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High Court Clears Debt Collector on Long-Delayed Suit

Siding with a debt collector, the Supreme Court ruled Tuesday that a man who didn’t know he was being sued over a $1,200 credit card debt missed the time window to sue.

WASHINGTON (CN) - Siding with a debt collector, the Supreme Court ruled Tuesday that a man who didn’t know he was being sued over a $1,200 credit card debt missed the time window to sue.

The statute of limitations for a federal unfair debt collection lawsuit begins to run when the alleged violation occurred, not when the debtor first learned about it, the ruling states.

Kevin Rotkiske became the target of a debt-collection effort after running up $1,200 in debt on his credit card from 2003 to 2005. Seeking to collect on the debt, the now-defunct law firm Klemm & Associates filed suit against Rotkiske in Philadelphia in 2008. After withdrawing that suit, the firm's principal Paul Klemm sued Rotkiske again in 2009.

The trouble is, Rotkiske says he never knew he was being sued. Klemm tried to serve him in each case, but Rotkiske says the firm had his wrong address and that someone else accepted service both times. 

Nevertheless, the Philadelphia Municipal Court entered a default judgment against Rotkiske in March 2009. 

Rotkiske didn’t learn about the judgment against him until September 2014, after he was denied a mortgage because of it. He turned around and filed a federal lawsuit in June 2015, claiming Klemm intentionally botched the attempts at service. 

A federal judge dismissed Rotkiske’s lawsuit in March 2016, ruling the one-year statute of limitations included in the Fair Debt Collection Practices Act does not pause if the plaintiff did not know about the action against him. 

The Third Circuit agreed and Rotkiske appealed to the Supreme Court.

In an 8-1 decision Tuesday, the justices found the intent of Congress clear: the statute of limitations on such lawsuits begins when the alleged violation of the law occurs, not when the person discovers it.   

Writing for the majority, Justice Clarence Thomas noted Congress has written other statutes of limitations that begin to run when a violation is discovered and decided not to do so in the FDCPA — a judgment the court is not entitled to second guess.

“It is Congress, not this court that balances those interests,” Thomas wrote in a 7-page opinion. “We simply enforce the value judgments made by Congress.” 

Justice Ruth Bader Ginsburg generally agreed with the majority’s holding but said Rotkiske should have been able to press his claims because he alleged Klemm’s fraud prevented him from bringing his lawsuit within the required time period. Under a long-recognized rule, this would started the statute of limitations when Rotkiske discovered the alleged fraud, Ginsburg argued.

“By knowingly arranging for service of the complaint against Rotkiske at an address where Rotkiske no longer lived, and filing a false affidavit of service, Rotkiske alleges, Klemm engaged in fraud,” Ginsburg wrote. “Such fraud, I would hold, warrants application of the discovery rule to time Rotkiske’s FDCPA suit from the date he learned of the default judgment against him.”

Ginsburg also disagreed on whether Rotkiske preserved that argument though he failed to raise it before the Third Circuit or in his petition asking the court to take up the case.

Justice Sonia Sotomayor joined the majority in full but penned a two-paragraph concurrence to defend the rule Ginsburg felt should have decided the case in Rotkiske's favor. While she agreed Rotkiske did not preserve his argument on that rule, Sotomayor said litigants should feel free to rely on it in the future.

Scott Gant, an attorney for Rotkiske with the firm Boies Schiller Flexner, said he is hopeful that the court will someday soon reach the issue of whether allegations of fraud could give litigants to a more generous statute of limitations.

"While we're disappointed the court declined to decide whether the fraud-based discovery rule applies to either the FDCPA or Mr. Rotkiske's particular claims, we're optimistic that a future decision will confirm that the rule does apply to the statute and to circumstances like those alleged by Mr. Rotkiske," Gant said in an email. 

Klemm is represented by Shay Dvoretzky of Jones Day. Dvoretzky did not immediately return a request for comment on the decision.

Categories / Appeals, Business, Consumers

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