Reed Smith Client Alerts

On December 10, 2019, the U.S. Supreme Court held in Rotkiske v. Klemm, 589 U.S. __ (2019), that the statute of limitations of the Fair Debt Collection Practices Act (FDCPA) begins to run when the alleged FDCPA violation occurs, not when the violation is discovered. In Rotkiske, the Court rejected the petitioner’s argument for application of a discovery rule to delay the commencement of the FDCPA's one-year period for filing suit until the petitioner knew or should have known of the alleged violation. The Court's ruling provides clarity for FDCPA defendants as to when suits are time-barred, but does not foreclose the application of equitable tolling in cases of fraud.

In Rotkiske, the petitioner alleged that, after he had accumulated credit card debt, his bank referred collection responsibilities to respondent Klemm & Associates. As part of those collection efforts, Klemm sued Rotkiske for payment and twice tried to serve process at an address where Rotkiske no longer lived. However, unbeknownst to Rotkiske, someone accepted service on his behalf at the old address. As a result, the court entered a default judgment against Rotkiske, who did not find out about the judgment until years later when trying to apply for a mortgage. Six years after entry of the default judgment, Rotkiske sued Klemm, arguing that the collection efforts were improper and violated the FDCPA.

Under the FDCPA, an action "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 one-year period elapsed before Rotkiske learned of the collection activities, he argued that a discovery rule be applied to toll the statute of limitations until the point at which he discovered the injury. The Eastern District of Pennsylvania rejected Rotkiske's argument, holding that the FDCPA's language is clear and the statute of limitations had run. See Rotkiske v. Klemm, No. 15-cv-03638, 2016 WL 1021140 (E.D. Pa. Mar. 14, 2016). On appeal, the U.S. Court of Appeals for the Third Circuit unanimously affirmed en banc, holding in an opinion penned by Judge Hardiman that the FDCPA "says what it means and means what it says: the statute of limitations runs from 'the date on which the violation occurs.'" As a result, the Third Circuit held that Rotkiske's claim was barred by the FDCPA's statute of limitations and should be dismissed with prejudice.