Counsel

(1) The Motion to Decertify found at Docket. No. 214 and 215 is DENIED.

(2) The Motion to Amend found at Docket No. 221 and 222 is GRANTED IN PART and DENIED IN PART.

(3) The Privilege Motion filed under seal at Docket No. 199 is GRANTED IN PART and DENIED IN PART.

1. The Debtor is released from all dischargeable debts.

2. Any judgment not obtained in this court is null and void as to the personal liability of the Debtor(s) regarding the following:

(a) debts dischargeable under 11 U.S.C. § 523(a);

(b) debts alleged to be excepted from discharge under 11 U.S.C. § 523(a)(2), (4), (6) or (15) unless determined by this court to be nondischargeable;

(c) debts determined by this court to be discharged.

3. All creditors whose debts are discharged by this order or whose judgments are declared null and void in 2 above, are enjoined from instituting or continuing any action, employing any process or engaging in any act to collect such debts as personal liabilities of the Debtor(s).

(a) A discharge in a case under this title—

(1) voids any judgment at any time obtained, to the extent that such judgment is a determination of the personal liability of the debtor with respect to any debt discharged under section 727, 944, 1141, 1192, 1228, or 1328 of this title, whether or not discharge of such debt is waived;

(2) operates as an injunction against the commencement or continuation of an action, the employment of process, or an act, to collect, recover or offset any such debt as a personal liability of the debtor, whether or not discharge of such debt is waived ...

(i) first, Defendant argued that Plaintiff must be compelled to “arbitrate all claims asserted [ ] in the Complaint, as the parties to this action entered into an agreement that claims related to collection or credit reporting would be resolved in binding arbitration on an individual basis,” [id. at pp. 10, 18–19] (“The Federal Arbitration Act authorizes the Court to compel arbitration” because, inter alia, Plaintiff's claims “are not based on provisions of the Bankruptcy Code that are remotely in conflict with the Arbitration Act, [and] it [therefore] cannot be said that arbitration of the Plaintiff's claim would ‘necessarily jeopardize’ the objectives of the Bankruptcy Code.”);

(ii) second, Defendant maintained that “[a]n order striking the class allegations is required” because Plaintiff “waived the right to proceed with any claims against Defendants on other than an individual basis; and because the claims are time barred pursuant to 28 U.S.C. § 1658(a),” [id. at p. 1]; and

(iii) third, Defendant argued that dismissal pursuant to Rules 12(b)(1), 12(b)(6), and 21 was appropriate because, inter alia, “28 U.S.C. § 1334(c) prohibits any court other than the district court in which [a bankruptcy] case under Title 11 is commenced or pending ... from exercising jurisdiction over property of the estate,” and because “there is no private right of action for an alleged violation of the discharge injunction,” id. at pp. 1–2.[5]

[A]rbitrating Plaintiffs-Appellees’ § 524 claims would necessarily jeopardize the objectives of the Bankruptcy Code... [because, inter alia,] [t]he Bankruptcy Code stems from “Congress's determination, rooted in Article 1, Section 8 of the Constitution, that debtors should be able to discharge their debts and creditors should have the benefit of uniform bankruptcy laws premised on that ultimate quid pro quo.” Accordingly, “Congress made it a central purpose of the [B]ankruptcy [C]ode to give debtors a fresh start in life and a clear field for future effort unburdened by the existence of old debts.” The effectiveness of a bankruptcy proceeding therefore relies exclusively on a functioning discharge. In order words, only through enforcement of the discharge order can the discharge provided by the Bankruptcy Court provide the debtor with a “fresh start,” a central objective to the bankruptcy laws ...

It is well established that the discharge is the foundation upon which all other portions of the Bankruptcy Code are built. We have observed that “[b]ankruptcy allows honest but unfortunate debtors an opportunity to reorder their financial affairs and get a fresh start. This is accomplished through the statutory discharge of preexisting debts” .... Th[is] “fresh start” is only possible if the discharge injunction crafted by Congress and issued by the bankruptcy court is fully heeded by creditors and prevents their further collection efforts. Violations of the injunction damage the foundation on which the debtor's fresh start is built.

