Opinion
19-CV-05255(EK)(PK)
2022-02-28
Giselle FRITZ, Plaintiff, v. LVNV FUNDING, LLC; Resurgent Capital Services, L.P. ; Mandarich Law Group, LLP; et al., Defendants.
Matthew Austin Schedler, Marisa-Lyn Menna, Camba Legal Services, Emma Caterine, Ahmad Keshavarz, Law Office of Ahmad Keshavarz, Brooklyn, NY, for Plaintiff. Arthur Sanders, Barron & Newburger, P.C., New City, NY, Mitchell Lee Williamson, Barron & Newburger, PC, Somerset, NJ, for Defendants LVNV Funding, LLC, Resurgent Capital Services, L.P. Nicole Strickler, Pro Hac Vice, Stephanie Strickler, Pro Hac Vice, Messer Strickler Burnette, Ltd., Barrington, IL, for Defendants Mandarich Law Group, LLP, Darleen V. Karaszewski.
Matthew Austin Schedler, Marisa-Lyn Menna, Camba Legal Services, Emma Caterine, Ahmad Keshavarz, Law Office of Ahmad Keshavarz, Brooklyn, NY, for Plaintiff.
Arthur Sanders, Barron & Newburger, P.C., New City, NY, Mitchell Lee Williamson, Barron & Newburger, PC, Somerset, NJ, for Defendants LVNV Funding, LLC, Resurgent Capital Services, L.P.
Nicole Strickler, Pro Hac Vice, Stephanie Strickler, Pro Hac Vice, Messer Strickler Burnette, Ltd., Barrington, IL, for Defendants Mandarich Law Group, LLP, Darleen V. Karaszewski.
MEMORANDUM & ORDER
ERIC KOMITEE, United States District Judge: Plaintiff Giselle Fritz asserts claims against two debt-collection companies, LVNV Funding, LLC and Resurgent Capital Services, L.P. (collectively "the Companies"), for attempting to collect a nonexistent debt from her. Plaintiff alleges violations of the Fair Debt Collection Practices Act, 15 U.S.C. §§ 1692 - 1692p, and New York General Business Law § 349(a).
Fritz requested discovery of certain documents allegedly relevant to whether the Companies engaged in a pattern and practice of attempting to collect on nonexistent or vacated judgments. After the Companies refused the request, Fritz moved to compel production of the documents. Magistrate Judge Peggy Kuo granted the motion. Defendants appealed. For the reasons set forth below, I affirm Judge Kuo's order to compel.
I. Background
Fritz claims that the Companies brought an action to collect credit card debt from her that she did not owe. Compl. ¶ 23, ECF No. 1. When she did not pay, the Companies obtained a default judgment against her in 2007. Compl. ¶ 27. Fritz asserts that LVNV improperly obtained the judgment by submitting to the court a false affidavit of service. Compl. ¶ 30. Fritz and LVNV in 2011 stipulated to a vacatur of the judgment once Fritz discovered it. Compl. ¶¶ 31-33. However, Fritz alleges that the Companies continued to send letters attempting to collect on the default judgment long after it was vacated. Compl. ¶¶ 35-60.
As part of discovery in this case, Fritz requested documents that she alleged would expose the Companies’ pattern and practice of attempting to collect on vacated or otherwise nonexistent judgments. Specifically, she requested documents that would demonstrate (1) "the number[ ] of times [the Companies] have attempted to collect on a non-existent judgment from January 1, 2018 to the present," and (2) "the number of times [the Companies] have been sued for attempting to collect on a non-existent judgment from January 1, 2018 to the present." Pl.’s First Set of Discovery to All Defs. 8, ECF No. 39-1. Following protracted wrangling before the Magistrate Judge, and in an apparent effort to accommodate the Companies’ claims of difficulty producing the documents, Fritz amended her request to the production of (1) "the complaints in all lawsuits filed against [the Companies]," rather than ones specifically relating to attempts to collect on nonexistent judgments, and (2) "consumer complaints regarding collection attempts on nonexistent judgments that did not result in lawsuits, rather than searching for and producing every instance of the conduct." Mtn. to Enforce 3, ECF No. 65.
