Godson v. Eltman, Eltman & Cooper, P.C. et al
ORDER granting 181 Motion for Protective Order; denying 186 Motion for Sanctions. Signed by Hon. H. Kenneth Schroeder Jr. on 1/9/2017. (KER)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NEW YORK
ELTMAN, ELTMAN & COOPER, PC., et al.,
DECISION AND ORDER
This case was referred to the undersigned by the Hon. William M.
Skretny, pursuant to 28 U.S.C. § 636(b)(1), for all pretrial matters. Dkt. ##25 & 43. It is
currently assigned to the Hon. Elizabeth A. Wolford. Dkt. #136.
Plaintiff commenced this action pursuant to the Fair Debt Collection
Practices Act (“FDCPA”), 15 U.S.C. § 1692 et seq., alleging that defendant Eltman,
Eltman & Cooper P.C. (“Eltman”), sent a collections letter on behalf of LVNV Funding,
LLC (“LVNV”), which failed to fully disclose the amount of debt allegedly due, instead
advising plaintiff that the amount due, “$2628.72 (Does not include all the interest).”
Dkt. #1, ¶ 20. Plaintiff seeks to certify a class of individuals in New York who received
substantially similar collection letters from defendants within one year prior to the filing
of this action. Dkt. #1, ¶ 27.
Currently before the Court is defendant LVNV Funding, LLC’s (“LVNV’s”),
motion (Dkt. #181), for a protective order striking plaintiff’s third set of discovery
demands seeking disclosure of deposition transcripts and exhibits from Cox v. Sherman
Capital, LLC, 12-CV-01654, filed in the Southern District of Indiana (“Cox Action”), and
plaintiff’s fifth motion for sanctions. Dkt. #186. For the following reasons, defendant’s
motion is granted and plaintiff’s motion is denied.
Plaintiff’s third set of discovery demands seeks any transcripts (including
exhibits), and/or video or audio recordings of any deposition taken of LVNV or LVNV
related entities, or any defendant in the Cox action, or any of their representatives,
employees or agents, including but not limited to, the deposition of Meghan Emmerich
on September 14, 2015. Dkt. #181-8, pp.6-7.
LVNV seeks a protective order preventing disclosure of deposition
transcripts and exhibits from the Cox action. Dkt. #181. In support of this motion,
LVNV argues that the information sought contains significant corporate/financial
records which are unrelated to this action as well as information which this Court has
already determined to be irrelevant to the issues remaining in this action. Dkt. #181-1,
p.5. LVNV notes significant distinctions in the facts alleged in the Cox action as
opposed to this action. Dkt. #181-1, p.8. In the Cox action, for example, plaintiffs
alleged that defendants fraudulently claimed to own the plaintiffs’ credit card debts.
Dkt. #181-1, p.16. In this action, in contrast, plaintiffs allege that the collections letter
sent to them failed to fully disclose the amount of debt allegedly due. Dkt. #1, ¶ 20. In
addition, LVNV asserts that plaintiff’s original creditor, Providian National Bank, was not
involved in the Cox action. Dkt. #181-1, p.18. LVNV further notes that the Cox matter
is covered by a stipulated protective order endorsed by the district court in the Southern
District of Indiana and that a subpoena served by plaintiff upon counsel for the Cox
plaintiffs seeking the same information requested in these discovery demands was
quashed by the district court for the Southern District of Indiana due to the confidential
nature of the deposition testimony, the protective order, and the lack of relevance of the
deposition transcripts to a claim or defense in this action. Dkt. #181-1, pp.8 & 12.