Following the logic of [prior cases], we find that arbitration of a claim based on an alleged violation of Section 524(a)(2) would “seriously jeopardize a particular core bankruptcy proceeding.” We come to this conclusion because 1) the discharge injunction is integral to the bankruptcy court's ability to provide debtors with the fresh start that is the very purpose of the Code; 2) the claim regards an ongoing bankruptcy matter that requires continuing court supervision; and 3) the equitable powers of the bankruptcy court to enforce its own injunctions are central to the structure of the Code. The fact that [Plaintiff's] claim comes in the form of a putative class action does not undermine this conclusion ... Accordingly ... [w]e hold that the bankruptcy court did not abuse its discretion by denying [Defendant's] motion to compel arbitration in this case.

(i) that “Plaintiff's claims are subject to mandatory arbitration,” [id. at p. 7];

(ii) that “[a]ll right, title and interest in Plaintiff's account and the receivable with [Defendant] was sold in May, 2012 ... [and] [f]ollowing [the] charge off of the Plaintiff's account on March 27, 2012, [Defendant] retained no economic rights associated with Plaintiff's account or the receivable,” [id.];

(iii) that this Court “lacks subject matter jurisdiction to entertain this putative nationwide class action premised on either the alleged violation of bankruptcy discharge orders entered by other courts, the alleged violation of 11 U.S.C. § 524(a) occurring outside this district, and over non-core claims of putative class members,” [id. at p. 8]; and

(iv) that “[t]he appearance of ‘charge off’ on a zero balance sold account tradeline on a bankrupt debtor's post-discharge credit report does not constitute an ‘act, to collect, recover or offset any such debt as a personal liability of the debtor’ ” within the meaning of Section 524 of the Bankruptcy Code, [id. at p. 10].

[F]ollowing [the Dismissal Order], Plaintiff served a deposition notice on [Defendant] under Federal Rule of Civil Procedure 30(b)(6). The proposed [ ] deposition is directed at the discovery of information regarding [Defendant's] organizational structure and the identification of the existence, location and format of discoverable documents and information and is intended to assist Plaintiffs in making its future discovery efforts more focused and efficient ...

On May 21, 2015, [Defendant] served a 25-page response to the deposition notice that objected to essentially every topic raised by Plaintiffs. The parties met and conferred on May 26, 2015 with regard to [Defendant's] objections to the deposition notice. While [Defendant] has raised objections to the scope, location and topics of the 30(b)(6) deposition notice, the fundamental disagreement between the parties relates to the timing of the deposition. [Defendant] has taken the position that it will not offer a witness for the deposition until the District Court has ruled on its appeal of this Court's ruling that, inter alia, denied [Defendant's] motion for a stay [pending its appeal of the Dismissal Order].

Plaintiff contends that [Defendant's] position is improper and in direct contravention of the rulings of this Court.

no discovery should proceed ... [and that Defendant] should not have to provide discovery that was “irrelevant” based on (a) its arbitration arguments, (b) its argument that most, and perhaps all, of Plaintiff's claims were time-barred, (c) its argument that a report of “charged off, zero balance” allegedly “reflect[s] the fact that the consumer is no longer liable for the discharged debt,” and (d) its argument that in any event it sold the debt at issue before the discharge ....

Mr. Slodov: There's no other documents.

The Court: There's no other responsive documents?

Mr. Slodov: That's what I've been told, Your Honor.

The Court: No, no. I want that under oath from the person responding to the production. That needs to be -- it's implicit, but I think I need it ... And, of course, obviously if there is any later introduction of any sort of policy, then there will be hell to pay. So that just needs to be done... It's implicit in every document production that it's completely responsive. All right? But from your answer to me, I got the impression that you thought it wasn't, so I want it under oath that [you] have diligently pursued [discovery] with [your] client and they are prepared and they will state under oath that they have no responsive documents.

Mr. Slodov: You want me to sign the declaration –

The Court: No, no, no. I want you to get that from them.

Mr. Slodov: Okay ... [but] [Plaintiff's] question[s] [are] the wrong question[s] in this case ...

The Court: [Y]ou are not allowed to pick and choose what you think the issues are .. I've had enough ... [Y]ou've heard it twice now. If you do this one more time, if you pick and choose what you are free to respond to on discovery based on your sense of what the merits are, I will rule against your company. I will draw an adverse interest right then, right there and then. This is an absolute disgrace, that position ... Are we clear?

