Powers, et al v. Credit Management Services, Inc. et al

Filing 106

ORDER granting the plaintiffs' 96 Motion to Compel and to supplement the Record. The defendants have until April 3, 2013 to show cause why sanctions, including the award of attorney's fees under Fed. R. Civ. P. 37(a)(5)(A) should not be imposed. Pursuant to NECivR 72.2 any objection to this Order shall be filed with the Clerk of the Court within fourteen (14) days after being served with a copy of this Order. Failure to timely object may constitute a waiver of any objection. Ordered by Magistrate Judge Thomas D. Thalken. (MKR)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEBRASKA
LAURA POWERS, NICHOLE PALMER,
and JASON PALMER, on behalf of
themselves and all others similarly
situated,
Plaintiffs,

8:11CV436
ORDER

vs.
CREDIT MANAGEMENT SERVICES,
INC., DANA K. FRIES, JESSICA L. V.
PISKORSKI, BRADY W. KEITH,
MICHAEL J. MORLEDGE, and
TESSA HERMANSON,
Defendants.
This matter is before the court on the plaintiffs’ Motion to Compel and to
Supplement the Record (Filing No. 96). The plaintiffs filed indices of evidence (Filing
Nos. 97 and 98) in support of the motion. The defendants filed a brief (Filing No. 99)
and an index of evidence (Filing No. 100) in opposition to motion. The plaintiffs did not
file a reply.
BACKGROUND
The plaintiffs, Laura Powers (Powers), Nichole Palmer, and Jason Palmer
(Palmers), received collection complaints and discovery requests from the defendant,
Credit Management Services, Inc. (CMS). Dana K. Fries (Fries), Tessa Hermanson
(Hermanson), Jessica L. V. Piskorski (Piskorski), and Brady W. Keith (Keith) are inhouse attorneys for CMS. See Filing No. 17 - Amended Complaint ¶ 6. Micheal J.
Morledge (Morledge) is the owner of CMS. Id. ¶ 7. Powers filed the instant action on
December 18, 2011. See Filing No. 1 - Complaint. On January 23, 2012, the plaintiffs
filed an amended complaint alleging violations of the Fair Debt Collection Practices Act,
15 U.S.C. § 1692, et seq. (FDCPA) and Nebraska’s Consumer Protection Act, Neb.
Rev. Stat. §§ 59-1601 to 59-1623 (NCPA) for the defendants’ routine practices of filing
collection complaints which represent that the defendants sought collection of the
alleged debt more than ninety days prior to filing the state court action when in fact the
defendants did not seek collection, sending standard discovery requests which mislead

and deceive consumers, and attempting to collect attorney fees or interest without
meeting the statutory requirements. See Filing No. 17 - Amended Complaint. The
plaintiffs seek actual and statutory damages for the plaintiffs and each putative class
member, costs, reasonable attorneys’ fees, and declaratory and injunctive relief. Id. at
14-15.
During discovery, the plaintiffs requested the defendants’ net-worth information.
See Filing No. 96 - Motion p. 1-2. The defendants objected because the plaintiffs’
request for net-worth information “seeks confidential information . . . [and] in any event,
unless there is class certification [the defendants’ net-worth information] is premature.”
Id. at 2. However, even though the defendants objected to the plaintiffs’ request for networth information, the defendants designated Sherri Bergholz (Bergholz) to testify as to
CMS’s net worth. Id. at 2-3. At Bergholz’s deposition, Bergholz testified as to CMS’s
net-worth only according to information an accountant provided Bergholz. Id. at 3-4.
Bergholz testified she did not know CMS’s assets or liabilities. Id. Subsequently, in
opposition to the plaintiffs’ motion for class certification, the defendants provided David
J. Faimon’s (Faimon) affidavit and report summarizing the defendants’ net-worth. See
Filing Nos. 89-6 - Affidavit; 91 - Net-worth Report.

The defendants also provided

supplemental responses to the plaintiffs’ discovery requests.

See Filing No. 98-3 -

Supplemental Responses. The defendants’ supplemental responses to the plaintiffs’
requests for admission, production of documents, and interrogatories generally referred
to Faimon’s affidavit and report. Id.

