November 29, 2023

Podcast - Abuse Discovery Practices by the Government

Clearly Conspicuous Podcast Series

In this episode of his "Clearly Conspicuous" podcast series, "Abuse Discovery Practices by the Government," consumer protection attorney Anthony DiResta reviews a district court's decision to sanction the Consumer Financial Protection Bureau (CFPB) for its behavior during a case involving a fraudulent debt collection scheme. The CFPB brought actions against 18 defendants, and the court dismissed claims against five of those defendants based on the agency's tactics during deposition. Mr. DiResta explains why the case serves as a reminder to counsel to challenge misconduct.

Listen to more episodes of Clearly Conspicuous here.

Good day and welcome to another podcast of Clearly Conspicuous. As we've noted in previous sessions, our goal in these podcasts is to make you aware of and succeed in this very aggressive and progressive environment, make you aware of what's going on with the federal and state consumer protection agencies and give you practical tips for success. It's a privilege to be with you today.


Today we discuss abuse discovery practices by the government, the Consumer Financial Protection Bureau, that were sanctioned by a district court and blessed by a court of appeals. The CFPB brought an action against 18 defendants in the U.S. District Court for the Northern District of Georgia for engaging in or substantially assisting a fraudulent debt collection scheme. The CFPB alleged that several individuals created limited liability companies in Georgia and New York and perpetuated a debt collection scheme targeting millions of consumers. Thirteen defendants were individuals and their respective companies who directly participated in the scheme. The other five defendants were alleged to have substantially assisted the fraudulent debt collection scheme by providing services to the individuals that were direct operators of the scheme.

Global Connect allegedly provided the television broadcast services used to "broadcast millions of threatening and false statements to consumers." Global Payments, Pathfinders Payment Solutions, Frontline Processing and Electronic Merchant Systems allegedly provided the processing service used to withdraw funds from consumer accounts. The CFPB alleged these five entities knew or should have known that their platforms were advancing unlawful conduct. In the litigation the CFPB served with deposition notices pursuant to Federal Rule of Civil Procedure 30(b)(6). The CFPB objected to the deposition notices, stating, 1) it had already provided the information to defendants in response to written inquiries, and 2) defendants inquired into topics within the law enforcement and deliberative process privilege and 3) the depositions were an improper attempt to question the CFPB counsel as to counsel's mental impressions and analysis. However, the district court overruled these objections, finding that 30(b)(6) applies equally to government agencies and that factual matters were subject to inquiry after the CFPB move for a protective order to reduce the scope of questioning. Relying on the same arguments, the district court granted in part and denied in part the CFPB's motion, finding that factual questions, including those regarding exculpatory facts, were allowed as opposed to questions about trial strategy.

CFPB's Evasive Tactics During Depositions

During the first deposition, the CFPB made over 70 work product objections, including objections to fact-based questions. The district court had explicitly ordered it to answer, and the CFPB instructed its witness not to answer. The CFPB objected to the question, "Are you aware of any facts that Global Payments knew that the debt collector defendants were collecting phantom debt?" Additionally, the CFPB stated that it had not identified any exculpatory facts in the record. Deposing counsel asked the CFPB witness, "In the 300 hours that you spent preparing for the deposition, you didn't identify a single fact that was exculpatory as to Global Payments?" To which the witness answered, "That's correct."

The CFPB gave its witness, "memory aids as well." The witnesses read verbatim for extended periods of time. One witness read from a memory aid for 58 minutes. Defendants had expressed concern with the CFPB's strategic and evasive behavior, prompting the district court to conduct a telephone hearing with the parties where the district court re-emphasized the guidelines of its previous order. Despite being reminded of the district court's order, the CFPB continued to object on work product grounds, and this witness continued to only use memory aids, not answering the fact-based yes or no and follow-up questions.

The District Court Dismisses the CFPB's Claims Based on Its Conduct

During the subsequent deposition, when the witness continued to read directly from these memory aides, deposing counsel resorted to incorporate into the record the portions that the witness would have otherwise read aloud. Over 50 pages were incorporated into the record during the particular deposition. Due to the CFPB's continued obstructions during the four depositions, the district court granted the defendant's motion for sanctions pursuant to Federal Rule of Civil Procedure 37(b) and 37(d), requesting the district court to dismiss the CFPB's claims against the five defendants.

The district court found that the CFPB, "put up as much opposition as possible at every turn." The court found that the CFPB demonstrated willful disregard for the court's instructions, allowing for sanctions under Rule 37(b), and that the CFPB witness, even though it was present, "fail to appear." Under Rule 37(d), the district court struck all the claims against the five service-providing defendants and dismissed them from the case. The issue before the Eleventh Circuit Court of Appeals was whether the district court abused its discretion when it dismissed the CFPB's claims against the five defendants based upon the CFPB's conduct during the depositions and the Eleventh Circuit sanctions ordering dismissal.

The Appellate Court Reviews the District Court's Ruling

The Eleventh Circuit was persuaded by the following facts:

  • The CFPB repeatedly disobeyed the district court's instructions and orders regarding Federal Rule of Civil Procedure 30(b)(6) depositions.
  • District courts have broad discretion to fashion appropriate sanctions for a violation of discovery orders.
  • The district court's instructions and orders were clear. The CFPB did not misunderstand, "it disagreed."
  • The district court repeatedly emphasized the factual matters were subject to inquiry, and the CFPB refused to respond properly to these inquiries. Continued refusal to adhere to the district court's order undermines the very purpose of Rule 30(b)(6) deposition. "The CFPB does not have the power to decide which discovery rules it will abide by and which ones it will ignore."
  • The CFPB continued to use work product objection to fact-based questions even after the district court had emphasized its orders to answer these questions.
  • The CFPB continued to take the "incredible position," and that's a quote from the Eleventh Circuit, that exculpatory facts did not exist as to any defendant in the case. "The district court retains the discretion to dismiss a complaint where the party's conduct announced a flagrant disregard and willful disobedience of the court's discovery orders."
  • The district court dismissed the claims against the respondents only after determining that reopening the depositions would not be fruitful. And the Eleventh Circuit agrees and finds no abuse of discretion. And the Eleventh Circuit finally said, "the court believes the record speaks for itself in refuting the contention that dismissal was improper because the CFPB claimed defendants were not prejudiced by its conduct."

Concluding Thoughts

So what's the key takeaway here? The government or the CFPB's elusive and filibuster style behavior was not tolerated by either court. The CFPB was informed of the effects of its problematic behavior, and when given an opportunity to correct its course, it continued to display evasive and strategic tactics in opposition to the district court's order. So this decision serves as a reminder to counsel involved in CFPB investigations to challenge misconduct. Don't be shy. We should know that the CFPB does not possess any governmental agency immunity to avoid depositions and affirmative discovery. So please stay tuned for further programs as we identify and address the key issues and developments and provide strategies for success. I wish you continued success and meaningful day. Thank you.

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