Mr. Slodov: Yes, Your Honor....

A. To the best of my information, knowledge, and belief, Credit One Bank N.A.’s responses to Plaintiff Orin Anderson's first request for production of documents are true and correct.

B. The documents included among the 2,203 pages of materials produced are the only documents responsive to the requests that have been located.

C. I am not aware of any other responsive documents in the possession, custody, or control of Credit One Bank N.A., which have not been produced.

Mr. Slodov: My understanding, Your Honor, after going through the process of securing the amended verification, [is] that Credit One did not do any email searches.

The Court: None.

Mr. Slodov: None.

The Court: No email searches.

Mr. Slodov: ‘None.

The Court: Even though the amended verification says -- refers to email, the central email?

Mr. Slodov: It refers to it, but it doesn't say it was searched.

The Court: Well, I'm glad we're hearing that now two hours into this hearing. I'm astonished. What's the reason for that?

Mr. Slodov: It had to do with in-house counsel, who is no longer at Credit One Bank, who dropped the ball on that.

The Court: And when did you learn this?

Mr. Slodov: It would have been in March.

The Court: In March?

Mr. Slodov: Yep.

The Court: And I just learned of it now....

(i) “[attorneys’] fees and expenses,” a sanction the Court found “appropriate” given Defendant's “systematic violation of [each plaintiff's] discharge injunction,” [id. at p. 60, 62]; and

(ii) a “mild uniform non-compensatory civil sanction” given that Defendant—a “sophisticated financial institution”—had engaged in a “systematic, willful [and] egregious” violation of the discharge injunctions of more than 200,000 plaintiffs, [see id. at p. 63] (“The failure to recognize such a sanction would leave discharged debtors to endure in derogation of the statute until they experience an added consequence of the violation, and encourage others to engage in similar acts until caught.”).

(i) the named plaintiff was a former Chapter 7 debtor whose credit card debt had been discharged at the close of her bankruptcy, id. at 300;

(ii) the defendant—the plaintiff's former credit card company—had, post-discharge, refused to update her credit report to reflect the fact that her debt had been discharged, [id.];

(iii) the named plaintiff thereafter reopened her bankruptcy to file an adversary proceeding against the defendant, alleging that the defendant had, inter alia, engaged in a “contempt of the statutory injunction set forth in § 524(a)(2),” [id.]; and

(iv) the named plaintiff's complaint sought to “certify a nationwide class of former debtors on the ground that [the defendant] similarly refused numerous post-discharge requests to correct erroneous tradelines,” [id.].

The class-wide relief sought by plaintiff raises a fundamental question: does the Bankruptcy Code authorize one bankruptcy court to employ its contempt power on behalf of other bankruptcy courts in a nationwide class action to enforce those bankruptcy courts’ discharge orders? ... [However,] as has long been the case outside of the bankruptcy context, a particular bankruptcy court's civil contempt authority does not extend beyond the enforcement of its own orders ... [and] [p]laintiff fails to offer a single example of one court exercising its civil contempt authority on behalf of another court's injunction. Nor are we aware of any. As telling as that gap is, it's of no surprise. The civil contempt power is, at its core, uniquely personal to each court; by providing a mechanism to mandate compliance when a court is confronted with disobedience, it is a necessary corollary to a court's authority to issue binding orders ... [and] a court's broad authority to identify, prosecute, adjudicate, and sanction contumacious conduct makes for a “potent weapon” ....

At bottom, plaintiff seeks a bankruptcy-specific expansion of the civil contempt power beyond its longstanding limits at equity. Congress is capable of intervening to guide the exercise of a bankruptcy court's civil contempt power. But “a major departure from the long tradition of equity practice should not be lightly implied” ... [C]ourts must take statutes as they find them, and, as written, the Code leaves intact the longstanding equitable principles regarding the enforcement of injunctions. A bankruptcy court's civil contempt authority does not extend to other bankruptcy courts’ discharge orders in a nationwide class action. The class-wide relief sought by plaintiff is therefore unavailable ....

