Memorandum in Response to Plaintiffs' Request to Compel Discovery by Prestamos CDFI, LLC — Marshall v. Prestamos CDFI, LLC (Dkt. 35, E.D. Pa. No. 5:21-cv-04337)

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U.S. District Court for the Eastern District of Pennsylvania · No. 5:21-cv-04337-JMG · Doc. 35 · 2022-04-04 · Docket on CourtListener

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IN THE UNITED STATES DISTRICT COURT 
FOR THE EASTERN DISTRICT OF PENNSYLVANIA 
 
 
ALICIA MARSHALL, DANIEL 
PRONSKY, PARIS TOWNSEND, 
NANCILEE HOLLAND, LEONA 
OWSLEY, KOLAWOLE AHMADOU, 
KIANA DERVIN, KRISTINA 
HENDERSON, DUSTIN INNIS, KELLY 
STALNAKER and JAMIE JONES, 
individually and on behalf of all others 
similarly situated, 
 
 
 
Plaintiffs, 
 
 
 
v. 
 
PRESTAMOS CDFI, LLC, 
 
 
 
 
Defendant. 
 
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Case No. 5:21-cv-04337-JMG 
 
 
 
 
 
 
 
 
DEFENDANT PRESTAMOS CDFI, LLC’S RESPONSE TO PLAINTIFFS’ 
REQUEST TO COMPEL DISCOVERY 
 
 
 
 
BALLARD SPAHR LLP 
HERRERA ARELLANO LLP 
 
Marcel S. Pratt (Pa. ID 307483) 
Roy Herrera* 
Michael R. McDonald (Pa. ID 326873) 
Daniel A. Arellano* 
Alexa L. Levy (Pa. ID 327973) 
Jillian Andrews* 
1735 Market Street, 51st Floor 
530 East McDowell Road, Suite 107-150 
Philadelphia, PA 19103 
Phoenix, AZ 85004 
T: 215-665-8500 
T: 602-567-4820 
F: 215-864-8999 
Roy@ha-firm.com 
PrattM@ballardspahr.com 
Daniel@ha-firm.com 
McDonaldM@ballardspahr.com 
Jillian@ha-firm.com 
LevyA@ballardspahr.com 
 
 
*pro hac vice admission to be sought 
 
Attorneys for Defendant 
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PRELIMINARY STATEMENT 
Plaintiffs have boldly proclaimed that their breach of contract case—alleging that nine 
Plaintiffs did not receive their Paycheck Protection Program (“PPP”) loans pursuant to loan 
agreements with Prestamos—is a “public law enforcement proceeding.” (Pls. Opp. Mot. Dismiss 
at 2, Doc. 29.) With that exaggerated view of their private loan agreement disputes, Plaintiffs 
attempt to justify unfettered and far-flung discovery of Prestamos. But this is not a government 
enforcement action: the law does not permit Plaintiffs to stand in the shoes of the U.S. Small 
Business Administration, the agency charged with administering and regulating the PPP. The 
CARES Act, which created the PPP, provides no private right of action to enforce it. Plaintiffs 
therefore cannot deputize themselves as the national caretakers of the PPP to support their 
unbridled discovery demands. They have no legal right to the intrusive discovery that they seek, 
which amounts to discovery of virtually every document in Prestamos’s possession about PPP and 
Prestamos’s finances, employees, customers, third-party contracts, and regulatory compliance. 
Indeed, Plaintiffs lack Article III standing to bring these claims even on behalf of 
themselves, and their allegations fail to state a claim as a matter of law. Prestamos has raised these 
issues in the now fully briefed Motion to Dismiss Plaintiffs’ Amended Complaint. (Docs. 24, 29, 
32). The Motion to Dismiss is case dispositive and would obviate the need for any discovery at all, 
let alone the production of, according to Plaintiffs, the “hundreds of thousands, and perhaps 
millions of pages of documents” that Plaintiffs seek from Prestamos. (Doc. 17 at 13.) A 
nationwide, putative class action seeking such sweeping discovery presents the “extraordinary 
circumstances” that justify a stay of discovery under the Court’s Policies and Procedures. 
Accordingly, because of the significant burden Plaintiffs’ discovery requests impose on Prestamos 
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while its dispositive motion is pending and the lack of prejudice to Plaintiffs in waiting, the Court 
should stay discovery pending resolution of the Motion to Dismiss. 
FACTUAL BACKGROUND 
 
