Nexus Services, Inc., Libre by Nexus, Inc., Micheal Donovan, Richard Moore, and Evan Ajin
Documents in this case
Case summary
On February 22, 2021, the Bureau filed a lawsuit against Nexus Services, Inc. (Nexus Services), Libre by Nexus, Inc. (Libre), and their principals, Micheal Donovan, Richard Moore, and Evan Ajin. Libre is a wholly owned subsidiary of Nexus Services, and both are non-banks with their principal places of business in Virginia. The Bureau filed its complaint jointly with the Attorneys General of Virginia, Massachusetts, and New York. The CFPB alleged that Libre and its owners violated the Consumer Financial Protection Act of 2010’s prohibition on deceptive and abusive acts and practices through their scheme to offer to pay immigration bonds to secure the release of consumers held in federal detention centers in exchange for large upfront fees and hefty monthly payments; and that Nexus substantially assisted.
On March 1, 2021, the defendants filed a motion to dismiss the complaint, which the court denied on March 22, 2022. On February 7, 2023, the magistrate judge ordered defendants to show cause why the district court should not sanction them—including through entrance of default judgment—for various violations of court orders. On May 1, 2023, the defendants filed a motion for judgment on the pleadings, and on May 11, 2023, the district court found the defendants in civil contempt and entered default against them. The court also denied as moot the defendants’ motion for judgment on the pleadings. Defendants appealed the district court’s denial of their motion for judgment on the pleadings, and on February 21, 2024, the Fourth Circuit dismissed the appeal on the ground it lacked jurisdiction.
On April 1, 2024, the district court granted final judgment to the Bureau and the states. The court ordered: defendants to pay $230,996,970.84 in consumer redress; each defendant to pay the Bureau $111,135, 620 in civil money penalties; and defendants to pay $24,390,000 in penalties to the states. The court also, among other restrictions, enjoined defendants from requiring consumers to wear a GPS device or collect payments related to GPS monitoring. The court also required defendants to make certain clear and prominent disclosures in writing, including: the terms of products or services; associated fees; and that non-payment or noncompliance will not have any impact on a consumer’s immigration status or associated immigration proceeding. On April 11, 2024, defendants appealed the judgment. The Fourth Circuit affirmed the judgment on October 8, 2025, and issued an amended opinion on October 15, 2025.
Complaint ()
PDF of this document (49 pages)
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IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF VIRGINIA Harrisonburg Division
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.
Case No.:
COMPLAINT The Consumer Financial Protection Bureau (Bureau), the Commonwealth of Massachusetts (Massachusetts), the People of the State of New York by Letitia James, Attorney General of the State of New York (New York), and the Commonwealth of Virginia (alone Virginia, together with Massachusetts and New York, the States), allege the following against Nexus Services, Inc., Libre by Nexus, Inc. (collectively Nexus), Micheal Donovan, Richard Moore, and Evan Ajin. Introduction 1.
Nexus Services, Inc. (Nexus Services), through its subsidiary Libre by Nexus, Inc. (Libre), preys on consumers held in federal detention centers by offering to 5:21-cv-00016 Case 5:21-cv-00016-EKD Document 1 Filed 02/22/21 Page 1 of 49 Pageid#: 1
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pay for consumers’ immigration bonds to secure their release. In exchange, Libre demands large upfront fees and hefty monthly payments while concealing or misrepresenting the true costs of its services.
2.
Libre’s potential clients are detainees in the custody of U.S. Immigration and Customs Enforcement (ICE) and those detainees’ friends and family members. Detainees who are deemed to not pose a flight risk or a threat to public safety are afforded the opportunity to post bond. Detainees without the ability to pay cash for their bond—averaging $7,500 nationally—must obtain third-party financing to pay for the bond in cash, get bonded by a surety company, or remain in detention. 3.
Libre offers to “securitize” immigration bonds for these cash-strapped consumers. The “securitization” service requires consumers to wear bulky GPS-tracking devices and pay monthly fees for those devices for years. 4.
Libre creates the reasonable impression in consumers’ minds at the time they sign up for its service that Libre has paid cash for their bond, creating a debt that must be repaid to Libre through an upfront fee and subsequent monthly payments. 5.
Once consumers sign written agreements, Libre’s efforts to collect monthly payments include making false threats to take legal action, sell accounts into collection, and report consumers to credit bureaus. Libre also threatens to re-detain or deport consumers for non-payment.
6.
Defendants Micheal Donovan, Richard Moore, and Evan Ajin (Individual Defendants) devised this business model, implemented it, directed its operation, and knew the details of its workings.
7.
The Bureau and the States bring this action against Nexus Services, Libre, Donovan, Moore, and Ajin (collectively, Defendants) under §§ 1042 and 1054 of the Case 5:21-cv-00016-EKD Document 1 Filed 02/22/21 Page 2 of 49 Pageid#: 2
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Consumer Financial Protection Act of 2010 (CFPA), 12 U.S.C. §§ 5552 and 5564. Defendants engaged in deceptive and abusive acts or practices in connection with Libre’s offer of credit to consumers for their immigration bonds. See 12 U.S.C. §§ 5531, 5536(a). And Nexus Services, Donovan, Moore, and Ajin knowingly or recklessly provided substantial assistance to Libre in its deceptive and abusive acts or practices, in violation of the CFPA. See 12 U.S.C. § 5536(a)(3). 8.
The States also bring related claims against Defendants for violating their respective consumer-protection laws.
Jurisdiction and Venue 9.
The Bureau brings this action under §§ 1031, 1036, and 1054 of the CFPA, 12 U.S.C. §§ 5531, 5536, 5564. The States bring this action under § 1042 of the CFPA, 12 U.S.C. § 5552, which authorizes state attorneys general to bring civil actions to enforce provisions of the CFPA, based on Defendants’ deceptive and abusive practices in violation of §§ 1031 and 1036 of the CFPA, 12 U.S.C. §§ 5531, 5536. 10.
This Court has subject-matter jurisdiction over this action because it is brought under “Federal consumer financial law,” 12 U.S.C. § 5565(a)(1), presents a federal question, 28 U.S.C. § 1331, and is brought by an agency of the United States, 28 U.S.C. § 1345.
11.
This Court has supplemental jurisdiction over the state-law claims asserted by Massachusetts, New York, and Virginia because they are so related to the federal claims that they form part of the same case or controversy. 28 U.S.C. § 1367(a). 12.
This Court has personal jurisdiction over Defendants and venue is proper in this district and in this division because Defendants are located, reside, and do business here. 12 U.S.C. § 5564(f); 28 U.S.C. § 1391(b)-(c); W.D. Va. Civ. R. 2(b). Case 5:21-cv-00016-EKD Document 1 Filed 02/22/21 Page 3 of 49 Pageid#: 3
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Parties 13.
The Bureau is an agency of the United States created by the CFPA and charged with regulating the offering and providing of consumer-financial products and services under federal consumer-financial laws. 12 U.S.C. § 5491(a). The Bureau has independent litigating authority. 12 U.S.C. § 5564(a)-(b). 14.
Massachusetts, represented by and through its Attorney General, is a sovereign state. The Attorney General is authorized to bring this action in the public interest by Massachusetts General Laws chapter 12, §§ 3 and 10, and chapter 93A, § 4, Mass. Gen. Laws (M.G.L.) ch. 12, §§ 3, 10; ch. 93A, § 4. 15.
New York, by its Attorney General (NYAG), is authorized to take action to enjoin (i) repeated and persistent fraudulent and illegal conduct under New York Executive Law § 63(12) and (ii) deceptive business practices under New York General Business Law (NY GBL) § 349.
16.
Virginia, by, through, and at the relation of its Attorney General, Mark R. Herring, has authority to bring this suit, and brings this suit, to enforce the Virginia Consumer Protection Act (VCPA), Virginia Code §§ 59.1-196 through 59.1-207, under Virginia Code §§ 59.1-203, 59.1-205, and 59.1-206. 17.
Nexus Services was incorporated in 2013 in Virginia. It was redomiciled in 2019 as a Georgia corporation, but its principal place of business is in Verona, Virginia, and it continues to do business in Virginia as a foreign corporation. 18.
Libre, a wholly owned subsidiary of Nexus Services, was incorporated in 2014 in Virginia. Libre was redomiciled in 2019 as a Georgia corporation, but its principal place of business is in Verona, Virginia, and it continues to do business in Virginia as a foreign corporation.
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19.
As described herein, Libre creates the reasonable impression in consumers’ minds that it is offering or providing extensions of credit to pay for consumers’ immigration bonds. These transactions are therefore consumer-financial products or services under the CFPA. 12 U.S.C. § 5481(5), (7), (15)(A)(i). Libre therefore is a “covered person” under the CFPA. 12 U.S.C. § 5481(6)(A). 20.
Donovan is a Virginia resident, a co-founder and a majority owner, officer, and director of Nexus Services, and the Chief Executive Officer of Libre. At all times relevant to this Complaint, Donovan has exercised managerial responsibility for Libre and Nexus Services and has materially participated in the conduct of each company’s affairs. Donovan is therefore a “related person” under the CFPA, 12 U.S.C. § 5481(C)(i), (ii), and thus deemed a “covered person” under the CFPA, 12 U.S.C. § 5481(25)(B). 21.
Moore is a Virginia resident, a co-founder and part owner of Nexus Services, the Chief Financial Officer of Libre, and the Executive Vice President of Libre and Nexus Services. At all times relevant to this Complaint, Moore has exercised managerial responsibility for Libre and Nexus Services and has materially participated in the conduct of each company’s affairs. Moore is therefore a “related person,” 12 U.S.C. § 5481(C)(i), (ii), and thus deemed a “covered person” under the CFPA, 12 U.S.C. § 5481(25)(B).
22.
Ajin is a Virginia resident, part owner of Nexus Services, a Director of Nexus Services, and a Vice President of Libre. Since at least 2016, Ajin has exercised managerial responsibility for Libre and Nexus Services and materially participated in the conduct of each company’s affairs. Ajin is therefore a “related person,” 12 U.S.C. § 5481(C)(i), (ii), and thus deemed a “covered person” under the CFPA, 12 U.S.C. § 5481(25)(B).
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Facts Through false and misleading statements and omissions, Libre targets detainees who are desperate to be released.
23.
Libre operates a business aimed at immigrants held in federal detention. The detainees and their families are typically desperate to get the detainees—who have typically been held in jails or detention centers for months—out of detention, but they cannot afford the bond.
24.
Libre markets, offers, and provides its services nationwide and has done business with consumers in Massachusetts, New York, Virginia, and elsewhere. 25.
ICE may release non-citizens held in its custody if an immigration judge has set a bond.
26.
Immigration bonds may be secured by a cash deposit in the full amount of the bond to ICE (cash bonds). Cash bonds are refundable when the consumer’s immigration proceedings are finally resolved. 27.
Immigration bonds also may be guaranteed by a surety company certified by the U.S. Treasury under 31 U.S.C. §§ 9304-9308. The Treasury publishes a list of certified companies on its website.
28.
As of the date of this filing, neither Nexus Services nor Libre appears on the Treasury’s list of certified companies.
29.
Neither Nexus Services nor Libre is a licensed bail-bond agent in any state. 30.
Detainees frequently lack the funds to obtain their release. In 2018, the median immigration bond cost $7,500, up 50% since 2013. 31.
Libre markets and describes its services to consumers as an easy and affordable alternative method of securing the release of detainees from federal custody. Case 5:21-cv-00016-EKD Document 1 Filed 02/22/21 Page 6 of 49 Pageid#: 6
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32.
The vast majority of Libre’s clients and their co-signers are Spanish speakers, most of whom do not read or write English and many of whom cannot read or write in any language.
33.
Libre markets to consumers with Spanish-language advertisements. 34.
From at least 2014 until at least late 2017, Libre used a multi-part, written client agreement of over 20 pages, all written in English except for a single page written in Spanish (Original Agreement). Thousands of active Libre clients signed the Original Agreement.
35.
Typically, either an immigrant in detention or a spouse, partner, or relative contacts Libre, and a Libre representative, over the phone, purports to explain the terms of the agreement. Libre then faxes a written agreement to the spouse, partner, or relative and requires that individual to co-sign the agreement and submit a substantial, non-refundable upfront payment.
36.
After receiving the upfront, non-refundable payment and signed written agreement from the co-signer, Libre obtains the detainee’s release by instructing a bond agent to post the bond.
37.
Libre acts as an intermediary between the detainees and the sureties and their bond agents. Libre requires detainees to execute an agreement with certain obligations and, in exchange, it agrees to indemnify the sureties and their bond agents for any losses in connection with the immigration bonds. The sureties then post and issue immigration bonds to ensure the detainee’s release. 38.
When the immigration bond is processed, the detainee is released from ICE custody. A Libre representative picks up the freed detainee at the detention center, then takes the freed detainee to a fast-food restaurant and then to a Libre office or a Case 5:21-cv-00016-EKD Document 1 Filed 02/22/21 Page 7 of 49 Pageid#: 7
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hotel. At this point, having just been released from immigration detention—in many cases having never been in the United States—and without any ability to contact a friend or family member, the freed detainee relies entirely on Libre for food, transportation, and guidance on how to reunite with their family.
39.
At Libre’s office or a hotel, often arriving after hours of driving and in the middle of the night, Libre presents the consumer with a written agreement. 40.
Libre instructs the newly released detainee that their co-signer has already executed the agreement and that they must do so as well. Libre sometimes represents that if the released detainee does not execute the agreement, they will be returned to detention, and their co-signer will forfeit the upfront payments they have made and may also be subject to additional liability for costs, losses, and interest on the bond under the Original Agreement.
41.
The consumer then signs the written agreement, thus becoming a Libre client and, under the Original Agreement, is obligated to wear a GPS ankle monitor and to pay a monthly fee of $420 until the immigration proceeding before ICE is resolved. Consumers rarely have access to a lawyer to represent their interests at this time. 42.
Released detainees are placed on ICE’s “non-detained” docket to await an immigration hearing. Immigrants on the non-detained docket typically wait about three years for a hearing, meaning that Libre’s clients may have to make $420 monthly payments for that long, or longer. Thus, for instance, under the Original Agreement, a Libre client with a $10,000 bond whose immigration case took three years to resolve could expect to make nonrefundable payments to Libre in excess of $17,000. 43.
Freed detainees and co-signers typically rely exclusively on Libre’s oral representations to understand the terms of the agreement. Case 5:21-cv-00016-EKD Document 1 Filed 02/22/21 Page 8 of 49 Pageid#: 8
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44.
But Libre misrepresents, conceals, or fails to explain many of the material terms. For example, Libre has omitted that monthly payments go to the GPS-device lease, not the bond, and are nonrefundable.
45.
Libre also misrepresents that it has paid the bond and that consumers need to make monthly payments to Libre without explaining that the purpose of the monthly payments is leasing the GPS device, leading consumers to reasonably believe that they owe a debt to Libre.
Libre’s written agreements contain misrepresentations designed to deceive and intimidate consumers.
46.
Since 2014, Libre has used at least two different written agreements. 47.
The Original Agreement requires consumers to make upfront payments in the amount of 20% of the bond, a $420 “advance payment,” and an “activation fee” up to $460.
48.
The Original Agreement requires consumers to wear a bulky GPS ankle monitor and make monthly payments of $420 until: (1) a consumer’s immigration proceedings are finally resolved; or (2) the consumer makes supplemental “collateral” payments—in addition to the $420 monthly 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. 49.
Under the Original Agreement, monthly “lease” payments are not refundable.
50.
Under the Original Agreement, “collateral” payments are refundable once consumers’ proceedings are resolved.
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51.
Libre told consumers that collateral payments are refundable once consumers’ proceedings are resolved.
52.
Libre did not properly track consumers’ payments in its systems, resulting in some collateral payments not being recorded.
53.
In many cases, Libre did not refund or took months to refund consumers’ collateral payments.
54.
In some instances, Libre also did not refund or took months to provide refunds to consumers who had made an initial payment but did not actually use Libre’s services.
55.
The Original Agreement includes a “Lease Agreement” between three parties: Libre, the consumer (Lessee), and “Agency.” The Lease Agreement states that “Agency has an interest in electronically monitoring individuals.” Under a section labeled “Agency Provisions,” Libre agrees to provide “Agency” access to the tracking device to “facilitate Agency’s monitoring of Lessee.” A section labeled “General Provisions Applicable to Both Lessee and Agency” states that “[t]he parties acknowledge that the tracking and monitoring which is contemplated hereunder by the Agency may be undertaken in conjunction with criminal process against Lessee, or that Lessee has voluntarily undertaken to use the Equipment in order to satisfy a criminal conviction or plea agreement, or to avoid incarceration by Agency.” 56.
The purported involvement of an “Agency” in the Original Agreement gives consumers the false impression that noncompliance with the terms of the written agreement may lead to action by a governmental “Agency,” such as re-arrest, redetention, or negative consequences to their immigration case. Case 5:21-cv-00016-EKD Document 1 Filed 02/22/21 Page 10 of 49 Pageid#: 10
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57.
Even though the agency name is left blank in the agreement, consumers may reasonably infer that “Agency” means ICE, because ICE detained them, their immigration bond is with ICE, and upon their release, ICE gave them a date to appear before an immigration judge.
58.
Libre reinforced this false impression by representing to consumers that non-compliance with Libre’s agreement could lead to negative consequences in the consumer’s immigration case, as if Libre’s agreements with consumers were linked or connected to their immigration cases.
59.
In fact, neither ICE nor any other agency is a party to Libre’s agreement, has “an interest” in monitoring the consumer, is monitoring the consumer through Libre’s GPS device, or is compelling or allowing the consumer to use Libre’s GPS device to avoid incarceration or to satisfy a criminal conviction or plea agreement. 60.
Libre’s Original Agreement states: “I understand that any alteration, damage, or destruction of the GPS device or band WILL RESULT in felony criminal prosecution against the respondent.” In fact, Libre has no authority to prosecute crimes. Moreover, in most jurisdictions where Libre operates, “alteration, damage, or destruction of the GPS device or band” would not be a felony. 61.
The Original Agreement contains a “Risk Assessment Instrument” (RAI), designed to calculate a “score” and determine whether a consumer was approved for entry into the Libre “program” and, if so, whether an ankle monitor was required. Quite similar to the software system employed by ICE and the Department of Homeland Security to determine the amount of an immigration bond, the RAI scoring categories include information about the consumer’s living arrangements, criminal history, Case 5:21-cv-00016-EKD Document 1 Filed 02/22/21 Page 11 of 49 Pageid#: 11
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employment, whether the consumer has a phone number, and the consumer’s mental health and substance abuse treatment.
62.
Notably, the RAI assigns 22 points if the “current offense [is] a presumption charge,” while mandating that “22+ points” means “GPS REQUIRED FOR APPROVAL.” Libre assigned every consumer that executed the Original Agreement 22 points for a “presumption charge.” Therefore, according to the RAI, every consumer was required to wear a GPS device, and the rest of the scoring system was irrelevant. Moreover, given the detainees’ circumstances at the time they signed an agreement with Libre, and that they very likely were unemployed, living with friends or family, and did not have a phone, these consumers were subject to an even higher RAI “score.” 63.
The Original Agreement contains a “Conditions of Monitoring” section that purports to impose certain obligations on consumers. Libre represented through these “Conditions” that the “Bail Bondsman” had imposed certain conditions as part of the “bail,” including: GPS monitoring; a curfew; abstaining from alcohol; and reporting “as required.” None of these conditions were imposed by the licensed surety or its agents as a condition to posting the immigration bond.
64.
Libre also represented through its “Conditions of Monitoring” that it was imposing its own conditions on the consumer as part of this agreement, including: maintain or seek employment; make payments to bondsman, as required by bondsman; make program participation payments of $420; and, mental health treatment plan. Libre did not condition any consumer’s eligibility to obtain an immigration bond through its services on the referenced conditions other than making participation payments. Libre also did not provide “mental health treatment plans” to consumers, nor did it screen for, recommend, or provide any such treatment. Case 5:21-cv-00016-EKD Document 1 Filed 02/22/21 Page 12 of 49 Pageid#: 12
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65.
The Original Agreement contains a “Payment Schedule – GPS Lease,” which states: “You are required to make payments for the lease of the GPS equipment and for the GPS monitoring service. The amount of the monthly lease payments [is] $420.00. These payments are due on the 1st of each month, for as long as you wear the GPS bracelet.” The “Nexus Securitization Contract – GPS Addendum” in the Original Agreement requires that co-signers place their initials next to the statement: “I understand that the respondent will be responsible for a monthly rental payment for the GPS device, in the amount of $420.” Libre also has told consumers at the time that Libre put on the device that consumers would be monitored. 66.
Thousands of consumers wear GPS devices required by Libre and make monthly payments purportedly for the devices and for the “GPS monitoring service.” But many devices did not properly function, and since at least February 2018, Libre could not provide any monitoring service for thousands of devices. 67.
Since at least February 2018, Libre has not provided any GPS monitoring service to thousands of consumers who wear GPS devices because Libre’s GPS vendor cut off Libre’s remote access to the monitoring software at that time. A month later, Libre’s vendor decommissioned all of Libre’s devices from that vendor, rendering them useless as monitoring devices.
68.
The Original Agreement includes provisions in which the co-signer agrees to indemnify Libre against losses. Libre has also frequently required co-signers to execute a promissory note under which they are obligated to repay the face amount of the immigration bond plus interest at a rate of 20% in the event of a bond breach. Case 5:21-cv-00016-EKD Document 1 Filed 02/22/21 Page 13 of 49 Pageid#: 13
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69.
The Original Agreement is about 21 pages, only one of which is in Spanish. The Spanish-language page of the Original Agreement fails to convey all the material terms of the agreement, including the amount of the required monthly “lease” payment. 70.
Thousands of consumers who signed the Original Agreement continue to wear the GPS and make monthly “lease” payments under it. 71.
In late 2017 or early 2018, Libre revised its written client agreement (New Agreement).
72.
Among other changes, the New Agreement did not require GPS monthly lease payments, but it instituted a new monthly payment called “Program Fees.” “Program Fees” are “recurring monthly charges by Libre that You must pay,” and they vary according to the bond amount. Libre’s New Agreement requires either Program Fees according to the following schedule or supplemental “Bond Collateralization Payments” that add up to the full amount of the bond: Amount of Bond Monthly Program Fees Number of Payments Total Up to $4,999 $250 $5,500 $5,000 - $7,499 $350 $7,700 $7,500 - $9,999 $375 $9,000 $10,000 - $14,999 $450 $15,300 $15,000 - $19,999 $450 $18,000 $20,000 and Up $475 $28,500 73.
After a consumer has either paid all of the Program Fee installments or made Bond Collateralization Payments in the full amount of the bond, the New Agreement requires a monthly Maintenance Fee of $50 until the bond is canceled. 74.
Similar to the Original Agreement, collateral payments are also refundable under the New Agreement.
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75.
Unlike the Original Agreement, the New Agreement does not require all consumers to wear a GPS device. Consumers with bond amounts of $5,000 or greater are required to wear a GPS device; consumers with bond amounts of $4,999 or less are not required to wear a GPS device.
76.
Libre’s Original Agreement does not provide for any way to remove the GPS device in cases of injury, pregnancy, or illness. And the New Agreement only allows for its removal in certain circumstances and at Libre’s “sole discretion.” 77.
Libre represents to consumers that it offers a “program” that includes more than the financial services relating to consumers’ immigration bonds. Libre boasts that its “program” includes “wraparound services,” such as access to medical services, guidance to consumers obtaining government assistance, relief during “natural disasters,” and access to medical providers.
78.
As part of its marketing and sales pitch, Libre also represents or creates the false impression that it will provide a free, full-service lawyer to help its clients with their immigration cases. Libre has described itself to consumers as “Immigration Legal Aid.”
79.
But Libre only provides referrals to purportedly independent, affiliate law firms Nexus Caridades, Inc. and Nexus Caridades Attorneys, Inc. These entities are not obligated to take a Libre client’s case and often do not take these cases. Libre uses non-functioning GPS ankle monitors.
80.
Libre has contracted with three GPS providers since 2014, including Omnilink Systems, Inc. (Omnilink), Attenti US, Inc. (3M/Attenti), and Buddi US, LLC (Buddi).
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81.
Libre contracted with Omnilink from November 2013 until about June 15, 2017, to lease GPS-enabled ankle monitors and provide GPS-location data about the wearers of the monitors. Omnilink terminated Libre’s access to its GPS-location software in September 2015 for nonpayment.
82.
Starting in September 2015, Libre did not have access to Omnilink’s GPSlocation data. Despite this, Libre continued to collect and receive payments from consumers wearing the Omnilink ankle monitors and continued to admonish consumers to charge their ankle monitors.
83.
Consumers continued to wear the Omnilink ankle monitors well after September 2015. Libre did not advise these consumers that the Omnilink ankle monitors were nonfunctional or that Libre was required to return the monitors to Omnilink when its contract was terminated.
84.
Libre contracted with 3M/Attenti on June 8, 2015, to lease GPS-enabled ankle monitors and provide GPS-location data about the wearers of the monitors. 3M/Attenti terminated Libre’s access to its GPS-location software and monitoring services on February 19, 2018, for nonpayment. 85.
After February 2018, Libre did not have access to 3M/Attenti GPS-location data. Despite this, Libre continued to collect and receive payments from thousands of consumers wearing the 3M/Attenti ankle monitors and continued to admonish consumers to charge their 3M/Attenti ankle monitors. 86.
Consumers continued to wear the 3M/Attenti ankle monitors well after February 2018. Libre did not advise these consumers that the 3M/Attenti ankle monitors were nonfunctional or that Libre was required to return the monitors to 3M/Attenti when its contract was terminated.
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87.
Finally, Libre contracted with Buddi on October 10, 2017. Buddi terminated Libre’s access to its GPS-location software on May 20, 2020, for nonpayment. Buddi demanded that Libre return all of its GPS monitors. Upon information and belief, Libre continues to accept payments from consumers for the Buddi monitors. Upon information and belief, Libre has not advised these consumers that the Buddi monitors are nonfunctional or that Libre is required to return the monitors to Buddi.
88.
Libre has stated publicly that it has decided to stop requiring GPS ankle monitors altogether as a sign of good faith. In truth, Libre has been forced to stop requiring these monitors because its contracts for them have been terminated. 89.
Libre experienced many functional problems with the GPS ankle monitors. Notably, the Omnilink and 3M/Attenti ankle monitors were large, cumbersome, and difficult for a consumer to wear twenty-four hours a day and seven days a week. 90.
Consumers frequently were not able to charge the ankle monitors, and the monitors frequently made sounds, noises, or alerts that consumers did not understand. Some consumers suffered injuries caused by the ankle monitors, including rashes, irritation, and burns. Libre was often slow to respond to and fix these problems, triggering follow-up phone calls from increasingly frustrated consumers. 91.
Additionally, given Libre’s multiple and overlapping contracts with its GPS providers, Libre on occasion had to switch the consumers’ ankle monitors for a different provider’s unit. This proved extraordinarily difficult for Libre, as it was required to locate a consumer, have them agree to come into its office or set up a time to go visit the consumer, obtain the old monitor and replace it with a new monitor. As a result, many consumers kept, wore, and paid for ankle monitors that did not work at all. Case 5:21-cv-00016-EKD Document 1 Filed 02/22/21 Page 17 of 49 Pageid#: 17
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92.
Libre also created guises to solicit consumers to come in and switch their GPS monitors, such as a “pizza party,” a “promotion,” or some type of special deal offering to “upgrade” their ankle monitors. Libre did not tell these consumers that it was delinquent in its payments to the GPS provider, causing the GPS provider to terminate Libre’s access to location-monitoring services.
Libre encourages its representatives to mislead clients and co-signers about what its written agreement requires.
93.
Libre’s incentive-compensation program rewards representatives for each new agreement signed or payment collected. As a result, call-center representatives can receive commissions many times their base salary. 94.
The financial rewards for Libre’s representatives provide incentives for them to rush through the intake process, to omit or misrepresent consumers’ obligations when they sign up with Libre, or to make false threats to consumers to collect payments. 95.
Libre lacks effective controls for the risks its incentive-compensation program may pose to consumers, including oversight of representatives to ensure that representatives do not earn financial rewards by means of deception. 96.
Libre’s policy directs its representatives speaking with prospective clients to make “a minimum of” four intake calls per hour, making it difficult or impossible to fully explain the material terms of Libre’s client agreement to a prospective co-signer or client.
97.
As of 2019, Libre had no call scripts or talking points relating to marketing and signing up customers.
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98.
During at least 2014 and 2015, Libre provided its representatives no scripts or checklists to use as guidance about which key terms in the written agreement they should convey to consumers.
99.