(i) first, that Bruce “requires decertification of the Main [ ] Class and the [ ] Subclass” because “this Court [ ] lacks [ ] the authority to adjudicate claims that [Defendant] has violated the discharge injunctions of other courts,” [see id. at pp. 17–18]; and

(ii) second, that the Main Class “must also be decertified for the second, independent reason that [Bruce] confirms that a bankruptcy court's contempt power is not greater than the contempt power of a district court and therefore precludes the punitive damages award that was the foundation for the Main [ ] Class,” [id. at p. 19].

(i) Bruce “only affects the contempt remedies sought in this action ... [and] does not give [Defendant] a pass on liability,” [id. at p. 8];

(ii) accordingly, Bruce permits the certification of a “declaratory judgment class,” a vehicle that would allow the Court to “declare the actions of [Defendant] to be violative of § 524 without addressing any issue of contempt of the individual discharge orders rendered in each class member's [ ] bankruptcy,” [id.]; and

(iii) alternatively or additionally, Bruce does not preclude the Court from “award[ing] Rule 37 sanctions on a class-wide basis to the class proximately caused by [Defendant's] ‘repeated, lengthy and willful discovery failures,’ and its ‘prolonged, extraordinary, wrongful efforts to prevent the exploration of its defenses to the complaint's allegations,’ ” [id.] (internal citations omitted); and, finally,

(iv) Bruce does not otherwise preclude the Court from “order[ing] [the] restitution of all funds paid by class members on discharged debts caused by [Defendant's] illegal collection practices without a finding of contempt,” [id.].[19]

(i) first, Defendant argues that Bruce precludes the assertion of a class-wide declaratory judgment claim because “there is no meaningful difference between a finding of contempt and a binding ‘declaration’ that a party has violated a [discharge injunction],” [id. at p. 7];

(ii) second, even if Bruce permitted class-wide declaratory relief, the Court should not allow the Complaint to be amended as this would severely prejudice Credit One, [id. at p. 12];

(iii) third, Plaintiff should not be allowed to amend the contempt class definition to assert a class limited to the Southern District of New York [id. at p. 17];

(iv) fourth, Plaintiff should not be permitted to amend the Complaint to “add additional allegations related to discovery,” [id. at p. 19]; and

(v) finally, “if Plaintiff is permitted to amend the Complaint, the default judgment must be vacated.” [id. at p. 20].

(A) Does Bruce prohibit any class actions based on violations of the Section 524(a)(2) Injunction?

(B) Has Plaintiff satisfied the applicable standard to amend the Complaint?

(C) How would the Proposed Amended Complaint affect the ruling in the Certification Decision?

(D) Are the Slodov Documents relevant to a subsequent damages award?

(E) Does the crime-fraud exception to the attorney-client privilege apply to the Slodov Documents?

(i) require the opponent to expend significant additional resources to conduct discovery and prepare for trial;

(ii) significantly delay the resolution of the dispute; or
(iii) prevent the non-moving party from bringing a timely action in another jurisdiction.

We find that arbitration of a claim based on an alleged violation of Section 524(a)(2) would “seriously jeopardize a particular core bankruptcy proceeding.” We come to this conclusion because 1) the discharge injunction is integral to the bankruptcy court's ability to provide debtors with the fresh start that is the very purpose of the Code; 2) the claim regards an ongoing bankruptcy matter that requires continuing court supervision; and 3) the equitable powers of the bankruptcy court to enforce its own injunctions are central to the structure of the Code.

*24 (iv) “a declaration pursuant to 28 U.S.C. §§ [2201] and [2202] that Defendant is in violation of § 524 by attempting to collect on a discharged debt” with respect to Plaintiff and a national class [First Cause of Action, Proposed Amended Complaint, Doc. 223-1, p. 19];

(v) “certification of ... a class limited to the Southern District of New York for relief for contempt for violation of § 524 and the class members’ individual discharge orders” [Second Cause of Action, Proposed Amended Complaint, Doc. 223-1 at p. 16];

(vi) a ruling that “Defendant be ordered to pay to all National Class Members sanctions pursuant to Rule 37 of the Federal Rules of Civil Procedure for their contumacious conduct before the Court.” [Id.].

