In Re: RFC and RESCAP Liquidating Trust Litigation

Filing 2662

ORDER granting in part and denying in part #2447 Motion to Compel Discovery of Servicing Records filed by Defendant Provident Funding and joined by Defendant First Guaranty Mortgage Corporation (Written Opinion). Signed by Judge Susan Richard Nelson on 06/21/17. (MJC)

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA

In Re: RFC and RESCAP Liquidating
Trust Actions

Civil File No. 13-3451 (SRN/HB)

ORDER

Order Regarding the Motion to Compel Discovery of Servicing Records Filed by
Defendant Provident Funding and Joined by Defendant First Guaranty Mortgage
Corporation
________________________________________________________________________
SUSAN RICHARD NELSON, United States District Judge
Before the Court is the Motion to Compel Discovery of Servicing Records filed by
Defendant Provident Funding (“Provident”) [Doc. No. 2447] and joined by Defendant
First Guaranty Mortgage Corporation (“First Guaranty”) [Doc. No. 2468]. For the reasons
set forth below, Defendants’ motion is granted in part and denied in part.
I.

DISCUSSION
Defendants bring the instant motion to compel Plaintiffs Residential Funding

Company, LLC and the ResCap Liquidating Trust (collectively, “RFC” or “Plaintiffs”) to
produce servicing records that Provident and First Guaranty identified in their respective
loan-by-loan “gap analyses.” Provident indicates that “servicing documents” include
“payment histories, comment logs, and other hard-copy servicing-related documents.”
(Provident’s Mem. Supp. Mot. to Compel at 1 [Doc. No. 2450].)

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A.

Homecomings’ and GMAC Mortgage’s Primary Loan Servicing

In general, the “primary servicing” of a residential mortgage loan consists of
collecting the monthly mortgage payments and corresponding with borrowers should any
payment issues arise. (Chatleain Aff. ¶ 3 [Doc. No. 2549].) Persons doing this work,
“primary servicers,” typically maintain two types of data in connection with primary
servicing: (1) payment histories, showing amounts and dates of payment, as well as
delinquency and default dates, if applicable; and (2) primary servicers’ notes, showing
evidence of contact with the borrower, such as telephone calls. (Id. ¶ 4.)
Prior to April 2007, Homecomings, RFC’s affiliate, undertook the primary
servicing for most loans in RFC’s residential mortgage backed securities (“RMBS), using
a loan servicing system called “LSAMS.” (Id. ¶ 5.) After April 2007, the primary
servicing data for loans that Homecomings was actively servicing moved to another RFC
affiliate, GMAC Mortgage, which assumed the primary servicing responsibility for
Homecomings’ loans. (Id. ¶ 6.) GMAC Mortgage used a servicing platform called
“LoanServ.” (Id.) Although LoanServ is a commercially available platform sold and
supported by FiServ, Inc. (“FiServ”), GMAC Mortgage used a customized, proprietary
version of LoanServ. (Chatleain Aff. ¶ 7; Wahl Aff. ¶ 12 [Doc. No. 1859].) FiServ is a
third-party service provider with which GMAC Mortgage contracted for the storage,
management, and maintenance of primary servicing data. (Wahl Aff. ¶ 12.) In April
2007, the primary servicing data for loans that had been serviced using the LSAMS
system, but were no longer actively serviced, was archived and remained on the LSAMS
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system. (Chatleain Decl. ¶ 8; Wahl Aff. ¶ 11.)
Prior to February 2013, GMAC Mortgage used the LoanServ platform to access
data stored at FiServ. (Wahl Aff. ¶ 13.) In addition, GMAC Mortgage stored a subset of
the data itself in Fi-Serv’s data warehouse utility called InformEnt. (Id.) The information
stored on InformEnt was designed for reporting purposes and was accessible through an
application called Business Objects. (Id. ¶ 14.) The end users of Business Objects
required extensive data knowledge and training in that application. (Id.)
B.

