal litigation. The Fourth Circuit took a different approach and implicitly invoked equitable tolling principles and found that the plaintiff in Lembach “had no way of discovering the alleged violation.”


The doctrine of equitable tolling provides that the statute of limitations will not bar the claim of a party injured by fraud or misrepresentation, by no fault of his or her own, who did not discover the injury until after the limitations period expired. The Third Circuit emphasized that the holding in Rotkiske “does nothing to undermine the doctrine of equitable tolling” in cases involving fraudulent, misleading, or concealing conduct. However, the Court failed to reach this question because Rotkiske failed to raise it on appeal. This line of cases illustrates the ambiguity that can be introduced to so-called “clear” legislation when equitable principles are applied to serve the underlying spirit of the law. Oral arguments in this case are scheduled for October 16, 2019.


U.S. Courts of Appeals for the Third Circuit Opinion

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