A Maryland federal district court, in Jennings v. Dynamic Recovery Solutions LLC, ruled that the effect of a partial payment on revival of the statute of limitations was governed by the law of Delaware, the state designated in the choice of law provision in the plaintiff’s credit agreement, rather than the law of Maryland, the forum state. Because Delaware law permitted revival, the court found that the plaintiff had stated a plausible claim that the defendant violated the FDCPA by not disclosing, in a letter offering options for settling a time-barred debt, that the plaintiff’s acknowledgment of the debt or partial payment could restart the statute of limitations on the debt.
In Jennings, the plaintiff’s credit agreement contained a Delaware choice of law provision. The debt collector sent a letter to the plaintiff providing options for her to settle her debt by paying an amount less than the full account balance. The letter stated the because of the debt’s age, the creditor and debt collector could not sue the plaintiff for the debt or report it to a consumer reporting agency. The plaintiff subsequently filed a putative class action complaint against the debt collector in Maryland, the state in which she presumably resided, alleging that it had violated the FDCPA by failing to disclose that by agreeing to a settlement offer or making a partial payment, the statute of limitations would be revived and allow the debt collector to sue the plaintiff for the debt.
The initial question considered by the court was whether the debt revival issue was governed by Delaware or Maryland law. While under Delaware law the statute of limitations can be revived through acknowledgment of a debt or partial payment, Maryland law does not permit revival under such circumstances. Maryland courts generally apply the statute of limitations of the forum state even when that state’s choice of law rules require another state’s substantive law to be applied. According to the district court, the resolution of the question of which state’s law governed revival turned on whether the effect of acknowledgment or partial payment was procedural because it implicates the statute of limitations, making it subject to Maryland law, or substantive, making it subject to Delaware law. In the court’s view, it was “a more honest and accurate characterization” to consider the potential for revival to be a substantive matter rather than a procedural matter. Accordingly, the court concluded that Delaware law should apply, meaning that the plaintiff’s acceptance of a settlement or partial payment could have revived the statute of limitations.
Having determined that Delaware law applied, the court then concluded that the debt collector’s failure to disclose in its letter that the plaintiff’s agreement to a settlement offer or partial payment could revive the statute of limitations stated an FDCPA claim. Specifically, it found that the plaintiff had stated a plausible claim that the debt collector violated the FDCPA provisions prohibiting the false representation of a debt’s character, amount or legal status or the use of a false representation or deceptive means to collect a debt.
The debt collector had moved to dismiss the plaintiff’s entire complaint, which also included a claim for a violation of the FDCPA provision prohibiting the use of unfair or unconscionable means to collect a debt. While dismissing this claim because the plaintiff had failed to allege how the conduct on which it was based was separate and distinct from the conduct covered by her other FDCPA claims, the court denied the debt collector’s motion to dismiss the balance of the complaint.