Sale to Ocwen Loan Servicing, LLC

In February 2013, as part of the bankruptcy proceedings involving GMAC
Mortgage and its parent company Residential Capital, LLC, Ocwen Loan Servicing, LLC
(“Ocwen”) purchased GMAC Mortgage’s loan servicing business at auction. (Chatleain
Aff. ¶¶ 13-14.) In addition to the mortgage servicing rights, Ocwen acquired all related
books and records, computer equipment, fixtures, and real property related to the GMAC
Mortgage servicing business, pursuant to the court-approved sale. (Id. ¶ 15; Wahl Aff. ¶
15.) When Ocwen acquired GMAC Mortgage’s servicing platform, it also acquired
GMAC Mortgage’s infrastructure, servers, platforms, and contracts, including the LSAMS
and LoanServ platforms and the contract with FiServ. (Wahl Aff. ¶ 16.) Consequently, all
of GMAC Mortgage’s available LSAMS data and LoanServ data–including data related to
Homecomings and GMAC Mortgage-serviced loans that were liquidated prior to February
2013–were transferred to Ocwen in February 2013. (Id.) Colette Wahl, who oversees the
Technology and Operations Group of ResCap, attests that ResCap has no reason to believe
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that any LSAMS data that was not transferred to LoanServ in April 2007 was deleted
between April 2007 and the transfer to Ocwen. (Id. ¶ 17.) Likewise, Wahl states that
ResCap has no reason to believe that any LoanServ data was deleted between April 2007
and the transfer to Ocwen in 2013, including data on loans liquidated between April 2007
and February 2013. (Id.)
Following the sale to Ocwen, ResCap requested and obtained from Ocwen a
“snapshot” of the primary servicing data stored in the InformEnt data warehouse, as it
existed at that time. (Id. ¶ 20.) Ms. Wahl and her colleague Cindy Chatleain, who is also
in ResCap’s Technology and Operations Group, state that the snapshot data is not readily
accessible. (Wahl Aff. ¶¶ 20, 22-25; Chatleain Aff. ¶¶ 19, 24.) It consists of over 650
separate Oracle data tables, with each table containing up to 577 fields, and each field
containing up to 100 million rows of data. (Id.) Further, they assert that extracting the
data for the more than 7.2 million loans in the snapshot would take more than 400 hours of
work, or about 50 days of one person’s full-time work. (Wahl Aff. ¶ 23; Chatleain Aff. ¶
21.) Even then, the information would be incomplete, they contend, and not viewable in a
format that would allow a user to review the servicing information in a single document or
spreadsheet. (Chatleain Aff. ¶ ¶ 21-22; Wahl Aff. ¶¶ 24.) Further, because the data fields
contain only codes, Ms. Wahl and Ms. Chatleain estimate that it would take several weeks
just to calculate an estimate of the work involved in linking the data so that all of the
primary servicing data for a given loan could be viewed together, and the codes linked to
the appropriate code tables. (Chatleain Aff. ¶ 22; Wahl Aff. ¶ 25.)
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C.

