Twelve active judges at the Third US Circuit Court of Appeals in Philadelphia broke with two other circuit court rulings last month. The court ruled, in an en banc decision, that the statute of limitations for claims filed under the Fair Debt Collection Practices Act (FDCPA) begins when the violation occurs, not when it is discovered.
The case, Rotkiske v. Klemm, involved a debtor named Kevin Rotkiske, who was sued by a debt collection agency in 2009. After failing to locate Rotkiske and notify him of the suit, the agency (Klemm) pursued a default judgement in court and succeeded. Rotkiske claims he didn’t find out about the lawsuit or the judgement until 2014. Rotkiske, who discovered the suit while attempting to get a mortgage, waited nine months before filing an FDCPA claim against Klemm.
Under the FDCPA, claimants have one year to file a claim. Previous circuit court decisions have said that the one-year limit begins at the moment the alleged violation is discovered. But the Third Circuit took a different view, arguing that the statute of limitations begins the moment it occurs. In Rotkiske’s case, this meant he was six years too late in the eyes of the court.
The Statutory Language
According to the language of the FDCPA, “An action to enforce any liability created by this subchapter may be brought in any appropriate United States district court … within one year from the date on which the violation occurs.” On a strict reading of the statute, the collection agency filed a motion to dismiss, which the court granted. The judges agreed with the defendant, and in the process, rejected the claimant’s argument that the statute of limitations begins upon discovery.
Intention of Lawmakers
In building its argument, the court referred to the intention behind the FDCPA, arguing that lawmakers clearly included an “occurrence rule” in the language of the statute (“on which the violation occurs”), precluding any implicit application of the discovery rule. In making this claim, the court steam-rolled its own previous ruling (Oshiver v. Levin, Fishbein, Sedran & Berman), according to which, the discovery rule is generally applicable – meaning statutes of limitations should generally begin at the moment of discovery. But this so-called general rule was overridden by the Supreme Court, according to the Third Circuit’s decision.
The Third Circuit also broke with two other appeals court rulings – namely those from the Fourth and Ninth Circuits. According to the Third Circuit, the Ninth Circuit ignored the Supreme Court’s ruling, which quashed the “general rule.” The Fourth Circuit, for its part, relied on the doctrine of equitable tolling, ignoring the discovery rule altogether – at least, that was what the Third Circuit claimed in its interpretation of the decision.
According to the doctrine of equitable tolling, a claimant may, in certain circumstances, file a claim outside the statute of limitations. But in order for this doctrine to apply, it must not be reasonably possible for the claimant to file within the given statutory timeline. The claimant must, however, file a claim within a reasonable period of time following the discovery of the violation. Rotkiske may not have pursued this legal argument because he waited nine months before filing. This might have led to questions about his decision to wait so long.
The Third Circuit maintained that such a doctrine could still apply in FDCPA claims, saying, “[O]ur opinion should not be read to foreclose the possibility that equitable tolling might apply to FDCPA violations that involve fraudulent, misleading, or self-concealing conduct.”
In the Interest of the Consumer
The majority also refuted the claimant’s argument that, since the law was specifically written to protect consumers against concealed fraudulent behavior, the statute of limitations should begin at the moment of discovery, as this is in the interest of the protected consumer. The court argued that many of the law’s provisions bar fraudulent activity involving phone calls and other forms of communication, which cannot be concealed. Thus, the majority claimed, the FDCPA could not be interpreted as specifically protective against concealed fraudulent activities.
Now, with a circuit split, the case might make its way to the Supreme Court. To do so, Rotkiske (or another related party) would need to file a petition for certiorari. Since the Justices are generally flooded with such requests, it isn’t likely that the case will be picked up any time soon. In the meantime, debt collectors and consumers will have to deal with nebulous legal interpretations vis à vis the FDCPA.