FEDERAL TRADE COMMISSION v. HOPE NOW MODIFICATIONS, LLC et al

Filing 144

MEMORANDUM OPINION AND ORDER: ORDERED that Defts' 128 Motion to Compel Answer to Interrogatory and Production of Documents is DENIED. Signed by Magistrate Judge Joel Schneider on 7/5/2011. (drw, )

[Doc. No. 128]
THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
CAMDEN VICINAGE
:
FEDERAL TRADE COMMISSION,
:
:
Plaintiff, :
:
v.
:
:
HOPE NOW MODIFICATIONS, LLC, :
et al,
:
:
Defendants. :
:

Civil No. 09-1204 (JBS/JS)

MEMORANDUM OPINION AND ORDER
This matter is before the Court on the “Motion to Compel
Answer to Interrogatory and Production of Documents” [Doc. No. 128]
filed by defendants Kwasnik, Rodio, Kanowitz & Buckley, P.C., and
Michael Kwasnik (hereinafter “defendants”). The Court received the
Federal Trade

Commission’s

(hereinafter

“plaintiff”

or

“FTC”)

opposition to defendants’ motion [Doc. No. 133], and defendants’
reply [Doc. No. 135], and held oral argument.

For the following

reasons, defendants’ motion is DENIED.
I. Background
The Honorable Jerome B. Simandle, U.S.D.J., set forth the
pertinent factual and procedural background of the case in his
Opinion dated March 10, 2011 [Doc. No. 122]:
This case was initially brought on March 17,
2009 by the FTC against a different set of
1

defendants, who were affiliated with a
mortgage modification corporation titled Hope
Now
Modifications,
LLC
(“Hope
Now
Defendants”). [Docket Item 1.] The FTC
subsequently submitted an amended complaint,
also
naming
as
defendants
the
Kwasnik
Defendants presently at issue. [Docket Item
60.]
On July 12, 2010, the Hope Now
Defendants entered into a settlement agreement
with the FTC and were subsequently terminated
from this action. [Docket Item 104.] The FTC
has alleged that the Kwasnik Defendants
engaged in unfair and deceptive practices in
violation of Section 5(a) of the Federal Trade
Commission Act (“FTC Act”), 15 U.S.C. § 45(a),
and
the
regulations
implementing
the
Telemarketing
and
Consumer
Fraud
Abuse
Prevention Act, 16 C.F.R. §§ 310.1-310.9.
Id. at 2.

Discovery has proceeded in the case, and defendants

filed the present motion seeking to compel two sets of documents:
(1)

FTC

staff

memoranda

purportedly

containing

a

crystalized

description of the factual basis for plaintiff’s claims against
defendants, and (2) notes made by FTC personnel during their
interview of Salvatore Puglia which took place on June 15, 2009.1
Defendants argue they are only seeking the factual information
contained in these documents, and have asked the Court to conduct
an in camera review of the documents for the purpose of redacting
any non-factual information.

In opposition to defendants’ motion,

plaintiff argues the FTC staff memoranda is covered by the work
product doctrine and the deliberative process privilege, and the

1

Puglia was interviewed after plaintiff’s complaint was
filed but before defendants were joined as additional named
defendants.
2

notes of the Puglia interview are covered by the work product
doctrine.2

The Court will address each of defendants’ requests in

turn.
II. DISCUSSION
A. FTC Staff Memoranda
Defendants

argue

the

FTC

“should

be

compelled

to

[sic]

[produce] the ‘Memo from staff to the Commission Recommending the
Filing of Amended Complaint,’” because, “[i]n addition to the facts
contained in the Staff Memo, the Staff Memo should serve to narrow
the actual issues that have been buried in the piles upon piles of
documents and witnesses that have been thrown at the Kwasnik
defendants in the disclosures, responses to document requests, and
answers to interrogatories.”3

Brief at 16-17.

Defendants claim

that neither the deliberative process privilege nor the work
product doctrine should shield production of the memoranda, as
defendants’ substantial need for the information contained in the
memoranda outweighs plaintiff’s interest in protection of same.
Id.

