KESANIA POWELL v. NELNET INC (2025)

SHOW-CAUSE ORDER

Kesania Powell sued Nelnet and Experian for violations of the Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq. The parties settled their disputes. Dkts. 28, 34, 100, 104. The only remaining matter for the court to resolve is whether, in what amount, and against whom to impose sanctions.

Nelnet moved for sanctions, Dkt. 95, but, after settling the underlying dispute, moved to withdraw that motion, Dkt. 105. It noted that withdrawal of its sanctions motion was not part of any settlement agreement, that it “stands by all assertions made within” the motion, and that it “objects to the striking of” the motion from the record. Id. at 2. Nelnet explained that it sought to withdraw its sanctions motion “to comply with the Court's February 4, 2025 Order.” Id.

The court, however, did not order Nelnet to withdraw its motion. The February 4 order required only that, if Nelnet “no longer intends to pursue sanctions,” it withdraw the motion within 30 days. Dkt. 101.

Although the motion to withdraw the sanctions motion was unopposed, Powell filed a response to it, stating that she agrees to withdrawal of the motion but “denies and objects to Defendant Nelnet's allegations of any wrongdoing by Plaintiff's Counsel.” Dkt. 106 at 1. She also attempted to include in that response a request for relief—namely, that the court strike Nelnet's sanctions motion. Id. at 1–2. In reply, Nelnet pointed out that Powell's response, which asks for court action, does not comply with the court's local rules for motion practice. Dkt. 107; see Loc. R. CV-7(a), (h)–(i) (requiring motions to be filed separately from responses and with certificates of conference confirming compliance with the “meet and confer” requirement); see also Dkt. 95-12 at 15 (transcript of October 18, 2024, hearing in which the court reminded the parties of their obligation to meet and confer). Powell filed a short sur-reply noting that Nelnet did not provide a copy of its withdrawal motion to Powell before filing it. Dkt. 108. In light of that procedural history, Nelnet's motion to withdraw its sanctions motion will remain pending until further order of the court.

Both the sanctions motion, Dkt. 95, and Nelnet's earlier report on spoliation, Dkt. 88, assert that Powell repeatedly refused to provide requested discovery responses even after the court ordered her to do so, see Dkt. 43 (discovery order). As Nelnet pursued responses to its requests, it learned that Powell and her therapist, Dr. Thomas Jones, worked together to alter Dr. Jones's records of her therapy sessions in a way that supported Powell's claim for emotional damages. Dkt. 95 at 8–9; see Dkt. 79 (joint report on spoliation). Those alterations resulted in the destruction of the original records. Dkts. 95 at 10, 79 at 1–2. Powell's current attorney, Heather Hersh, suggested that Powell altered the records at the instruction of her former attorney, which the court understands to be Ivonne Saldana. Dkt. 95-12 at 27 (transcript of October 18, 2024, hearing, which misidentifies Hersh as Sabrina Neff, Nelnet's attorney). That concession by Hersh appears to be at odds with Powell's recent filing, Dkt. 106, which denies any wrongdoing by Powell's counsel and is signed by Hersh, see Fed. R. Civ. P. 11(a), (b). And Nelnet, after deposing Dr. Jones, Powell, and Saldana, learned that Saldana found out that the records had been altered during a phone conversation Saldana had with Powell (which Dr. Jones overheard), and Saldana produced them to Nelnet anyway. Dkt. 95 at 11. Nelnet's motion also suggests that Powell's attorneys submitted discovery responses that contained the false statement that Powell was unable to qualify for a mortgage due to Nelnet's erroneous credit reporting and that Powell's attorneys signed the inaccurate discovery responses on her behalf without her knowledge. Id. at 13; see Fed. R. Civ. P. 26(g).

The court is authorized to impose sanctions pursuant to both the Federal Rules of Civil Procedure and its inherent powers. Chambers v. NASCO, Inc., 501 U.S. 32, 50 (1991). That authority extends beyond the resolution of the dispute between the parties. Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 395–96 (1990). The court's authority to sanction an attorney also extends past the termination of the attorney–client relationship. St. Amant v. Bernard, 859 F.2d 379, 384 (5th Cir. 1988) (noting that an attorney's motion to withdraw could not insulate him from consequences for sanctionable conduct that occurred during the representation); see also Holgate v. Baldwin, 425 F.3d 671, 677 (9th Cir. 2005) (explaining that “[t]he fact that [an attorney] was allowed to withdraw as counsel due to a conflict of interest does not protect him from [Rule 11] sanctions based on a filing that he made before that withdrawal”).

Powell and her current and former attorneys will be required to show cause why they should not be sanctioned for the conduct identified in the joint report on spoliation of evidence, Dkt. 79, Nelnet's report regarding spoliation, Dkt. 88, Nelnet's motion for sanctions, Dkt. 95, and this order. Specifically, they should be prepared to discuss:

1) Powell's delays in complying with the court's discovery order, Dkt. 43;

2) Powell's alteration of Dr. Jones's records;

3) Saldana's knowledge of the alterations to Dr. Jones's records and her production of the altered records to Nelnet;

4) the destruction of Dr. Jones's original records; and

5) the type and amount of sanctions that should be imposed under any applicable rule or the court's inherent power.

It is ORDERED that Powell, Hersh, Saldana, and a representative of Jaffer & Associates appear at a hearing to SHOW CAUSE why they should not be sanctioned. The hearing is set for 2:00 p.m. on April 15, 2025, at the United States Courthouse, 7940 Preston Road, Courtroom 108, in Plano, Texas. Any person ordered to appear may also submit a written brief on the question of sanctions no longer than 2,000 words no later than seven days before the hearing.

Nelnet is ADVISED that it may, but is not required to, appear at the hearing to present its position on any sanctions that the court may impose. If it intends to appear, Nelnet should file a notice with the court no later than seven days before the hearing identifying who will appear on its behalf and what evidence, if any, beyond the evidence attached to its previous filings, Dkts. 88, 95, it intends to offer.

So ORDERED and SIGNED this 5th day of March, 2025.

Bill Davis United States Magistrate Judge