Court: District Court, N.D. California; June 18, 2015; Federal District Court
The order addresses the ongoing legal dispute between Plaintiff John Lofton and Defendant Verizon Wireless (VAW) LLC regarding alleged violations of debt collection practices. Lofton claims that Verizon's third-party agent, Collecto, Inc., contacted him multiple times on his cell phone without his consent, violating the California Invasion of Privacy Act (IPA) and the federal Telephone Consumer Protection Act (TCPA). The case, initially filed in state court, has involved numerous discovery disputes and has been transferred to federal court, where the magistrate judge has convened multiple hearings and issued several discovery orders to facilitate the process.
In the current ruling, the court partially grants Lofton's motion to compel Verizon to respond to outstanding discovery requests and also partially grants his motion for sanctions against both Verizon and Collecto. The sanctions motion highlights concerns about their failure to provide necessary call detail records that Lofton argues are essential for certifying a class of non-Verizon customers impacted by erroneous calls. The ongoing discovery disputes date back to requests made in mid-2014, with many issues still unresolved since the inception of the case in 2012.
The legal standard for discovery, as outlined, emphasizes that parties may obtain information relevant to any claim or defense, even if such information is not directly admissible at trial, provided it could lead to admissible evidence. The court retains broad discretion to allow discovery of material relevant to the subject matter of the action.
Relevant evidence, as defined by Federal Rule of Evidence 401, is any evidence that makes a consequential fact more or less probable. Federal Rule of Evidence 402 states that all relevant evidence is admissible unless restricted by the U.S. Constitution, Acts of Congress, or other applicable rules. Courts should interpret relevancy broadly, allowing discovery unless the information sought is clearly irrelevant. District courts exercise broad discretion in determining relevancy for discovery. A party objecting to discovery requests must provide specific objections, and if the requesting party is dissatisfied, they can move to compel further responses. The moving party must detail why they believe they are entitled to the requested discovery while also showing compliance with proportionality requirements outlined in Fed. R. Civ. P. 26(b)(2), which assesses duplicative or burdensome discovery against its benefits. The burden of proof lies with the party seeking to compel discovery to show relevancy, while the opposing party must justify their objections and support them with sufficient evidence.
In the case at hand, the Plaintiff challenges the Defendant Verizon’s responses to extensive discovery requests, including interrogatories and requests for documents related to the Telephone Consumer Protection Act (TCPA). The Plaintiff objects to Verizon’s boilerplate objections regarding undue burden, relevance, and other grounds, asserting that specificity is required in such objections or they are waived. The Plaintiff seeks to compel Verizon to provide TCPA-related discovery from June 2008, arguing that this timeframe is relevant due to the four-year statute of limitations under the TCPA. Verizon contends that it is only required to provide discovery from November 2009, following the filing of the Third Amended Complaint. The Court acknowledges that discovery concerning calls made by debt collectors prior to November 2009 is relevant to the Plaintiff’s claims and is therefore discoverable. The Court will address Plaintiff’s specific objections to Verizon’s responses subsequently.
The Court will first address outstanding discovery requests related to documents from Verizon and Collecto, before considering requests for documents from other third-party debt collectors.
For Verizon and Collecto documents, Plaintiffs have raised issues concerning documents withheld or redacted as privileged by Verizon, which has not provided any privilege logs. Plaintiffs argue that Verizon waived its privilege by failing to submit a timely privilege log, as required by Rule 34 and the Court’s Standing Order. The Standing Order mandates that if a party claims privilege, a privilege log must be provided within fourteen days of disclosure or discovery response deadlines, with failure to do so potentially waiving the privilege.
While the Ninth Circuit does not impose an automatic waiver for late privilege logs, it allows for a case-by-case analysis to determine if late, detailed objections may still be valid. Factors considered include the effectiveness of the privilege assertion for evaluation purposes, the timeliness of the log, and the challenges faced in responding to discovery. Courts often do not find waiver if a party first presents insufficient boilerplate objections and later submits a detailed privilege log.
Despite Verizon's extensive delay in producing a privilege log while asserting various privileges for over a year, the Court will not rule that Verizon has waived its privilege claim at this time. Instead, it orders Verizon to produce a privilege log for documents withheld concerning its termination of services with Collecto, Inc. by June 19, 2015. Additionally, regarding RFP 63, Collecto asserts that all non-privileged documents related to the case Powell v. Collecto, Inc. have been produced, and the remaining documents are privileged settlement documents.
