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Consumer Financial Protection Bureau v. Navient Corp.

United States District Court, M.D. Pennsylvania

May 4, 2018

CONSUMER FINANCIAL PROTECTION BUREAU, Plaintiff,
v.
NAVIENT CORPORATION, et al., Defendants.

          MEMORANDUM OPINION

          Robert D. Mariani, United States District Judge

         I. Introduction

         Through this lawsuit, the Consumer Financial Protection Bureau ("Plaintiff') seeks to prove that Navient Corporation, Navient Solutions, Inc., and Pioneer Credit Recovery, Inc., (collectively "Defendants"), committed various violations of the Consumer Financial Protection Act, 12 U.S.C. §§ 5531, 5536, the Fair Debt Collection Practices Act, 15 U.S.C. § 1692e, and Regulation V of the Fair Credit Reporting Act, 12 C.F.R. §1022.42. (Doc. 1). Presently before the Court are several disputes that have arisen during the course of discovery.

         The first set of disputes came to the Court's attention on January 5, 2018. Per the procedure of the Court, Defendants, instead of filing a motion, filed a brief letter with the Court identifying the dispute and requesting a telephone conference. (Doc. 68). The Court set a date for a telephone conference and directed that, before the conference would take place, "Plaintiff shall submit a concise letter to the Court briefly outlining its position with respect to Defendants' letter." (Doc. 69). After Plaintiff responded with a somewhat lengthy letter, (Doc. 70), the Court held a telephone conference on January 18, 2018. (Doc. 76). After hearing from each side, the Court made clear that, while it understood each side's legal arguments, it was having difficulty identifying what was specifically being sought by Defendants and, therefore, the Court did not have enough information to issue a ruling on the matter. (Id. at 34-35). Accordingly, the Court ordered the parties to file a joint statement identifying what was in dispute-that is, "what documents, what kinds of documents, and in connection with what claims." (Id. at 35-36). The parties, however, disregarded the Court's Order and filed two separate statements on February 8, 2018. (Docs. 72, 73).

         On February 27, 2018, while those disputes remained pending, Plaintiff filed a lengthy letter with the Court requesting a telephone conference to address several new disputes that had arisen between the parties. (Doc. 74). The Court scheduled a telephone conference and directed Defendants to file a concise letter before that time which briefly outlined their position with respect to Plaintiffs letter. (Doc. 78). Before responding to Plaintiffs letter, however, Defendants filed a lengthy letter of their own which identified different disputes that they wished to have discussed during the scheduled telephone conference. (Doc. 79). Given the breadth of the disputes raised, the Court cancelled the telephone conference and ordered the parties to appear in person to discuss all pending discovery disputes. (Doc. 80). Additionally, the Court ordered each side to respond to the other side's letter. (Id.). On April 9, 2018, Defendants and Plaintiff filed their respective lengthy responses. (Docs. 83, 84).

         The parties appeared before the Court on April 17, 2018. While some of the disputes had resolved themselves by that time, the majority of the disputes remained pending. Each side was afforded ample time to present their arguments as to why certain discovery should or should not be allowed. For the reasons that follow, the Court will sustain in part and overrule in part Plaintiff's objections to Defendants' requests for production of documents, and sustain in part and overrule in part Defendants' objection to Plaintiffs requests for production of documents.[1] Further, in light of the extensive number and scope of discovery requests propounded to date and for the reasons discussed during the April 17 conference, the Court will order that the parties serve no additional interrogatories or requests for production of documents beyond those which have already been served.

         II. Analysis

         The Court will address each dispute individually. To begin with, however, the Court will briefly explain two general principles that have guided the Court's rulings. First, the parties' arguments have tended to conflate relevancy in the context of discovery with admissibility at trial. Nevertheless, as both parties are aware, Federal Rule of Civil Procedure 26 provides, in part, that [i]nformation within this scope of discovery need not be admissible in evidence to be discoverable." Fed.R.Civ.P. 26(b)(1). Further, "[i]t is well recognized that the federal rules allow broad and liberal discovery." Pacitti v. Macy's, 193 F.3d 766, 777 (3d Cir. 1999); see also In re MSTG, Inc., 675 F.3d 1337, 1346 (Fed. Cir. 2012) ("In general, the Federal Rules of Civil Procedure promote a 'broad and liberal' policy of discovery 'for the parties to obtain the fullest possible knowledge of the issues and facts before trial.'" (quoting Hickman v. Taylor, 329 U.S. 495, 501, 507, 67 S.Ct. 385, 91 L.Ed. 451 (1947))). Accordingly, the Court will not sustain a relevancy objection unless it can determine at this early stage that the materials sought cannot, as a matter of law, have any possible relevance to the present matter.

         Second, both parties have raised proportionality arguments. Federal Rule of Civil Procedure 26 provides, in part, that

Unless otherwise limited by court order, the scope of discovery is as follows: 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.

