Neff et al v. Flagstar Bank, FSB

Filing 40

OPINION AND ORDER granting in part and denying in part 35 Motion to Compel. Signed by Magistrate Judge Norah McCann King on 10/30/2013. (pes1)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
TIM L. NEFF, et al.,
Plaintiffs,
vs.

Civil Action 2:11-cv-1136
Judge Sargus
Magistrate Judge King

FLAGSTAR BANK, FSB,
Defendant.
OPINION AND ORDER
This matter is before the Court for consideration of the Motion
of Plaintiffs Tim and Bobbie Neff to Compel Discovery (“Motion to
Compel”), Doc. No. 35, defendant’s Memorandum in Opposition to Motion
to Compel Discovery (“Defendant’s Response”), Doc. No. 37, and
Plaintiffs’ Reply, Doc. No. 39.

For the reasons that follow,

plaintiffs’ Motion to Compel is GRANTED in part and DENIED in part.
I.

Background
The Court has previously set forth the background of this case:
On September 30, 2008, the plaintiffs, Tim L. and Bobbie K.
Neff, executed a note in favor of the defendant Flagstar
Bank, FSB (“Flagstar”), payment of which was secured by a
mortgage to Mortgage Electronic Registration System, Inc.
(“MERS”) as nominee for Flagstar, against real property
located at 174 Salem Avenue in Fredericktown, Ohio
(“Property”). Because of financial difficulties, the Neffs
contacted Flagstar in September 2009 about modifying their
loan, and Flagstar requested that the Neffs complete and
submit certain documents toward that end.
The Neffs
completed and submitted the documents.
In October 2009,
Mr. Neff was injured during the course of his employment.
Flagstar requested that the Neffs send additional paperwork
related to a potential loan modification, and they
complied.

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On February 15, 2010, Flagstar sent the Neffs a letter
offering them a “reinstatement arrangement” and indicated
that they would be reviewed for a loan modification after
they made four payments of $1,116.92.
(Compl. ¶ 28, Ex.
A.)
The letter provides that the Neffs' “account will be
allowed to remain delinquent” so long as they make each
required payment on or before March 1, April 1, May 1, and
June 1, 2010.
(Compl., Ex. A at 1.)
After each payment
was made, the Neffs were to submit additional documents so
that Flagstar could determine “alternatives to cure the
delinquency.” Id.
The Neffs signed the letter on February 19, 2010 and sent
in the first payment contemplated by it.
In a telephone
conversation in April 2010, “Flagstar told Mr. Neff to make
the remaining payments according to the [letter], and
[Flagstar]
would
offer
a
loan
modification
after
determining affordability.” (Compl. ¶ 33.)
The Neffs made the May payment. On May 11, 2010, Flagstar
sent the Neffs a letter informing them that they were in
default on their loan.
The Neffs submitted their June 2010 payment and, in another
telephone conversation that month, Flagstar represented to
Mr. Neff that it would provide a loan modification
agreement.
On August 31, 2010, Flagstar “sent the Neffs a letter
requesting
more
documents,
which
they
next
promptly
sent.” Id. ¶¶ 44–45. “[O]n September 14, 2010, [Flagstar]
sent the Neffs another letter indicating that they were
still in default.” Id. ¶ 46. Mr. Neff contacted Flagstar,
which again requested documents.
Mr. Neff supplied the
requested documents.
In November 2010, Mr. Neff called Flagstar, which again
informed Mr. Neff that he needed to continue to submit
paperwork, and that Flagstar was reviewing his file for a
modification.
On December 16, 2010, a law firm, on behalf of Flagstar,
sent a letter to the Neffs indicating that . . . their loan
was in default and that they owed Flagstar $151,351.10. In
January 2011, Mr. Neff called Flagstar to ask about the
status of the contemplated loan modification.
Flagstar
indicated that it was working on the modification.
On January
foreclosure

21, 2011, Flagstar filed a complaint for
in the Knox County, Ohio, Court of Common

