Ishee v. Federal National Mortgage Association et al

Filing 355

ORDER granting in part and denying in part Defendants' 191 Motion to Strike Untimely Designation; and granting in part and denying in part Defendants' [208, 311, 332] Motion to Exclude the Expert Testimony of Bernard Jay Patterson. Signed by District Judge Keith Starrett on January 15, 2015 (dsl)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
EASTERN DIVISION
PORTIA B. ISHEE

PLAINTIFF

V.

CIVIL ACTION NO. 2:13-CV-234-KS-MTP

FEDERAL NATIONAL MORTGAGE
ASSOCIATION, et al.

DEFENDANTS

MEMORANDUM OPINION AND ORDER
For the reasons stated below, the Court grants in part and denies in part
Defendants’ Motion to Strike Untimely Designation [191] and grants in part and
denies in part Defendants’ Motion to Exclude [208, 311, 332] the testimony of
Bernard Jay Patterson.
I. DEFENDANTS’ MOTION TO STRIKE UNTIMELY DESIGNATION [191]
First, Defendants argue that the Court should strike the “Supplemental and
Amended Expert Witness Report” [191-3] provided by Plaintiff’s expert, Bernard
Jay Patterson. Defendants contend that the report is not a supplement to
Patterson’s initial report [191-1], but that it contains entirely new opinions in an
area of expertise for which Patterson was not designated.

A.

Applicable Law
Rule 26 provides that “a party must disclose to the other party the identity of

any witness it may use at trial to present” expert testimony. FED. R. CIV. P.
26(a)(2)(A). “Unless otherwise stipulated or ordered by the court, this disclosure
must be accompanied by a written report – prepared and signed by the witness – if
the witness is one retained or specially employed to provide expert testimony in the

case . . . .” FED. R. CIV. P. 26(a)(2)(B). Among other things, the report must contain
“a complete statement of all opinions the witness will express and the basis and
reasons for them,” “the facts or data considered by the witness in forming them,”
and “any exhibits that will be used to summarize or support them . . . .” FED. R. CIV.
P. 26(a)(2)(B)(i)-(iii). In summary, a proponent of expert testimony must provide “a
detailed and complete written report, stating the testimony the witness is expected
to present during direct examination, together with the reasons therefor.” FED. R.
CIV. P. 26 advisory committee’s note. The “purpose of the reports is to avoid the
disclosure of sketchy and vague expert information . . . .” Sierra Club, Lone Star

Chapter v. Cedar Point Oil Co., 73 F.3d 546, 571 (5th Cir. 1996).
“A party must make these disclosures at the times and in the sequence that
the court orders,” FED. R. CIV. P. 26(a)(2)(D), and “[t]he parties must supplement
these disclosures when required under Rule 26(e).” FED. R. CIV. P. 26(a)(2)(E). “[A]
party is required to supplement its expert disclosures if the court so orders or if ‘the
party learns in some material respect the information disclosed is incomplete or
incorrect and if the additional or corrective information has not otherwise been
made known to the other parties during the discovery process or in writing.’” Sierra

Club, 73 F.3d at 570 n. 42 (quoting FED. R. CIV. P. 26(e)(1)). “[T]he party’s duty to
supplement extends both to information included in the report and to information
given during the expert’s deposition. Any additions or changes to this information

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must be disclosed by the time the party’s pretrial disclosures under Rule 26(a)(3)
are due.” Fed. R. Civ. P. 26(e)(2). Rule 26(a)(3) provides that pretrial disclosures
must be made at least thirty days before trial, “unless the court sets a different time
. . . .” Local Rule 26 provides that a “party is under a duty to supplement disclosures
at appropriate intervals under Fed. R. Civ. P. 26(e) and in no event later than the
discovery deadline established by the case management order.” L.U.Civ.R. 26(a)(5).
In summary, Plaintiff’s expert designations were due on or before May 15,
2014 [47], and any supplements were due on or before August 1, 2014 – the
discovery deadline – unless they were otherwise made known to Defendants during
discovery. FED. R. CIV. P. 26(e)(1)-(2); L.U.Civ.R. 26(a)(5). Plaintiff served the
disputed report on August 1, 2014. Therefore, if it is a supplement, it was timely.
But if it contains entirely new opinions or addresses subject matter outside the
scope of Plaintiff’s designation and Patterson’s initial report, it is not a supplement.
Rather, it is an untimely designation. See Harmon v. Ga. Gulf Lake Charles LLC,
476 F. App’x 31, 36 (5th Cir. 2012); Garza v. Allstate Tex. Lloyd’s Co., 284 F. App’x
110, 112 (5th Cir. 2008); Elliot v. Amadas Indus., 796 F. Supp. 2d 796, 802 (S.D.
Miss. 2011); Cooper Tire & Rubber Co. v. Farese, 3:02-CV-210-SA-JAD, 2008 U.S.
Dist. LEXIS 96729, at *10-*11 (N.D. Miss. Nov. 26, 2008).