Fed. R. Civ. P. 26(b)(1). The matter before the Court is a massive piece of litigation which raises multiple important issues that have the potential of impacting thousands, if not hundreds of thousands, of student loan borrowers. The amount in controversy is potentially into the hundreds of millions of dollars, (April 17, 2018, Hr'g Tr. at 40), and every party involved is a sophisticated corporate or government entity with significant resources at its disposal. Accordingly, given that these factors weigh in favor of extensive discovery being proportional to the needs of the case, the Court is not inclined to sustain a proportionality objection without a showing that the sought after material is unimportant to the issues in this case and the burden or expense of producing such material is excessive in comparison to the size of this litigation.

         With those guiding principles in mind, the Court will now turn to the specific discovery disputes raised by the parties.

         A. Documents Related to Policies and Guidance Considered by Plaintiff and the Department of Education

          Defendants first argue that, based on several requests for production of documents that they served on Plaintiff, Defendants are entitled to documents related to proposed or final policies and guidance considered by Plaintiff and the Department of Education.[2] (Doc. 68 at 1). According to Defendants, this includes "information received from third parties, such as borrower surveys and complaints, and internal and external communications with stakeholders such as the Department of Education, State Attorneys General, borrowers, members of Congress, and consumer advocacy organizations." (Doc. 72 at 3). Defendants have identified a list of "fourteen publicly issued rules, regulations, or guidance that Defendants believe are clearly relevant to the administration of the government contracts and federal regulations governing federal student loan servicing and collection practices at issue in the Complaint." (Id.).

         Plaintiff argues that unpublished, predecisional views of, and internal discussions among, Plaintiffs staff are not binding on Plaintiff and are therefore not relevant to present action. (Doc. 73-1 at 4). Stated otherwise, Plaintiffs position is that, because unpublished views of an agency employee or group of agency employees are not official agency positions, they carry no legal significance and are thus have no relevance. (Doc. 70 at 1-2). Further, Plaintiffs contend that Defendants have failed to show that these documents are relevant because they have not shown that Defendants were aware of them and thus could have based their behavior on them. (Doc. 73-1 at 4; April 17, 2018, Hr'g Tr. at 62).

         Defendants reply that these documents are relevant because communications, internal and external, regarding policies or guidance that touch upon issues in this case are relevant to whether Defendants acted reasonably. (Doc. 76 at 9-10, 22; April 17, 2018, Hr'g Tr. at 59-60). For example, these documents could show that Plaintiff had internal policy debates about what conduct was reasonable and unreasonable and "the fact that there [were] legitimate policy debates about the range of reasonableness demonstrates that the conduct here was not so unreasonable as to justify massive fines." (Doc. 76 at 24-25). Further, Defendants argue that these documents are relevant because Defendants are vendors of the Federal Government through contracts with the Department of Education, and therefore many of the actions they took were at the direction of, or with the approval of, the Department of Education. (Id. at 6-8; April 17, 2018, Hr'g Tr. at 59-60). Thus, if there was a policy debate relevant to the issues in this case between Plaintiff and the Department of Education, Defendants contend that they are entitled to know if Plaintiff lost that policy debate and is bringing the present action in an effort to vindicate its position. (Doc. 76 at 22-23).

         The position Plaintiff takes is not without support. In United States v. Farley, the United States sued Farley because he failed to notify the Department of Justice and the FTC when the purchases he made of a particular stock triggered a reporting requirement under Section 7A of the Hart-Scott-Rodino Antitrust Improvements Act ("HSR Act"), 15 U.S.C. § 18a(a)(3)(B). 11 F.3d 1385, 1387 (7th Cir. 1993). During the course of litigation, the United States refused to turn over certain requested documents on the basis of the work product and deliberative process privilege. Id. at 1388. The dispute was ultimately whittled down to nine documents. Id. at 1388-89. The contested "documents included memoranda of FTC staff members and discussions of the Farley matter, as well as documents containing the FTC staffs views on the investment-only exemption and recommendations for future action." Id.

         On appeal of the District Court's order to produce those documents, the Seventh Circuit first found that the nine documents fell within the deliberative process privilege and therefore "the government could only be required to produce them if Farley made a showing that his need for the documents outweighed the government's interest in not disclosing them." Id. at 1389. Turning to the issue of need, the Court held that "[s]ince the documents at issue are not relevant to the controversy before us, Farley cannot, as a matter of law, make a showing of need." Id. at 1390. According to the Court:

The FTC documents are definitely not relevant to Farley's claim that his purchases fell within the investment-only exemption to the HSR Act's reporting requirements. This defense requires only that the district court interpret the statutory exemption and determine whether Farley's purchases were within the scope of that exemption. The suppositions of FTC staff members expressed in internal memoranda as to requirements of the Act are not pertinent to this task. In its attempt to decipher the meaning of a statute a court may rely on various tools, including official agency interpretations. Courts may not, however, rely on ...

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