Supreme Court Alert: FDCPA Limitations Period Runs From Violation, Not Discovery

Financial Services Law

In a victory for common sense, the Supreme Court has ruled, in Rotkiske v. Klemm, that the Fair Debt Collection Practices Act’s statute of limitations begins to run when the alleged FDCPA violation occurs, not when the violation is discovered. The ruling resolves a circuit court split on the question.

What happened

After Kevin Rotkiske failed to pay approximately $1,200 in credit card debt, Klemm & Associates sought to collect for the creditor. In March 2008, Klemm sued Rotkiske, but service failed. Klemm refiled suit in January 2009 and a process server attempted service at the same address, but someone other than Rotkiske accepted service. When Rotkiske failed to respond to the summons, Klemm obtained a default judgment. In June 2015, more than six years after the default, Rotkiske brought an FDCPA-based suit against Klemm, alleging an FDCPA violation in contacting Rotkiske without lawful ability to collect. The district court dismissed as untimely and the Third Circuit affirmed, rejecting application of the discovery rule in two other Circuits. See Mangum v. Action Collection Serv., Inc., 575 F. 3d 935, 940-41 (9th Cir. 2009) and Lembach v. Bierman, 528 F. App’x 297 (4th Cir. 2013) (per curiam).   

Justice Clarence Thomas, joined by both conservatives and liberals on the bench, commenced his analysis with the statute itself. “Here, the text of [FDCPA] §1692k(d) clearly states that an FDCPA action ‘may be brought . . . within one year from the date on which the violation occurs.’ That language unambiguously sets the date of the violation as the event that starts the one-year limitations period.” While Rotkiske urged a broader interpretation (that the Court include a general “discovery rule” that applies to all FDCPA actions), the Court here disagreed:

“Congress has shown that it knows how to adopt the omitted language or provision. Congress has enacted statutes that expressly include the language Rotkiske asks us to read in, setting limitations periods to run from the date on which the violation occurs or the date of discovery of such violation. See, e.g., 12 U.S.C. §3416; 15 U.S.C. §1679i. In fact, at the time Congress enacted the FDCPA, many statutes included provisions that, in certain circumstances, would begin the running of a limitations period upon the discovery of a violation, injury, or some other event. See, e.g., 15 U.S.C. §77m (1976 ed.); 19 U.S.C. §1621 (1976 ed.); 26 U.S.C. §7217(c) (1976 ed.); 29 U.S.C. §1113 (1976 ed.). It is not our role to second-guess Congress’ decision to include a ‘violation occurs’ provision, rather than a discovery provision, in §1692k(d). The length of a limitations period ‘reflects a value judgment concerning the point at which the interests in favor of protecting valid claims are outweighed by the interests in prohibiting the prosecution of stale ones.’ Johnson v. Railway Express Agency, Inc., 421 U.S. 454, 463–464 (1975). It is Congress, not this Court, that balances those interests. We simply enforce the value judgments made by Congress.”

Justice Ruth Bader Ginsburg, the sole dissent, agreed with the Court that the discovery rule does not apply to the FDCPA, but disagreed with the result because Rotkiske alleged fraud by Klemm in “knowingly arranging for service of the complaint against Rotkiske at an address where Rotkiske no longer lived, and filing a false affidavit of service.”

A copy of the decision may be found here.

Why it matters

The decision affects dozens of cases presently on file in jurisdictions covered by the Fourth and Ninth Circuits, as well as numerous district court cases across the nation that relied on these contrary rulings. The FDCPA’s tight one-year statute of limitations just became a significant barrier to future claims, many of which are first discovered, much later, by debtor’s counsel.