On January 22, 2018, the U.S. Supreme Court issued an opinion where it resolved a jurisdictional split regarding the impact of 28 U.S.C. §1367(d)’s tolling provision for a state claim's limitations period while such a claim is pending in federal court.
A court can only hear a claim over which it has subject-matter jurisdiction. Federal courts generally do not have subject-matter jurisdiction over state law claims. However, a federal court may exercise what is called “supplemental jurisdiction” over state law claims that arise from the same case or controversy as a federal claim before the court. E.g., allegations that one collection letter violates both the FDCPA and a state-equivalent law.
Section 1367(d) provides that if a federal court exercises supplemental jurisdiction over a state law claim, the limitations period for the state claim “shall be tolled while the claim is pending [in federal court] and for a period of 30 days after it is dismissed unless state law provides for a longer tolling period.”
There is a jurisdictional split regarding whether §1367(d) pauses the limitations clock on the state claim while it is pending in federal court or whether the clock continues to run but the plaintiff is afforded a 30 day grace period to file the claim in state court after the federal court dismissal. Of note, this only applies to dismissals due to lack of supplemental jurisdiction over the claim. It does not apply to a dismissal on the merits, which would not trigger §1367(d).
In Artis v. District of Columbia, 583 U.S. ____ (2018), an opinion written by Justice Ginsburg, the U.S. Supreme Court ruled that the former definition applies.
Read the decision here.
Facts of the Underlying Case
Petitioner Stephanie Artis filed a lawsuit against the District of Columbia on a federal employment discrimination claim as well as several related state law claims, including a violation of the District of Columbia Whistleblower Act and other wrongful termination claims. This suit, which included both federal and state claims, was filed in federal court within the statute of limitations for all claims. The statute of limitations for the state law claims expired two years after Petitioner filed the federal court case.
On June 27, 2014, two and a half years after the federal court case was filed, the court dismissed Petitioner’s only federal claim. Since the sole federal claim in the suit was dismissed, the court declined to exercise supplemental jurisdiction over the state law claims and dismissed them as well.
Petitioner filed her state law claims in state court fifty-nine days after the federal court dismissal. The state trial court granted Respondent’s motion to dismiss the claim due to it being time barred. The trial court reasoned that the statute of limitations expired during the pendency of the federal court case so Petitioner only had a thirty day grace period to file her claims in state court per §1367(d). The D.C. Court of Appeals affirmed this decision. The case was ultimately reviewed and reversed by the U.S. Supreme Court.
In its decision, the Court reversed the D.C. Court of Appeals decision and decided that §1367(d) effectively stops the clock on the limitations period for a state claim while it is pending in federal court.
The Court reviewed the evidence provided of other court interpretations and statutory use of each reading of the statute. In this review, the Court found that the grace period interpretation is “a feather on the scale against the weight of decisions in which ‘tolling’ a statute of limitations signals stopping the clock.”
Petitioner argued that if the stop-the-clock interpretation were Congress’ intent, then there would be no need for the 30 day grace period portion of the statute. This argument did not persuade the Court, which found that this 30 day grace period is intended as “breathing room” for a plaintiff that files her claim in federal court very close to the expiration of the statute of limitations. The Court dismissed the argument that a plaintiff can solve for this by pursuing the claim in state court while the federal case is pending, stating that this is inefficient and wastes already strained judicial resources.
The majority opinion also addressed the constitutional issue of whether this interpretation of §1367(d) exceeds Congress’ enumerated powers and encroaches on state sovereignty. The majority opinion rejected both of these arguments.
Justice Gorsuch crafted the dissenting opinion, in which he was joined by Justice Kennedy, Justice Thomas, and Justice Alito.
Many states have their own equivalent of the FDCPA. Since such state claims are usually filed in federal court along with federal FDCPA claims, firms and agencies in the debt collection industry should take note of this decision. U.S. Supreme Court decisions are binding on all courts and jurisdictions in the United States, both state and federal.
The opinion may seem negative at first blush, but its impact to the industry will not be as widespread. Since §1367(d) only applies to claims that are dismissed due to the court declining to exercise supplemental jurisdiction, it will have no impact on state claims that a federal court decides on the merits. Once a claim is decided on the merits, res judicata principles prevent the plaintiff from re-litigating the claim against the same defendant in another court. The only recourse at that point is an appeal.
A situation that might trigger §1367(d) is where a case is filed in federal court alleging both an FDCPA and a state claim and the court dismisses an FDCPA claim for lack of standing per Spokeo. Since the only federal claim was dismissed, there is no similar case or controversy for the court to attach the state law claim to, thus prohibiting it from exercising supplemental jurisdiction. In this situation, the limitations period for the state law claim will have tolled – or paused – while the claim was pending in federal court.
In sum, a federal court exercising supplemental jurisdiction over a state law claim stops the clock on the limitations period for that claim. Agencies and firms that are regularly sued on both federal and state claims in federal court – or that remove such claims to federal court – should keep this opinion in mind.