Until mid-2015, Libre did not review the mainly English written agreement with its call-center representatives. As a result, call-center representatives, including those who spoke only Spanish, did not have a full understanding of the written agreement to be able to review it with consumers. 100. Libre failed to implement any training for its representatives until mid- 2015, and the training it eventually put in place does not provide adequate guidance on what to say to consumers, and it does not ensure that call-center representatives are able to explain key terms in the written agreement to consumers. Libre makes false threats about the purported consequences of nonpayment or noncompliance.
101.
Libre regularly makes false and misleading threats to clients and cosigners in an attempt to secure their compliance with the company’s agreement. 102.
Libre aggressively attempts to collect debts allegedly owed by clients and co-signers. Libre contends that, on average, its clients owe substantial debts to the company, including thousands of dollars in delinquent monthly payments. 103.
Since at least 2014, Libre has repeatedly threatened clients and co-signers that they are at risk of re-arrest, detention, deportation, or other negative outcomes in their immigration case if they fail to pay monthly fees or they remove their GPS device. 104.
Libre has no legal or contractual authority to cause any person to be deported or to negatively impact the outcome of someone’s immigration case. Case 5:21-cv-00016-EKD Document 1 Filed 02/22/21 Page 19 of 49 Pageid#: 19
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105.
Since at least 2014, Libre has repeatedly threatened co-signers that they may be required to wear GPS devices if they fail to make payments. 106.
Libre has no legal or contractual authority to make a co-signer wear a GPS device.
107.
Since at least 2018, call-center representatives have repeatedly threatened clients that their accounts might be sold to a debt buyer or collection agency for nonpayment. But Libre has not and does not sell debts or refer them to collection agencies.
108.
Since at least 2018, call-center representatives have repeatedly threatened clients and co-signers that their credit would be harmed if they do not pay amounts owed. But Libre has never furnished information to credit-reporting agencies. 109.
Since at least 2018, call-center representatives have repeatedly threatened clients and co-signers that Libre would sue them for nonpayment. But Libre has not and does not sue clients or co-signers for nonpayment. 110.
Libre has also demanded payments from clients and co-signers based on incomplete or inaccurate accounting records for amounts that were not due. 111.
For payments to be recorded in Libre’s payments system, consumers must send Libre a photograph of a deposit receipt. This requirement is not in Libre’s agreement, and many consumers are not told about the requirement when they sign up with Libre and do not send photographs of their deposit receipts. As a result of this and other slipshod recordkeeping processes, Libre has not accurately recorded payments made by consumers.
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112.
The systemic failure to accurately record payments causes Libre to regularly make false statements to consumers about what they owe, such as by calling or texting consumers to demand a payment that they do not in fact owe. 113.
Even when consumers have objected and raised disputes concerning debts, Libre has refused to acknowledge or respond to them and has persisted with collection activities without validating those debts. Consumers reasonably believe that Libre has paid consumers’ bonds and that their monthly payments pay down the bond.
114.
Libre has falsely told consumers that Libre paid the full amount of the consumer’s bond to ICE to secure the consumer’s release. 115.
Libre has falsely told consumers that the $420 monthly payments were repayments to Libre for the bond it paid, or they have failed to explain that the monthly payments go to the GPS-device lease, leading consumers to reasonably believe that the monthly payments were repayments to Libre for the bond it claimed to have paid. 116.
Under Libre’s New Agreement, the Program Fees constitute a payment plan with a set term and a total amount that is about equal to the amount of the consumer’s bond. Libre expressly or implicitly represented to consumers that these monthly payments, which consumers were required to repay over a term of months, were payments toward a loan.
117.
Consumers routinely told call-center employees that they thought their monthly payments were going toward paying down their bond. Libre has long known that consumers routinely and materially misunderstand Libre’s offerings but has not implemented policies and procedures to ensure that employees provide accurate information about Libre’s program to consumers. Case 5:21-cv-00016-EKD Document 1 Filed 02/22/21 Page 21 of 49 Pageid#: 21
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118.
Libre knows or should have known that consumers depend entirely on its oral representations for key agreement terms because Libre knows that the vast majority of co-signers and clients do not read or speak English and therefore cannot understand its Original Agreement that is almost entirely in English. 119.
Libre understands that its prospective clients are in detention and that they and their family members are typically desperate for their release. 120.
Libre’s misrepresentations lead consumers to reasonably believe that Libre has paid cash bonds, that consumers owe a debt to Libre in the amount of the cash bonds, and that monthly payments pay down that debt. Thus, consumers reasonably believe that Libre offers or provides a credit transaction in which consumers incur a debt and defer the right to repay.
The Individual Defendants know about or actively direct Libre’s misrepresentations and omissions to consumers.
121.
Nexus Services, which owns Libre, has three shareholders: Individual Defendants Donovan, Moore, and Ajin.
122.
The Individual Defendants have had the authority and responsibility to approve Libre, or Nexus Services on behalf of Libre, entering into agreements with clients.
123.
The Individual Defendants knew or should have known that the vast majority of Libre’s consumers cannot read or understand English and that these consumers rely on Libre to verbally represent the material terms of its written agreements to them. The Individual Defendants knew or should have known that Libre’s representatives habitually omit or misrepresent material terms to consumers. Case 5:21-cv-00016-EKD Document 1 Filed 02/22/21 Page 22 of 49 Pageid#: 22
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124.
The Individual Defendants have authority and responsibility over the call center and knew or should have known of representations made to consumers, including those reviewed in internal quality assurance reports. The Individual Defendants knew or should have known that Libre’s representatives misrepresent that Libre has paid consumers’ bonds and that monthly payments pay down the bond. 125.
The Individual Defendants have authority and responsibility over consumer complaints, and they knew or should have known of consumer complaints, including those about monthly payments, terms of consumer agreements, GPS devices, and threats of re-arrest, detention, and deportation. The Individual Defendants at times have responded directly to consumers regarding their complaints. 126.
The Individual Defendants have had substantial control over Libre’s operations, including approval of representatives’ training and compensation structure. The Individual Defendants knew or should have known that since at least 2018, Libre could not monitor thousands of GPS devices.
127.
Donovan owns a controlling 51% share of Nexus Services. 128.
Donovan has the authority and responsibility to approve Nexus Services’s and Libre’s policies and practices, including the content of agreements with consumers. 129.
Donovan has actively managed Nexus Services and Libre since their founding. Donovan actively directs Libre’s day-to-day activities, including approving posting of new clients’ bonds and approving modifications to clients’ payment plans or other contractual obligations. Donovan receives regular updates on problems associated with GPS devices.
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130.
Donovan’s name appears on all of the immigration bonds that Libre provides. Donovan’s name and signature appear on Libre’s agreements with its GPS vendors, agreements with sureties, and agreements with bond agents. 131.
Donovan was directly involved in the management of the call center, and its representatives and field representatives, including troubleshooting issues and interacting directly with clients.
132.
Moore has the authority and responsibility to approve Nexus Services’s and Libre’s policies and practices, including the content of agreements with consumers. 133.
Moore has actively managed Nexus Services and Libre since their founding. Moore controls all external payments by Libre, approves posting new clients’ bonds, approves modifications to clients’ payment plans or other contractual obligations, and sometimes directly interacts with Libre’s clients. 134.
Moore has supervised Libre’s customer-service personnel and managers of Libre’s call center.
135.
Moore has the authority and responsibility to refund consumers’ collateral payments and knew that some consumers were owed refunds of thousands of dollars. Moore did not refund consumers’ collateral payments or took many months to refund the payments.
136.
Since at least 2015, Ajin has had the authority and responsibility to approve Libre’s policies and practices relating to the call center. 137.
Ajin has actively managed Nexus Services and Libre since at least 2015. Ajin approves posting new clients’ bonds, approves modifications to clients’ payment plans or other contractual obligations, and sometimes directly interacts with Libre’s Case 5:21-cv-00016-EKD Document 1 Filed 02/22/21 Page 24 of 49 Pageid#: 24
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clients. Ajin receives regular updates on problems associated with GPS devices. Ajin also directly supervises Libre’s call center.
Nexus Services substantially assisted Libre’s business operations. 138.
Nexus Services has been directly involved in establishing Libre’s policies and business operations, including hiring Libre’s employees, signing vendor contracts, and developing internal policies and consumer agreements. The entities commingle corporate funds and share common employees, officers, ownership, addresses, and office space. In communications to consumers, the entities interchangeably represented themselves as “Libre by Nexus” and “Nexus Services.” 139.
Many of the representatives who engaged with consumers on behalf of Libre were employed by Nexus Services. Training manuals for Libre’s representatives were marked “Nexus Services.” Nexus Services, and not Libre, entered into business contracts for products and services that were used exclusively by Libre, including multimillion-dollar contracts with GPS service providers and with bond agents. 140.
Nexus Services entered into certain parts of Libre’s Original Agreement. For example, Nexus Services, not Libre, is a party to the GPS Monitoring Agreement. Similarly, the Client Information Sheet mentions Nexus Programs, which is defined as Nexus Services elsewhere in the agreement.
141.
The Individual Defendants are officers and directors of Nexus Services and Libre. Nexus Services wholly owns Libre. Nexus Services knew or should have known of Libre’s misconduct to the extent that the Individual Defendants knew or should have known of Libre’s misconduct as described in paragraphs 121–137. Case 5:21-cv-00016-EKD Document 1 Filed 02/22/21 Page 25 of 49 Pageid#: 25
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The CFPA 142.
Under the CFPA, it is unlawful for any covered person to engage in a deceptive or abusive act or practice in connection with any transaction with a consumer for a consumer-financial product or service or the offering of a consumer-financial product or service. 12 U.S.C. §§ 5531(a), 5536(a)(1)(B). 143.
It is also unlawful for any person to knowingly or recklessly provide substantial assistance to a covered person in violation of § 1031 of the CFPA, and the provider of such substantial assistance is in violation of that section to the same extent as the person to whom such assistance is provided. 12 U.S.C. § 5536(a)(3). 144.
An act or practice is deceptive if it involves a material misrepresentation or omission that is likely to mislead a consumer acting reasonably under the circumstances. An act or practice is abusive if, among other things, it “materially interferes with the ability of a consumer to understand a term or condition of a consumer financial product or service.” 12 U.S.C. § 5531(d). Count One:
Deceptive Statements Regarding Monthly Payments (Asserted by the Bureau and the States Against Libre and the Individual Defendants) 145.
The Bureau and the States reallege and incorporate by reference paragraphs 1–144.
146.
In numerous instances, Libre represented that it has paid consumers’ bonds and that consumers’ monthly payments are to repay Libre for doing so. 147.
In fact, Libre does not pay consumers’ bonds, and consumers’ monthly payments are rental fees for a GPS device that do not go to repaying consumers’ bonds. Case 5:21-cv-00016-EKD Document 1 Filed 02/22/21 Page 26 of 49 Pageid#: 26
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148.
Libre’s representations were false or misleading, were material because they were likely to affect consumers’ decisions to make payments to Libre, and constituted deceptive acts or practices, in violation of the CFPA. 12 U.S.C. §§ 5531(a), 5536(a)(1)(B).
149.
The Individual Defendants also violated the CFPA because they engaged in these deceptive acts or practices. 12 U.S.C. §§ 5531(a), 5536(a)(1)(B). Count Two:
Deceptive Threats of Deportation (Asserted by the Bureau and the States Against Libre and the Individual Defendants) 150.
The Bureau and the States reallege and incorporate by reference paragraphs 1–144.
151.
In numerous instances, Libre has threatened consumers with re-arrest, detention, or deportation if they fail to make monthly payments or if they remove Libre’s GPS device.
152.
But Libre cannot and does not arrest, detain, or deport a consumer for failing to make a payment or removing their GPS device. 153.
In numerous instances, Libre also has threatened to place GPS devices on co-signers for failing to make payments.
154.
Libre also has no legal or contractual authority to make a co-signer wear a GPS device for failing to make a payment.
155.
Libre’s threats were false or misleading, were material because they were likely to affect consumers’ decisions to make payments to Libre and to wear a GPS device, and constituted deceptive acts or practices in violation of the CFPA. 12 U.S.C. §§ 5531(a), 5536(a)(1)(B).
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156.
The Individual Defendants also violated the CFPA because they engaged in these deceptive acts or practices. 12 U.S.C. §§ 5531(a), 5536(a)(1)(B). Count Three:
Deceptive Threats to Sell Accounts into Collections or Place Them with Debt Collectors (Asserted by the Bureau and the States Against Libre and the Individual Defendants) 157.
The Bureau and the States reallege and incorporate by reference paragraphs 1–144.
158.
In numerous instances, Libre has threatened consumers that their accounts would be turned over to a debt buyer or collection agency. 159.
But Libre has never sold a debt or referred a debt to a collection agency. 160.
Libre’s representations were false or misleading, were material because they were likely to affect consumers’ decisions to make payments to Libre, and constituted deceptive acts or practices in violation of the CFPA. 12 U.S.C. §§ 5531(a), 5536(a)(1)(B).
161.
The Individual Defendants also violated the CFPA because they engaged in these deceptive acts or practices. 12 U.S.C. §§ 5531(a), 5536(a)(1)(B). Count Four:
Deceptive Threats to Harm Consumers’ Credit (Asserted by the Bureau and the States Against Libre and the Individual Defendants) 162.
The Bureau and the States reallege and incorporate by reference paragraphs 1–144.
163.
In numerous instances, Libre has threatened consumers that failing to make payments to Libre could harm their credit. Case 5:21-cv-00016-EKD Document 1 Filed 02/22/21 Page 28 of 49 Pageid#: 28
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164.
But Libre does not furnish information to credit-reporting agencies. Thus, a failure to pay Libre does not result in Libre reporting information to consumerreporting agencies that could have an adverse effect on the ability of consumers to obtain credit.
165.
Libre’s representations were false or misleading, were material because they were likely to affect consumers’ decisions to make payments to Libre, and constituted deceptive acts or practices in violation of the CFPA. 12 U.S.C. §§ 5531(a), 5536(a)(1)(B).
166.
The Individual Defendants also violated the CFPA because they engaged in these deceptive acts or practices. 12 U.S.C. §§ 5531(a), 5536(a)(1)(B). Count Five:
Deceptive Threats to Sue for Collection (Asserted by the Bureau and the States Against Libre and the Individual Defendants) 167.
The Bureau and the States reallege and incorporate by reference paragraphs 1–144.
168.
In numerous instances, Libre has threatened to sue consumers for nonpayment.
169.
But Libre has never filed a collection lawsuit against a consumer. 170.
Libre’s representations were false or misleading, were material because they were likely to affect consumers’ decisions to make payments to Libre, and constituted deceptive acts or practices in violation of the CFPA. 12 U.S.C. §§ 5531(a), 5536(a)(1)(B).
171.
The Individual Defendants also violated the CFPA because they engaged in these deceptive acts or practices. 12 U.S.C. §§ 5531(a), 5536(a)(1)(B). Case 5:21-cv-00016-EKD Document 1 Filed 02/22/21 Page 29 of 49 Pageid#: 29
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Count Six:
Deceptive Statements Regarding GPS Monitoring (Asserted by the Bureau and the States Against Libre and the Individual Defendants) 172.
The Bureau and the States reallege and incorporate by reference paragraphs 1–144.
173.
In numerous instances, Libre has represented that it monitors consumers by GPS and collects monthly payments from consumers to “lease” the GPS devices. 174.
In fact, many of the GPS devices did not work, and since at least February 2018, Libre could not monitor thousands of devices. 175.
Libre’s representations were false or misleading, were material because they were likely to affect consumers’ decisions to continue wearing the GPS device and to make payments to Libre, and constituted deceptive acts or practices in violation of the CFPA. 12 U.S.C. §§ 5531(a), 5536(a)(1)(B). 176.
The Individual Defendants also violated the CFPA because they engaged in these deceptive acts or practices. 12 U.S.C. §§ 5531(a), 5536(a)(1)(B). Count Seven:
Deceptive Statements Regarding Refunding Collateral Payments (Asserted by the Bureau and the States Against Libre and the Individual Defendants) 177.
The Bureau and the States reallege and incorporate by reference paragraphs 1–144.
178.
Libre has represented that collateral payments are refundable once consumers’ proceedings are resolved.
179.
In many cases, Libre did not refund or took months to refund consumers’ collateral payments.
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180.
Libre’s representations were false or misleading, were material because they were likely to affect consumers’ decisions to make payments to Libre, and constituted deceptive acts or practices in violation of the CFPA. 12 U.S.C. §§ 5531(a), 5536(a)(1)(B).
181.
The Individual Defendants also violated the CFPA because they engaged in these deceptive acts or practices. 12 U.S.C. §§ 5531(a), 5536(a)(1)(B). Count Eight:
Deceptive Statements Regarding Legal Representation (Asserted by the Bureau and the States Against Libre and the Individual Defendants) 182.
The Bureau and the States reallege and incorporate by reference paragraphs 1–144.
183.
Libre has repeatedly told or intimated to its clients that Libre will provide a free, full-service lawyer to help clients with their immigration cases or that clients were likely to obtain legal representation pro bono publico through one of Libre’s affiliated law firms. Libre has described itself to consumers as “Immigration Legal Aid.” 184.
In truth, Libre’s affiliated law firms are not obligated to take a Libre client’s case and often do not take these cases. 185.
Libre’s representations were false or misleading, were material because they were likely to affect consumers’ decisions to make payments to Libre, and constituted deceptive acts or practices in violation of the CFPA. 12 U.S.C. §§ 5531(a), 5536(a)(1)(B).
186.
The Individual Defendants also violated the CFPA because they engaged in these deceptive acts or practices. 12 U.S.C. §§ 5531(a), 5536(a)(1)(B). Case 5:21-cv-00016-EKD Document 1 Filed 02/22/21 Page 31 of 49 Pageid#: 31
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Count Nine:
Abusive Use of English-Language Documents to Bind Monolingual Non-English-Speaking Consumers (Asserted by the Bureau and the States Against Libre and the Individual Defendants) 187.
The Bureau and the States reallege and incorporate by reference paragraphs 1–144.
188.
From 2014 to at least late 2017, Libre used predominantly Englishlanguage agreements to enroll clients. Libre knew that many of its clients and co-signers did not understand English and that some were unable to read in any language. Libre rushed through the enrollment process and omitted or misrepresented material terms of Libre’s written agreement to clients and co-signers before they were enrolled. 189.
Libre therefore materially interfered with consumers’ ability to understand the terms and conditions of Libre’s offers of credit. 190.
Libre engaged in abusive acts or practices in violation of the CFPA. 12 U.S.C. §§ 5531(d)(1), 5536(a)(1)(B).
191.
The Individual Defendants also violated the CFPA because they engaged in these abusive acts or practices. 12 U.S.C. §§ 5531(a), 5536(a)(1)(B). Count Ten:
Unlawful Substantial Assistance (Asserted by the Bureau and the States Against Nexus and the Individual Defendants) 192.
The Bureau and the States reallege and incorporate by reference paragraphs 1–144.
193.
Libre is a covered person engaging in deceptive and abusive acts or practices in violation of § 1031 of the CFPA. Case 5:21-cv-00016-EKD Document 1 Filed 02/22/21 Page 32 of 49 Pageid#: 32
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194.
The Individual Defendants provided substantial assistance to Libre’s deceptive and abusive acts or practices by, among other things, approving Libre’s policies and practices, exercising authority over Libre’s call center and field representatives, reviewing quality assurance reports, overseeing the training of Libre’s representatives and their compensation structure, overseeing the handling of consumer complaints, and approving new clients. Defendants Moore and Donovan also approved the content of Libre’s consumer agreements.
195.
Nexus Services, through the management and control of the Individual Defendants, provided substantial assistance to Libre’s deceptive and abusive acts or practices by, among other things, employing Libre’s representatives, entering into contracts related to Libre’s use of GPS monitoring devices, and as a party to the GPS Monitoring Agreement signed by Libre’s consumers.
196.
Nexus Services and the Individual Defendants knowingly or recklessly provided this substantial assistance. Nexus Services and the Individual Defendants were aware that the vast majority of Libre’s consumers cannot read or understand English and that these consumers relied on Libre to verbally represent the material terms of its written agreements to them. Nexus Services and the Individual Defendants were aware that Libre’s representatives habitually either omit or misrepresent material terms to consumers. The Individual Defendants, who managed and controlled Nexus Services, were aware of consumer complaints, including those about monthly payments and terms of consumer agreements. Nexus Services and the Individual Defendants were aware that since at least early 2018, Libre could not monitor thousands of GPS devices. Case 5:21-cv-00016-EKD Document 1 Filed 02/22/21 Page 33 of 49 Pageid#: 33
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197.
Therefore, Nexus Services and the Individual Defendants substantially assisted Libre’s deceptive and abusive acts or practices in violation of the CFPA. 12 U.S.C. § 5536(a)(3).
Count Eleven:
Violations of Virginia Consumer Protection Act (Asserted by Virginia Against Nexus Services and Libre) 198.
Virginia realleges and incorporates by reference paragraphs 1–141. 199.
Pursuant to Virginia Code § 59.1-197, the VCPA is to be applied as remedial legislation to promote fair and ethical standards of dealing between suppliers and the consuming public.
200. Before commencing this action, Virginia gave Nexus Services and Libre written notice that these proceedings were contemplated and a reasonable opportunity to appear before the Office of the Attorney General to demonstrate that no violations of the VCPA had occurred, or, in the alternative, to execute an appropriate Assurance of Voluntary Compliance that is acceptable to Virginia. 201.
Nexus Services and Libre failed to demonstrate that no violations had occurred and did not agree to execute an Assurance of Voluntary Compliance that was acceptable to Virginia.
202. In connection with consumer transactions, the VCPA prohibits suppliers from, among other things:
a.
misrepresenting the source, sponsorship, approval, or certification of goods or services pursuant to Virginia Code § 59.1-200(A)(2); b.
misrepresenting the affiliation, connection, or association of the supplier, or of the goods or services, with another pursuant to Virginia Code § 59.1-200(A)(3);
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c.
misrepresenting that goods or services have certain quantities, characteristics, ingredients, uses, or benefits pursuant to Virginia Code § 59.1-200(A)(5); and d.
using any other deception, fraud, false pretense, false promise, or misrepresentation in connection with a consumer transaction pursuant to Virginia Code § 59.1-200(A)(14). 203. During all relevant times, Nexus Services and Libre were “suppliers” of “goods” or “services” in connection with “consumer transactions,” as those terms are defined in Virginia Code § 59.1-198, by advertising and offering immigration bond financial services to Virginians for personal, family, or household purposes. 204. Nexus Services and Libre violated the VCPA through the acts and practices described in this Complaint, including without limitation: a.
engaging in deceptive conduct by providing the Original Agreement in English, when the vast majority of its customers could not read or write in English, in violation of Virginia Code § 59.1-200(A)(14); b.
engaging in deceptive conduct by using and providing sham documents in the Original Agreement, which had no meaning or effect, in violation of Virginia Code § 59.1-200(A)(14); c.
misrepresenting their affiliation with immigration authorities, in violation of Virginia Code § 59.1-200(A)(3); d.
misrepresenting their ability to influence or affect the outcome of a consumer’s immigration bond case, in violation of Virginia Code § 59.1-200(A)(3);
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e.
misrepresenting that the GPS ankle monitors they required consumers to wear were functional, in violation of Virginia Code § 59.1 -200(A)(14);
f.
engaging in deceptive conduct by requiring consumers to wear, maintain, charge, and pay for GPS ankle monitors that did not function properly, were not functional at all, or did not provide location monitoring services, in violation of Virginia Code § 59.1- 200(A)(14);
g.
misrepresenting that they would take certain debt-collection activity, in violation of Virginia Code § 59.1-200(A)(14); h.
misrepresenting their status as an immigration-bond company or provider, in violation of Virginia Code § 59.1-200(A)(14); and i.
misrepresenting the nature of the services they provided to consumers, in violation of Virginia Code § 59.1-200(A)(5). 205. Nexus Services and Libre willfully engaged in the acts and practices described in this Complaint in violation of the VCPA. 206. Individual consumers have suffered losses as a result of the aforesaid violations of the VCPA by Nexus Services and Libre. Count Twelve:
Violations of Massachusetts Consumer Protection Law (M.G.L. ch. 93A, § 2) Deceptive Acts and Practices (Asserted by Massachusetts Against All Defendants)
207. Massachusetts realleges and incorporates by reference paragraphs 1–141. 208. Libre is engaged in trade or commerce in Massachusetts and is subject to the Massachusetts Consumer Protection Law. Case 5:21-cv-00016-EKD Document 1 Filed 02/22/21 Page 36 of 49 Pageid#: 36
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209. At least five days before commencing this action, Massachusetts provided Defendants with notice of its intent to file claims under the Consumer Protection Law, and provided them an opportunity to confer with the Office of the Attorney General concerning its proposed action as required by M.G.L. ch. 93A, § 4. Notice was provided to Defendants by postage-paid mail at their usual place of business and last known address.
210.
Libre has engaged, and continues to engage, in unfair and deceptive acts and practices in violation of the Consumer Protection Law. 211.
Without limiting the foregoing, Libre misrepresents the nature, terms, and costs of its services to Massachusetts consumers and engages in other deceptive practices in connection with the marketing, sale, and administration of its bondsecuritization program. This conduct includes: a.
misrepresenting that it has paid consumers’ bonds and that consumers’ monthly payments are to reimburse the company for doing so—and are therefore capped at or about the face amount of the bond;
b.
misrepresenting its relationship with federal immigration authorities; c.
misrepresenting that the GPS tracking component of its program is required by federal immigration authorities, bond agents, or other third parties;
d.
misrepresenting that it can affect the outcome of consumers’ immigration cases and that non-compliance with its agreement would lead to arrest, criminal prosecution, detention, deportation, or other negative consequences;
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e.
misrepresenting that it would provide consumers with a free lawyer or free legal services;
f.
misrepresenting that it is monitoring consumers’ use of GPS devices while concealing that those devices have been deactivated or are otherwise not operational;
g.
failing to refund collateral payments that it represents are refundable at the conclusion of consumers’ immigration proceedings; and h.
failing to refund initial payments that it represents will be used to pay or post an immigration bond when a consumer does not use the company’s services.
212.
Nexus Services and the Individual Defendants are liable for this unlawful conduct because they participated in the conduct or exercised control over Libre and had knowledge of the conduct.
213.
Defendants knew, or should have known, that their conduct violated the Consumer Protection Law, and Defendants are therefore subject to the imposition of civil penalties, costs, and attorney’s fees. Count Thirteen:
Violations of Massachusetts Consumer Protection Law (M.G.L. ch. 93A, § 2) Unfair Acts and Practices (Asserted by Massachusetts Against All Defendants)
214.
Massachusetts realleges and incorporates by reference paragraphs 1–141 and 207–213.
215.
Libre has also violated, and continues to violate, the Massachusetts Consumer Protection Law by taking advantage of severe imbalances in bargaining Case 5:21-cv-00016-EKD Document 1 Filed 02/22/21 Page 38 of 49 Pageid#: 38
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power, and using deceptive and abusive tactics, to impose unfair agreements and obligations on Massachusetts consumers.
216.
Without limiting the foregoing, Libre offers its services to consumers it knows are in a desperate situation and have no meaningful ability, or opportunity, to negotiate with the company.
217.
Libre requires these consumers to enter into complicated and confusing agreements that it knows they do not understand. In many cases, Libre has used agreements that were written in a language it knew consumers could not understand. 218.
Despite knowing that consumers rely upon it for information, Libre misrepresents and conceals material terms of its services. 219.
As a result, consumers have an incomplete and inaccurate understanding of the terms of their agreements with Libre. 220. Libre’s agreements include terms that are oppressive and surprising to consumers or that the company administers in a manner that is unfair under the circumstances. For example:
a.
Libre charges consumers unfair and excessive fees, including nonrefundable monthly payments that in total exceed the face amount of consumers’ bonds; and b.
Libre requires consumers to wear, maintain, and pay for GPS devices that frequently malfunction, disrupt everyday activities, and cause physical discomfort and injury. Libre fails to timely respond to complaints about these devices from consumers. And it requires consumers to continue to wear, maintain, and pay for, devices that have been deactivated or are otherwise not operational. Case 5:21-cv-00016-EKD Document 1 Filed 02/22/21 Page 39 of 49 Pageid#: 39
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221.
Libre makes false and misleading threats to consumers to secure their compliance with its agreements.
222. Nexus Services and the Individual Defendants are liable for this unlawful conduct because they participated in the conduct or exercised control over Libre and had knowledge of the conduct.
223. Defendants knew, or should have known, that their conduct violated the Consumer Protection Law and are therefore subject to the imposition of civil penalties, costs, and attorney’s fees.
Count Fourteen:
Violations of Massachusetts Fair Debt Collection Practices Act (M.G.L. ch. 93, § 49) and Consumer Protection Law (M.G.L. ch. 93A, § 2) Unfair and Deceptive Debt Collection Practices (Asserted by Massachusetts Against All Defendants) 224. Massachusetts realleges and incorporates by reference paragraphs 1–141 and 207–223.
225.
