United States District Court, N.D. California
DISCOVERY ORDER Re: Dkt. Nos. 234, 235
JOSEPH C. SPERO, Magistrate Judge.
In this individual and class action, Plaintiff Heather L. Newton ("Newton") and Defendants Rocky Mountain Bank & Trust ("RMBT") and Global Client Solutions, LLC ("GCS") submitted two joint letters regarding discovery disputes, which the Court construes as Newtons motions to compel responses to several Requests for Production ("RFPs") and one Request for Admission ("RFA"). See Dkt. Nos. 234, 235. These motions are presently before the Court on an order of reference from Judge Edward M. Chen, presiding in this case. See Dkt. Nos. 236. For the reasons explained below, the Court GRANTS Newtons motion to compel RMBT to comply with RFP Nos. 31 and 36 and GCS to comply with RFP No. 30; GRANTS IN PART AND DENIES IN PART Newtons motion to compel RMBT to comply with RFP No. 32 and GCS to comply with RFP No. 41; and GRANTS Newtons motion to compel GCS to respond to RFA No. 28.
The factual background of this case is set out more fully in Judge Chens previous orders on motions for summary judgment and motions to dismiss, and only a summary is presented here. See Dkt. Nos. 204 at 2-4 ("Order on MSJ"), 223 at 1-3 ("Order on MTD").
In August 2009, Plaintiff signed up with American Debt Services ("ADS") for "debt settlement and restructure services, " which "consist[ed] of negotiating with creditors on behalf of [Newton] for reduction of debt and formulation of a payment plan." See Order on MSJ at 2 (citing Dkt. No. 146-1). Quality Support Services ("QSS") provided certain "customer service functions" and other functions to ADS clients. See Order on MSJ (citing Dkt. No. 185). When Newton signed up for the debt settlement services with ADS, she authorized RMBT to create a custodial bank account. See Order on MSJ at 3 (citing Dkt. Nos. 144, 145-1). Newton also authorized GCS to transfer and disburse funds from her primary checking account into the RMBT account. See Order on MSJ at 3 (citing Dkt. No. 163-1). Newton then stopped making payments to and ceased communications with her creditors, per Defendants' instructions. See Order on MSJ at 3-4 (citing Dkt. No. 163).
After Newton was contacted by or contacted three of her creditors regarding her debts- apparently, Defendants had never contacted them-Newton terminated her account with ADS. See Order on MSJ at 4 (citing Dkt. Nos. 146-4, 163). Ultimately, Newton paid a total of $4, 206.50 to Defendants, of which $2, 200 was paid to one of her creditors, $70.04 was refunded to her, and the balance was kept by Defendants. See Order on MSJ at 4 (citing Dkt. No. 146-4).
Previously, in April 2009, RMBT had consented to a Federal Deposit Insurance Corporation ("FDIC") order to "cease and desist from... unsafe or unsound banking practices and violations of laws and/or regulations." See Dkt. No. 164-1 at 2 ("Cease and Desist Order"). Paragraph 13 of the Cease and Desist Order provided that RMBTs "board of directors shall provide adequate and effective oversight over the Banks third-party relationships, specifically focusing on monitoring the activities of third-party payment processors and their customers... [and] [e]nsuring... compliance with Federal and state consumer protection laws, regulations, and policies." See id. ¶ 13.
In June 2011, Newton brought this suit against ADS, QSS, RMBT, and GCS for violations of state and federal consumer protection laws in connection with debt settlement services. See Order on MSJ at 4. For the purposes of this order, two sections of the so-called "Proraters Law" of the California Financial Code are at issue. First, the Proraters Law requires the licensure of "proraters, " who are defined as "person[s] who, for compensation, engage in whole or in part in the business of receiving money or evidences thereof for the purpose of distributing the money or evidences thereof among creditors in payment or partial payment of the obligations of the debtor." See Order on MSJ at 17 (quoting Cal. Fin. Code § 12200). Second, the Proraters Law mandates a ceiling above which proraters cannot charge consumers for services; the relevant ceiling in this case is twelve percent for the first $3, 000 distributed to creditors. See Order on MSJ at 17 (citing Cal. Fin. Code § 12314). There is evidence that ADS and QSS directly violated the Proraters Law. See, e.g., Order on MSJ at 21 (noting evidence to support proposition that RMBT and GCS knew of ADS and QSSs violations of the Proraters Law).
Following RMBT and GCS' motions for summary judgment and motions to dismiss, Judge Chen ruled that although GCS and RMBT cannot be directly liable for violations of the Proraters Law, the following claims could proceed to trial: (1) RMBT could be liable for aiding-and-abetting a violation of the Proraters Law; (2) GCS could be liable aiding-and-abetting a violation of the Proraters Law; and (3) GCS could be liable for conspiring to violate the Proraters Law. See Order on MTD at 3, 8.
Newton moves to compel RMBT to comply with RFP Nos. 31, 32, and 36, and GCS to comply with RFP Nos. 30 and 41. See Dkt. Nos. 234, 235. Newton also moves to compel GCS to respond to RFA No. 28. RMBT and GCS make various objections.
A. Documents Received From or Provided to Federal Regulatory Authorities
For the reasons explained below, Newtons motion to compel RMBT to comply with RFP Nos. 31 and 36 and GCS to comply with RFP No. 30 is GRANTED.
RFP No. 31 requests RMBT to "[p]roduce all documents mentioning debt settlement that RMBT received from or provided to any Federal regulatory authority between June 29, 2007 and December 31, 2013." See Dkt. No. 234-1 at 2. RMBT has represented that the only responsive documents fall into two categories: (1) documents and communications exchanged between RMBT and the FDIC pertaining to the Cease and Desist Order, and (2) certain requests for information from the FDIC pertaining to various debt resolution companies. See Dkt. No. 234 at 1, 2. RMBT objects to the first category on the basis that such documents are protected from disclosure by FDIC regulations; namely, 12 C.F.R. § 309 et seq. See id. at 2. RMBT objects to the second category on the basis that the documents are irrelevant to the claim that RMBT aided and abetted ADS and QSS in violating the Proraters Law, because none of the documents pertain to those two companies. See id. at 3. RMBT also objects to the time period of June 29, 2007 to December 31, 2013 as ...