B.

Supplement or Untimely Designation?
Plaintiff designated [208-3] Patterson as a “Certified Fraud Examiner

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specializing in . . . examination and forensic and investigative accounting involving
the servicing transactions of mortgage loans . . . .” Plaintiff represented that
Patterson would provide a forensic analysis of the servicing on her loan, and that he
would provide an opinion that Defendants improperly “refused to apply the
insurance proceeds to the balance owed on the home,” and that “[p]roper accounting
oversight and guides should have been in place to monitor the activities of the loan
servicer and to prevent such misconduct.”
In his initial report [191-1], Patterson stated that he was asked to “[p]rovide
a forensic accounting investigation, examination, and analysis of the mortgage loan
transactions during the life of the subject mortgage loan and . . . offer [his] findings
and conclusions.” He examined the transaction history data related to Plaintiff’s
loan and summarized the relevant transactions and events. He asserted that GMAC
could have pursued options other than foreclosure once it received the payoff
amount from Alfa Insurance that was short by $93.60. According to Patterson, if the
funds had been properly applied, the loan would have been brought current and/or
paid to zero, avoiding foreclosure and litigation.
In his supplemental report, Patterson represented that Plaintiff’s counsel
asked him to amend the original report in several ways. First, he amended his
original analysis of the application of the Alfa Insurance payment to account for
transaction records received from GMAC after the initial report had been prepared.

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Next, he provided a substantial analysis regarding Fannie Mae’s servicing guides –
explaining them, interpreting them, and applying them to Defendants’ actions.
Patterson also provided opinions and analysis regarding force-placed insurance,
Defendants’ fiduciary duties, and several alternative damage calculations.
In the Court’s opinion, most of the supplemental report [191-3] constitutes
entirely new opinions which exceed the scope of Patterson’s designation [208-3] and
initial report [191-1]. Broadly construing the designation and initial report,
Patterson was retained to provide an explanation of the loan servicing transaction
history, an analysis of the application of the Alfa Insurance funds, and an opinion
as to whether the funds were properly applied. The portion of the supplemental
report which revises the initial analysis to account for the detailed transaction
history obtained from GMAC is a proper supplement. However, the portions which
1) address and apply Fannie Mae’s servicing guides, 2) provide opinions and
analysis

regarding

force-placed

insurance,

3)

provide

opinions

regarding

Defendants’ alleged fiduciary duties, and 4) provide damage calculations, exceed the
scope of the designation and initial report. Therefore, they are untimely
designations. Harmon, 476 F. App’x at 36; Garza, 284 F. App’x at 112; Elliot, 796 F.
Supp. 2d at 802.

C.

Exclusion of Untimely Designation
“If a party fails to provide information or identify a witness as required by

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Rule 26(a) or (e), the party is not allowed to use that information or witness to
supply evidence on a motion, at a hearing, or at a trial, unless the failure was
substantially justified or is harmless.” Fed. R. Civ. P. 37(c)(1). When applying Rule
37 and considering sanctions for discovery violations, the Court considers the
following factors: “(1) the explanation for the failure to identify the witness; (2) the
importance of the testimony; (3) potential prejudice in allowing the testimony; and
(4) the availability of a continuance to cure such prejudice.” Hamburger v. State

Farm Mut. Auto. Ins. Co., 361 F.3d 875, 883 (5th Cir. 2004) (citing Geiserman v.
MacDonald, 893 F.2d 787, 790 (5th Cir. 1990)). The Court “should impose only that
sanction which is the least severe way to effect compliance with the court’s
discovery orders,” United States v. Garza, 448 F.3d 294, 300 (5th Cir. 2006), and it
has “broad discretion” in formulating such sanctions. Barrett v. Atlantic Richfield

Co., 95 F.3d 375, 380 (5th Cir. 1996).
As for the first factor, Plaintiff claims that the supplemental report was
based on discovery materials which were not received until after the initial report
had been prepared. Even if that is true, it fails to explain why the supplemental
report exceeds the scope of the designation and the subject matter of the initial
report. Receipt of new discovery materials can justify revising an analysis from the
initial report or providing new details not previously known, but it can not justify
exploring an entirely new field of inquiry for which the expert was never

