MOTIONS FOR CONSOLIDATION DENIED;

MOTIONS FOR CONSOLIDATION DENIED;

COORDINATED DISCOVERY PROCEDURES ADOPTED:

July 26, 2018

CBCA 6001, 6049

COLLECTO, INC. dba EOS CCA,

Appellant in CBCA 6001,

and

TRANSWORLD SYSTEMS INC.,

Appellant in CBCA 6049,

v.

DEPARTMENT OF EDUCATION,

Respondent.

Joseph J. Petrillo and Karen D. Powell of Petrillo & Powell, PLLC, Washington, DC,

counsel for Appellant in CBCA 6001.

Paul A. Debolt and Chelsea B. Knudson of Venable LLP, Washington, DC; and James

Y. Boland of Venable LLP, Tysons Corner, VA, counsel for Appellant in CBCA 6049.

Sara Falk, Office of the General Counsel, Department of Education, Washington, DC,

counsel for Respondent.

CBCA 6001, 6049

2

Before Board Judges BEARDSLEY and LESTER.

LESTER, Board Judge.

ORDER

On June 13, 2018, respondent, the Department of Education (ED), filed motions

seeking to consolidate the appeal docketed as Transworld Systems Inc. v. Department of

Education, CBCA 6049, with the appeal docketed as Collecto, Inc. d/b/a EOS CCA v.

Department of Education, CBCA 6001.1 ED asserts that the task orders underlying both

appeals are essentially the same and that the issues to be decided in the two appeals are the

same. In considering ED’s motion, the Board judges assigned to preside over the two

appeals have consulted, have reviewed the briefing on consolidation that was filed in both

appeals, and have reviewed relevant documents from the Rule 4 appeal file in each of the two

appeals. For the reasons set forth below, the Board denies the current motions to consolidate,

without prejudice to their renewal at a later date, but agrees that coordination of the

appellants’ discovery is warranted.

Background

Effective July 1, 2009, ED’s Federal Student Aid Office (FSA) issued essentially

identical task orders to several private collection agencies (PCAs), including Collecto, Inc.

(Collecto), and the predecessor-in-interest to the appellant in this case, Transworld Systems

Inc. (TSI),2 through contract no. GS-23F-0240K under the General Services Administration’s

Financial and Business Solutions Schedule. Compare Transworld Exhibit 1 with Collecto

Exhibit 1.3 The task orders were for PCA debt collection and administrative resolution

services associated with defaulted educational loans. Pursuant to the terms of those orders,

ED transferred numerous defaulted student loan accounts to TSI and Collecto for collection

and related activities. The terms of TSI’s and Collecto’s task orders regarding payment by

1

ED filed parallel motions in the Collecto and Transworld appeals on the same day.

2

The task order at issue in the Transworld appeal was originally awarded to NCO

Financial Services, Inc. (NCO). Effective November 1, 2014, ED recognized TSI as the

successor-in-interest to NCO and novated NCO’s task order accordingly.

3

All exhibits referenced in this decision as “Transworld Exhibit __” are found in

the appeal file for the Transworld appeal, docketed as CBCA 6049, and all exhibits

referenced as “Collecto Exhibit __” are found in the appeal file for Collecto, CBCA 6001.

CBCA 6001, 6049

3

ED of fixed commissions or fees for various types of default resolution activities, with the

precise amounts set forth in the task orders, were identical.

ED alleges that, when the various PCAs began performance under their task orders

and for some time thereafter, ED generated data on commissions and fees payable to each

PCA and sent that data on a monthly basis to TSI, Collecto, and the other contracted PCAs.

According to ED, each PCA would review ED’s data and, based upon that data, prepare and

submit an invoice for payment.

In September 2011, ED alleges, ED implemented for its debt collection work a new

data processing platform known as the Debt Management Collections System (DMCS). ED

further alleges that, because of problems implementing the new system, the invoicing

procedures that it had previously put in place for the task orders that were being performed

were disrupted. ED contends that, because of its problems with the DMCS transition, it was

unable to generate the invoice data for a period of time and had to instruct TSI, Collecto, and

the other PCAs to submit invoices using data generated from their own systems. This new

invoicing process, ED alleges, remained in place until August 31, 2013, when ED was able

to renew its prior process of generating data upon which PCAs would base their invoices.