Plaintiffs filed this nationwide, putative class action on October 1, 2021. (Doc. 1). They 
then served premature discovery requests on Prestamos on November 16, 2021. On December 27, 
2021, the parties filed a Joint Rule 26(f) report in which Plaintiffs represented that they “anticipate 
that Defendant will produce hundreds of thousands, and perhaps millions of pages of documents.” 
(Doc. 17 at 13 (emphasis added)). The parties agreed to and did serve initial disclosures under 
Rule 26(a)(1) on January 14, 2022, and Prestamos responded to Plaintiffs’ interrogatories and 
requests for production on January 19, 2022, largely with objections to the substance of the 
requests, which were voluminous, overbroad, and sought irrelevant information.  
 
The parties met and conferred at length on January 25, 2022 and again on March 23, 2022.1 
Prestamos’s position is that Plaintiffs’ discovery requests—some of which seek discovery into 
matters involving over 490,000 loans and how Prestamos financed its PPP operation—should be 
stayed pending resolution of the case-dispositive Motion to Dismiss. While Prestamos stood by its 
current position that discovery should be stayed in full, Prestamos proposed—as a compromise—
to produce in the interim discoverable information in its possession, custody, or control that relates 
                                            
1 Plaintiffs assert that Prestamos did not respond to its offer to put in writing the categories 
of documents that Prestamos would produce and a date for production, which could “potentially 
resolve” the parties’ dispute. (Pls. Br. at 2 n.1.) As Prestamos explained, in light of Plaintiffs’ prior 
conduct, Prestamos did not consider that offer to be in good faith. On February 5, 2022—over 45 
days before the second meet-and-confer—Prestamos made the first request Plaintiffs to submit 
specific requests for documents that would not be burdensome to produce, and Plaintiffs never 
responded. It also became clear during the March 23 meet-and-confer that Plaintiffs had no 
intention on compromising to accept limited discovery because, regardless of what Prestamos 
offered, Plaintiffs insisted on discovery into irrelevant topics, such as Prestamos’s borrowings 
from the Federal Reserve Bank. 
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to each named Plaintiff. However, Plaintiffs have refused to limit the scope of discovery during 
the pendency of the Motion to Dismiss. Plaintiffs have declined—without negotiating or offering 
a counter-proposal to address Presatmos’s well-founded concerns—to accept Prestamos’ proposal 
to produce this limited set of discovery. 
  
Separately, Plaintiffs have also served duplicative, wide-ranging discovery on Prestamos’s 
parent entity, Chicanos Por La Causa Inc. (“CPLC”), and the parties are litigating the 
enforceability of those subpoenas in the U.S. District Court for the District of Arizona, where 
CPLC is located and where compliance is to take place. 
ARGUMENT 
I. 
The Court should stay discovery. 
 
