On December 10, 2019, the U.S. Supreme Court held that, absent the application of an equitable doctrine, the one-year statute of limitations for actions against debt collectors under the Fair Debt Collection Practices Act (“FDCPA”) begins to run on the date on which an alleged FDCPA violation occurs, not the date on which the violation is discovered. In doing so, the Supreme Court declined to apply a general discovery rule to the FDCPA’s limitation period as a principle of statutory interpretation, but left the door open for the application of a fraud-specific discovery rule as an equitable doctrine.
The case—Rotkiske v. Klemm, 589 U.S. ___ (2019)—involves the suit of a credit card debtor (“Rotkiske”) against his debt collector (“Klemm”), claiming Klemm attempted to collect an unpaid debt that it lacked the lawful ability to collect. In January 2009, Klemm sued Rotkiske on the debt and employed fraudulent service of process to obtain and conceal a default judgment. Rotkiske did not discover the existence of the default judgment against him until September 2014. On June 29, 2015, less than one year after discovering the default judgment, but more than six years after it was obtained, Rotkiske sued Klemm under the FDCPA.
Klemm moved to dismiss under the FDCPA’s one-year statute of limitations, 15 U.S.C. § 1692k(d). Citing Ninth Circuit precedent, Rotkiske responded that the “discovery rule” should apply so that the statute of limitations began to run when he knew or should have known of the alleged FDCPA violation, rather than the date the violation occurred. The district court rejected Rotkiske’s argument and dismissed the action as time barred. An en banc Third Circuit affirmed. Notably, Rotkiske failed to raise the application of equitable doctrines on appeal, so the Third Circuit did not address that issue. The Supreme Court granted certiorari to resolve the conflict between the Ninth and Third Circuits.
The Discovery Rule
On review, the Court explained that there is no generally accepted meaning of the phrase “discovery rule,” but that there are at least two conceptions of the rule: (1) the application of a general discovery rule as a principle of statutory interpretation, and (2) the application of a fraud-specific discovery rule as an equitable doctrine. Addressing each in turn, the Court affirmed the Third Circuit’s decision.
First, the Court explained that Rotkiske was, in effect, asking the Court to read the discovery rule into § 1692k(d)’s limitations period, even though this would amount to an “atextual judicial supplementation” of the statute. The Court cited several other federal statutes that expressly set limitations periods to run from the date on which a violation occurred or the date of discovery of such violation, concluding that in the absence of such language, the Court could not supply the discovery rule as an exception. It characterized the argument in favor of supplementing § 1692k(d)’s plain language as “bad wine of recent vintage.”
Second, the Court explained that while there is a basis in the Court’s precedent for applying an equity-based doctrine to toll the statute of limitations, Rotkiske had failed to preserve the issue before the Third Circuit. As such, the Court declined to decide whether §1692k(d) permits the application of equitable doctrines, but indicated that an equitable, fraud-specific discovery rule might potentially apply in other cases.
On this second point, Justice Sotomayor (concurring) stated that this fraud-specific equitable principle was not the bad wine of recent vintage that the majority denounced, and that nothing in the Court’s decision prevented parties from invoking a fraud-specific discovery rule.
To this end, Justice Ginsberg (dissenting in part) went even further, framing the fraud-based discovery rule as a statutory presumption “read into every federal statute of limitations.” She also said that “[u]nlike the general discovery rule, there is no reason to believe the FDCPA displaced the fraud-based discovery rule,” and “[t]he Court does not hold otherwise.” In her view, the fraud-based discovery rule would apply “if either the conduct giving rise to the claim is fraudulent, or if fraud infects the manner in which the claim is presented.”
The Rotkiske decision conclusively bars the application of a general discovery rule to the FDCPA’s one-year statute of limitations. The decision, however, leaves the door open for the application of a fraud-specific discovery rule as an equitable doctrine, likely if (1) the conduct giving rise to the claim is fraudulent, or (2) fraud infects the manner in which the claim is presented.