Our conclusion rests on a longstanding interpretive principle: when a statutory term is “ ‘obviously transplanted from another legal source,’ ” it “ ‘brings the old soil with it.’ ” ... Here, the statutes specifying that a discharge order “operates as an injunction,” § 524(a)(2), and that a court may issue any “order” or “judgment” that is “necessary or appropriate” to “carry out” other bankruptcy provisions, § 105(a), bring with them the “old soil” that has long governed how courts enforce injunctions. That “old soil” includes the “potent weapon” of civil contempt.

(1) In the last paragraph under “FIRST CAUSE OF ACTION,” Plaintiff asserts: that “Pursuant to its statutory and inherent authority, this Court may award appropriate injunctive, monetary and restitutionary relief and attorney's fees and costs for Defendant's violation of § 524(a)(2), their collection on discharged debts and their contumacious conduct before this Court.” [Proposed Amended Complaint, Doc. 223-1, p. 19]; and

(2) In the list of relief that Plaintiff seeks, Plaintiff asks that “Defendant be ordered to pay to all National Class Members sanctions pursuant to Rule 37 of the Federal Rules of Civil Procedure for their contumacious conduct before the Court.” [Id. at pp. 19–20].

(1) first, Judge Drain found Defendant liable for discovery violations pursuant to Rule 7037, and the relief he granted for such liability was the default judgment on Plaintiff's claim [Certification Decision, Doc. 176, p. 47–48];

(2) second, Judge Drain found Defendant liable for violating the Section 524(a)(2) Injunction of the class members pursuant to the default judgment, and the relief for that liability was to be $50-1,000 for each Plaintiff in the class, which amount was left to be decided at a later date.

(1) Numerosity: this was satisfied by the “287,980 Accounts that Credit One reported as ‘charged off’ that were subsequently discharged under Chapter 7 of the Bankruptcy Code between May 1, 2007 and April 2017, excluding any accounts that were reported as charged off after December 2016.” [Id. at p. 72];

(2) Commonality: Judge Drain explained that this factor was met because “all the claims arise from Credit One's systematic policy not to correct its tradelines to reflect the discharge; in addition, as discussed above, since 2007, the inception of the class period, the law on the class's underlying claims, discussed above, has been substantially the same throughout the country.” [Id. at p. 73];

(3) Typicality: after explaining the distinction between commonality—which focuses on the definition of who fits the class—and typicality, which analyzes the similarity of the claims among class members, Judge Drain stated that “[o]nce again in the light of Credit One's systematic practice serving as the basis for Anderson's claims as well as those of the other class members, the ‘typicality’ requirement is satisfied here.” [Id. at p. 74];

(4) Adequacy: finally, when considering whether Mr. Anderson would fairly and adequately protect the interests of the class, Judge Drain found that “Anderson has vigorously pursued the underlying claims for himself and the class, having been deposed twice; serious concerns regarding his credibility do not exist; and his counsel clearly are qualified and experienced and to date have conducted this litigation ably, including in the face of Credit One's extraordinary misconduct.” [Id. at p. 75].

Under the Declaratory Judgment Act, ‘Further necessary or proper relief based on a declaratory judgment or decree may be granted, after reasonable notice and hearing, against any adverse party whose rights have been determined by such judgment.’ It is well settled that “further relief” may include an award for damages... In deciding whether to award damages or require the parties to engage in further litigation the determinative factor is which solution will result in the most expeditious and just conclusion of the controversy.

These documents are relevant to the issues before the Court because they relate to the sanction that is yet to be determined by this Court. In its [Certification Decision], the court stated that its award of between $50 and $1000 to each class member is dependent, not only on Credit One's intentional refusal to correct the class members’ credit reports, but also on the fact that Credit One “engaged in prolonged extraordinary wrongful efforts to prevent the exploration of its defenses to the complaint's allegations” and “lied not only about its discovery efforts but also misrepresented to the Court and obfuscated in discovery” ... It is clear from the redacted papers alone that the [u]nredacted [i]ntervention [p]apers will provide new, key details concerning the extent of Credit One's fraud, and therefore assist the Court in determining the appropriate amount for a sanction.