Plaintiff disputes this contention, and argues, “[t]he
2

While plaintiff asserts other grounds in opposition to
defendants’ motion, the Court will address the grounds it
considers most salient (here, the work product doctrine and the
deliberative process privilege).
3

Defendants contend that they have a “substantial need” for
the FTC memoranda because “the FTC has provided close to 20,000
pages of documents as part of its document disclosure. Through
its Rule 26 disclosures and answers to interrogatories, the FTC
has identified hundreds upon hundreds of witnesses.” Brief at
16.
3

Recommendation Memoranda fall squarely within both the deliberative
process and attorney work product privileges and the Kwasnik
Defendants

have

failed

to

demonstrate

any

reason

why

such

Opposition at 6.4

privileges should be cast aside.”

The Court concurs with plaintiff’s assessment. Documents such
as the FTC staff memoranda at issue here have been found to be
covered by the work product doctrine.
said...‘(w)hatever

the

outer

“As the Supreme Court has

boundaries

of

the

attorney’s

work-product rule are, the rule clearly applies to memoranda
prepared by an attorney in contemplation of litigation which sets
forth

the

attorney’s

theory

of

the

case

and

his

litigation

strategy.’” Bristol-Meyers Co. v. F.T.C., 598 F.2d 18, 28-29 (D.C.
Cir. 1978) (citing NLRB v. Sears, Roebuck & Co., 421 U.S. 132, 154
(1975)).
Further,

the

deliberative

process

privilege

protects

communications that are part of the decision-making process of a
governmental agency.

Sears, Roebuck, 421 U.S. at 150-152.

“[A]

party’s assertion of the deliberative process privilege requires a
two-step review in the district court.

First, it must decide

whether the communications are in fact privileged.
court must balance the parties’ interests.”

4

Second, the

Redland Soccer Club,

Plaintiff also asserts, “by forcing disclosure of the
Recommendation Memoranda, [defendants] are asking the Court to
direct the FTC to do the work for them of determining which
documents and witnesses are important for their defense.” Id. at
17.
4

Inc. v. Department of Army of U.S., 55 F.3d 827, 854 (3d Cir.
1995).

The Court finds that the affidavit of plaintiff’s General

Counsel, Willard K. Tom, establishes that the communications at
issue are privileged.

After listing the documents that comprise

the requested memoranda, Mr. Tom indicates the following:
The documents reflect the thoughts, review,
analysis, recommendations, and communications
by and among staff at all levels of the FTC
relating to decisions to amend a complaint or
to accept a settlement.
They contain frank
discussions and comments by FTC personnel
about the legal and policy issues that the FTC
has a statutorily-imposed mandate to address
and were used by FTC staff attorneys and
managers in formulating their own proposals
and recommendations.
The memoranda reflect
the actual formal advice and recommendations
to the Commission by the FTC staff members who
are most directly responsible for developing
Commission
policies,
carrying
out
investigations of possible law violations, and
litigating enforcement actions.
Declaration of Willard K. Tom ¶ 14.

In balancing the parties’

interests,

the

the

“[m]aintaining

Court
the

finds

that

confidentiality

of

FTC’s

the

interest

staff’s

in

thoughts,

analyses, recommendations, and advice to senior management and to
the Commission” (Id. ¶ 15) substantially outweighs defendants’
interest

in

considered

obtaining
by

the

FTC

against...defendants.”

“a
in

good

source

determining

Brief at 16.

of
to

the

central

bring

the

facts
claims

This is especially true in

view of the fact that defendants have and will in the future
conduct substantial discovery, including numerous depositions and

5

document productions.
Further,

substantial

precedent

dictates

that

FTC

staff

memoranda to senior agency officials with recommendations and legal
interpretations are covered by the deliberative process privilege
and thus exempt from production.

See e.g., U.S. v. Farley, 11 F.3d

1385, 1389 (7th Cir. 1993) (citing United States v. Nixon, 418 U.S.
683, 705 (1974)); Sears, Roebuck, 421 U.S. at 150-151) (“The
deliberative

process

extends

to

these

pre-decisional

communications-if communications such as these were exposed the
candor of government staff would be tempered ‘with a concern for
appearances to the detriment of the decisionmaking process.’”));
Novo Laboratories, Inc. v. F.T.C.,

No. 80-1989, 1981 WL 2214, at

*4 (D.D.C. July 21, 1981).
The Court recognizes that the deliberative process privilege
is not absolute.

Redland Soccer Club, 55 F.3d at 854.

The

privilege does not protect factual information, even if such
information is contained in an otherwise protectable document, as
long as the information is severable.

Id.

See also U.S. S.E.C. v.