ED contends that, beginning in late 2013, it began working with the PCAs on an

invoice reconciliation process to ensure that amounts billed during the disruption period were

accurate and that any overpayments or underpayments that had occurred were corrected. At

the conclusion of that process, ED presented TSI and Collecto with proposed task order

modifications identifying invoice reconciliation procedures that were “effective for

performance occurring from September 16, 2011, through August 31, 2013,” the period

during which ED contends its DMCS system had experienced problems. Transworld Exhibit

5 at 1; Collecto Exhibit 6 at 1. Nevertheless, the modifications contained language regarding

accounting and payment for work performed during the first half of September 2011 – prior

to ED’s switch to DMCS – when FSA was still using a financial management tool called

Legacy:

Payments received in September, 2011 after Legacy shutdown (9/15/11).

Payments received during this period would normally have an effective date

(“date entered”) in September, 2011. DMCS assigned them an effective date

in October, 2011. For compensation purposes, FSA will use the systemassigned effective date and actual posting date.

Transworld Exhibit 5 at 4; Collecto Exhibit 6 at 4.

CBCA 6001, 6049

4

In an attachment to each proposed modification, ED listed the amounts that each PCA

should have been paid for each collection action taken during the period covered by the

modification, including, next to the title “Sep-11 Legal Invoice” in each of TSI’s and

Collecto’s proposed modifications, amounts relating to those two contractors’ early

September 2011 work. Transworld Exhibit 5 at 18; Collecto Exhibit 5 at 17. The

modifications then identified the total amounts that TSI and Collecto were due for all of their

work during the entire disruption period (inclusive of the work covered by each “Sep-11

Legal Invoice”) and the amounts that ED had already paid TSI and Collecto in response to

their “PCA-Created Invoices.” Comparing the previously paid figures to those to which ED

had found TSI and Collecto entitled for the period of time covered by the modifications, the

attachments to the modifications indicated that ED had underpaid both TSI and Collecto for

the disruption period and that both TSI and Collecto were entitled to payment of additional

monies. Transworld Exhibit 5 at 18; Collecto Exhibit 5 at 17.

On April 23 and 24, 2014, TSI and Collecto, respectively, executed the proposed

modifications that the ED contracting officer had signed. Both TSI and Collecto submitted

invoices for the amounts that the modifications indicated were due and owing to them, and

ED paid those invoices.

ED alleges that it subsequently discovered that, in listing the “PCA-Created Invoices”

in the proposed modifications, ED failed to account for previous payments from ED to TSI

and Collecto. ED contends that, prior to sending the proposed modifications to TSI and

Collecto, ED had worked with those task order holders to identify the amounts paid through

prior PCA-created invoices and that the figures for those amounts came from TSI and

Collecto. ED asserts that, had TSI and Collecto provided ED with the proper amounts of

PCA-created invoices (inclusive of the “Sep-11 Legacy Invoice”), the invoice reconciliation

process would have reflected that both TSI and Collecto had previously been overpaid, rather

than underpaid, for the period covered by that process. ED contends that both TSI and

Collecto knew, or should have known, of the errors in the modifications, yet never alerted

ED to the errors prior to modification execution.

On March 6, 2017, the ED contracting officer sent letters to both TSI and Collecto

demanding repayment of the amounts that ED asserts TSI and Collecto have been overpaid.

According to ED, both TSI and Collecto denied that any overpayment occurred. On

December 22, 2017, the ED contracting officer issued final decisions to both TSI and

Collecto, finding ED entitled to recovery of the previously identified amounts from TSI and

Collecto and notifying TSI and Collecto of their appeal rights under the Contract Disputes

Act (CDA), 41 U.S.C. §§ 7101-7109 (2012).

CBCA 6001, 6049

5

Collecto appealed its contracting officer’s decision to the Board on January 19, 2018,

represented by attorneys associated with Petrillo & Powell, P.L.L.C. The Clerk of the Board

docketed that appeal as CBCA 6001, and it was assigned to Judge Erica S. Beardsley. TSI

subsequently filed its own appeal on February 26, 2018, represented by different attorneys

at a different firm, Venable LLP, and the appeal, docketed as CBCA 6049, was assigned to

Judge Harold D. Lester, Jr. TSI’s appeal notice did not mention Collecto’s appeal.

On February 27, 2018, the day after TSI’s appeal was docketed, ED filed notices of

related case in the Collecto appeal and in the Transworld appeal, indicating that the two cases

“may have common issues of law or fact,” but reserving for a future date a decision on

whether to seek consolidation. Subsequently, on June 13, 2018, ED filed motions seeking

to consolidate the two appeals. Both TSI and Collecto have filed oppositions to those

motions, but neither appellant opposes the Board’s coordination of their depositions of the

Government’s witnesses.