Libre is a creditor and is subject to the Massachusetts Fair Debt Collection Practices Act in addition to the Consumer Protection Law. 226. Libre has used, and continues to use, unfair, deceptive, and unreasonable methods to collect debts from Massachusetts consumers in violation of the Fair Debt Collection Practices Act and Consumer Protection Law. 227.
Without limiting the foregoing, Libre has attempted to collect debts from alleged debtors based upon records it had notice were incomplete and inaccurate. 228. Libre has failed to acknowledge or respond to consumer disputes concerning alleged debts and has continued collection activities without validating those debts.
229. Libre has repeatedly demanded payment of debts that are not due. Case 5:21-cv-00016-EKD Document 1 Filed 02/22/21 Page 40 of 49 Pageid#: 40
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230. Libre has threatened to take action against alleged debtors that it cannot and does not take in the usual course of its business. 231.
Nexus Services and the Individual Defendants are liable for this unlawful conduct because they participated in the conduct or because they exercised control over Libre and had knowledge of the conduct.
232. Defendants knew, or should have known, that their conduct violated the Consumer Protection Law, and Defendants are therefore subject to the imposition of civil penalties, costs, and attorney’s fees. Count Fifteen:
Violation of New York Executive Law § 63(12) Repeated and Persistent Fraudulent Conduct (Asserted by New York Against All Defendants) 233. New York realleges and incorporates by reference paragraphs 1–141. 234. NY Executive Law § 63(12) authorizes the NYAG to bring an action to enjoin repeated or persistent fraudulent conduct. 235.
The statute defines fraud to include “any device, scheme or artifice to defraud and any deception, misrepresentation, concealment, suppression, false pretense, [or] false promise.”
236. As set forth above, Defendants have engaged in repeated and persistent fraudulent acts, including but not limited to: a.
misrepresenting that Libre has paid consumers’ bonds and that consumers’ monthly payments are to repay Libre for doing so; b.
falsely threatening consumers with re-arrest, detention, or deportation if they fail to make monthly payments or if they remove Libre’s GPS device;
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c.
falsely threatening to place GPS devices on co-signers when Libre has no legal or contractual authority to make a co-signer wear a GPS device for failing to make a payment; d.
falsely threatening consumers that their accounts would be turned over to a debt buyer or collection agency; e.
falsely threatening consumers that failing to make payments to Libre could harm their credit when Libre does not report any information to credit-reporting agencies; f.
threatening to sue consumers for non-payment when Libre has never filed a collection lawsuit against a consumer; g.
mispresenting that Libre monitors consumers by GPS and collecting monthly payments for “leases” for those GPS devices; h.
misrepresenting that Libre customers would get a free lawyer to represent them in their immigration case, when Libre only provides referrals;
i.
falsely threatening criminal prosecution for tampering with a GPS device, when Libre has no authority to prosecute crimes; j.
failing to refund collateral payments to consumers, once their immigration proceedings are resolved, and failing to refund initial payments when a consumer does not end up using Libre’s services; and k.
demanding payments from consumers who do not owe money, because Libre systemically fails to accurately record consumer payments.
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237.
The Individual Defendants have knowledge of or participated in the above repeated fraudulent acts.
238. By these actions, Defendants have engaged in repeated and persistent fraudulent conduct in violation of Executive Law § 63(12). Count Sixteen:
Violation of New York Executive Law § 63(12) Unconscionable Contract Provisions (Asserted by New York Against All Defendants) 239. New York realleges and incorporates by reference paragraphs 1–141. 240. New York Executive Law § 63(12) authorizes the NYAG to bring an action to enjoin repeated or persistent fraudulent conduct. 241.
The statute defines fraud to include “any . . . unconscionable contractual provisions.”
242. As set forth above, Defendants have used procedurally unconscionable tactics, including by preying on vulnerable consumers when they are detained and desperate to get out of detention; using lengthy and complicated contracts written in English when most consumers do not understand English; and presenting contracts to detainees for signature only after they have been released from detention. 243. As set forth above, Defendants have required consumers to agree to substantively unconscionable contractual provisions, including provisions setting excessive fees; provisions that do not allow for removal of the GPS device, even for medical or health reasons; and provisions that threaten criminal prosecution in various circumstances.
244. The Individual Defendants have knowledge of or participated in the above acts.
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245.
By these actions, Defendants have used unconscionable contract provisions and, therefore, have engaged in repeated and persistent fraudulent conduct in violation of Executive Law § 63(12).
Count Seventeen:
Violation of NY GBL § 349 Deceptive Acts and Practices (Asserted by New York Against All Defendants) 246. New York realleges and incorporates by reference paragraphs 1–141. 247.
NY GBL § 349 prohibits deceptive acts and practices in the conduct of any business, trade, or commerce or in the furnishing of any service in New York State. 248. NY GBL § 349(b) authorizes the NYAG to enjoin such deceptive acts and practices and to obtain “restitution of any moneys or property obtained directly or indirectly” by any such acts or practices. 249. As set forth above, Defendants have engaged in deceptive acts that violate NY GBL § 349, including but not limited to: a.
misrepresenting that Libre has paid consumers’ bonds and that consumers’ monthly payments are to repay Libre for doing so; b.
falsely threatening consumers with re-arrest, detention, or deportation if they fail to make monthly payments or if they remove Libre’s GPS device;
c.
falsely threatening to place GPS devices on co-signers when Libre has no legal or contractual authority to make a co-signer wear a GPS device;
d.
falsely threatening consumers that their accounts would be turned over to a debt buyer or collection agency; Case 5:21-cv-00016-EKD Document 1 Filed 02/22/21 Page 44 of 49 Pageid#: 44
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e.
falsely threatening consumers that failing to make payments to Libre could harm their credit when Libre does not report any information to credit-reporting agencies; f.
threatening to sue consumers for non-payment when Libre has never filed a collection lawsuit against a consumer; g.
mispresenting that Libre monitors consumers by GPS and collecting monthly payments for “leases” for those GPS devices; h.
misrepresenting that Libre customers would get a free lawyer to represent them in their immigration case, when Libre only provides referrals;
i.
falsely threatening criminal prosecution for tampering with a GPS device, when Libre has no authority to prosecute crimes; j.
failing to refund collateral payments to consumers, once their immigration proceedings are resolved, and failing to refund initial payments when a consumer does not end up using Libre’s services; and k.
demanding payments from consumers who do not owe money, because Libre systemically fails to accurately record consumer payments.
250. The Individual Defendants have knowledge of or participated in the above deceptive acts and practices.
251.
By these actions, Defendants have engaged in deceptive acts and practices in violation of NY GBL § 349.
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Demand for Relief Wherefore, the Bureau and the States request that the Court: 1.
enjoin Defendants from making material misrepresentations, omitting material terms in representations to consumers, materially interfering with consumers’ ability to understand terms or conditions of their offers of credit, and engaging in all other deceptive, abusive, and unlawful conduct alleged in the Complaint; 2.
order Defendants to pay damages, restitution, or other monetary relief; 3.
order disgorgement of or compensation for unjust enrichment; 4.
impose on Defendants civil money penalties under 12 U.S.C. § 5565(c); 5.
order Defendants to pay costs under 12 U.S.C. § 5565(b); 6.
grant judgment against Nexus Services and Libre, jointly and severally, and award to Virginia civil penalties of up to $2,500.00 per violation for each willful violation of § 59.1-200 of the VCPA pursuant to Virginia Code § 59.1-206(A), the exact number of violations to be proven at trial, as well as its costs, reasonable expenses incurred in investigating and preparing the case up to $1,000.00 per violation of the VCPA, and its attorneys’ fees, pursuant to Virginia Code § 59.1-206(C); 7.
award Massachusetts civil penalties of up to $5,000 for each unfair and deceptive act or practice as found by the Court pursuant to M.G.L. ch. 93A, § 4; 8.
award Massachusetts attorney’s fees and costs pursuant to M.G.L. ch. 93A; 9.
award Massachusetts damages sufficient to compensate any person who suffered a loss as a result of any unfair or deceptive method, act, or practice pursuant to M.G.L. ch. 93A, § 4;
10.
impose on Defendants civil money penalties under NY GBL § 350-d; 11.
order Defendants to pay costs under NY CPLR § 8303(a)(6); Case 5:21-cv-00016-EKD Document 1 Filed 02/22/21 Page 46 of 49 Pageid#: 46
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12.
order Defendants to produce an accounting of monies collected from New York consumers pursuant to the fraudulent, deceptive, and unlawful conduct alleged in the Complaint; and 13.
award additional relief as the Court may determine to be just and proper.
Respectfully submitted,
Attorneys for the Consumer Financial Protection Bureau
Cara M. Petersen
Acting Enforcement Director Jeffrey Paul Ehrlich
Deputy Enforcement Director Kara K. Miller
Assistant Litigation Deputy
Hai Binh T. Nguyen California Bar Number: 313503 Donald R. Gordon District of Columbia Bar Number: 482384 Consumer Financial Protection Bureau 1700 G Street, NW Washington, DC 20552 Telephone (Nguyen): (202) 435-7251 Telephone (Gordon): (212) 328-7011 Email: [email protected] Email: [email protected]
Attorneys for the Commonwealth of Virginia, ex rel. Mark R. Herring, Attorney General
Mark R. Herring
Attorney General Erin B. Ashwell
Chief Deputy Attorney General Samuel T. Towell
Deputy Attorney General Richard S. Schweiker, Jr.
Chief and Senior Assistant Attorney General
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David B. Irvin Virginia Bar Number: 23927 Unit Manager and Senior Assistant Attorney General Erin E. Witte Virginia Bar Number: 81096 Stephen J. Sovinsky Virginia Bar Number: 85637 Assistant Attorneys General Office of the Attorney General Consumer Protection Section 202 North Ninth Street Richmond, VA 23219 Telephone (Irvin): (804) 786-4047 Telephone (Witte): (703) 359-6716 Telephone (Sovinsky): (804) 823-6341 Fax: (804) 786-0122 Email: [email protected] Email: [email protected] Email: [email protected]
Attorneys for the Commonwealth of Massachusetts
Maura Healy
Attorney General
Jon Burke Massachusetts Bar Number: 673472 Assistant Attorney General Office of the Attorney General 10 Mechanic Street Worcester, MA 01608 Telephone: (774) 214-4416 Fax: (508) 795-1991 Email: [email protected]
Attorneys for the People of the State of New York
LETITIA JAMES
Attorney General Jane Azia (New York Bar Number: 1539600)
Bureau Chief for the Bureau of Consumer Frauds and Protection Laura Levine (New York Bar Number: 2337368)
Deputy Bureau Chief for the Bureau of Consumer Frauds and Protection
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Joseph P. Mueller New York Bar Number: 5079389 Stewart Dearing New York Bar Number: 5108444 Assistant Attorney General Office of the Attorney General 28 Liberty Street New York, NY 10005 Telephone (Mueller): (212) 416-8321 Telephone (Dearing): (212) 416-8320 Fax: (212) 416-6003 Email: [email protected] Email: [email protected] Case 5:21-cv-00016-EKD Document 1 Filed 02/22/21 Page 49 of 49 Pageid#: 49
Opinion ()
PDF of this document (18 pages)
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IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF VIRGINIA HARRISONBURG DIVISION
CONSUMER FINANCIAL
) PROTECTION BUREAU, et al.,
)
)
Plaintiffs,
) Civil Action No. 5:21-cv-00016
) v.
) By: Elizabeth K. Dillon
) United States District Judge NEXUS SERVICES, INC., et al.,
)
) Defendants.
)
MEMORANDUM OPINION
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 filed a 17-count complaint against Nexus Services, Inc. (“Nexus”), Libre by Nexus, Inc. (“Libre”) (collectively, the “Entity Defendants”), Micheal Donovan, Richard Moore, and Evan Ajin (collectively, the “Individual Defendants”). (Compl., Dkt. No. 1, at 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.) This matter is now before the court on plaintiffs’ motion for sanctions (Dkt. No. 139) and for consideration of U.S. Magistrate Judge Joel C. Hoppe’s February 7, 2023 Order for Defendants to Show Cause & Certification Under 28 U.S.C. 636(e)(6)(B)(iii) (“Show Cause Order & Certification”) (Dkt. No. 181). By reason of the facts certified by Judge Hoppe, the court finds each defendant in civil contempt; accordingly, the court will grant plaintiffs’ motion and will enter default judgment against each defendant. Case 5:21-cv-00016-EKD-JCH Document 201 Filed 05/11/23 Page 1 of 16 Pageid#: 3074
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I. BACKGROUND A. Discovery Dispute and the June 8 Order
On May 4, 2022, pursuant to Judge Hoppe’s order regarding the resolution of discovery disputes (Dkt. No. 81), the parties brought to the court a dispute over defendants’ responses and objections to plaintiffs’ first sets of Requests for Production (“RFP”) of Documents and Electronically Stored Information (“ESI”). (See Dkt. No. 115 (plaintiffs’ statement detailing and itemizing the discovery dispute, which noted that in June 2021, plaintiffs served one set of RFPs on the Entity Defendants and another set of RFPs on each of the Individual Defendants); Dkt. No. 120 (defendants’ response to plaintiffs’ statement).) Then, on June 8, 2022, Judge Hoppe issued an Order overruling many of defendants’ objections and in turn directing them to take certain steps, within certain timeframes, to fully respond to and produce specific categories of documents and ESI responsive to plaintiffs’ outstanding RFPs (June 8 Order, Dkt. No. 129); this Order is the subject of the subsequent Show Cause Order and Certification. Specifically, the June 8 Order directed the Entity Defendants to do the following: • Within seven days, provide plaintiffs with the name and contact information for the individual or company who recorded or transcribed each deposition listed in RFP No. 241 and, to the extent that they had not yet already done so, identify and produce complete copies of any such recordings or transcripts, including deposition exhibits, within the Entity Defendants’ possession, custody, or control (June 8 Order ¶ 2 (“Depositions”));
1 This RFP listed several depositions taken in other cases then pending in federal courts (including this court): one deposition taken in Vasquez v. Libre by Nexus, Inc., No. 4:17-cv-775 (N.D. Cal.), and six depositions taken in RLI Insurance Co. v. Nexus Services, Inc.., No. 5:18-cv-66 (W.D. Va.). (See Dkt. No. 115 at 22–23.)
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• Within 14 days, file a Notice indicating that defendants had retained an ESI discovery vendor and providing a good faith estimate of how much time the vendor needs to run the agreed-upon searches and return the results to defendants’ counsel for their initial review (id. ¶ 3 (“ESI Vendor”));2 • Run automated (as opposed to manual) searches using plaintiffs’ proposed search terms and the parties agreed-upon list of custodians to identify and collect any ESI (other than that stored in Capsule, Lightspeed, or similar databases) that is responsive to Entity RFP Nos. 4, 6, 7, 9, 11, 13, 14, 17, 20, 21, and/or 22 (id. ¶ 4 (“ESI Search Terms”);3 • Within 21 days, export and produce to plaintiffs complete, unredacted electronic versions of all Capsule, Lightspeed, and other database files or records responsive to Entity RFP Nos. 5, 8, 10, 11, 13, 14, 17, and/or 20 (id. ¶ 5 (“Database Files”));4 and • Within 21 days, produce any documents responsive to Entity RFP No. 16 that had not been produced by a specific certified public accountant in response to plaintiffs’ third-party subpoena or by defendants in response to any of plaintiffs’ prior requests (id. ¶ 6 (“CPA Records”)).
2 This estimate also needed to give the parties enough time to finish discovery on or before October 1, 2022. (See Dkt. No. 66 (setting bench trial to begin on January 30, 2023, and requiring parties to complete discovery 95 days before trial); Dkt. No. 113 (incorporating this deadline).)
3 These RFPs requested relevant information about staff compensation, program marketing and development, defendants’ third-party contracts, and internal or external program audits. (See Dkt. No. 15 at 21–22.)
4 These RFPs sought relevant information about the individual consumers who received defendants’ products or services, including the consumers’ payment histories, program or service documents provided to those consumers, records of Nexus or Libre employees’ communications with the consumers, and consumer complaints. (See Dkt. No. 115 at 12–21.)
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Further, Judge Hoppe ordered each Individual Defendant to, within 21 days from the date of the June 8 Order, produce any documents or information that (a) was responsive to any of Individual RFP Nos. 3, 5, 6, and/or 8; and (b) had not been produced either by the Entity Defendants or by a third party in response to plaintiffs’ discovery requests served in this case. (Id. ¶ 9 (“Individual Records”).)5 B. Plaintiffs’ Motion for Sanctions and Judge Hoppe’s Show Cause Orders Over a month later, on July 19, 2022, and with no intervening request by defendants for an extension of time, plaintiffs filed their motion for sanctions and for an order to show cause why defendants should not be held in contempt (Dkt. No. 139), upon a sworn declaration of James Scott, counsel for the Commonwealth of Virginia (Dkt. No. 141) which, in Judge Hoppe’s assessment, “laid out Defendants’ complete failure to obey most, if not all, of [his] Discovery Order’s specific requirements as of that date.” (Show Cause Order & Certification 8.) After defendants responded to the motion (addressing some of the discovery issues but not others), the court ordered at least one attorney from each party to file additional sworn declarations. (Dkt. No. 159.) Over the ensuing months, the parties filed several sworn declarations updating the court on the status of defendants’ compliance with its June 8 Order. (Dkt. Nos. 157 (supplemental declaration of Mr. Scott), 166 (second supplemental declaration of Mr. Scott); 167 (declarations of former counsel for defendants and of defendant Evan Ajin, Vice President of Operations at Nexus Services, Inc.); 175 (third supplemental declaration of Mr. Scott).)
5 These RFPs sought relevant information about each Individual Defendant’s employment history and financial relationship with an Entity Defendant or other affiliated entity, as well as the Individual Defendant’s financial condition from January 1, 2016, through the present. (Dkt. No. 115 at 24–26.) Because the Individual Defendants had access to financial records produced by the Entity Defendants and any third parties in the case, the court reasoned that each Individual Defendant would be in the best position to determine which of his own financial records had not been produced as of the date of the Order. (See June 2022 Order 7 n.3.)
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On February 7, 2023, Judge Hoppe issued the Show Cause Order & Certification (Dkt. No. 181), which granted plaintiffs’ motion to the extent it sought a certification of facts and an order for defendants to show cause why they should not be held in contempt. First, Judge Hoppe offered a thorough and extensive certification of facts—spanning six-and-a-half pages and 29 numbered sections and sub-sections—regarding defendants’ abject failure to timely comply with several of the court’s discovery mandates from the June 8 Order.6 (Show Cause Order & Certification 19–25.) In doing so, Judge Hoppe concluded that (1) the Entity Defendants violated paragraphs 3, 4, and 57 of the June 8 Order; and (2) the Individual Defendants violated paragraph 9 of the June 8 Order. (Id.) According to Judge Hoppe, “[d]efendants’ knowing violations” of the June 8 Order “significantly harmed Plaintiffs’ ability to prepare their case for trial in a just, speedy, and inexpensive manner,” as it “prevented Plaintiffs from completing discovery in accordance with the scheduling Order and required the Court to cancel the bench
6 Under the Federal Magistrates Act, 28 U.S.C. § 636, a magistrate judge overseeing pretrial matters under § 636(b)(1) who is faced with an act that constitutes a civil contempt
shall forthwith certify the facts to a district judge and may serve or cause to be served, upon any person whose behavior is brought into question under this paragraph, an order requiring such person to appear before a district judge upon a day certain to show cause why that person should not be adjudged in contempt by reason of the facts so certified.
28 U.S.C. § 636(e)(6)(B)(iii). The magistrate judge’s role in certifying facts under § 636(e)(6) is “to determine whether the moving party can adduce sufficient evidence to establish a prima facie case of contempt.” Church v. Steller, 35 F. Supp. 2d 215, 217 (N.D.N.Y. 1999) (citing Proctor v. State Gov’t of N.C., 830 F.2d 514, 521 (4th Cir. 1987)).
7 Judge Hoppe found that the Entity Defendants violated paragraph 5 because they failed to produce any files from four of the six databases (NetSuite, QuickBooks, American Spirit, and Five-9) and only produced files from two of the databases (Lightspeed and Capsule) after the deadline. (Show Cause Order & Certification 23–24.) As to the Lightspeed files that were untimely produced, Judge Hoppe resolved that the Entity Defendants’ production was still insufficient because it did not include any records from 2020 or 2021. (Id. 23.) As to the Capsule file that were untimely produced, Judge Hoppe concluded that “[o]n this mixed record, I cannot find that the deficiencies in Defendants’ production of the Capsule database violated the [June 8] Order,” but that “[n]evertheless, the parties should be prepared to present evidence on this issue at the contempt hearing before the presiding District Judge.” (Id. 24.)
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trial previously set for January 30, 2023.” (Id. 25.) Judge Hoppe ordered all defendants to appear before the undersigned to show cause why each should not be adjudged in contempt by reason of the facts certified against them. (Id.) Lastly, based on his “familiarity with each Defendant’s unjustified failure and refusal to comply with its discovery obligations under both the Federal Rules and [his] June 8, 2022 Order,” Judge Hoppe recommended that the undersigned treat each defendant’s failure to obey the June 8 Order as civil contempt. (Id. 26–27.) In doing so, Judge Hoppe proposed sanctions to induce compliance with the June 8 Order—specifically, a fine of $1,000 per day and $500 per day upon the Entity and Individual Defendants, respectively,8 and an award to plaintiffs of attorneys’ fees and costs incurred in relation to briefing and arguing their motion. (Id. 27; see also, e.g., Church v. Steller, 35 F. Supp. 2d 215, 217 (N.D.N.Y. 1999) (stating that, “[u]pon certification,” “the magistrate judge may recommend that certain sanctions be imposed by the district court upon a finding of contempt.”).) Separately, but on the same day, Judge Hoppe ordered the Entity Defendants (Dkt. No. 182) to show cause why the court should not sanction each Entity Defendant, including by entering default judgment, for disobeying the court’s January 11, 2023 Order directing each of them to retain a licensed attorney and have that attorney enter his or appearance on that defendant’s behalf in this matter within 14 days of its entry (Dkt. No. 178). A month prior,
8 Of note, when plaintiffs moved for sanctions and an order for defendants to show cause why they should not be held in contempt, they explicitly sought only monetary sanctions (see Dkt. No. 139 at 2); they have since expanded their request to call for entry of default judgment (see Dkt. No. 189 at 1). However, they did make a catch-all plea for “any other or additional relief that may be appropriate,” which would include dispositive sanctions, if deemed appropriate. (Id.) But nevertheless, as further explained herein, the court may, when warranted, enter default judgment sua sponte pursuant either to Rule 37 or its inherent power, and is not cabined by the contours of plaintiffs’ initial request to the magistrate judge. Moreover, although plaintiffs’ initial motion did not put defendants on notice that they were seeking default judgment, their subsequent supplemental brief (Dkt. No. 189) did. Further, Rule 37 does not require “a clear and explicit warning of dismissal” before default judgment may be entered. See Rangarajan v. Johns Hopkins Univ., 917 F.3d 218, 225–26 (4th Cir. 2019). Case 5:21-cv-00016-EKD-JCH Document 201 Filed 05/11/23 Page 6 of 16 Pageid#: 3079
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Judge Hoppe had granted defendants’ prior counsel’s motions to withdraw (Dkt. Nos. 134–36), after defendants and their prior counsel represented to the court that defendants could no longer pay for their prior counsel’s services. (Hr’g Tr., Dkt. No. 152, at 4:21–5:15, 7:14–21.) C. Show Cause Hearing and Related Briefing On March 14, 2023, after a conference with the parties (which neither the Entity nor Individual Defendants attended), the court set a schedule for any supplemental briefing, witness lists, and/or exhibit lists for the matters to be presented at the hearing. (Dkt. No. 187.) On April 3, 2023, plaintiffs filed a supplemental brief in response to the show-cause Orders and in further support of its motion for sanctions. (Dkt. No. 189.) In that brief, plaintiffs requested that the court impose the dispositive sanction of entry of default judgment (as opposed to a monetary sanction) against all defendants; they further asserted that defendants had not corrected any of the violations Judge Hoppe identified. In a related declaration, Mr. Scott swore to the court that, since entry of the Show Cause Order & Certification:
• “[N]o Defendant and no counsel on behalf of any Defendant has contacted any plaintiff, whether in regard to further attempts to comply with the [June 8] Order or otherwise” (Dkt. No. 190 ¶ 3);
• Nexus Services, Inc. has not “produced any deposition transcripts and, therefore, has not cured its noncompliance with ¶ 2 of the [June 8] Order” (id. ¶ 4); • Neither Entity Defendant has “informed Plaintiffs that they retained a discovery vendor, and Plaintiffs are therefore unaware of any action taken by the Entity Defendants to comply with ¶ 3 of the [June 8] Order” (id. ¶ 5); • Neither Entity Defendant has “produced any ESI to Plaintiffs and, therefore, have not cured their compliance with ¶ 4 of the [June 8] Order” (id. ¶ 6); Case 5:21-cv-00016-EKD-JCH Document 201 Filed 05/11/23 Page 7 of 16 Pageid#: 3080
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• Neither Entity Defendant has produced any files from the NetSuite, QuickBooks, American Spirit, or Five-9 databases, nor any additional Lightspeed files, and, therefore, “have not cured their noncompliance with ¶ 5 of the [June 8] Order” (id. ¶¶ 7–8); and • None of the Individual Defendants have “produced any documents concerning their financial condition and, therefore, have not cured their noncompliance with ¶ 9 of the [June 8] Order” (id. ¶ 9).
Plaintiffs maintained that at this point, entry of default judgment “is the only appropriate sanction” because “[t]hroughout this litigation, Defendants have consistently ignored their discovery obligations and this Court’s orders.” (Dkt. No. 189 at 4–5.) On April 14, 2023, three days before the scheduled hearing and over three months after the court first ordered the Entity Defendants to retain new counsel (and two months after the court ordered them to show cause for failing to do so), an attorney appeared in this action on behalf of all defendants. (Dkt. No. 192.)
The court held a show-cause hearing on April 17, 2023. (Dkt. No. 196.) No parties presented additional evidence or witnesses, nor did any party contest the veracity of the facts certified by Judge Hoppe. Indeed, defendants conceded that their conduct was contemptuous and agreed to be sanctioned but solely argued against entry of default judgment. II. LEGAL STANDARDS A. Civil Contempt Federal courts have the inherent authority to hold parties in civil contempt for violating court orders. See Redner’s Mkts., Inc. v. Joppatowne G.P. Ltd. P’ship, 608 F. App’x 130, 131 (4th Cir. 2015) (“There can be no question that courts have inherent power to enforce compliance with their lawful orders through civil contempt.”) (quoting Shillitani v. United Case 5:21-cv-00016-EKD-JCH Document 201 Filed 05/11/23 Page 8 of 16 Pageid#: 3081
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States, 384 U.S. 364, 370 (1966)); Ex parte Robinson, 86 U.S. 505, 510 (1874) (“The power to punish for contempt[] is inherent in all courts; its existence is essential to the preservation of order in judicial proceedings, and to the enforcement of judgments, orders, and writs of the courts, and consequently to the due administration of justice.”); Chambers v. NASCO, Inc., 501 U.S. 32, 44 (1991) (The power to punish for contempt is “firmly established”). In addition, Federal Rule of Civil Procedure 37(b)(2) explicitly vests in the district court the authority to impose sanctions when “a party or a party’s officer, director, or managing agent . . . fails to obey an order to provide or permit discovery.” Fed. R. Civ. P. 37(b)(2)(A); RLI Ins. Co. v. Nexus Servs., Inc., No. 5:18-cv-00066, 2022 WL 2654227, at *1 (W.D. Va. July 8, 2022) (citing Law Funder, LLC v. Munoz, 924 F.3d 753, 758 (5th Cir. 2019)). To find a party in civil contempt, the moving party must show: (1) the existence of a valid court order, (2) that the order was in the moving party’s favor, (3) a knowing violation of the terms of the order, and (4) that the moving party suffered harm from the violation. See CFPB v. Klopp, 957 F.3d 454, 461 (4th Cir. 2020). “Willfulness is not an element of civil contempt.” Joppatowne, 608 F. App’x at 131. If these elements are satisfied, the burden shifts to the non-moving party “to show good faith [in making] all reasonable efforts to comply with the enforcement order” to avoid being held in civil contempt. Klopp, 957 F.3d at 461–62.
B. Sanctions; Default Judgment “Once a court makes the threshold determination under Rule 37(b) that a party has failed to obey a prior discovery order issued by it, then it must determine what sanctions are warranted.” Thompson v. U.S. Dep’t of Hous. & Urban Dev., 219 F.R.D. 93, 102 (D. Md. 2003). “Rule 37(b)(2) provides a non-exclusive list of possible sanctions,” id., and the Supreme Court has provided guidance as to the exercise of the court’s discretion in issuing sanctions. Case 5:21-cv-00016-EKD-JCH Document 201 Filed 05/11/23 Page 9 of 16 Pageid#: 3082
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Rule 37(b)(2) contains two standards—one general and one specific—that limit a district court’s discretion. First, any sanction must be “just”; second, the sanction must be specifically related to the particular “claim” which was at issue in the order to provide discovery.
