Supreme Court rejects discovery rule in identity-theft case.

The Ninth Circuit erred in ruling that the federal statute of limitations for claims alleging Fair Credit Reporting Act (FCRA) violations begins to run when a consumer discovers the wrongdoing, not when the wrongdoing occurs, the U.S. Supreme Court has ruled. (TRW, Inc. v. Andrews, 122 S. Ct. 441 (2001).)

"The court of appeals rested its decision on the premise that all federal statutes of limitation, regardless of context, incorporate a general discovery rule" that the statute starts running when a party learns of his or her injuries, wrote Justice Ruth Bader Ginsburg. The unanimous Court disagreed: "The FCRA does not govern an area of the law that cries out for application of a discovery rule, nor is the statute 'silent on the issue' of when the statute of limitations begins to run."

The act requires that litigation be brought within two years from the date on which the liability arises, unless the defendant willfully misrepresented information. Then, action may be brought within two years of the consumer's discovering the misrepresentation. The TRW case involved no misrepresentation.

The decision has been described as a victory for credit bureaus. Consumers with so-called identity-theft cases--alleging that these agencies wrongly disclosed personal information to unauthorized parties--will be required to bring their claims sooner than the Ninth Circuit would have required.

Los Angeles attorney Andrew R. Henderson represented the plaintiff. He said, "Consumers cannot possibly be expected to assert their rights in court before they suspect there is a problem. All too often, identity-theft victims learn of their plight long after the credit reporting agency has violated the law."

Plaintiff Adelaide Andrews visited a radiologist's office in Santa Monica, California, in June 1993 and filled out a new-patient form listing her name, date of birth, Social Security number, and other basic information. The office receptionist, Andrea Andrews (no relation), copied the information, moved to Las Vegas, and tried to open credit accounts using Adelaide's Social Security number and her own last name and address.

Credit-reporting agency TRW, Inc., registered a match between Adelaide's Social Security number, last name, and first initial, and provided copies of her credit report in July 1994, September 1994, October 1994, and January 1995 to companies from which Andrea sought credit. Adelaide learned of the disclosures in May 1995 when she received a copy of her report while refinancing her home mortgage.

Adelaide sued the company in October 1996, nearly 17 months after she discovered the fraud and more than two years after TRW's first two disclosures.

The U.S. District Court for the Central District of California granted TRW's motion for partial summary judgment, ruling that the statute of limitations had expired on the July 1994 and September 1994 disclosure claims because both had occurred more than two years before Adelaide brought suit. The court rejected her argument that the limitations period did not begin until May 1995, when she discovered the disclosures.

On appeal, the Ninth Circuit reversed, holding that "none of [Adelaide's] injuries were stale when suit was brought." (Andrews v. Trans Union Corp., 225 F.3d 1063, 1066 (9th Cir. 2000).)

Reversing, the U.S. Supreme Court stated that "the Ninth Circuit conspicuously overstated [a general discovery rule's] scope and force" and remanded the case for further consideration. Ginsburg noted that the Ninth Circuit split from four other circuits' conclusion that a discovery exception may not be read into the act.

Henderson said that Congress may soon introduce five bills that will amend the statute at issue in TRW to identity-theft victims' advantage.

"The credit-reporting industry may have won the court battle, but it may lose the war," he said.