Supreme Court rules that FDCPA claim begins to run when the violation occurs, not when it is discovered

The US Supreme Court was asked in Rotkiske v. Klemm, No. 18-328 (U.S. Dec. 10, 2019) to weigh in on when the statute of limitations begins to run on an FDCPA claim. It held that absent the application of an equitable doctrine, the statute of limitations begins to run when the alleged violation occurs, not when it was discovered.

The debt collector had sued the debtor for unpaid credit card debt. It attempted service at an address where the debtor no longer lived and an individual other than the debtor accepted service. A default judgment was entered against the debtor in 2009, but the debtor alleged he did not learn of the judgment until 2014 when his mortgage application was denied. He then sued the debt collector for violating the FDCPA claiming the debt collector attempted to collect an unpaid debt that it lacked the lawful ability to collect.

The debt collector moved to dismiss asserting that the action was barred by the FDCPA’s one-year statute of limitations. The debtor argued for the application of a “discovery rule” to delay the beginning of the limitations period until the date that he knew or should have known of the alleged FDCPA violation. Relying on the statute’s plain language, the District Court dismissed the action. The Third Circuit affirmed.

In accepting the case, the Supreme Court sought to settle a conflict between the Third and the Ninth Circuits, with the latter having previously held that, under the “discovery rule,” limitations periods in federal litigation generally begin to run when plaintiffs know or have reason to know of their injury.
The Court explained that the debtor’s arguments invoking the discovery rule implicated two distinct concepts—the application of a general discovery rule as a principle of statutory interpretation and the application of a fraud-specific discovery rule as an equitable doctrine.

As to the first concept, the clear text of § 1692k(d) is that the FDCPA limitations period begins to run on the date the alleged FDCPA violation actually happened. The debtor did not take issue with that, but asked that the Court should interpret § 1692k(d) to include a general “discovery rule” that applies to all FDCPA actions. The Court rejected that suggestion. For adopting this approach would require “improper atextual supplementation” of the statute. Such supplementation is particularly inappropriate when, as here, Congress has shown that it knows how to adopt the omitted language or provision.

The Court also held that the debtor cannot rely on the application of an equitable, fraud-specific discovery rule to excuse his otherwise untimely filing, either. While there is a basis in the Court’s precedent for applying an equity-based doctrine to toll the statute of limitations, the debtor failed to preserve the issue before the Third Circuit. As such, the Court declined to decide whether §1692k(d) permits the application of equitable doctrines, but indicated that an equitable, fraud-specific discovery rule might potentially apply in other cases.

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