In Castro v Collecto, Inc, No 09-50975, 2011 WL 651921 (5th Cir Feb 24, 2011), the Fifth Circuit affirmed the dismissal of the plaintiffs' Fair Debt Collections Practices Act ("FDCPA") claims, holding that the two year statute of limitations under the Federal Communications Act (“FCA”) did not preempt the four year Texas statue of limitations period for the collection of mobile services debts.
Castro filed suit against the defendants, Collecto, Inc. and U.S. Asset Management, Inc. alleging violations of the FDCPA due to defendants’ attempt to collect an approximately three year old debt owed to Sprint PCS. Castro alleged that the letters sent by the defendants could be interpreted as threatening litigation, despite the fact that the claims were time-barred under the FCA. Castro sought and was granted class certification, consisting of all individuals with Texas addresses who received a similar letter that sought collection of a debt that became delinquent more than two years prior to the sending of the letter. In certifying the class, the district court was persuaded by plaintiffs’ argument that the FCA set a two year statute of limitations for actions by carriers to recover charges and was therefore applicable to their case. Further, the district court found that the FCA statute of limitations preempted any state statute of limitation.
However, in deciding defendants’ motion to dismiss, the lower court changed course. The lower court determined that the FCA did not apply to the debts at issue because the FCA was only applicable to the recovery of lawful charges, which the lower court understood related to tariffs filed with the Federal Communications Commission. Regarding preemption, the lower court determined that the FCA did not preempt state law in actions relating to billing practices or disputes. The lower court articulated a third reason as well, holding that even if the FCA two year statute of limitation applied, the defendants would be entitled to a “bona fide error” defense under the FDCPA, because it was clearly possible that reasonable lawyers may disagree as to the applicable limitation period.
The Fifth Circuit agreed with the lower court’s assessment. While making a determination as to the threshold question of which statute of limitations applied, the court reviewed Congress’ intent in drafting and subsequently amending the FCA. The court noted that the FCA had been amended to allow state to handle many aspects of regulating commercial mobile services, including billing practices and consumer protections. The court found that Congress did not intend to preempt “the historic police power of the states” and ultimately concluded that it was unclear whether Congress intended for the FCA statute of limitations to preempt state statute of limitations in actions brought under state law to collect non-tariffed charges. Due to this uncertainty, the Fifth Circuit declined interpreting the FCA and the meaning of the term “lawful charges” in such a way that conflict preemption applied to this case.