Discovery

The factual recitation below by no means fully documents the lengthy discovery
process concerning primary loan servicing documents, but notes some of the events
identified by the parties in their memoranda. In response to Defendants’ request for all
loan servicing records, in January 2015, Plaintiffs agreed to produce loan servicing files
for the at-issue loans in Plaintiffs’ “possession, custody or control” that Plaintiffs could
“locate through a reasonable search.” (Supalla Decl., Ex. A (RFC’s Responses to Defs.’
First Set of Interrogs. and Requests for Prod. at Request No. 2) [Doc. No. 2454].)
Defendants also subpoenaed third party Ocwen in April 2015 for loan servicing-related
documents.
In approximately June 2015, Plaintiffs began to analyze all available servicingrelated documents and data in their possession in order to determine what information was
retained after the sale of the servicing platform to GMAC Mortgage, and where it might be
stored, as well as what servicing-related information was transferred to Ocwen as part of
the sale. (Wahl Decl. ¶ 9 [Doc. No. 2548].) After doing so, Plaintiffs worked to locate
and produce such primary servicing-related documents and data. (Id. ¶ 10.)
In the course of reviewing the loan servicing-related documents produced by
Plaintiffs, Defendants noted gaps in Plaintiff’s production. In August 2015, the parties
communicated about Plaintiffs’ purported production deficiencies. (See Alden Decl. [Doc.
No. 2547], Ex. A (8/14/15 Email) (email from Plaintiffs’ counsel to Mr. Jorissen, former
representative counsel for Defendants on issues regarding the loan servicing documents,
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and others, offering to meet and confer with Defendants and Ocwen).) In October 2015,
Mr. Jorissen inquired about RFC’s availability to meet and confer with Defendants and
Ocwen and also identified the general categories of servicing-related documents that
Defendants were seeking. (Alden Decl., Ex. B (10/7/15 Email); Ex. C (10/16/15 Email).)
While the deadline for Defendants to bring a motion to compel this discovery was
set for September 30, 2016, at the August 2016 Case Management Conference, the Court
extended the deadline to November 16, 2016, stating that this was “[a] brief extension
because I’m really not feeling like this is moving forward.” (8/18/16 CMC Tr. at 28 [Doc.
No. 1744].) On September 15, 2016, the Court directed Defendants to identify any gaps in
the loan servicing data, meet and confer, and provide a status update to the Court on
September 29, 2016, (Minute Entry of 9/16/16 at 3 [Doc. No. 1800]), observing that “we
haven’t made any progress in this in so long.” (9/15/16 CMC Tr. at 32-33 [Doc. No.
1806].)
In October 2016, Plaintiffs served the Wahl Affidavit, in which Ms. Wahl provided
background concerning, among other things: (1) GMAC Mortgage’s transfer of servicing
data to Ocwen; (2) the contents of the InformEnt snapshot of primary servicing data that
Ocwen provided to ResCap; and (3) explanations for why certain servicing-related
information is unavailable from Plaintiffs. (See Wahl Decl. ¶ 19.) Much of this
information was provided in response to Defendants’ written questions. (Id.)
On November 16, 2016, Provident provided a “missing loan documents
spreadsheet,” indicating that it was missing, among other categories of information,

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complete loan servicing documentation for 878 at-issue loans out of 889 loan files.
(Supalla Decl., Ex. B (11/16/16 Email); Blake Decl., Ex. A (11/16/16 Excel spreadsheet).)
In subsequent correspondence, Provident provided a general summary of the types of
missing documents. (Supalla Decl., Ex. C (12/8/16 Letter).)
On November 29, 2016, counsel for Ocwen emailed Mr. Alden, and others, with a
quote of approximately $130,000 to process and Bates stamp the approximately 770,000
loan file records that it had located. (Alden Decl., Ex. H (11/29/16 Email.) Nearly two
months later, Defendants asked Ocwen to deliver the materials. (Alden Decl. ¶ 22.)
Also in the final quarter of 2016, Plaintiffs learned for the first time that Ocwen
stored some of its documents with a document storage vendor called Corodata. (Wahl
Decl. ¶ 16.) As Ocwen’s contract with Corodata was about to expire, Plaintiffs assumed
the contract and reviewed the Corodata-stored documents, pulling all of the files
associated with at-issue loan numbers that matched Corodata’s inventory list. (Id.) On
April 6, 2017, Mr. Alden provided to defense counsel an inventory list of Ocwen’s boxes
maintained by Corodata. (Alden Decl., Ex. D (4/6/17 Email).)
In addition, in late 2016, because most Defendants had not yet committed to a date
certain by which they would provide their lists of loan-servicing-related deficiencies in
Plaintiffs’ and Ocwen’s productions, the Court again extended the deadline and ordered
Defendants to identify any such gaps by February 15, 2017, and to bring any motion to
compel regarding the deficiencies in time to be heard at the March 2017 Case
Management Conference. (12/2/16 Order ¶ 4 [Doc. No. 2007].)

