Thursday, March 3, 2011

FYI: 5th Cir Says Collecting on Time-Barred Debts "May" Violate FDCPA, But Not In This Case

In a case involving collection activities on an allegedly time-barred cell
phone debt, the U.S. Court of Appeals for the Fifth Circuit recently held
that: (1) the Federal Communications Act statute of limitations of two
years did not apply in this case, as there was no indication of federal
preemption of state statutes of limitation on collecting on cell phone
bills; and (2) the relevant state statute of limitations of four years
applied, and the defendant's were therefore not "threatening to sue on
time-barred debts."

A copy of the opinion is available online at:

The consumer brought suit against two debt collectors concerning letters
he perceived as threatening suit on an approximately three (3) year old
cellular phone bill. The consumer alleged that these collecting on these
cell phones bills was time-barred under the Federal Communications Act

The relevant language of the FCA, 47 U.S.C. §415(a), states: "All actions
at law by carriers for recovery of their lawful charges . . . shall be
begun, within two years from the time the cause of action accrues, and not

The district court certified as a class all persons with Texas addresses
who had received similar letters to Castro's during a specified time
period on debts that had gone delinquent more than two years before the
letters were sent. However, the district court then granted the
defendants' motion to dismiss, and denied the consumer's motion for
partial summary judgment. The consumer appealed.

One appeal, the Fifth Circuit noted that "threatening to sue on
time-barred debt may well constitute a violation of the FDCPA." Thus, the
Court determined that "in order to proceed "the plaintiffs needed to
demonstrate that their debts were "time-barred."

The Court then contrasted the 4-year statute of limitations in §
16.004(a)(30) of the Texas Civil Practice & Remedies Code with the 2-year
limitations period under the FCA, 47 U.S.C. §415(a).

The Fifth Circuit framed the choice between these two statutes of
limitations as "a question of preemption." Due to the fact that Congress
had amended the FCA to allow states to control "many aspects of regulating
commercial mobile services" including the traditional state regulation of
contracts and consumer protection, the Court held that "Congress did not
intend to preempt "the historic police powers of the states," absent a
showing that this was "the clear and manifest purpose of Congress."

Because the plaintiffs did not contend that express or field preemption
was applicable in this matter, the Court focused on the possibility of
conflict preemption.

The Court noted that when the FCA was enacted in 1934 carriers were
required "to file their rates, also called 'tariffs' with the FCC."
Although many telecommunications carriers have since been released from
the requirement to file tariffs, the Court noted that "Congress did not
change the language of §415(a)."

The plaintiffs urged the Court to accept their definition of "lawful
charges" as applying to non-tariffed as well as tariffed charges.
However, Court held that given the history of the regulation it was "at
least equally reasonable to read 'lawful charges' in §415(a) as a term of
art meaning only tariffed charges." Due to this ambiguity in the meaning
of "lawful charges," the Court would not "interpret the term in such a way
that conflict preemption would apply."

Because conflict preemption did not apply to displace the 4-year state
statute of limitations period, the cell phone debts at issue were not
time-barred, and the consumer had no claim. Thus, the Fifth Circuit
affirmed the lower court's judgment.

Ralph T. Wutscher
Kahrl Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct: (312) 551-9320
Fax: (312) 284-4751
Mobile: (312) 493-0874

NOTICE: We do not send unsolicited emails. If you received this email in
error, or if you wish to be removed from our update distribution list,
please simply reply to this email and state your intention. Thank you.

Our updates are available on the internet, in searchable format, at:

The information transmitted (including attachments) is covered by the Electronic Communications Privacy Act, 18 U.S.C. 2510-2521, is intended only for the person(s) or entity/entities to which it is addressed and may contain confidential and/or privileged material. Any review, retransmission, dissemination or other use of, or taking of any action in reliance upon, this information by persons or entities other than the intended recipient(s) is prohibited. If you received this in error, please contact the sender and delete the material from any computer.

Notice Under U.S. Treasury Department Circular 230: To the extent that this e-mail communication and the attachment(s) hereto, if any, may contain written advise concerning or relating to a Federal (U.S.) tax issue, United States Treasury Department Regulations (Circular 230) require that we (and we do hereby) advise and disclose to you that, unless we expressly state otherwise in writing, such tax advise is not written or intended to be used, and cannot be used by you (the addressee) or other person(s), for purposes of (1) avoiding penalties imposed under the United States Internal Revenue Code or (2) promoting, marketing or recommending to any other person(s) the (or any of the) transaction(s) or matter(s) addressed, discussed or referenced herein. Each taxpayer should seek advice from an independent tax advisor with respect to any Federal tax issue(s), transaction(s) or matter(s) addressed, discussed or referenced herein based upon his, her or its particular circumstances.