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United States District Court Dismisses CFPB Enforcement Claims Over Discovery Abuses

GavelIn a stunning decision under Federal Rules of Civil Procedure governing discovery, the United States District Court for the Northern District of Georgia dismissed enforcement claims filed by the Consumer Financial Protection Bureau [1] (CFPB) against several entities accused of committing fraudulent debt collection activities. In Consumer Financial Protection Bureau v Universal Debt Solutions, LLC, U.S.D.C. N.D. Ga., 1:15-CV-859-RWS (2017), various defendants filed motions for sanctions under applicable federal rules based upon the conduct of CFPB during discovery. In the opinion, the Court ultimately dismissed six defendants from the action.

In order to prepare their defense, various defendants sought discovery from CFPB, including testimony at oral depositions.  Upon receiving notice of the deposition, the CFPB claimed that information was already provided in discovery and that the requests were protected by the law enforcement and deliberative process privilege.  Despite Court orders permitting inquiry into certain areas, the CFPB refused to offer meaningful information outside of what was already provided, drafted a “memory aid” for witnesses to recite, and interposed repeated objections to questions based claims of information being privileged.  Even with Court orders, conference calls, and explanations regarding what is and is not privileged, the CFPB still refused to provide adequate responses.

In a powerfully stated conclusion, the Court explained that it:

finds that the CFPB willfully violated the Court’s repeated instructions to identify for Defendants the factual bases for its claims and that, in each deposition, it willfully failed to present a knowledgeable 30(b)(6) witness.  In light of the CFPB’s pattern of conduct in this case, the Court is not optimistic that reopening the depositions would be fruitful.  That is especially true given the CFPB’s continued use of privilege objections in response to questions that the Court expressly identified as permissible.  Thus, Defendants’ motions for Rule 37 sanctions . . . are all GRANTED.

The decision is a guide as to how parties in enforcement actions may use the discovery process to learn the facts underlying the lawsuit, as well as a good lesson in what can happen when the discovery process is abused.