Update; Dec. 10, 2019 – Opinion issued.
Holding: Absent the application of an equitable doctrine, the statute of limitations in the Fair Debt Collection Practices Act, 15 U.S.C. §1692k(d), begins to run when the alleged FDCPA violation occurs, not when the violation is discovered.
Judgment: Affirmed, 8-1, in an opinion by Justice Thomas on December 10, 2019. Justice Sotomayor filed a concurring opinion. Justice Ginsburg filed an opinion dissenting in part and dissenting from the judgment.
LIT agrees with the dissenting Ginsberg
“I do not agree that Rotkiske failed to preserve a fraud-based discovery rule argument in the Court of Appeals. See ante, at 7. Rotkiske did raise the issue; he argued that “[a]t the very least, . . . the discovery rule applies to [FDCPA] claims based on false or misleading misrepresentations or other self-concealing conduct.” Supp. Brief for Appellant in No. 16-1668 (CA3), p.13 (citing Bailey, 21 Wall., at 350). The Court of Appeals apparently declined to address that argument because Rotkiske had failed to raise “equitable tolling” in his appellate briefs. 890 F. 3d 422, 428-429, and n. 5 (CA3 2018). But failure to raise “equitable tolling” should pose no obstacle to determining whether the discrete fraud-based discovery rule applies to Rotkiske’s claim.
Nor do I agree that Rotkiske forfeited the issue by not raising it in his petition for certiorari. See ante, at 7. Generously read, Rotkiske asked whether a discovery rule of any kind applies to the FDCPA’s one-year statute of limitations. While hardly a model of the deft pleader’s art, the petition for certiorari stated that Rotkiske did not learn of Klemm’s debt-collection suit and default judgment until long after their occurrence because of the “intended reservice [of Klemm’s complaint] at a known incorrect address.” Pet. for Cert. 8. His brief on the merits in this Court noted: “Petitioner is not advocating that the Court adopt a generally applicable discovery rule.” Brief for Petitioner 16, n.16. His reply brief was more precise: “The default judgment obtained by [Klemm] at issue in [Rotkiske’s FDCPA complaint] was made possible by the filing of a fraudulent Affidavit of Service.” Reply Brief 15. Indeed, the Court recognizes that Rotkiske’s arguments included “a fraud-specific discovery rule as an equitable doctrine.” Ante, at 4.
Rotkiske’s FDCPA complaint, in my view, falls comfortably within the fraud-based discovery rule’s scope. See Brief for Samuel L. Bray et al. as Amici Curiae 12-14. Rotkiske alleged that Klemm engaged in “sewer service”—intentionally serving process in a manner designed to prevent Rotkiske from learning of the collection suit. Klemm did so, according to Rotkiske, in order to ensure that Klemm’s untimely suit would result in a default judgment that would remain undiscovered until time to oppose that judgment, and to commence an FDCPA suit, ran out. Though Rotkiske did not allege that “sewer service” is itself a practice independently proscribed by the FDCPA, such service is nonetheless a fraudulent abuse that should trigger the fraud-based discovery rule. See Reply Brief 15-17.”
Rotkiske v. Klemm, No. 18-328, 15-16 (U.S. Dec. 10, 2019)
Friday, 18th October 2019
UPDATE: This Petiton Appears to Have Raised a Poorly Framed Question and that’s Upset the Justices as It Changes the Whole Case. Looks Like this One is Going to Be Dismissed as ‘Improvidently Granted’.
Argument analysis: “Not a paragon of clarity”
On Wednesday, the Supreme Court heard argument in Rotkiske v. Klemm. What seemed like a run-of-the-mill statutory-interpretation case revealed itself to be deeply convoluted, involving uncertainty both about which issues had been waived in earlier proceedings and what the question presented even means. These fundamental questions clouded the argument enough that I would not be surprised to see this case dismissed as improvidently granted.
The underlying facts in the case are fairly standard. Rotiske accumulated and then defaulted on roughly $1,200 in credit card debt. Klemm & Associates attempted to collect the debt by filing suit against Rotkiske. Klemm first filed suit in 2008 in Philadelphia Municipal Court, but it dropped the claim after learning that the address at which it had served papers was no longer Rotkiske’s address. Nevertheless, in 2009, Klemm again sued Rotkiske, and its process server attempted to serve him at the same address as in the 2008 case. Rotkiske states that he had no knowledge of the proceeding and therefore failed to appear. He claims not to have known about the case, or the default judgment entered against him, until he applied for a mortgage in 2014.
