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U.S. Supreme Court Weighs in on Ticking FDCPA Timer

In Rotkiske v. Klemm, 2019 U.S. LEXIS 7521, the United States Supreme Court resolved a dispute between the federal appellate circuits regarding when the statute of limitations begins to run under the Fair Debt Collection Practices Act (FDCPA or Act).

A statute of limitations is the amount of time permitted to bring a particular court action—in other words, it’s the ticking timer. Typically, once that countdown ends, or in legal terms, the limitations period expires, the right to sue expires along with it.

The FDCPA, which is a federal Act designed to keep debt collectors in-check, permits suits “within one year from the date on which the violation occurs.” 15 U.S.C. §1692k(d). Although this language appears to be rather clear-cut, in law, shadows can often be created out of seemingly transparent passages.

In Mangum v. Action Collection Serv, Inc., 575 F.3d 925 (9th Cir., 2009), the Ninth Circuit Court of Appeals held that all federal statutes of limitation, including the FDCPA’s, begin to run “when the plaintiff knows or had reason to know of the injury.” Id. at 940.  This rule, otherwise known as the discovery rule, sets the clock to begin ticking only upon the detection, rather than the occurrence of the violation, despite the contradicting language of the FDCPA itself, thereby greatly expanding the timeframe to litigate for many possible suits.

However, in a later case, the Third Circuit Court of Appeals declined to follow this path, reiterating that the FDCPA statute of limitations runs from “the date on which the violation occurs.” Rotkiske v.  Klemm, 890 F.3d 422 (3rd Cir., 2018.) In doing so, the Court directly rejected the Ninth Circuit’s approach and refused to apply a broad discovery rule to all federal limitations periods.

To silence its squabbling children, the U.S. Supreme Court agreed to weigh-in—legally phrased as granting certiorari to resolve an appellate conflict—and deemed the Third Circuit the victor. The Court held that “[t]he FDCPA limitations period begins to run on the date the alleged FDCPA violation actually happened. We must presume that Congress ‘says in a statute what it means and means in a statute what it says…’” Rotkiske v. Klemm, 2019 U.S. LEXIS 7521, *8. In appearing to chastise the Ninth Circuit, the High Court went on to state that “[i]t is not our role to second-guess Congress’ decision to include a ‘violation occurs’ provision, rather than a discovery provision…[w]e simply enforce the value judgments made by Congress.” Id. at *10.

However, a door to widening the limitations period was left distinctly ajar, as the Supreme Court carefully stated that it was not deciding whether the application of “equitable doctrines” would be permissible. According to the Court, this issue wasn’t properly presented, and therefore wouldn’t be determined. Nonetheless, the Court distinctly acknowledged the existence of something known as the “fraud discovery rule.” Id. at *11.

The fraud discovery rule, a close cousin to the similarly worded ‘discovery rule,’ states that “where a plaintiff has been injured by fraud and remains in ignorance of it without any fault or want of diligence or care on his part, the bar of the statute [of limitations] does not begin to run until the fraud is discovered.” Id. at *13-14. More simply stated, under the fraud discovery rule, a delayed clock start time is permitted when fraud exists.

In dissent, Justice Ginsburg, although agreeing with the Supreme Court’s disallowance of the general discovery rule, argued that the fraud discovery rule was properly presented and should have been ruled upon. Moreover, she stated that she would have held that “the [fraud discovery] 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.”  Of course, fraud allegations must typically be pled with particularity, so specific facts regarding the fraud would still be needed.

Regardless, absent allegations of fraud, it’s now clear that the ticking timer for FDCPA suits really does begin on the date of the violation, just as the FDCPA dictates, which finally brings long-awaited certainty to the interpretation of already definitive language.

About Author: Lauren Riddick

Lauren Riddick handles contested foreclosure matters as a member of the Codilis & Associates, P.C.’s Contested Litigation Unit and also assists with title matters. She joined the firm in August 2013. Prior to joining the firm, she was an Adjunct Professor of Law with several colleges and a Securities Attorney for a large broker-dealer in Florida. Riddick is a member of the Illinois and Florida Bar Associations. She received her Juris Doctor in 2001 from the University of Florida Levin College of Law, and her Bachelor of Science in 1998 from the University of Florida.
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