The U.S. Supreme Court’s decision in Rotkiske v. Klemm clarifies when businesses can face lawsuits for alleged violations of the Fair Debt Collections Practices Act (FDCPA). By a vote of 8-1, the Court held that the statute of limitations on FDCPA suits begins when the alleged violation of the law occurs, not when the person discovers it.

Fair Debt Collection Practices Act

Under the Fair Debt Collection Practices Act (FDCPA), businesses must follow certain rules when attempting to collect a debt. The federal law also imposes penalties for violations and provides protections for debtors. The FDCPA requires that actions for violations of the statute must be brought “within one year from the date on which the violation occurs.”  However, several federal courts of appeal had held that the “discovery rule” applies, and, thus, the clock doesn't start ticking until the alleged violation is discovered.

In Rotkiske v. Klemm, Klemm & Associates (Klemm) sued Kevin Rotkiske to collect an unpaid credit debt and attempted service at an address where Rotkiske no longer lived. An individual other than Rotkiske accepted service. Rotkiske failed to respond to the summons, and Klemm obtained a default judgment in 2009.

Rotkiske claims that he first learned of this judgment in 2014 when his mortgage application was denied. He then filed suit against Klemm, alleging that Klemm violated the FDCPA by contacting him without lawful ability to collect. According to Rotkiske, Klemm intentionally botched the attempts at service in order to obtain a default judgment.

Klemm moved to dismiss the action as barred by the FDCPA’s one-year statute of limitations. Rotkiske argued for the application of a “discovery rule” to delay the beginning of the limitations period until the date that he knew or should have known of the alleged FDCPA violation. To support his argument, Rokiske relied on the Ninth Circuit’s decision in Mangum v. Action Collection Serv., Inc., 575 F. 3d 935 (2009). That case held that, under the “discovery rule,” limitations periods in federal litigation generally begin to run when plaintiffs know or have reason to know of their injury.

Relying on the statute’s plain language, the District Court rejected Rotkiske’s approach and dismissed the action. The Third Circuit affirmed. In doing so, the appeals court expressly rejected the Ninth Circuit’s approach, stating that there is no default presumption that all federal limitations periods run from the date of discovery.

Supreme Court’s Decision in Rotkiske v. Klemm

The Supreme Court affirmed. “We hold that, absent the application of an equitable doctrine, the statute of limitations in §1692k(d) begins to run on the date on which the alleged FDCPA violation occurs, not the date on which the violation is discovered,” Justice Clarence Thomas wrote.

In reaching its decision, the Court emphasized that the “plain text of §1692k(d) unambiguously sets the date of the violation as the event that starts the FDCPA’s one-year limitations period.” It also noted that Congress is tasked with establishing the statute of limitations when it drafts federal laws. As Justice Thomas explained:

It is not our role to second-guess Congress’ decision to include a “violation occurs” provision, rather than a discovery provision, in §1692k(d). 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.” Johnson v. Railway Express Agency, Inc., 421 U. S. 454, 463–464 (1975). It is Congress, not this Court, that balances those interests. We simply enforce the value judgments made by Congress.

Justice Ruth Bader Ginsburg dissented. While she largely agreed with the majority, she argued that Rotkiske should have been able to pursue his claim because Klem’s alleged fraud prevented him from filing suit within the required time period.  “By knowingly arranging for service of the complaint against Rotkiske at an address where Rotkiske no longer lived, and filing a false affidavit of service, Rotkiske alleges, Klemm engaged in fraud,” Justice Ginsburg wrote. “Such fraud, I would hold, warrants application of the discovery rule to time Rotkiske’s FDCPA suit from the date he learned of the default judgment against him.”

Key Takeaway

As the Supreme Court’s decision highlights, timeliness can play a significant role in FDCPA suits. If you are facing the threat of legal action in connection with a debt, it is imperative to consult an attorney experienced in creditor collections who can help you resolve the matter. For businesses, it is also advisable to work with legal counsel to ensure that your debt collection practices do not result in costly FDCPA violations.

If you have questions, please contact us

If you have any questions or if you would like to discuss the matter further, please contact me, Bob Levy, or the Scarinci Hollenbeck attorney with whom you work, at 201-806-3364.