Letter dated July 18, 2023 by Prestamos CDFI, LLC — Marshall v. Prestamos CDFI, LLC (Dkt. 78, E.D. Pa. No. 5:21-cv-04337)

Record facts

U.S. District Court for the Eastern District of Pennsylvania · No. 5:21-cv-04337-JMG · Doc. 78 · 2023-07-18 · Docket on CourtListener

Full text

Marcel Pratt 
Tel: 215.864.8506 
Fax: 215.864.8999 
prattm@ballardspahr.com 
 
 
 
 
July 18, 2023 
 
By Electronic Filing 
Judge John M. Gallagher 
United States District Court for the  
Eastern District of Pennsylvania 
Edward N. Cahn Courthouse & Federal Bldg. 
504 W. Hamilton Street, Suite 4701 
Allentown, Pennsylvania 18101 
Re: 
Marshall, et al. v. Prestamos CDFI, LLC, No. 5:21-cv-04337-JMG (E.D. Pa.) 
Dear Judge Gallagher: 
We write on behalf of Defendant Prestamos CDFI LLC (“Prestamos”) in response to 
Plaintiffs’ July 14, 2023 discovery dispute letter (ECF No. 76) and pursuant to the Court’s 
July 17, 2023 Notice of Telephonic Discovery Conference, setting Prestamos’s deadline to 
respond. This dispute arose because Plaintiffs seek the production of regulatory reports—
SBA Form 1502s and PPPLF Pledge and Advance Request forms (“PARs”)—that Prestamos 
submitted to the Small Business Administration (“SBA”) and the Federal Reserve Bank, 
respectively, after Plaintiffs executed their Notes. Notably, Plaintiffs’ focus is not on the 
contents of these reports; they have not identified any field of data that is relevant to their 
claims. Rather, they contend that the submission of these reports is somehow relevant to 
their claims, even though the reports are not referenced in any contracts between the parties 
and the reports likely contain information for over 400,000 nationwide borrowers who are 
not members of their putative class. 
The reports are irrelevant to Plaintiffs’ breach of contract claim. Under basic principles of 
contract law, subsequent dealings with third parties can have no bearing on the objective 
terms of the contract as between the parties. In addition, the collection, review, and 
production of these reports covering over 400,000 borrowers—not just the 7,900 loans at 
issue in this litigation—would impose substantial burdens on Prestamos separate from and in 
addition to its obligation to preserve such records. Because Prestamos’s post-hoc reports to 
the SBA and the Federal Reserve are neither relevant to Plaintiffs’ breach of contract claim 
nor proportional to the needs of the case, the records are beyond the scope of discovery and 
not subject to production. See Fed. R. Civ. P. 26(b)(1). 
 
 
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Background 
The central issue in this case is whether Prestamos breached an obligation to fund 
Plaintiffs’ Paycheck Protection Program (“PPP”) loans and not, as Plaintiffs’ letter suggests, 
whether Prestamos collected a loan processing fee or what Prestamos reported to the SBA 
and the Federal Reserve concerning Prestamos’s loans. Plaintiffs’ claims relate solely to 
contracts between Plaintiffs and Prestamos – there are no third-party or indemnity claims at 
issue here. Whether Prestamos promised to lend Plaintiffs money, whether Prestamos 
breached that promise, and whether Plaintiffs were damaged thereby is each an element on 
which Prestamos’s after-the-fact reports to the SBA and the Federal Reserve would have no 
bearing. 
The SBA Form 1502 is “completed monthly by Lenders participating in the SBA’s 
7(a) loan program.” See SBA Form 1502 and Instructions (available at 
https://www.sba.gov/document/sba-form-1502-sba-form-1502-instructions) (last visited July 
18, 2023). A Form 1502 report can contain thousands of entries. Form 1502 reports are 
submitted to the SBA only after underlying notes are executed – as evidenced by the 
information sought. For instance, the Form 1502 reports require lenders to provide the 10 
digit numerical SBA-assigned loan identification number, as well as information about each 
borrower’s next payment installment due date, the total amount disbursed on the loan during 
the reporting month, and the interest rate on the loan. Consistent with these requirements, to 
the extent Prestamos prepared and submitted Form 1502 reports to the SBA that contained 
information on Plaintiffs’ loans, the Forms were prepared and submitted only after Plaintiffs’ 
underlying Notes were executed. Plaintiffs do not dispute that Prestamos’s Form 1502 
reports were submitted to the SBA only after Plaintiffs’ underlying Notes were executed. See 
Plaintiffs’ Letter at 2 (“The Form 1502 Report is a form which PPP lenders are obligated to 
submit to the SBA, on a loan-by-loan basis, initially within 10 days after a loan was funded) 
(emphasis added). The Form 1502s that Prestamos sent to SBA contain entries for all of 
Prestamos’ over 400,000 borrowers, not just Plaintiffs. 
As for the PARs, during the relevant time period, Prestamos submitted the PARs on 
practically a daily basis to the Federal Reserve to obtain advances from the PPP Liquidity 
Facility (the “PPPLF”) to fund its PPP loans. PARs can also contain thousands of entries. 
Like the Form 1502 reports, to the extent Prestamos prepared and submitted PARs in 
connection with Plaintiffs, they were prepared and submitted only after Plaintiffs’ 
underlying Notes were executed—a point Plaintiffs do not dispute. See Plaintiffs’ Letter at 3 
(“A PPPLF loan advance would only be provided by the Federal Reserve after the SBA 
approved the loan and the loan documents were executed”) (emphasis added). Like the 
1502s, the PARs contain information relating to all of Prestamos’s borrowers, not just the 
borrowers in the putative class. 
 