To date, the parties in both the Collecto and Transworld appeals have submitted

appeal files and supplemental appeal files in accordance with Board Rule 4, and the

complaint and answer have been filed in both appeals. At the parties’ request, discovery

commenced in the Collecto appeal on June 29, 2018, and in the Transworld appeal on July 2,

2018. Under the current scheduling order in Collecto, discovery is scheduled to close in the

Collecto appeal on September 14, 2018 (with each party allowed to take no more than five

depositions), but, by motion dated July 25, 2018, the parties in Collecto have requested an

enlargement of the discovery period to November 16, 2018. In Transworld, discovery is

currently scheduled to conclude on October 31, 2018 (without any current restriction on the

number of depositions to be taken). Motions to dismiss and for summary relief are due in

Collecto no later than September 28, 2018, but, by motion dated July 25, 2018, the parties

in Collecto requested an enlargement of that deadline to December 12, 2018. The Board has

not yet imposed a deadline for such motions in the Transworld appeal, although TSI has

requested a deadline of November 30, 2018.

Discussion

“Under Rule 2(d) of the Board’s Rules, we may order consolidation (or make any

other orders concerning proceedings as needed to avoid unnecessary costs or delays) when

two or more cases involve ‘common issues of law or fact.’” Harris IT Services Corp. v.

Department of Veterans Affairs, CBCA 5814, et al., 17-1 BCA ¶ 36,901, at 179,800 (quoting

48 CFR 6101.2(d) (2016)). In considering a request to consolidate two or more appeals, the

Board must first determine whether there are, in fact, “common issues of law or fact” that

bind the appeals. Id. If the Board finds that such common issues exist, “[t]he

appropriateness of consolidating claims [then] depends on whether the interest of judicial

CBCA 6001, 6049

6

economy outweighs the potential for delay, confusion, and prejudice that may result from

consolidation.” Karuk Tribe of California v. United States, 27 Fed. Cl. 429, 433 (1993).

In evaluating a consolidation request, we apply the same considerations that underlie

Rule 42 of the Federal Rules of Civil Procedure, which governs actions in federal courts.

Harris IT Services, 17-1 BCA at 179,800. Like federal courts, the Board “has broad

discretion to determine whether consolidation is appropriate.” Cienega Gardens v. United

States, 62 Fed. Cl. 28, 32 (2004). “In the exercise of discretion, courts have taken the view

that considerations of judicial economy favor consolidation,” but that “the discretion to

consolidate is not unfettered.” Johnson v. Celotex Corp., 899 F.2d 1281, 1285 (2d Cir.

1990). “Considerations of convenience and economy must yield to a paramount concern for

a fair and impartial trial.” Id. “One of the primary objectives of consolidation is to prevent

separate actions from producing conflicting results, which can occur when both cases require

judicial determinations of the same facts.” Karuk Tribe of California, 27 Fed. Cl. at 433.

Nevertheless, consolidation may also be appropriate when it “would create litigation

efficiencies.” Harris IT Services, 17-1 BCA at 179,801. Those efficiencies relate not only

to “the avoidance of extra costs and delay to the parties,” but also “the avoidance of waste

of adjudicative resources.” Algernon Blair, Inc., GSBCA 5920, et al., 82-2 BCA ¶ 15,859,

at 78,626. “[T]hat latter consideration” – avoiding a waste of adjudicative resources – “can

take precedence over the desires of one or more of the parties.” Id.

In making its discretionary determination regarding consolidation, the tribunal should

attempt realistically to assess, based upon the information before it, the relative overall

benefits and disadvantages of consolidation, considering the factors identified below, and to

weigh them against each other:

[W]hether the specific risks of prejudice and possible confusion [are]

overborne by the risk of inconsistent adjudications of common factual and

legal issues, the burden on parties, witnesses and available judicial resources

posed by multiple lawsuits, the length of time required to conclude multiple

suits as against a single one, and the relative expense to all concerned of the

single-trial, multiple-trial alternatives.

Hendrix v. Raybestos-Manhattan, Inc., 776 F.2d 1492, 1495 (11th Cir. 1985) (quoting Arnold

v. Eastern Air Lines, Inc., 681 F.2d 186, 193 (4th Cir. 1982)). “The outer limit of a tribunal’s

discretion to consolidate actions in whole or in part is the potential of prejudice to the rights

of one or more of the parties whose actions have been consolidated.” Algernon Blair, 82-2

BCA at 78,626. “Consolidation can be ordered despite opposition by the parties.” Cienega

Gardens, 62 Fed. Cl. at 32; see Entergy Nuclear Indian Point 2, LLC v. United States,

CBCA 6001, 6049

7

62 Fed. Cl. 798, 802 (2004) (“The court should take the positions of the parties into account

in its analysis but need not accord the parties’ views dispositive weight.”).

