Michelo et al v. National Collegiate Student Loan Trust 2007-2 et al

Filing 261

ORDER IMPOSING DISCOVERY SANCTIONS AND DENYING STAY APPLICATION: TSI's last-minute application for a stay of this Court's October 23 and December 30 Orders is DENIED. It is hereby ORDERED that TSI shall producethe CFPB documents within the next ten days, no later than March 15, 2021. Should it fail to do so, monetary sanctions will be assessed pursuant to Fed. R. Civ. P. 37(b)(2)(A) beginning on March 16, 2021, at the rate of $2,000 per day, payable to the Clerk of Court. It i s further ORDERED that the deadline for completing deposition discovery (with the possible exception of the Affiant X deposition, which will be the subject of a separate motion, see Dkt. No. 259) is EXTENDED to April 19, 2021. All relief not expres sly granted herein is DENIED. The foregoing constitutes a written order stating the decision of the Court pursuant to Fed. R. Civ. P. 72(a). (As further set forth in this Order.) ( Deposition due by 4/19/2021.) (Signed by Magistrate Judge Barbara C. Moses on 3/5/2021) Filed In Associated Cases: 1:18-cv-01781-PGG-BCM, 1:18-cv-07692-PGG-BCM (cf) Modified on 3/5/2021 (cf).

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
MUTINTA MICHELO, individually and on
behalf of all others similarly situated, et al.,
Plaintiffs,

3/5/21
18-CV-1781 (PGG) (BCM)

-againstNATIONAL COLLEGIATE STUDENT
LOAN TRUST 2007-2, et al.,
Defendants.
CHRISTINA BIFULCO, individually and on
behalf of all others similarly situated, et al.,

18-CV-7692 (PGG) (BCM)

Plaintiffs,
-againstNATIONAL COLLEGIATE STUDENT
LOAN TRUST 2004-2, et al.,

ORDER IMPOSING DISCOVERY
SANCTIONS AND DENYING STAY
APPLICATION

Defendants.
BARBARA MOSES, United States Magistrate Judge.
By order dated February 19, 2021 (OSC) (Dkt. No. 256), entered in both of these
consolidated cases, 1 I directed defendant TSI to show cause why it should not be sanctioned for
its failure to comply with two prior discovery orders issued by the undersigned Magistrate Judge:
(i) an order dated October 23, 2020 (October 23 Order) (Dkt. No. 241), which required TSI to
produce certain documents previously produced to the Consumer Financial Protection Bureau
(CFPB), in compliance with defendants' Request No. 19, no later than November 6, 2020; and
(ii) a later order, dated December 30, 2020 (December 30 Order) (Dkt. No. 253), which, in
response to the parties' joint request, extended the deadline for producing documents – including
the CFPB documents – to February 5, 2021, and extended the deadline for taking fact

1

All citations to docket entries refer to the docket in Michelo, Case No. 18-CV-1781.

depositions to February 22, 2021. Although TSI filed objections to the October 23 Order,
pursuant to Fed. R. Civ. P. 72(a) (Dkt. No. 243), it made no effort to seek a stay of that order
from any judge. TSI's objections remain pending before the Hon. Paul G. Gardephe, United
States District Judge. TSI's continuing failure to produce the CFPB documents came to light on
February 18, 2021, when the parties jointly requested another extension of the deposition
deadline, in the process advising the Court that TSI would have "substantial documentary
production to complete once Judge Gardephe rules on TSI's objections to Your Honor's October
23, 2020 order that documents from the CFPB investigation be produced." (Dkt. No. 255.)
In its written response to the OSC, dated February 26, 2021 (TSI Resp.) (Dkt. No. 258),
TSI states that it believed that Judge Gardephe effectively stayed its obligation to produce the
CFPB documents on December 4, 2020, when he issued an order (December 4 Order) (Dkt. No.
248) denying plaintiffs' December 1, 2020 request (Dkt. No. 247) that he overrule TSI's
objections without waiting for a reply brief and "order TSI [to] produce all the CFPB documents
immediately." In his December 4 Order, Judge Gardephe stated: "The Court will review
Defendant's objections to Judge Moses's October 23, 2020 Order after Defendant files its reply."
Dec. 4 Order at 3. Even if TSI was mistaken about the meaning of the December 4 Order, it
argues, its belief that Judge Gardephe had issued a stay "for all intents and purposes" was
"reasonable," and any error was made in good faith, such that no sanctions should be assessed.
TSI Resp. at 2, 4. TSI adds that its continuing delay in producing the CFPB documents has not
prejudiced plaintiffs, but that requiring it to comply with the October 23 and December 30
Orders would "operate to effectively waive TSI’s right to object to the District Court [sic], as
well as its confidentiality and privilege objections," id. at 3, and – for the first time – expressly

