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Supreme Court Rejects Application of the Discovery Rule to FDCPA Claims as ‘Bad Wine of Recent Vintage’

On December 10, 2019, the United States Supreme Court issued its ruling in Rotkiske v. Klemm, an appeal from the Third Circuit concerning the statute of limitations for claims under the Fair Debt Collection Practices Act (FDCPA). The Supreme Court reviewed and affirmed the Third Circuit’s en banc holding that the FDCPA’s one year statute of limitations runs from the date the alleged violation occurred, not the date it was discovered. This resolved a split among the Third, Fourth and Ninth Circuits.

The discovery rule is an equitable doctrine that courts apply to extend the time in which a party may assert a time-barred claim where it is determined that the claim was not previously known or discoverable. Here, the plaintiff’s FDCPA allegations arose from a debt-collection complaint but were not asserted until more than one year after the service of the subject pleading. The plaintiff alleged that service of the complaint was deficient and that the defendant’s general practice was designed to conceal the existence of the suit in order to obtain judgment by default.

Writing for the majority, Justice Thomas analyzed two primary issues: (1) did Congress intend to apply the discovery rule to all claims arising under the FDCPA; and (2) was a “fraud-specific” discovery rule applicable regardless of the statutory interpretation? After conducting a statutory analysis, the Court unanimously found there was no ambiguity in the language chosen by Congress under § 1692k(d) that all claims must be brought “within one year from the date on which the violation occurs.” Justice Thomas, quoting his former colleague and friend, Justice Scalia, criticized the broad application of the discovery rule to unambiguous statutes as “bad wine of recent vintage” and concluded that the “limitations period begins to run on the date the alleged FDCPA violation actually happened.”

The Court declined to address or rule on whether a fraud-based discovery rule applied to FDCPA claims as that issue had not been preserved before the Third Circuit and was not raised in the petition for certiorari. Justice Sotomayor wrote a concurring opinion agreeing with the majority decision but pointed out that she did not believe that application of a fraud-based discovery rule was the equivalent of a poor vintage wine. Justice Ginsburg dissented as to the Court’s finding that the fraud-based discovery rule was not properly preserved or presented. There, she felt that the issue should have been considered and that it would have applied to extend the statutory claim period given the plaintiff’s allegations.

Overall, the Court’s decision can be viewed as a positive ruling to entities and individuals subject to the FDCPA, as it confirms a finite claims period under the FDCPA, absent allegations of fraud. Given that the structure and language of the FDCPA is similar to many other federal enumerated consumer financial protection laws, the decision will have a broad benefit to the entire consumer financial services industry. The ruling also foretells additional litigation, however, in that it identifies an unresolved issue concerning a fraud-based discovery rule. This will likely invite further appellate review and Supreme Court intervention.

Click to view a copy of the Supreme Court’s ruling.


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