In an 8-1 decision, the U.S. Supreme Court has ruled in Rotkiske v. Klemm that the FDCPA’s one-year statute of limitations (SOL) runs from the date of the alleged violation and not from a consumer’s discovery of the violation. The decision resolves a circuit split, with the Third Circuit having taken the position adopted by the Supreme Court and the Fourth and Ninth Circuits having ruled that the discovery rule applies to the FDCPA’s one-year SOL.
The FDCPA provides that “[a]n 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.” In Rotkiske, the plaintiff alleged that the defendant violated the FDCPA by obtaining a default judgment against him based on service of a complaint at an address the defendant knew or should have known was incorrect (a practice sometimes referred to as “sewer service”).
In rejecting the plaintiff’s position that the FDCPA’s SOL includes a discovery rule, the Supreme Court relied on the plain meaning of the FDCPA’s language, stating that the “dictionary definitions [of the word “occur”] confirm what is clear from the face of §1692k(d)’s text: The FDCPA limitations period begins to run on the date the alleged FDCPA violation actually happened.” Calling the “expansive approach” to the discovery rule sought by the plaintiff “a ‘bad wine of recent vintage,’” the Court stated that “a textual judicial supplementation is particularly inappropriate when, as here, Congress has shown that it knows how to adopt the omitted language or provision.” The Court cited to statutes in which Congress has expressly included language that starts the running of an SOL upon the discovery of a violation.
While the Supreme Court’s decision does provide a measure of consistency and will help to constrict the time for plaintiffs’ attorneys to bring FDCPA claims, it leaves the door open for plaintiffs’ attorneys to circumvent the one-year SOL by framing their claims as fraud-based. The Supreme Court stated that the plaintiff could not rely on the equitable doctrine of a “fraud-specific discovery rule” because the plaintiff had failed to preserve the issue in the Third Circuit and did not raise the issue in his petition for certiorari. Accordingly, the Court indicated that “we do not decide whether the text of 15 U.S.C. §1692k(d) permits the application of equitable doctrines or whether the claim raised in this case falls within the scope of the doctrine applied in [cases that have delayed the running of an SOL in fraud actions].”
Moreover, Justice Ginsburg’s dissenting opinion could set the battle lines for future litigation over the application of a fraud-based discovery rule to FDCPA claims. In her opinion, Justice Ginsburg noted that the DOJ (which filed an amicus brief in support of the defendant) argued that a fraud-based discovery rule “applies only when the fraudulent conduct is itself the basis for the plaintiff’s claim for relief.” The DOJ asserted that the plaintiff’s complaint did not raise such a claim because his FDCPA claim was based on the assertion that the defendant’s debt collection suit was time barred.
Justice Ginsburg rejected the DOJ’s view of the fraud-based discovery rule, stating that she would hold “that the rule governs if either the conduct giving rise to the claim is fraudulent, or if fraud infects the manner in which the claim is presented.” In her view, the plaintiff had not failed to preserve a fraud-based discovery rule argument. She concluded that, if proved, the plaintiff’s allegation that that the defendant “employed fraudulent service to obtain and conceal the default judgment that precipitated Rotkiske’s FDCPA claim…should suffice, under the fraud-based discovery rule, to permit adjudication of Rotkiske’s claim on the merits.”