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designated. Furthermore, the servicing guides were available to Patterson at the
time of the initial report, and he cited them among the documents he relied upon in
preparing it. Finally, the conspicuous timing of Plaintiff’s “supplementation” – on
the final day of discovery when Defendants would not have the opportunity to
question Patterson regarding the new opinions – belies Plaintiff’s argument that
the delay was legitimate. The Court concludes that the first factor weighs in favor of
exclusion.
With respect to the second factor, the Court will assume for the purpose of
the present motion that the new opinions are of moderate importance. However,
according to Plaintiff’s theory of the case, the servicing guides constitute contracts
between Fannie Mae and its servicers of which she is a third-party beneficiary.
Therefore – under Plaintiff’s theory of the case – Patterson’s extensive
interpretation

and

application

of

the

servicing

guides

would

constitute

impermissible legal conclusions. See Snap-Drape, Inc. v. Comm’r, 98 F.3d 194, 198
(5th Cir. 1996); Russ v. Safeco Ins. Co. of Am., 2:11-CV-KS-MTP, 2013 U.S. Dist.
LEXIS 42333, at *54-*55 (S.D. Miss. Mar. 26, 2013).
Furthermore, Patterson’s damage calculations arise from a presumption that
Plaintiff was owed full payment of policy limits under multiple insurance policies
for the same loss. Patterson represented that Plaintiff’s counsel instructed him to
“determine the amount of funds that would have been due to the borrower if both

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the force-placed insurance policy and the Alfa insurance policy would have been
paid to GMAC,” but Patterson did not provide an opinion that Plaintiff was due
payment on every policy. Regardless, such testimony would constitute an
impermissible legal conclusion. See Russ, 2013 U.S. Dist. LEXIS 42333 at *54-*55;

Willis v. Allstate Ins. Co., 2:13-CV-60-KS-MTP, 2014 U.S. Dist. LEXIS 136139, at
*5-*6 (S.D. Miss. Sept. 26, 2014) (citing several cases for the principle that
interpretation of an insurance policy is a question of law for the court). For all of
these reasons, the Court concludes that the second factor – the importance of the
testimony – is neutral, at best.
The third factor – the potential prejudice in allowing the testimony – weighs
in favor of exclusion. Defendants have not had the opportunity to depose Patterson
concerning the new opinions and subject matter contained within the supplemental
report, and they would be prejudiced if the Court allowed the testimony. The fourth
factor likewise weighs in favor of exclusion, as there is insufficient time before the
pretrial conference to reconvene Patterson’s deposition, and the Court declines to
grant another continuance of the pretrial conference or trial setting.
Three of the four factors weigh in favor of exclusion. Accordingly, the Court
grants in part and denies in part Defendants’ Motion to Strike [191] the
supplemental report of Plaintiff’s expert, Jay Bernard Patterson. The Court denies
the motion with respect to the portions of the supplemental report which revise the

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initial analysis to account for the detailed transaction history obtained from GMAC.
Those portions of the supplemental report were within the scope of the designation
and initial report, and they were timely disclosed by the discovery date. FED. R. CIV.
P. 26(e)(1)-(2); L.U.Civ.R. 26(a)(5).
The Court grants the motion as to the remainder of the supplemental report,
including the portions which 1) address and apply Fannie Mae’s servicing guides, 2)
provide opinions and analyses regarding force-placed insurance, 3) provide opinions
regarding Defendants’ alleged fiduciary duties, and 4) provide damage calculations.
Those portions of the supplemental report constitute an untimely designation,
addressing subject matter outside the scope of the designation and initial report.
Applying the Hamburger factors, discussed above, the Court finds that they should
be excluded, and Plaintiff may not rely on them “on a motion, at a hearing, or at a
trial . . . .” FED. R. CIV. P. 37(c)(1).
II. DEFENDANTS’ MOTION TO EXCLUDE OPINION TESTIMONY [208, 311, 332]
Defendants also filed a Motion to Exclude [208, 311, 332] the testimony of
Plaintiff’s expert, Bernard Jay Patterson, on several alternative bases. For the
reasons provided below, the Court grants the motion in part and denies it in part.

A.