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Pleas, Case Number 11FR01–0042 (“Foreclosure Action”).
On February 22, 2011, Flagstar sent the Neffs a letter
requesting
more
documents.
Specifically,
Flagstar
requested that the Neffs send a financial form and their
last two paystubs.
Mr. Neff submitted the requested
documents.
There was no contact between the parties until May 2011
when Mr. Neff telephoned Flagstar. At that time, Flagstar
informed him that it needed to continue to update his file
with more financial paperwork.
Mr. Neff provided the
requested paperwork.
The Neffs aver that, “[g]enuinely believing that [Flagstar]
was completing a loan modification for the[m], the Neffs
did not answer the state foreclosure action.”
Id. ¶ 65.
In July 2011, default judgment was entered against the
Neffs in the Foreclosure Action.
In August 2011, Mr. Neff called Flagstar to ask about the
loan modification.
Flagstar requested that Mr. Neff send
more paperwork and stated that it was working on a new
agreement for the Neffs.
In September 2011, Flagstar called the Neffs and “asked Mr.
Neff to send more paperwork and [indicated] that if the
property is foreclosed on, although a default judgment had
already
been
entered,
that
Mr.
Neff
should
call
[Flagstar].”
Id. ¶
73.
“The
Neffs
understood
‘foreclosure’ to mean the scheduled sale of the property,
not realizing the implications of Flagstar having already
secured a default judgment against them.” Id. ¶ 74.
Mr.
Neff asked Flagstar whether the Neffs should retain counsel
to help resolve . . . their situation with Flagstar.
Flagstar told Mr. Neff not to obtain counsel, that it could
do the same thing an attorney could do, and that counsel
was not necessary.
On September 14, 2011, the Court of Common Pleas in Knox
County ordered a sheriff's sale of the Neffs' home.
In
October 2011, Mr. Neff received a notice of the foreclosure
sale through the newspaper, which indicated that their home
would be sold on December 9, 2011.
Mr. Neff called
Flagstar, and was told that he needed to send more
financial documents to complete the loan modification,
which he did.
On November 16, 2011, the Neffs retained counsel.
On
November 23, 2011, counsel for the Neffs filed in the Knox

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County Court of Common Pleas a motion for relief from
judgment and a motion to stay the sheriff's sale.
On
December 6, 2011, Flagstar opposed those motions.
On
December 11, 2012, the state court entered on its docket an
“express[ ] confirm[ation]” that it overruled the Neffs'
motion for relief from judgment and stay of sheriffs sale.
On December 20, 2011, the Neffs filed the instant action.
The Neffs bring federal and state claims, alleging that
this Court possesses federal question jurisdiction over its
federal claim, and supplemental and diversity jurisdiction
over its state law claims.
On February 17, 2012, Flagstar moved to dismiss this action
pursuant to Federal Rule of Civil Procedure 12(b)(6) (Doc.
No. 3), which this Court granted (Doc. No. 17). The Neffs
appealed that decision, and the Sixth Circuit reversed and
remanded.
Neff v. Flagstar Bank, FSB, No. 2:11-cv-1136, 2013 WL 3872115, at *1-2
(S.D. Ohio July 25, 2013).

On remand, this Court dismissed

plaintiffs’ claim for violation of the Fair Debt Collections Practices
Act, 15 U.S.C. § 1692, et seq., and permitted plaintiffs’ state law
claims for fraudulent misrepresentation and promissory estoppel to
proceed.

See Opinion and Order, Doc. No. 28.

This matter is now

before the Court for consideration of plaintiffs’ Motion to Compel.
II.

Standard
Rule 37 of the Federal Rules of Civil Procedure authorizes a

motion to compel discovery when a party fails to provide proper
response to requests for production of documents under Rule 34.
R. Civ. Pro. 37(a)(3)(B).

Fed.

“The proponent of a motion to compel

discovery bears the initial burden of proving that the information
sought is relevant.”

Martin v. Select Portfolio Serving Holding

Corp., No. 1:05–cv–273, 2006 U.S. Dist. LEXIS 68779, at *2 (S.D. Ohio

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Sept. 25, 2006) (citing Alexander v. Fed. Bureau of Investigation, 186
F.R.D. 154, 159 (D.D.C. 1999)).
Rule 26(b) provides that “[p]arties may obtain discovery
regarding any nonprivileged matter that is relevant to any party’s
claim or defense.”

Fed. R. Civ. P. 26(b)(1).

purposes is extremely broad.
F.3d 389, 402 (6th Cir. 1998).