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requests that this Court "enter the stay which TSI reasonably assumed was effected by Judge
Gardephe's December 4, 2020 Order." Id. at 5.
In a reply to TSI's response, dated March 4, 2021 (Pl. Reply) (Dkt. No. 260), plaintiffs
argue that the December 4 Order "simply addressed Plaintiffs' application that Judge Gardephe
deny TSI's untimely request to submit a reply brief in support of TSI's Objections to the Oct. 23
Order to produce the CFPB Documents," and had "absolutely nothing to do with a stay of
discovery." Pl. Reply at 2. As a sanction for what they characterize as TSI's "intentional" and
continuing noncompliance with this Court's discovery orders, plaintiffs request that this Court (i)
preclude TSI from raising certain arguments or defenses; (ii) "certify" TSI's noncompliance to
the District Judge "for imposition of a contempt fine"; and (iii) award them attorney fees and
costs "in an amount to be determined later." Id. at 4-5. Finally, plaintiffs oppose TSI's "belated"
stay request, arguing that TSI waived its right to seek a stay through delay. Id. at 5.
As this Court previously explained, the law in the Second Circuit is clear: the filing of
Rule 72(a) objections to a magistrate judge's discovery order does not excuse a party from
complying with that order. To protect itself from sanctions, the objecting party must request and
obtain a stay of the underlying order. Grossman v. Schwarz, 989 WL 46594, at *1 (S.D.N.Y.
Apr. 21, 1989) (citing Litton Industries Inc. v. Lehman Kuhn Loeb, Inc., 124 F.R.D. 75
(S.D.N.Y. 1989)). Accord Shim-Larkin v. City of New York, 2019 WL 4688703, at *2 (S.D.N.Y.
Sept. 25, 2019); Thai Lao Lignite (Thailand) Co. v. Gov't of the Lao People's Democratic
Republic, 2011 WL 4111504, at *9 (S.D.N.Y. Sept. 13, 2011); Rock Salt Co., LLC v. Norfolk S.
Corp., 371 F. Supp. 2d 358, 360 (W.D.N.Y. 2005); Herskowitz v. Chaney, 1995 WL 104007, at
*3 (S.D.N.Y. Mar. 8, 1995). Accord 12 Wright & Miller, Fed. Prac. & Proc. § 3069 (3d ed.). It

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is also clear that – until now – TSI never requested a stay, either from me or from the District
Judge. 2
I note, preliminarily, that TSI offers no excuse for its failure to produce the CFPB
documents between November 6, 2020 (the date on which they were due pursuant to the October
23 Order) and December 4, 2020 (the date on which TSI now claims its production obligation
was stayed, sub silentio, by the District Judge). Rather, it argues that it reasonably interpreted
Judge Gardephe's December 4 Order as "obviat[ing] the need for a formal stay," thus
retroactively excusing its past noncompliance and authorizing its continued nonproduction for an
indefinite period of time, until its objections are resolved. TSI Resp. at 5. I cannot agree that this
was a reasonable interpretation of the December 4 Order, particularly given that (i) TSI did not
ask the District Judge for a stay; (ii) the December 4 Order denied plaintiffs' request for
"immediate" action on the objections but did not grant any affirmative relief to TSI; and (iii)
approximately three weeks later, the parties requested (and I granted) an extension until February
5, 2021, of the deadline to produce documents, "including documents concerning the CFPB
investigation." Dec. 30 Order at 2 (emphasis added). Even if I were to credit TSI's assertion that
it did not believe it was bound by the November 6, 2020 production deadline set forth in the
October 23 Order, I cannot credit its further claim that – after expressly requesting and receiving
an extension to produce the CFPB documents until February 5, 2021 – it believed itself under no
obligation to comply with that extended deadline.
TSI's request for a retroactive and indefinite stay of its obligation to produce the CFPB
documents is equally unconvincing. To begin with, it has made no showing of likelihood of

2

The only request that TSI made to the District Judge, in connection with its objections, was for
a two-week extension of time to file its reply brief. (Dkt. No. 245.)

