Bloomberg Law
Oct. 16, 2019, 12:03 PM

High Court Must Define Meaning of Silence in Debt Collection Case

Evan Weinberger
Evan Weinberger
Assistant Managing Editor

The U.S. Supreme Court will determine when Congress wanted the clock to start ticking on some Fair Debt Collection Practices Act lawsuits when it hears a dispute between a New Jersey lawyer and a debtor.

The central issue in the Rotkiske v. Klemm case is whether the discovery rule, which states that the statute of limitations only begins in a case when the plaintiff learns of a potential violation, applies to the FDCPA even if the legislation itself does not address the question. Oral arguments are set for Oct. 16.

“Does that silence indicate that Congress doesn’t believe it’s necessary, or does it mean that Congress hasn’t considered the issue?” said Charles Delbaum, a senior staff attorney at the National Consumer Law Center.

Delbaum co-wrote an amicus brief for the NCLC in support of Kevin Rotkiske, the petitioner in the case, and his position that the discovery rule applies to the FDCPA.

The justices could find ways to make their opinion in the case narrow and apply only to the FDCPA and other similar legislation. The court could also determine whether the discovery rule and the doctrine of equitable tolling—which allows for the suspension of statutes of limitations in instances where plaintiffs have done their due diligence to discover violations—serve two different, limited purposes, according to Samuel Bray, a professor at the University of Notre Dame Law School.

“Does it want to treat equitable tolling and the discovery rule as two garlic presses or treat equitable tolling as a multipurpose tool like a chef’s knife,” Bray said.

Wrong Address

The facts of the Rotkiske case revolve around the failed attempts of Roseland, N.J.-based debt collection attorney Paull Klemm to notify Rotkiske about an existing debt.

Klemm’s law firm first attempted to notify Rotkiske about an existing credit card debt in March 2008, but sent a letter to a Philadelphia address where Rotkiske no longer lived. Klemm subsequently withdrew a lawsuit against Rotkiske, according to court filings.

In January 2009, Klemm refiled the lawsuit and attempted to serve papers on Rotkiske at the same Philadelphia address. This time, a third party at the address acknowledged being served with the suit and Rotkiske was ultimately hit with a default judgment of $1,182.39.

But Rotkiske only found out about Klemm’s lawsuit in 2014, when he applied for a mortgage and discovered the problem on his credit report. He sued Klemm in June 2015 but a federal district court and, ultimately, the U.S. Court of Appeals for the Third Circuit ruled that the FDCPA’s one-year statute of limitations for challenging a debt had expired.

The Third Circuit’s ruling that the discovery rule did not apply under the FDCPA, which came in May 2018, created a split with the U.S. Courts of Appeals for the Fourth and Ninth Circuits.

Occurrence or Discovery

The Supreme Court is going to have delve deep into the question of what Congress meant to say in the FDCPA, the 1977 law governing the debt collection industry, by not saying anything about the discovery rule.

“The biggest challenge for the petitioners is that in certain circumstances, when Congress wants a statute to have a discovery rule, it has made that explicit,” Delbaum said, pointing to the Fair Credit Reporting Act, which contains discovery rule language

The debt collection industry and business groups firmly believe that Congress meant for the one-year statute of limitations to apply in all but exceptional FDCPA cases.

“It’s pretty clear already that it the occurrence rule applies, and that’s what Congress intended,” Barber said.

The Justice Department and the Consumer Financial Protection Bureau filed their own brief opposing the application of the discovery rule to FDCPA litigation.

But it may not be that clear. Some legal scholars say that silence simply means that Congress “legislates against a background” in which all fraud-based claims should be governed by the discovery rule, according to an impartial amicus brief filed by Stuart Banner, a professor at the UCLA School of Law.

“Statutes that neither expressly include nor expressly preclude a discovery rule are best read to include a discovery rule in cases of fraud,” the brief, which Bray and two other professors signed on to, said.

‘Not a Just Result’

The FDCPA does not address the discovery rule, but it does provide for equitable tolling. Rotkiske waived using equitable tolling in his appeals despite attempting to argue that it applied at the district court level.

That should be enough for consumers to challenge fraudulent debt collection practices, making the discovery rule unnecessary, according to Yale Levy, the National Creditors Bar Association’s president.

“We agree with the Third Circuit Court of Appeals that there is no indication or reason to apply the discovery rule to the FDCPA,” he said in an email.

The NCBA wrote an amicus brief in the case supporting Klemm.

Equitable tolling does not cover all of the situations where a consumer may not find out about a debt, however.

Instead, it only applies under exceptional circumstances, like an outright fraud by a debt collector, Delbaum said.

In an instance like the Rotkiske case, where letters were delivered to a third party but not to the debtor, there is little to no recourse if a consumer finds out about a debt collection activity after the one-year statute of limitations expires, he said.

“That’s not a just result when the injured party has not had a reasonable opportunity to become aware that they’ve had an injury,” Delbaum said.

Congress’s silence on the discovery rule in the FDCPA context created an environment where circuits are split on the question.

So one thing that both creditors and debtors will be looking for is a clear answer on whether it applies.

“Whatever the decision ends up being, hopefully they will provide some clarity and security to not only defendants, but plaintiffs as well,” said Kari Barber, corporate counsel for ACA International, a debt collection industry group.

ACA International wrote its own amicus brief supporting Klemm’s position.

Rotkiske v. Klemm, U.S., 18-328, Oral Arguments 10/16/19

To contact the reporter on this story: Evan Weinberger in New York at

To contact the editor responsible for this story: Michael Ferullo at