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Who Bears the Burden on a Statutory Exemption?

On behalf of Cohn Lifland Pearlman Herrmann & Knopf LLP | Oct 27, 2016 |


The United States Court of Appeals for the Third Circuit established standards that court will use in determining whether, under a claim based on a federal statute containing certain exceptions to its requirements, the plaintiff has the burden of proving the exemption does not apply or the defendant has the burden of proving it does. This case arose in the context of a claim under the Fair Debt Collection Practices Act (“FDCPA”) 15 U.S.C. §1692, et seq., which, among other things, makes a debt collector liable to a consumer for contacting third parties in an effort to collect the consumer’s debt-except in certain specified circumstances. The exception relevant here is where the contact is “for the purposes of acquiring location information about the consumer.” Even then, however, the FDCPA prohibits more than one contact “unless the debt collector reasonably believes the earlier response of such third person is erroneous or incomplete and that such person now has correct or complete location information.” 15 U.S.C. §1692b. A violation of the statute subjects the debt collector to statutory as well as actual damages.

The issue of whether the burden is on the debt collector to prove-or the consumer to disprove-entitlement to the exemption, was a matter of first impression in the United States Circuit Courts of Appeals. Varying district courts have come to disparate conclusions on the issue. In conducting its analysis, the court began with the “default rule” that a plaintiff bears the burden of proving his or her claim. That was the beginning, but not the end, since it required the court to determine whether the exception was in fact an element of plaintiff’s claim or an exemption to the statute’s general prohibition, since the burden of proving a justification or exemption to the statute’s prohibition generally lies on the one who claims the benefit of that exemption. Citing Schaffer v. Weast, 546 U.S. 49, 57 (2005)

In deciding whether an exception is an element of the claim or a defense to it, the court established a five factors: “(1) whether the defense is framed as an exception to the statute’s general prohibition or an element of a prima facie case; (2) whether the statute’s general structure and scheme indicate where the burden should fall; (3) whether a plaintiff will be unfairly surprised by the assertion of a defense; (4) whether a party is in particular control of information necessary to prove or disprove the defense; and (5) other policy or fairness considerations.” It addressed and resolved each of these elements in favor of the plaintiff concluding: with respect to (1) and (2), because the offense and exception were in two separate sections of the statute, the exception likely was an affirmative defense and not part of the claim itself; with respect to (3) it would create an unfair surprise to a plaintiff if a defendant were to rely upon such a defense at trial without asserting it as an affirmative defense in the answer, since plaintiff would not necessarily direct her discovery toward such a defense unless pled separately; with respect to (4) the defendant here was the party in control of the information necessary to prove or disprove the defense; and with respect to (5) because the statute is remedial in nature, enacted to avoid unnecessary inconvenience to third parties and embarrassment of debtors for no legitimate purpose, placing the burden upon the plaintiff to prove the lack of the exception would be inconsistent with its remedial purposes.

Accordingly, the court concluded: “we started our analysis with the default rule that a plaintiff bears the burden of proving her claim, but we end with the canon that, absent compelling reasons to the contrary, a party seeking to shelter in an exception to a statute has the burden of proving it. We find no such compelling reason in this case.”