FTC v. Am. Future Sys., Inc.
FTC v. Am. Future Sys., Inc.
2022 WL 368578 (E.D. Pa. 2022)
January 28, 2022
Slomsky, Joel H., United States District Judge
Summary
The Court ordered AFS to respond fully to each discovery request from January 1, 2016 and July 1, 2015 to present, as well as to produce documents, recordings, emails, and other ESI (“ESI”) from July 1, 2015 to present. AFS was also ordered to add certain custodians to the custodial list for purposes of ESI discovery.
Additional Decisions
FEDERAL TRADE COMMISSION, et al., Plaintiffs,
v.
AMERICAN FUTURE SYSTEMS, INC., et al., Defendants
v.
AMERICAN FUTURE SYSTEMS, INC., et al., Defendants
CIVIL ACTION NO. 20-2266
United States District Court, E.D. Pennsylvania
Filed January 28, 2022
Counsel
Christian M. Capece, Derek E. Diaz, Harris A. Senturia, Jonathan L. Kessler, Maris Snell, Amy C. Hocevar, Fil Maria Debanate, U.S. Federal Trade Commission, Cleveland, OH, for Plaintiff Federal Trade Commission.John Abel, PA Office of Attorney General Bureau of Consumer Protection, Harrisburg, PA, Sarah Anne Ellis Frasch, PA Office of Attorny General, Philadelphia, PA, Derek E. Diaz, Federal Trade Commission, Cleveland, OH, for Plaintiff Commonwealth of Pennsylvania.
Ilana H. Eisenstein, DLA Piper LLP, David H. Marion, Morgan S. Birch, White and Williams LLP, Philadelphia, PA, Casey A. Coyle, Mark S. Stewart, Eckert Seamans Cherrin & Mellott LLC, Harrisburg, PA, for Defendants American Future Systems, Inc., Progressive Business Publications of New Jersey, Inc., Edward M. Satell.
Stephen M. Hladik, Eric J. Phillips, Lauren L. Schuler, Pamela L. Cunningham, Hladik Onorato & Federman, LLP, North Wales, PA, for Defendants International Credit Recovery, Inc., Richard Diorio, Jr., Cynthia Powell.
Slomsky, Joel H., United States District Judge
ORDER
AND NOW, this 28th day of January 2022, upon consideration of the December 27 and 31, 2021 Reports and Recommendations of Special Master James J. Rohn, Esquire (Doc. Nos. 141, 145), Defendant American Future Systems, Inc. (“AFS”) Objections to the Special Master's December 27, 2021 Report and Recommendation (Doc. No. 148), Plaintiffs Federal Trade Commission (“FTC”) and Commonwealth of Pennsylvania's (“Commonwealth”) Response to AFS's Objections to the Special Master's December 27, 2021 Report and Recommendation (Doc. No. 152), Plaintiffs FTC and Commonwealth's Joint Response to the Special Master's December 31, 2021 Report and Recommendation (Doc. No. 149), and Defendant AFS's Reply to Plaintiffs' Joint Response to the Special Master's December 31, 2021 Report and Recommendation (Doc. No. 151), the Court finds that the Special Master did not abuse his discretion under Federal Rule of Civil Procedure 53(f)(5) in issuing his December 27, 2021 and December 31, 2021 Reports and Recommendations (Doc. Nos. 141, 145). Accordingly, it is ORDERED that Plaintiffs FTC and Commonwealth's Motion to Compel (Doc. No. 125) is GRANTED in part and DENIED in part, Plaintiff FTC's Second Set of Requests for Production (“RFP”) of Documents (Doc. No. 75) is GRANTED in part and DENIED in part, and the Special Master's Reports and Recommendations (Doc. Nos. 141, 145) are AFFIRMED in part and MODIFIED in part as follows:[1]
Special Master's December 27, 2021 Report and Recommendation
1. With respect to the categories of AFS's Revenue and Tax Returns (FTC RFP 3 and 4; Commonwealth RFP 3 and 4 and Commonwealth Interrogatories Nos. 1–6):[2]
a. The portions of these requests seeking discovery predating January 1, 2016 is denied.
b. AFS shall respond fully to each discovery request from this category dating from January 1, 2016 to present.