Sentinel Mgmt. Grp., Inc., No. 07 C 4684, 2010 WL 4977220, at *3
(N.D. Ill. Dec. 2, 2010) (internal citations omitted) (“Discussion
of objective facts, as opposed to opinions and recommendations,
generally

is

privilege.”).
not

exempt

not

protected

by

the

deliberative

process

However, “[w]hile factual information is generally

from

disclosure,

in

6

certain

circumstances,

purely

factual material is presented in a manner such that its release in
itself would compromise the deliberative process.”

Novo Labs.,

supra, 1981 WL 2214, at *4 (citing Mead Data Central Inc. v. U. S.
Dep’t of Air Force, 566 F. 2d 242, 256 (D. C. Cir. 1977); Montrose
Chem. Corp. v. Train, 491 F. 2d 63, 68 (D. C. Cir. 1974)). See also
Sentinel Mgmt. Grp., Inc., supra, 2010 WL 4977220, at *3 (“[P]urely
factual information must be segregated from deliberative material
and

produced

privileged

unless

material

it

is

inextricably

or

would

itself

intertwined

reveal

the

with

the

deliberative

process.”).
The FTC staff memoranda at issue here present an instance
where the factual information they contain is so intertwined with
the authors’ thought processes that parsing the information becomes
impracticable.

See Declaration of Willard K. Tom ¶ 14.

As such,

the Court finds the memoranda to be covered by the deliberative
process privilege as well as the work product doctrine, and thus
exempt from compelled disclosure.
B. Investigator Notes of Puglia Interview
Defendants argue the FTC should be ordered to describe in
detail what Puglia said during his interview on June 15, 2009, and
the FTC should also be compelled to produce its investigator’s
notes of the interview.5

See Brief at 4-5.

5

Defendants argue that

Although it is not perfectly clear, the Court assumes only
one set of investigator notes exists. If other sets of
investigator notes from the June 15, 2009 interview of Puglia
7

neither the attorney-work product doctrine nor the deliberative
process privilege justifies withholding the investigator’s notes.
Id. at 6-13. Plaintiff counters that the information regarding the
Puglia

interview

doctrine.

is

protected

by

the

attorney

work

product

See Opposition at 18-23.

Pursuant to Fed. R. Civ. P. 26(b)(3), attorney work product is
only discoverable if the party seeking the disclosure demonstrates
“substantial need of the materials ... and that the party is unable
without undue hardship to obtain the substantial equivalent of the
materials by other means.” Even when work product is discoverable,
the

Court

must

“protect

impressions,

conclusions,

attorney

other

or

litigation.”

against

disclosure

opinions,

representative

of

or

legal

a

party

of

the

theories

mental
of

concerning

an
the

Id.

The Court finds that Puglia’s interview notes are covered by
the

work

Sentinel

product
Mgmt.

doctrine

Grp.,

and

Inc.,

entitled

supra,

2010

to
WL

protection.6
4977220,

See
at

*7

(“Materials prepared by SEC attorneys in anticipation of litigation

exist, the same ruling would apply to them.
6

Although plaintiff and defendants discuss other arguments
in their briefs, the Court will only address the grounds it deems
salient to resolution of the present dispute. Regarding
defendants’ request for the investigator’s notes from the Puglia
interview, the Court finds the work product doctrine provides an
adequate basis on which to deny defendants’ motion, obviating the
need for discussion of the deliberative process and law
enforcement privileges.
8

that

disclose

what

they

learned

during

witness

interviews

undoubtedly constitute attorney work product.”). The Third Circuit
has delineated the “several unique and well-documented problems”
faced by a Court in considering the discoverability of memoranda
summarizing oral interviews.

In re Grand Jury Investigation, 599

F.2d 1224, 1231 (3d Cir. 1979).

In In re Grand Jury Investigation,

the

“[m]emoranda

Third

Circuit

noted,

summarizing

oral

interviews...may indirectly reveal the attorney’s mental processes,
his opinion work product....[S]pecial considerations...must shape
any ruling on the discoverability of interview memoranda....[S]uch
documents will be discoverable only in a ‘rare situation.’”

Id.

Further, “[a]s the work product sought here is based on oral
statements from witnesses, a far stronger showing is required than
the

‘substantial

need’

and

‘without

undue

hardship’

standard

applicable to discovery of work-product protected documents and
other tangible things.”

In re Sealed Case, 856 F.2d 268, 273 (D.C.