 
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Argument 
A threshold element of an enforceable contract is “mutual assent by the parties to be 
bound.” Ryan v. Temple Univ., 535 F. Supp. 3d 356, 364 (E.D. Pa. 2021) (Gallagher, J.). “In 
ascertaining the existence of mutual assent, the relevant inquiry is what a reasonable person 
would understand the intent of parties to be given their objective manifestations.” Id. at 364–
65. To ascertain the parties’ intent when the writing itself is unclear, “the court considers the 
parties’ outward and objective manifestations of assent, as opposed to their undisclosed and 
subjective intentions.” Landan v. Wal-Mart Real Est. Bus. Tr., No. 2:12-cv-926, 2015 WL 
1491257, at *10 (W.D. Pa. Mar. 31, 2015) (quoting Stamerro v. Stamerro, 889 A.2d 1251, 
1258 (Pa. Super. Ct. 2005)). 
 
The upshot is that courts engage in an objective analysis of the parties’ words and 
conduct to each other; subjective understandings held by one party but never disclosed to 
the other do not inform the objective question of contractual intent. See Azer Sci. Inc. v. 
Quidel Corp., No. 5:21-cv-02972-JMG, 2023 WL 289696, at *5 (E.D. Pa. Jan. 18, 2023) 
(Gallagher, J.) (“[T]he subjective intent of the Parties is not material to the formation of a 
contract.”); Sethness-Greenleaf, Inc. v. Green River Corp., 65 F.3d 64, 67 (7th Cir. 1995) 
(“Contractual obligations are created and defined by objective signals the parties exchange. 
Private expectations are of no consequence . . . .”) (internal citations omitted). It follows that 
one party’s manifestations or expressions of intent to non-parties and undisclosed to a 
counterpart on the contract are irrelevant in a breach of contract suit.  
 
Consistent with these elementary principles of contract law, various courts have 
found third-party dealings irrelevant and undiscoverable as to the contractual intent of the 
parties. See, e.g., Mid-Am. Salt, LLC v. Bob & Dave’s Lawn & Landscape Maint., Inc., No. 
1:16-cv-285-HAB, 2020 WL 1181769, at *3 (N.D. Ind. Mar. 12, 2020) (noting that a court’s 
obligation “to review all circumstances in determining the intent of the parties . . . refers to 
the circumstances surrounding the negotiations of the parties, not dealings with third 
parties”) (emphasis in original); Neill Corp. v. John Paul Mitchell Sys., No. CIV. A. 92-
2157, 1995 WL 217480, at *6 (E.D. La. Apr. 12, 1995) (“Discovery requests relating to 
contracts between an opponent and others in connection with allegations which did not 
involve the party that sought the discovery is not relevant to a litigation involving claims for 
breach of contract.”) (internal quotation marks and citations omitted); Freeman v. Witco 
Corp., No. CIV. A. 97-1448, 1999 WL 389892, at *1 (E.D. La. June 11, 1999) (denying 
motion to compel seeking “documents related to contract negotiations between [party 
litigant] and its other clients” to show habitual conduct of said litigant was irrelevant to 
dispute concerning contractual dispute between parties to the lawsuit); World Wrestling Fed. 
Entm’t, Inc. v. William Morris Agency, Inc., 204 F.R.D. 263, 265 (S.D.N.Y. 2001) 
(“Ordinarily, what is relevant in a breach of contract claim is the transaction between the 
parties to the contract. Ordinarily, contractual agreements between one of the contracting 
parties and third parties is irrelevant.”); Herman v. Seaworld Parks & Ent., Inc., No. 8:14-
cv-3028-T-35JSS, 2016 WL 3746421, at *2 (M.D. Fla. July 13, 2016) (observing that while 
the scope of discovery is broad, the civil rules “do not permit the parties to go on a fishing 
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expedition,” (alteration omitted) and, relying on cases refusing to compel production of non-
party contracts, holding that such non-party contracts not referenced in or a part of any claim 
or defense were irrelevant and that their production would be disproportional to the needs of 
the case); BNSF Ry. Co. v. Panhandle N. R.R. LLC, No. 4:16-cv-01061-O, 2018 WL 
4076487, at *2 (N.D. Tex. Jan. 11, 2018) (holding that “third-party agreements and 
communications should not generally be discoverable” in breach of contract action, and that 
requests for such information “are highly likely to be irrelevant and overbroad”). 
 
