The U.S. Court of Appeals for the Eleventh Circuit has upheld the U.S. District Court for the Northern District of Georgia’s sanction against the Consumer Financial Protection Bureau (CFPB) for failure to comply with a court order requiring the bureau sit for Rule 30(b)(6) depositions.
The district judge found the CFPB engaged in misconduct and abuse of the discovery process by refusing to be deposed.
The underlying lawsuit, CFPB v. Brown, involved an action brought by the CFPB for alleged violations of the Consumer Financial Protection Act (CFPA) and the Fair Debt Collection Practices Act against 18 defendants for engaging in or substantially assisting in an alleged fraudulent debt collection scheme.
The CFPB alleged several individuals “created limited liability companies in Georgia and New York” to “perpetrate a debt-collection scheme targeting millions of consumers.”
Thirteen of the defendants were individuals, and their respective companies, who directly participated in the scheme. The other five defendants—the appellees in this case—were not direct participants of the scheme, but provided services to the individuals who were.
The CFPB alleged these service-providing entities “provided substantial assistance” to the debt collectors’ “unlawful conduct” and engaged in “unfair acts or practices” in violation of the CFPA, suggesting that they knew or should have known about the unlawful conduct being perpetrated by the other defendants.
The sanctioned conduct by the CFPB began during the discovery process. When served with a notice for deposition pursuant to Federal Rule of Civil Procedure 30(b)(6), the bureau asserted that it had “already… provided [the information] to defendants… in response to written interrogatories,” that “defendants inquired into topics within the law enforcement and deliberative process privilege,” and “the depositions [were] an improper attempt to question [CFPB] counsel as to counsel’s mental impression and analyses.”
The district court overruled the objections, reasoning that Rule 30(b)(6) applies with equal force to government agencies and “factual matters are subject to inquiry even if those matters have been disclosed in interrogatory responses.”
The CFPB then moved for protective orders to reduce the scope of defendants’ questioning, relying on those same arguments. The court granted in part, determining defendants could enquire into facts – including exculpatory facts – but that questions relating the bureau’s trial strategy were off limits.
In the first deposition, the CFPB used myriad tactics to avoid answering questions. This included more than 70 work product objections and objections to fact-based questions the court had instructed be answered.
The bureau objected to basic yes-or-no questions of fact, including a simple question of whether CFPB counsel had spoken to any witnesses in the case.
The CFPB also equipped its witness with so-called “memory aids” from which the witness read verbatim for extended periods of time.
“In response to one question,” the court noted, “the witness read from his memory aid for more than 40 minutes and then, after a break, continued reading for 18 minutes before the parties stipulated that he would have read another 93 pages.”
Additionally, in response to the district court’s instruction that exculpatory facts were fair game, the CFPB took the position that it had not “identified any exculpatory facts” in the entire record.
The district court once again ordered the bureau to submit to depositions and to cease its obstructionist tactics. The CFPB, however, continued this conduct for an additional four depositions.
Because of the CFPB’s contumacious conduct, defendants moved for sanctions pursuant to Rule 37, requesting the district court strike the CFPB’s claims against them. The district court granted the defendants’ motion. The bureau appealed.
“The standard of review for a Rule 37(b) dismissal is not whether the reviewing court would, as an original matter, have dismissed the action; it is whether the district court abused its discretion in dismissing the action,” the circuit court wrote.
The court noted that Rule 37(b) states: “If a party or a party’s officer, director, or managing agent—or a witness designated under Rule 30(b)(6) or 31(a)(4)—fails to obey an order to provide or permit discovery . . . the court where the action is pending may issue further just orders.”
The circuit court notes the district court repeatedly gave orders to the CFPB to submit to the depositions but the bureau maintained an obstructionist position and refused to comply with the district court’s orders.
The Eleventh Circuit came to the conclusion that, because of the bureau’s conduct, and the repeated efforts of the defendants and the district court to force the CFPB to comply with the Federal Rules of Civil Procedure, the district court did not act inappropriately in issuing sanctions against the CFPB. The circuit court further held the district court’s sanctions order dismissing the CFPB’s claims against the five appellees was not an abuse of discretion and upheld the dismissal.