Ins. Corp. of Ir. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 707 (1982). Ultimately, “[t]he appropriate remedy for civil contempt is within the court’s broad discretion.” Joppatowne, 608 F. App’x at 131; see also Rainbow Sch., Inc. v. Rainbow Early Educ. Holding, LLC, 887 F.3d 610, 617 (4th Cir. 2018).
One possible sanction explicitly provided for in Rule 37 is “[the] rendering [of] a default judgment against the disobedient party.” Fed. R. Civ. P. 37(b)(2)(A)(iv). Moreover, the Fourth Circuit has on multiple occasions upheld default judgment as a sanction for discovery abuses under Rule 37. See, e.g., Anderson v. Found. for Advancement, Educ., & Employment of Am. Indians, 155 F.3d 500 (4th Cir. 1998); Young Again Prods., Inc. v. Acord, 459 F. App’x 294 (4th Cir. 2011). However, in recognition of “the seriousness of the imposition of default judgment,” see Young Again Prods., 459 F. App’x at 301, the Fourth Circuit has instructed district courts to apply a four-factor test when determining appropriate sanctions under Rule 37(b): (1) whether the non-complying party acted in bad faith, (2) the amount of prejudice that noncompliance caused the adversary, (3) the need for deterrence of the particular sort of non-compliance, and (4) whether less drastic sanctions would have been effective.
Anderson, 155 F.3d at 504 (citing Wilson v. Volkswagen of Am., Inc., 561 F.2d 494, 503–05 (4th Cir. 1977)). These factors aim to balance a “district court’s desire to enforce its discovery orders” and a “party’s rights to a trial by jury and a fair day in court.” Mut. Fed. Sav. & Loan Ass’n v. Richards & Assocs., Inc., 872 F.2d 88, 92 (4th Cir. 1989) (citing Wilson, 561 F.2d at 503–05).
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III. ANALYSIS With respect to a finding of civil contempt, the calculus here is rather straightforward. “Th[e] certificate of facts forwarded by the magistrate to the district court” is “considered the statement of a prima facie case” of contempt. See Proctor v. State Gov’t of N.C., 830 F.2d 514, 521 (4th Cir. 1987). “Thus, if there is nothing else appearing before the district court and the certified facts, if true, will support a violation, then the district court may, if it deems the burden of persuasion to have been satisfied, find a party in contempt.” Id. In careful detail, Judge Hoppe’s Show Cause Order & Certification documented the failings of both the Entity and Individual Defendants to respond to plaintiffs’ discovery requests or make a good faith effort to do so. The factual certification constitutes prima facie evidence of contempt, which sustains plaintiffs’ initial burden of proof. Then, at the hearing, no party contested any of the certified facts; rather, counsel for defendants conceded that defendants should be held in contempt and offered consent to a monetary sanction in lieu of default judgment. (See also Defs.’ Mot. for Continuance, Dkt. No. 195, at 2–3 (“[T]he real question, given the admitted non-compliance, is whether Defendants can and will purge themselves of contempt and comply with outstanding discovery requests.”) (emphasis added).) And in a sworn declaration, plaintiffs advised the court that defendants still have not produced any additional discovery or otherwise come into further compliance with the June 8 Order. (Dkt. No. 190 at 1– 3.) As defendants do not challenge any of the certified facts and have not produced the discovery required by Judge Hoppe’s Order to date, defendants’ contempt is established. The record establishes (1) the existence of the June 8 Order; (2) that compelling discovery responses from defendants is in plaintiffs’ favor; (3) a knowing violation of the Order on behalf of both the Case 5:21-cv-00016-EKD-JCH Document 201 Filed 05/11/23 Page 11 of 16 Pageid#: 3084
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Entity and Individual Defendants; and (4) harm to plaintiffs by virtue of gross delay of the discovery process, several sources of excess expense, and postponement of the bench trial. Moreover, if default judgment is to ever be warranted as a sanction for discovery abuses, it is emphatically so in this case. Cf. Projects Mgmt. Co. v. Dyncorp Int’l, LLC, 734 F.3d 366, 374 (4th Cir. 2013) (upholding entry of final judgment where the party “with[held] a large number of relevant documents during discovery” and “ma[de] late disclosures of material significance”). First, defendants’ bad faith is implicit in their pattern of knowing noncompliance with numerous orders of the court, including but not limited to their failure to timely retain counsel when ordered to do so (Dkt. No. 178), their refusal to respond in writing to Judge Hoppe’s order to show cause when directed to do so (Dkt. No. 182), and their unexcused absence from a scheduled telephone conference (Dkt. No. 188) (especially the Individual Defendants, who need not be represented by counsel to attend). See Young Again Prods., 459 F. App’x at 302 (citing Richards, 872 F.2d at 93).
Defendants’ other litigation activity in this case—even after the appearance of new counsel—further indicates a lack of candor with the court and a delusion as to the exigency of the situation. For example, in an April 17 motion to continue the show-cause hearing, counsel for defendants (who had entered an appearance only three days prior) expressed their intention “to come into compliance with the Court’s June Discovery Order as quickly as humanly possible” (Defs.’ Mot. to Continue 6 (emphasis added)) and not “to further delay or to prevaricate and obfuscate their way out of discovery compliance or sanctions.” (Id. 8.) But that representation proved false-hearted; two weeks later (and with no further indication of progress on discovery compliance), defendants filed a motion for judgment on the pleadings—long after Case 5:21-cv-00016-EKD-JCH Document 201 Filed 05/11/23 Page 12 of 16 Pageid#: 3085
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any conceivable deadline to do so9 and with an incomplete supporting memorandum10—based on the theory that the cased must be dismissed in its entirety because the CFPB’s funding structure is unconstitutional.11 (Dkt. No. 198.) That is hardly consistent with the conduct of a litigant for whom purging itself of contempt and avoiding delay are top priorities. Defendants have simply failed to demonstrate to the court that “factors other than obduracy and willfulness led to [their] prior non-compliance.” (See Defs.’ Mot. to Continue 7.) As to the prejudice caused by defendants’ persistent noncompliance, over two years after filing their complaint, plaintiffs are without meaningful discovery and without a trial date. They “have been forced to expend a tremendous amount of time, effort, and expense in the discovery process and motions practice,” and defendants’ conduct “has rendered much of that activity essentially meaningless,” given that plaintiffs still have not received large swaths of responsive ESI. See Rangarajan v. Johns Hopkins Univ., 917 F.3d 218, 226 (4th Cir. 2019) (finding that
9 Under the most recent version of the scheduling order, dispositive motions were due on November 11, 2022. (See Dkt. No. 113 (setting the deadline for dispositive motions at 80 days before trial, which was then set to begin on January 30, 2023).) Moreover, motions for judgment on the pleadings must be filed “early enough not to delay trial,” see Fed. R. Civ. P. 12(c), and it is hard to imagine how full briefing, argument, and disposition of a dispositive motion raising a hotly debated constitutional question (as defendants’ brief does) would not delay any prospective trial date.
10 The submission presented more as a rough draft than as a finalized memorandum ready for filing; in several passages, defense counsel evidently neglected to substitute placeholder words in both narrative text and in citations. (See, e.g., Dkt. No. 198 at 1 (defendants asked the court to “dismiss[] the CRPB from this action and order[] all filings made by CFPB and in which CFPB participated utilizing funding pursuant to (statute) void”) (emphasis added); 3–4 (“Furthermore, it seems this result is demanded by CITATION, which notes the importance of maintaining incentives for litigants to continue to undertake separation-of-powers defenses in order to ensure constitutionality and prevent abusive over-reach. CITATION (PARENTHETICAL).”) (emphasis in original).)
11 The Supreme Court recently granted certiorari in a case that raises this constitutional issue to be argued during the October 2023 Term. See CFPB, et al. v. Cmty. Fin. Servs. Ass’n of Am., Ltd., No. 22-448, 143 S. Ct. 978 (Feb. 27, 2023). Even assuming that defendants’ motion was somehow timely, the court has grave doubts that it could even fully consider that issue on the pleadings alone and without a developed record. As to the state plaintiffs, defendants insist that “it is almost impossible to imagine that Co-Plaintiffs can unlearn what they have learned, whether it be the knowledge gleaned of the CFPB’s unconstitutionally funded legal research and analysis or the fruits of an investigation which was tainted by unconstitutional funding.” (Dkt. No. 198 at 3.) But the pleadings do not attest to any such research, analysis, or investigation in drafting the complaint, nor can the court simply assume such activity occurred simply because the CFPB is one of four plaintiff entities that signed the document. Importantly, in Community Financial Services Association, the Court will review a grant of summary judgment, not judgment on the pleadings.
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similar considerations supported entry of default judgment). As a result, plaintiffs are effectively unable to “conduct[] effective discovery or tak[e] effective depositions,” see Dyncorp, 734 F.3d at 374. Relatedly and as mentioned previously, defendants’ noncompliance caused the cancellation of the early 2023 bench trial. As Judge Hoppe certified, their violation “significantly harmed Plaintiffs’ ability to prepare their case for trial in a just, speedy, and expensive manner.” (Show Cause Order & Certification 25.) The need for deterrence of this particular sort of noncompliance could not be greater, as defendants have “stall[ed] and ignore[ed] the direct orders of the court with impunity.” See Richards, 872 F.2d at 93. And relatedly, the circumstances indicate that no sanction short of default can accomplish deterrence in this case. Defendants are now on their third set of lawyers; although the court understands the difficulties that face counsel who enter representation of a party already in dire legal straits, that can no longer excuse the party’s manifest refusal to comply with court mandates and the discovery process. Notably, defendants’ former counsel admitted that, despite repeated efforts, he was unable to compel his clients to comply with the June 8 Order and could not identify a sanction that would coerce their compliance. (See Hr’g Tr., Dkt. No. 183, at 20:17–22.) As new counsel for defendants has admitted, defendants are in “a financial situation which has made retention and payment of counsel difficult if not impossible, which leads to loss of counsel, which compounds procedural difficulties, which makes it more difficult to find counsel.” (Dkt. No. 195 at 11.) Defendants have not provided the court with any indication that this financial situation has changed. At the hearing, defendants argued that they should be afforded an opportunity to demonstrate compliance under a monetary sanction because the court had not already used monetary sanctions to compel that compliance. Though it is true that the court has not yet Case 5:21-cv-00016-EKD-JCH Document 201 Filed 05/11/23 Page 14 of 16 Pageid#: 3087
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ordered sanctions in this case, civil contempt in the federal courts is not new territory for Nexus; both the Entity and Individual Defendants have quite recently been reprimanded for failing to comply with court orders—including discovery orders—in other cases. See RLI Ins. Co. v. Nexus Servs., Inc., No. 5:18-cv-00066, 2022 WL 2654227 (W.D. Va. July 8, 2022) 12; Vasquez v. Libre by Nexus, Inc., No. 17-cv-00755 CW, 2023 WL 36042 (N.D. Cal. Jan. 23, 2023).13 Accordingly, entry of default judgment sends “an unmistakable message to [defendants] and others that the judicial system will not tolerate repeated misconduct never wholly remedied in the future.” Richards, 872 F.2d at 94. Given the broader context, entering lesser sanctions would, in the court’s view, “send the opposite message that the court may be pushed, ignored and defied to the outermost limits so long as the noncomplying party has even an inadequate fallback act ready in the wings should the final curtain be falling.” Id.
In sum, the court finds that the Wilson factors counsel in favor of entry of default judgment against all defendants under Rule 37.14
12 In RLI, even after this court, in October 2020, entered partial summary judgment in favor of RLI and ordered Nexus to both pay RLI over $3.3 million in damages and provide RLI with access to its books and data (No. 5:18-cv-00066, Dkt. No. 585), Nexus continued to evade compliance, which eventually led to the July 2022 order finding the defendants in contempt of several of Judge Hoppe’s post-judgment discovery orders and imposing monetary sanctions of $1,000 per day of noncompliance (id., Dkt. No. 796–97). Most recently, in November 2022, RLI moved to increase the sanctions to $5,000 per day of noncompliance and convert the outstanding sanctions amount to a judgment (id., Dkt. No. 806); that motion remains pending.
13 As Judge Hoppe did, the court takes judicial notice of the content of the court records in these cases. Colonial Penn Ins. Co. v. Coil, 887 F.2d 1236, 1239 (4th Cir. 1989).
14 In the alternative, the court finds that entry of default judgment pursuant to its inherent authority (as opposed to Rule 37) would likewise be warranted on this record under the factors set forth by the Fourth Circuit in United States v. Shaffer Equipment. Co., 11 F.3d 450 (4th Cir. 1993), because defendants have “abuse[d] the process at a level that is utterly inconsistent with the orderly administration of justice [and] undermines the integrity of the process,” see id. at 462.
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IV. CONCLUSION
For the foregoing reasons, upon consideration of Judge Hoppe’s Order for Defendants to Show Cause & Certification Under 28 U.S.C. 636(e)(6)(B)(iii) (Dkt. No. 181), the court finds each defendant in civil contempt of court. The court will grant plaintiffs’ motion for sanctions (Dkt. No. 139) and, pursuant to Rule 37(b)(2)(A)(vi), enter default judgment against each defendant. As a result, defendants’ motion for judgment on the pleadings (Dkt. No. 198) will be denied as moot, and the show-cause order regarding the Entity Defendants’ failure to timely retain counsel (Dkt. No. 182) will be withdrawn as moot. An appropriate order will follow.
Entered: May 11, 2023.
/s/ Elizabeth K. Dillon
Elizabeth K. Dillon
United States District Judge Case 5:21-cv-00016-EKD-JCH Document 201 Filed 05/11/23 Page 16 of 16 Pageid#: 3089
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IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF VIRGINIA HARRISONBURG DIVISION
CONSUMER FINANCIAL
) PROTECTION BUREAU, et al.,
)
)
Plaintiffs,
) Civil Action No. 5:21-cv-00016
) v.
) By: Elizabeth K. Dillon
) United States District Judge NEXUS SERVICES, INC., et al.,
)
) Defendants.
)
ORDER
For the reasons stated in the accompanying memorandum opinion, it is hereby ORDERED that:
1. Upon the certification of facts and order to show cause by U.S. Magistrate Judge Joel C. Hoppe pursuant to 28 U.S.C. § 636(e)(6)(B)(iii) (Dkt. No. 181) and declarations submitted by the parties, defendants Nexus Services, Inc., Libre by Nexus, Inc., Micheal Donovan, Richard Moore, and Evan Ajin (“defendants”) are hereby ADJUDGED IN CIVIL CONTEMPT for violating the court’s June 8, 2022 Discovery Order (Dkt. No. 129);
2. Plaintiffs’ motion for sanctions (Dkt. No. 139) is GRANTED insofar as it seeks entry of default judgment against all defendants pursuant to Federal Rule of Civil Procedure 37(b)(2)(A)(vi);
3. The clerk is directed to enter default judgment against each defendant; 4. The show-cause order regarding the Entity Defendants’ failure to timely retain counsel (Dkt. No. 182) is WITHDRAWN AS MOOT; and Case 5:21-cv-00016-EKD-JCH Document 202 Filed 05/11/23 Page 1 of 2 Pageid#: 3090
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5. Defendants’ motion for judgment on the pleadings (Dkt. No. 198) is DISMISSED AS MOOT.
The court will hold additional proceedings to determine the appropriate remedies and/or damages in connection with the entry of default judgment against each defendant. Accordingly, it is further ORDERED that:
1. Plaintiffs shall file any opening brief on the issues of remedies and/or damages on or before June 1, 2023;
2. Defendants shall file any response brief on the issues of remedies and/or damages on or before June 15, 2023;
3. Any witness and/or exhibit lists for a hearing on the issues of remedies and/or damages shall be filed on or before June 22, 2023; and 4. The parties, by counsel, are directed to participate in the status conference call scheduled for today at 2:30 p.m. to set a date for the hearing. The clerk is directed to provide a copy of this order and the accompanying memorandum opinion to all counsel of record.
Entered: May 11, 2023.
/s/ Elizabeth K. Dillon
Elizabeth K. Dillon
United States District Judge Case 5:21-cv-00016-EKD-JCH Document 202 Filed 05/11/23 Page 2 of 2 Pageid#: 3091
Opinion ()
PDF of this document (4 pages)
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UNPUBLISHED
UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT
No. 23-1836
CONSUMER FINANCIAL PROTECTION BUREAU; COMMONWEALTH OF MASSACHUSETTS; PEOPLE OF THE STATE OF NEW YORK, by Letitia James, Attorney General of the State of New York; COMMONWEALTH OF VIRGINIA, ex rel. Attorney General of Virginia,
Plaintiffs - Appellees,
v.
NEXUS SERVICES, INC.; LIBRE BY NEXUS, INC.; MICHEAL DONOVAN; RICHARD MOORE; EVAN AJIN,
Defendants - Appellants.
Appeal from the United States District Court for the Western District of Virginia, at Harrisonburg. Elizabeth Kay Dillon, District Judge. (5:21-cv-00016-EKD-JCH)
Submitted: February 15, 2024 Decided: February 21, 2024
Before KING, WYNN, and RICHARDSON, Circuit Judges.
Dismissed by unpublished per curiam opinion.
ON BRIEF: Zachary Lawrence, LAWRENCE LAW FIRM PLLC, Cold Brook, New York, for Appellants. Seth Frotman, General Counsel, Steven Y. Bressler, Deputy General Counsel, Kristin Bateman, Assistant General Counsel, Stephanie B. Garlock, CONSUMER FINANCIAL PROTECTION BUREAU, Washington, D.C.; Andrea Joy Campbell, Attorney General, David C. Kravitz, Deputy State Solicitor, OFFICE OF THE
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ATTORNEY GENERAL, Boston, Massachusetts; Letitia James, Attorney General, Jane Azia, Bureau Chief, Laura Levine, Deputy Bureau Chief, Andrea W. Trento, Assistant Solicitor General, OFFICE OF THE ATTORNEY GENERAL, New York, New York; Jason S. Miyares, Attorney General, Charles H. Slemp, III, Chief Deputy Attorney General, Steven G. Popps, Deputy Attorney General, Richard S. Schweiker, Jr., Chief and Senior Assistant Attorney General, James E. Scott, Assistant Attorney General, OFFICE OF THE ATTORNEY GENERAL, Richmond, Virginia, for Appellees.
Unpublished opinions are not binding precedent in this circuit.
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PER CURIAM:
Appellants Nexus Services, Inc., Libre by Nexus, Inc., Micheal Donovan, Richard Moore, and Evan Ajin seek to appeal the district court’s order denying as moot their motion for judgment on the pleadings and the court’s subsequent order denying their Fed. R. Civ. P. 54(b) motion to reconsider that order or, alternatively, to certify this interlocutory appeal pursuant to 28 U.S.C. § 1292(b). We dismiss the appeal for lack of jurisdiction. This court may exercise jurisdiction only over final orders, 28 U.S.C. § 1291, and certain interlocutory and collateral orders, 28 U.S.C. § 1292; Fed. R. Civ. P. 54(b); Cohen v. Beneficial Indus. Loan Corp., 337 U.S. 541, 545-46 (1949). Appellants contend the district court’s orders are immediately appealable collateral orders. “[U]nder the collateral order doctrine, appellate jurisdiction extends to a narrow class of decisions that do not terminate the litigation, but are sufficiently important and collateral to the merits that they should nonetheless be treated as final.” United States ex rel. Citynet, LLC v. Gianato, 962 F.3d 154, 158 (4th Cir. 2020) (internal quotation marks omitted). “Specifically, we have jurisdiction over an order if it conclusively determines the disputed question, resolves an important issue completely separate from the merits of the action, and would be effectively unreviewable on appeal from a final judgment.” Nero v. Mosby, 890 F.3d 106, 121 (4th Cir. 2018) (internal quotation marks omitted). An order must satisfy all three requirements to be immediately appealable, and “the collateral-order doctrine must never be allowed to swallow the general rule that a party is entitled to a single appeal, to be deferred until final judgment has been entered.” In re Grand Jury 2021 Subpoenas, 87 F.4th 229, 244-45 (4th Cir. 2023) (internal quotation marks omitted).
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The district court’s orders do not satisfy the requirements of the collateral order doctrine. “[T]he entire category of orders to which” these orders belong is not comparable to those that have previously been authorized for immediate appeal under the collateral order doctrine. See Cobra Nat’l Res., LLC v. Fed. Mine Safety & Health Rev. Comm’n, 742 F.3d 82, 87 (4th Cir. 2014) (internal quotation marks omitted); see also id. at 91-92 (collecting cases). And deferring review of the district court’s orders would not “so imperil[] the interest” Appellants seek to vindicate “as to justify the cost of allowing immediate appeal of the entire class of relevant orders.” Mohawk Indus., Inc. v. Carpenter, 558 U.S. 100, 108 (2009); see also id. at 108-09 (noting courts “routinely require litigants to wait until after final judgment to vindicate valuable rights”). Accordingly, we dismiss the appeal for lack of jurisdiction. We dispense with oral argument because the facts and legal contentions are adequately presented in the materials before this court and argument would not aid the decisional process. DISMISSED
Judgment ()
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IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF VIRGINIA HARRISONBURG DIVISION
CONSUMER FINANCIAL PROTECTION ) BUREAU; COMMONWEALTH OF ) MASSACHUSETTS; THE PEOPLE OF ) THE STATE OF NEW YORK, by ) Civil Action No. 5:21-cv-00016 LETITIA JAMES, ATTORNEY
) GENERAL OF THE STATE OF NEW )
YORK; and COMMONWEALTH OF ) By: Elizabeth K. Dillon VIRGINIA, ex rel. MARK R. HERRING, ) United States District Judge ATTORNEY GENERAL,
)
) Plaintiffs,
)
)
v.
)
) NEXUS SERVICES, INC.; LIBRE BY ) NEXUS, INC.; MICHEAL DONOVAN;
) RICHARD MOORE; and EVAN AJIN, )
) Defendants.
)
AMENDED FINAL JUDGMENT ORDER
Plaintiffs Consumer Financial Protection Bureau (CFPB), the Commonwealth of Massachusetts (Massachusetts), the People of the State of New York by Letitia James, Attorney General of the State of New York (NYAG), and the Commonwealth of Virginia (alone Virginia, together with Massachusetts and the NYAG, the States), commenced this civil action on February 22, 2021, to obtain permanent injunctive relief, restitution, civil money penalties, and other relief, from Nexus Services, Inc., Libre by Nexus, Inc., Micheal Donovan, Richard Moore, and Evan Ajin. (Compl., Dkt. No. 1.) The complaint alleges violations of §§ 1031(a) and 1036(a) of the Consumer Financial Protection Act of 2010 (CFPA), 12 U.S.C. §§ 5531(a), 5536(a)(1)(A); §§ 59.1-200(A)(2), (3), (5), and (14) of the Virginia Consumer Protection Act (VCPA); the Massachusetts Consumer Protection Act (Massachusetts General Laws (M.G.L.), Case 5:21-cv-00016-EKD-JCH Document 246 Filed 04/01/24 Page 1 of 25 Pageid#: 3716
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ch. 93A, § 2), and the Massachusetts Fair Debt Collection Practices Act (M.G.L. c. 93, § 49); § 63(12) of the New York Executive Law; and § 349 of the New York General Business Law in connection with the offering and providing of services related to immigration bonds. This court entered default judgment against Defendants and directed the parties to brief the issues of remedies and damages. (Dkt. No. 202). After considering the pleadings, declarations, exhibits, and the entire record in this matter, and for the additional reasons set forth in the accompanying memorandum opinion, the court hereby orders and adjudges as set forth herein.
I. FINDINGS 1.
This court has jurisdiction over the parties and the subject matter of this action. 2.
The complaint states claims against Defendants upon which relief can be granted. 3.
Defendants’ liability has been established as to the claims set forth in Counts 1 through 17 in the complaint, and thus, Plaintiffs are entitled to judgment on those claims by virtue of Defendants’ default.
4.
Sections 1054 and 1055 of the CFPA, 12 U.S.C. §§ 5564 and 5565; §§ 59.1- 203(A), 59.1-205, and 59.1-206(A) of the VCPA; Massachusetts Consumer Protection Act, M.G.L. ch. 93A, § 4; the New York Executive Law § 63(12); and the New York General Business Law § 349 empower the court to order injunctive and other equitable relief against Defendants for violations of the CFPA, VCPA, Massachusetts Consumer Protection Act, Massachusetts Fair Debt Collection Practices Act, New York Executive Law, and New York General Business Law, and to award legal restitution, damages, refund of moneys, and disgorgement of ill-gotten gains resulting from Defendants’ unlawful acts and practices, and civil money penalties for violations of the federal consumer financial laws and the States’ laws. Case 5:21-cv-00016-EKD-JCH Document 246 Filed 04/01/24 Page 2 of 25 Pageid#: 3717
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5.
Plaintiffs have established through competent evidence that, during the Relevant Period (as defined below), Defendants collected approximately $230,996,970.84 in fees paid by Affected Consumers (as defined below). (See Am. Stipulation, Dkt. No. 238.) The CFPB is entitled to relief in the amount of $230,996,970.84 against Defendants as redress for the fees paid by Affected Consumers. This redress will provide the relief sought by the States for Affected Consumers in their respective states, which includes an estimated $14,021,516.13 for Virginia consumers, an estimated $3,349,456.08 for Massachusetts consumers, and an estimated $13,721,220.07 for New York consumers.
6.
Plaintiffs are entitled to an order imposing a permanent injunction and requiring defendants to pay redress in the amount of $230,996,970.84. 7.
Each Defendant has violated the CFPA, warranting civil money penalties of $111,135,620 from each defendant to the CFPB. 12 U.S.C. § 5565(c)(2)(B). 8.
By reason of Corporate Defendants’ (as defined below) violations of § 59.1- 200(A)(2), (3), (5), and (14) of the VCPA, Corporate Defendants, jointly and severally, are liable for $7,100,000 in civil money penalties to Virginia. Va. Code Ann. § 59.1-206(A). 9.
By reason of Defendants’ violations of M.G.L. ch. 93A, §§ 2 and 4, Defendants, jointly and severally, are liable for $3,400,000 in civil money penalties to Massachusetts. 10.
By reason of Defendants’ violations of the New York General Business Law, Defendants, jointly and severally, are liable for $13,890,000 in civil money penalties to the NYAG.
11.
This action and the relief awarded herein are in addition to, and not in lieu of, other remedies as may be provided by law, including both civil and criminal remedies. 12.
Entry of this Order is in the public interest.
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II. DEFINITIONS 13.
The following definitions apply to this Order: a.
“Affected Consumers” includes any person who entered into an agreement with any Corporate Defendant for Nexus Immigration Bond Services and paid fees for such services between December 1, 2013, and the Effective Date.
b.
“Assist Others” or “Assisting Others” includes, but is not limited to: i. consulting in any form whatsoever;
ii. performing customer-service functions, including but not limited to, receiving or responding to consumer complaints; iii. providing names of, or assisting in the generation of, potential customers;
iv. performing marketing, billing, or payment services of any kind; and v. acting or serving as an owner, officer, director, manager, or principal of any entity.
c.
“Clearly and Prominently” means:
i. in textual communications (e.g., printed publications or words displayed on the screen of an electronic device), the disclosure must be of a type size and location sufficiently noticeable for an ordinary consumer to read and comprehend it, in print that contrasts with the background on which it appears;
ii. in communications disseminated orally or through audible means (e.g., radio or streaming audio), the disclosure must be delivered in a volume Case 5:21-cv-00016-EKD-JCH Document 246 Filed 04/01/24 Page 4 of 25 Pageid#: 3719
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and cadence sufficient for an ordinary consumer to hear and comprehend it;
iii. in communications disseminated through video means (e.g., television or streaming video), the disclosure must be in writing in a form consistent with subsection (i), and must appear on the screen for a duration sufficient for an ordinary consumer to read and comprehend it;
iv. in communications made through interactive media such as the internet, online services, and software, the disclosure must be unavoidable and presented in a form consistent with subsection (i); v. in communications that contain both audio and visual portions, the disclosure must be presented simultaneously in both the audio and visual portions of the communication; and vi. in all instances, the disclosure must be presented before the consumer incurs any financial obligation, in an understandable language and syntax, and with nothing contrary to, inconsistent with, or in mitigation of the disclosures used in any communication with the consumer.
d.
“Defendants” means the Individual Defendants and the Corporate Defendants, individually, collectively, or in any combination. i. “Corporate Defendants” means Libre by Nexus, Inc. and Nexus Services, Inc., individually or collectively, and their successors and assigns.
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ii. “Individual Defendants” means Micheal Donovan, Richard Moore, and Evan Ajin, individually, collectively, or in any combination, and each of them by any other names by which they might be known. e.