ANALYSIS
“Parties may obtain discovery regarding any nonprivileged matter that is relevant
to any party’s claim or defense . . . [or] appears reasonably calculated to lead to the
discovery of admissible evidence.” Fed. R. Civ. P. 26(b)(1). “Broad discovery is an
important tool for the litigant, and so ‘[r]elevant information need not be admissible at
the trial if the discovery appears reasonably calculated to lead to the discovery of
admissible evidence.’” WWP, Inc. v. Wounded Warriors Family Support, Inc., 628
F.3d 1032, 1039 (8th Cir. 2011) (alteration in original) (quoting Fed. R. Civ. P.
26(b)(1)). Relevant means “any matter that bears on, or that reasonably could lead to
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other matter that could bear on, any issue that is or may be in the case.” Oppenheimer
Fund, Inc. v. Sanders, 437 U.S. 340, 351 (1978). Rule 26 “vests the district court with
discretion to limit discovery.” Roberts v. Shawnee Mission Ford, Inc., 352 F.3d 358,
361 (8th Cir. 2003).
The plaintiffs argue the defendants systematically stonewalled the plaintiffs in
obtaining any net-worth information; however, at the last minute, after the plaintiffs filed
the motion for class certification, the defendants filed Faimon’s unverified affidavit and
report summarizing the defendants’ net-worth. See Filing No. 96 - Motion p. 4. The
plaintiffs argue Faimon was not disclosed as an individual with relevant information in
the defendants Rule 26 disclosures. Id. at 1. The plaintiffs also argue the defendants’
Rule 30(b)(6) witness, Bergholz, who was designated to testify as to CMS’s net-worth,
did not have knowledge of its net-worth. Id. at 2-4. The plaintiffs request the court to
order the defendants to: 1) fully supplement the plaintiffs’ discovery requests regarding
the defendants’ net-worth, 2) produce a Rule 30(b)(6) witness to testify as to CMS’s networth, 3) compel each defendant to answer deposition questions pertaining to networth, and 4) allow the plaintiffs to supplement the record as to their challenge to the
defendants’ net-worth. Id. at 1. The plaintiffs request the defendants bear the costs of
the additional discovery and depositions. Id.
The defendants argue the plaintiffs’ motion should be denied for two reasons.
See Filing No. 99 - Response p. 1. First, the defendants argue the plaintiffs have not
attempted to meet and confer pursuant to NECivR 7.1(i) to resolve the issue. Id. at 1-4.
Second, the defendants argue discovery of the defendants’ net-worth is premature while
the issue of class certification is pending. Id. at 1. Additionally, the defendants argue
the plaintiffs’ motion is moot because the defendants provided basic information
regarding the defendants’ net-worth appropriate for this stage of the litigation. Id. at 4.
The defendants also argue a particular individual’s annual salary or CMS’s revenue is
not part of a net-worth calculation and therefore irrelevant.

Id. at 5.

Lastly, the

defendants argue it would be inefficient and unnecessary for the plaintiffs to conduct
additional depositions or more detailed discovery regarding Morledge’s and Keith’s networth prior to a ruling on their pending summary judgment motion. Id. at 5-6.

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1.

Meet and Confer
The Local Rules state:
To curtail undue delay in the administration of justice, this
court only considers a discovery motion in which the moving
party, in the written motion, shows that after personal
consultation with opposing parties and sincere attempts to
resolve differences, the parties cannot reach an accord.
This showing must also state the date, time, and place of the
communications and the names of all participating persons.
“Personal
consultation”
means
person-to-person
conversation, either in person or on the telephone. An
exchange of letters, faxes, voice mail messages, or emails is
also personal consultation for purposes of this rule upon a
showing that person-to-person conversation was attempted
by the moving party and thwarted by the nonmoving party.

See NECivR 7.1(i). The Federal Rules of Civil Procedure also require good faith efforts
by the moving party to resolve the dispute, prior to filing a motion to compel or for
protective order, the absence of which precludes the issuance of an award of expenses.
See Fed. R. Civ. P. 37(a)(5).
In the plaintiffs’ first set of discovery requests, the plaintiffs requested the
defendants’ net-worth information. See Filing No. 96 - Motion p. 1-3. The defendants
refused to produce net-worth information on the bases the information is confidential
and premature. Id. Additionally, during depositions, the defendants objected to the
plaintiffs’ questions seeking net-worth information. See Filing Nos. 97-3 Hermanson
Depo. p. 37-38; 97-6 - Fries Depo. p. 56-57; 97-7 - Keith Depo. p. 17; 97-10 - Morledge
Depo. p. 60-61.

After the defendants produced Faimon’s affidavit and report in

opposition to the plaintiffs’ motion for class certification, on February 18, 2013, the
plaintiffs wrote a letter and requested the defendants to supplement their discovery
responses regarding the defendants’ net-worth. See Filing No. 96 - Motion p. 2. The
plaintiffs received Faimon’s affidavit and report but did not receive full supplemental
responses to the plaintiffs’ discovery requests. Id. Although the plaintiffs do not detail
their discussions with the defendants, the plaintiffs attempted to obtain the defendants’
net-worth information and the defendants objected on numerous occasions.

