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In re RFC and RESCAP Liquidating Trust Actions

United States District Court, D. Minnesota

February 10, 2017

In Re RFC and RESCAP Liquidating Trust Actions

          ORDER REGARDING PHASE II RULE 30(B)(6) ISSUES

          SUSAN RICHARD NELSON, UNITED STATES DISTRICT JUDGE

         Before the Court is the Motion to Compel Phase II 30(b)(6) Deposition Testimony of Plaintiffs [Doc. No. 2115] filed by Defendant First Guaranty Mortgage Corporation (“FGMC”). In addition, similar issues concerning Phase II Rule 30(b)(6) depositions were raised in letters to the Court filed by Defendants Provident Funding Associates, L.P. (“Provident”) [Doc. Nos. 2104 & 2077], Synovus Mortgage Corp. (“Synovus”) [Doc. No. 2150], and iServe Residential Lending, LLC (“iServe”) [Doc. No. 2148]. Defendants represented by attorney Philip Stein of Bilzin Sumberg in this consolidated action, specifically, Colonial Savings, F.A. (“Colonial”), E Trade Bank (“E Trade”), Standard Pacific Mortgage, Inc. (“Standard Pacific”), and CTX Mortgage Company, LLC (“CTX”) (collectively, “the Bilzin Sumberg Defendants”), have sought related testimony.

         Lastly, before the Court is a dispute between Plaintiffs and PNC Bank, N.A. (“PNC”) that relates to PNC's Phase II Rule 30(b)(6) Deposition Notice to Plaintiffs, Topic No. 5.F. (See PNC's Ltr. of 1/24/17 [Doc. No. 2145-1]; Pls.' Ltr. of 1/24/17 at 3-5 [Doc. No. 2146].)

         I. BACKGROUND

         In this consolidated action arising out of Defendants' sale of allegedly defective mortgage loans to RFC, the Court directed that Rule 30(b)(6) depositions occur in particular phases and sequences. (See Pretrial Order No. 13 (“Deposition Protocol”) [Doc. No. 1094]; Addendum to Pretrial Order No. 13 (“Addendum”) [Doc. No. 1694].) In Phase I of the 30(b)(6) depositions, Defendants were to elicit from Plaintiffs' witnesses testimony concerning common practices and policies, applicable to all loans. (See Deposition Protocol at 1-3.) Defendants were permitted to take six days of testimony on such common policies. (Id. at 1.) In taking these depositions, Defendants could use certain exemplar loans to obtain testimony demonstrating how Plaintiffs' common practices and procedures would apply to a given loan. In Phase I of Plaintiffs' depositions of Defendants, Plaintiffs were similarly permitted to inquire about the Defendants' general practices, policies, and procedures. (Id. at 3.)

         To address Defendants' concerns that Plaintiffs might have utilized different practices and policies specific to individual defendants, the Court permitted a second phase of 30(b)(6) depositions of Plaintiffs. In Phase II, Defendants were permitted to elicit Defendant-specific testimony, to the extent that RFC's common practices and procedures, addressed in Phase I, did not apply to a particular Defendant. (See Addendum at 1-2.)

         II. DISCUSSION

         A. Phase II Rule 30(b)(6) Testimony

         In FGMC's Rule 30(b)(6) motion, it seeks to examine RFC's designee on 25 exemplar loans drawn from the 150-loan sample of FGMC's allegedly breached loans.[1](FGMC's Mem. at 6 [Doc. No. 2117].) Specifically, FGMC proposes a seven-hour deposition devoted to the factual history of the 25 exemplar loans, covering 13 topics, including the following: RFC's pre-purchase due diligence assessments; post-purchase quality control investigations and findings; decisions to slot specific loans in particular RMBS trusts; efforts to mitigate the losses on specific loans; and repurchase requests from RMBS trusts to RFC and from RFC to FGMC. (Id.; see also FGMC Ltr. of 12/23/16 [Doc. No. 2119-2].) If RFC agrees to stipulate that two of the 13 topics involving losses incurred by Plaintiffs will be addressed by Plaintiffs' experts, FGMC states that it will withdraw these two topics from the 30(b)(6) deposition. (FGMC's Mem. at 6, n.3.)