Plaintiff responds that the depositions of Resurgent; Sherman Financial
Group; Sherman Originator, LLC; Sherman Capital, LLC and Meghan Emmerich, as
well as other deponents, are both relevant to its claims and proportional to the needs of
this action. Dkt. #190, pp.7 & 12. Specifically, plaintiff argues that the Cox depositions
are relevant to the issue of whether LVNV sent debts out for collection knowing that the
amounts were inaccurate. Dkt. #190. p.24. Plaintiff cites the 30(b)(6) deposition
notices from the Cox action seeking information regarding policies and procedures for
maintaining records and information for accounts and/or receivables it requires; the
process by which accounts or receivables are assigned and/or transferred to and from
the entity; the entities safeguards and/or procedures designed and/or intended to
prevent FDCPA violations; and due diligence undertaken by the entity to verify
ownership, legitimacy and pertinent information of acquired accounts as relevant to
plaintiff’s claim that LVNV knew that its records concerning the amounts and interest
rates of charged-off consumer accounts were inaccurate and/or unreliable, yet decided
to hire third parties to collect on those accounts anyway. Dkt. #190, pp.14-15. Plaintiff
also argues that the procedures used by the LVNV entities did not differ depending
upon the source of the original creditor, rendering testimony regarding such procedures
relevant regardless of whether the debt originated from Providian or Citigroup. Dkt.
#190, pp.19-20. Finally, plaintiff argues that production of the deposition testimony
demanded would impose no burden upon defendants as the expense of copying or
scanning the deposition transcripts would be minimal and a protective order is in place
in this action. Dkt. #190, p.21.
Defendants reiterate that the discovery demands at issue in this motion
“have no connection to the calculation of the amount of plaintiff’s debt as stated in the
Collection letter - the only issue involved in this case.” Dkt. #197, p.4. Defendants
continue to assert that plaintiff is attempting to expand the scope of discovery to obtain
“access to LVNV’s business structure, practices, procedures and the manner in which it
evaluates a debt portfolio.” Dkt. #197, p.5. Because the plaintiff’s debt and the
collection letter issued in this action were not discussed in the depositions in the Cox
action, defendants argue that the testimony in the Cox action “simply cannot shed any
light onto what LVNV knew and what LVNV did not know concerning his debt and the
amount due as stated in the Collection Letter,” especially given that the allegations in
the Cox action involved ownership of the debt rather than calculation of interest. Dkt.
Fed. R. Civ. P. 26(b)(1) provides, in relevant part:
Parties may obtain discovery regarding any nonprivileged
matter that is relevant to any party’s claim or defense and
proportional to the needs of the case, considering the
importance of the issues at stake in the action, the amount
in controversy, the parties’ relative access to relevant
information, the parties’ resources, the importance of the
discovery in resolving the issues, and whether the burden or
expense of the proposed discovery outweighs its likely
benefit. Information within the scope of discovery need not
be admissible in evidence to be discoverable.
The Advisory Committee Notes to the 2015 Amendment clarifies that the rule was
amended to “encourage judges to be more aggressive in identifying and discouraging
Furthermore, “pursuant to Rule 26(c), the court may limit discovery even if
the information sought is relevant.” Tisby v. Buffalo General Hosp., 157 F.R.D. 157, 170
(W.D.N.Y. 1994); Coyne v. Houss, 584 F. Supp. 1105, 1109 (E.D.N.Y. 1984). Fed. R.
Civ. P. 26(c) provides, in relevant part, that the court “may make any order which justice
requires to protect a party or person from annoyance, embarrassment, oppression, or
undue burden or expense . . . .” Moreover, “[t]he management of discovery lies within
the sound discretion of the district court, and the court's rulings on discovery will not be
overturned on appeal absent an abuse of discretion.” Grady v. Affiliated Cent., Inc.,
130 F.3d 553, 561 (2d Cir. 1997), cert. denied, 525 U.S. 936 (1998); see Robertson v.
National Basketball Ass’n, 622 F.2d 34, 35-36 (2d Cir. 1980) (“Protection against
unnecessary discovery is discretionary with the trial court and will be reversed only on a
clear showing of abuse of discretion.”).