“Effective Date” means the date on which the Order is entered by the Court.
f.
“Enforcement Director” means the Assistant Director of the Office of Enforcement for the Consumer Financial Protection Bureau, , or their delegate. g.
“Enrollment” means when a consumer enters into an agreement with Corporate Defendants.
h.
“Nexus Immigration Bond Services” means Defendants’ services related to immigration bonds described in the Complaint. i.
“Plaintiffs” means the Consumer Financial Protection Bureau, the Commonwealth of Massachusetts, the People of the State of New York by Letitia James, Attorney General of the State of New York, and the Commonwealth of Virginia, collectively, or in any combination. j.
“Related Consumer Action” means a private action by or on behalf of one or more consumers or an enforcement action by another governmental agency brought against any Defendant based on substantially the same facts as described in the Complaint.
III. ORDER It is hereby ORDERED as follows:
A. Conduct Provisions 1. Prohibition on deceptive practices Case 5:21-cv-00016-EKD-JCH Document 246 Filed 04/01/24 Page 6 of 25 Pageid#: 3721
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14.
Defendants and their officers, agents, servants, employees, and attorneys, and all other persons in active concert or participation with them who receive actual notice of this Order, whether acting directly or indirectly, shall be permanently restrained and enjoined from: a.
violating sections 1031(a) and 1036(a)(1)(B), (a)(3) of the CFPA, 12 U.S.C. §§ 5531(a), 5536(a)(1)(B), (a)(3);
b.
violating M.G.L. c. 93A, § 2 and M.G.L. c. 93, § 49; c.
violating section 63(12) of the New York Executive Law, and section 349 of the New York General Business Law;
d.
in connection with the advertising, marketing, promotion, offering for sale, sale, or provision of Nexus Immigration Bond Services, misrepresenting, or Assisting Others in misrepresenting, expressly or impliedly, the terms or nature of services provided, including:
i. whether payments are applied to the consumers’ immigration bonds; ii. whether Corporate Defendants are affiliated with U.S. Immigration and Customs Enforcement (ICE) or any other governmental body or agency;
iii. the nature, limitations, or conditions of the provision of legal services to consumers;
iv. the consequences of non-payment of fees or non-compliance with the terms of Defendants’ agreements with consumers, including misrepresentations regarding selling consumers’ debt; v. whether Defendants furnish information to credit reporting agencies; Case 5:21-cv-00016-EKD-JCH Document 246 Filed 04/01/24 Page 7 of 25 Pageid#: 3722
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vi. whether Defendants bring debt-collection actions against consumers; or vii. any other fact material to consumers concerning Nexus Immigration Bond Services, such as: the total costs; any material restrictions, limitations, or conditions; or any material aspect of its performance, efficacy, nature, or central characteristics. 15.
Pursuant to § 59.1-203(A) of the VCPA, Corporate Defendants, their officers, agents, servants, employees, and attorneys, and all other persons in active concert or participation with them who receive actual notice of this Order, whether acting directly or indirectly, shall be permanently restrained and enjoined from violating § 59.1-200(A) of the VCPA and from engaging in the acts set forth in ¶ 14(d)(i)–(vii) of this Order. 2. Prohibitions regarding GPS devices 16.
Defendants and their officers, agents, servants, employees, and attorneys, and all other persons in active concert or participation with them who receive actual notice of this Order, whether acting directly or indirectly, shall be permanently restrained and enjoined from: a.
requiring a consumer who enters into an agreement with Defendants for Nexus Immigration Bond Services to wear a GPS device; b.
using GPS devices with any consumers regardless of the date on which they entered into an agreement with Defendants; and c.
collecting payments related to GPS monitoring. 3. Prohibition on collecting or retaining monies Case 5:21-cv-00016-EKD-JCH Document 246 Filed 04/01/24 Page 8 of 25 Pageid#: 3723
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17.
Defendants and their officers, agents, servants, employees, and attorneys, and all other persons in active concert or participation with them who receive actual notice of this Order, whether acting directly or indirectly, shall be permanently restrained and enjoined from: a.
Collecting, or attempting to collect, any monies in connection with an agreement with any Corporate Defendant for Nexus Immigration Bond Services between December 1, 2013, and the Effective Date; and b.
retaining money owed to consumers.
B. Affirmative Requirements 1. Required disclosures relating to consumer agreements 18.
Defendants must Clearly and Prominently disclose in writing to each consumer before Enrollment, in a language accessible to the consumer: a.
the full and complete terms of any product or service to be provided to the consumer;
b.
all fees that Libre may charge in connection with that product or service, the circumstances in which those fees may be charged, and whether those fees are refundable or non-refundable;
c.
that Libre will not report consumers to law enforcement for non-payment of fees or non-compliance with the contract, and that non-payment or noncompliance will not have any impact on a consumer’s immigration status or associated immigration proceeding; and d.
that Libre has no authority to cause any consumer to be returned to immigration detention, to be deported, or to otherwise suffer any negative Case 5:21-cv-00016-EKD-JCH Document 246 Filed 04/01/24 Page 9 of 25 Pageid#: 3724
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consequence associated with their immigration status or associated immigration proceedings.
2. Customer information 19.
Defendants, and their officers, agents, servants, employees, attorneys, and all other persons in active concert or participation with any of them, who receive actual notice of this Order, whether acting directly or indirectly, may not: a.
disclose, use, or benefit from customer information, including names, addresses, telephone numbers, email addresses, social security numbers, other identifying information, or any data that enables access to a customer’s account (including a credit card, bank account, or other financial account), that Defendants obtained before the Effective Date in connection with the offering and provision of Nexus Immigration Bond Services; and b.
attempt to collect, sell, assign, or otherwise transfer any right to collect payment from any consumer who entered into an agreement for Nexus Immigration Bond Services with Defendants.
However, customer information may be disclosed if requested by a government agency or required by law, regulation, or court order.
C. Monetary Provisions 1. Order to Pay Redress 20.
A judgment for monetary relief is entered in favor of Plaintiffs and against Defendants, jointly and severally, in the amount of $230,996,970.84. 21.
Within 10 days of the Effective Date, Defendants must pay to Plaintiffs, by wire transfer to Plaintiffs or to Plaintiffs’ agents, and according to Plaintiffs’ wiring instructions, a Case 5:21-cv-00016-EKD-JCH Document 246 Filed 04/01/24 Page 10 of 25 Pageid#: 3725
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total of $230,996,970.84 in full satisfaction of the judgment as ordered in Paragraph 20 of this Section.
22.
Any funds received by Plaintiffs in satisfaction of this judgment will be deposited into a fund or funds administered by the CFPB, Massachusetts, Virginia, or NYAG, or any Plaintiff’s agent according to applicable statutes and regulations to be used for redress for Affected Consumers, including, but not limited to, refund of moneys, legal restitution, damages or other monetary relief, and for any attendant expenses for the administration of any such redress.
23.
If the CFPB determines, in its sole discretion, that providing redress to consumers is wholly or partially impracticable or if funds remain after the administration of redress is completed, the CFPB will deposit any remaining funds in the U.S. Treasury. Defendants will have no right to challenge the CFPB’s choice of remedies under this Section and will have no right to contest the manner of distribution chosen by the CFPB. 24.
If Virginia determines, in its sole discretion, that providing redress to consumers is wholly or partially impracticable or if funds remain after the administration of redress is completed, Virginia will deposit any remaining funds into the Virginia Attorney General’s Regulatory, Consumer Advocacy, Litigation and Enforcement Revolving Trust Fund to be used by the Attorney General for consumer protection, education, or enforcement purposes, or for other purposes permitted by law. Defendants will have no right to challenge Virginia’s choice of remedies under this Section and will have no right to contest the manner of distribution chosen by Virginia.
25.
If Massachusetts determines, in its sole discretion, that providing redress to consumers is wholly or partially impracticable or if funds remain after the administration of Case 5:21-cv-00016-EKD-JCH Document 246 Filed 04/01/24 Page 11 of 25 Pageid#: 3726
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redress is completed, any remaining funds shall escheat to Massachusetts, by and through the Office of the Attorney General, and shall be deposited or disposed of by the Office of the Attorney General, at the discretion of the Attorney General, as permitted by law. Defendants will have no right to challenge Massachusetts’s choice of remedies under this Section and will have no right to contest the manner of distribution chosen by Massachusetts. 26.
If NYAG determines, in its sole discretion, that providing redress to consumers is wholly or partially impracticable or if funds remain after the administration of redress is completed, NYAG will retain any remaining funds. Defendants will have no right to challenge NYAG’s choice of remedies under this Section and will have no right to contest the manner of distribution chosen by NYAG.
27.
Payment of redress to any Affected Consumer under this Order may not be conditioned on that Affected Consumer waiving any right. 2. Order to pay civil money penalty to the CFPB 28.
Under Section 1055(c) of the CFPA, 12 U.S.C. § 5565(c), by reason of the violations of law alleged in the Complaint and continuing until the Effective Date, each Defendant must pay a civil money penalty of $111,135,620 to the CFPB. 29.
Within 10 days of the Effective Date, Defendants must pay the civil money penalty by wire transfer to the CFPB or to the CFPB’s agent in compliance with the CFPB’s wiring instructions.
30.
The civil money penalty paid under this Order will be deposited in the Civil Penalty Fund of the CFPB as required by Section 1017(d) of the CFPA, 12 U.S.C. § 5497(d). Case 5:21-cv-00016-EKD-JCH Document 246 Filed 04/01/24 Page 12 of 25 Pageid#: 3727
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31.
Defendants, for all purposes, must treat the civil money penalty paid under this Order as a penalty paid to the government for all purposes. Regardless of how the CFPB ultimately uses those funds, Defendants may not:
a.
claim, assert, or apply for a tax deduction, tax credit, or any other tax benefit for any civil money penalty paid under this Order; or b.
seek or accept, directly or indirectly, reimbursement or indemnification from any source, including but not limited to payment made under any insurance policy, with regard to any civil money penalty paid under this Order. 32.
The civil penalty imposed by the Order represents a civil penalty owed to the United States Government, is not compensation for actual pecuniary loss, and, thus, as to any Individual Defendant, it is not subject to discharge under the Bankruptcy Code under 11 U.S.C. § 523(a)(7).
3. Order to pay civil money penalty to Virginia 33.
Pursuant to § 59.1-206(A) of the VCPA, by reason of the violations of the VCPA alleged in the Complaint, Corporate Defendants are jointly and severally liable for, and must pay to Virginia, a civil money penalty of $7,100,000. 34.
Within 10 days of the Effective Date, Corporate Defendants must pay the civil money penalty by wire transfer to Virginia in compliance with Virginia’s wire transfer instructions.
35.
The civil money penalty ordered to be paid pursuant to the VCPA will be deposited into the Virginia Attorney General’s Regulatory, Consumer Advocacy, Litigation and Enforcement Revolving Trust Fund to be used by the Attorney General for consumer protection, education, or enforcement purposes, or other purposes permitted by law. Case 5:21-cv-00016-EKD-JCH Document 246 Filed 04/01/24 Page 13 of 25 Pageid#: 3728
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36.
Corporate Defendants must treat the civil penalty paid under this Order as a penalty paid to the government for all purposes. Regardless of how the Office of the Attorney General ultimately uses those funds, Corporate Defendants may not: a.
claim, assert, or apply for a tax deduction, tax credit, or any other tax benefit for any civil money penalty paid under this Order; or b.
seek or accept, directly or indirectly, reimbursement or indemnification from any source, including but not limited to payment made under any insurance policy, with regard to any civil money penalty paid under this Order. 4. Order to pay civil money penalty to Massachusetts 37.
Under M.G.L. c. 93A, § 4, by reason of the violations of law alleged in the Complaint and continuing until the Effective Date, Defendants must pay a civil penalty of $3,400,000.00 to Massachusetts. Defendants shall be jointly and severally liable for payment of this civil penalty.
38.
Within 10 days of the Effective Date, Defendants must pay the civil penalty by wire transfer to Massachusetts pursuant to wiring instructions provided by the Office of the Attorney General.
39.
The civil penalty paid under this Order will be deposited or disposed of by the Office of the Attorney General, at the discretion of the Attorney General, as permitted by law. 40.
Defendants must treat the civil penalty paid under this Order as a penalty paid to the government for all purposes. Regardless of how the Office of the Attorney General ultimately uses those funds, Defendants may not: a.
claim, assert, or apply for a tax deduction, tax credit, or any other tax benefit for any civil money penalty paid under this Order; or Case 5:21-cv-00016-EKD-JCH Document 246 Filed 04/01/24 Page 14 of 25 Pageid#: 3729
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b.
seek or accept, directly or indirectly, reimbursement or indemnification from any source, including but not limited to payment made under any insurance policy, with regard to any civil money penalty paid under this Order. 41.
The civil penalty imposed by the Order represents a civil penalty owed to Massachusetts, is not compensation for actual pecuniary loss, and, thus, as to any Individual Defendant, it is not subject to discharge under the Bankruptcy Code under 11 U.S.C. § 523(a)(7). 5. Order to pay civil money penalty to New York 42.
Under General Business Law § 350-d, by reason of the violations of General Business Law § 349 alleged in the Complaint and continuing until the Effective Date, Defendants must pay a civil penalty of $13,890,000 to New York. Defendants shall be jointly and severally liable for payment of this civil penalty. 43.
Within 10 days of the Effective Date, Defendants must pay the civil penalty by wire transfer to New York pursuant to wiring instructions provided by the NYAG. 44.
The civil penalty paid under this Order will be deposited or disposed of by the NYAG, at the discretion of the Attorney General, as permitted by law. 45.
Defendants must treat the civil penalty paid under this Order as a penalty paid to the government for all purposes. Regardless of how the NYAG ultimately uses those funds, Defendants may not:
a.
claim, assert, or apply for a tax deduction, tax credit, or any other tax benefit for any civil money penalty paid under this Order; or b.
seek or accept, directly or indirectly, reimbursement or indemnification from any source, including but not limited to payment made under any insurance policy, with regard to any civil money penalty paid under this Order. Case 5:21-cv-00016-EKD-JCH Document 246 Filed 04/01/24 Page 15 of 25 Pageid#: 3730
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46.
The civil penalty imposed by the Order represents a civil penalty owed to New York, is not compensation for actual pecuniary loss, and, thus, as to any Individual Defendant, it is not subject to discharge under the Bankruptcy Code under 11 U.S.C. § 523(a)(7). 6. Additional monetary provisions 47.
In the event of any default on Defendants’ obligations to make payment under this Order, interest, computed under 28 U.S.C. § 1961, as amended, will accrue on any outstanding amounts not paid from the date of default to the date of payment, and will immediately become due and payable.
48.
Defendants relinquish all dominion, control, and title to the funds paid under this Order to the fullest extent permitted by law and no part of the funds may be returned to Defendants.
49.
The facts alleged in the Complaint will be taken as true and be given collateral estoppel effect, without further proof, in any proceeding based on the entry of the Order, or in any subsequent civil litigation by or on behalf of any Plaintiff, including in a proceeding to enforce its rights to any payment or monetary judgment under this Order, such as a nondischargeability complaint in any bankruptcy case.
50.
The facts alleged in the Complaint establish all elements necessary to sustain an action by any Plaintiff under Section 523(a)(2)(A) of the Bankruptcy Code, 11 U.S.C. § 523(a)(2)(A), and for such purposes this Order will have collateral estoppel effect against each Defendant, even in such Defendant’s capacity as debtor-in-possession. 51.
Under 31 U.S.C. § 7701, each Defendant, unless it already has done so, must furnish to Plaintiffs its taxpayer-identification numbers, which may be used for purposes of collecting and reporting on any delinquent amount arising out of this Order. Case 5:21-cv-00016-EKD-JCH Document 246 Filed 04/01/24 Page 16 of 25 Pageid#: 3731
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52.
Within 30 days of the entry of a final judgment, order, or settlement in a Related Consumer Action, Defendants must notify the Enforcement Director, Virginia, Massachusetts, and the NYAG of the final judgment, order, or settlement in writing. That notification must indicate the amount of redress, if any, that Defendants paid or is required to pay to consumers and describe the consumers or classes of consumers to whom that redress has been or will be paid. To preserve the deterrent effect of the civil money penalty in any Related Consumer Action, Defendants may not argue that Defendants are entitled to, nor may Defendants benefit by, any offset or reduction of any monetary remedies imposed in the Related Consumer Action because of the civil money penalty paid in this action or because of any payment that the CFPB makes from the Civil Penalty Fund. If the court in any Related Consumer Action offsets or otherwise reduces the amount of compensatory monetary remedies imposed against Defendants based on the civil money penalty paid in this action or based on any payment that the CFPB makes from the Civil Penalty Fund, Defendants must, within 30 days after entry of a final order granting such offset or reduction, notify the CFPB and pay the amount of the offset or reduction to the U.S. Treasury. Such a payment will not be considered an additional civil money penalty and will not change the amount of the civil money penalty imposed in this action. 53.
Upon written request of a representative of the CFPB, Virginia, Massachusetts, or the NYAG, any consumer reporting agency must furnish consumer reports to the requesting Plaintiff concerning any Individual Defendant under Section 604(a)(1) of the Fair Credit Reporting Act, 15 U.S.C.§ 168l b(a)(1), which may be used for purposes of collecting and reporting on any delinquent amount arising out of this Order. D. Compliance Provisions 1. Reporting requirements Case 5:21-cv-00016-EKD-JCH Document 246 Filed 04/01/24 Page 17 of 25 Pageid#: 3732
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54.
Defendants must notify the CFPB, Virginia, Massachusetts, and the NYAG, of any development that may affect compliance obligations arising under this Order, including but not limited to, a dissolution, assignment, sale, merger, or other action that would result in the emergence of a successor company; the creation or dissolution of a subsidiary, parent, or affiliate that engages in any acts or practices subject to this Order; the filing of any bankruptcy or insolvency proceeding by or against a Defendant; or a change in a Defendant’s name or address. Defendants must provide this notice at least 30 days before the development, but in any case no later than 14 days after the development, whichever is sooner. 55.
Within 7 days of the Effective Date, each Defendant must: a.
designate at least one telephone number and email, physical, and postal addresses as points of contact that Plaintiffs may use to communicate with Defendant;
b.
identify all businesses for which Defendant is the majority owner, or that Defendant directly or indirectly controls, by all of their names, telephone numbers, and physical, postal, email, and Internet addresses; c.
describe the activities of each such business, including the products and services offered, and the means of advertising, marketing, and sales. d.
identify each Individual Defendant’s telephone numbers and all email, Internet, physical, and postal addresses, including all residences; and e.
describe in detail any Individual Defendant’s involvement in any business for which he performs services in any capacity or which he wholly or partially owns, including Individual Defendant’s title, role, responsibilities, participation, authority, control, and ownership.
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56.
Defendants must report any change in the information required to be submitted under Paragraph 57 at least 30 days before the change or as soon as practicable after learning about the change, whichever is sooner.
57.
One year after the Effective Date, each Defendant must submit to the Enforcement Director an accurate written compliance progress report (Compliance Report), sworn to under penalty of perjury, which, at a minimum: a.
describes the steps that each Corporate Defendant has taken to reasonably assess whether such Defendant is complying with each applicable paragraph and subparagraph of this Order;
b.
describes in detail whether and how each Defendant has complied with each appliable paragraph and subparagraph of this Order, including the manner of verification of such compliance and any corrective actions taken to remedy potential noncompliance with the applicable requirement, paragraph, or subparagraph; and c.
attaches a copy of each Order Acknowledgment obtained under Section D(2) of this Order unless previously submitted to the Plaintiffs. 2. Order distribution and acknowledgment 58.
Within 7 days of the Effective Date, each Defendant must submit to the Enforcement Director, Virginia, Massachusetts, and the NYAG, an acknowledgment of receipt of this Order, sworn under penalty of perjury. 59.
Within 30 days of the Effective Date, Corporate Defendants, and Individual Defendants, for any business for which they are the majority owner or which they directly or indirectly control, must deliver a copy of this Order to each of its executive officers, as well as to Case 5:21-cv-00016-EKD-JCH Document 246 Filed 04/01/24 Page 19 of 25 Pageid#: 3734
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any managers, employees, service providers, or other agents and representatives who have responsibilities related to the subject matter of the Order. 60.
For 10 years from the Effective Date, Corporate Defendants and Individual Defendants, for any business for which they are the majority owner or which they directly or indirectly control, must deliver a copy of this Order to any business entity resulting from any change in structure referred to in Section D(1) of this Order, any future executive officers, as well as to any managers, employees, Service Providers, or other agents and representatives who will have responsibilities related to the subject matter of the Order before they assume their responsibilities.
61.
Defendants must secure a signed and dated statement acknowledging receipt of a copy of this Order, within 30 days of delivery, from all persons receiving a copy of this Order under this Section.
62.
Ninety days from the Effective Date, each Defendant must submit to the Plaintiffs a list of all persons and their titles to whom this Order was delivered under Paragraphs 59 and 60 and a copy of all signed and dated statements acknowledging of receipt of this Order under Paragraph 61.
3. Recordkeeping 63.
Defendants (including any business for which any Individual Defendant, individually or collectively with any other Defendants, is a majority owner or which he directly or indirectly controls) must create, for at least 10 years from the Effective Date, all documents and records necessary to demonstrate full compliance with each provision of this Order, including all submissions to Plaintiffs. Defendants must retain these documents for at least 10 years after creation and make them available to the CFPB, Virginia, Massachusetts, or the Case 5:21-cv-00016-EKD-JCH Document 246 Filed 04/01/24 Page 20 of 25 Pageid#: 3735
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NYAG upon request.
64.
Defendants (including any business for which any Individual Defendant, individually or collectively with any other Defendants, is a majority owner or which he directly or indirectly controls) must maintain, for at least 10 years from the Effective Date or 10 years after creation, whichever is longer:
a.
copies of all sales scripts; training materials; advertisements; websites; and other marketing materials relating to the subject of this Order, including any such materials used by a third party on a Defendant’s behalf; b.
for each individual Affected Consumer: the consumer’s name, address, phone number, email address; amount of any payments the consumer paid; a copy of any contracts the consumer signed; and a copy of any promotional or welcome materials provided;
c.
accounting records showing the gross and net revenues from all goods or services sold;
d.
all consumer complaints and refund requests by Affected Consumers (whether received directly or indirectly, such as through a third party), and any responses to those complaints or requests; and e.
records showing, for each employee providing Nexus Immigration Bond Services, that person’s name; telephone number; email, physical, and postal address; job title or position; dates of service; and, if applicable, the reason for termination;
65.
All documents and records must be maintained in their original electronic format. Data should be centralized, and maintained in such a way that access, retrieval, auditing and production are not hindered.
66.
Defendants must make these materials available to the CFPB, Virginia, Massachusetts, or the NYAG upon request.
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4. Notices 67.
Unless otherwise directed in writing by Plaintiffs, Defendants must provide all submissions, requests, communications, or other documents relating to this Order in writing, with the subject line, “CFPB v. Libre by Nexus, Inc., et al., Case No. 5:21-cv-00016,” and send them by overnight courier or first-class mail to the below addresses and contemporaneously by email to:
a. CFPB [email protected] ATTN: Assistant Director for Enforcement Consumer Financial Protection Bureau Office of Enforcement b. Virginia Assistant Attorney General James E. Scott (or in his absence, to the person holding the title of Chief, Consumer Protection Section) Office of the Attorney General Consumer Protection Section 202 North Ninth Street Richmond, VA 23219 [email protected] c. Massachusetts Office of the Attorney General Attn: Chief, Civil Rights Division One Ashburton Place Case 5:21-cv-00016-EKD-JCH Document 246 Filed 04/01/24 Page 22 of 25 Pageid#: 3737
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Boston, MA 02108 d. NYAG Assistant Attorney General Franklin Romeo (or in his absence, to the person holding the title of Bureau Chief, Consumer Frauds & Protection Bureau) Consumer Frauds & Protection Bureau Office of the New York Attorney General 28 Liberty Street New York, NY 10005 [email protected] 5. Cooperation with Plaintiffs 68.
Defendants must cooperate fully to help Plaintiffs determine the identity and location of, and the amount of injury sustained by, each Affected Consumer. Defendants must provide such information in its or its agents’ possession or control within 14 days of receiving a written request from Plaintiffs.
69.
Defendants must cooperate fully with Plaintiffs in this matter and in any investigation or litigation related to or associated with the conduct described in the Complaint. Defendants must provide truthful and complete information, evidence, and testimony. Individual Defendants must appear and Corporate Defendants must cause Corporate Defendants’ officers, employees, representatives, or agents to appear for interviews, discovery, hearings, trials, and any other proceedings that Plaintiffs may reasonably request upon 10 days’ written notice, or other reasonable notice, at such places and times as Plaintiffs may designate, without the service of compulsory process.
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70.
Within 30 days of the Effective Date, Defendants must complete all steps necessary to register Corporate Defendants for the CFPB’s Company Portal, including providing the information required at www.consumerfinance.gov/company-signup and in the CFPB’s Company Portal Boarding Form (OMB No. 3170-0054). Defendants, in connection with responding to consumer complaints and inquiries, whether acting directly or indirectly, must comply with the requirements that §§1034(b) and (c) of the CFPA, 12 U.S.C. §§ 5534(b) and (c), imposes on covered persons subject to supervision and primary enforcement by the CFPB pursuant to section 1025 of the CFPA, 12 U.S.C. § 5515. 6. Compliance monitoring 71.
Within 14 days of receipt of a written request from the CFPB, Virginia, Massachusetts, or the NYAG, Defendant must submit additional compliance reports or other requested information, which must be sworn under penalty of perjury; provide sworn testimony; or produce documents.
72.
For purposes of this Section, the CFPB, Virginia, Massachusetts, or the NYAG may communicate directly with each Defendant, unless such Defendant retains counsel related to these communications.
73.
Defendant must permit representatives of the CFPB, Virginia, Massachusetts, or the NYAG to interview any employee or other person affiliated with Defendants who has agreed to such an interview regarding: (a) this matter; (b) anything related to or associated with the conduct described the Complaint; or (c) compliance with this Order. The person interviewed may have counsel present.
74.
Nothing in this Order will limit the CFPB’s lawful use of compulsory process, under 12 C.F.R. § 1080.6.
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7. Transfer or Assignment of Operations 75.
Should Defendants seek to transfer or assign all or part of their operations that are subject to this Order, Defendants must, as a condition of sale, obtain the written agreement of the transferee or assignee to comply with all applicable provisions of this Order. 8. Retention of Jurisdiction 76.
The Court will retain jurisdiction of this matter for the purpose of enforcing this Order.
77.
The clerk is directed to strike this matter from the active docket of the court and provide a copy of this order and the accompanying memorandum opinion to all counsel of record.
Entered: April 1, 2024.
/s/ Elizabeth K. Dillon
Elizabeth K. Dillon
United States District Judge
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IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF VIRGINIA HARRISONBURG DIVISION
CONSUMER FINANCIAL PROTECTION ) BUREAU; COMMONWEALTH OF ) MASSACHUSETTS; THE PEOPLE OF ) THE STATE OF NEW YORK, by ) Civil Action No. 5:21-cv-00016 LETITIA JAMES, ATTORNEY
) GENERAL OF THE STATE OF NEW )
YORK; and COMMONWEALTH OF ) By: Elizabeth K. Dillon VIRGINIA, ex rel. MARK R. HERRING, ) United States District Judge ATTORNEY GENERAL,
)
) Plaintiffs,
)
)
v.
)
) NEXUS SERVICES, INC.; LIBRE BY ) NEXUS, INC.; MICHEAL DONOVAN;
) RICHARD MOORE; and EVAN AJIN, )
) Defendants.
