The U.S. Supreme Court has declined to impose a general discovery rule to actions brought under the Fair Debt Collection Practices Act. The court's ruling, however, leaves open the question of whether debtors may be able to bring claims outside the statute of limitations under a more specific fraud-based discovery rule.

The high court's 8-1 decision in Rotkiske v. Klemm affirmed a 2018 decision from the U.S. Court of Appeals for the Third Circuit, which rejected the argument that the time period for suing begins to run when the violation is discovered, rather than when the violation occurs. The case was initially filed in the U.S. District Court for the Eastern District of Pennsylvania against a Roseland, New Jersey, firm.

The Third Circuit's ruling had caused a split with the split with the Fourth and Ninth circuits on the issue.

Writing for the majority, Justice Clarence Thomas said that, despite Congress having included language allowing for broad discovery rules in other statutes, the language of the FDCPA clearly said the statute of limitations began to run at the time the violation occurred.

"It is not our role to second-guess Congress' decision to include a 'violation occurs' provision, rather than a discovery provision," Thomas said. "It is Congress, not the court, that balances those interests. We simply enforce the value judgments made by Congress."

Justice Sonia Sotomayor issued a concurring opinion noting that the ruling did not bar claims based on fraud or concealment, and Justice Ruth Bader Ginsburg issued a dissenting opinion, saying plaintiff Kevin Rotkiske had preserved the fraud-based discovery rule arguments, and therefore, the high court should have allowed the case to go back to the Third Circuit to proceed on those claims.

Jones Day attorney Shay Dvoretzky represented the defendants, Paul Klemm and Nudelman, Klemm & Golub. He did not return a message seeking comment.

Boies Schiller Flexner attorney Scott Gant represented Rotkiske.

"We're gratified the court accepted our argument that there is a fraud-based discovery rule, separate from equitable tolling," he said in an emailed statement. "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 a future decision will confirm that the rule does apply to the statute and to circumstances like those alleged by Mr. Rotkiske."

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—the successor firm of Nudelman, Klemm & Golub—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 Klemm and several associated entities, including 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.

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.