Can the FDCPA’s One-Year Statute of Limitations Be Expanded under the “Discovery Rule”? Supreme Court Will Decide

On February 25, the Supreme Court agreed to hear another major case under the Fair Debt Collection Practices Act. The case is an appeal of the Third Circuit’s decision in Rotkiske v. Klemm, 890 F.3d 422 (3d Cir. 2018), where that court held that the FDCPA’s one-year statute of limitations is not subject to enlargement by the “discovery rule.” Under the discovery rule, a court-made doctrine, the statute of limitations for certain claims does not begin to run until a plaintiff becomes aware of the injury giving rise to the claim. The Third Circuit’s Rotkiske decision is at odds with decisions in the Fourth and Ninth Circuits.    

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The FDCPA’s statute of limitations states that a lawsuit may be filed “within one year from the date on which the violation occurs.” 15 U.S.C. § 1692k(d).

In the Rotkiske case, plaintiff Kevin Rotkiske’s credit card debt was referred for collection to Klemm & Associates. Klemm sued on the debt in 2008 and attempted to serve Rotkiske at a prior address. There, an individual unknown to Rotkiske accepted service on his behalf. Klemm eventually withdrew its lawsuit after being unable to locate Rotkiske personally. In January 2009, Klemm filed a second lawsuit and, again, someone at Rotkiske’s former address accepted service on behalf of Rotkiske. This time, Klemm did not withdraw the suit and eventually obtained a default judgment. Rotkiske, according to his FDCPA complaint, only learned about the suit and the judgment when he applied for a mortgage loan in September 2014. 

On June 29, 2015—within a year of learning about the default judgment against him, but many years after the judgment was obtained—Rotkiske filed his FDCPA claim alleging that Klemm improperly obtained a default judgment on a debt. In the district court, when confronted with Klemm’s argument that the claim was barred by the statute of limitations, Rotkiske argued the FDCPA is subject to the discovery rule, which “delays the beginning of a limitations period until the plaintiff knew of or should have known of his injury.”  Rotkiske v. Klemm, No. 15-3638, 2016 WL 1021140, at *3 (E.D. Pa. Mar. 15, 2016). Under Rotkiske’s theory, the one-year limitations period did not begin to run until September 2014, making his lawsuit timely.  

The district court rejected Rotkiske’s argument, holding that the statutory language clearly indicates that the one-year time period begins to run on “the date on which the violation occurs.” The Third Circuit affirmed the district court’s ruling and rationale:

[The] one-year limitations period begins to run when a would-be defendant violates the FDCPA, not when a potential plaintiff discovers or should have discovered the violation.

In agreeing to review the case, the Supreme Court appears determined to resolve the existing split of authority among different courts and to bring uniformity to the application of the FDCPA’s limitations period. The high court has considered application of the “discovery rule” before, most notably in a 2001 decision involving the Fair Credit Reporting Act. In that case, TRW, Inc. v. Andrews, 534 U.S. 19, the court reversed a Ninth Circuit decision that broadly applied the discovery rule without examining the “text and structure” of the statute. The court instead held that the discovery rule, if it is to be invoked at all, must be supported by the overall statutory scheme and must not render Congress’s carefully chosen words superfluous or otherwise insignificant.  

Applying the standard articulated by the Supreme Court in the TRW case, both the Fourth and Ninth Circuit courts have held that the FDCPA’s statute of limitations is subject to the discovery rule, creating an obvious split among lower courts when the Third Circuit held the opposite in the Rotkiske case. At least one other lower court, applying the Supreme Court’s TRW test, has found the discovery rule to apply elsewhere in the consumer finance context: the District Court for the Southern District of New York applied the discovery rule to expand the Fair Housing Act’s two-year limitations period in Adkins v. Morgan Stanley, No. 12-cv-7667, 2013 WL 3835198, at *5 (S.D.N.Y. July 25, 2013), appealing to the broad remedial purpose of the FHA in construing the limitations period “expansively.”  

The decision to review the Third Circuit’s Rotkiske decision adds another FDCPA case to the high court’s docket. The court is currently considering whether the FDCPA applies to non-judicial foreclosures in Obduskey v. McCarthy & Holthus LLP. That case was argued on January 7 and a decision is expected before the court recesses for the summer in late June.  

On the same day it granted review in the Rotkiske case, the Supreme Court denied a request to review the Second Circuit’s decision in Huebner v. Midland Credit Mgmt., Inc., 897 F.3d 42 (2d Cir. 2018). That “triple-whammy” request for review, as previously covered by InsideARM, sought clarity on a variety of FDCPA issues.  

The Rotkiske case will very likely be among the first cases argued in the Supreme Court’s next term, beginning in October.  The case is Rotkiske v. Klemm, No. 18-328.

About the Author

Mark E. Rooney is the principal and founder of The Rooney Firm PLLC, a Washington, DC-based law firm representing debt collectors and other companies in litigation and compliance matters relating primarily to the FDCPA, TCPA, and FCRA.  He is the co-chair of the American Bar Association’s FDCPA & TCPA litigation subcommittee and the publisher and editor of the website FDCPABulletin.com.

Editor's Note: This article is published on insideARM with permission from the author.