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

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. ‎