A. 
The legal standard.  
“Rule 26(c) of the Federal Rules of Civil Procedure empowers district courts to impose a 
stay of discovery on a showing of good cause.” Pfizer, Inc. v. Johnson & Johnson, No. 17-cv-
4180, 2018 WL 1071932, at *1 (E.D. Pa. Feb. 27, 2018). Whether to stay discovery while 
considering a motion to dismiss is within the Court’s sound discretion. In re Orthopedic Bone 
Screw Prod. Liab. Litig., 264 F.3d 344, 365 (3d Cir. 2001). While the filing of a motion to dismiss 
does not automatically stay discovery, “a stay is proper where the likelihood that such a motion 
may result in a narrowing or an outright elimination of discovery outweighs the likely harm to be 
produced by the delay.” 19th St. Baptist Church v. St. Peters Episcopal Church, 190 F.R.D. 345, 
349 (E.D. Pa. 2000) (internal quotation marks omitted). The Court should “carefully balance the 
relative benefit and harm that would ensue to each party from the grant or denial of a stay.” Id.  
Where “a pending motion to dismiss may dispose of the entire action and where discovery 
is not needed to rule on such motion, the balance generally favors granting a motion to stay.” 
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Weisman v. Mediq, Inc., No. 95-cv-1831, 1995 WL 273678, at *2 (E.D. Pa. May 3, 1995). The 
Court need not “form an opinion as to the merits of the motion,” but rather must “consider the 
scope of the motion and ask whether it may potentially lead to the end of the case, and whether it 
will provide the parties with full knowledge as to which claims are viable and, correspondingly, 
as to what discovery need occur.” Perelman v. Perelman, No. 10-cv-5622, 2011 WL 3330376, at 
*1 (E.D. Pa. Aug. 3, 2011) (internal quotation marks omitted).  
B. 
The Motion to Dismiss is case dispositive and would eliminate the need for 
discovery. 
Here, the Motion to Dismiss would dispose of the entire action and would obviate the need 
for discovery. As a starting point, then, the balance already “lean[s] in favor of staying discovery.” 
Pfizer, 2018 WL 1071932, at *1. Even a partial grant would narrow the issues in the case, such 
that a stay would avoid needless expense and help focus discovery on those claims that are viable. 
Weisman, 1995 WL 273678, at *2. Simply put, “delaying discovery until the Court can determine 
whether or not Plaintiffs have pled the facts necessary to proceed with the claim, may help to 
streamline the expensive discovery process, and, thereby, minimize the burden on counsel, parties 
and the Court.” McLafferty v. Deutsche Lufthansa A.G., No. 08-cv-1706, 2008 WL 4612856, at *2 
(E.D. Pa. Oct. 15, 2008). 
The Motion to Dismiss presents exceptional circumstances warranting a stay. First, the 
Motion to Dismiss asserts that the Court lacks subject matter jurisdiction to entertain the suit, as 
Plaintiffs lack Article III standing. It would be unfair to require that Prestamos engage in costly 
discovery only for the Court to later hold it lacked jurisdiction to permit Plaintiffs’ sweeping 
discovery in the first place. See Wyers Prod Grp. v. Cequent Performance Prod., Inc., No. 12-cv-
02640, 2013 WL 2466917, at *2 (D. Colo. June 7, 2013) (“Courts have routinely recognized that 
discovery may be inappropriate where the court’s jurisdiction is at issue. . . . [S]tays are generally 
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favored when a jurisdictional defense under Rule 12(b)(1) is asserted.”). Even if the Court has 
subject matter jurisdiction, the Motion to Dismiss sets forth comprehensive arguments for why 
each count of the Amended Complaint fails to state a claim. 
Second, the Court must “consider the scope of the proposed discovery,” Pfizer, 2018 WL 
1071932, at *2, and here, as in Pfizer, “the scope of discovery in this case will likely be enormous.” 
Id. (finding that a stay is justified where “discovery will be a large and costly undertaking.”) 
Plaintiffs have made clear that they “anticipate that Defendant will produce hundreds of thousands, 
and perhaps millions of pages of documents.” (Doc. 17 at 13 (emphasis added)). Plaintiffs seek 
intrusive discovery into Prestamos’s issuance of over 490,000 loans and virtually every document 
and communication in Prestamos’s possession about PPP. For example, Plaintiffs seek discovery 
into every PPP application that Prestamos received—a number that would exceed the 490,000 
loans it issued—through a request with over 70 sub-parts (RFP No. 13); all documents related to 
Prestamos’s “Bank accounts, securities accounts, trust accounts and other accounts” that it used to 
participate in PPP (RFP Nos. 15–16); every report (Form 1502) that Prestamos sent to the SBA for 
every fully disbursed loans (RFP No. 21); Prestamos’s compliance with the “Bank Secrecy Act or 
other federal anti-money laundering policies” (RFP No. 24); and every communication that 
Prestamos had with SBA about PPP (RFP. No. 25). Where, as here, “discovery will be a large and 
costly undertaking,” a stay should issue. Pfizer, 2018 WL 1071932, at *2.  
By comparison, any prejudice to Plaintiffs is minimal. While the Court considers and does 
not take lightly a plaintiff’s “interest in a speedy resolution” of the litigation, such delay does not, 
by itself, constitute prejudice “in a significant way” or create any particularized harm. Pfizer, 2018 
WL 1071932 at *4. Plaintiffs have not sought time-sensitive relief through a temporary restraining 
order or preliminary injunction, and any delay in obtaining relief (if it were warranted) could be 
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accounted for in a damages award. Nor is this a case involving time-sensitive evidence that may 
disappear absent its immediate production. Cf. 19th St. Baptist Church, 190 F.R.D. at 346 
(allowing immediate discovery where witnesses were “aged and infirm” and might no longer be 
available at trial). As Plaintiffs acknowledge, Prestamos “already has a clear and basic obligation 
to maintain” the records Plaintiffs seek, (Doc. 34 at 8), and they provide no basis to support an 
insinuation that Prestamos would fail to honor its record preservation obligations. They certainly 
provide no evidence whatsoever for their irresponsible accusation that funds may be 
misappropriated or stolen. (Doc. 34 at 7.)  
 