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First Guaranty served its gap analysis on Plaintiffs on March 24, 2017, identifying
missing servicing-related data for 25 at-issue loans out of approximately 1,455. (Dulis
Decl., Ex. A (3/24/17 Email), and Provident provided an updated summary gap analysis on
that date as well. (Supalla Decl., Ex. D (3/24/17 Letter).)
Anthony Alden, counsel for RFC, attests that throughout this process, he and other
members of Plaintiffs’ counsel have expended at least 750 hours assisting Defendants with
gaining access to primary servicing-related discovery. (Alden Decl. ¶ 9.) This includes
time spent in meet-and-confers with counsel for Defendants and Ocwen as well as other
entities involved in loan servicing such as Specialized Loan Servicing LLC and Equator
LLC, (“Equator”), (id. ¶¶ 2-5), and assisting with the preparation of the Chatleain and
Wahl affidavits, among other things. (Id. ¶¶ 6-7.) Plaintiffs also argue that despite
taking 48 hours of Rule 30(b)(6) testimony of RFC, and over 100 depositions of Plaintiffs’
former and current employees, Defendants failed to ask about the location of servicingrelated records. (Pls.’ Opp’n Mem. at 14 [Doc. No. 2545].) Nor did they serve any Rule
30(b)(6) deposition notices on Ocwen. (Id.)
In the Wahl Declaration, submitted in support of Plaintiffs’ opposition to the instant
motion, Ms. Wahl addresses Plaintiffs’ search for primary servicing-related documents
and data. (Wahl Decl. ¶ 8.) She notes that, among other things, Plaintiffs ran the at-issue
loan numbers over the FileNet system–a repository of loan-related documents–and pulled
documents from the combined repository of RFC, Homecomings, and GMAC Mortgage
data, spoke to multiple former employees of RFC, Homecomings, and GMAC Mortgage

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to confirm that FileNet was the imaging system used by each entity, and produced the
responsive, non-privileged documents that they had located. (Id. ¶ 11.) Ms. Wahl
estimates that Plaintiffs spent approximately 12,288 hours pulling the loan and servicingrelated documents from FileNet, which involved the “utilization of multiple business and
IT experts from ResCap, and the development of tools to support the process.” (Id.)
Further, pursuant to Defendants’ request, Plaintiffs spent approximately 450 hours
requesting, reformatting, and producing the LSAMS data that had been transferred to
Ocwen as part of the sale of GMAC Mortgage’s servicing platform. (Id. ¶ 17.) She also
notes that Plaintiffs interviewed at least 10 former RFC, Homecomings, and GMAC
Mortgage employees concerning those companies’ respective servicing-related systems,
document storage and retention policies, and where additional documents might be
located. (Id. ¶ 18.)
Referring to her previously submitted affidavit of October 17, 2016, Ms. Wahl
estimates that she and other ResCap employees spent approximately 40 hours preparing
the document, (id. ¶ 19); her colleague, Ms. Chatleain, and other ResCap employees spent
approximately 40 hours preparing the Chatleain Affidavit. (Id. ¶ 20.) Ms. Wahl also
attests that Plaintiffs spent more than 20 hours researching Equator, a third-party vendor
that appears to have been used at one point by RFC, Homecomings, and/or GMAC
Mortgage to facilitate sales of mortgaged properties, and documents held by Equator,
LLC. (Id. ¶ 21.) In conclusion, Ms. Wahl states, “ResCap is currently unaware of any
other sources within its possession that would contain non-duplicative primary servicing-

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related data or documents pertaining to the at-issue loans.” (Id. ¶ 22.)
D.

Motion to Compel

In the instant motion, Defendants argue that the servicing records in question are
relevant, “critical pieces of evidence” necessary to their defense of Plaintiffs’ claims,
discoverable under the rules, and within Plaintiffs’ control. (Provident’s Mem. Supp. Mot.
to Compel at 1, 11.) They ask this Court to order the production of the requested
materials. (Id.) Alternatively, Defendants seek “an affidavit, declaration, or Rule 30(b)(6)
deposition testimony explaining in detail why the missing servicing records cannot be
produced.” (Id. at 17.)
II.

DISCUSSION
Under Rule 26, the Federal Rules authorize discovery
regarding any nonprivileged matter that is relevant to any party’s claim or
defense and proportional to the needs of the case, considering the importance
of the issues at stake in the action, the amount in controversy, the parties’
relative access to relevant information, the parties’ resources, the importance
of the discovery in resolving the issues, and whether the burden or expense
of the proposed discovery outweighs its likely benefit.

