Cascade Capital, LLC et al v. DRS Processing LLC

Filing 30

ORDER that Defendant DSR Processing LLC dba Miller Stark Klein & Associates and its owner Darryl Miller are hereby found in contempt of the Courts Default Judgment Order entered January 5, 2018. On account of such contempt, the Court imposes the following sanctions; however, execution of the sanctions is suspended until after a hearing on October 2, 2018, at 10 am. Signed by District Judge Robert J. Conrad, Jr on 9/29/2018. (jaw)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NORTH CAROLINA
CHARLOTTE DIVISION
3:17-cv-00470-RJC-DSC
CASCADE CAPITAL, LLC and
CASCADE CAPITAL, LLC –
SERIES A,

)
)
)
)
Plaintiffs,
)
)
v.
)
)
DRS PROCESSING LLC d/b/a
)
MILLER STARK KLEIN &
)
ASSOCIATES
)
)
Defendant.
)
____________________________________ )

ORDER

THIS MATTER comes before the Court on Cascade Capital, LLC and Cascade
Capital, LLC – Series A’s (“Plaintiffs”) Motion for Order to Show Cause, (Doc. No. 18),
and this Court’s Order granting the motion and directing that DSR Processing LLC
dba Miller Stark Klein & Associates and its owner Darryl Miller (collectively,
“Defendant”), appear and show cause why it and he should not be held in contempt,
(Doc. No. 24).
I.

FINDINGS OF FACT
The facts of this case are fully set forth in the Court’s January 5, 2018, Default

Judgment Order, (Doc. No. 16), and the Court’s August 29, 2018, Show Cause Order,
(Doc. No. 24). The facts contained in those Orders are specifically incorporated by
reference herein.
The Default Judgment Order provided:
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… the Court grants as Plaintiffs’ relief a permanent injunction to enjoin
Defendant from:
1.
Communication.
Defendants are enjoined from further
communicating with any consumer regarding accounts within the
Santander Portfolio.
2.
Collection. Defendants are enjoined from collecting or attempting
to collect on accounts from the Santander portfolio.
Additionally, the Court grants Plaintiffs’ request to compel Defendant
to produce:
1.
Specific Santander Accounts. Defendants must produce reports
identifying all Santander accounts Defendant has acquired or collected
on in the past 24 months.
a.
These reports should identify each consumer with the following:
(1) their last name; (2) the last four digits of their social security number;
and (3) their corresponding Santander account number
2.
Related Documents. Defendants must produce all documents
related to their purchase of the Santander Accounts within the past 24
months.
a.
These documents include, but are not limited to, correspondence,
bills of sale, and purchase documents.
3.
Collection Documents. Defendants must produce all records of
their collection activities in respect to Santander Portfolio accounts.
a.
These records include, but are not limited to, notes,
correspondence, and recordings of any calls with consumers.
4.
Third Party Referrals. Defendants must produce the identity of
any third party, if any, who referred Santander accounts to Defendant
for collection.
5.
Santander Account Sellers. Defendants must produce the
identity of any person or entity that sold Santander accounts to
Defendant by way of name, address, email, telephone, and website.
6.
Copies of Santander Account Agreements. Defendants must
produce copies of each and every purchase or forwarding agreements for
all Santander accounts identified.
7.

Accounting. Defendant must make an accounting of all monies
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collected from any of the Santander accounts.
a.
This accounting must include monies collected by Defendant or
their employees, contractors, affiliates, members, designees, owners,
clients, or any other third party entity acting in concert with Defendant.
The Court defines “Santander Accounts” and “Santander Portfolios” as
those accounts and portfolios originally purchased by Plaintiffs from
Santander which Defendant has obtained, communicated with, or
collected from. Defendant has 30 days to provide Plaintiffs the
documents listed above. Afterward, an evidentiary hearing regarding
Plaintiff’s monetary damages will then be scheduled.
(Doc. No. 16 at 12-13).
Plaintiff served Defendant with the Default Judgment Order by first class and
certified mail on January 8, 2018. (Doc. No. 17). An attorney contacted counsel for
Plaintiff on January 16, 2018, and requested an extension of the Order’s production
deadline, (Doc. No. 20 at 2); thus, Defendant had actual knowledge of the Order.
Nevertheless, Defendant produced no records to Plaintiff, (Id. at 3), and continued to
collect on the accounts after service of the Order, (Doc. No. 23 at 2). Additionally, a
third party provided information that Defendant sold accounts to it for $50,000 near
the time the Order was issued. (Doc. No. 20 at 2-3; Doc. No. 21 at 2).
Due to its lack of compliance with the Order, on August 29, 2018, the Court
directed Defendant and its owner Darryl Miller to appear on September 19, 2018, to
show cause why it and he should not be held in contempt. (Doc. No. 24 at 4-5).
Counsel for Plaintiff served the Show Cause Order on Defendant by first class and
certified mail at its current and previous registered business addresses, one of which
was the address used to perfect service of the Default Judgment Order, (compare Doc.
No. 17 with Doc. No. 25), and on its owner, Darryl Miller. The Court conducted the

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show cause hearing on September 19, 2018, at which counsel for Plaintiff and Mr.
Miller, pro se, appeared.
II.

