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    Locke Lord QuickStudy: U.S. Supreme Court Rejects Application of “Discovery Rule” to Statute of Limitations Under FDCPA, but Leaves Open Possibility of Application of Equitable Doctrines

    Locke Lord Publications

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    On December 10, 2019, the United States Supreme Court issued its decision in Rotkiske v. Klemm, ‎holding that, absent application of an equitable doctrine, the statute of limitations for a claim under ‎the Fair Debt Collection Practices Act begins to run on the date the alleged violation occurs, not the ‎date on which the violation is discovered.  ‎

    Klemm brought suit against Rotkiske for an unpaid credit card debt. Klemm purported to serve the ‎complaint at an address where Rotkiske no longer lived, and a person other than Rotkiske accepted ‎service. When Rotkiske failed to respond to the summons, Klemm obtained a default judgment ‎against him. Rotkiske claimed he was unaware of the lawsuit until years later, when he was denied a ‎mortgage because of the default judgment. Rotkiske then sued Klemm for violation of the FDCPA ‎more than six years after the default judgment. ‎

    Klemm moved to dismiss the action as barred under the FDCPA’s one-year statute of limitations, 15 ‎U.S.C. §1692k(d). Rotkiske argued that the court should apply the “discovery rule” to delay the ‎beginning of the statute of limitations until he knew or should have known of the alleged violation, ‎relying on the Ninth Circuit’s decision in Mangum v. Action Collection Serv., Inc., 575 F. 3d 935 (9th Cir. ‎‎2009). Mangum held that under the “discovery rule,” the statute of limitations in federal litigation ‎generally begins to run when plaintiffs know or have reason to know of their injury. ‎

    The District Court, relying on the plain language of section 1692k(d), held that the Ninth Circuit’s ‎general rule does not apply. The District Court also concluded that Rotkiske was not entitled to ‎equitable tolling because he was not misled by Klemm’s conduct.‎

    On appeal, the Third Circuit unanimously affirmed in an en banc decision. The Third Circuit expressly ‎rejected the Ninth Circuit’s approach in Mangum, stating that there is no default presumption that all ‎federal limitations periods run from the date of discovery. Rather, the Third Circuit relied on the text ‎of section 1692k(d), which provides for a deadline of “one year from the date on which the violation ‎occurs.”  ‎

    The Supreme Court agreed with the Third Circuit’s analysis, also relying on the plain language of ‎section 1692k(d) that “unambiguously sets the date of the violation as the event that starts the one-‎year limitations period.” The Court declined to apply a general “discovery rule,” because doing so ‎would violate the fundamental principle of statutory interpretation that provisions absent from a ‎statute cannot be added by the courts. The Court further pointed out that Congress has enacted ‎other statutes that contain limitations periods running from the discovery of the violation, indicating ‎that Congress knows how to include such language when it wishes, but no such provision is included in ‎the FDCPA. ‎

    Rotkiske also argued that his lawsuit should have been treated as timely under an equitable discovery ‎rule adopted by courts that delays the commencement of the statute of limitations in fraud actions. ‎The Supreme Court rejected this argument because Rotkiske had failed to preserve the issue before ‎the Third Circuit and failed to raise it in his petition for certiorari. As a result, the Court expressly noted ‎that it was not deciding whether the text of section 1692k(d) permits the application of equitable ‎doctrines.‎

    The Supreme Court’s decision in Rotkiske should assist in limiting cases brought under the FDCPA by ‎eliminating plaintiffs’ ability to claim “delayed discovery” and requiring them to more promptly file suit. ‎However, the Court’s decision not to address whether equitable doctrines can be applied to the ‎FDCPA’s statute of limitations period leaves open the possibility that plaintiffs will continue to be ‎permitted to pursue lawsuits filed more than one year after the claimed FDCPA violation has occurred. ‎

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