Consumer Financial Protection Bureau v. Nexus Services, Inc.
U.S. Court of Appeals for the Fourth Circuit
Consumer Financial Protection Bureau v. Nexus Services, Inc.
Opinion
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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 8, 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
PROTECTION BUREAU, Washington, D.C., for Appellee. ON BRIEF: Seth Frotman,
General Counsel, Steven Y. Bressler, Deputy General Counsel, Kristin Bateman, Assistant
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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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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 $366,500,000 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
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for release on immigration bonds. See J.A. 61-80 (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 under28 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.
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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.
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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.
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the defendants’ continued noncompliance and failure to meaningfully engage in the pre-
trial 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’ bad-
faith 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.
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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.
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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 remedies-
related 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.
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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
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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
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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)
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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 $366,523,000.
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
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).
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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).
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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 default-
judgment 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
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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,
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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.
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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.
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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
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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 $366,523,000. That sum
includes $230,996,970.84 in restitution to the immigrant consumers, along with an
attendant assessment of civil penalties in the sums of $111,135,620 to the CFPB;
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$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
23
Reference
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