2. With respect to the category of Telemarketing Personnel (FTC Interrogatory No. 1), AFS shall respond fully to this discovery request.[3]
3. With respect to the category of Scripts That AFS Has Used (FTC Interrogatories Nos. 2–7 and FTC RFP 1 third set):
a. The portions of these requests seeking discovery predating July 1, 2015 are denied.
b. AFS shall respond fully to each discovery request from this category dating from July 1, 2015 to present. If, after conducting a reasonable inquiry sufficient to obtain responsive information relating to this category from its employees, AFS determines that no such responsive information exists, or, that AFS already has produced such information, then a representative from AFS shall certify in writing that no such responsive information exists or that it has already has been produced, giving the date ranges covered by the scripts.
Special Master's December 31, 2021 Report and Recommendation
1. All of Plaintiff's requests seeking discovery that predates July 1, 2015 are denied.
2. With respect to the category Report Provided to Edward Satell (FTC RFP 2; Commonwealth RFP 2): Within twenty-one (21) days of the entry of this Order, AFS shall produce reports provided to Mr. Satell from July 1, 2015 to the present, as specifically requested in FTC RFP 2 and Commonwealth RFP 2.
3. With respect to the category Recording of Calls (FTC RFP's 27, 28, and 35; Commonwealth RFP's 28, 29, and 36):
a. With respect to the recordings of all outgoing calls for the first day of each month since AFS began maintaining audio records of outgoing calls:
i. Within fourteen (14) days of entry of this Order, AFS shall produce to Plaintiffs a list of orders with entity or company name for the last three (3) days of each month from July 1, 2015 to present, identifying the date of each order.
ii. Within twenty-one (21) days of the entry of this Order, AFS shall produce to Plaintiffs all recordings of outgoing calls for the last three (3) days of each month from July 1, 2015 to present, organized so that Plaintiff can identify the date of each recording.
b. With respect to the recordings of outgoing calls for specific consumer complaints made to the Better Business Bureau, the Attorney General, or the FTC:
i. Within seven (7) days of the entry of this Order, Plaintiffs shall provide to AFS for seventy-five (75) complaints either (1) AFS's account number; or (2): (a) the business name, (b) the business address, and (c) the name of the individual who placed the order with AFS and/or the date the order was placed.
ii. Within twenty-one (21) days of receiving the information described in paragraph (3)(b)(i), AFS shall produce to Plaintiffs the seventy-five (75) requested recordings.
iii. Plaintiffs are limited to seventy-five (75) recordings in total. Plaintiffs are permitted to request a different recording if AFS is unable to locate a requested recordings.
4. With respect to the category Emails with Customer Service (FTC RFP's 38, 39, and 40; Commonwealth RFP's 39, 40, and 41): Within twenty-one (21) days of the entry of this Order, AFS shall produce to Plaintiffs all emails for the month of February in the years 2016–2021 involving customer_service@pbp.com and service@pbpinfo.com.
5. With respect to the category The Text Document that Includes the Customer Responses to the “Order Confirmation” (FTC RFP's 35, 38, 40, and 41 and Commonwealth RFP's 36, 39, 41, and 42): Within twenty-one (21) days of the entry of this Order, AFS shall produce to Plaintiffs all documents responsive to this category from July 1, 2015 to present, including the “text document” referred to by AFS in its January 22, 2018 letter to the FTC.
6. With respect to the category Voicemails and Emails from January 1, 2015 – December 31, 2020 Sent From localtouch@pbp.com (FTC RFP's 35, 38, and 42; Commonwealth RFP's 36, 39, and 43):
a. Within twenty-one (21) days of the entry of this Order, AFS shall produce to Plaintiffs all recordings of incoming calls for the first day of each month from July 1, 2015 to present.
b. Within twenty-one (21) days of the entry of this Order, AFS shall produce to Plaintiffs all emails sent from localtouch@pbp.com for the first fifteen (15) days of each month (in other words, approximately on half of each month) from July 1, 2015 to December 31, 2020.
7. With respect to the category Emails with AFS's Collections Department (FTC RFP's 35, 38, 39, and 40; Commonwealth RFP's 36, 39, 40, and 41):
a. AFS shall add Jennifer Rann to the custodial list for purposes of electronic discovery.
b. Within seven (7) days of this Order, AFS shall confirm and verify to Plaintiffs that no one else other than Rann worked in the collections department. If there are any other individuals identified by AFS as working in the collections department from July 2015 to present, AFS shall add such individuals as custodians as well.