)
AMENDED1 MEMORANDUM OPINION
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
1 The court amends this memorandum opinion to clarify restitution and civil penalties. Case 5:21-cv-00016-EKD-JCH Document 247 Filed 04/02/24 Page 1 of 31 Pageid#: 3741
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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. Case 5:21-cv-00016-EKD-JCH Document 247 Filed 04/02/24 Page 2 of 31 Pageid#: 3742
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(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 Case 5:21-cv-00016-EKD-JCH Document 247 Filed 04/02/24 Page 3 of 31 Pageid#: 3743
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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 Case 5:21-cv-00016-EKD-JCH Document 247 Filed 04/02/24 Page 4 of 31 Pageid#: 3744
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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 Case 5:21-cv-00016-EKD-JCH Document 247 Filed 04/02/24 Page 5 of 31 Pageid#: 3745
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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, defendants filed their initial exhibit and witness lists. (Dkt. No. 219.) The witness list included two expert witnesses and 11 lay witnesses whom defendants had never before disclosed to plaintiffs. The only witness on this list whose identity was previously disclosed was Evan Ajin—one of the Individual Defendants. The exhibit list included a total of 17 documents—two of which were expert reports. Defendants did not provide copies of any of the documents identified as exhibits in this list to plaintiffs. (Dkt. No. 222-1 ¶ 3.) On July 25, 2023, plaintiffs filed objections to the entirety of defendants’ proposed exhibit and witness lists. (Dkt. No. 223.) Also on July 25, 2023, and in advance of the scheduled evidentiary hearing, plaintiffs sent a proposed order to the court and counsel. Defendants did not comment on the proposed order. On August 8, 2023, the court issued a memorandum opinion and order sustaining all of plaintiffs’ objections regarding defendants’ proposed exhibits and all but one of plaintiffs’ objections to defendants’ expert witnesses, leaving Evan Aijn as defendants’ only witness for the evidentiary hearing. (See Mem. Op. on Objs., Dkt. No. 229.) The day before the hearing was set to take place, the parties entered a stipulation, which provides, in pertinent part, “The parties stipulate that after accounting for refunds that Corporate Defendants already provided to consumers, Corporate Defendants received $230,996,970.84 from consumers Case 5:21-cv-00016-EKD-JCH Document 247 Filed 04/02/24 Page 6 of 31 Pageid#: 3746
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between December 2013 to June 2022, as reflected in Corporate Defendants’ Supplemental Responses to the Commonwealth of Virginia’s First Interrogatories and the Lightspeed records produced by Defendants in this litigation.” (Am. Stipulation 2–3, Dkt. No. 238.) After the parties indicated that there was no need to present any evidence or argument not already before the court, the hearing was canceled with the agreement of all parties. (See Dkt. No. 239.) The entry of the stipulation and cancelation of the hearing effectively resolved plaintiffs’ requests for additional Rule 37 sanctions because most of the sanctions sought were already granted when the court sustained the majority of plaintiffs’ objections to defendants’ witness and exhibit lists, and the court is resolving the issues of remedies in plaintiffs’ favor, as detailed below. (See Mem. Op. on Objs.) Now, all that is left to decide are the particular remedies in this matter. Defendants have effectively conceded most of plaintiffs’ arguments by failing to address these arguments in their response. (See generally Br. in Opp’n. to Remedies, Dkt. No. 221.) See, e.g., Gowen v. Winfield, No. 7:20-cv-00247, 2022 WL 822172 (W.D. Va. Mar. 18, 2022) (“[P]laintiff has conceded this argument by failing to respond to it . . . ”); Intercarrier Communs., LLC v. Kik Interactive, Inc., No. 3:12-cv-771, 2013 WL 4061259, at *1 (E.D. Va. Aug. 9, 2013) (holding that where a party fails to respond to an argument it is “effectively conceding” the argument). Defendants do, however, contest the calculations of restitution and civil penalties.2 (See Br. in Opp’n. to Remedies 10, 21.)
II. DISCUSSION A. Legal Standards
2 Defendants also continue to argue that the CFPB is unconstitutionally funded. (See Br. in Opp’n. 3 n.3.) Defendants made this argument in their untimely motion for judgment on the pleadings, which the court found moot. (Dkt. No. 202). Furthermore, the court declined to reconsider the ruling and noted that even if the issue were not moot, the court would follow the line of cases concluding that the CFPB’s funding structure does not violate the Constitution. (Dkt. No. 226.) Case 5:21-cv-00016-EKD-JCH Document 247 Filed 04/02/24 Page 7 of 31 Pageid#: 3747
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When a defendant defaults, the complaint’s well-pleaded allegations relating to the defendant’s liability are taken as true, with the exception of the allegations relating to the amount of damages. See Ryan v. Homecomings Fin. Network, 253 F.3d 778, 780 (4th Cir. 2001); see also Mey v. Phillips, 71 F.4th 203, 223 (4th Cir. 2023) (same as to entry of default as a Rule 37 sanction). The court then analyzes “whether or not the face of the pleadings supports the default judgment and the causes of action therein” using a standard of review akin to that applicable to a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6). See Commodity Futures Trading Comm’n v. Dupont, No. 8:16-cv-02358-TMC, 2018 WL 3148532, at *5 (D.S.C. June 22, 2018). Under the 12(b)(6) standard, the complaint must “contain sufficient factual matter” to “state a claim that is plausible on its face” for which relief can be granted and from which the court can draw the “reasonable inference” that the defendant is “liable for the misconduct alleged.” Paradise Wire & Cable Defined Ben. Pension Plan v. Weil, 918 F.3d 312, 315 (4th Cir. 2019) (citing Edwards v. City of Goldsboro, 178 F.3d 231, 244 (4th Cir. 1999)). The court should draw “all reasonable factual inferences” in a plaintiff’s favor. Id. The court must then determine “whether the well-pleaded allegations . . . in [the] complaint support the relief sought” and award relief accordingly. Ryan, 253 F.3d at 780.
B. The Plaintiffs’ Well-Pleaded Claims 1. Claims against all defendants under the Consumer Financial Protection Act (Counts 1–9)
a. “Covered persons” under the CFPA Plaintiffs allege that Libre is a “covered person” under the CFPA and is thus bound to the law’s requirements. (Compl. ¶ 19.) The CFPA prohibits “covered person[s]” from engaging in “any unfair, deceptive, or abusive act or practice.” 12 U.S.C. § 5536(a)(1)(B). “Covered Case 5:21-cv-00016-EKD-JCH Document 247 Filed 04/02/24 Page 8 of 31 Pageid#: 3748
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person[s]” include individuals and corporations that engage “in offering or providing a consumer financial product or service.” 12 U.S.C. § 5481(6)(A). A “consumer financial product or service” includes “extending credit and servicing loans.” 12 U.S.C. § 5481(5). Here, Libre purports to provide extensions of credit to pay for consumers’ immigration bonds, which are “consumer financial products or services” under the CFPA. (Compl. ¶ 19.) Plaintiffs therefore have plausibly alleged that Libre is a “covered person” under the CFPA.
“Covered person[s]” also include “related person[s].” 12 U.S.C. § 5481(25)(B). A “related person” is a “director, officer, or employee charged with managerial responsibility for, or controlling shareholder of” the company or “any shareholder . . . who materially participates in the conduct of [its] affairs.” 12 U.S.C. § 5481(25)(C). Plaintiffs contend that Individual Defendants are “related persons” to Libre because they are directors, officers, or employees charged with managerial responsibility for the company and shareholders and materially participated in the conduct of Libre’s affairs. (Compl. ¶¶ 20–22.) Plaintiffs have plausibly alleged that Individual Defendants are “related persons” and are therefore subject to the CFPA.3 b. “Practice of deception” under the CFPA Plaintiffs allege that defendants engaged in widespread acts of deception in violation of the CFPA. (Br. in Supp. of Remedies 13.) An act or practice is deceptive under the CFPA if: (1) “there is a representation, omission, or practice that,” (2) “is likely to mislead consumers acting reasonably under the circumstances,” and (3) “the representation, omission, or practice is
3 Defendants attempt to contest their status as “covered persons” by claiming that Libre was not actually in “the business of providing financial products,” but rather the consumers “reasonably believed” it was selling financial products. (Br. in Opp’n. 3 n.3, 22–23.) Defendants correctly note that, since the court has already entered default judgment, they cannot contest this theory of liability. Moreover, as plaintiffs note, defendants are “covered persons” because they “[have] create[d] the reasonable impression in consumer’s minds that [they are] offering or providing extensions of credit to pay for consumers’ immigration bonds[.]” (Compl. ¶ 19 (emphasis added).) See SEC v. Lauer, 52 F.3d 667 (7th Cir. 1995) (“[It] is the representations made by the [defendants], not their actual conduct, that determine” whether defendants violated a federal securities law analogous to the CFPA.).
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material.” CFPB v. Gordon, 819 F.3d 1179, 1192–93 (9th Cir. 2016) (internal quotations omitted). In the context of the Federal Trade Commission Act, a similar consumer protection law, a representation, omission, or practice is considered material when it “involves information that is important to consumers and, hence, likely to affect their choice of, or conduct regarding a product.” Fanning v. FTC, 821 F.3d 164, 172 (1st Cir. 2016) (quoting Kraft, Inc. v. FTC, 970 F.2d 311, 322 (7th Cir. 1992)). Materiality is presumed for “at least four types of claims,” including “express” claims and “claims pertaining to a central characteristic of the product about which reasonable consumers would be concerned.” Id. at 172–73 (internal quotations omitted). Plaintiffs allege that Libre engaged in a number of deceptive practices. Libre deceived consumers regarding the nature of the payments its consumers were making and the functionality and purpose of the GPS devices. (Compl. ¶¶ 66–67, 81–87, 90–91, 174.) Libre represented that it paid the full amounts of immigration bonds, which the consumers would pay back through a flat fee and subsequent monthly payments. (Id. ¶¶ 1, 4, 19, 45, 115–16, 120.) Contrary to these claims, Libre did not pay the immigration bonds, and the monthly payments were in actuality “rental fees” for the GPS devices. (Id. ¶¶ 44, 115, 147.) Plaintiffs argue that consumers reasonably relied on Libre’s oral representations that they were paying back the bond amount, particularly since Libre’s written agreements were predominately in English while the vast majority of their clients could not read or speak English. (Id. ¶¶ 4, 19.) Libre also represented that the GPS devices were used to monitor consumers’ locations after release when the GPS devices were often non-functional. (Id. ¶¶ 66–67, 81–87, 90–91, 174.) Plaintiffs further allege that Libre threatened consumers with re-arrest, detention, and deportation by an “Agency”—which consumers likely believed was ICE—if they failed to pay the monthly fees or removed their GPS devices, even though Libre had no such relationship with Case 5:21-cv-00016-EKD-JCH Document 247 Filed 04/02/24 Page 10 of 31 Pageid#: 3750
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ICE nor did it have the authority to prosecute its consumers. (Id. ¶¶ 5, 55–58, 103, 151.) Plaintiffs contend that defendants’ call center employees repeatedly threatened consumers that their accounts would be turned over to debt collectors or reported to credit agencies; Libre never followed through on these threats. (Id. ¶¶ 5, 107–09, 158, 163, 168.) Furthermore, Libre represented that collateral payments were refundable once a consumer’s proceedings were resolved, yet, according to plaintiffs, Libre often did not provide these refunds. (Id. ¶¶ 50–53, 74, 178.) Plaintiffs also contend that Libre promised consumers that it would provide free immigration attorneys to help them with their cases or refer them to pro bono attorneys through affiliated law firms. (Id. ¶¶ 78, 183.) However, Libre only provided referrals to independent law firms that often declined to take cases from Libre’s consumers. (Id. ¶¶ 79, 184.) Plaintiffs argue that the above express misrepresentations by Libre mischaracterized the central characteristics of its services and materially affected consumers’ decisions to do business with Libre. (Id. ¶¶ 148, 175.) Plaintiffs have plausibly alleged that Libre committed deceptive acts in violation of the CFPA, and the facts established by default satisfy each of the elements of a CFPA claim. See Gordon, 819 F.3d at 1192–93 (setting forth elements of a CFPA claim). Plaintiffs further allege that Individual Defendants themselves engaged in acts of deception under the CFPA. As the three controlling shareholders of Libre’s parent company Nexus, Individual Defendants had the authority and responsibility to approve Libre entering into agreements with consumers and controlled all aspects of Libre’s operations, including training employees. (Id. ¶¶ 124–26.) Plaintiffs contend that Individual Defendants knew or should have known that employees were misrepresenting the terms of the program to consumers. (Id. ¶ 141.) Plaintiffs assert that Individual Defendants violated the CFPA by either directly participating in the deceptive and abusive acts detailed above or by having the authority to control or correct this Case 5:21-cv-00016-EKD-JCH Document 247 Filed 04/02/24 Page 11 of 31 Pageid#: 3751
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deceptive conduct. (Id. ¶¶ 124–137.) See CFPB v. CashCall, Inc., 35 F.4th 734, 749 (9th Cir. 2022) (finding corporate officer liable under CFPA because he had “authority to control” company’s actions). Plaintiffs have plausibly alleged that Individual Defendants engaged in acts of deception in violation of the CFPA.
2. Claims against Nexus and Individual Defendants—substantial assistance under the CFPA (Count 10)
Under the CFPA, it is unlawful for any person to knowingly or recklessly provide substantial assistance to a covered person in violation of the CFPA, and the provider of such substantial assistance is in violation of that section to the same extent as the person to whom such assistance is provided. 12 U.S.C. § 5536(a)(3). Although “relatively few cases have precisely delineated the elements of substantial assistance under the CFPA, courts have required (1) a primary violation of the CFPA; (2) the defendant's knowledge or reckless disregard of the primary violation; and (3) the defendant's substantial assistance in the primary violation.” Consumer Fin. Prot. Bureau v. Manseth, No. 22-CV-29-LJV, 2023 WL 5400235, at *16 (W.D.N.Y. Aug. 22, 2023) (citing Consumer Fin. Prot. Bureau v. RD Legal Funding, LLC, 332 F. Supp. 3d 729 (S.D.N.Y. 2018), vacated on other grounds, 828 F. App’x 68 (2d Cir. 2020); CFPB v. Univ. Debt & Payment Sols., LLC, No. 1:15-cv-0859-RWS, 2019 WL 1295004, at *15 (N.D. Ga. Mar. 21, 2019)).
As stated above, plaintiffs have plausibly alleged numerous violations of the CFPA and that Individual Defendants knew or should have known about these violations. Plaintiffs contend that Individual Defendants substantially assisted Libre and its operations by approving Libre’s policies and practices, exercising authority over Libre’s call center and field representatives, reviewing quality assurance reports, overseeing the training of Libre’s representatives and their Case 5:21-cv-00016-EKD-JCH Document 247 Filed 04/02/24 Page 12 of 31 Pageid#: 3752
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compensation structure, overseeing the handling of consumer complaints, and approving new clients. (Compl. ¶¶ 194–95.) Plaintiffs additionally argue that Nexus substantially assisted Libre in its violations of the CFPA. Nexus, through the management and control of Individual Defendants, substantially assisted Libre in its deceptive acts “by employing Libre’s representatives, entering into contracts related to Libre’s use of GPS monitoring devices, and as a party to the GPS Monitoring Agreement signed by Libre’s consumers.” (Compl. ¶ 195.) Plaintiffs have sufficiently pled that Individual Defendants and Nexus provided substantial assistance to Libre, with knowledge or reckless disregard of Libre’s violations of the CFPA.
For all of these reasons, the court finds that plaintiffs have sufficiently pled claims under the CFPA for which relief can be granted.
3. Claims under the Virginia Consumer Protection Act (Count 11) The Commonwealth of Virginia brings claims against Corporate Defendants under the Virginia Consumer Protection Act (VCPA). To state a claim for relief under § 59.1-200 of the VCPA, Virginia must allege the following statutory elements: (1) that Corporate Defendants were “supplier[s]” subject to the prohibitions of § 59.1-200(A); (2) that Corporate Defendants engaged in “consumer transaction[s]” with Virginians; and (3) that Corporate Defendants committed one or more “unlawful” “acts or practices” identified in § 59.1-200(A) in connection with a “consumer transaction[.]”
Virginia contends that Corporate Defendants are “suppliers” under the VCPA because they engaged in “consumer transactions” with Virginia consumers. (Compl. ¶ 203.) Virginia describes a number of Corporate Defendants’ alleged unlawful acts or practices. (Id. ¶ 204.) Section 59.1-200(A)(3) of the VCPA prohibits suppliers from misrepresenting their “affiliation, Case 5:21-cv-00016-EKD-JCH Document 247 Filed 04/02/24 Page 13 of 31 Pageid#: 3753
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connection, or association” with a third party. Virginia points out that Corporate Defendants misrepresented their affiliation with immigration authorities and misled consumers to believe that they could influence the outcome of their clients’ immigration cases based on this supposed affiliation. (Id. ¶ 204(c).) Similarly, Section 59.1-200(A)(5) prohibits suppliers from misrepresenting that their services have “certain quantities, characteristics, ingredients, uses, or benefits.” Virginia argues that Corporate Defendants misled consumers into believing that a characteristic or benefit of their services was that they were paying for their clients’ bonds when they were not actually doing so. (Id. ¶ 204(i).) Finally, Section 59.1-200(A)(14) generally prohibits Corporate Defendants from using “any other deception, fraud, false pretense, false promise, or misrepresentation in connection with a consumer transaction.” As described in detail above, the complaint describes Corporate Defendants as engaging in a slew of deceptive conduct, including providing non-English speakers program information and agreements only in English, falsely claiming that the GPS devices were functional, not providing refunds, and misrepresenting that monthly payments were going towards the amount of the bond when the payments were actually rental fees for the GPS devices. (See Compl. ¶ 204.) The court finds that Virginia has sufficiently stated a claim under the VCPA against Corporate Defendants for which relief can be granted.
4. Claims under the Massachusetts Consumer Protection Act and the Massachusetts Fair Debt Collection Practices Act (Counts 12–14)
The Commonwealth of Massachusetts contends that defendants engaged in unfair and deceptive conduct in violation of the Massachusetts Consumer Protection Act (MCPA). The MCPA prohibits “unfair or deceptive acts or practices in the conduct of any trade or commerce” that directly or indirectly affect Massachusetts consumers. Mass. Gen. Laws ch. 93A, § 2. Case 5:21-cv-00016-EKD-JCH Document 247 Filed 04/02/24 Page 14 of 31 Pageid#: 3754
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Conduct is “unfair” within the meaning of the MCPA if it falls “within the penumbra of a common-law, statutory, or other established concept of unfairness; [or is] immoral, unethical, oppressive or unscrupulous.” Milliken & Co. v. Duro Textiles, LLC, 887 N.E.2d 244, 259 (Mass. 2008) (citing Morrison v. Toys “R” Us, Inc., 806 N.E.2d 388, 392 (2004)) (internal quotations omitted). Conduct is “deceptive” if it has “the capacity to mislead consumers, acting reasonably under the circumstances.” Aspinall v. Philip Morris Cos., 813 N.E.2d 476, 488 (Mass. 2004).
Massachusetts alleges that Libre engaged in numerous instances of unfair and deceptive misconduct when providing services to Massachusetts consumers. (Compl. ¶ 220.) Massachusetts asserts that Libre engaged in unfair conduct when it required consumers to wear GPS devices that frequently malfunctioned and caused physical discomfort, made false threats to consumers regarding noncompliance with Libre’s policies, required mostly Spanish-speaking consumers to enter into English-language agreements, among other “oppressive” misconduct. (Id.) Massachusetts contends that Libre deceived consumers when it misrepresented that it had paid consumers’ bonds, falsified its relationship with federal immigration authorities, gave consumers false information regarding the purposes of fees, failed to provide promised refunds, and otherwise misled consumers. (Id. ¶ 211.) Massachusetts also alleges that Individual Defendants themselves are liable under the MCPA as corporate officers. Under the MCPA, “a corporate officer may be held individually liable for the conduct of a corporation if they: (a) participated in the unlawful misconduct; or (b) had the authority to control the operation of the corporation and knew, or should have known, of the unlawful acts.” See FTC v. Ross, 743 F.3d 886, 892 (4th Cir. 2014) (setting out standard for individual liability under Federal Trade Commission (FTC) Act, 15 U.S.C. § 41 et seq.); see also Nader v. Citron 360 N.E.2d 870, 875 (Mass. 1977) (adopting FTC Act standard for Chapter 93A Case 5:21-cv-00016-EKD-JCH Document 247 Filed 04/02/24 Page 15 of 31 Pageid#: 3755
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cases), abrogated on other grounds by Iannacchino v. Ford Motor Co., 888 N.E.2d 879 (Mass. 2008). As discussed above, Massachusetts claims that Individual Defendants had control over Corporate Defendants and knew, or should have known, of the deceptive conduct at issue. (Compl. ¶ 213.) Massachusetts has plausibly alleged claims against defendants under the MCPA.
Massachusetts also brings claims against defendants under the Massachusetts Fair Debt Collection Practices Act (MFDCPA). Mass. Gen. Laws ch. 93 § 49. The MFDCPA applies to creditors who attempt to collect a debt in an unfair, deceptive, or unreasonable manner. Id. Massachusetts alleges that defendants, as creditors under the MFDCPA, attempted to collect debts from consumers based on incomplete and inaccurate records, failed to respond to consumers’ disputes about alleged debts, continued collection activities without validating the existence of debts, and falsely threatened to take action against alleged debtors, all in violation of the MFDCPA. (Compl. ¶¶ 225–32.) Massachusetts has plausibly stated claims under the MFDCPA.
5. Claims under the New York Executive Law and the New York General Business Law (Counts 15 and 16)
The State of New York brings claims against defendants under the New York Executive Law (NYEL), alleging that defendants engaged in repeated and persistent fraudulent acts. (Compl. ¶ 236.) Fraud under the NYEL includes “any device, scheme or artifice to defraud and any deception, misrepresentation, concealment, suppression, false pretense, false promise or unconscionable contractual provisions.” N.Y. Exec. Law § 63(12). This definition has been “liberally construed to defeat all unsubstantial and visionary schemes . . . whereby the public is fraudulently exploited,” and prohibits a broad range of deceptive and abusive behavior. People ex rel. Cuomo v. Greenberg, 946 N.Y.S.2d 1, 8 (App. Div. 1st Dept. 2012) (internal quotations Case 5:21-cv-00016-EKD-JCH Document 247 Filed 04/02/24 Page 16 of 31 Pageid#: 3756
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omitted); People v. Lexington Sixty-First Assocs., 345 N.E.2d 307, 313 (N.Y. 1976). Establishing fraud under the NYEL requires a showing that “the targeted act has the capacity or tendency to deceive, or creates an atmosphere conducive to fraud.” People ex rel. Spitzer v. Gen. Elec. Co., 756 N.Y.S.2d 520, 523 (App. Div. 1st Dept. 2003).
As discussed extensively above, New York alleges that defendants have engaged in many acts that have the capacity or tendency to deceive vulnerable consumers, such as mispresenting that Libre paid consumers’ bonds, falsely threatening consumers if they failed to make their monthly payments or take off the GPS devices, falsely claiming that Libre would provide consumers free legal counsel, and failing to refund collateral payments. (Compl. ¶ 236.) New York further argues that defendants violated the NYEL by entering into and enforcing unconscionable contracts. (Id. ¶ 243.) For a contract to be found so grossly unreasonable that is deemed unenforceable, it must be both “procedurally and substantively unconscionable.” Gillman v Chase Manhattan Bank, 534 N.E.2d 824, 828 (N.Y. 1988). Procedural unconscionability is present “if one party lacked meaningful choice in the contract formation and can be demonstrated by establishing, among other factors, that deceptive tactics were used, that the contracts included fine print, or that a disparity in experience, education, or bargaining power existed between the parties.” Id. Defendants took advantage of unsophisticated, non-English speaking consumers by using lengthy and complicated Englishlanguage contracts to sign them up for services. (Compl. ¶ 242.) New York also alleges that defendants threatened consumers with criminal prosecution and did not permit the removal of the GPS devices even for medical reasons. (Id. ¶ 243.) New York contends that the contracts were therefore procedurally unconscionable because of the imbalance of knowledge and bargaining power between defendants and consumers. (Br. in Supp. of Remedies 31.) Case 5:21-cv-00016-EKD-JCH Document 247 Filed 04/02/24 Page 17 of 31 Pageid#: 3757
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Substantive unconscionability can be established under the NYEL by demonstrating that a contract’s provisions, as enforced, were unreasonably favorable to one side. Gillman, 534 N.E.2d at 828 (citing In re State v. Avco Fin. Serv. of New York, 406 N.E.2d 1075, 1077 (N.Y. 1980)). New York argues that the contracts here placed significant burdens on vulnerable and often impoverished consumers such as hefty monthly payments, uncomfortable and restrictive GPS monitors, and threats of prosecution and financial ruin. (Br. in Supp. of Remedies 32.) New York concludes that the contracts here were therefore both procedurally and substantively unconscionable in violation of the NYEL. (Id.) Finally, under the NYEL, individuals are liable for the fraudulent conduct of a corporate entity if they participated or had actual knowledge of the conduct. People v. Apple Health & Sports Clubs, Ltd., 599 N.E.2d 683, 686 (N.Y. 1992). As discussed above, New York alleges that Individual Defendants had knowledge of or participated in the misconduct of Corporate Defendants. (Compl. ¶ 244.) New York has therefore plausibly stated claims under the NYEL for which relief can be granted.
New York also brings claims against defendants under the New York General Business Law (NYGBL), which prohibits deceptive acts and practices in the conduct of any business, trade, or commerce or in the furnishing of any service in New York State. N.Y. Gen. Bus. Law § 349(a). This prohibition is “intended to be broadly applicable, extending beyond the reach of common law fraud.” New York v. Feldman, 210 F. Supp. 2d 294, 301 (S.D.N.Y. 2002). An act or omission violates the NYGBL if it is “consumer-oriented” and likely to “mislead a reasonable consumer” in a “material way.” Oswego Laborers Local 214 Pension Fund v. Marine Midland Bank, 647 N.E.2d 741, 743–44 (N.Y. 1995). Defendants’ acts alleged here were certainly oriented toward consumers and, as discussed extensively above, were likely to materially Case 5:21-cv-00016-EKD-JCH Document 247 Filed 04/02/24 Page 18 of 31 Pageid#: 3758
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mislead consumers. (Compl. ¶ 249.) Additionally, and similarly to the NYEL, an individual defendant is liable under the New York General Business Law if the defendant “participates in a deceptive scheme or has the authority to control the deceptive content at issue.” New York v. Debt Resolve, Inc., 387 F. Supp. 3d 358, 369 (S.D.N.Y. 2019) (internal quotations omitted). As detailed extensively above, New York alleges that Individual Defendants authorized and controlled Corporate Defendants’ deceptive practices. (Compl. ¶ 250.) New York has plausibly pled claims under the NYGBL for which relief can be granted. C. The Plaintiffs’ Proposed Relief 1. Injunctive relief a. Injunctive relief under the CFPA The CFPA specifically authorizes the CFPB to seek “equitable relief including a permanent or temporary injunction” and allows courts to place “limits on the activities or functions” of a defendant as a remedy for unfair, deceptive, and abusive acts that contravene the statute. 12 U.S.C. § 5564(a); § 5565(a)(2)(G). A permanent injunction is justified under the CFPA where there is “some reasonable likelihood of future violations.” See CFPB v. Chou Team Realty LLC, No. 8:20-cv-00043-SB-ADS, 2021 WL 4077110, at *5 n.6 (C.D. Cal. Aug. 10, 2021), aff’d sub nom. CFPB v. Nesheiwat, No. 21-56052, 2022 WL 17958636 (9th Cir. Dec. 27, 2022). To obtain a permanent injunction, courts have typically required the CFPB to show: (1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction.
Bureau of Consumer Fin. Prot. v. Future Income Payments, LLC, No. 8:19-2950-BHH-KFM, 2021 WL 672928 (D.S.C. Feb. 22, 2021) (citing eBay Inc. v. MercExchange, LLC, 547 U.S. 388, Case 5:21-cv-00016-EKD-JCH Document 247 Filed 04/02/24 Page 19 of 31 Pageid#: 3759
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391 (2006)); see also Christopher Phelps & Assocs., LLC v. Galloway, 492 F.3d 532, 543 (4th Cir. 2007).
The CFPB argues that injunctive relief is warranted to enjoin defendants from continuing to violate the CFPA, and defendants have not offered any arguments in opposition to the requested relief. (Br. in Supp. of Remedies 34; Reply in Supp. of Remedies 3, Dkt. No. 222.) The court finds that the CFPB has met the standard for injunctive relief under the CFPA. Here, the CFPB “may not have itself suffered an irreparable injury, but it proceeds . . . on behalf of thousands of . . . individuals who were victimized by the defendants’ violations of the law.” Consumer Fin. Prot. Bureau v. Siringoringo, No. SACV 14-01155 JVS (AJWx), 2016 WL 102435, at *6 (C.D. Cal. Jan. 7, 2016). Monetary penalties alone are likely insufficient to enjoin defendants’ unlawful conduct since, without an injunction, defendants “would be free to return to their old ways.” Disney Enters., Inc. v. Redbox Automated Retail, LLC, 336 F. Supp. 3d 1146, 1158 (C.D. Cal. 2018) (citing FTC v. Affordable Media, LLC, 179 F.3d 1228, 1237 (9th Cir. 1999)). Generally, “the balance of hardships weighs in favor of the party seeking injunctive relief when the opposing party has no legal right to continue [their] current course of conduct.” RXD Media, LLC v. IP Application Dev., No. 1:18-CV-486, 2019 WL 2569543, at *1 (E.D. Va. June 21, 2019) (citing Portfolio Recovery Assocs., Inc. v. Portfolio Recovery Grp., LLC, 2013 WL 5723869, at *10 (E.D. Va. Oct. 18, 2013). Defendants certainly do not have a legal right to continue their unlawful activity in violation of the CFPA, so the balance of hardships weighs in the CFPB’s favor.
