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6th Cir. Holds FDCPA SOL Triggered on Date of Last Violation, Not Date Faulty Collection Action Was Filed

The U.S. Court of Appeals for the Sixth Circuit recently reversed a trial court’s dismissal of a consumer’s federal Fair Debt Collection Practices Act claim, and held that the FDCPA claim actually fell within the statute of limitations.

In so ruling, the Sixth Circuit held that, because the FDCPA creates an independent statute of limitations for each discrete violation of the FDCPA, and even though the alleged FDCPA violation occurred in a collection lawsuit that was filed more than one year before the filing of the FDCPA action, the specific alleged FDCPA violation at issue occurred later in the collection lawsuit and within the FDCPA’s one-year statute of limitation.

A copy of the opinion in Bouye v. Bruce is available at:  Link to Opinion.

The consumer financed a furniture purchase through a retail installment contract (“RIC”). The RIC was sold to a financing company. The consumer defaulted, and the financing company, through its attorney, sued in state court to recover the debt and attorney’s fees.

The RIC attached to the complaint did not establish a transfer to the financing company. The court ordered the financing company to file proof of assignment, and the company filed an updated RIC that listed the previous creditor’s store manager as assigning the debt to the financing company. The trial court then granted the financing company summary judgment, but the state appellate court found that the financing company had not sufficiently demonstrated a valid transfer. The state appellate court remanded the case, and the financing company eventually filed a voluntary dismissal.

Then, 380 days after the financing company originally filed its lawsuit in state court, the consumer sued the financing company’s attorney in federal court under the FDCPA, alleging that the attorney doctored the RIC mid-litigation to make it look like the assignment was proper.

Upon the attorney’s motion, the federal trial court dismissed the complaint as untimely under the FDCPA’s one-year limitations period. The consumer filed a motion for reconsideration, and the attorney filed a motion for attorney’s fees. The trial court denied both motions, and the parties timely appealed.

Meanwhile, the consumer and the financing company entered into a settlement agreement that released the company, later clarifying in an addendum that the company’s attorney was not released. Three months before the court denied the motions for reconsideration and attorney’s fees, the attorney learned of the settlement agreement.

Before the parties briefed the merits of their appeals, the attorney moved to dismiss the consumer’s appeal for lack of jurisdiction based on the settlement agreement. The consumer argued that the attorney had forfeited this argument or, alternatively, that the agreement did not go to the Sixth Circuit’s jurisdiction to hear the case. And, producing the addendum to the agreement as well as the attorney’s employment contract with the financing company, the consumer also argued that the attorney was not an intended third-party beneficiary of the settlement agreement.

The Sixth Circuit denied the attorney’s motion to dismiss the consumer’s appeal, holding that the settlement agreement did not moot the appeal because, in the context of the case, the agreement did not go to the Court’s jurisdiction to hear the case. The Court then allowed the parties to proceed with their briefing on appeal.

The consumer argued that her claim fell within the FDCPA’s one-year statute of limitations. The attorney challenged the consumer’s Article III standing to bring the lawsuit because, according to him, she was only pleading a statutory harm related to the state-court lawsuit and, therefore, could not meet the injury-in-fact requirement. The attorney also argued that the consumer’s claim was time-barred and that she released her claim against him through the settlement agreement.

As you may recall, to establish Article III standing, a plaintiff must have suffered an injury-in-fact that is fairly traceable to the defendant’s conduct and would likely be redressed by a favorable decision from a court. Rice v. Vill. of Johnstown, 30 F.4th 584, 591 (6th Cir. 2022). For the injury-in-fact requirement, a plaintiff’s allegations must establish that she has experienced an injury that is “concrete, particularized, and actual or imminent.” Barber v. Charter Twp. of Springfield, 31 F.4th 382, 390 (6th Cir. 2022).

Here, the Sixth Circuit concluded that the consumer was not merely pleading a statutory violation because she also alleged that she suffered an injury from defending against a state lawsuit that the financing company had no right to bring in the first place. Thus, in the Court’s view, that harm established a concrete injury that met the injury-in-fact requirement. See Hurst v. Caliber Home Loans, Inc., 44 F.4th 418, 423 (6th Cir. 2022).

Regarding the statute of limitations question, the Sixth Circuit noted that every alleged discrete FDCPA violation has its own statute of limitations. Slorp v. Lerner, Sampson & Rothfuss, 587 F. App’x 249, 259 (6th Cir. 2014). “[T]he date on which the violation occurs” determines when the one-year statute of limitations starts running. § 1692k(d).

The Court then found that the consumer’s complaint did allege a timely FDCPA violation: that the attorney filed an updated RIC and moved for summary judgment on that basis, allegedly affirmatively misrepresenting to the trial court that the assignment of the debt occurred before the financing company filed suit against the consumer.

The attorney argued that the alleged FDCPA violation was a continuing effect of the financing company’s initial filing of the state lawsuit and was therefore time-barred because the consumer did not file within a year of the company’s initiation of the state suit. See Slorp, 587 F. App’x at 259.

However, the Sixth Circuit held that the consumer’s single claim was independent of the financing company’s initial filing of the lawsuit — not a continuing effect of it — because it was a standalone FDCPA violation. The allegation was that the consumer introduced an RIC with a false assignment of debt that occurred after the lawsuit was filed. The Court reasoned that if it was only to consider the date the company filed suit, without regard to subsequent FDCPA violations within that lawsuit, it would create a rule that disregards the fact that § 1692k(d) creates an independent statute of limitations for each discrete violation of the FDCPA. See Bender v. Elmore & Throop, P.C., 963 F.3d 403, 407 (4th Cir. 2020).

The attorney also argued that the consumer released her FDCPA claim in the settlement agreement. The Sixth Circuit noted that the attorney first invoked that agreement in support of his jurisdictional argument that the agreement mooted the consumer’s suit. At that time, the Court rejected the attorney’s jurisdictional argument in its earlier order denying the motion to dismiss the appeal.

Nevertheless, the Sixth Circuit remanded this case for the trial court to evaluate in the first instance any merits argument based on the settlement agreement. Additionally, the Court vacated the trial court’s order denying attorney’s fees since the litigation below was allowed to continue.

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The attorneys of Maurice Wutscher are seasoned business lawyers with substantial experience in business law, financial services litigation and regulatory compliance. They represent consumer and commercial financial services companies, including depository and non-depository mortgage lenders and servicers, as well as mortgage loan investors, financial asset buyers and sellers, loss mitigation companies, third-party debt collectors, and other financial services providers. They have defended scores of putative class actions, have substantial experience in federal appellate court litigation and bring substantial trial and complex bankruptcy experience. They are leaders and influencers in their highly specialized area of law. They serve in leadership positions in industry associations and regularly publish and speak before national audiences.

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