Blasi et al v. United Debt Services, LLC et al
OPINION AND ORDER granting in part 190 MOTION for Sanctions Against AMG Lead Source; striking 157 MOTION to Dismiss for Lack of Jurisdiction as to Defendant Name Seeker Inc.'s Crossclaims; granting 199 MOTION to Wi thdraw as Attorney of Record by Personius Melber LLP on the conditions set forth in this Opinion and Order. Any prior stay of proceedings is vacated. The parties shall either submit an agreed case scheduling order within fourteen days or request a conference with the Court. Signed by Magistrate Judge Terence P. Kemp on 2/21/2017. (agm)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF OHIO
Peter Blasi, et al.,
United Debt Services, LLC,
Case No. 2:14-cv-83
JUDGE GEORGE C. SMITH
Magistrate Judge Kemp
OPINION AND ORDER
This is a case with a number of moving parts.
complaint alleged, on a class action basis, that four defendants
- United Debt Services, New Wave Lending Corp., Benjamin
Rodriguez, and MTC Texas Corp dba Masada Texas Corp. - violated
the Fair Credit Reporting Act by using “prescreened consumer
lists” for marketing debt relief services.
While such lists may
be used for permissible purposes under the Act, Plaintiffs
alleged that the defendants used the list for other purposes,
thus permitting United Debt Services to send direct mail
solicitations to consumers in financial distress (which would
also violate the FCRA).
The complaint has since been amended twice.
amended complaint added three new parties - Name Seeker, Inc.,
AMG Lead Source, and Equifax, Inc. (later changed by stipulation
to Equifax Information Services, LLC).
See Doc. 47 and Doc. 111.
Pursuant to a Rule 16 scheduling order, Plaintiffs moved on
January 15, 2016 to certify a class comprised of approximately
166,000 Ohio residents whose names were on the consumer lists
referred to in the complaint.
While that motion was pending, New
Wave Lending and Mr. Rodriguez were dropped as parties, and Name
Seeker moved for leave to, and eventually did, file a crossclaim
against AMG Lead Source.
That crossclaim is Doc. 146, and it is
proceedings relating to the crossclaim that set much of the stage
for the issuance of this Opinion and Order.
Proceedings on the Crossclaim
In response to the crossclaim, AMG Lead Source filed a
motion to dismiss (Doc. 157), asserting that the Court does not
have personal jurisdiction over AMG because AMG lacked minimum
contacts with the State of Ohio.
Name Seeker opposed that
It also sought discovery from AMG, and the Court has
held a number of conferences and issued a number of orders
concerning that discovery.
One of the earlier orders is Doc.
165, which reflects that the parties had agreed that AMG would
serve written discovery responses by July 25, 2016, produce all
responsive documents, and prepare and serve a privilege log.
also agreed to produce witnesses for deposition in mid-August.
month later, the order was amended, also by agreement, to provide
that the AMG depositions would take place at the end of
That order is significant because it also contains
provisions concerning AMG’s production of a laptop computer.
had given the laptop to its counsel, and the parties agreed that
it would be preserved and imaged.
Name Seeker would then be
allowed to access the documents contained on the laptop, subject
to an appropriate clawback agreement.
All of that was to happen
very shortly after August 16, 2016, the date the order was
It is probably an understatement to say that things did not
go as planned.
By way of an agreed order filed on September 30,
2016 (Doc. 182), the AMG depositions were again postponed.
that order extended the protections of the clawback order to a
thumb drive produced by AMG, and it provided for the imaging of
that storage device.
The order also set out a procedure for the
forensic examination of the laptop and thumb drive.
number of issues which had arisen concerning AMG’s written
discovery responses and its document production were addressed
At that point, it seems that counsel believed that
the order’s provisions were adequate to allow Name Seeker to
obtain the relevant information from the laptop and thumb drive
and to use that information at the depositions to be taken in
As it turned out, the laptop and thumb drive proved not to
be useful sources of information.
Based on an examination of
those devices, Name Seeker concluded that information on both
devices had been deleted and that the destruction of the
information which they previously contained was intentional.
therefore requested and received permission to file a motion for
sanctions based on spoliation of evidence, and AMG also agreed
not to oppose, on timeliness grounds, a motion for leave to amend
the crossclaim to include a cause of action for spoliation.