Because the Court may lack subject matter jurisdiction to hear this suit, the scope of 
discovery is massive and costly to Plaintiffs, and the relative burden to Plaintiffs is light, a stay 
of discovery pending resolution of the Motion to Dismiss is appropriate. “In short, the stay will 
potentially save time and money for all concerned.” Weisman, 1995 WL 273678, at *2. 
 
Alternatively, even if the Court does not issue a stay, it should direct Plaintiffs to continue 
to meet-and-confer on Prestamos’s compromise proposal to proceed with discovery into 
documents relating to the named Plaintiffs. Plaintiffs’ overwrought concern that such an agreement 
would give Prestamos “unilateral” discretion to decide the scope of the discovery it provides (Doc. 
34 at 8) can easily be assuaged by negotiating over that scope, which Plaintiffs have so far declined 
to do in favor of burdening the Court with a vague request for relief. 
II. 
Plaintiffs are not entitled to discovery of the “status and whereabouts” of so-called 
“proceeds.” 
 
 
Rule 26(b)(1) limits the scope of discovery to matters that are “relevant to any party’s claim 
or defense,” and subsection (c)(1)(D) provides that the Court may enter protective orders to protect 
a party from undue burden or expense by “forbidding inquiry into certain matters.” Here, even if 
the Court does not stay discovery altogether, good cause warrants a protective order to forbid 
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inquiry into “the status and whereabouts of the SBA-approved proceeds at issue,” (Doc. 34 at 7), 
because such information is irrelevant to the merits of Plaintiffs’ claims.2 
 
Plaintiffs press for information “about where the unfunded PPP proceeds are, how much, 
and to whom and when they may have been distributed.” (Doc. 34 at 3.) As Prestamos explained 
in its March 15, 2022 letter to the Court, Plaintiffs are knowingly perpetuating a false narrative 
regarding how PPP works, in contravention of public knowledge. (Doc. 31.) Prestamos never 
received individual borrowers’ “PPP proceeds.” In order to issue a PPP loan, Prestamos lent its 
own money that it borrowed, with interest, from the Federal Reserve Bank through the PPP 
Liquidity Facility (“PPPLF”). Id.; see also See Def. Mem. Supp. Mot. Dismiss at 8, 13, Doc. 24-
1. But what Prestamos did with money that it paid to borrow from the Federal Reserve Bank is 
beside the point: what matters, under Plaintiffs’ theory, is that Plaintiffs did not receive PPP loans 
from Prestamos. The critical issues for the breach-of-contract theory underpinning Plaintiffs’ 
entire case is whether Prestamos had indeed promised to fund Plaintiffs’ loans; whether Prestamos 
breached that promise; and whether Plaintiffs suffered damages. The “whereabouts” of money that 
Prestamos borrowed is irrelevant, regardless of the answers to any of those issues. 
 