Powell reached a settlement with Verizon after six months of litigation, prompting Verizon to seek communications related to this settlement. While settlement communications are generally privileged under Rule 408 of the Federal Rules of Evidence, this privilege pertains to trial admissibility rather than discoverability. Courts have established that there is no federal privilege preventing the discovery of settlement agreements and related documents. Verizon estimated that only 10 documents related to the Powell settlement exist and must submit these for in camera review along with a privilege log for withheld documents by June 19, 2015, or risk waiving its privilege claim.
Requests for Admission (RFAs) 104-107 inquire whether Verizon was aware in 2012-2014 that its debt collectors could provide a list of outgoing calls. These RFAs are interpreted as seeking information on Verizon's knowledge about its debt collector, Collecto. Verizon is required to respond by June 19, 2015.
Request for Production (RFP) Nos. 53-54 require Verizon to produce documents referenced in disclosures under Rule 26(a)(1) and to certify that its responses are current by June 19, 2015. RFP No. 56 seeks the document "Verizon bad phone search.csv," deemed relevant by the Plaintiff, which Verizon must produce by the same deadline. RFP No. 60 requests documents supporting claims that cellular carriers cannot determine if California residents were in-state during calls; Verizon must amend its response to confirm all responsive documents have been produced by June 19, 2015. RFP No. 64 seeks communications about the case between Verizon and third-party vendors, with Verizon required to produce communications with Collecto by the same date, while the Court defers decisions regarding other vendors. Lastly, many disputes involve discovery requests for documents held by other third-party vendors used by Verizon as debt collectors.
Interrogatory No. 21 and RFA Nos. 56-107 request detailed information from Verizon regarding calls made by its debt collectors from 2008 to present, including call specifics and operational details of the dialing process. RFP No. 48 seeks documents to substantiate the information requested in Interrogatory 21. The Plaintiff argues for a court order to compel Verizon to respond, asserting the information is within Verizon's control. Verizon counters that the information is not under its legal control and responding would impose an undue burden, suggesting that the Plaintiff should pursue documents via Rule 45 subpoenas.
The Court, however, declines to compel Verizon to produce documents related to other debt collectors due to the procedural context, as a prior ruling had limited discovery regarding these entities until an amended pleading was filed. While this pleading has occurred, new motions related to TCPA claims against these collectors are anticipated. For the IPA claims, the Court mandates Verizon to disclose which vendors recorded relevant calls by June 19, 2015, allowing for the use of prior or new declarations.
Considering the vendors' lack of cooperation, obtaining documents may be challenging for the Plaintiff, who might need to utilize Rule 45 subpoenas. The Court instructs Verizon to seek vendor consent to litigate subpoenas in this District, with a report due by June 19, 2015, on their response. The Court partially grants the Plaintiff's motion to compel, ordering Verizon to pay half of the Plaintiff's reasonable attorneys' fees and costs associated with this motion, with a submission of these expenses required by June 25, 2015.
Plaintiff seeks significant sanctions against Verizon and Collecto for alleged discovery abuses related to obtaining call detail records to identify class members receiving erroneous calls from debt collectors. Requested sanctions include legal fees, nullification of Verizon’s privilege claims due to the crime-fraud exception, criminal prosecution referrals for obstruction of justice, and evidentiary sanctions supporting class certification. Both Verizon and Collecto oppose the sanctions, arguing that Verizon is not liable for misconduct attributed to Collecto and that both have complied with discovery obligations. Collecto contends there is no bad faith or sufficient evidence of prejudice from its actions, and that the proposed sanctions are excessive.
The Court expresses concern over the contentious nature of the discovery process but ultimately concludes that limited sanctions are warranted due to the misconduct of both Verizon and Collecto. The basis for imposing sanctions rests on the Court's inherent authority, which allows for sanctions against parties who act in bad faith or disobey court orders. The standard for establishing bad faith is stringent and requires evidence of willful misconduct or recklessness with improper intent. The Court affirms its authority to sanction both parties and nonparties involved in abusive litigation practices, emphasizing that it may impose sanctions even without statutory grounds to deter such behavior.
In Seco Nevada v. McMordie (In re Holloway), the Ninth Circuit established that courts have the authority to sanction nonparties funding litigation if they engage in bad faith or improper purpose. The court must explicitly find such misconduct before imposing sanctions. Specifically, the court may sanction Collecto if it is found to have used abusive litigation tactics with such motives. Verizon, as a party to the case, can also be sanctioned for its own bad faith actions, and under certain conditions, Collecto's misconduct may be attributed to Verizon.