DISCUSSION
To establish civil contempt, a movant must show each of the following elements

by clear and convincing evidence:
(1) the existence of a valid decree of which the alleged contemnor had
actual or constructive knowledge; (2) . . . that the decree was in the
movant's “favor”; (3) . . . that the alleged contemnor by its conduct
violated the terms of the decree, and had knowledge (at least
constructive knowledge) of such violations; and (4) . . . that [the] movant
suffered harm as a result.
Ashcraft v. Conoco, Inc., 218 F.3d 288, 301 (4th Cir. 2000) (quoting Colonial
Williamsburg Found. v. Kittinger Co., 792 F. Supp. 1397, 1405–06 (E.D. Va. 1992),
aff'd, 38 F.3d 133 (4th Cir. 1994)). Intent is largely irrelevant to a finding of civil
contempt; the Court focuses only on whether in fact the alleged contemnor’s conduct
complied with some “unequivocal command” set forth in specific detail in the Order.
In re Gen. Motors Corp., 61 F.3d 256, 258 (4th Cir. 1995). If the moving party makes
a prima facie showing of these elements, the burden shifts to alleged contemnor to
justify his non-compliance. United States v. Rylander, 460 U.S. 752, 757 (1983).
Finally, prior to holding a person in contempt, the district court must provide the
alleged contemnor notice and opportunity for a hearing. Int’l Union, United Mine
Workers of Am. v. Bagwell, 512 U.S. 821, 826–27 (1994).
A. Defendant is in Contempt of the Default Judgment Order
The Court finds that Plaintiffs have established each element of a prima facie
case for contempt by clear and convincing evidence, and Defendant has failed to
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justify its non-compliance. The Court further finds that Defendant was given notice
and a hearing before being held in contempt.
The Default Judgment Order is a valid order issued by the Court in Plaintiffs’
favor, of which Defendant has actual and constructive knowledge. Plaintiff has
presented substantial evidence documenting Defendant’s ongoing violation of the
terms of the Default Judgment Order.

For example, Defendant provided no

information to Plaintiff in response to the Default Judgment Order until September
11, 2018. (Doc. No. 28: Plaintiff H’rg Exhibit 3). In the September 11 response,
Defendant claimed to have no records of its collection activities, including
correspondence with Santander Portfolio account consumers. (Id. at 1). Yet, some of
those consumers provided Plaintiffs with written demands for payment bearing
Defendant’s letterhead. (Doc. No. 26: Plaintiff H’rg Exhibit 1). Similarly, Defendant
claimed to have no accounting records showing monies collected on Santander
accounts. (Doc. No. 28: Plaintiff H’rg Exhibit 3 at 1). Yet, a consumer provided
Plaintiff a Payment Method Authorization Form bearing Defendant’s name and
detailing numerous credit card payments. (Doc. No. 27: Plaintiff H’rg Exhibit 2). The
Court finds that the information on record establishes by clear and convincing
evidence that Defendant has actual knowledge of its violations and continues to
violate willfully the Court’s Order.
Finally, the Court finds by clear and convincing evidence that Plaintiffs has
suffered resulting harm, including but not limited to Defendant’s continuing to collect
money on Santander accounts and failing to disclose records necessary to determine

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the amount of money owed to Plaintiffs, as well as the loss of goodwill of customers
being pursued by multiple companies for the same debt. Accordingly, the Court finds
Defendant in contempt of court.
B. Civil Contempt Sanctions
The Court has the inherent power to coerce compliance with its orders, and it
may exercise that authority by ordering a defendant to be incarcerated or to pay a
fine, or both, until he purges himself of his contempt. Int’l Union, United Mine
Workers of Am., 512 U.S. at 828. “Judicial sanctions in civil contempt proceedings
may, in a proper case, be employed for either or both of two purposes; to coerce the
defendant into compliance with the court’s order, and to compensate the complainant
for losses sustained.” United States v. United Mine Workers of Am., 330 U.S. 258,
303–04 (1947). The term of incarceration may be indefinite because “the contemnor
is able to purge the contempt and obtain his release by committing an affirmative
act.” Id. Therefore, he “‘carries the keys of the prison in his own pocket.’” Id. (quoting
Gompers v. Buck’s Stove & Range Co., 221 U.S. 418, 442 (1911)); see also Shillitani
v. United States, 384 U.S. 364, 370 n.6 (1966) (upholding a two-year civil contempt
sentence that included a purge clause). Similarly, financial penalties, such as a per
diem fine until a contemnor complies exerts “constant coercive pressure” to compel
obedience with an affirmative court order. Id. at 829. Disgorgement of profits is
viewed as a means of deterring future violations by the contemnor. W.E Bassett Co.
v. Revlon, Inc., 435 F.2d 656, 664 (2d Cir. 1970).
Here, the records yet to be produced are necessary to determine the amount of

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profit gained by Defendant’s continued collection on and possible sale of the accounts.
Defendant’s failure to provide any information until just days before the show cause
hearing, its provision of incomplete and false information in the September 11
response, and its lack of candor during the hearing before the Court establish that
contempt sanctions of imprisonment and fines are necessary to coerce Defendant to
comply with the Default Judgment Order. Accordingly, the Court will order a per
diem fine and indefinite incarceration until the needed documents are produced.
Although Defendant has had ample opportunity to cure his non-compliance, the
Court will suspend the imposition of the sanctions below until after a hearing on
October 2, 2018, at 10 am.
III.

