A case previously adjudicated by the Third Circuit is poised to become the vehicle for the U.S. Supreme Court to resolve a split among federal appeals courts over when the statute of limitations begins to run under the Fair Debt Collection Practices Act.
The high court on Monday granted certiorari in Rotkiske v. Klemm, in which last year an en banc panel of the U.S. Court of Appeals for the Third Circuit determined that the discovery rule does not apply to the FDCPA, meaning the statute of limitations begins to run as soon as the alleged violation. That ruling upheld a decision by the U.S. District Court for the Eastern District of Pennsylvania.
The Third Circuit decision differs from the conclusions reach by the Fourth and Ninth circuits.
In a statement emailed Monday, Matthew Weisberg of Weisberg Law in Philadelphia, who is representing plaintiff Kevin Rotkiske, said the justices’ decision marks an “extremely important consumer protection cert grant.”
“The appellate circuits are split on whether that one-year limitation can be paused pursuant to the ‘discovery rule,’” he said. “We look forward to the Supreme Court’s reversal of what we respectfully believe is both an absurd and not legislatively intended result[,] effectively punishing our client for being held untimely when he could not have discovered the violation prior.”
The case stems from credit card debt Rotkiske accumulated in 2003 and 2005. According to court records, his bank referred the debt to Klemm & Associates for collection. In 2008, the company sued Rotkiske, but attempted to serve him at an address where he no longer lived. The company withdrew its suit when it was unable to locate Rotkiske, but refiled it in 2009 and attempted to serve him again at the same address.
Court records said that, without Rotkiske’s knowledge, someone at the residence accepted service on his behalf, and Klemm & Associates obtained a default judgment for nearly $1,200. Rotkiske, however, only learned about the judgment in 2014, after he applied for a mortgage.
Less than a year after discovering the default judgment, Rotkiske sued Paul Klemm and several associated entities, including the successor firm to Klemm & Associates, raising allegations that the defendants violated the FDCPA. The defendants asked the district court to dismiss the claim as untimely, given the one-year statute of limitations under the FDCPA, and the district court agreed, finding that the clear language of the statute said the clock began to run at the alleged violation, rather than when the plaintiff discovered there was an alleged violation.
On appeal, a 13-judge en banc Third Circuit panel agreed with the district court that the statute clearly incorporated an occurrence rule, although the panel also emphasized that its decision did not wade into issues regarding equitable tolling.
The defendants pointed to the equitable tolling issue as part of its argument that the Supreme Court should not take up Rotkiske’s appeal. The defendants contended that in most cases the alleged FDCPA violations will be immediately apparent, and that in cases involving fraudulent or concealing conduct, equitable tolling will “usually prevent any ‘patent unfairness’—and, again, make the discovery rule largely irrelevant.”
Rotkiske, however, contended that the Third Circuit’s decision to reject the discovery rule went against decisions in the Fourth and Ninth circuits, and that district courts have been similarly split on the issue. He further argued that the Third Circuit’s ruling would lead to “absurd result,” and that his case would be a good vehicle for the justices to resolve these issues.
“Thus, whether the FDCPA’s statutory occurrence text effectively creates a statute of repose precluding the discovery rule—as the Third Circuit found[—]or otherwise requires the discovery rule for situations such as this—as the Fourth and Ninth Circuits held[—]makes this (simplistic factual) matter a perfect vehicle for this court’s determination,” Rotkiske said in the brief.
Jones Day attorney Shay Dvoretzky, who is representing the defendants, did not return a call seeking comment.