The plaintiffs argue that sanctions are warranted due to Collecto's concealment of the Powell case, a previous TCPA lawsuit involving wrong number calls. Collecto's responses to interrogatories failed to disclose the Powell case despite its relevance, which the plaintiffs assert indicates bad faith. Collecto had previously claimed limitations in identifying wrong number calls in the Powell case, yet this information was omitted from responses to the plaintiffs' interrogatories. The plaintiffs contend that had the Powell case been disclosed earlier, it would have facilitated class discovery and potentially prevented issues related to the destruction of call logs.
Collecto claims the omission was inadvertent and without intent to conceal, but this assertion is presented only through attorney argument, which is not considered evidence in this district. The court notes that factual claims in opposition to motions must be supported by affidavits or declarations, highlighting a procedural requirement for establishing the basis of Collecto's defense.
Collecto's omission of the Powell case reference lacks a justifiable explanation, leading the Court to conclude that Verizon and Collecto acted with improper intent in failing to disclose this information in response to Interrogatories 19 and 20, thus warranting sanctions. Additionally, Plaintiff seeks sanctions based on misrepresentations by Verizon and Collecto regarding the existence of call detail records (CDRs), which document outgoing calls made by debt collectors. The Plaintiff asserts that the relevant discovery requests sought these CDRs, which Verizon failed to provide, instead offering unstructured account notes that incurred substantial consultant fees and attorney time to make searchable. Ultimately, it was revealed that Collecto's dialers did generate the requested call logs, leading the Plaintiff to claim that the failure to initially disclose these records was a bad faith effort to conceal evidence necessary for class certification, also meriting sanctions. Furthermore, Plaintiff alleges spoliation of evidence due to Collecto's practice of deleting call detail records after two years, a policy not changed until September 2014, which resulted in the loss of records from November 2011 to September 2012. Verizon and Collecto argue that the previously produced documents contain sufficient information, disputing the need for sanctions related to spoliation.
Federal trial courts possess discretionary authority to make evidentiary rulings regarding the destruction or spoliation of relevant evidence. Courts can sanction parties for failing to comply with discovery orders under Federal Rule of Civil Procedure 37(b)(2)(A). To impose sanctions for spoliation, a party must demonstrate three elements: (1) the litigant had a duty to preserve documents; (2) the documents were destroyed with a culpable state of mind; and (3) the destroyed documents were relevant. The burden of proof lies with the party seeking sanctions, and courts do not require evidence of bad faith; willfulness or fault may suffice. A party is expected to preserve documents when it should know that they could be relevant to future litigation, and while bad faith is sufficient for sanctions, mere notice of potential relevance is also adequate.
Sanctions may be inappropriate if the withheld documents are unlikely to materially affect the case's outcome, especially if alternative evidence is available. In this case, Collecto and Verizon acknowledged that call detail records are relevant to the plaintiffs' claims and that Collecto deleted these records for two years while the case was pending. The court noted that Collecto was aware of its duty to preserve these documents based on prior litigation. The destruction of these records constitutes spoliation, regardless of Collecto's intent. However, the court found that the situation does not involve the total loss of evidence, as Collecto maintained archives for all dialers and provided these records during discovery. The plaintiff argued that the archived data is less accessible and missing crucial information, but Collecto's expert contended that the archived data satisfies the plaintiff's needs.
The Court orders Collecto and Verizon to cover the expenses for expert Aaron Woolfson to reconstruct missing archived call log data as specified by the Plaintiff. Plaintiff seeks sanctions against Verizon for not complying with prior Court Orders related to document retrieval from Verizon's debt collectors, specifically referencing Docket Nos. 71 and 106. In Order 71, the Court clarified that Verizon had the right to access documents regarding the use of automatic dialers by its debt collectors. Order 106 directed the parties to communicate with third-party debt collectors to assess the possibility of producing call detail records. The Court finds that Verizon complied with Order 71 and that Order 106 did not mandate the production of records but rather facilitated discussions about feasibility. Verizon's inability to secure documents from other debt collectors is not grounds for sanctions, and the Court declines to undermine the joint defense privilege between Verizon and these debt collectors.
