Third Circuit Disagrees with Fourth and Ninth Circuit, Rules that Limitations Period for FDCPA Claims Starts on Occurrence

In Rotkiske v. Klemm, the Third Circuit ruled that the statute of limitations for a Fair Debt Collection Practices Act (FDCPA) claim begins to toll on the date of the alleged violation, not when the plaintiff discovers the violation. That's significant, because the Fourth and Ninth Circuits have ruled otherwise.

The plaintiff in this case had alleged that the defendant law firm violated the FDCPA by erroneously obtaining a default judgment against him in 2009 when it knowingly served him at an improper address. However, the plaintiff alleged that he did not discover the judgment until September of 2014, when he was denied a mortgage loan based on the judgment, and that he timely filed his claim in June of 2015, within the one year statute of limitations under the FDCPA. The defendants moved to dismiss based on a plain reading of the FDCPA, arguing that the case was commenced more than one year after the alleged violation occurred. The Plaintiff argued that the legislative history and intent of the FDCPA incorporated a discovery rule into the Act which tolled the accrual of the statute of limitations until the plaintiff knew or should have known of the violation. In support of his argument, the Plaintiff cited decisions by the United States Courts of Appeals for the Fourth and Ninth Circuits applying the "discovery rule" and holding that the FDCPA statute of limitations begins to accrue when the plaintiff discovers the violation. See Lembach v. Bierman, 528 F. App'x 297 (4th Cir. 2013) (per curiam); Mangum v. Action Collection Serv., Inc., 575 F.3d 935 (9th Cir. 2009).

The relevant text of the FDCPA states that an "action to enforce any liability created by this subchapter may be brought… within one year from the date on which the violation occurs." 15 U.S.C. § 1692k(d) (emphasis added). The District Court determined that the clock started to run when the FDCPA was violated, dismissed the case, and the Plaintiff appealed. The Third Circuit, en banc, affirmed the dismissal and disagreed with the Fourth and Ninth Circuit since in its view, "statutory interpretation… begins with the text" of the statute and here, "the Act says what it means and means what it says: the statute of limitations runs from the "date on which the violation occurs." According to the Third Circuit, Congress's legislative intent for statutes of limitations is to "fix an end point for civil liability" and while both the "discovery rule" and "occurrence rule" are proper, sometimes, like here, Congress "clearly picks one model of accrual over another."

The Third Circuit reasoned that its departure from the Fourth and Ninth Circuit was proper since neither decision "analyzed the "violation occurs" language contained in the FDCPA." It held that "[i]n Mangum, the Ninth Circuit did not engage the text of the Act" and "[t]he Fourth Circuit in Lembach failed to engage the statutory text on its way to determining that a discovery rule would vindicate the policies underlying the FDCPA."

Although it is clear that the occurrence rule now applies to FDCPA cases in the Third Circuit, litigants should stay tuned, since a petition to the U.S. Supreme Court may follow given that the Rotkiske decision creates a split in the circuits regarding this critical statutory interpretation of the FDCPA.