Cir. 1988).
As with defendants’ request for compelled disclosure of the
FTC staff memoranda, the Court does not find that defendants have
made

an

adequate

investigator’s

notes

showing
from

of
the

“substantial
Puglia

need”

interview,

considering the strong showing that is required.

for

the

especially

Defendants argue

they have “a substantial need for the materials to prepare their
case and these defendants cannot find out prior to the deposition

9

of Salvatore Puglia what was said by any other means.”
8-9.

Brief at

Defendants’ argument is conclusory and they have not made a

sufficient

showing

of

substantial

need.

At

oral

argument,

plaintiff indicated that it cannot reveal facts from the interview
without also revealing work product.

The FTC further asserted,

“[t]o the extent Mr. Puglia has sent [the FTC] e-mail and he has
sent [the FTC] e-mail, those have all been turned over.

Anything

that’s unfiltered by [the FTC], has been turned over. [The FTC]
turned

over

21,000

documents

to

[defendants]

and

[the

FTC]

responded fully to all contention interrogatories.”

Transcript of

May 16, 2011 Oral Argument, N.T. 25:23 to 26:6.

In addition,

Puglia will be deposed, so defendants will learn his version of the
relevant facts.7

See, e.g., Frieman v. USAir Group, Inc., Civ. A.

No. 93-3142, 1994 WL 675221, at *1 (E.D.Pa. Nov. 23, 1994) (“A
party can obtain the substantial equivalent of investigatory notes
with

interrogatories

investigation

or

by

that

elicit

deposing

7

information

witnesses

about

interviewed

by

the
an

Anticipating plaintiff’s opposition to their Motion,
defendants point out, “[t]he FTC will argue that the Kwasnik
defendants can obtain this information from Mr. Puglia at his
deposition. That is easy for the FTC to say, they already know
what Mr. Puglia told them. The factual information of what Mr.
Puglia told the FTC should be available through answers to
interrogatories, however...the FTC refuses to disclose through
answers to interrogatories exactly what Mr. Puglia told them.
Thus, the information is not available through other means.”
Brief at 12-13. Defendants’ argument lacks merit. The fact that
plaintiff may have pre-existing knowledge of what a witness may
say at his deposition is not unusual and does not serve as a
basis for ordering production of an attorney’s work product.
10

investigator.”).
The present case is distinguishable from a situation where a
witness

is

difficulty.

no

longer

available

or

can

be

reached

only

with

See Hickman v. Taylor, 329 U.S. 495, 512 (1947).

This

case is also distinguishable from circumstances where a witness has
invoked his Fifth Amendment right against self-incrimination as a
basis for refusing to answer questions at a deposition. See, e.g.,
Sentinel Mgmt. Grp., Inc., supra, 2010 WL 4977220, at *9 (citing
Hickman, 329 U.S. at 508) (noting that a situation where a party is
“unable to interview or depose...witnesses because a parallel grand
jury proceeding has made witnesses unwilling to provide interviews
and has caused witnesses to invoke the Fifth Amendment at their
depositions

rather

than

answer

questions...[is]

a

far

cry

from...where a party served an interrogatory seeking ‘oral and
written statements of witnesses whose identity is well known and
whose availability to petitioner appears unimpaired.’”).

Because

defendants have not demonstrated an inability to obtain Puglia’s
deposition testimony and version of the relevant events, they have
not demonstrated a substantial need for compelled disclosure of the
investigator’s notes.
The fact that the notes at issue here are those of an
investigator and not an attorney is of no moment.
dealing

with

attorneys’

investigators

shows

that

“The case law
they

should

generally be afforded the same protection as the attorneys for whom

11

they work.”
The

Alexander v. F.B.I., 192 F.R.D. 12, 18 (D.D.C. 2000).

investigator’s

affidavit

submitted

to

the

Court

provides

additional support for finding the notes to be protected by the
work product doctrine.

As the investigator declares, “[t]he notes

consist of [his] mental impressions, conclusions, and summaries of
some of what was said by the various persons at the meeting.

The

notes reflect [his] thoughts of the conversation as it related to
the FTC’s investigative and legal theories of the case. Nothing in
[his] notes consists of verbatim or near verbatim statements of
what was said by anyone at the meeting.”
Hernacki ¶ 5.

Declaration of Andrew

If the notes were authored by an attorney in the

case, it is likely defendants would not challenge their nonproduction.

