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:

http://www.ca5.uscourts.gov/opinions/pub/09/09-50975-CV0.wpd.pdf

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 (“FCA”).

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 after.”

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