The Third Circuit holds that the discovery rule does not apply to the FDCPA’s one-year statute of limitations, but that the doctrine of equitable tolling might apply.On May 21, 2018 by Schnader in Finance
In a precedential decision diverging from holdings in the Fourth and Ninth Circuits, the United States Court of Appeals for the Third Circuit, sitting en banc, held that the one-year statute of limitations in the FDCPA runs from the date the alleged violation occurs, not from the date a claimant discovers the violation. The Court noted, though, that the FDCPA’s statute of limitations may be equitably tolled under the proper circumstances.
In Rotkiske v. Klemm, a collection agency filed a lawsuit against a debtor in 2009 to collect an unpaid credit card debt. When the debtor did not respond to the lawsuit, the collection agency obtained a default judgment against him. The debtor claimed that he did not learn about the lawsuit or the judgment until September 2014 when he applied for a mortgage. Nine months later, in June 2015, the debtor brought a claim against the collection agency alleging that its actions in filing the lawsuit violated the Fair Debt Collection Practices Act (FDCPA).
The FDCPA contains a one-year statute of limitations: “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.” 15 U.S.C. § 1692k(d). Because the debtor filed his claim more than six years after the alleged violation, the collection agency moved to dismiss the suit on the grounds that it was time barred. Rejecting the debtor’s argument that the FDCPA’s statute of limitations begins to run when the debtor discovers the alleged violation, the district court granted the motion to dismiss.
On appeal, the Third Circuit affirmed the dismissal. The Court held that the language “within one year from the date on which the violation occurs” in the FDCPA’s statute of limitations made clear that Congress intended the limitations period to begin running on the date of the alleged violation, not on the date of discovery of the alleged violation.
The debtor argued that the discovery rule should apply to FDCPA claims because Congress did not expressly state in the act that the discovery rule did not apply. The Court flatly rejected this argument, holding that “Congress’s explicit choice of an occurrence rule implicitly excludes a discovery rule.” The debtor also argued that application of the occurrence rule would thwart the purpose of the FDCPA because the Act is designed to protect consumers from fraudulent debt collection practices that creditors may conceal from debtors. The Court disagreed with the premise that the Act is designed to protect consumers against concealed fraudulent practices, noting that many of the actions the FDCPA proscribes (for instance, repetitive contacts by telephone or mail) “will be apparent to consumers the moment they occur.”
The Court also backed away from its dicta in Oshiver v. Levin, Fishbein, Sedran & Berman. In that Title VII case from 1994, the Third Circuit mentioned in passing the “general rule” that limitations periods in federal statutes begin to run on the date a plaintiff discovers his or her injury. The Court noted, however, that more recent United States Supreme Court decisions, such as TRW Inc. v. Andrews, suggest that the previously-cited “general rule” is not correct and that the discovery rule may not be implied into federal statutes.
The Court also refused to follow decisions from the Fourth Circuit and Ninth Circuit in which those courts held that the FDCPA’s statute of limitations contains an implied discovery rule. The Third Circuit noted that neither court analyzed the “date on which the violation occurs” language in the FDCPA’s statute of limitations, and that the Ninth Circuit relied upon the defunct “general rule” that federal limitations period run from the date of discovery. The Court also noted that the Fourth Circuit appeared to have applied the doctrine of equitable tolling rather than the discovery rule.
Finally, after pointing out that the debtor did not pursue the issue of equitable tolling on appeal, the Court explained that “our holding today does nothing to undermine the doctrine of equitable tolling for civil suits alleging an FDCPA violation” and that “our 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.”
Although not addressed in the Court’s opinion in Rotkiske, the Third Circuit previously has explained that “even in situations in which equitable tolling initially applies, a party must file suit within a reasonable period of time after realizing that such a suit has become necessary.” Walker v. Frank, 56 Fed. Appx. 577, 582 (3d Cir. 2003). It is possible, then, that the debtor in Rotkiske chose not to invoke the equitable tolling doctrine on appeal because he would have had difficulty arguing that his nine month delay in filing his lawsuit after he discovered the alleged FDCPA violation was “a reasonable period of time.”
In sum, debtors who wish to pursue FDCPA claims in the Third Circuit must do so within one year of the date the alleged violation occurred, or within a reasonable period of time after discovering the violation.
Note: On December 10, 2019, the United States Supreme Court affirmed the Third Circuit.