Consumer Fin. Prot. Bureau v. Nexus Servs.

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CONSUMER FINANCIAL PROTECTION BUREAU; COMMONWEALTH OF MASSACHUSETTS; THE PEOPLE OF THE STATE OF NEW YORK, by LETITIA JAMES, ATTORNEY GENERAL OF THE STATE OF NEW YORK; and COMMONWEALTH OF VIRGINIA, ex rel. MARK R. HERRING, ATTORNEY GENERAL, Plaintiffs, v. NEXUS SERVICES, INC.; LIBRE BY NEXUS, INC.; MICHEAL DONOVAN; RICHARD MOORE; and EVAN AJIN, Defendants.

Civil Action No. 5:21-cv-00016

United States District Court, W.D. Virginia, Harrisonburg Division

March 31, 2024

MEMORANDUM OPINION

Elizabeth K. Dillon, United States District Judge.

In February 2021, the Consumer Financial Protection Bureau (“CFPB”), the Commonwealth of Massachusetts, the People of the State of New York, and the Commonwealth of Virginia (collectively, the “plaintiff-states”) filed a 17-count complaint against Nexus Services, Inc. (“Nexus”), Libre by Nexus, Inc. (“Libre”) (collectively, “Corporate Defendants”), Micheal Donovan, Richard Moore, and Evan Ajin (collectively, “Individual Defendants”) (Compl. 1, Dkt. No. 1). Plaintiffs allege that defendants violated the Consumer Financial Protection Act (“CFPA”), the Virginia Consumer Protection Act (“VCPA”), and Massachusetts and New York consumer protection laws in administering “immigration bonds” for indigent consumers facing deportation. (Compl. ¶¶ 1-3, 26-47.) After a series of discovery disputes and the entry of default against defendants, what is now left to decide are the appropriate remedies. For the following reasons, the court will grant plaintiffs' requested remedies in full.

I. BACKGROUND

A. Factual Background

Nexus, through its wholly owned subsidiary Libre, operates a nationwide business aimed at immigrants held in federal detention. (Compl. ¶ 23.) The business was designed and implemented by Micheal Donovan, Richard Moore, and Evan Ajin. (Id. ¶ 6.) At the time the suit was originally filed, Donovan was a majority owner, officer, and director of Nexus and the chief executive officer of Libre. (Id. ¶ 20.) Moore was part owner of Nexus, the chief financial officer of Libre, and the executive vice president of Nexus and Libre. (Id. ¶ 21.) Ajin was part owner and a director of Nexus and a vice president of Libre. (Id. ¶ 22.)

Libre advertises its services to immigrants who are detained and may be released on bond. (Id. ¶¶ 26, 30.) In 2018, the average immigration bond was $7,500. (Id.) A detainee may pay an immigration bond fully in cash or guarantee the bond through a surety company that is certified by the U.S. Treasury. (Id. ¶¶ 26-27.) Neither Nexus nor Libre is a licensed bail-bond agent or a surety company certified by the U.S. Treasury. (Id. ¶¶ 28, 29.) Instead, Libre is a service provider that acts as an intermediary between immigration detainees and sureties and their bond agents. (Id. ¶ 37.)

To obtain Libre's services, Libre requires detainees to execute an agreement with certain obligations, and, in exchange, Libre agrees to indemnify the sureties and their bond agents for any losses in connection with the immigration bonds. (Id.) From about 2014 until 2017, Libre used a multi-part, 21-page, written client agreement (“the Original Agreement”). (Id. ¶¶ 34, 69.) The Original Agreement was written in English, except for a single page written in Spanish.

(Id.) The Original Agreement required consumers to make upfront payments in the amount of 20% of the bond, a $420 advance payment, and an activation fee up to $460. (Id. ¶ 47.) In addition, it required consumers to wear a GPS ankle monitor and make monthly payments of $420 until: (1) the consumer's immigration proceedings are resolved; or (2) the consumer makes supplemental collateral payments that add up to 80% of the amount of the bond, at which time the ankle monitor is removed, and the consumer agrees to pay the remaining 20% over a specified time. (Id. ¶ 48.) A consumer's monthly payments to Libre are not refundable, but the collateral payments are refundable once a consumer's immigration proceedings are resolved. (Id. ¶¶ 49, 50.)

In late 2017 or early 2018, Libre revised its written client agreement (the “New Agreement”). (Id. ¶ 71.) The New Agreement does not require GPS monthly lease payments. Instead, it requires monthly “program fees,” which are recurring monthly charges that vary according to the bond amount. (Id. ¶ 72.) The New Agreement requires consumers to either pay program fees according to a schedule or to pay supplemental bond collateralization payments that add up to the full amount of the bond. (Id.) After a consumer has paid all of the program fee installments or made bond collateralization payments in the full amount of the bond, the consumer must then pay a monthly maintenance fee of $50 until the bond is cancelled. (Id. ¶ 73.)