Upon due consideration of these factors, the Court grants defendants’
motion for a protective order. Plaintiff’s demand for any transcripts of any deposition
taken from any defendant in the Cox action is obviously overbroad. Even if the Court
were to limit the demand to the deposition transcripts of parties to the instant action,
there remains a substantial risk that the deposition testimony would reveal confidential
information that is not relevant to this action and spur additional discovery disputes in a
case that has already seen far too many discovery disputes. In any event, even if those
deposition transcripts contained some information that could be deemed relevant to the
issues in this action, such information is more appropriately obtained from those
parties during the course of depositions in this action.
Plaintiff’s fifth motion for sanctions asks the Court to determine that, for
purposes of this action, LVNV violated 15 U.S.C. § 1692e(2) by hiring third-party debt
collectors and directing them to collect principal and interest on defaulted consumer
accounts with knowledge that the amount of interest demanded was uncertain or
unreliable. Dkt. #186. Plaintiff also seeks attorneys’ fees to compensate counsel for
LVNV’s failure to comply with the Court’s Decision and Order entered April 15, 2016.
In that Decision and Order, the Court determined that, for purposes of this
action, LVNV is a debt collector as defined by 15 U.S.C. § 1692a(6) and LVNV’s net
worth is $50 million. Dkt. #180, p.12. The Court further determined that the Purchase
and Sale Agreement by and between Providian National Bank and Sherman Originator
LLC, as well as any additional documentation or communications regarding the transfer
of plaintiff’s debt from Providian National Bank to Sherman Originator LLC to Sherman
Acquisition LP to LVNV remain relevant to the resolution of plaintiff’s allegation that
LVNV violated the FDCPA by sending accounts out for collection without knowing the
correct amounts due. Dkt. #180, p.12. Accordingly, the Court directed LVNV to
disclose, without redaction: the Purchase and Sale Agreement by and between
Providian National Bank and Sherman Originator LLC; any additional documentation or
communications regarding the transfer of plaintiff’s debt from Providian National Bank
to Sherman Originator LLC to Sherman Acquisition LP to LVNV; and any servicing
agreements or other agreements relating to the collection of plaintiff’s debt between any
of these entities or certify to the Court, within 30 days of the entry of this Decision and
Order, that no such documents exist. Dkt. #180, pp.12-13. The Court warned LVNV
that its failure to comply would preclude it from arguing that it did not violate 15 U.S.C.
§ 1692e(2) by hiring third-party debt collectors and directing them to collect principal
and interest on defaulted consumer accounts with knowledge that the amount of
interest demanded was uncertain or unreliable. Dkt. #180, p.13.
In response to the Court’s Decision and Order, Meghan Emmerich, an
authorized representative of LVNV, declared that a copy of the Purchase and Sale
Agreement by and between Providian National Bank and Sherman Originator LLC
relating to plaintiff’s debt was produced, without redaction, to plaintiff’s counsel and
LVNV is not in possession, custody or control of any
additional documents or communications that have not
already been produced regarding the transfer of Plaintiff’s
debt from Providian National Bank to Sherman Originator
LLC to Sherman Acquisition LP to LVNV.
Dkt. #183, ¶¶ 7 & 8. Ms. Emmerich also certified that
LVNV is not in possession, custody or control of any
additional servicing agreements or other agreements that
have not already been produced relating to the collection of
Plaintiff’s debt entered by or between any of the following
entities: Providian National Bank, Sherman Originator LLC,
Sherman Acquisition LP or LVNV.
Dkt. #183, ¶ 9.
In support of its current motion for sanctions, plaintiff argues that LVNV
failed to produce the documents which the Court ordered LVNV to produce and
attempted to disguise its noncompliance with the caveat that such documents were not
in its possession, custody or control. Dkt. #187, p.4. Plaintiff notes that Ms. Emmerich
does not deny that such documents exist and argues that it is inconceivable that a
successful debt purchasing operation such as the companies involved in the purchase
of plaintiff’s debt would conduct business without the additional documentation sought
by plaintiff and ordered disclosed by the Court. Dkt. #187, pp.9-12. Plaintiff also cites
deposition testimony of individuals involved with the Sherman entities supporting the
existence of analysis and valuation of asset purchases by Sherman Capital Markets or
Sherman Financial Operating Group pursuant to management services agreements.