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success on the merits of its objections, as required when seeking such a stay. See Kwik Ticket
Inc. by Shamah v. Spiewak, 2020 WL 5658723, at *1 (E.D.N.Y. Sept. 23, 2020) (denying
defendants' motion for stay of magistrate judge's order requiring certain limited discovery where
defendants failed to show either irreparable harm or likelihood of success on the merits).
TSI's claim that plaintiff will not be prejudiced by the indefinite stay it seeks ignores the
obvious prejudice flowing from the parties' obligation to complete deposition discovery. (Dkt.
No. 256.) If all remaining fact depositions are taken without access to the CFPB documents,
there is a substantial likelihood that at least some of them will have to be reopened, imposing
unnecessary expense and burden on all parties and on the witnesses. The alternative – that the
deposition deadline be extended sine die, until some date after Judge Gardephe has ruled on
TSI's objections (which is what the parties requested in their February 18, 2021 letterapplication) – is equally unacceptable from a case management standpoint. 3
TSI's contention that it will be prejudiced by complying with this Court's underlying
orders is similarly unavailing. It is true, of course, that in the absence of a stay it will be required
to comply with the discovery orders to which it objects. But this is true whenever a party objects
to a magistrate judge's discovery order, and therefore cannot be sufficient, standing alone, to
demonstrate the prejudice required to obtain such a stay. TSI does not articulate any other
species of prejudice. Indeed, as I noted in the October 23 Order (at 2), TSI has been litigating
Request No. 19 since May 2020 (see Dkt. Nos. 148, 167, 190, 204, 205, 211, 212, 214, 219,
227), during which period it has failed, repeatedly, to convince this Court (or the CFPB, see Dkt.
No. 229-1) that producing the documents will cause it (or the CFPB) any legally cognizable

3

TSI asserts that Judge Gardephe's decision on the Rule 72(a) objections is "anticipated
"imminently," TSI Resp. at 1, but not does not explain the basis for that anticipation.

5

prejudice. Moreover, TSI now concedes that it has assembled the CFPB documents and is
reviewing them for privilege and confidentiality so as to be ready to produce them promptly "if
Judge Gardephe denies TSI's Objections," TSI Resp. at 5, 4 thus undercutting any remaining
burden argument. 5
For these reasons, TSI's last-minute application for a stay of this Court's October 23 and
December 30 Orders is DENIED. Given plaintiffs' failure to press the issue in the February 18,
2021 joint letter (or at any time since the document production extension expired on February 5,
2021), I will not impose monetary sanctions on TSI for its past noncompliance. Future
noncompliance, however, will not be tolerated. It is hereby ORDERED that TSI shall produce
the CFPB documents within the next ten days, no later than March 15, 2021. Should it fail to do
so, monetary sanctions will be assessed pursuant to Fed. R. Civ. P. 37(b)(2)(A) beginning on
March 16, 2021, at the rate of $2,000 per day, payable to the Clerk of Court. See Royal Park
Invs. SA/NV v. Deutsche Bank Nat'l Tr. Co., 2018 U.S. Dist. LEXIS 128189, at *20-22 (S.D.N.Y.
May 15, 2018) (requiring plaintiff to pay $1,000 per day to the Clerk of Court should it continue
to disobey a prior discovery order); Funk v. Belneftekhim, 861 F.3d 354, 368 (2d Cir. 2017)
(affirming order requiring defendants "to pay $2,000 to the Clerk of Court for every day they

4

It is not clear to this Court what remaining privilege or confidentiality issues TSI could raise.
TSI reviewed the documents for privilege (and prepared a privilege log) before producing them
to the CFPB. See TSI Letter dated August 20, 2020, Ex. 1 (Dkt. No. 214-1) at ECF page 3
("[A]ny privilege log that would be produced in response to Request No. 19 would be identical
to the privilege log that TSI provided to the Bureau in response to one or more CIDs served on
TSI in that matter."). The additional privilege and confidentiality objections that TSI made
during the litigation of Request No. 19 were all rejected. See Oct. 23 Order at 3 ("[T]his Court
has previously rejected TSI's confidentiality and 'reverse engineering' arguments. Moreover, the
protections and privileges that TSI describes would be assertible, if at all, by the CFPB, which
has now unequivocally declined to do so.").
5

See Oct. 23 Order at 3 (concluding that TSI had failed "to substantiate its claim of burden, and
therefore [had] failed to substantiate its claim of disproportionality").

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failed to provide the ordered discovery, as well as $5,000 in litigation costs to plaintiffs").
Additionally, plaintiffs may at that point seek "further just orders," Fed. R. Civ. P. 37(b)(2), for
TSI's continued noncompliance.
It is further ORDERED that the deadline for completing deposition discovery (with the
possible exception of the Affiant X deposition, which will be the subject of a separate motion,
see Dkt. No. 259) is EXTENDED to April 19, 2021.
All relief not expressly granted herein is DENIED.
The foregoing constitutes a written order stating the decision of the Court pursuant to
Fed. R. Civ. P. 72(a).
Dated: New York, New York
March 5, 2021

SO ORDERED.

________________________________
BARBARA MOSES
United States Magistrate Judge

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