The U.S. Court of Appeals for the Ninth Circuit has ruled that the discovery rule applies to all plaintiff actions brought under the Fair Debt Collection Practices Act (FDCPA), and that the one-year FDCPA statute of limitations starts to run in all cases when the plaintiff knew or had reason to know about a collection case.
In Lyons v. Michael & Associates, the defendant filed a debt collection suit against the plaintiff in Monterey, California, on December 7, 2011. The plaintiff lived — and incurred the debt — in San Diego. On January 3, 2013, the plaintiff filed suit alleging that the defendant violated the FDCPA by filing their collection suit in the incorrect judicial district. A district court dismissed the plaintiff’s suit as time-barred, ruling that an FDCPA violation occurs at the time the debt collection action is filed.
On June 8, 2016, the Ninth Circuit reversed the district court’s ruling, finding that the discovery rule applies in FDCPA actions and therefore, the plaintiff’s action was not time-barred since the one-year FDCPA statute of limitations did not start running until the plaintiff knew or had reason to know about the collection action. She did not know until she received service of process, which was done within the year prior to her suit being filed.
In reaching its decision, the Ninth Circuit cited its 2009 decision in Mangum v. Action Collection Service Inc., where a plaintiff alleged that a debt collector violated the FDCPA by wrongfully disclosing her debt information to an outside party. “In general, the discovery rule applies to statutes of limitations in federal litigation, that is, federal law determines when the limitations period begins to run, and the general federal rule is that a limitations period begins to run when the plaintiff knows or has reason to know of the injury which is the basis of the action.”
The Ninth Circuit said that although the circumstances of the two cases were different, the discovery rule was properly applied and, in fact, applies equally regardless of what type of FDCPA violation is alleged.
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