The Companies have refused to provide any of this information, asserting that Plaintiff's need for such documents is disproportional to the burden of producing them. Letter Mot. to Compel 4–5, ECF No. 39. Instead, as part of the proceedings before Judge Kuo, the Companies have produced two affidavits supporting their assertion that providing such documents would be unduly burdensome. Herthneck Aff., ECF No. 50-8; Freeman Aff., ECF No. 58-1. Additionally, LVNV have argued that punitive damages under section 349 are capped at $1,000 and that this cap weighs against a finding of proportionality.
In January 2021, Judge Kuo granted Fritz's motion and ordered the production of the documents she requested. Judge Kuo explained that she need not yet decide whether Section 349 caps punitive damages. Instead, she proceeded to operate under the assumption that punitive damages were not capped. See Order of January 31, 2021. She also found that the Companies "have failed to produce supplemental information to allow the Court, pursuant to Fed. R. Civ. P. 26(b)(1), to weigh the burden of production against the likely benefits." Id. Accordingly, she ordered the Companies to respond to Fritz's request.
On March 4, 2021, the Companies appealed Judge Kuo's order. See Appeal of Magistrate Judge Decision 1, ECF No. 73.
II. Legal Standard
"[A] party seeking to overturn a discovery ruling by a magistrate judge generally bears a heavy burden." Mental Disability L. Clinic v. Hogan , 739 F. Supp. 2d 201, 203–04 (E.D.N.Y. 2010) (citations and internal quotation marks omitted and alterations accepted). Because the order resolved a nondispositive motion, this Court reviews Judge Kuo's order for "clear error." See Fed. R. Civ. P. 72, advisory committee's note to 1983 amendment. "This standard is highly deferential and only permits reversal where the magistrate abused his discretion." Mental Disability L. Clinic , 739 F. Supp. 2d at 204. Under this standard, the question is whether the magistrate judge "fail[ed] to apply or misapplie[d] relevant statutes, case law or rules of procedure," see Weiner v. McKeefery , No. 11-CV-2254, 2014 WL 2048381, at *3 (E.D.N.Y. May 19, 2014), or, in entering a finding of fact, rendered a decision that leaves this Court "with the definite and firm conviction that a mistake has been committed," see United States v. Isiofia , 370 F.3d 226, 232 (2d Cir. 2004).
III. Analysis
To be discoverable, information must be both "relevant to any party's claim or defense" and "proportional to the needs of the case." Fed. R. Civ. P. 26(b)(1). The Companies do not dispute the relevance of the requested documents here. Thus, the question is simply whether the "burden or expense of production outweighs its potential benefits." Quinby v. WestLB AG , 245 F.R.D. 94, 106 (S.D.N.Y. 2006).
Because the Companies claim a disproportionate and undue burden, they "must, with some degree of specificity, illustrate the nature and extent of the burden of production." Barella v. Village of Freeport , 296 F.R.D. 102, 105 (E.D.N.Y. 2013) ; see also Trilegiant Corp. v. Sitel Corp. , 275 F.R.D. 428, 431 (S.D.N.Y. 2011) ("Once relevance has been shown, it is up to the responding party to justify curtailing discovery.").
The Companies’ argument fails here because they have not made the required showing, with specificity, that they would suffer a burden disproportionate to the potential benefits if required to produce the documents. Because the burden is theirs, I thus first turn to the evidence the Companies have offered in their effort to make this showing.
A. Undue Burden
The party objecting to a discovery request must describe the burden of responding to the request by "submitting affidavits or offering evidence revealing the nature of the burden." John Wiley & Sons, Inc. v. Book Dog Books, LLC , 298 F.R.D. 184, 186 (S.D.N.Y. 2014). "[W]hether production of documents is unduly burdensome or expensive turns primarily on whether [they are] kept in an accessible or inaccessible format (a distinction that corresponds closely to the expense of production)." Zubulake v. UBS Warburg LLC , 217 F.R.D. 309, 318 (S.D.N.Y. 2003).
