Ad Astra Recovery Services, Inc. v. Heath

District Court, D. Kansas·Decided July 29, 2020·No. 6:18-cv-01145·Unknown

Opinion

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF KANSAS

AD ASTRA RECOVERY SERVICES, INC.,

Plaintiff,

v. Case No. 18-1145-JWB-ADM

JOHN CLIFFORD HEATH, ET AL.,

Defendants.

MEMORANDUM AND ORDER

This matter comes before the court on Defendants’ Motion Seeking Attorneys’ Fees. (ECF No. 212.) After multiple discovery conferences and deficient supplemental interrogatory responses, defendants filed a motion to compel a sufficient response to a single interrogatory, which the court granted in full. See Ad Astra Recovery Servs., Inc. v. Heath, No. 18-1145-JWB- ADM, 2020 WL 3034810, at *1 (D. Kan. June 5, 2020). Defendants now seek an award attorneys’ fees for time spent on the motion to compel and on this motion for fees. For the reasons explained below, plaintiff’s conduct on this discovery dispute was unreasonable and legally unsupported. Defendants conferred with plaintiff in good faith on multiple occasions to attempt to obtain the information without court involvement. Even after the court became involved through multiple discovery conferences, plaintiff refused to simply provide a responsive answer to the interrogatory, instead forcing the matter to motion practice and taking positions that were not substantially justified. Even in response to this motion for fees, plaintiff does not justify its positions on the motion to compel. Instead, plaintiff points a relevance objection that it lodged in response to the initial interrogatory but later removed and abandoned by the time the court ruled on the motion to compel. Plaintiff also argues the court should not award fees in connection with this motion because plaintiff previously prevailed in large part on other discovery motions where the court did not award fees. This argument is frivolous. Plaintiff’s conduct on this discovery motion is the exact conduct that the FED. R. CIV. P. 37(a)(5)’s fee- shifting provision was designed to curb. These tactics run up costs for litigants and waste time and resources. The court gave plaintiff every opportunity and incentive to provide a sufficient

interrogatory response without triggering the costs associated with formal motion practice. For these reasons, explained in more detail below, the court grants defendants’ motion insofar as the court will award attorneys’ fees. However, the court denies the motion insofar as the court will reduce the award to account for prevailing market rates in this district. I. BACKGROUND Plaintiff Ad Astra Recovery Services, Inc. (“Ad Astra”) is a debt collector and credit agency that alleges defendants “engaged in a fraudulent credit-repair scheme designed to bombard debt collectors with false credit dispute letters with the intention of deceiving debt collectors . . . and frustrating their efforts to collect legitimate debts.” (Am. Compl. ¶ 3 (ECF No. 120).) Ad

Astra asserts claims under the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. §§1962(c) and (d), and a Kansas common law fraud claim.1 Ad Astra has named as defendants: (1) the law firm, John C. Heath, Attorney at Law, PLLC d/b/a Lexington Law (“Lexington Law”); (2) certain attorneys with the firm: John Clifford Heath, Kevin Jones, Adam C. Fullman; (3) other related corporate entities that Ad Astra alleges directed and/or participated in the scheme: Progrexion Holdings, Inc.; Progrexion Teleservices, Inc.; PGX Holdings, Inc.;

1 Ad Astra also pleaded a claim for tortious interference with contractual relationships, but Ad Astra informed the court during the pretrial conference that it intends to abandon that claim. Progrexion ASG, Inc.; Progrexion Marketing, Inc.; Progrexion IP, Inc.; and (4) Jeffrey R. Johnson, CEO of the Progrexion entities (collectively “defendants”). Relatively early in discovery, the parties agreed to limit the scope of certain requests for production (“RFPs”) seeking communications between the defendant law firm and its consumer clients because full compliance would require production of records from more than 14,000 of the

firm’s clients. The parties agreed that the firm could produce responsive documents from a sampling of clients, capped at 100, with Ad Astra selecting the clients in increments of 50. (ECF No. 54.) Defendants later became concerned that the list was not a representative sample of Lexington Law’s client base but that Ad Astra intended to argue that it was. (ECF No. 192-2, at 4-5.) Defense counsel emailed Ad Astra’s counsel to ask about the manner of selection. (Id.) Ad Astra’s counsel dismissed these inquiries by responding, “We are done responding to this fiction.” (Id. at 2.) On January 28, 2020, defendants served Interrogatory No. 1. It asked Ad Astra to: “Explain in detail the process used by Ad Astra to select the list of fifty consumers included on the list

produced by Ad Astra titled ‘Random Sampling of Lexington Law Consumers in accordance with May 31, 2019 Order.’” (ECF No. 192-3, at 7.) Ad Astra’s initial response incorporated its general objections, asserted a relevance objection, and provided a non-responsive answer. (ECF No. 192- 3, at 3-4.) During a discovery conference with the court on March 24, defendants raised the issue of Ad Astra’s deficient interrogatory response. Defendants explained that they were concerned that Ad Astra would attempt to present the documents as being from a random or representative sampling of Lexington Law’s client base, but defendants had no way to test that assertion because they did not know how Ad Astra selected the names. The court asked Ad Astra what objection Ad Astra lodged to the interrogatory that it continued to maintain, to which Ad Astra responded that it asserted a relevance objection. (ECF No. 192-5, at 31-32.) The court did not issue any substantive ruling but told the parties that, based on their arguments, the interrogatory appeared to seek relevant information. (Id. at 34.) At that point, Ad Astra agreed to supplement its response. (Id. at 36.) Ad Astra served an amended response on April 3. The amended response removed the

relevance objection and Ad Astra’s incorporation of its general objections, and the amended response did not assert any further objections. It stated only that Ad Astra attempted to select 50 consumers from a client list that Lexington Law had produced, but Ad Astra believed the client list was inaccurate so “Ad Astra compiled a list of 50 consumers who Ad Astra had reason to believe had used Lexington Law’s services at some point in time.” (ECF No. 192-6, at 3-4.) During another discovery conference with the court on April 24, defendants again raised issues relating to deficiencies in Ad Astra’s amended response. The court agreed that the response did not provide the substantive information sought by the interrogatory and included much non- responsive verbiage. On April 28, Ad Astra served another supplemental response—again,

without asserting any further objections. The second amended response spans over 3 pages (ECF No. 192-8, at 3-6) and, as explained in the court’s underlying order, is largely non-responsive and evasive. The supplemental response still contained the same problematic language the court had earlier noted during the discovery conference. Following this response, the parties exchanged follow-up emails. (ECF No. 192-9, at 2-3.) Ad Astra’s counsel provided answers to several questions but refused to respond to certain questions on the grounds that they called for the disclosure of attorney-client privileged information. (ECF No. 192-10, at 3; ECF No. 196-4, at 1- 3; ECF No. 192-11, at 2.) Defendants then moved to compel, asserting the second amended response did not provide a complete answer and that the selection of the 50 consumers is not attorney-client privileged, and argued the motion at a hearing on May 29.

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