         FGMC argues that loan-level testimony on the breach loans is central and critical to its defenses in this $100 million action. (Id. at 7.) Because the exemplar breach loans are considered representative of FGMC's breach loans as a whole, FGMC contends that the factual history of these loans is essential. (Id. at 10.) Pointing to the Court's Addendum, FGMC asserts that the only limitation that the Court placed on Phase II 30(b)(6) depositions was that they not include common issue topics that would have been proper as Phase I topics. (Id. at 11-12) (citing Addendum at 1.)

         Further, FGMC contends that it expected to have the opportunity “to conduct the loan-level inquiry on exemplar loans that it has noticed, ” asserting that RFC asked loan-level questions of FGMC's 30(b)(6) designee, far beyond matters of policy and procedure. (Id. at 13-14.) In particular, FGMC asserts that Plaintiff's counsel examined FGMC's 30(b)(6) witness about underwriting decisions on specific loans, quality control measures on specific loans, and specific attributes of the exemplar loans, including: (1) whether one would ordinarily expect that a borrower in a specific loan file, listing her occupation as engineer, would have had more than 12 years of education; (2) whether, when comparing a borrower's financial information on a loan application against disparities in her bankruptcy filing, the borrower had misrepresented her income in her loan application; (3) whether properties owned by a particular borrower, but not declared on the borrower's loan application, constituted a misrepresentation; and (4) whether the presence of certain information in specific borrowers' files would have raised a red flag for FGMC's underwriter, including a borrower engineer claiming an income of over $75, 000, yet listing only a high school education and identifying outstanding consumer debt of over $12, 000, the presence of various charged-off accounts on a borrower's credit report, and instances of twelve credit inquiries per month on a particular borrower's credit report. (Kreun Decl. ¶ 14 [Doc. No. 2118].) Counsel for FGMC attests that had he understood that the Deposition Protocol, or any court order, prohibited loan-level questioning in the Phase II 30(b)(6) depositions, he would not have permitted RFC to conduct such examination of his client. (Id. ¶ 15.)

         Defendants Provident, iServe, and Synovus raise arguments similar to those asserted by FGMC. Provident argues that it is entitled to depose RFC's Rule 30(b)(6) witness about historical/actual loss amounts, due diligence, and loan-level questions. (Provident's Ltr. of 1/6/17 at 3 [Doc. No. 2104].) Provident contends that the plain language of the Deposition Protocol and Addendum expressly permits inquiry on defendant-specific issues and loan-specific issues in Phase II. (Id. at 3-4.) After obtaining the Court's guidance at the September case management conference, Provident and Plaintiffs have attempted to devise other means by which to obtain the requested information, but Provident contends that Plaintiffs have rejected its proposals. (Id. at 5-6.)

         Defendant iServe agrees with the arguments advanced by FGMC. Provident proposes to examine Plaintiff's Rule 30(b)(6) witness on the historical facts of eight at-issue loans. (iServe Ltr. of 2/14/17 [Doc. No. 2148].) Also, iServe seeks defendant-specific testimony regarding breach contentions, pre- and post-acquisition due diligence, testimony about whether RFC granted any exceptions or variances on the underwriting of six at-issue loans inconsistent with an established policy, and damages testimony concerning differences between alleged loss amounts provided to Defendants. (Id. at 2.)

         Following the December case management conference, Defendant Synovus believed that it had reached agreement with Plaintiffs on the scope of the Phase II topics. (Synovus Ltr. of 1/24/17 at 2 [Doc. No. 2150].) Among other things, Synovus understood that Plaintiffs would provide a written summary of the testimony that it agreed to provide, along with certain stipulations. (Id.) Shortly before the January case management conference, however, Synovus contends that Plaintiffs reneged on their earlier agreement, pointing to unfruitful Phase II 30(b)(6) depositions taken by Defendants represented by Bilzin Sumberg. (Id.) Synovus notes that the parties did not have time to meet and confer prior to the January case management conference. (Id. at 3.) If, however, the parties are directed to engage in further meet and confer efforts, Synovus indicates that it may require a short extension of the current schedule, which requires the completion of Phase II 30(b)(6) ...


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