In September 2014, Rotkiske sued Klemm in the U. S. District Court for the Eastern District of Pennsylvania. Everything you need to know about the proceedings in the district court comes from the acknowledgement of Rotkiske’s counsel, Scott Gant, “that the complaint here was not a paragon of clarity. It could have been done better.” According to Assistant to the Solicitor General Jonathan Bond, who argued as a “friend of the court” in support of Klemm, the complaint’s only allegation of improper service “doesn’t allege any kind of misrepresentation, isn’t premised on fraud.” That is potentially a problem because Rotkiske’s current argument is that 15 U.S.C. Section 1692k(d), which provides that all actions arising under the FDCPA must be brought “within one year from the date on which the violation occurs,” includes the common-law discovery rule. The discovery rule is a doctrine—the parties appear to disagree as to whether it is legal or equitable—that delays when the statute of limitations begins to run in cases in which the victim could not have known that they had a claim.
The relationship between fraud and the discovery rule is the key to the justices’ uncertainty over the question presented on certiorari. The question in Rotkiske’s petition reads: “Whether the ‘discovery rule’ applies to toll the one (1) year statute of limitations under the Fair Debt Collection Practices Act, 15 U.S.C. §§ 1692, et seq., as the Fourth and Ninth Circuits have held but the Third Circuit (sua sponte en banc) has held contrarily.” At the argument, the justices attempted to ascertain whether the case presents the question of whether there is a blanket discovery rule for all FDCPA claims or whether the FDCPA’s statute of limitations includes the discovery rule only in cases of fraud. The U.S. Court of Appeals for the 3rd Circuit decided the case as if Rotkiske had argued that the discovery rule would apply to all FDCPA cases.
During the argument, Shay Dvoretzky, arguing on behalf of Klemm, sought to portray the question presented as involving only a blanket application of the discovery rule. That framing likely helps Klemm because it drives the discovery rule squarely into the text of FDCPA’s one-year statute of limitations. None of the justices seemed inclined toward applying such a blanket rule to the FDCPA. When asked whether the petition only sought certiorari on a blanket rule, Gant ducked: “Well, that certainly wasn’t how it was intended. And you may know, I didn’t draft that, as I — I don’t read it that way, and I — I know for certain that that’s – was not intended to exclude that.”
The next issue regarding the question presented is whether it asks only about statutory interpretation or whether it includes equitable doctrines that might affect the application of the statute. Several of the justices were interested in whether these facts were best handled by the doctrine of equitable tolling, but because Rotkiske’s prior counsel failed to preserve equitable tolling on appeal to the 3rd Circuit, that off-ramp was closed. Justice Sonia Sotomayor pointed out that four of the judges of the en banc 3rd Circuit would have remanded to the district court to consider whether this case presented self-concealing fraud subject to equitable tolling. Gant adopted the arguments in the amicus brief filed by several law professors, but that required him to explain that sometimes the Supreme Court “use[s] the label of ‘equitable tolling’ to describe circumstances that I think are best understood as the Bailey/Holmberg discovery rule.” Gant told the justices that in Bailey, an 1875 case, and Holmberg, a 1946 case, the Supreme Court “adopted as its own the old chancery rule, that where a plaintiff has been injured by fraud and remains in ignorance of it without any false or want of diligence or care on his part, the bar of the statute does not begin to run until the fraud is discovered.”
This exchange seemed to frustrate Justice Brett Kavanaugh, who said, “So the discovery rule could be part of a statute, but, if it’s not part of the statute, there exists, I think you’re saying, an equitable discovery rule as well that is akin to but maybe not the same as equitable tolling.” When Gant hesitated, Kavanaugh demanded, “Can you just give me real clear on the answer?” Clarity did not come, and there was a convoluted exchange about whether the common law could include an equitable discovery rule premised on common-law fraud, in which Lord Coke made an appearance. Justice Stephen Breyer questioned whether the facts could support a common law fraud claim, because if anybody was defrauded by the affidavit of service in this case, it was the Philadelphia Municipal Court, not Rotkiske. Breyer, and later Dvoretzky, wanted to rely on Judge Richard Posner’s opinion in Cada v. Baxter Healthcare Corp., which reads Holmberg as concerning equitable exceptions to statutes of limitations. Justice Elena Kagan and Kavanaugh expressed concern that the question presented in this case did not ask them to consider whether there were equitable exceptions to the statute of limitations; rather, it asked only whether the discovery rule applies generally to the statute.