According to plaintiffs, Libre falsely told consumers that it paid the full amount of the consumer's bond to Immigration and Customs Enforcement (“ICE”). (Compl. ¶ 114.) In addition, Libre falsely told consumers that the $420 monthly payments in the Original Agreement were repayments to Libre for the bond Libre paid, but the monthly payments actually went toward leasing the GPS device. (Id. ¶ 115.) Regarding the New Agreement, Libre represented to consumers that the monthly payments were payments toward a loan. (Id. ¶ 116.) Further, consumers told call-center employees that they thought their monthly payments were going toward paying down their bonds. (Id. ¶ 117.) Most Libre consumers do not read or speak English; therefore, they cannot understand the terms in the written agreement and rely on Libre's oral representations. (Id. ¶ 118.) Plaintiffs allege that “Libre's misrepresentations lead consumers to reasonably believe that Libre ha[d] paid cash bonds, that consumers owe[d] a debt to Libre in the amount of the cash bonds, and that [consumers'] monthly payments pa[id] down that debt.” (Id. ¶ 120.)

B. Procedural History

In February 2021, the CFPB, the Commonwealth of Massachusetts, the People of the State of New York, and the Commonwealth of Virginia filed a complaint against Nexus Libre, Donovan, Moore, and Ajin, alleging that defendants engaged in deceptive, abusive, and fraudulent conduct in the course of their business. (Compl. ¶¶ 1-3, 26-47.) Counts One through Ten assert violations of the Consumer Financial Protection Act of 2010 (“CFPA”), 12 U.S.C. §§ 5481, et seq., on behalf of all plaintiffs against different groups of defendants, and Counts Eleven through Seventeen assert violations of various state consumer protection laws on behalf of the corresponding individual plaintiff-state.

On May 19, 2021, defendants agreed to provide in discovery their Rule 26(a) individual disclosures on or before July 22, 2021, which they ultimately did on July 21 (Dkt. No. 222-3). With respect to disclosure of individuals who were “likely to have discoverable information . . . that [defendants] may use to support [their] claims or defenses,” Fed.R.Civ.P. 26(a)(1)(A)(i), defendants listed nineteen individuals/entities, most of whom were already named somewhere in the complaint. (Dkt. No. 222-3 at 2.) Concerning the disclosure of copies of “all documents, electronically stored information, and tangible things that [defendants had] in [their] possession, custody, or control and may use to support [their] claims or defenses,” Fed.R.Civ.P. 26(a)(1)(A)(ii), defendants indicated that they “have no documents, electronically stored information, and tangible things[] in their possession, custody, or control at this time.” (Dkt. No. 222-3 at 3.) To date, defendants have not supplemented those initial disclosures.

On September 13, 2021, the court issued an order scheduling a bench trial for January 30 through February 17, 2023, and setting other key deadlines in this case. Defendants largely failed to produce documents and electronically stored information responsive to plaintiffs' discovery requests throughout this litigation. On June 8, 2022, U.S. Magistrate Judge Joel C. Hoppe ordered defendants to take certain steps to fully respond to plaintiffs' outstanding requests for production. (Dkt. No. 129.) Defendants did not comply with that order. Consequently, on July 19, 2022, plaintiffs moved the court to sanction defendants for their noncompliance. (Dkt. No. 139.)

The deadline for defendants' expert disclosures (August 1, 2022) came and went, and defendants had not yet disclosed the identity or written report of any expert. Likewise, the deadline to complete discovery (October 27, 2022) passed, and plaintiffs still had not received most of their requested discovery. (Dkt. No. 201 at 13.) As a result, on December 1, 2022, the court canceled the early 2023 bench trial. (Dkt. No. 171.)

On May 11, 2023, the court issued a memorandum opinion and order finding each defendant in civil contempt and entering default against them pursuant to Federal Rule of Civil Procedure 37(b)(2)(A)(iv). (Dkt. Nos. 201, 202.) Because the sanctions resolved only the disposition of plaintiffs' claims and not the extent of the associated relief, the court ordered further proceedings to determine the appropriate damages and/or other remedies in relation to those claims. (Dkt. No. 202 at 2.) In their briefing on remedies, plaintiffs made a number of requests for additional Rule 37 sanctions against defendants in order to curtail their production of new evidence at the evidentiary hearing not previously produced in discovery. (Br. in Supp. of Remedies 9-12, Dkt. No. 216.) Plaintiffs also requested the court “decid[e] all evidentiary disputes relevant to remedies and damages in Plaintiffs' favor ....” (Id. at 9.)

The court set the damages/remedies hearing for August 15 and 16 2023, and ordered the parties to file initial exhibit and witness lists for that hearing on or before June 26, 2023. (Dkt. No. 211.) On June 26, defendant...