There are, without doubt, several factors that support consolidation of the two appeals

at issue here: the fact that the contracts in both appeals are essentially the same, that the

contract modifications that created the current disputes in both appeals contain identical

language (but for listed dollar amounts), that the legal theories that ED is pursuing and that

the Board will have to decide are the same, and that TSI and Collecto likely will seek at least

some duplicative discovery. Those types of factors have supported tribunals’ decisions in

other circumstances to grant motions to consolidate cases. See, e.g., Cienega Gardens, 62

Fed. Cl. at 33 (consolidating cases filed by two different plaintiffs where cases all involved

contracts with the same terms and conditions, even though the properties at issue were

located in different states); Powerine Oil Co., EBCA 278, et al., 87-1 BCA ¶ 19,631, at

99,375 (discussing how the appeals of nine different appellants were consolidated because

their oil sale contracts and arguments for recovery were virtually the same); Truong Giang,

ASBCA 15278, et al., 71-2 BCA ¶ 9149, at 42,414 (discussing how ten appeals involving

different appellants, but with identical or substantially similar contract clauses, were

consolidated for decision).

Although TSI and Collecto argue, in opposing consolidation, that there will likely be

differences in the evidence necessary to establish the quantum that ED asserts each of them

owes, consolidation “does not require identical factual scenarios, only common issues of

fact.” Munjak v. Signator Investors, Inc., No. 02-2108-CM, et al., 2003 WL 23506989, at

*2 (D. Kan. Dec. 10, 2003). To the extent that (as appellants argue) ED might seek

production of proprietary accounting records, which each appellant might want to keep from

the other, appellants correctly assert that this concern can weigh against consolidation. See

Jackson v. Ford Consumer Finance Co., 181 F.R.D. 537, 540 (N.D. Ga. 1998) (denying

consolidation in part because defendants “are competitors and the consolidation of these

matters for pre-trial purposes raises additional concerns about the possible inappropriate

disclosure of defendants’ confidential commercial information”). Appellants’ assertion about

the discovery that ED might seek, however, is speculative at this point, and, in any event,

“concerns regarding [appellants’] confidential and proprietary information can,” at least in

most cases, “be addressed through the entry of an appropriate protective order.” Smithkline

Beecham Corp. v. Geneva Pharmaceuticals, Inc., No. 99-CV-2926, 2001 WL 1249694, at

*6 (E.D. Penn. Sept. 26, 2001).4

4

To the extent that TSI and Collecto argue against consolidation because they are

separate entities and that forcing them to combine their appeals will complicate their

litigation strategies, that complaint does not preclude consolidation. Although, in

CBCA 6001, 6049

8

Nevertheless, we do not believe that consolidation is necessary, at least at this point

in time, to allow for the efficient development and presentation of these two appeals. It does

not appear that the matters before the Board fall within the definition of what we would

generally consider “complex litigation,” which, even if “not capable of precise definition,”

generally tends to involve “multiple related cases, extensive pretrial activity, extended trial

times, difficult or novel issues, [or] postjudgment judicial supervision.” First State

Insurance Co. v. Superior Court of Los Angeles County, 94 Cal. Rptr. 2d 104, 109 (Ct. App.

2000). At the present time, there are only two, rather than multiple, appellants, and ED has

not indicated that there are likely to be any more related appeals filed with the Board. It

appears from the submissions to date that the parties envision only minimal written discovery

and depositions, even though the appellants apparently will seek to depose at least some of

the same individuals, and it appears quite possible that the issues in play may be subject to

resolution through dispositive motions rather than a hearing on the merits.

Were there a multitude of PCAs with identical task orders challenging the same type

of ED refund demand, it is possible that consolidation would be warranted as a way to allow

for efficient case development, to reduce the need for multiple judges to decide the same

issues, and to preclude inconsistent resolutions. With only two appellants, though, in appeals

in which only minimal discovery is anticipated, we believe that the Board, through the

consultation of the two presiding judges, can easily coordinate the development of the

appeals through discovery and briefing without the need to combine or consolidate them, at

least given their current posture. See Christopher Village, LP v. United States, 50 Fed. Cl.