Fed. R. Civ. P. 26(b)(1).
Rule 34 describes the general procedures and requirements for discovery requests
within the scope of Rule 26(b), requiring the responding party “to produce and permit the
requesting party . . . to inspect, copy, test, or sample” items “in the responding party’s
possession, custody, or control.” Fed. R. Civ. P. 34(a)(1).
There is no dispute that the loan-servicing documents are relevant. As to their
importance, Defendants’ pace in identifying Plaintiffs’ purportedly deficient productions,
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and their failure to obtain any Rule 30(b)(6) testimony on the subject from Plaintiffs or
Ocwen, undercuts their position that the “missing servicing records are critical pieces of
evidence[.]” (Provident’s Mem. Supp. Mot. to Compel at 1.) In any event, Defendants
argue that because Plaintiffs agreed to produce loan servicing records in their possession,
custody, or control, they are obliged to produce the missing records. (Id. at 14-15.) The
Court rejects this argument. As quoted above, Rule 26 expressly provides that, even with
requests for relevant evidence, courts are to balance the burden or expense of discovery to
the producing party against the benefit of the discovery to the requesting party. Fed. R.
Civ. P. 26(b)(1). Moreover, in Plaintiffs’ interrogatory responses, they agreed to produce
loan servicing files for the at-issue loans in their “possession, custody or control” that they
could “locate through a reasonable search.” (Supalla Decl., Ex. A (RFC’s Responses to
Defs.’ First Set of Interrogs. and Requests for Prod. at Request No. 2)) (emphasis added).
Plaintiffs have satisfied that representation. Their efforts to search for the requested loanservicing files and to assist third parties in searching for them, as detailed in the Chatleain
Affidavit, Wahl Affidavit, and Wahl Declaration, have been reasonable, if not also
herculean.
Defendants cite Damgaard v. Avera Health, No. 13-cv-2192 (RHK/JSM), 2014 WL
12599853, at *2 (D. Minn. June 9, 2014), for the proposition that “control” broadly
includes documents over which the responding party has “the legal right or practical
ability to demand.” (citing In re Application of Hallmark Capital Corp., 534 F. Supp. 2d
981, 982 (D. Minn. 2008); Triple Five of Minn., Inc. v. Simon, 212 F.R.D. 523, 527 (D.

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Minn. 2002); Prokosch v. Catalina Lighting, Inc., 193 F.R.D. 633, 636 (D. Minn. 2000)).
While Defendants acknowledge that RFC no longer has physical possession or custody of
the records, they nevertheless assert that RFC has control over the locations, documents,
and data where the missing servicing records exist, and should be ordered to retrieve them.
(Provident’s Mem. Supp. Mot. to Compel at 15.) For factual support for this proposition,
Defendants refer to Section 6.4 of the Asset Purchase Agreement between RFC and
Ocwen , which addresses records and post-closing access to information. (Id.) But
Plaintiffs correctly note that any such duty to “preserve and retain” records arose between
Plaintiffs and Ocwen–not Plaintiffs and Defendants–and arose after the February 2013
Ocwen-RFC closing date. (Pls.’ Opp’n Mem. at 4 n.1) (citing Alden Decl., Ex. X § 6.4
(Ocwen-RFC APA)).
Plaintiffs have made clear, through two affidavits and a declaration, that RFC and
Ocwen have undertaken diligent, good faith efforts to locate the requested discovery.
There is little more “control” that Plaintiffs could exert and Ocwen itself has searched for
the materials. While the loan-servicing records would be beneficial to Defendants, the
burden of complying with the request has been largely shouldered by Plaintiffs, at a
significant expenditure of time and money. Most importantly, there appears to be no
additional loan-servicing discovery that Plaintiffs could reasonably find, nor do
Defendants suggest where the missing records could be. Accordingly, Defendants’ motion
to compel Plaintiffs to produce missing loan-servicing related discovery is denied in part.
As to Defendants’ alternative request for an affidavit, declaration, or Rule 30(b)(6)

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deposition testimony explaining why the records cannot be produced, Defendants’ motion
is granted in part. Plaintiffs shall provide a sworn affidavit stating that they have
conducted a reasonable search for the requested information within their possession,
custody, or control and have produced all relevant, non-privileged documents identified in
that search.
THEREFORE, IT IS HEREBY ORDERED THAT:
1.

The Motion to Compel Discovery of Servicing Records filed by Defendant
Provident Funding [Doc. No. 2447] and joined by Defendant First Guaranty
Mortgage Corporation is GRANTED in part and DENIED in part.

Dated: June 21, 2017

s/Susan Richard Nelson
SUSAN RICHARD NELSON
United States District Judge

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