8. With respect to the category Complaints to the BBB and Attorney General, AFS' Response, and AFS' Communications with Each Consumer (FTC RFP 35; Commonwealth RFP 36): Within twenty-one (21) days of the entry of this Order, AFS shall produce all responsive documents to this request after conducting an ESI search and collection.
9. With respect to the category Documents Responsive to Request 47 (FTC RFP 47; Commonwealth RFP 48): Within fourteen (14) days of the entry of this Order, AFS shall inform Plaintiffs how the random sampling of the Notices of Written Warnings was conducted.
10. With respect to the category Manager Employee Files (FTC RFP 49; Commonwealth RFP 50): Within twenty-one (21) days of the entry of this Order, AFS shall produce all employee files, including records of evaluation or discipline, of any current or former manager of a telemarketing office who was an employee at any time from January 1, 2016 to present.
11. With respect to the category AFS's Communications with Debt Collectors (FTC RFP's 15, 18, and 19; Commonwealth RFP's 16, 19, and 20): Within twenty-one (21) days of the entry of this Order, AFS shall produce to Plaintiffs all communications to or from the known email addresses of its debt collectors from January 1, 2016 to present.
12. With respect to the category Keyword Search:
a. The scope of discovery is July 1, 2015 to present.
b. The following individuals/accounts are custodians: Edward M. Satell, Melissa Schwenk (maiden name Bowman), Denise Haney, Lisa Kott, Nichole Shimmel, Jennifer Rann, Robin Bilthheiser-Buck, Meg Hass, Colin Drummond, Heather Wood (maiden name Moyle), Gary Calobrisi, Christopher McCunney, Mike Gorton, Curt Brown, Katy Murray, Lynn McCullough, Kamil Yakubov, Sharon McHugh, localtouch@pbp.com, altoona@pbp.com, willaimsport@pbp.com, woodbury@pbp.com, wyomissing@pbp.com, Cynthia Reasor, Susan Grabert, Tom Schubert, Phil Ahr, John Falcetta, Mike Statmore.
c. The following terms are search terms: Complain*, Suppres* or supres*, Scam*, Better Business Bureau*, did not order, cease and desist, cancel immediately, never subscribed, never ordered, never authorized, quality cancel, office summary, are you selling something, icrbennett@aol.com, ICR400@aol.com, icrpowell@aol.com, cthomas@intlcreditrec.com, secretary script*, Received an invoice? Here's why, cancel correction report, office summary report, Attorney General*, AG, AG., AG?, AG!, Federal Trade Commission*, FTC*.
d. With respect to any remaining search term or custodian that is still the subject of dispute, within ten (10) days of the entry of this Order, the parties shall provide the Special Master with their arguments and positions on these terms and custodians, and explanations as to why their opponent's position should be rejected.
BY THE COURT:
Footnotes
The Court has considered all objections to the Reports and Recommendations of the Special Master and finds that to the extent the Special Master recommends that certain discovery be turned over to Plaintiffs, the discovery falls within the scope of discovery factors noted in Federal Rule of Civil Procedure 26(b)(1).
The Court specifically affirms the Special Master's finding that discovery requests regarding AFS's revenue and tax returns “seek permissible discovery under Rule 26(b)(1),” irrespective of whether the FTC may obtain monetary damages from the FTC. (Doc. No. 141 at 8.) As the Special Master correctly concluded, “[s]imply because the FTC may not obtain monetary relief in this lawsuit does not categorically prohibit it from obtaining discovery related to monetary records.” (Id.) For example, as the Special Master correctly noted, such discovery may shed light on, inter alia, “the seriousness of the harm that AFS's practices have caused,” “the scope of consumers and/or customers that were the recipient of AFS's practices,” and “the relationship between AFS and ICR.” (Id.) Accordingly, since the information sought is relevant to Plaintiff's claims in this case, they are discoverable under Rule 26(b)(1).
The Court specifically affirms the Special Master's finding that “AFS has an obligation to fully respond to the discovery request [concerning AFS's telemarketing personnel] unless it is outside the bounds of the Federal Rules [of Civil Procedure] or case law.” (Id. at 9.) As the Special Master concluded, “AFS has not identified how or why the Telemarketing Personnel category is outside the bounds of the Federal Rules [of Civil Procedure] or case law.” (Id.) Therefore, to satisfy its obligation with respect to this request, AFS must provide “identification of all telemarketing personnel, not the 22 telemarketing personnel AFS deems relevant.” (Id.)