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Justices Scratch Heads About When Clock Pauses for FDCPA Suits

Oct. 16, 2019, 8:58 PM

The justices of the U.S. Supreme Court sidestepped during oral argument whether the discovery rule applies to the Fair Debt Collection Practices Act and focused on whether plaintiffs should rely on equitable tolling when the one-year statute of limitations has run.

Kevin Rotkiske sued a third-party debt collection firm Klemm & Associates, alleging the firm violated the FDCPA because the firm served the wrong person in its suit over Rotkiske’s credit card debt and subsequently filed a default judgment against him without his knowledge.

The discovery rule allows the clock to start ticking for filing a lawsuit once the claimant knows or should have known of the injury or occurrence which provides the reason to file suit. This rule protects blamelessly ignorant plaintiffs from getting their claim dismissed, based on the expiration of a statute of limitations.

The courts are split on this issue, with the Third Circuit holding that the discovery rule doesn’t apply in FDCPA cases, and the Fourth and Ninth Circuits holding that it does apply, and the one-year period should not begin until an individual was aware of the violation.

If the Supreme Court decides the discovery rule is applicable to the FDCPA, it has the potential to open the door to more litigation under the statute.

The attorney for Rotkiske, Scott E. Gant of Boies Schiller Flexner LLP in Washington, said there is confusing terminology regarding the discovery rule versus equitable tolling.

Justice Brett Kavanaugh agreed saying, “we do need clarity,” and continued to question about the difference between the two doctrines.

If the court finds the discovery rule applies, then it would be applicable in all FDCPA cases. But if the discovery rule is not available to the plaintiff then equitable tolling can be on hand for extraordinary cases.

This is terribly confusing because of the use of terms, Justice Sonia Sotomayor said.

Chief Justice John Roberts said that “equitable tolling has a higher threshold than the discovery rule.”

The case is Rotkiske v. Klemm, U.S., No. 18-328, argued 10/16/19.

To contact the reporter on this story: Heather Saltz in Washington at hsaltz@ic.bloomberglaw.com

To contact the editors responsible for this story: Jessie Kokrda Kamens at jkamens@bloomberglaw.com; Kimberly Strawbridge Robinson at krobinson@bloomberglaw.com

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