(i) the client communication or attorney work product in question was itself a furtherance of the crime or fraud; and

(ii) probable cause to believe that the particular communication with counsel or attorney work product was intended in some way to facilitate or to conceal the criminal activity.

(i) “First, the [Privilege Motion] omits the fact that, just four weeks after [Defendant's New Counsel] entered its appearance, Judge Drain determined that Credit One should stand down on its backward-looking inquiry into the discovery that occurred or didn't occur up to today.” [Privilege Opposition, Doc. 205, p. 22].

(ii) “Second, Plaintiff's Motion does not contain a single allegation (nor could it) that Credit One and its new counsel failed to comply with their obligations to provide discovery sufficient to address Plaintiff's requests since January 2017 when discovery resumed.” [Id. at p. 23].

(i) A declaratory judgment claim pursuant to 28 U.S.C. §§ 2201 & 2202 may be asserted for a violation of the Section 524(a)(2) Injunction.

(ii) Plaintiff is permitted to amend the Complaint to include a declaratory judgment claim under 28 U.S.C. §§ 2201 & 2202.

(iii) The default judgment in the Certification Decision as to Defendant's liability for violation of the Main Class and Sub Class's Section 524(a)(2) Injunction remains in place on the declaratory judgment claim.

(iv) Judge Drain's finding of contempt with regard to Plaintiff Anderson's discharge is maintained, as well as the accompanying sanction of attorneys’ fees. Plaintiff's Counsel is directed to file a fee application within 60 days of this Opinion.

(v) The Court will conduct an in camera inspection of the Slodov Documents containing communications between Defendant and Defendant's Prior Counsel to determine if they fall within the crime-fraud exception.

(vi) The Court will allow for additional briefing by the parties on the issue of nominal damages after the Court reviews the Slodov Documents.

(vii) Plaintiff shall file an Amended Complaint consistent with this ruling no later than April 4, 2025.

(i) Plaintiff's 30(b)(6) deposition of Defendant in New York “would result in [an] undue burden” because Defendant's principal place of business was in Las Vegas, Nevada, [Doc. 23, pp. 7–8];

(ii) the “scope of [Plaintiff's] inquiry is so broad[ ] that ‘the burden or expense of the proposed discovery outweighs its likely benefit,’ ” [id. at p. 18];

(iii) Plaintiff's discovery requests were “not relevant and the scope of inquiry [was] overbroad” because Plaintiff's individual contempt claim was meritless, [id. at pp. 11–14]; and, relatedly,

(iv) Plaintiff “lack[ed] standing to pursue discovery on behalf of a class” because, inter alia, Plaintiff “contractually waived the right to pursue a class against [Defendant],” [id. at pp. 15–17].

[Defendant's] failure to provide a legitimate reason, notwithstanding repeated opportunities to do so, for its policy not to correct its tradelines to reflect the bankruptcy discharge, coupled with its extraordinary efforts to thwart discovery designed to test its asserted defenses, as well as the dribs and drabs that, despite those efforts, emerged during discovery to show the falsity of those defenses, makes it hard to see how [Defendant] would ever defeat Plaintiff's claim that its policy violated the discharge [injunction].

(i) the removal of references to Defendant's affiliate, [see generally Doc. 223-1, Proposed Amended Complaint];

(ii) a paragraph referencing Defendant's “persistent, willful and contumacious disregard for the rules of discovery in this action and by its willful misrepresentations to this Court and its willful violations of Court orders,” id. at p. 17; and

(iii) the removal of Plaintiff's original request for “declaratory and injunctive relief and [ ] compensatory and punitive damages, attorney's [sic] fees and costs for Defendant[‘s] violation of § 524(a)(2),” id. at p. 19.

All individuals who, after May 3, 2007, have had a consumer credit report relating to them prepared by any of the credit reporting agencies in which one or more of their Tradeline accounts or debts with Defendant was not reported as discharged despite the fact that such debts had been discharged as a result of their bankruptcy under Chapter 7 of the Bankruptcy Code.

[Plaintiff] can make a motion and say that there was a fraud on the court and that's an exception to the attorney-client privilege ... all you need to do is file a motion that says that ... it's not privileged anymore and gives the Court authority for it to Credit One, and follow, you know a procedure for doing it in a way that doesn't blow the issue before the Court decides it.