Finally, injunctive relief would undoubtedly serve the public interest. The public interest is served by injunctions that reasonably “fence in” defendants from engaging in behavior related to their previous illegal conduct. Future Income Payments, 2020 WL 6162947, at *6 (citing Case 5:21-cv-00016-EKD-JCH Document 247 Filed 04/02/24 Page 20 of 31 Pageid#: 3760
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Siringoringo, 2016 WL 102435, at *6). If defendants were to resume their unlawful activities, other potential victims could suffer similar harm. Id. Thus, the CFPB’s requested injunctive relief would serve the public interest.
For the above reasons, the court finds that the CFPB’s requested injunctive relief is justified and appropriate. The court will therefore grant the CFPB’s requested injunctive relief as detailed in the Final Order.
b. Injunctive relief under the state laws Injunctive relief is also available under the state statutes, and defendants have not offered any arguments in opposition to the requested relief. (Reply in Supp. of Remedies 3.) Injunctive relief may be entered under the Virginia Consumer Protection Act in order “to restrain and prevent violations” of the law. Va. Code Ann. § 59.1-203(C). The Massachusetts Consumer Protection Act authorizes injunctive relief when the “attorney general has reason to believe that any person is using or is about to use any method, act, or practice declared by [the Consumer Protection Act] to be unlawful,” and that the injunction “would be in the public interest.” Mass. Gen. Laws Ann. ch. 93A § 4. The New York Executive Law states, “Whenever any person shall engage in repeated fraudulent or illegal acts . . . the attorney general may apply . . . for an order enjoining the continuance of such business activity . . . .” N.Y. Exec. Law § 63(12). The New York General Business Law prohibits “[d]eceptive acts or practices in the conduct of any business” and authorizes the attorney general to bring an action to “enjoin such unlawful acts[.]” N.Y. Gen. Bus. Law § 349(a).
As discussed in detail above, plaintiffs argue that defendants have violated each of these statutes and that injunctive relief is justified in order to avoid future violations. (Br. in Supp. of Remedies 34.) For the same reasons discussed in addressing injunctive relief under the CFPA, Case 5:21-cv-00016-EKD-JCH Document 247 Filed 04/02/24 Page 21 of 31 Pageid#: 3761
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the court finds that injunctive relief under the state statutes is an appropriate remedy and will grant the requested relief, as detailed in the Final Order. 2. Redress to consumers The CFPA authorizes the court to grant “any appropriate legal or equitable relief,” including a refund of moneys, damages, restitution, or other monetary relief. 12 U.S.C. § 5565(a)(1); § 5565(a)(2). Restitution “serves to ensure that consumers are made whole when they have suffered a violation of the statute.” CashCall, Inc., 35 F.4th at 750. Restitution may be measured by the “full amount lost by consumers rather than limiting damages to a defendant’s profits.” Gordon, 819 F.3d at 1192–93. The CFPB is seeking consumer redress here in the form of legal restitution or the refund of moneys for defendants’ violations of the CFPA. (Br. in Supp. of Remedies 37.) In calculating consumer redress, the CFPB bears the initial burden of “proving that the amount it seeks in restitution reasonably approximates the defendant’s unjust gains.” CashCall, 35 F.4th at 751 (internal citations omitted). Then, “the burden shifts to [defendants] to demonstrate that the net revenues figure overstates [defendants’] unjust gains.” Id.; see also FTC v. Kuykendall, 371 F.3d 745, 766 (10th Cir. 2004) (en banc). The risk of any uncertainty in this calculation falls on defendants. Kuykendall, 371 F.3d at 765. The CFPB claims it has met its initial burden by establishing that defendants’ net revenues, “the amount consumers paid for the product or service minus refunds and chargebacks[,]” are reasonable approximations of defendants’ unjust gains. CashCall, 35 F.4th at 751. Gross and net revenues are regularly used to approximate consumer loss or gain. See Gordon, 819 F.3d at 1195; Consumer Fin. Prot. Bureau v. Cashcall, Inc., No. CV 15-7522-JFW (RAOx), 2023 WL 2009938, at *27 (C.D. Cal. Feb. 10, 2023). The stipulation provides that Case 5:21-cv-00016-EKD-JCH Document 247 Filed 04/02/24 Page 22 of 31 Pageid#: 3762
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defendants’ net revenues between December 2013 and June 2022 were $230,996,970.84. (Am. Stipulation 2.) Defendants oppose the use of the net revenues to calculate restitution, arguing that a plaintiff cannot always meet its burden of approximating losses or gains by calculating from gross or net revenues, though they do not provide any case law illustrating an alternative calculation method. (Br. in Opp. to Remedies 11.) Defendants further argue that revenue can typically only be used in calculating unjust gains when there were widespread material misrepresentations that led to the consumer loss that resulted in the revenues. FTC v. Kitco of Nevada, Inc., 612 F. Supp. 1282, 1293 (D. Minn. 1985). Defendants claim that their alleged misrepresentations were not widespread but “rather rare and isolated events which Nexus actively attempted to mitigate.” (Br. in Opp’n. of Remedies 15.) However, once “a pattern or practice of contemptuous conduct [is proven] at the liability stage by clear and convincing evidence, a presumption arises that allows the district court to use all revenue attributable to the contemptuous conduct . . . as a baseline for assessing [restitution].” Kuykendall, 371 F.3d at 766. As detailed above, plaintiffs have clearly set forth defendants’ systemic pattern of unlawful and deceptive conduct against all of their consumers. (Reply in Supp. of Remedies 23,) Therefore, the court finds that defendants’ revenues are wholly attributable to their pattern of contemptuous conduct and that revenue is an appropriate measure of restitution. Defendants also contend that the value of the services they provided should offset their net revenue; this was one of the main arguments defendants had planned to make at the evidentiary hearing. (Br. in Opp’n. to Remedies 13.) The court ultimately excluded all but one of defendants’ witnesses who were going to testify about the value of the services and, with agreement from the parties, ultimately canceled the evidentiary hearing altogether. (See Mem. Case 5:21-cv-00016-EKD-JCH Document 247 Filed 04/02/24 Page 23 of 31 Pageid#: 3763
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Op. on Objs.) The subsequent stipulation did not include any information to allow the court to assess the purported value of the services provided. The court is therefore unable to deduce what effect the purported value of the services would have had on defendants’ net revenues.
The court finds that the CFPB has met its burden of establishing that the amount of restitution it seeks—that is, defendants’ net revenues—reasonably approximate defendants’ unjust gains. Defendants have not fulfilled their burden of showing that net revenues overstate their unjust gains. The court will therefore award plaintiffs their requested restitution in the amount of $230,996,970.84 jointly and severally against all defendants. Plaintiffs note that “redress for harmed consumers in Virginia, Massachusetts, and New York is subsumed into the amount sought” by the CFPB, and the CFPB will distribute restitution to the states as set out in the final order.4 (Br. in Supp. of Remedies 41.) 3. Civil monetary penalties a. Monetary penalties under the CFPA Under the CFPA, “[a]ny person [including individuals and entities] that violates, through any act or omission, any provision of Federal consumer financial law shall forfeit and pay a civil penalty.” 12 U.S.C. § 5565(a)(2)(H). The CFPA provides three tiers of penalties, based on the subject’s degree of scienter: up to $6,813 per day for any violation, up to $34,065 per day for each reckless violation, and up to $1,362,567 per day for each knowing violation. 12 U.S.C. § 5565(c)(2)(A)–(C); 12 C.F.R. § 1083.1. For violations occurring before November 2, 2015, those amounts were $5,000 for Tier 1 violations, $25,000 for Tier 2 violations, and $1,000,000 for Tier 3 violations. 12 U.S.C. § 5565(c)(2)(A)–(C).
4 Virginia is seeking $14,021,516.13 in restitution, Massachusetts is seeking $3,349,456.08 in restitution, and New York is seeking $13,721,220.07 in restitution. (Br. in Supp. of Remedies 41.) Case 5:21-cv-00016-EKD-JCH Document 247 Filed 04/02/24 Page 24 of 31 Pageid#: 3764
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The CFPB contends that defendants at least acted recklessly. (Br. in Supp. of Remedies 42.) Generally, “[a] person acts recklessly . . . when he consciously disregards a substantial and unjustifiable risk attached to his conduct, in gross deviation from accepted standards.” CashCall, 35 F.4th at 748 (citing Borden v. United States, 593 U.S. 420, 427 (2021)). The CFPB urges the court to find that defendants’ violations were reckless and impose Tier Two penalties accordingly, emphasizing that defendants “charged over 46,000 desperate and vulnerable consumers hundreds of millions of dollars over more than a decade using deceptive and abusive tactics, including by making threats to them of deportation or detention while trying to collect payment for the program.” (Br. in Supp. of Remedies 42.)
Defendants assert that their conduct was not reckless and cite to CashCall, a Ninth Circuit case, in support. (Br. in Opp’n. of Remedies 21.) There, the district court, when determining the penalty level under the CFPA, took note of the fact that the defendants sought out the advice of attorneys and experts regarding the legality of their business model. Cashcall, 35 F.4th at 748. These experts (incorrectly) informed the defendants that the business model was lawful because there was no clear case law at the time. Id. It eventually became clear, however, that the business model was in fact unlawful, yet the defendants continued to use the business model even after the experts advised them of its illegality. Id. at 749. The Ninth Circuit upheld the district court’s determination that the defendants did not recklessly violate the CFPA at the time they were relying on these experts, but found that, once the defendants ignored this advice, they began recklessly violating the law. Id.
Defendants here attempt to both analogize and differentiate their conduct from the CashCall defendants. (Br. in Opp’n. of Remedies 21.) They claim that when they amended their client agreement in late 2017 or early 2018, they were attempting to comply with the law and Case 5:21-cv-00016-EKD-JCH Document 247 Filed 04/02/24 Page 25 of 31 Pageid#: 3765
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altered their contracting and business practices in light of the knowledge they gained over time about the legality of their business model. (Compl. ¶ 71; Br. in Opp’n. of Remedies 21.) Defendants argue that, like the model in CashCall, their business practices were novel and the legality of such practices was not clear. (Br. in Opp’n. of Remedies 21.) Unlike in Cashcall, defendants here claim that, once they learned about the illegality of their client agreement, they amended the agreement to conform with the law. (Id.) Defendants contend that, for these reasons, they did not recklessly violate the CFPA. (Id.)
The court finds this argument unavailing. First, there is no evidence before the court regarding the reasons why the client agreement was changed or that defendants sought expert counsel to advise on the legality of their business model. Indeed, there is no evidence whatsoever that defendants attempted to comply with the law. Moreover, just because a business practice is “novel” does not mean that it is exempted from consumer protection laws. Defendants’ reliance on CashCall is ultimately misplaced. A far more analogous case regarding the imposition of Tier Two penalties under the CFPA is Consumer Fin. Prot. Bureau v. Morgan Drexen, Inc., No. SACV 13-1267-JLS (JEMx), 2016 WL 6601650 (C.D. Cal. Mar. 16, 2016). There, the Bureau accused a debt settlement and bankruptcy services provider of violating the CFPA by charging consumers up-front fees for its services. Id. at *1. Over the course of the litigation, the Bureau requested the defendants produce a series of documents by a particular deadline, but the defendants initially did not comply. Consumer Fin. Prot. Bureau v. Morgan Drexen, Inc., 101 F. Supp. 3d 856, 862 (C.D. Cal. 2015.) When they did eventually comply, many of the documents produced were altered or falsified, while others had been destroyed. Id. at 862–63. The court subsequently entered default judgment against the defendants for their discovery abuses. Id. at 876. When it came Case 5:21-cv-00016-EKD-JCH Document 247 Filed 04/02/24 Page 26 of 31 Pageid#: 3766
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time for the court to impose civil penalties under the CFPA, the court looked to the Bureau’s allegations that the defendants made “false and misleading” representations that “constitute[d] deceptive acts or practices” under the CFPA. Morgan Drexen, 2016 WL 6601650, at *2. The court found that the defendants, “by way of default, admitted[,]” these allegations. Id. The court thereby held that the Bureau’s uncontested allegations were sufficient to deem the defendant’s conduct as reckless under the CFPA, and the court imposed Tier Two penalties accordingly. Id. The court will follow a similar approach here. Plaintiffs have extensively alleged that each of the defendants “knowingly or recklessly” engaged in “deceptive acts or practices in violation of the CFPA.” (Compl. ¶¶ 143, 155.) Defendants admit these allegations by virtue of their default. The allegations here demonstrate that defendants consciously disregarded substantial and unjustifiable risks to their vulnerable consumers–namely the risk of financial harm— in gross deviation from accepted standards set forth by the CFPA and other consumer protection laws. The court finds that defendants recklessly violated the CFPA and will impose Tier Two penalties.
As the CFPA directs, the court must also take into account certain mitigating factors before imposing civil penalties, including “the size of financial resources and good faith of the person charged[,]” “gravity of the violation[,]” “severity of the risks to or losses of the consumer[,]” “the history of previous violations[,]” and “such other matters as justice may require.” See 12 U.S.C. § 5565(c)(3).
None of these factors would support mitigating defendants’ civil penalties. First, the court does not have any evidence before it regarding the size of defendants’ financial resources, and there is no evidence to demonstrate that defendants acted in good faith when conducting their business. Defendants’ violations of the CFPA were especially grave and caused severe Case 5:21-cv-00016-EKD-JCH Document 247 Filed 04/02/24 Page 27 of 31 Pageid#: 3767
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risks and losses to their consumers. As described in detail above, defendants deceived tens of thousands of vulnerable consumers about the nature of Libre’s services and the supposed penalties that would be imposed if consumers did not comply with defendants’ terms. Defendants claim that the “value of [] freedom” for their consumers and the fact that their profits were “minimal” should mitigate the amount of their civil penalties, but, again, the court has no evidence before it to assess these claims. (Br. in Opp’n. to Remedies 23.) The court struggles to identify any facts in the record that would mitigate the gravity of defendants’ violations. Further still, defendants have a long history of violations. Libre “previously settled with Washington’s attorney general and several states’ insurance regulators for unlawful conduct and has faced legal proceedings from its surety company and a class of consumers, both of which resulted in contempt findings.” (Br. in Supp. of Remedies 45 (citing In re Nexus Services, Inc., No. 19-2-22351-1SEA (Wash. Sup. Ct. Aug. 26, 2019); Vasquez v. Libre by Nexus, Inc., No. 17- CV-00755 CW, 2022 WL 4878648 (N.D. Cal. Oct. 3, 2022); RLI Ins. Co. v. Nexus Servs. Inc., 470 F. Supp. 3d 564 (W.D. Va. 2020).) Rather than mitigate the need for damages, defendants’ history of violations instead demonstrates the sheer scale of defendants’ wrongful acts and the need to deter future violations. Finally, there are no other matters that justice may require regarding the mitigation of civil penalties.
For the reasons stated above, the court will grant the CFPB’s requested Tier Two penalties under the CFPA. The court will impose a penalty of $25,000 per day from December 1, 2013, to November 1, 2015, and $34,065 for each day between November 2, 2015, and May 11, 2023 (when default was entered), for a total amount of $111,135,620 against each defendant.
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b. Calculating civil monetary penalties under the state laws State Plaintiffs are each seeking an award of penalties based on a calculation that defendants committed one violation per consumer in their respective states to compensate for defendants’ discovery abuses. (Br. in Supp. of Remedies 45.) Defendants never produced evidence on which consumers in which states were harmed by their business practices, though they did previously report estimates of proportionate shares of consumers by state in their Class Action Fairness Act Notice in Vasquez v. Libre by Nexus, Inc. (Id.) Plaintiffs estimate the number of consumers per state based on that information. (Id.) As discussed above, plaintiffs have alleged that defendants “engaged in pervasive unfair, abusive, and deceptive misconduct that infected virtually every aspect of their relationship with consumers over a period of nearly a decade[,]” making it likely that defendants actually committed more than one violation per consumer. (Id. at 46.) Plaintiffs ask the court to “make a reasonable inference” that the total number of violations per state averages out to one per consumer. (Id.) The state statutes allow for such an inference. As to the VCPA, Virginia courts have awarded remedies based on a “pattern and practice of violations” without assessing which particular consumers were harmed. See Commonwealth ex rel. Gilmore v. Smoky Mt. Secrets, 41 Va. Cir. 564, 567 (Cir. Ct. 1997). Under Massachusetts law, in situations where a defendant’s failure to produce information makes the calculation of the exact number of violations impractical or impossible, a court may base an award of civil penalties on an approximate calculation or reasonable estimate. See Com. v. AmCan Enterprises, Inc., 712 N.E.2d 1205, 1211 (1999). In New York, “[u]ncertainty as to amount does not preclude recovery. Mathematical certitude is unnecessary. A reasonable basis for the computation of approximate result is the only requisite.” Tobin v. Union News Co., 239 N.Y.S.2d 22, 26 (App. Div. 4th Dept. 1963) (internal Case 5:21-cv-00016-EKD-JCH Document 247 Filed 04/02/24 Page 29 of 31 Pageid#: 3769
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citations omitted); see also Matter of People v. Orbital Publ’g Grp., 148 N.Y.S.3d 67 (App. Div. 1st Dept. 2021) (applying this principle to violations under the New York Executive Law and General Business Law).
Defendants contest this method of calculation, arguing that the complaint does not establish the number of violations or that every consumer suffered harm. (Br. in Opp’n. of Remedies 24.) While the exact number of violations per customer is indeed unknown, this uncertainty is primarily of defendants’ doing. If defendants had complied with discovery, perhaps the court could have assessed damages in a more particularized manner. However, the court is now constrained to the information the parties have provided, and defendants present no alternative means of calculating the state penalties. Therefore, the court will assess state-level penalties based on the number of defendants’ consumers per state.5 d. Civil penalties under the VCPA
The Commonwealth of Virginia is only seeking civil penalties from Corporate Defendants. (Br. in Supp. of Remedies 46.) The VCPA permits penalties of up to $2,500 per violation. Va. Code Ann. § 59.1-206(A). Plaintiffs represent that defendants had approximately 2,840 consumers in Virginia and request a $7,100,000 civil penalty to be entered jointly and severally against Corporate Defendants. (Br. in Supp. of Remedies 46.) The court will grant the requested penalty.
e. Civil penalties under the MCPA The MCPA authorizes courts to award civil penalties of up to $5,000 whenever a person or entity engages in any act or practice that they “knew or should have known” was unfair or deceptive in violation of the statute. Mass. Gen. Laws Ann. ch. 93A, § 4. As discussed above,
5 Also, given the dearth of mitigating evidence, the court will impose the maximum penalties allowed under the state laws.
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plaintiffs have established that defendants knew or should have known of their violations of the MCPA. (Compl. ¶ 213.) Plaintiffs estimate that there are approximately 680 affected consumers in the Commonwealth of Massachusetts and request a civil penalty of $3,400,000 to be entered jointly and severally against all defendants. (Br. in Supp. of Remedies 49.) The court will grant the requested penalty.
f. Civil penalties under the NYGBL The New York General Business Law provides for civil penalties of up to $5,000 for each violation of the statute. N.Y. Gen. Bus. Law. § 350-d. Plaintiffs report that there are 2,778 affected consumers in New York and request a civil penalty in the amount of $13,890,000 to be entered jointly and severally against all defendants. (Br. in Supp. of Remedies 50.) The court will grant the requested penalty.
III. CONCLUSION
For the foregoing reasons, the court finds that plaintiffs have sufficiently stated claims for which relief can be granted under the CFPA, the VCPA, the MCPA, the MFDCPA, the NYEL, and the NYGBL. The court will grant plaintiffs’ requested injunctive relief, as detailed in the accompanying Final Judgment Order. The court will also grant $230,996,970.84 in restitution to the plaintiffs and award civil penalties in the amounts of $111,135,620 per defendant to the CFPB, $7,100,000 to the Commonwealth of Virginia, $3,400,000 to the Commonwealth of Massachusetts, and $13,890,000 to the State of New York, as set forth in the order.
Entered: April 2, 2024.
/s/ Elizabeth K. Dillon
Elizabeth K. Dillon
United States District Judge Case 5:21-cv-00016-EKD-JCH Document 247 Filed 04/02/24 Page 31 of 31 Pageid#: 3771
Opinion ()
PDF of this document (23 pages)
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ON REHEARING
PUBLISHED
UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT
No. 24-1334
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; COMMONWEALTH OF VIRGINIA EX REL. JASON S. MIYARES,
Plaintiffs – Appellees,
v.
NEXUS SERVICES, INC.; LIBRE BY NEXUS, INC.; MICHEAL DONOVAN; RICHARD MOORE; EVAN AJIN,
Defendants – Appellants.
Appeal from the United States District Court for the Western District of Virginia, at Harrisonburg. Elizabeth K. Dillon, Chief District Judge. (5:21-cv-00016-EKD-JCH)
Argued: September 12, 2025 Decided: October 15, 2025
Before KING, RUSHING, and BENJAMIN, Circuit Judges.
Affirmed by published opinion. Judge King wrote the opinion, in which Judge Rushing and Judge Benjamin joined.
ARGUED: Zachary Timothy Peter Lawrence, LAWRENCE LAW FIRM PLLC, Cold Brook, New York, for Appellants. Larkin Turner, CONSUMER FINANCIAL USCA4 Appeal: 24-1334 Doc: 70 Filed: 10/15/2025 Pg: 1 of 23
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PROTECTION BUREAU, Washington, D.C., for Appellee. ON BRIEF: Seth Frotman, General Counsel, Steven Y. Bressler, Deputy General Counsel, Kristin Bateman, Assistant General Counsel, Stephanie B. Garlock, CONSUMER FINANCIAL PROTECTION BUREAU, Washington, D.C., for Appellee Consumer Financial Protection Bureau. Andrea Joy Campbell, Attorney General, David C. Kravitz, State Solicitor, OFFICE OF THE ATTORNEY GENERAL OF MASSACHUSETTS, Boston, Massachusetts, for Appellee Commonwealth of Massachusetts. Letitia James, Attorney General, Andrea W. Trento, Assistant Solicitor General, Jane Azia, Bureau Chief, Laura Levine, Deputy Bureau Chief, Bureau of Consumer Frauds and Protection, OFFICE OF THE ATTORNEY GENERAL OF NEW YORK, New York, New York, for Appellee People of the State of New York. Jason S. Miyares, Attorney General, Steven G. Popps, Chief Deputy Attorney General, Thomas J. Sanford, Deputy Attorney General, Richard S. Schweiker, Jr., Chief and Senior Assistant Attorney General, James E. Scott, Senior Assistant Attorney General, Consumer Protection Section, OFFICE OF THE ATTORNEY GENERAL OF VIRGINIA, Richmond, Virginia, for Appellee Commonwealth of Virginia, ex rel. Jason S. Miyares, Attorney General.
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REVISED OPINION KING, Circuit Judge:
The defendants herein — namely, two corporate entities named Nexus Services, Inc. and its subsidiary, Libre by Nexus, Inc., plus three individuals connected to those entities named Micheal Donovan, Richard Moore, and Evan Ajin (collectively, the “Nexus defendants”) — appeal from an adverse final judgment of the Western District of Virginia. They challenge the district court’s rulings that imposed default judgment and evidentiary sanctions against the defendants, plus permanent injunctive relief and the imposition of a monetary award that subjects them to approximately $811,000,000 in liability. As explained in further detail below, we are satisfied to reject the appellate contentions of the defendants and affirm the final judgment of the district court.
I.
A.
In February 2021, the Consumer Financial Protection Bureau (the “CFPB”), the Commonwealth of Massachusetts, the State of New York, and the Commonwealth of Virginia (collectively, the “plaintiffs”), initiated a civil enforcement action in the federal district court for Western Virginia at Harrisonburg against the Nexus defendants. By their 17-count complaint, the plaintiffs sought to hold the Nexus defendants accountable for a nationwide fraud scheme that preyed on vulnerable and distressed immigrant consumers held in custody by U.S. Immigration and Customs Enforcement (“ICE”), who were eligible USCA4 Appeal: 24-1334 Doc: 70 Filed: 10/15/2025 Pg: 3 of 23
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for release on immigration bonds. See J.A. 36-84 (the “Complaint”).1 The Complaint alleged, inter alia, that the Nexus defendants marketed their product to the immigrant consumers as an “easy and affordable” method of securing release from ICE custody on immigration bonds. Id. at 41. In reality, however, the Nexus defendants charged the immigrant consumers exorbitant fees for a purported array of services — only some of which the defendants actually provided — and deceived and abused those immigrant consumers, in violation of federal and state consumer protection statutes. More specifically, the factual background giving rise to this civil enforcement action — having been entirely admitted by the default judgment entered against the Nexus defendants, see, e.g., Ryan v. Homecomings Fin. Network, 253 F.3d 778, 780 (4th Cir. 2001) — was spelled out best by the district court: Nexus, through its wholly owned subsidiary Libre, operates a nationwide business aimed at immigrants held in federal detention. The business was designed and implemented by Micheal Donovan, Richard Moore, and Evan Ajin. 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. Moore was part owner of Nexus, the chief financial officer of Libre, and the executive vice president of Nexus and Libre. Ajin was part owner and a director of Nexus and a vice president of Libre.
Libre advertises its services to immigrants who are detained and may be released on bond. In 2018, the average immigration bond was $7,500. 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. Neither Nexus nor Libre is a licensed bail-bond agent or a surety company certified by the U.S. Treasury. Instead, Libre is a service provider that acts as an intermediary between . . . detainees and sureties and . . . bond agents.
1 Citations herein to “J.A. ___” refer to the contents of the Joint Appendix filed by the parties in this appeal.
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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. From about 2014 until 2017, Libre used a multi-part, 21-page, written client agreement (“the Original Agreement”). The Original Agreement was written in English, except for a single page written in Spanish. 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. 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. A consumer’s monthly payments to Libre are not refundable, but the collateral payments are refundable once a consumer’s immigration proceedings are resolved.
In late 2017 or early 2018, Libre revised its written client agreement (the “New Agreement”). 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. 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. 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.
According to plaintiffs, Libre falsely told consumers that it paid the full amount of the consumer’s bond to [ICE]. 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. Regarding the New Agreement, Libre represented to consumers that the monthly payments were payments toward a loan. Further, consumers told call-center employees that they thought their monthly payments were going toward paying down their bonds. 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. 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.”
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See J.A. 1720-22 (citation modified).
B.
After the Nexus defendants unsuccessfully sought dismissal of the Complaint in early 2021 on grounds that the district court lacked subject-matter jurisdiction, they engaged in a systematic and continuous pattern of noncompliance with multiple court orders, and they failed to engage properly in discovery proceedings.2 Put simply, the defendants refused to meaningfully participate in discovery, including by failing to respond to the plaintiffs’ discovery requests, ignoring multiple court orders compelling the disclosure of documents and other information, and by disregarding pertinent deadlines. The panoply of the Nexus defendants’ discovery misconduct and failure to participate in this litigation was well summarized by the district court in April 2024: 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. 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. 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
2 By its Memorandum Opinion of March 22, 2022, the district court rejected the Nexus defendants’ arguments for dismissal of the Complaint. See Consumer Fin. Prot. Bureau v. Nexus Servs., Inc., No. 5:21-CV-00016 (W.D. Va. Mar. 22, 2022), ECF No. 108. Therein, the court concluded it possessed subject-matter jurisdiction over the case because the plaintiffs’ CFPA claims conferred it with original jurisdiction pursuant to 28 U.S.C. § 1331, and supplemental jurisdiction over the plaintiffs’ state law claims under 28 U.S.C. § 1367(a). Although the Nexus defendants do not challenge that ruling, we are satisfied with the court’s assessment of its subject-matter jurisdiction in this case. USCA4 Appeal: 24-1334 Doc: 70 Filed: 10/15/2025 Pg: 6 of 23
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things in their possession, custody, or control at this time.” 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. Defendants did not comply with that order. Consequently, on July 19, 2022, plaintiffs moved the court to sanction defendants for their noncompliance.
The deadline for defendants’ expert disclosures . . . came and went, and defendants had not yet disclosed the identity or written report of any expert. Likewise, the deadline to complete discovery . . . passed, and plaintiffs still had not received most of their requested discovery. As a result, on December 1, 2022, the court canceled the early 2023 bench trial. See J.A. 1722-23 (citation modified).