Dkt. #187, pp. 15-17. Moreover, plaintiff notes that the Purchase and Sale agreement
between Providian National Bank and Sherman Originator LLC makes clear that
Providian National Bank provided Sherman Originator LLC with sufficient information for
Sherman Originator LLC to conduct an independent evaluation of relevant information
and referenced specific documents exchanged between the parties, including a closing
statement, account schedule, resale notifications, communications to ratings agencies,
the seller questionnaire, the review file and Sherman Capital Markets’ internal analysis
of the review file. Dkt. #195, pp.17-19. Given that 100% of LVNV is owned by
Sherman Originator LLC and 100% of Sherman Originator LLC is owned by Sherman
Financial Group and that their finances are consolidated with Sherman Financial Group
and the officers and directors of the Sherman entities overlap with each other and with
LVNV, plaintiff argues that agency principles dictate that LVNV cannot feign lack of
custody of documents that may be in the possession of the Sherman entities. Dkt.
#187, pp. 20-24. Furthermore, plaintiff notes that the management services agreement
between Sherman Capital Markets and Sherman Financial Group requires Sherman
Capital Markets to provide management services to Sherman Financial Group’s
subsidiaries, including LVNV and Sherman Originators. Dkt. #187, p.22. Finally,
plaintiff cites deposition testimony stating that all of the Sherman Companies share a
database which is wholly owned by Sherman Financial Group and maintained by
Resurgent. Dkt. #187, p.23.
Plaintiff complains that LVNV has produced nothing to demonstrate an
agreement between plaintiff and Providian National Bank as to a certain rate of interest.
Dkt. #187, p.26. Moreover, plaintiff notes that the purchase and sale agreement
between Providian and Sherman Originators suggests that no information concerning
plaintiff’s interest rate was transmitted to Sherman Originators. Dkt. #195, p.27. In
other words, the only evidence produced by LVNV suggests that the interest rate
charged to plaintiff and the other members of the class was pulled out of thin air. Dkt.
#195, p.27. As a result of LVNV’s refusal to produce information to the contrary,
plaintiff argues that “it is appropriate for the Court to determine, for purposes of this
case, that LVNV sent out debts for collection not knowing the correct amounts or
interest rates,” thereby violating 15 U.S.C. §§ 1692e(2)(A); 1692f(1); and 1692g. Dkt.
In opposition to the motion, LVNV argues that plaintiff is seeking
documents beyond the scope of those ordered disclosed by the Court. Dkt. #196, pp.68. In any event, LVNV argues that, contrary to plaintiff’s argument that no documents
evince the appropriate interest rate, the Data Fields provided to Sherman Originator
from Providian, which were produced to plaintiff during discovery, contained, among
other items, “the APR applicable to the plaintiff’s account.” Dkt. #196, p.9. LVNV
states that Providian specifically warrants within the purchase and sale agreement that
the information contained in the Data Fields was accurate. Dkt. #196, p.9 n.3. In any
event, LVNV argues that once LVNV converted plaintiff’s debt to a Florida State Court
Judgment, a total debt of $2,485.28 was established, with a post judgment statutory
interest rate of 11% per annum. Dkt. #196, pp.9-10. LVNV submitted a copy of the
Default Final Judgment from the County Court of the 17th Judicial Circuit in Broward
County Florida, dated July 3, 2007, ordering recovery by LVNV, as assignee of
Providian Financial Corp., from plaintiff
the sum of $1,877.55 on principal, pre-judgment interest of
$422.73, with costs in the sum of $185.00, and attorney’s
fees of $.00, making a total of $2,485.28, which shall accrue
interest at a rate of eleven percent (11%) per annum, for all
of which let execution issue forthwith.