Here, too, whatever Prestamos might have told the SBA or the Federal Reserve 
regarding Plaintiffs’ loans would shed no light as to what Prestamos and the Plaintiffs 
objectively manifested to each other, whether by the terms of the Note or their course of 
conduct as between themselves. Unsurprisingly, the Notes do not reference the Form 1502s 
or the PARs because neither report relates to any contractual matter between Prestamos and 
Plaintiffs. Because the Form 1502 reports and PARs are irrelevant to Plaintiffs’ breach of 
contract claim, their production is beyond the scope of discovery under Rule 26(b)(1) of the 
Federal Rules of Civil Procedure. 
 
Not only are the 1502 reports and the PARs irrelevant to the breach of contract issues 
in this case, they would require significant burden to produce. For example, the PARs—
massive spreadsheets containing reams of data—were submitted to the Federal Reserve by 
Prestamos on a daily basis by email during the relevant time period. If the Court determines 
that the PARs are relevant to the breach of contract issues in this case, Prestamos would need 
to pull them one-by-one through running individual searches on emails for specific loan 
numbers. In other words, if Prestamos were required to find the PARs covering the 7,900 
putative class members, this would requiring running 7,900 individual, manual searches—an 
exceedingly arduous process. For the 1502s, during the relevant time-period, Prestamos 
submitted them via email to the SBA up until a certain point in 2021, and then began 
uploading them via the SBA’s E-TRAN system. Similarly, finding the 1502s encompassing 
each of the 7,900 relevant loans would require individual, manual searches by loan number 
across the emailed and uploaded spreadsheets. Moreover, because both reports contain data 
on all of Prestamos’s loans on a particular day, the reports will likely contain information for 
more than 400,000 additional borrowers who are not in the putative class.   
 
Lastly, Plaintiffs’ attempt to paint this dispute as one that has been ongoing since 
November 2021 is wrong. It was not until May 5, 2023 (after an April 26, 2023 meet and 
confer discussion between the parties) that the parties agreed Plaintiffs would designate a 
subset of five of their discovery requests as high priority (the “Priority Requests”) and 
Prestamos would respond to those requests promptly without prejudice to Plaintiffs’ 
remaining requests. Consistent with the parties’ agreement, Prestamos responded to the 
Priority Requests on May 26, 2023 and began producing responsive documents and 
information shortly thereafter. Of the Priority Requests, Prestamos objected and refused to 
produce responsive documents only to Priority Request No. 3, which sought the 1502s and 
PARs. Prestamos objected to Priority Request No. 3 as irrelevant and disproportionate to the 
needs of the case but agreed to meet and confer on the issue. Plaintiffs were unable to 
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establish the relevance of the requested documents and information during the parties’ 
telephonic meet and confer on June 5, 2023. Prestamos encouraged Plaintiffs to set forth the 
purported justification for Priority Request No. 3 in writing, which they did via email on 
June 13, 2023. Plaintiffs’ June 13, 2023 email failed to explain how documents that 
Prestamos submitted to the SBA and the Federal Reserve after Plaintiffs executed their notes 
had any bearing on Plaintiffs’ breach of contract claim against Prestamos. Prestamos 
responded to Plaintiffs in writing on June 20, 2023, expounding upon its relevance and 
proportionality objections. Plaintiffs then waited nearly a month to file their discovery letter, 
on Friday, July 14, 2023. 
 
Accordingly, Prestamos respectfully requests that the Court sustain its objections to 
Plaintiffs’ Priority Request No. 3. 
Respectfully submitted, 
 
Marcel Pratt 
 
 
cc: 
All counsel of record (via CM/ECF) 
 
 
 
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