The U.S. Court of Appeals for the Second Circuit recently held, for a second time, that a consumer need not receive notice of a potential violation of the Fair Debt Collection Practices Act in order for the statute of limitations to start; rather, the focus remains on when the injury occurs. A copy of the opinion is available here.

In an effort to enforce a judgment against Andrew Benzemann, on December 6, 2011, a law firm sent a request under New York law to a bank directing it to freeze an account (called a “restraining notice”). The notice identified Andrew Benzemann as the judgment debtor but contained the Social Security Number and address of Alexander Benzemann, who was not the debtor. The bank froze Alexander’s account. On December 13, Alexander discovered that he could not access his accounts. The next day he learned that his account had been frozen due to the restraining notice. By the evening of December 15, the freeze had been lifted.

On December 14, 2012, Alexander Benzemann filed suit against the law firm, asserting an FDCPA violation, among other claims. The district court initially dismissed the FDCPA claim as untimely, finding that the alleged violation occurred when the law firm mailed the restraining notice on December 6, 2011 – one year and eight days before suit was filed.

Benzemann appealed to the Second Circuit, which held that the district court had erred in finding that the FDCPA violation occurred when the law firm sent the restraining notice. Rather, the Court held, where a debt collector sends an allegedly unlawful restraining notice to a bank, the FDCPA violation does not “occur” for purposes of the statute of limitations until the bank freezes the debtor’s account. The Court reasoned that “it was only then that he has a complete cause of action and notice of the FDCPA violation.”

The case was remanded with instructions for the district court to determine whether the account was frozen on December 13 or December 14, and if the account was frozen on December 13, whether the FDCPA’s statute of limitation is subject to the common-law “discovery rule,” pursuant to which a plaintiff’s cause of action accrues when he discovers, or with due diligence should have discovered, the injury.

After further proceedings, the district court determined that the account had been frozen on December 13, which was both the date of the injury and the date of discovery (although Benzemann did not learn that the freeze was due to the restraining notice until December 14), thus obviating the need for a determination on the applicability of the discovery rule. Accordingly, the district court found that the FDCPA claim was time-barred and entered summary judgment in favor of the defendants.

Benzemann again appealed, this time arguing that an individual must receive notice of a violation before the statute of limitations clock can begin to run. Here, although Benzemann discovered that his account was frozen on December 13, 2011, he did not learn of the restraining notice that initiated the account freeze until December 14, 2011, which would make his filing on December 14, 2012 within the statute of limitations window.

The Second Circuit rejected Benzemann’s focus on the term “notice of the FDCPA violation” contained in its previous opinion, announcing that “[t]o the extent our decision in Benzemann I created any confusion, we now make clear that an FDCPA violation occurs, triggering the statute of limitations, when an individual is injured by unlawful conduct.” In addition to the plain language of the statute, which does not require notice to the consumer for the violation to be complete, the Court invoked the practical difficulty of making notice of the violation an additional requirement under the FDCPA, as well as the policy underlying statutes of limitations generally, i.e., encouraging putative plaintiffs to diligently prosecute their claims and promoting justice by preventing prosecution of claims that have been allowed to slumber.

While such close-call statute of limitations scenarios may not arise every day, it is important for those defending against FDCPA claims to keep in mind the analysis in Benzemann I and II when arguing for the earliest statute of limitations start date possible.

Moreover, while the Court managed to sidestep the discovery rule in Benzemann based on the finding that the date of the violation and of its discovery were the same, the decision comes within the context of a circuit split over the applicability of the discovery rule to the FDCPA’s statute of limitations generally, which the Supreme Court earlier this year agreed to hear. Stay tuned for further reporting on Rotkiske v. Klemm, 890 F.3d 422 (3rd Cir. 2018), cert. granted 139 S. Ct. 1259 (U.S. Feb. 25, 2019) (No. 18-328).