Under

the

circumstances

present

here,

the

investigator’s notes are afforded the same protection.
Defendants urge the Court to sever the factual information
contained in the notes from what would be considered protected work
product.
in

the

See Brief at 17 (“The Kwasnik defendants are interested
facts

impressions
providing

contained

or

these

opinions

in

these

documents,

of

any

investigator

documents,

the

privileged

documents can be redacted.”).

not

the

mental

or counsel.

portions

of

In
those

This request is unavailing, as “the

deliberative process privilege, not the work-product privilege, is
the source of the fact/deliberative process distinction, and ...
factual elements can ‘seldom’ be segregated from attorney work

12

product.”

Judicial Watch, Inc. v. Department of Justice, 432 F.3d

366, 372 (D.C. Cir. 2005) (quoting Martin v. Office of Special
Counsel, 819 F.2d 1181, 1186 (D.C. Cir. 1987)).

Moreover, “even

where the attorney’s summary of a witness’s oral statements appears
to

be

entirely

factual,

the

attorney’s

necessarily disclosed to some degree.”

mental

processes

are

Sentinel Mgmt. Grp., Inc.,

supra, 2010 WL 4977220, at *8 (citing Upjohn v. United States, 449
U.S. 383, 399 (1981)).
Accordingly, the Court finds the investigator’s notes of
Puglia’s interview are protected by the work product doctrine,
thereby exempting them from disclosure. Just as the investigator’s
notes are shielded from compelled disclosure, plaintiff is also
shielded from answering defendants’ interrogatory, which requires
plaintiff to rely on its notes from the Puglia interview.

As the

Supreme Court noted in Hickman,
[F]orcing an attorney to repeat or write out
all that witnesses have told him and to
deliver the account to his adversary gives
rise to grave dangers of inaccuracy and
untrustworthiness. No legitimate purpose is
served by such production.
The practice
forces the attorney to testify as to what he
remembers or what he saw fit to write down
regarding witnesses’ remarks. Such testimony
could not qualify as evidence; and to use it
for impeachment or corroborative purposes
would make the attorney much less an officer
of the court and much more an ordinary
witness.
The standards of the profession
would thereby suffer.
329 U.S. at 512-13.

In addition, the desire to use the interview

13

notes for impeachment purposes does not constitute “substantial
need.”

See In re Grand Jury, 599 F.2d at 1233 (“We do not

believe...that the desire to impeach or corroborate a witness’s
testimony, by itself, would ever overcome the protection afforded
the interview memoranda.”).
C. In Camera Review
Finally, the Court declines defendants’ entreaty to conduct an
in camera review of the requested documents.

See Brief at 17.

A

court should not conduct in camera reviews solely because a party
begs it to do so.

United States v. Zolin, 491 U.S. 554, 571-72

(1989). “Before engaging in in camera review to determine the
applicability of [a privilege], the [Court] should require a
showing of a factual basis adequate to support a good faith belief
by a reasonable person that in camera review of the materials may
reveal

evidence

applies.”

to

establish

the

claim

that

the

[privilege]

Graco, Inc. v. PMC Global, Inc., No. 08-1304 (FLW/DEA),

2011 WL 666048, at *19 (D.N.J. Feb 14, 2011)(citing Haines v.
Liggett Group Inc., 975 F.2d 81, 96 (3d Cir. 1992); Zolin, 491 U.S.
at 572)).

See also Nishika, Ltd. v. Fuji Photo Film Co., Ltd., 181

F.R.D. 465, 467 (D.Nev. 1998) (citing Zolin, supra)(“There must
first

be

a

legitimate
asserted.”).

sufficient
issue

as

to

evidentiary
the

showing

application

which
of

the

creates

a

privilege

“Once such a showing is made, ‘the decision whether

to engage in in camera review rests in the sounds discretion of the

14

district court.’” Graco, Inc., supra (internal citations omitted).
For the reasons already discussed, the Court finds defendants have
not made an adequate showing that in camera review is necessary,
and the case law provides adequate support for the Court’s denial
of defendants’ Motion.
V. CONCLUSION
Accordingly, for all the foregoing reasons, it is on this 5th
day of July 2011 hereby ORDERED that Defendants’ “Motion to Compel
Answer to Interrogatory and Production of Documents” [Doc. No. 128]
is DENIED.
s/Joel Schneider
JOEL SCHNEIDER
United States Magistrate Judge

15