Additionally, Plaintiff requests sanctions against Collecto for not providing adequately prepared Rule 30(b)(6) deponents on class discovery topics. Rule 30(b)(6) requires corporations to designate knowledgeable individuals to testify on their behalf. A failure to provide adequate witnesses can lead to sanctions under Rule 37(d)(1)(A)(i), which treats such a failure as a non-appearance.
Failure to adequately prepare a 30(b)(6) witness can be equated to a failure to appear if the designated witness lacks knowledge on most topics assigned. In *v. O.C. Seacrets*, the designated witness, Peter Cappola, could not recall instructions related to the collection of account notes (EOS 491-95) and was unaware of the completeness of the data, admitting omissions including a specific call. Another witness, Steve Madden, initially stated that Collecto had not been required to provide information about wrong number calls in previous litigation, but later contradicted himself based on prior filings. Both witnesses were deemed unprepared for their designated topics, which were specific enough to warrant that they should have been able to testify competently. However, since alternative records existed, the court refused to mandate further depositions regarding EOS 491-95.
Additionally, the plaintiff sought sanctions against Verizon for allegedly obstructing subpoenas issued to debt collectors, arguing that Verizon prompted the debt collectors to object or quash the subpoenas. The plaintiff requested the court apply the crime-fraud exception to attorney-client privileges to compel Verizon to disclose communications with debt collectors. The court declined this request, affirming that Rule 45 allows parties to issue subpoenas to non-parties, who then retain the right to object or move to quash such requests.
The Rule does not allow an opposing party to instruct a subpoena recipient to disregard the subpoena. Courts have sanctioned parties who improperly advised third parties not to comply with subpoenas, as demonstrated in Price v. Trans Union, L.L.C. and Fox Industries, where sanctions were imposed for such conduct. In the current case, there is no evidence that Verizon instructed its third-party vendors to object to subpoenas or not respond. Despite a vendor's declaration that it was "informed" of Verizon's objections, this does not prove any interference by Verizon. The court determined that Verizon made efforts to have its vendors respond, thus it will not impose sanctions related to third-party subpoenas, nor will it find that Verizon's conduct constituted obstruction of justice.
On the sanctions imposed, the court found that Collecto failed to disclose relevant litigation, concealed and destroyed critical call detail records, and inadequately prepared witnesses for depositions. While Verizon was considered to have engaged in sanctionable conduct by allowing the destruction of records, it did not demonstrate egregious misconduct warranting severe sanctions. Consequently, Collecto will be required to pay some of the plaintiff's costs for the motion for sanctions, including the expenses for further depositions. Both Collecto and Verizon are responsible for the costs associated with reconstructing archived data.
Collecto and Verizon are ordered to bear half of the Plaintiff's reasonable expenses related to a motion for sanctions due to limited success in that motion. The Court emphasizes that sanctions beyond this are inappropriate, noting that the crime-fraud exception does not invalidate Verizon's claim of privilege regarding communications with debt collectors. There is no basis for criminal prosecution against Verizon or Collecto for obstruction of justice. The request for a default judgment as a sanction is rejected, as most factors outlined in Halaco v. Costle weigh against it. Although Verizon and Collecto acted with willfulness, extraordinary circumstances for default are absent, and lesser sanctions are deemed sufficient. The Court has extended the class certification deadline to allow the Plaintiff to obtain necessary information, acknowledging some prejudice due to delays but emphasizing that substantial discovery has already been provided. The Plaintiff is permitted to construct Collecto’s dial list at the expense of Collecto and Verizon, aligning with the treatment of other TCPA plaintiffs. The Court grants the Plaintiff's motions to compel and for sanctions in part.
Collecto and Verizon are required to adhere to the court's orders, which include deadlines for document production, privilege logs, scheduling renewed 30(b)(6) depositions, and providing expert Aaron Woolfson to the Plaintiff for reconstructing archived call log data. The Plaintiff must submit a written account of reasonable litigation expenses by June 25, 2015. This order resolves Docket Nos. 119 and 129. The specific interrogatory asked Collecto to identify any legal proceedings related to its ability to locate records demonstrating calls made to incorrect numbers. Plaintiff’s counsel admitted uncertainty regarding when they first learned about the call logs but indicated discovery through personal efforts or their expert. The excerpt notes that courts have sanctioned parties for unjustified interference with Rule 45 subpoenas, typically when they adopted erroneous objections from adversaries; however, this situation is distinct.