Because of these disputes, the Court stayed other
proceedings in the case.
It also scheduled a hearing on the
motion for sanctions, which was duly filed on November 10, 2016
The Motion for Sanctions
Name Seeker’s motion for sanctions identifies three reasons
why the Court should sanction AMG: for intentional destruction of
evidence, violation of discovery orders, and serving false
In support of its position, Name Seeker
recounts the history of its efforts to obtain full discovery from
AMG, noting, most significantly, the fact that after AMG produced
some small number of documents which it purportedly found on the
laptop, once the laptop was actually produced and examined, it
contained neither copies of these emails nor any other documents
relating to AMG’s business activities.
AMG apparently told its
counsel that the missing contents had been transferred to a thumb
drive, which led to the orders described above relating to
production and copying of that storage device.
When the thumb drive was examined, it had, indeed, contained
a folder entitled “Name Seeker E-mails.”
But that folder had
Further, after the Court entered its order
directing preservation and production of the contents of the
laptop, someone ran software on the laptop (“Ccleaner”) which
removed any otherwise-recoverable data.
Normally, such allegations would be contested by the party
accused of this type of egregious misconduct.
That was why the
Court set the matter for an evidentiary hearing.
the hearing, which was set for December 20, 2016, could occur,
several things happened.
First, counsel for AMG, Brian Melber,
moved for leave to withdraw.
Second, at the request of counsel,
the Court vacated the hearing.
the motion for sanctions.
Third, AMG elected not to oppose
The Court is therefore entitled to
assume that all of the factual statements made in Name Seeker’s
motion are true.
Consistent with that assumption, it is
reasonable to conclude that AMG intentionally destroyed relevant
evidence both in violation of its obligations under the Federal
Rules of Civil Procedure and in contravention of orders of this
Such destruction permits the Court to sanction AMG.
only question left to be resolved is the extent of the
The first sanction Name Seeker requests is the denial of the
motion to dismiss for lack of personal jurisdiction.
earlier decision of this Court, JPMorgan Chase Bank, N.A. v.
Neovi, Inc., 2007 WL 1989752 (S.D. Ohio July 9, 2007)(which
adopted a Report and Recommendation from this Magistrate Judge,
see JPMorgan Chase Bank, N.A. v. Neovi, Inc., 2007 WL 1514005
(S.D. Ohio May 22, 2007)), Name Seeker argues that such a
sanction is appropriate because some of the destroyed evidence
may have assisted in establishing AMG’s minimum contacts with
For the same reasons set forth in the Neovi case, this
In Neovi, the Court said that “Neovi has
deliberately and stubbornly refused to produce the most basic
information about its Ohio contacts and has likely destroyed much
of that information after it put those contacts directly at
issue. It is hard to conceive of a set of circumstances where
harsh sanctions are more appropriate.”
1514005, at *5.
See Neovi, 2007 WL
Consequently, as a discovery sanction, the Court
will strike the motion to dismiss.
Next, Name Seeker asks for a default judgment on its
Recognizing that a default judgment is the most
severe discovery sanction available, it nonetheless argues that
lesser sanctions are not appropriate here because of the
egregious nature of the conduct and the evident prejudice to Name
Seeker which lesser sanctions cannot cure.
Again, there would
seem to be little contrary argument to be made.
The only real
issue is the extent to which Name Seeker has been prejudiced.
There is now a discovery order in place (Doc. 212) which provides
for additional discovery from AMG to be conducted, including
additional forensic examination of electronic storage devices and
the depositions of the AMG representatives.
It strikes the Court
as more appropriate to await the outcome of this discovery to see
if, in fact, some of all of the prejudice from AMG’s willful
conduct can be cured.
Consequently, the Court declines to enter
a default judgment on the crossclaim at this time, but may do so
later depending on the results of the upcoming discovery.
also be helpful to note that, as an unrepresented corporate
entity, AMG will not be able to proceed further in this case, and
will be subject to a default judgment if it does not retain new
Finally, Name Seeker has asked for monetary sanctions
including reasonable attorneys’ fees expended in its pursuit of
discovery from AMG.
That is an entirely appropriate remedy.
