Government may proceed in consumer protection suit

Where defendants sued for violating federal and state laws while administering “immigration bonds” for indigent consumers facing deportation moved to quash subpoenas sent to non-parties, their motion was denied. The subpoenas properly sought information to “fully understand” the defendants’ financial condition and relevant business relationships.

Background

The Consumer Financial Protection Bureau, or CFPB, the Commonwealth of Massachusetts, the People of the State of New York and the Commonwealth of Virginia filed a 17-count complaint alleging that corporate and individual defendants violated the Consumer Financial Protection Act, or CFPA, and similar state laws in administering “immigration bonds” for indigent consumers facing deportation. The matter is before the court further to its prior order denying in part and taking under advisement in part defendants’ “Revived Motion to Stay and Motion to Quash Third-Party Subpoenas.”

Timeliness

Plaintiffs argue that defendants’ motion to quash or for protective order is untimely with respect to 22 subpoenas not attached to their revived motion “because the dates for response to those subpoenas ha[d] passed” before defendants moved to quash them. However the court is considering defendants’ request for protective order as to the nonparties’ information under Rule 26(b)-(c), which does not explicitly limit the time within which a party must move for a protective order.

Next, plaintiffs argue that defendants are not entitled to the remaining relief sought in their motion — i.e., that the court quash the third-party subpoenas and “preclud[e] Plaintiffs from seeking discovery on the Non-Parties” — because defendants cannot assert a nonparty’s legal rights or interests. I previously found that defendants had a personal right or interest in protecting their own financial information from disclosure.

The remaining information sought by those (and 22 other) subpoenas relates only to the nonparties’ “financial records and communications with the banks.” Defendants do not claim any “personal right to, or privilege in” that information. Defendants instead suggest that they can vicariously assert Mr. Okonski’s and Mr. Schneider’s personal “privacy rights” because “the Fourth Circuit has “directed” lower courts to protect the ‘privacy or confidentiality interests’ of ‘others who might be affected’ by a subpoena.”

Contrary to defendants’ position, this language does not “direct” lower courts to always “consider the interests of … others who might be affected” by a third-party subpoena. Moreover, defendants here claim no cognizable interest in either the information sought by plaintiffs’ third-party subpoenas or the procedure by which plaintiffs may have obtained that information. Accordingly, defendants have not demonstrated standing to challenge any of plaintiffs’ subpoenas to the extent they seek information related to Mr. Okonski, Mr. Schneider or the non-party entities.

Nonetheless, the court must ensure that discovery stays within the scope permitted by Rule 26(b)(1). Here, the Court looks to the CFPA and state consumer-protection laws to determine whether the information sought is relevant under Rule 26(b)(1).

Defendants do not specifically articulate why the nonparty information sought in plaintiffs’ subpoenas is “irrelevant” to the claims or defenses in this action or “not proportional” to the needs of the case. “Instead, Defendants mistakenly try to shift the burden of persuasion off of themselves and onto Plaintiff[s] as the requesting party.” Defendants are “resisting discovery” here, and they bear the burden “to explain specifically why [their] objections, including those based on irrelevance, are proper given the broad and liberal construction of federal discovery rules.” They have not done so.

Moreover, plaintiffs argued persuasively that information about defendants’ business and financial relationships with the non-party entities and individuals “is relevant because it ‘logically relates’ to claims and fact[s]” at issue in this case, including potential remedies if plaintiffs prevail on their CFPA claims. Plaintiffs also produced evidence demonstrating that Donovan, Moore and Ajin are the “sole owners” of Nexus, “which in turn wholly owns” several non-party entities listed in plaintiffs’ subpoenas, and that “Nexus Programs, Inc. is a ‘predecessor entity … providing bond securitization services for [immigration] detainees thought the use of GPS devices.’”

Plaintiffs correctly note that their “subpoenas seek documents concerning entities in which Mr. Okonski and Mr. Schneider have rights to sign or make changes on the accounts,” not the nonparty individuals’ personal financial records. Accordingly, I find that plaintiffs may obtain and review the requested nonparty information to “fully understand” defendants’ financial condition and relevant business relationships, as they prepare their case for trial.

Defendants’ revived motion to stay and motion to quash third-party subpoena denied.

Consumer Financial Protection Bureau v. Nexus Services Inc., Case No. 5:21-cv-00016, May 19, 2022. WDVA at Harrisonburg (Hoppe). VLW 022-3-218. 22 pp.