Qualification
First, Defendants argue that Patterson is not qualified to provide expert

testimony. Defendant specifically argues that Patterson is not qualified to provide

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expert testimony regarding force-placed insurance, the purported damage
calculations provided in Patterson’s supplemental report, or Defendants’ servicing
methods or practices. Many aspects of Defendants’ motion are rendered moot by the
Court’s ruling on their Motion to Strike [191]. The only qualification issue
remaining is whether Patterson is qualified to provide the expert testimony for
which he was originally designated and which he provided in his initial report.
Plaintiff designated [208-3] Patterson as a “Certified Fraud Examiner
specializing in . . . examination and forensic and investigative accounting involving
the servicing transactions of mortgage loans . . . ,” and represented that Patterson
would provide a forensic analysis of the servicing on her loan. In his initial report
[191-1], Patterson stated that he was asked to “[p]rovide a forensic accounting
investigation, examination, and analysis of the mortgage loan transactions during
the life of the subject mortgage loan and . . . offer [his] findings and conclusions.” He
examined the loan’s transaction history, summarized the relevant events, and
concluded that the Alfa Insurance proceeds were improperly applied.
An expert may be qualified “by knowledge, skill, experience, training, or
education . . . .” FED. R. EVID. 702. “A district court should refuse to allow an expert
witness to testify if it finds that the witness is not qualified to testify in a particular
field or on a given subject.” Huss v. Gayden, 571 F.3d 442, 452 (5th Cir. 2009). A
proposed expert does not have to be “highly qualified in order to testify about a

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given issue. Differences in expertise bear chiefly on the weight to be assigned to the
testimony by the trier of fact, not its admissibility.” Id. As Rule 702 clearly provides,
an expert may be qualified by his practical work experience. Martin v. Wal-Mart

Stores, Inc., 2011 U.S. Dist. LEXIS 146577, at *3-*4 (S.D. Miss. Dec. 20, 2011)
(citing multiple cases).
The Court concurs with the opinion entered by Judge Ozerden in Neel v.

Fannie Mae, 1:12-CV-311-HSO-RHW, 2014 U.S. Dist. LEXIS 36653, at *7-*8 (S.D.
Miss. Mar. 20, 2014). Patterson has “nine years of experience working on matters
involving fraud and forensic accounting analysis, both in the context of mortgage
servicing.” Id. at *7. To obtain his certification as a fraud examiner, he passed
multiple examinations and submitted to peer review. Id. He has “led seminars on
topics regarding mortgage servicing systems and how those systems can be used in
the context of bankruptcy and/or foreclosure.” Id. He is qualified to offer expert
testimony within the scope of his designation, initial report, and those portions of
the supplemental report not excluded above. The Court denies Defendants’ Motion
to Exclude [208, 311, 332] with respect to Patterson’s qualifications.

B.

Contract Interpretation
Defendants argue that Patterson may not provide an opinion that

Defendants violated the “waterfall” provision of the Deed of Trust. Again, the Court
concurs with the opinion entered by Judge Ozerden in Neel, 2014 U.S. Dist. LEXIS

11

36653 at *9-*10.
Proposed expert testimony which offers a legal opinion is inadmissible,

Estate of Sowell v. United States, 198 F.3d 169, 171 (5th Cir. 1999), because it does
not “help the trier of fact to understand the evidence or determine a fact in issue . . .
.” FED. R. EVID. 702(a). “An opinion is not objectionable just because it embraces the
ultimate issue” in the case, FED. R. EVID. 704(a), but expert witnesses are not
permitted “to tell the jury what result to reach” or “to give legal conclusions.” Owen

v. Kerr-McGee Corp., 698 F.2d 236, 240 (5th Cir. 1983); see also Askanase v. Fatjo,
130 F.3d 657, 673 (5th Cir. 1997) (district court properly excluded expert testimony
that party breached its fiduciary duties); Hobbs v. Legg Mason Inv. Counsel &

Trust Co., N.A., 3:09-CV-SA-DAS, 2011 U.S. Dist. LEXIS 7168, at *10-*12 (N.D.
Miss. Jan. 25, 2011). The “interpretation of a contract is a question of law for the
court.” Amica Mut. Ins. Co. v. Moak, 55 F.3d 1093, 1096 n. 5 (5th Cir. 1995); see

also Cunningham & Co. v. Consolidated Realty Mgmt., Inc., 803 F.2d 840, 843 (5th
Cir. 1986) (contract interpretation is a question of law for the court, not the jury);

Russ, 2013 U.S. Dist. LEXIS 42333 at *54-*55; Ergon-West Va., Inc. v. Dynergy
Mktg. & Trade, 3:06-CV-714-DPJ-LRA, 2011 U.S. Dist. LEXIS 25064, at *14 (S.D.
Miss. Feb. 25, 2011).
Patterson’s opinion that Defendants failed to comply with the “waterfall”
provision of the deed of trust is essentially an opinion that Defendants “breached