The only cognizable evidence the Companies point to are the aforementioned affidavits. These two documents do not, however, establish that it would be unduly burdensome to produce either category of information at issue.
With respect to the lawsuit complaints, the Companies submitted an affidavit by Anne Herthneck, a paralegal employed by Resurgent. She explains that Resurgent has a program referred to as "CounselLink," which "keeps track of all lawsuits filed against Resurgent/LVNV and acts as a database of all relevant information for each lawsuit." Herthneck Aff. ¶ 3. Herthneck indicates that the database contains some 6,000 cases and that "there is no automated way" to review all those cases "to determine whether any of [LVNV's] closed cases contain ... allegations" of attempts to collect on nonexistent or vacated judgments." Id. ¶¶ 7-8. This concern is not responsive to the actual document request, as Plaintiff is no longer asking the Companies to isolate the cases containing such allegations. She is, instead, asking for all 6,000 filings, and taking on herself the obligation to identify allegations of that nature. Herthneck acknowledges that her "team has access to all of the files in CounselLink and can access each file using the name of the consumer," id. ¶ 5, but she provides no information regarding the process to be employed, nor any rigorous estimate of the time required, to produce all 6,000 complaints.
Turning to the customer complaints (as distinct from legal complaints), the Companies submitted an affidavit by Karen Freeman, the "Senior Director — Servicer Support" for Resurgent. Freeman Aff. ¶ 1. Her affidavit states that Fritz's counsel was apparently under the mistaken impression that the customer complaints would be located in something called "The Bridge" that counsel described as a "database." Id. ¶ 2. "In fact," Freeman explains, "The Bridge is not a database, but is a portal" used by collection servicers that does not contain customer complaints. Id. ¶¶ 2–4. Rather, according to Freeman, "reporting" of "[i]ndividual disputes" is "done through a SUF (Servicer Update File) or through an Excel-based Disputes file." Id. ¶ 5. According to Freeman, "[b]oth methods of transmission result in the dispute data being loaded in AMCS." Id.
Notably, Freeman does not explain anything further about what the terms "SUF (Servicer Update File)," "Excel-based Disputes file," or "AMCS" mean, or even say what the abbreviations stand for. Id. ¶ 6. She does explain that "[t]he Active Disputes report is accessible through The Bridge," but that that report does not contain disputes "older than two weeks." Id. She further represents that "Resurgent is capable of searching disputes by certain limited categories, but there is no category ‘Enforcement of Non-Existent Judgments’ or "Enforcement of Vacated Judgments.’ " Id.
The affidavits fail to show undue burden, or really any meaningful burden at all, that is relevant to Fritz's suggested arrangement. Neither affidavit describes a difficulty that would arise from being required to produce all 6,000 litigation complaints located in CounselLink. And neither affidavit describes, with specificity, the challenges that would make searching for the requested non-lawsuit complaints overly burdensome. Freeman asserts that there is no category in the Companies’ systems that would immediately produce Fritz's desired results. But she does not describe how long it would take to locate the complaints. In fact, she does not even describe what the process would be or explain the jargon and abbreviations that she uses.
Thus, the Companies have failed to offer sufficient specific evidence of their burden to produce the documents Fritz seeks.
B. Needs of the Case
But even if the Companies have not provided much, if any, information about the burden or expense of producing the requested documents, the question remains whether there is a "need" for the documents sufficient to justify the burden of their production. I agree with Judge Kuo that there is such a need for the documents here.
Fritz asserts that the documents are needed to show a pattern or practice of attempting to collect on vacated or nonexistent judgments, which would support a claim for punitive damages under section 349. See, e.g. , Tr. of Telephone Conference on April 3, 2020, at 33:19–21, ECF No. 65-1. In assessing the discovery request's proportionality, a possible cap on punitive damages informs the "needs of the case." Fed. R. Civ. P. 26(b)(1) ; see also Lifeguard Licensing Corp. v. Ann Arbor T-shirt Co., LLC , No. 15-CV-8459, 2016 WL 5936887, at *2 (S.D.N.Y. Oct. 11, 2016) (finding "discovery is proportional in light of the damages that Plaintiffs seek").