Name Seeker will be directed to submit an itemization of its
costs and fees within fourteen days.
If those costs and fees are
reasonable and if, as seems likely, AMG does not oppose the
submission, the Court will enter a fee award in Name Seeker’s
Other Pending Matters
The Court turns next to Mr. Melber’s motion to withdraw as
In the motion (Doc. 199), Mr. Melber represents
that AMG has not met its financial obligations to counsel and has
decided not to defend this action any further.
Those reasons are
sufficient to permit withdrawal, and no party argues otherwise.
Also, AMG was served with the order and given a chance to
respond, but it has not done so.
Other parties, however, have filed responsive memoranda
suggesting that conditions be attached to counsel’s withdrawal.
Name Seeker’s response (Doc. 205) asks the Court to direct
counsel to respond to discovery prior to withdrawing, based on
Mr. Melber’s representation that he would do so, and also to
produce other electronic devices.
Name Seeker also points out
that the extent to which AMG’s counsel may have been involved in
the spoliation of evidence is not clear, and that the issue of
monetary sanctions for that conduct should be resolved as well
before counsel withdraws.
Equifax, in its response (Doc. 208),
adds that counsel should also remain in the case until a firm
commitment is made by AMG to appear for depositions.
It appears to the Court that, once the agreements made in
the latest discovery order (Doc. 212) are satisfied, any
objections to the withdrawal of Mr. Melber and his firm will be
The Court will therefore grant the motion but its order
will not be effective until AMG carries out its obligations under
Should all of the other conditions be satisfied, and
should AMG’s witnesses then appear as agreed for deposition,
counsel will not be obligated to defend those depositions.
This order will not affect Name Seeker’s ability to pursue
sanctions against AMG’s counsel should it believe that course of
action to be warranted.
Whether or not counsel continues to
represent AMG, an attorney may not, simply by withdrawing from
the case, escape liability for sanctionable conduct which may
have occurred while the attorney was counsel of record.
Name Seeker wish to pursue the issue of sanctions against AMG’s
counsel, it should make that clear in its submission as to fees
and costs and serve a copy of that submission on counsel.
counsel will, of course, be entitled to contest any effort to
have sanctions imposed against them.
That leaves only the issue of other proceedings, including
discovery by other parties and briefing on the class action
Counsel in this case have shown an admirable ability to
reach agreement on procedural matters.
Consequently, the Court
directs them to confer after receipt of this order and to propose
a new case schedule.
Any prior stay entered by the Court is
If counsel cannot agree on a schedule, they shall
contact the Court to arrange a conference on that issue.
Based on the foregoing the Court orders:
Name Seeker’s motion for sanctions (Doc. 190) is granted
As a discovery sanction, AMG Lead Source’s motion to
dismiss (Doc. 157) is stricken.
Within fourteen days, Name
Seeker shall file an itemization of its attorneys’ fees and costs
reasonably incurred in seeking discovery and sanctions from AMG.
It shall specify whether it is also seeking to recover fees and
costs from AMG’s counsel.
Any response to this itemization shall
be filed within 21 days of its filing, and Name Seeker may reply
within fourteen days thereafter.
The request for default
judgment as a discovery sanction is denied without prejudice.
The motion for leave to withdraw as counsel (Doc. 199)
is granted on the conditions set forth in this Opinion and Order.
Any prior stay of proceedings is vacated.
shall either submit an agreed case scheduling order within
fourteen days or request a conference with the Court.
Motion for Reconsideration
Any party may, within fourteen days after this Order is
filed, file and serve on the opposing party a motion for
reconsideration by a District Judge.
28 U.S.C. §636(b)(1)(A),
Rule 72(a), Fed. R. Civ. P.; Eastern Division Order No. 14-01,
The motion must specifically designate the
order or part in question and the basis for any objection.
Responses to objections are due fourteen days after objections
are filed and replies by the objecting party are due seven days
The District Judge, upon consideration of the
motion, shall set aside any part of this Order found to be
clearly erroneous or contrary to law.
This order is in full force and effect even if a motion for
reconsideration has been filed unless it is stayed by either the
Magistrate Judge or District Judge.
S.D. Ohio L.R. 72.3.
/s/ Terence P. Kemp
United States Magistrate Judge
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