12

the contract at issue in this case.” Neel, 2014 U.S. Dist. LEXIS 36653 at *9. As
demonstrated by the authorities cited above, such testimony is inadmissible.
Plaintiff argues that Patterson’s conclusions regarding the “waterfall” provision are
admissible under Rule 704, which permits an expert opinion which “embraces an
ultimate issue.” Fed. R. Evid. 704(a). However, Rule 704 was not “intended to allow
a witness to give legal conclusions.” Owen, 698 F.2d at 240; see also United States

v. Pettigrew, 77 F.3d 1500, 1515-16 (5th Cir. 1996).
Plaintiff argues that Patterson’s opinion regarding the interpretation and
application of the deed of trust is admissible because the “contract language is
ambiguous or involves a specialized term of art, science or trade,” citing Suzlon

Wind Energy Corp. v. Shippers Stevedoring Co., 662 F. Supp. 2d 623, 668-69 (S.D.
Tex. 2009). The Court disagrees. The Court examined the deed of trust, and the
provisions regarding the application of payments are not ambiguous or difficult to
understand. Therefore, Patterson may not testify as to Defendant’s duties under the
deed of trust.
He may, however, testify regarding “technical and specialized” aspects of the
mortgage industry that will “assist the trier of fact in understanding the issues and
related evidence,” including relevant industry standards applicable to the servicing
of mortgage loans. Willis v. Allstate, 2:13-CV-60-KS-MTP, 2014 U.S. Dist. LEXIS
136139, at *6-*7 (S.D. Miss. Sept. 26, 2014); Russ, 2013 U.S. Dist. LEXIS 42333 at

13

*61-*62. He may not “draw conclusions from those standards” as to Defendants’
alleged breach of contract. Jones v. Reynolds, 2:06-CV-57-SA, 2008 U.S. Dist.
LEXIS 40120, at *31 (N.D. Miss. May 16, 2008).
For these reasons, the Court grants Defendants’ Motion to Exclude [208, 311,
332] with respect to Patterson’s opinion regarding interpretation and application of
the “waterfall” provision of the deed of trust.

C.

Servicing Guides
Next, Defendants seek the exclusion of Patterson’s opinions regarding Fannie

Mae’s servicing guides, including his opinion that GMAC and/or Green Tree
violated those guidelines. This issue is moot, as the Court already excluded
Patterson’s testimony addressing and applying Fannie Mae’s servicing guides, as
those opinions were not timely designated and exceed the scope of Patterson’s
designation and initial report. Therefore, this aspect of Defendants’ Motion to
Exclude [208, 311, 332] is denied as moot.

D.

Summary of Transaction History
Finally, Defendant seek the exclusion of Patterson’s summaries of payment

and transaction histories, arguing that the subject matter does not require
scientific, technical, or other specialized knowledge, and will not assist the jury. The
Court disagrees, as the transaction records may be difficult for an average juror to
understand. In fact the Court believes it safe to assume that an average juror may

14

have difficulty understanding how their own mortgage payments are applied.
Understanding banking records can sometimes require more than “the ability to
read,” as Defendant urges. Patterson’s explanation of the sequence of events may,
at the very least, help the jury to understand what occurred. The Court denies this
aspect of Defendants’ Motion to Exclude [208, 311, 332].
III. CONCLUSION
For the reasons stated above, the Court grants in part and denies in part
Defendants’ Motion to Strike Untimely Designation [191] and grants in part and
denies in part Defendants’ Motion to Exclude [208, 311, 332] the testimony of
Bernard Jay Patterson.
The Court denies Defendants’ Motion to Strike [191] the supplemental report
of Plaintiff’s expert with respect to the portions of the supplemental report which
revise the initial analysis to account for the detailed transaction history obtained
from GMAC. The Court grants the motion as to the remainder of the supplemental
report, including the portions which 1) address and apply Fannie Mae’s servicing
guides, 2) provide opinions and analysis regarding force-placed insurance, 3)
provide opinions regarding Defendants’ alleged fiduciary duties, and 4) provide
damage calculations.
As for Defendants’ Motion to Exclude [208, 311, 332] the expert testimony of
Bernard Jay Patterson, the Court denies the motion as it concerns Patterson’s

15

qualifications, grants it with respect to any testimony providing contract
interpretation or application, denies it as moot with respect to testimony about
Fannie Mae’s servicing guides, and denies it as to Patterson’s summary/explanation
of the loan transaction record.
SO ORDERED AND ADJUDGED this 15th day of January, 2015.
s/Keith Starrett
UNITED STATES DISTRICT JUDGE

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