Both Dvoretzky and Bond emphasized that questions of equitable relief of any flavor are not before the court. They argued that to the extent that there are cases, such as TRW Inc. v. Andrews, in which the Supreme Court recognized a legal discovery rule, those cases are distinct from Bailey and Holmberg, which were equitable cases. Justice Ruth Bader Ginsburg, who wrote the opinion in TRW Inc., pushed back on this distinction. She looked to Justice Antonin Scalia’s concurrence in that case, which she characterized as saying that “the discovery rule as a general matter doesn’t toll when your statute of limitation [is] triggered by the … occurrence — of the violation, but … there is an exception to the non-application of the discovery rule for fraud” that is based on a “historical exception for cases based on fraud.” There was a moment of levity when Dvoretzky quipped, “the Court — and it pains me to say this – Justice Scalia, were not — have not always been precise in their use of this terminology” – to which Sotomayor responded, “He’s turning over in his grave now.”
Toward the end of Gant’s argument, Kavanaugh previewed a potential opinion in which the court could maintain the possibility of a discovery rule in cases of fraud but determine that any such rule is equitable and therefore not applicable to this case. Bond took care to agree with this view, and none of the other justices appeared to disagree.
In the end, the most surprising thing about this argument is that none of justices seemed very concerned about the policy considerations that Rotkiske and the National Consumer Law Center had focused on in their briefs. Without even the more liberal justices expressing worry that the opinion below might incentivize abuse by creditors, Rotkiske’s path to victory looks vanishingly narrow.
SCOTUS Set to Decide whether FDCPA’s Statute of Limitations is Tolled by “Discovery Rule”
The FDCPA requires that any lawsuit must be brought, if at all, “within one year from the date on which the violation” of the act occurs. 15 U.S.C. § 1692k(d). The US Supreme Court will hear argument this month in Rotkiske v. Klemm to decide whether this statute of limitations is paused until a plaintiff discovers the basis for his or her lawsuit.
The facts underlying the case are straightforward. Kevin Rotkiske accumulated credit card debt between 2003 and 2005, which was then referred to Klemm & Associates for collection. Klem sued Rotkiske in 2008 and attempted service at an address where Rotkiske no longer lived. The lawsuit was withdrawn, but Klemm tried again in 2009 and someone at the former residence accepted service on his behalf. Klemm obtained a default judgment for around $1,500.00.
Rotkiske did not discover the judgment until 2014 when he applied for a mortgage. In 2015, Rotkiske sued Klemm arguing that the collection efforts violated the FDCPA. Klemm moved to dismiss the suit, arguing that the suit was time-barred, as the alleged violations took place in 2008 and 2009. The district court agreed and dismissed the suit.
In doing so, the district court rejected Rotkiske’s assertion that § 1692k(d) incorporates a discovery rule which “delays the beginning of a limitations period until the plaintiff knew of or should have known of his injury.” Rotkiske appealed the decision to the Third Circuit, which affirmed. Parsing the statutory text, the Third Circuit found that Congress did not include a discovery rule in the FDCPA, and that the remedial purposes underlying the act does not demand that courts interpret the FDCPA to include one. The court held that when drafting the FDCPA, Congress was most concerned about the “repetitive contacts” that debt collectors may make with debtors, not that debt collectors will conceal their actions to unscrupulously obtain judgments against unknowing consumers.
The Third Circuit’s en banc opinion created a split in the federal circuit courts of appeal, with the Third Circuit holding that § 1692k(d) does not contain a discovery rule, and the Fourth and Ninth Circuits holding that it does. Briefing is complete, and the case is set for oral argument at the court on October 16, 2019. Expect oral argument to encompass topics such as whether the FDCPA’s text clearly and unambiguously excludes a discovery rule, whether Congress presumed that a common law principle such as the discovery rule would be incorporated into the FDCPA, and whether an implied discovery rule fits with the act’s remedial purpose.
We will have a blog post after oral argument, and when an ultimate decision is made by the Court.