Texas Federal Court Holds Limitations Period May Not Have Run on FDCPA Claim if Creditor Obtained Default Judgment in Improper Venue

The United States District Court for the Eastern District of Texas recently denied a debt collector’s motion to dismiss, holding that the one-year statute of limitations under the FDCPA may not have commenced if the creditor brought its action against the debtor in an improper venue.  See Barboza v. Weinstein & Riley, P.S., 2020 WL 5849549 (E.D. Tex. 2020).  In the case, the defendant debt collector filed an action against plaintiff in state court in 2010, obtaining a default judgment in 2011.  In 2019, defendant filed a garnishment action against plaintiff’s bank, seeking to turn over plaintiff’s funds.  Plaintiff then brought this action alleging a violation of the FDCPA.  Specifically, plaintiff alleged that defendant violated Section 1692i, which prohibits a debt collector from bringing an action in a venue unless (i) it is enforcing a security interest against real property in that county or judicial district, (ii) the debtor resides in that county or judicial district, or (iii) the debtor entered into the contract at issue in that county or judicial district.  Defendant filed a motion to dismiss, arguing that a garnishment action was not subject to 1692i and that any claim relating to the 2010 action would be outside the FDCPA’s one-year statute of limitations.

The Court denied the motion.  First, the Court found that the one-year limitations period for a violation under 1692i does not begin to run until the debtor receives notice of the lawsuit.  Here, the parties did not present the Court with any information about when plaintiff received notice of the 2010 lawsuit, so the Court denied the motion with regard to the 2010 lawsuit.  Second, the Court found that the 2019 garnishment action may have restarted the limitations period.  Adopting a two-step analysis from the 9th Circuit, the Court found that a garnishment action may constitute a “legal action” subject to 1692i if the original action resulting in a default judgment was brought in an improper venue.  In this case, “[a]s alleged, the Credit Card Suit was filed in the wrong venue, and hence, the Default Judgment was secured in the wrong venue.”  Accordingly, the Court denied the motion to dismiss.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com, Michael Crowley at mcrowley@riker.com, or Andrew Raimondi at araimondi@riker.com.