Plaintiffs may argue that they need this discovery to preserve their ability to collect on a 
judgment. (Doc. 34 at 7 (alleging, baselessly, that a stay would “jeopardize Plaintiffs’ ability to 
collect on any judgment that Plaintiffs may obtain)). But except where punitive damages are 
available, “district courts across the country generally do not allow pre-judgment discovery 
                                            
2 Importantly, discovery into information related to the “whereabouts” of Prestamos’s 
finances is not the only request from Plaintiffs that Prestamos believes is objectionable. 
Nonetheless, Plaintiffs continue to invoke this information as an example of the discovery they 
purportedly need to litigate their claims; because it is wholly irrelevant and needlessly intrusive, 
Prestamos moves for a protective order against it while reserving all rights to seek relief from other 
of Plaintiffs’ discovery requests in the future. 
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regarding a defendant’s financial condition or ability to satisfy a judgment,” because “such 
discovery is not relevant to the parties’ claims or defenses and is not reasonably calculated to lead 
to the discovery of admissible evidence.” Sierrapine v. Refiner Prod. Mfg., Inc., 275 F.R.D. 604, 
609 (E.D. Cal. 2011) (collecting cases); see also DiNapoli v. Int’l All. of Theatrical Stage Emps. 
8, No. 09-cv-5924, 2011 WL 1004576, at *7 (E.D. Pa. Mar. 18, 2011) (“[I]f punitive damages are 
unavailable, the court will not allow discovery to determine whether the defendant has the means 
to satisfy a judgment because a defendant’s ability to satisfy a judgment has little to do with the 
subject matter of the litigation notwithstanding a claim for punitive damages.”). 
Punitive damages are not available here, and therefore the Court should not allow discovery 
into Prestamos’s ability to satisfy any judgment. The cases are clear that punitive damages can 
never be awarded for breach of contract or for violation of the California or Ohio consumer 
protection statutes upon which Plaintiffs rely. See DiGregorio v. Keystone Health Plan E., 840 
A.2d 361, 370 (Pa. Super. 2003) (“Appellants could not recover punitive damages for an action 
solely sounding in breach of contract.”); Clark v. Superior Court, 235 P.3d 171, 174 (Cal. 2010) 
(“Not recoverable [under California’s unfair competition statute] are damages, including punitive 
damages and increased or enhanced damages.”); Frisch's Rest., Inc. v. Elby’s Big Boy of 
Steubenville, Inc., 661 F. Supp. 971, 992 (S.D. Ohio 1987) (recognizing that the Ohio Deceptive 
Trade Practices Act does not provide for an award of punitive damages). Punitive damages are 
sometimes available under the Illinois Consumer Fraud and Deceptive Businesses Practices Act, 
Keeling v. Esurance Ins. Co., 660 F.3d 273, 275 (7th Cir. 2011). But Plaintiffs cannot state a claim 
under that statute because, as described in the Motion to Dismiss briefing, the alleged consumer 
fraud and breach of contract “rest on the same foundation” (that Prestamos did not fund the loans 
as allegedly promised), and no distinct deceptive acts are alleged. Greenberger v. GEICO Gen. 
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Ins. Co., 631 F.3d 392, 399 (7th Cir. 2011) (“When allegations of consumer fraud arise in a 
contractual setting, the plaintiff must prove that the defendant engaged in deceptive acts or 
practices distinct from any underlying breach of contract.”). 
Plaintiffs also cannot obtain this discovery based on general allegations of “the national 
import of this case.” (Doc. 34 at 6.) Congress did not create a private right of action in the CARES 
Act or the PPP amendments. See 15 U.S.C. §§ 9001–9141, 636(a)(36); Profiles, Inc. v. Bank of 
Am. Corp., 453 F. Supp. 3d 742, 748 (D. Md. 2020). Plaintiffs instead can seek discovery relevant 
to the merits of their claims. For that reason, Prestamos has offered to produce nonprivileged 
discovery that is specific to each Plaintiff and relevant to their claims. Discovery about the 
“whereabouts” of SBA proceeds are irrelevant to Plaintiffs’ claims, and its production should not 
be compelled. 
CONCLUSION 
 
For the foregoing reasons, the Court should deny Plaintiffs’ request to compel discovery 
and should instead stay all discovery pending resolution of the Motion to Dismiss. In the 
alternative, the Court should enter a protective order to protect Prestamos from having to produce 
information regarding the ultimate disposition of loan proceeds and fees. 
 
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