Dkt. #196-4. LVNV argues that “because the Florida State Court Judgment affixed the
amount owed by Plaintiff as of 2007 as well as the post-judgment interest rate that
would apply moving forward, the Plaintiff cannot use a Federal Lawsuit to challenge or
question the amounts of his debt or interest rates that were applicable prior to the
issuance of that judgment.” Dkt. #196, p.13. LVNV also submits a supplemental
declaration from Ms. Emmerich certifying that
LVNV has produced all documents and communications
regarding the transfer of Plaintiff’s debt from Providian
National Bank to Sherman Originator LLC to Sherman
Acquisition LP to Sherman Originator to LVNV.
Dkt. #196-1, ¶ 6. Ms. Emmerich further declares that
no other documents or communications exist relating to the
transfer of Plaintiff’s debt from Providian National Bank to
Sherman Originator LLC to Sherman Acquisition LP to
Sherman Originator LLC to LVNV.
Dkt. #196-1, ¶ 8.
In reply, plaintiff argues that LVNV is intentionally and improperly
redefining the scope of discovery ordered disclosed by this Court. Dkt. #198, p.5.
Plaintiff notes that LVNV’s narrow definition of transfer documents “includes nothing
more than two data points - the alleged amount of Plaintiff’s debt, and the alleged
interest rate on Plaintiff’s debt - as those points are stored in the database maintained
by Resurgent and shared with Eltman.” Dkt. #198, p.6. Plaintiff argues that the
accuracy and reliability of these two data points are the issue plaintiff is attempting to
investigate through his discovery demands. Dkt. #198, p.6. In other words,
Plaintiff has alleged that the two numbers LVNV was using
for the amount of Godson’s debt and the interest rate were
inaccurate and unreliable - and, in response, LVNV is
arguing that the only information relevant to those
allegations is . . . the two numbers LVNV was using!
Dkt. #198, p.6. Plaintiff also notes that, prior to this motion, LVNV has never taken the
position that the data points provided to plaintiff were responsive to plaintiff’s request for
documents and communications related to the transfer of plaintiff’s debt. Dkt. #198,
p.7. In any event, plaintiff argues that this document is
not a document that the Sherman Companies received from
Providian! To the contrary, it is a document generated from
Resurgent’s own debt-collection database, which it
apparently shares with all of the third-party collectors such
as Eltman to collect debts.
Dkt. #198, p.7. More specifically, plaintiff notes that Ms. Emmerich and LVNV’s
attorneys “do not actually claim that the [data points documents] were provided by
Providian; they only claim that the data appearing on the [data points documents] was
provided by Providian.” Dkt. #198, p.8. Plaintiff argues that it needs more than LVNV
and Resurgent’s own data; it needs “the actual documents and communications that
Providian gave the Sherman Companies before Sherman decided to purchase
Plaintiff’s debt, as well as the Sherman Companies’ own internal analysis of Plaintiff’s
debt that guided its decision.” Dkt. #198, p.9. Plaintiff argues that LVNV’s argument
that the documents sought are not relevant is misplaced given that this not a motion to
compel, but rather a motion for sanctions based upon LVNV’s failure to abide by this
Court’s Decision and Order directing discovery. Dkt. #198, p.9. Finally, plaintiff argues
that he is not seeking to appeal the amount or post-judgment interest awarded by the
Florida state court, but is instead challenging the accuracy and reliability of information
LVNV sent to the debt collectors it hired to collect plaintiff’s debt. Dkt. #198, p.10.
The Court accepts LVNV’s declaration that it has produced any
documents upon which it could rely in defending the interest rate it applied to the
calculation of the amount due set forth in the collection letter mailed to plaintiff. LVNV
shall be bound by that representation and shall be precluded from introducing into
evidence any other documentation with respect to this issue. Whether the information
produced is sufficient, as LVNV alleges, to support the demand set forth in the
collection letter is a matter to be resolved by the district judge upon resolution of
dispositive motions. Accordingly, plaintiff’s motion for further sanctions is denied.
Buffalo, New York
January 9, 2017
s/ H. Kenneth Schroeder, Jr.
H. KENNETH SCHROEDER, JR.
United States Magistrate Judge
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