In a major victory for the industry, the Supreme Court, in an 8-1 decision yesterday, determined that the one-year statute of limitations to file a suit alleging a violation of the Fair Debt Collection Practices Act starts when the violation allegedly occurs and not when it is discovered.
A copy of the ruling, written by Justice Clarence Thomas, in the case of Rotkiske v. Klemm can be accessed by clicking here.
The legal issue at play here is whether Congress intended to use something known as the discovery rule, which delays the beginning of a limitations period until the plaintiff knew of or should have known of his injury, or the occurrence rule, which is when the actual violation happened, when it enacted the FDCPA. If the Supreme Court decides the discovery rule is what determines when the statute of limitations clock starts ticking, it could open up companies in the credit and collection industry to more lawsuits from individuals claiming violations of the FDCPA.
“The FDCPA limitations period begins to run on the date the alleged FDCPA violation actually happened,” Justice Thomas wrote. “We must presume that Congress ‘says in a statute what it means and means in a statute what it says there.’ ”
The only vote against the majority was voiced by Justice Ruth Bader Ginsburg, who, in a dissenting opinion, wrote, “Klemm allegedly employed fraudulent service to obtain and conceal the default judgment that precipitated Rotkiske’s FDCPA claim. That allegation, if proved, should suffice, under the fraud-based discovery rule, to permit adjudication of Rotkiske’s claim on its merits.”
The petitioner had a balance on his credit card that was placed with the respondent for collections. The respondent attempted to sue the petitioner in 2008 but was unable to locate him. The respondent tried again in 2009, and unbeknownst to the petitioner, someone accepted service of the lawsuit on his behalf. The respondent was able to obtain a default judgment, which was discovered when the petitioner applied for a mortgage in 2014.
In June 2015, the petitioner filed suit against the respondent, alleging a violation of the FDCPA. The respondent moved to have the case dismissed because the statute of limitations had expired and the District Court judge granted the motion. That decision was appealed to the Third Circuit, which affirmed the dismissal. That decision was appealed to the Supreme Court.
The lawyer who represented Rotkiske painted a picture where a similar case may be brought back before the Supreme Court again, now that a foundation has been laid.
“We’re gratified the court accepted our argument that there is a fraud-based discovery rule, separate from equitable tolling,” said Boies Schiller Flexner attorney Scott Gant, according to a published report