The

defendants argue the plaintiffs have not met and conferred to discuss disclosing the
disputed discovery; however, it appears the defendants would not produce the
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discovery until the motions for class certification and summary judgment are resolved,
as re-stated in the defendants’ brief in opposition to this motion. Thus, the plaintiffs filed
the instant motion. NECivR 7.1(i) does not require the plaintiffs to constantly request
the disputed discovery only to be rebuffed with the response the discovery is
confidential and premature. Under the circumstances, NECivR 7.1(i) does not require
dismissal of the plaintiffs’ motion.

2.

Net-Worth Information
The defendants initially opposed production of the defendants’ net-worth

information on the bases that the information is premature while class certification is
pending and confidential.

Merely because documents may contain confidential

information does not foreclose disclosure, confidentiality does not equate to privilege.
See Fed. Open Mkt. Comm. v. Merrill, 443 U.S. 340, 362 (1979).

“Although

information is not shielded from discovery on the sole basis that the information is
confidential, a party may request the court enter a protective order pursuant to Fed. R.
Civ. P. 26(c) as a means to protect such confidential information.” Horizon Holdings,
LLC v. Genmar Holdings, Inc., 209 F.R.D. 208, 213-14 (D. Kan. 2002). Discovery in
this case is already subject to a protective order. See Filing No. 58 - Protective Order.
The parties are prevented from disclosing confidential documents. Therefore, the
defendants’ objection the information is confidential is not a basis to oppose disclosing
the defendants’ net-worth information to the plaintiffs.
With regard to the defendants’ response the information is premature,
presumably the defendants’ object to production based on relevance only due to timing.
However, the defendants made no motion for a protective order as to timing. See Fed.
R. Civ. P. 26(c). The defendants raised the issue of their net-worth as part of their
opposition to the plaintiffs’ motion for class certification and thereby placed the
defendants’ net-worth in issue at this time. The defendants’ production of the net-worth
information waived any objection the information is irrelevant. The defendants’ networth is relevant to the class action. Therefore, the plaintiffs shall have an opportunity
to review and challenge the defendants’ net-worth information.

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The defendants provided supplemental responses to the plaintiffs’ discovery
requests.

The supplemental responses referenced Faimon’s affidavit and report.

Although the defendants produced Faimon’s net-worth conclusions, the affidavit and
report provide no supporting documentation to verify the net-worth calculations. Thus,
the defendants are ordered to supplement the defendants’ responses with relevant
documentation used to calculate the defendants’ net worth. If further depositions are
required to discover net-worth information, the individual defendants shall be made
available for depositions. Additionally, CMS shall designate a Rule 30(b)(6) witness
with knowledge of CMS’s net-worth, the calculations used to determine CMS’s networth, and the underlying data.

3.

Costs
The plaintiffs request the defendants bear the costs of the additional discovery

and depositions. See Filing No. 96 - Motion p. 1. The Federal Rules of Civil Procedure
provide:
If the motion is granted--or if the disclosure or requested
discovery is provided after the motion was filed--the court
must, after giving an opportunity to be heard, require the
party or deponent whose conduct necessitated the motion,
the party or attorney advising that conduct, or both to pay the
movant’s reasonable expenses incurred in making the
motion, including attorney’s fees.
Fed. R. Civ. P. 37(a)(5)(A).
The defendants continuously refused to produce the defendants’ net-worth
information, without apparent legally supported objections. However, after refusing the
plaintiffs’ discovery requests, the defendants submitted an affidavit and report
summarizing the defendants’ net-worth in opposition to the plaintiffs’ motion for class
certification. The plaintiffs had no opportunity to review or challenge the defendants’
net-worth information. The court shall, after the defendants have a chance to respond,
grant the plaintiffs’ reasonable expenses for filing the motion to compel and costs
associated with additional discovery unless the defendants show substantial and legal
justification for refusing to produce the defendants’ net-worth information but ultimately
relying on such information to oppose the plaintiffs’ motion for class certification.
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IT IS ORDERED:
1.

The plaintiffs’ Motion to Compel and to Supplement the Record (Filing No.

96) is granted.
2.

The defendants have until April 3, 2013, to show cause why sanctions,

including the award of attorney’s fees under Fed. R. Civ. P. 37(a)(5)(A), should not be
imposed.

ADMONITION
Pursuant to NECivR 72.2 any objection to this Order shall be filed with the Clerk
of the Court within fourteen (14) days after being served with a copy of this Order.
Failure to timely object may constitute a waiver of any objection. The brief in support of
any objection shall be filed at the time of filing such objection. Failure to file a brief in
support of any objection may be deemed an abandonment of the objection.

Dated this 20th day of March, 2013.
BY THE COURT:
s/ Thomas D. Thalken
United States Magistrate Judge

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