Supreme Court Refuses to Apply Discovery Rule to the FDCPA’s One Year Statute of Limitations

Today, in Rotkiske v. Klemm et al., case number 18-328, the Supreme Court of the United States confirmed the one-year time limit for filing a Fair Debt Collection Practices Act (FDCPA) suit generally begins to run when the alleged violation occurs, not when it is discovered.

Citing the FDCPA’s statutory provision that claims must be filed “within one year from the date on which the violation occurs,” the Court upheld a Third Circuit opinion last year that declined to revive a 2015 lawsuit brought by Kevin Rotkiske, who claims he only learned of an outstanding credit card judgment against him when he was rejected for a mortgage.

“It is not our role to second-guess Congress’ decision to include a ‘violation occurs’ provision, rather than a discovery provision, in [the FDCPA provision],” Justice Clarence Thomas said in the majority (8-1) opinion.

“The length of a limitations period ‘reflects a value judgment concerning the point at which the interests in favor of protecting valid claims are outweighed by the interests in prohibiting the prosecution of stale ones,’” Justice Thomas said, citing the Supreme Court’s 1975 opinion in Johnson v. Railway Express Agency, Inc.

“It is Congress, not this court, that balances those interests,” he added. “We simply enforce the value judgments made by Congress.”

Rotkiske originally brought the FDCPA action in 2015, roughly one year after he discovered that Paul Klemm obtained a judgment against him in a 2009 state court debt collection action. Rotkiske claimed Klemm served the collection complaint on the wrong person, with the result that Rotkiske did not learn of the 2009 judgment until 2014, after he was rejected for a home loan due to credit reporting reflecting the outstanding judgment. Rotkiske alleged Klemm deliberately made sure that he did not receive service in order to obtain a default judgment in violation of the FDCPA. Klemm moved to dismiss the complaint, arguing Rotkiske did not bring the action within the FDCPA one-year statute of limitations. The district court granted Klemm’s motion and Rotkiske appealed to the Third Circuit Court of Appeals.

The Third Circuit agreed with the debt collector, finding that FDCPA says the occurrence rule — in which the statute of limitations begins the moment the alleged wrongdoing happens — applies to such claims.

Justice Ruth Bader Ginsburg wrote the sole dissent on the grounds that, in her view, Rotkiske “had preserved a fraud-based discovery rule argument in the Court of Appeals.” Per Justice Ginsburg, “the ordinary applicable time trigger does not apply when fraud on the creditor’s part accounts for the debtor’s failure to sue within one year of the creditor’s violation.”

The Rotkiske decision resolves a split among federal Circuit Courts of Appeals over whether the one-year statute of limitations beings to run from the time an alleged violation occurs, as opposed to when it is discovered. This ruling is a welcome limitation on debt collector liability under the FDCPA.

Troutman Sanders LLP served as counsel to the National Creditors Bar Association (NCBA), as amicus curiae in support of Klemm. The NCBA is a bar association dedicated to serving law firms engaged in the practice of creditors’ rights law.