CONCLUSION
IT IS, THEREFORE, ORDERED that:

1. Defendant DSR Processing LLC dba Miller Stark Klein & Associates and its
owner Darryl Miller are hereby found in contempt of the Court’s Default
Judgment Order entered January 5, 2018.
2. On account of such contempt, the Court imposes the following sanctions; however,
execution of the sanctions is suspended until after a hearing on October 2, 2018,
at 10 am:
a. Defendant is fined $500 per day, beginning on October 2, 2018, and continuing
until such time as Defendant has purged itself of said contempt.
b. Defendant shall immediately disgorge any monies collected on Santander
accounts or received from selling Santander accounts from January 5, 2018,

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forward. The Court will determine the amount to be disgorged at the hearing
on October 2, 2018.
c. The United States Marshal is authorized and directed to take any and all
actions necessary, including but not limited to the use of reasonable force, to
arrest and take into custody Defendant’s owner Darryl Miller, and to enter and
remain on the premises where he is located, or reasonably believed to be
located, including but not limited to, the land, buildings, vehicles and any
structures located thereon. Upon his arrest, the United States Marshal is not
required to take Darryl Miller before a magistrate, but instead to incarcerate
him in a facility which the United States Marshal shall designate. Thereafter,
Darryl Miller shall remain incarcerated and in the custody of the United States
Marshals Service until Defendant has purged itself of said contempt and/or
until such time as the Court orders his release.
d. Plaintiff shall pay the United States Marshal a deposit, in advance, for any
and all anticipated expenses, as estimated by the United States Marshal, in
connection with: (1) the apprehension and custody of Darryl Miller; (2) his
transportation to the facility that the Marshal designates; and (3) the
execution of this and any other process associated with this finding of
contempt. Darryl Miller shall be liable and shall reimburse Plaintiff for actual
expenses incurred in connection with his arrest and incarceration under this
Order and the United States Marshal to the extent of actual expenses incurred
and paid in excess of Plaintiff’s advance deposit. The United States Marshal

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shall submit a report of its expenses, as described herein, to the Court within
ten (10) days after Darryl Miller’s arrest.
e. Plaintiff shall submit itemized documentation with supporting affidavits of all
reasonable costs, fees, and expenses incurred in this action to the Court within
fourteen (14) days of this Order.
3. Defendant shall purge itself of its contempt by:
a. fully complying with and obeying the Default Judgment Order, entered
January 5, 2018, as well as this Order;
b. apprising the Court of any attempt that it makes to satisfy the prescribed
means for purging this contempt citation, by filing sworn affidavits with the
Clerk of Court specifying the actions taken to comply with the Court’s
directions, supported by all necessary documentation;
c. upon full compliance with the Orders, filing an appropriate motion for purging
of contempt and release from incarceration, supported by all necessary
documentation and sworn affidavits specifying all actions taken to comply with
the Court’s directions; and
d. making such further report as the Court may require.
4. In the event that Defendant fails to purge itself of its contempt or fails to take
substantial steps toward purging their contempt within fourteen (14) days of
Darryl Miller’s arrest, the United States Marshal is authorized and directed to
take any necessary actions, including reasonable force, to enter the premises
located at 1811 Sardis Road North, Suite 218, Charlotte, North Carolina 28270 if

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still controlled by Defendant, to secure the premises and to enable Plaintiff to
enter the premises and recover any pertinent information located therein,
including digital devices on which such information may be stored, and ensure
compliance with the Court’s Orders.
5. The United States Marshal is also authorized to seize or impound any property on
the premises identified by Plaintiff as personal property belonging to the
Defendant, up to an amount sufficient to satisfy the debt owed by Defendants on
the judgment at that time, including interest and the United States Marshal's
fees. See 28 U.S.C. § 1921. Plaintiff shall create and sign a written inventory of
all items removed from the premises, which the United States Marshal shall
confirm and sign when verified, and provide a copy of same to the United States
Marshal and the Court. Plaintiff shall be solely responsible for the transport and
storage of all items removed from the premises. The United States Marshal is
further directed to sell the items seized pursuant to Paragraph 5 of this Order by
public auction pursuant to 28 U.S.C. §§ 2001, 2002, et seq., at a time and place
designated by the United States Marshal and federal law.
6. The Court retains jurisdiction, upon the failure of Defendant to purge itself fully
of civil contempt, to levy a compliance fine against it and to grant such other and
further relief as the Court finds appropriate.
7. This Order may be executed nationwide pursuant to Federal Rule of Civil
Procedure 4.1(b) which provides that “An order committing a person for civil
contempt of a decree or injunction issued to enforce federal law may be served and

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enforced in any district.”
The Clerk is directed to certify copies of this Order to Plaintiff, Defendant, and
the United States Marshal Service.

Signed: September 29, 2018

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