635, 645 n.10 (2001) (“The court has, on other occasions, worked with parties to coordinate

discovery or briefing on related issues found in separate cases, where the cases share

common legal issues but the individual claims for damages are predicated on very different

factual questions.”). Both TSI and Collecto have represented that they do not oppose

coordinating the depositions that they wish to take. The presiding judges for both the

Transworld and Collecto appeals, through this order, adopt parallel discovery schedules for

the two appeals, with discovery to be complete in both appeals by November 16, 2018; will

considering a motion to consolidate, the Board should take note of the burden that

consolidation will impose upon parties, Hendrix, 776 F.2d at 1495, tribunals have not

hesitated to consolidate cases, even though they were filed by different entities, where doing

so was necessary to protect, or would assist in protecting, the overall integrity and efficiency

of the dispute resolution process. See, e.g., Davenport v. Goodyear Dunlop Tires North

America, Ltd., No. 1:15-CV-03751-JEC, et al., 2016 WL 6216200, at *3 (D.S.C. Oct. 25,

2016); Soler v. G&U, Inc., 477 F. Supp. 102, 106 (S.D.N.Y. 1979); Wolfchild v. United

States, 72 Fed. Cl. 511, 527 (2006); Boston Edison Co. v. United States, 67 Fed. Cl. 63, 67

(2005).

CBCA 6001, 6049

9

require TSI and Collecto to coordinate any depositions of ED or third-party witnesses to

ensure that each witness need appear for deposition only once; and impose a limit on the

number of depositions that the appellants, collectively, may take absent ED’s agreement or

a further order of the Board. The Board is also adopting a parallel deadline in both appeals

for the submission of dispositive motions. If such motions are filed, the presiding judges can

coordinate their panels’ review of and decision on those motions.

If, after the conclusion of discovery, the parties decide that these appeals cannot be

resolved by dispositive motion and will require resolution through a hearing, ED may renew

its motion to consolidate or may propose other methods of case management if it believes

that separate hearings in the Transworld and Collecto appeals would require duplicative

testimony and/or create a risk of inconsistent outcomes. See In re Levaquin Products

Liability Litigation, No. 08-1943, 2009 WL 5030772, at *4 (D. Minn. Dec. 14, 2009)

(denying motion to consolidate without prejudice to its renewal at the close of discovery).

Decision

For the foregoing reasons, ED’s MOTION TO CONSOLIDATE is DENIED,

subject to renewal if ED determines that circumstances so warrant. The Board will

coordinate discovery in the Transworld and Collecto appeals as follows:

1.

Discovery will conclude in both appeals on November 16, 2018. This order

supercedes the deadlines established by prior orders in Collecto and Transworld.

2.

Because ED did not object to the commencement of written discovery prior to the

Board’s resolution of its consolidation motion and the parties in Collecto have

apparently already exchanged written discovery requests, we will not require the

appellants to coordinate their written discovery, but each party’s interrogatories in

each appeal will be limited to no more than twenty-five (not including subparts).

Answers to any written discovery request will be provided within thirty calendar days

of a party’s receipt of the request. TSI and Collecto may share ED’s responses with

one another to the extent that they wish to do so, but shall notify ED in writing of the

extent to which TSI and Collecto have exchanged ED’s responses and/or document

productions.

3.

Depositions will not commence prior to October 15, 2018 (pursuant to the request of

the parties in Collecto), and will conclude no later than November 16, 2018. ED may

take up to five depositions of witnesses in the Transworld appeal and up to five

depositions in the Collecto appeal. Because, as we understand it, the same ED

employees worked on the TSI and Collecto task orders and were involved in

CBCA 6001, 6049

10

developing ED’s claims against both TSI and Collecto, TSI and Collecto may,

collectively, take no more than five depositions of ED employees and/or third-party

witnesses. TSI and Collecto shall confer prior to October 15, 2018, and attempt to

agree upon which individuals they wish to depose. No witness will be required to sit

for a deposition in these appeals more than once. To the extent that both TSI and

Collecto will depose the same witness, they shall depose that witness on the same day,

shall question the witness ad seriatim, and shall make every effort to avoid asking

questions that duplicate those asked by the other appellant. To the extent that the

appellants cannot agree upon the five individuals whom they collectively wish to

depose, the appellants, unless ED voluntarily agrees to allow more than five

depositions, may apply to the Board (through motions filed in both Transworld and

Collecto) for additional depositions, supported by an explanation of why either or

both parties need the additional depositions.

4.

Any dispositive motions must be filed in the Transworld and Collecto appeals no later

than December 7, 2018. This order supercedes the deadline established by prior order

in Collecto.

5.

Further proceedings will be scheduled by subsequent orders. The parties’ motion to

amend the schedule in Collecto, filed July 25, 2018, is granted to the extent reflected

above and otherwise denied as moot.

Harold D. Lester, Jr.

HAROLD D. LESTER, JR.

Board Judge

Erica S. Beardsley

ERICA S. BEARDSLEY

Board Judge