Following this pattern of litigation misconduct, during a January 2023 hearing before the United States Magistrate Judge, the parties discussed the defendants’ noncompliance with court orders and their unfulfilled discovery obligations, along with potential sanctions. See J.A. 1035-79. Notably, the defendants’ lawyers conceded that monetary sanctions were unlikely to prompt any compliance by the defendants with prior court orders and discovery obligations. Id. at 1069-70 (defendants’ counsel stating to court that he was “at a loss” for what sanctions to “suggest”). At that juncture of the proceedings, the plaintiffs clarified their position and explained that “[i]f there are no financial fines that we can impose . . . that are going to get [the defendants] to take the basic steps to participate in this litigation, then it’s time to hold them in default.” Id. at 1071. USCA4 Appeal: 24-1334 Doc: 70 Filed: 10/15/2025 Pg: 7 of 23
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Soon thereafter, the Magistrate Judge issued several court orders aimed at addressing the ongoing discovery noncompliance and litigation misconduct of the Nexus defendants. The Magistrate Judge also approved the defendants’ counsel’s requests to withdraw from their representation of the defendants and ordered the two corporate defendants — that is, Nexus and Libre — to have new counsel enter appearances within 14 days, by January 25, 2023. See J.A. 1082. Therein, the Magistrate Judge explicitly warned the defendants that failure to comply could result in a default. But the Nexus defendants nevertheless failed to comply. That is, the defendants ignored the Magistrate Judge’s orders by failing to produce any additional documents responsive to the plaintiffs’ discovery requests, see J.A. 1135-36; by failing to attend a March 2023 status conference with the District Judge, id. at 1136, 1204; and by seeking to delay the proceedings by making promises in April 2023 to ensure compliance with discovery obligations “as quickly as humanly possible,” id. at 1150.3 Eventually, given
3 The Nexus defendants’ promise to come into compliance with their discovery obligations “as quickly as humanly possible” was short-lived. See J.A. 1150. Indeed, just two weeks after an April 2023 hearing before the District Judge, the defendants moved for judgment on the pleadings, contending that the plaintiffs’ claims against them should be dismissed based on a constitutional contention about the CFPB’s statutory funding mechanism, see J.A. 1190, which the Supreme Court has since rejected, see CFPB v. Cmty. Fin. Servs. Ass’n of Am., Ltd., 601 U.S. 416, 441 (2024). As the District Judge would thereafter observe — in granting the plaintiffs’ request for default judgment — the filing of that untimely motion, more than five months after the deadline for dispositive motions had lapsed, was “hardly consistent with the conduct of a litigant for whom purging itself of contempt and avoiding delay are top priorities.” See J.A. 1205. USCA4 Appeal: 24-1334 Doc: 70 Filed: 10/15/2025 Pg: 8 of 23
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the defendants’ continued noncompliance and failure to meaningfully engage in the pretrial litigation, the plaintiffs requested that the district court impose default judgment.4 C.
On May 11, 2023, in addressing the Nexus defendants’ record of well-documented noncompliance and misconduct with court orders and applicable rules governing litigation, the district court resolved — pursuant to Rule 37 of the Federal Rules of Civil Procedure and the court’s inherent authority — to sanction the defendants with an entry of default judgment. And the court’s decision in that respect was predicated on the defendants’ badfaith violations of multiple court orders, disregard for applicable deadlines, and refusal to engage in discovery proceedings. See Consumer Fin. Prot. Bureau v. Nexus Servs., Inc., No. 5:21-cv-00016 (May 11, 2023), ECF No. 201 (the “Default Judgment Ruling”). Applying the four-factor test for Rule 37 sanctions such as default judgment, as set forth by our Court in Wilson v. Volkswagen of America, Inc., 561 F.3d 494, 503-05 (4th Cir. 1977), the district court concluded that, “if default judgment is to ever be warranted as a sanction for discovery abuses, it is emphatically so in this case.” See Default Judgment Ruling 12. The court then emphasized and explained that the Nexus defendants’ bad faith . . . in their pattern of knowing noncompliance with numerous orders of the court, including but not limited to their failure to timely retain counsel when ordered to do so, their refusal to respond in writing to [the
4 Notably, the Nexus defendants failed to file a timely response to the plaintiffs’ request for default judgments. On appeal, the defendants stated that their failure to file such a response was due to the fact that they did not have counsel. That fact was revealed in spite of the Magistrate Judge’s prior order — from months earlier — directing the defendants to promptly secure representation by counsel. See Br. of Appellant 49. USCA4 Appeal: 24-1334 Doc: 70 Filed: 10/15/2025 Pg: 9 of 23
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Magistrate Judge’s] order to show cause when directed to do so, and their unexcused absence from a scheduled telephone conference.
Id. at 12 (citation modified). The court also observed that the defendants’ “other litigation activity in this case — even after the appearance of new counsel — further indicates a lack of candor with the court and a delusion as to the exigency of the situation.” Id. Furthermore, the district court concluded that the plaintiffs were prejudiced by the Nexus defendants’ misconduct and “persistent noncompliance” in failing to provide them with “meaningful discovery.” See Default Judgment Ruling 13. The court explained that the plaintiffs were “‘forced to expend a tremendous amount of time, effort, and expense in the discovery process and motions practice,’ and defendants’ conduct ‘has rendered much of that activity essentially meaningless,’ given that plaintiffs still have not received large swaths of responsive [information].” Id. (quoting Rangarajan v. Johns Hopkins Univ., 917 F.3d 218, 226 (4th Cir. 2019)). And lastly, the court reasoned that “[t]he need for deterrence of this particular sort of noncompliance could not be greater, as defendants have ‘[s]talled and ignore[d] the direct orders of the court with impunity.’” Id. at 14 (quoting Mut. Fed. Sav. & Loan Ass’n v. Richards & Assocs., Inc., 872 F.2d 88, 92 (4th Cir. 1989)).5
5 In addition to imposing default judgment against the Nexus defendants, the district court held the defendants in civil contempt based on the Magistrate Judge’s show cause order and certification, which documented in “careful detail” the “failings of [the defendants] to respond to plaintiffs’ discovery requests or make good faith effort to do so.” See Default Judgment Ruling 11. The court then recognized that, because “[t]he factual certification constitutes prima facie evidence of contempt, which sustains plaintiffs’ initial burden of proof,” the defendants’ lawyer’s subsequent concession “that defendants should be held in contempt” — along with the defendants’ failure to contest or oppose the certified facts — supported a finding of civil contempt. Id. at 11, 16. Notably, the defendants do not challenge the civil contempt aspect of the Default Judgment Ruling. USCA4 Appeal: 24-1334 Doc: 70 Filed: 10/15/2025 Pg: 10 of 23
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D.
During the ensuing post-default judgment proceedings, on June 13, 2023, the district court scheduled an evidentiary hearing for August 2023 concerning the civil remedies sought by the plaintiffs, which included, inter alia, a request for permanent injunctive relief and monetary penalties.6 Leading to that evidentiary hearing, on June 26, 2023, the Nexus defendants disclosed witnesses and exhibits that had not been previously disclosed in discovery proceedings, prompting swift objections from the plaintiffs. See J.A. 1458-67. By its Memorandum Opinion of August 8, 2023, the district court sustained most of the plaintiffs’ objections and resolved to exclude the Nexus defendants’ proposed witnesses — with the exception of individual defendant Ajin — along with all of their proposed exhibits. See Consumer Fin. Prot. Bureau v. Nexus Servs., Inc., No. 5:21-cv-00016 (Aug. 8, 2023), ECF No. 229 (the “Witnesses and Exhibits Ruling”). Therein, the court ruled that such an exclusion was the appropriate remedy, pursuant to Rules 26 and 36 of the Federal Rules of Civil Procedure, and that the nondisclosures of evidence were neither substantially justified nor harmless. Applying our Court’s 2003 precedent in Southern States Rack & Fixture, Inc. v. Sherwin-Williams Co., 318 F.3d 592, 596 (4th Cir. 2003),
6 In responding to the plaintiffs’ request for a permanent injunction, the Nexus defendants did not mount any opposition in their remedies briefing. See J.A. 1468-98. Nor did they respond, object, or offer an alternative to the relief sought by the plaintiffs, id. at 1925-50; argue against injunctive relief requested by the plaintiffs during the remediesrelated evidentiary hearing (but instead asked only to cancel the hearing), id. at 1612, 1889- 90; or request reconsideration or modification of the injunction after it was entered. USCA4 Appeal: 24-1334 Doc: 70 Filed: 10/15/2025 Pg: 11 of 23
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the court explained in the Witnesses and Exhibits Ruling that its exclusion of the defendants’ proposed exhibits was appropriate for the following reasons: Collectively, the Southern States factors weigh heavily against permitting defendants to introduce these documents as exhibits at the damages/remedies hearing. First, surprise to plaintiffs upon admission of these documents into evidence would be inevitable; defendants have essentially filibustered against plaintiffs’ reasonable requests not only by failing to provide copies of the proposed exhibits to this day, but also not definitively stating whether any of the documents were provided in discovery (though defense counsel indicated his “belief” that “most” of the documents were probably not produced — without specifying which documents might indeed have been produced). Second and relatedly, defendants had the chance to at least attempt to cure that surprise by providing plaintiffs with copies of the proposed exhibits as soon as they resolved to put them on their initial exhibit list. But they have thus far squandered that chance. Third, the court expects that allowing defendants to present these exhibits would significantly disrupt the hearing; plaintiffs will have had little to no opportunity to review the documents for possible evidentiary objections based on (among other grounds) authenticity, hearsay, the witness’s personal knowledge, unfair prejudice, and the like. Fourth, although one cannot be certain how exactly defendants intend to use each exhibit, the court sees no reason why defendants would endeavor to introduce 17 documents not already produced in discovery if those documents were not in some sense important to the issues. Moreover, each of the defendants’ proposed exhibits relate, in one respect or another, to one of their 12 proposed witnesses. This factor favors defendants and the admission of the evidence; however, it is insufficient to overcome the other factors. Notably, one wonders why the documents, if so important to the damages and remedies issues, were not produced and still have not been produced. This also bolsters plaintiffs’ argument that they are prejudiced by the late disclosure of the documents without their production.
Lastly, defendants’ principal reason for only recently disclosing these documents was that their counsel only recently entered this case in April 2023 — long after discovery had closed — and did the best they could in light of their clients’ default and earlier discovery violations. But while the court appreciates their efforts, that does not relieve the defendants themselves of their obligation to comply with the Federal Rules and court-ordered discovery deadlines, by and through whomever represents them at the time. Even putting that aside, at the hearing on plaintiffs’ objections, defense counsel failed to offer the court a meaningful explanation for why defendants had not yet provided copies of the proposed exhibits despite having identified USCA4 Appeal: 24-1334 Doc: 70 Filed: 10/15/2025 Pg: 12 of 23
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them on their list. In that regard, defense counsel’s recent entry into this case is no excuse.
See Witnesses and Exhibits Ruling 10-11 (citation modified). From there, the district court extended that reasoning in also excluding 11 of the 12 witnesses identified by the defendants in their pre-evidentiary hearing submission: Looking to the first Southern States factor, permitting defendants to elicit testimony from any of the witnesses on their list (other than Ajin) would cause even greater surprise to plaintiffs than would admission of the documents. Indeed, defendants’ failure to timely disclose the identity of these witnesses prevented plaintiffs from taking any of their depositions before the close of discovery, thereby inhibiting their preparation for an eventual trial (or, in this case, a hearing on damages/remedies). And as to any experts, defendants still have not provided plaintiffs with a final report, leaving them with even less information. Second, unlike the exhibits, there was no realistic way for defendants to entirely cure the surprise to plaintiffs that would result from calling undisclosed, un-deposed witnesses at the hearing while operating within the confines of the already-delayed schedule because defendants indicated their intent to disclose these new witnesses less than two months before the scheduled damages/remedies hearing. Third, allowing defendants to present these witnesses would disrupt the hearing in the same way as would admitting the undisclosed exhibits. Lastly, defendants’ explanation for the late disclosure of the witnesses was essentially the same as for the late disclosure of the exhibits and is insufficient for the same reasons.
See Witnesses and Exhibits Ruling 12-13.
On August 15, 2025, the Nexus defendants requested that the district court cancel its planned evidentiary hearing concerning the plaintiffs’ request for permanent injunctive relief and monetary remedies. See J.A. 1889 (defendants’ counsel confirming to court that defendants “do not believe that a hearing is necessary”). That same day, and of importance concerning the issue of remedies, the parties stipulated to the sum of $230,996,970.84 as being the monies collected by the defendants from the immigrant consumers and not USCA4 Appeal: 24-1334 Doc: 70 Filed: 10/15/2025 Pg: 13 of 23
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refunded. Id. at 1629 (stipulating that Nexus and Libre “received $230,996,970.84 from consumers between December 2013 to June 2022”) (the “Stipulation”). E.
In early April 2024, the district court entered its final judgment, therein awarding permanent injunctive relief against the Nexus defendants to prevent further illegal conduct and otherwise assessing a monetary award, pursuant to both federal and state law. See Consumer Fin. Prot. Bureau v. Nexus Servs., Inc., No. 5:21-cv-00016 (April 1, 2024), ECF No. 246 (the “Amended Final Judgment”); Consumer Fin. Prot. Bureau v. Nexus Servs., Inc., No. 5:21-cv-00016 (April 2, 2024), ECF No. 247 (the “Amended Memorandum Opinion”). In those rulings, the court concluded and explained that the Complaint had alleged valid claims against the Nexus defendants under the Consumer Financial Protection Act (“CFPA”) and relevant state statutes, which had permitted the court’s earlier entry of default judgment. Next, applying the four-factor test governing the issuance of permanent injunctive relief, as articulated by the Supreme Court in eBay LLC v. MercExchange, LLC, 547 U.S. 388, 391 (2006), the court ascertained that the plaintiffs’ request for injunctive relief — set forth in a proposed order submitted by the plaintiffs, and without any opposition from the defendants — was warranted under both federal and state law. See Amended Memorandum Opinion 20.7 In particular, the court recognized that the “public
7 The eBay test requires a federal court to consider the following four factors in ascertaining whether permanent injunctive relief is appropriate and warranted: (1) that [the plaintiff] has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate (Continued) USCA4 Appeal: 24-1334 Doc: 70 Filed: 10/15/2025 Pg: 14 of 23
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interest is served by injunctions that reasonably ‘fence in’ [the defendants] from engaging in behavior related to their previous illegal conduct.” Id. Moving on, in light of the Stipulation by the parties concerning the Nexus defendants’ net collections from their immigrant consumers, the district court resolved to assess a monetary award in favor of the plaintiffs, totalling approximately $811,000,000. Predicated on well-established precedent, that monetary award included the sum agreed to by the parties and set forth in the Stipulation as restitution payable to the immigrant consumers, along with the court’s attendant assessment of civil penalties of $111,135,620 per defendant (for an aggregate of $555,678,100) to the CFPB; $7,100,000 to the Commonwealth of Virginia; $3,400,000 to the Commonwealth of Massachusetts; and $13,890,000 to the State of New York.
As to the issue of restitution to the immigrant consumers, the court explained that the plaintiffs had satisfied their “burden of establishing that the amount of restitution [they seek] — that is, defendants’ net revenues — reasonably approximate defendants’ unjust gains,” which the court thereupon observed was the appropriate measure of restitution to the immigrant consumers under federal law and precedent. See Amended Memorandum Opinion 22 (citing, inter alia, Consumer Fin. Prot. Bureau v. CashCall, Inc., 35 F.4th 734, 750 (4th Cir. 2022)) (citation modified). In that sense, the court explained that “[g]ross
for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction.
See eBay, 547 U.S. at 391; see also Wudi Indus. (Shanghai) Co., Ltd. v. Wong, 70 F.4th 183, 190 (4th Cir. 2023) (applying eBay factors to assess permanent injunctive relief). USCA4 Appeal: 24-1334 Doc: 70 Filed: 10/15/2025 Pg: 15 of 23
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and net revenues are regularly used to approximate consumer loss or gain,” such that the Stipulation reflected an appropriate amount of restitution. Id.8 Turning to the issue of civil monetary penalties, the district court concluded that such penalties were also appropriate. With respect to the CFPA, the court explained that it would “follow a similar approach” in assessing penalties against the Nexus defendants: Plaintiffs have extensively alleged that each of the defendants “knowingly or recklessly” engaged in “deceptive acts or practices in violation of the CFPA.” Defendants admit these allegations by virtue of their default. The allegations here demonstrate that defendants consciously disregarded substantial and unjustifiable risks to their vulnerable consumers — namely the risk of financial harm — in gross deviation from accepted standards set forth by the CFPA and other consumer protection laws. The court finds that defendants recklessly violated the CFPA and will impose Tier Two penalties [i.e., up to $34,065 per day for each reckless violation of the CFPA].
See Amended Memorandum Opinion 27 (citation modified).9
8 Although the Nexus defendants argued to the district court that “a plaintiff cannot always meet its burden of approximating losses or gains by calculating from gross or net revenues,” the court observed that the defendants provided “[no] case law illustrating an alternative calculation method.” See Amended Memorandum Opinion 23. In any event, the court then proceeded to explain that, in light of the “systemic pattern of unlawful and deceptive conduct against all of their consumers” established by the plaintiffs, the use of defendants’ revenues to measure restitution was appropriate given that such revenues are “wholly attributable to their pattern of contemptuous conduct.” Id. 9 As to civil penalties under state law — i.e., the laws of Virginia, Massachusetts, and New York — the court calculated the number of immigrant consumers in each jurisdiction (2,840 immigrant consumers in Virginia; 680 immigrant consumers in Massachusetts, and 2,778 immigrant consumers in New York) and then multiplied those totals by the applicable civil penalty under each governing state statute. See, e.g., Va. Code Ann. § 59.1-206(A) (permitting penalty of up to $2,500 per statutory violation); Mass. Gen. Laws Ann. ch. 93A, § 4 (permitting penalty of up to $5,000 per violation whenever person or entity engages in any act or practice that they “knew or should have known” was unfair or deceptive); N.Y. Gen. Bus. Law. § 350-d (permitting penalty of $5,000 per violation). USCA4 Appeal: 24-1334 Doc: 70 Filed: 10/15/2025 Pg: 16 of 23
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On April 11, 2024, the Nexus defendants timely appealed from the Amended Final Judgment. We possess jurisdiction in this appeal pursuant to 28 U.S.C. § 1291.
II.
Our Court reviews for abuse of discretion a district court’s imposition of defaultjudgment sanctions under Rule 37(b)(2) and evidentiary sanctions under Rule 37(c)(1) of the Federal Rules of Civil Procedure. See Russell v. Absolute Collection Servs., Inc., 763 F.3d 385, 396 (4th Cir. 2014). We also “review for abuse of discretion both the court’s decision to enter the injunction and the scope of relief awarded” therein. See RXD Media, LLC v. IP Application Dev. LLC, 986 F.3d 361, 375 (4th Cir. 2021). And finally, we review de novo the challenged legal principles underlying a district court’s remedial award. See U.S. ex rel. Drakeford v. Tuomey, 792 F.3d 364, 384 (4th Cir. 2015).
III.
On appeal, the Nexus defendants have presented four assignments of error with respect to the district court’s rulings and final judgment. First, the defendants maintain that the court abused its discretion in sanctioning them with default judgment for their series of affronts to the court and violations of the court’s various orders, plus other violations of applicable deadlines and litigation obligations. Second, the defendants assert that the court was required to approve the introduction of their evidence and witnesses at the scheduled remedies-related evidentiary hearing, despite the fact that such evidence had neither been disclosed to the plaintiffs nor produced during discovery proceedings. Third, the USCA4 Appeal: 24-1334 Doc: 70 Filed: 10/15/2025 Pg: 17 of 23
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defendants contend that the court’s permanent injunctive relief does not comply with applicable law and Rule 65(d) of the Federal Rules of Civil Procedure. Fourth, the defendants assert that the court erred in calculating the monetary award. As explained herein, we reject each of the defendants’ appellate contentions. A.
First, the district court did not abuse its discretion in sanctioning the Nexus defendants with default judgments in the first instance. The thorough and well-reasoned Default Judgment Ruling of May 2023 — which abides by our precedent — explained that default judgment was warranted for the defendants’ “knowing noncompliance with numerous orders of the court.” See Default Judgment Ruling 12. And that proposition is bolstered by the defendants’ lawyer’s statement to the court that he was “at a loss” for what other sanction might be appropriate in ensuring his clients’ compliance with court orders, discovery obligations, and other litigation deadlines. See J.A. 1069-70. Stated succinctly, there was simply no error in the district court’s entry of default judgment against the Nexus defendants, who were — in the words of the able District Judge — “stall[ing] and ignor[ing] the direct orders of the court with impunity.” See Default Judgment Ruling 14 (emphasis added). Rather, the Default Judgment Ruling contains detailed and comprehensive findings documenting the defendants’ blatant misconduct in this litigation, which included defiance of court orders and the rules that govern the orderly resolution of pending litigation. See, e.g., Wilson v. Volkswagen of America, Inc., 561 F.3d 494, 503-05 (4th Cir. 1977); Mey v. Phillips, 71 F.4th 203, 218 (4th Cir. 2023). Such “repeated misconduct [by a litigant] . . . will not [be] tolerate[d]” in our judicial system, USCA4 Appeal: 24-1334 Doc: 70 Filed: 10/15/2025 Pg: 18 of 23
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and we perceive of no reason as to why it should be tolerated here. See Mut. Fed. Sav. & Loan Ass’n v. Richards & Assocs., Inc., 872 F.2d 88, 94 (4th Cir. 1989).10 B.
Second, we are entirely unpersuaded by the contention that the district court abused its discretion in excluding certain proposed exhibits and witnesses in the scheduled — but unconducted — remedies-related evidentiary hearing once set for August 2023, which the defendants indisputably failed to disclose or identify in discovery. Pursuant to the Rules of Civil Procedure, if a litigant fails to provide information or identify a witness, as required by Rules 26(a) and (e), that litigant is not entitled to utilize the undisclosed information or such witnesses at trial, unless the failure to disclose was “substantially justified” or “harmless.” See Fed. R. Civ. P. 37(c)(1). As our Court has explained in that regard,
10 The Nexus defendants inanely suggest that, prior to imposing the sanction of default judgment, the district court was required to explicitly warn them that noncompliance with prior court orders could result in default. See Br. of Appellant 49 (citing Hathcock v. Navistar Int’l Transp. Corp., 53 F.3d 36, 40 (4th Cir. 1995)). But our precedent directly refutes this contention. Instead, we have recognized that “an explicit warning is not always necessary . . . because a party is already put on notice of the possibility of default by the terms of Federal Rule of Civil Procedure 37.” See Mey, 71 F.4th at 218 (explicitly rejecting that Hathcock always requires pre-default judgment warning requirement and otherwise recognizing that circumstances exist “where the entry of default judgment against a defendant for systemic discovery violations is the natural next step in the litigation, even without an explicit prior warning from the district court”). Relatedly, the Nexus defendants claim they were also not given an adequate opportunity to cure their misconduct after learning that the plaintiffs would seek default judgment. Yet again, this argument is meritless. Consistent with Mey, if a defendant has been “given ample opportunity to satisfy the conditions of the court’s discovery orders” and chooses “continued obstinacy,” such that there is no requirement to provide a defendant with notice before default judgment is entered, then there can be no requirement for a post-notice opportunity to cure, as the defendants suggest. See 71 F.4th at 221. USCA4 Appeal: 24-1334 Doc: 70 Filed: 10/15/2025 Pg: 19 of 23
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whether a nondisclosure of evidence is substantially justified or harmless for purposes of a Rule 37(c)(1) exclusion analysis, a district court should be guided by the following factors: (1) the surprise to the party against whom the evidence would be offered; (2) the ability of that party to cure the surprise; (3) the extent to which allowing the evidence would disrupt the trial; (4) the importance of the evidence; and (5) the nondisclosing party’s explanation for its failure to disclose the evidence.
S. States Rack & Fixture, Inc. v. Sherwin-Williams Co., 318 F.3d 592, 596 (4th Cir. 2003). Prior to the scheduled — but unconducted — evidentiary hearing on remedies, the Nexus defendants failed to disclose all the exhibits included on their proposed list for introduction, and they also failed to disclose 11 of their 12 proposed witnesses. In that regard, the Witnesses and Exhibits Ruling explained why the court’s exclusion of the defendants’ proposed witnesses for the evidentiary hearing (with the exception of defendant Ajin, who was included in the defendants’ initial disclosures) — and its exclusion of all of their proposed but undisclosed exhibits — was appropriate and warranted by our Court’s 2003 Southern States precedent. We thus also reject this contention, on the basis of the court’s thorough Witnesses and Exhibits Ruling.11
11 The Nexus defendants argue that the district court’s evidentiary sanctions (at the remedies stage) were duplicative of the default judgment sanction (at the liability stage). See Br. of Appellant 55-56. Not only is that argument unavailing, but it overlooks the fact that trial courts routinely impose both types of sanctions when warranted. See, e.g., Tandycrafts, Inc. v. Bublitz, 2002 WL 324290, at *3 (N.D. Tex. Feb. 27, 2002); Glob. Digit. Sols., Inc. v. Grupo Rontan Electro Metalurgica, S.A., 2020 WL 8816214, at *1-2 (S.D. Fla. Dec. 1, 2020). And otherwise, the defendants have failed to point to any authority — much less controlling authority — to support their erroneous position. USCA4 Appeal: 24-1334 Doc: 70 Filed: 10/15/2025 Pg: 20 of 23
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C.
Third, the district court did not abuse its discretion in entering its well-supported, specific, and detailed permanent injunction. Although the plaintiffs broadly maintain that the Nexus defendants “forfeited their [appellate] challenges to the [permanent] injunction by failing to raise them before the district court,” see Br. of Appellee 38 — such that we should review those challenges only for stringent “fundamental error,” see, e.g., Hicks v. Ferreyra, 965 F.3d 302, 310 (4th Cir. 2020) — we are satisfied to simply reject the defendants’ arguments regarding the propriety of the court’s permanent injunction because they abjectly fail, even under an abuse-of-discretion standard of review. With respect to the Nexus defendants’ primary substantive challenge to the permanent injunction, we are satisfied that the “fencing-in” relief afforded by the injunction — which faced no objection by the defendants’ in the underlying proceedings — is appropriately tailored to account for the defendants’ various and several violations of federal and state consumer protection laws. And such relief was otherwise necessary to prevent further evasion by the defendants. See, e.g., Fed. Trade Comm’n v. Pukke, 53 F.4th 80, 110 (4th Cir. 2022) (recognizing that appropriate award of injunctive relief may include “fencing-in” provisions designed to “prevent [defendants] from engaging in similarly illegal practices” in future); accord Fed. Trade Comm’n v. Ruberoid Co., 343 U.S. 470, 473 (1952); Russian Media Grp., LLC v. Cable Am., Inc., 598 F.3d 302, 307 (7th Cir. 2010); Fed. Trade Comm’n v. Grant Connect, LLC, 763 F.3d 1094, 1105 (9th Cir. 2014). Procedurally, the district court’s permanent injunction — which includes very detailed factual findings and thorough definitions of relevant terms — clearly describes the USCA4 Appeal: 24-1334 Doc: 70 Filed: 10/15/2025 Pg: 21 of 23
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acts restrained and required, and thus complies with Federal Rule of Civil Procedure 65(d). That is, the injunction states “its terms specifically” and it “describe[s] in reasonable detail — and not by referring to the complaint or other document — the act or acts to be restrained or required.” See Fed. R. Civ. P. 65(d)(1)(B)-(C). Those mandatory requirements, the Supreme Court has observed, serve to ensure “that those who must obey [an injunction] will know what the court intends to require and what it means to forbid.” See Int’l Longshoremen’s Ass’n, Loc. 1291 v. Phila. Marine Trade Ass’n, 389 U.S. 64, 76 (1967). To reiterate, Rule 65(d) has been adhered to, and we therefore reject the defendants’ belated attempts to undermine the procedural propriety of the permanent injunction. D.
Finally, we reject the Nexus defendants’ confusing last-ditch effort to undermine the district court’s monetary award by claiming that it requires them to pay as restitution the total sum collected from the immigrant consumers (i.e., the amount identified in the Stipulation), as opposed to some other unspecified amount. To that end, we agree with and adopt the well-crafted — and legally correct — analysis set forth in the court’s Amended Final Judgment and the Amended Memorandum Opinion. As detailed more fully above, those rulings cogently explain the legal rationale underlying the restitution and penalties imposed, which comply with precedent, the CFPA, and the applicable state statutes. Accordingly, we affirm the district court’s monetary award in favor of the plaintiffs and against the Nexus defendants, totalling approximately $811,000,000. That sum includes $230,996,970.84 in restitution to the immigrant consumers, along with an attendant assessment of civil penalties of $111,135,620 per defendant (for an aggregate of USCA4 Appeal: 24-1334 Doc: 70 Filed: 10/15/2025 Pg: 22 of 23
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$555,678,100) to the CFPB; $7,100,000 to the Commonwealth of Virginia; $3,400,000 to the Commonwealth of Massachusetts; and $13,890,000 to the State of New York.
IV.
Pursuant to the foregoing — and with austere reverence for our judicial system and its rules concerning the orderly and fair disposition of pending disputes — we reject the Nexus defendants’ appellate contentions and affirm the final judgment. AFFIRMED USCA4 Appeal: 24-1334 Doc: 70 Filed: 10/15/2025 Pg: 23 of 23