Section 349 prohibits deceptive acts or practices in the conduct of any business, trade, or commerce. N.Y. Gen. Bus. Law § 349(a). At issue here is the provision of section 349 governing damages for a violation. That provision states that a private plaintiff may recover "his actual damages or fifty dollars, whichever is greater." Id. § 349(h). Additionally, "[t]he court may, in its discretion, increase the award of damages to an amount not to exceed three times the actual damages up to one thousand dollars, if the court finds the defendant willfully or knowingly violated this section." Id.
Under New York law, punitive damages are appropriate when the defendant "evidences a high degree of moral culpability, or where the conduct is so flagrant as to transcend mere carelessness, or where the conduct constitutes willful or wanton negligence or recklessness." Wilner v. Allstate Ins. Co. , 71 A.D.3d 155, 893 N.Y.S.2d 208, 218 (2010). Thus, the question of whether the Companies have continued to attempt to collect on vacated or nonexistent judgments, even after being served up a slew of lawsuits and complaints, is relevant to whether Fritz may be entitled to punitive damages.
Judge Kuo noted that the New York Court of Appeals has not clearly resolved the question of whether punitive damages under Section 349 are subject to the cap of $1,000. Nevertheless, following the longer and more recent line of authority, she held that the possibility that Fritz may recover punitive damages was sufficient to "weigh the burden of production against the likely benefits." January 31, 2021 Order. This assessment was not clearly erroneous.
Whether punitive damages are capped under GBL § 349 presents a question on which the case law is split. Bueno v. LR Credit 18, LLC , 269 F. Supp. 3d 16, 19–24 (E.D.N.Y. 2017) (collecting cases). While one set of cases holds that punitive damages are subject to the $1,000 cap, another holds that the cap applies to treble damages, not punitive damages. Id. For instance, the Second Department has taken the latter view. Wilner , 893 N.Y.S.2d at 218 ("Under General Business Law § 349 consumers may recover actual damages in any amount, and may recover treble damages under General Business Law § 349(h) up to $1,000). Moreover, the plaintiffs may seek both treble damages and punitive damages." (citations omitted). Various district courts in the Second Circuit have adopted the same reading. See, e.g. , Koch v. Greenberg , 14 F. Supp. 3d 247, 278–79 (S.D.N.Y. 2014).
Nevertheless, even if the weight of the case law was equally distributed, in the absence of a clear answer by the New York Court of Appeals, Judge Kuo certainly did not err in adhering to the more recent line of cases. Defendants have not "identif[ied] [the] precedents prohibiting the magistrate judge from exercising her discretion or making a particular legal finding." Farmer v. Woodside Optical Corp., No. 16-CV-5178, 2017 WL 3578697, at *2 (E.D.N.Y. Aug. 17, 2017). Since "a magistrate judge's decision is contrary to law only where it runs counter to controlling authority," Pall Corp. v. Entegris, Inc. , 655 F. Supp. 2d 169, 172 (E.D.N.Y. 2008), Judge Kuo's assessment that punitive damages can be recovered under section 349 was firmly within her discretionary authority.
C. The Companies’ Other Arguments
The companies press additional arguments that have no bearing on the discovery motion. First, LVNV contends that speculative claims about deceptive actions taken against other consumers are insufficient to support a suit under section 349. But Fritz seeks to recover based on her own injuries, not upon actions against other consumers. Her need for the requested documents stems from a desire to prove that the actions taken against her were part of a pattern or practice, as discussed above.
Second, LVNV's argument that the discovery requests are barred by Section 349 ’s statute of limitations has no basis in the law. See Fitzgerald v. Henderson , 251 F.3d 345, 365 (2d Cir. 2001) ("A statute of limitations does not operate to bar the introduction of evidence that predates the commencement of the limitations period ....").
I have also carefully considered the Companies’ remaining arguments and conclude they are without merit.
IV. Conclusion
For the reasons set forth above, the Companies have failed to show that it would suffer undue burden if required to produce Fritz's requested documents. Accordingly, the Court affirms Judge Kuo's order.
SO ORDERED.