Relevance for discovery

Lewis v. ACB Bus. Servs., Inc., 135
“The scope of examination permitted

under Rule 26(b) is broader than that permitted at trial.

The test is

whether the line of interrogation is reasonably calculated to lead to
the discovery of admissible evidence.”

Mellon v. Cooper-Jarrett,

Inc., 424 F.2d 499, 500-01 (6th Cir. 1970).

However, “district courts

have discretion to limit the scope of discovery where the information
sought is overly broad or would prove unduly burdensome to produce.”
Surles ex rel. Johnson v. Greyhound Lines, Inc., 474 F.3d 288, 305
(6th Cir. 2007) (citing Fed. R. Civ. P. 26(b)(2)).

See also Lewis,

135 F.3d at 402 (determining the proper scope of discovery falls
within the broad discretion of the trial court).

In determining the

proper scope of discovery, a district court balances a party’s “right
to discovery with the need to prevent ‘fishing expeditions.’”

Conti

v. Am. Axle & Mfg. Inc., 326 F. App’x 900, 907 (6th Cir. 2009)
(quoting Bush v. Dictaphone Corp., 161 F.3d 363, 367 (6th Cir. 1998)).
Finally, the party moving to compel discovery must certify that
it “has in good faith conferred or attempted to confer with the person
or party failing to make disclosure or discovery in an effort to

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obtain it without court action.”

Fed. R. Civ. P. 37(a)(1).

See also

S.D. Ohio Civ. R. 37.2.
III. Discussion
This discovery dispute arises out of defendant’s alleged
deficient responses to two interrogatories and four requests for
production of documents.

Specifically, plaintiffs argue that

defendant failed to adequately respond to Interrogatories 9 and 13 and
failed to make any response to Document Requests 44, 50, 51, 52, and
53.

Motion to Compel, p. 3.

Interrogatory 9 provides: “State what

actions You took to set up a face-to-face meeting with Plaintiffs
prior to initiating the State Foreclosure Action, including the dates
said actions were taken.”

Interrogatories 9, 13, attached to Motion

to Compel as Exhibit A, p. 2.

Interrogatory 13 provides:

“Please provide a detailed explanation of Defendant’s
decision to foreclose on the Home rather than modify the
terms of Plainitffs’ Loan, including:
a) Identifying Fully the person or persons who made the
decision to foreclose on the Home rather than modify the
terms of Plaintiffs’ Loan;
. . .
b) The date Defendant decide [sic] it was going
foreclose on the Home rather than modify the terms
Plaintiffs’ Loan; and

to
of

. . .
c) The reasoning behind Defendant’s decision to foreclose
on the Home rather than modify the terms of Plaintiffs’
loan.
Id. at pp. 3-4.

Document Request 44 seeks: “A complete copy of the

Investor Loss Mitigation and Loan Modification Guidelines related to

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this Loan.”

Requests for Production of Documents 44, 50-53, attached

to Motion to Compel as Exhibit B, p. 2.

Finally, Document Requests

50-53 seek:
50. A copy of all written loss-mitigation rules and workout procedures related to any defaults regarding this Loan
and similar loans.
51.
Copies of any agreements You have signed with any
member or members of the United States Congress with
respect to the implementation of Loss Mitigation Rules and
Policies for any type of mortgage product.
52.
All Documents that support Your compliance with all
conditions
precedent
before
initiating
the
State
Foreclosure Action, including but not limited to:
a.
All Documents mailed to
Covenant 7 of the Mortgage;

Plaintiff

that

comply

with

b.
All Documents mailed
paragraph 6 of the Note;

Plaintiff

that

comply

with

to

c.
All Documents provided to Plaintiff by Defendant that
comply with 24 C.F.R. 203; and
d.
Documents utilized internally by Plaintiff to ensure
compliance with 24 C.F.R. 203.
53. All manuals or Documents describing the Procedure used
by Defendant to ensure compliance with the conditions
precedents located within the Mortgage and Note.
Id. at p. 3.
The Motion to Compel seeks “discovery from Defendant on the
underwriting guidelines of Defendant’s foreclosure alternative
programs available from 2009 to 2011” and “information and documents
on Defendant’s efforts to comply with the Federal Housing
Administration (‘FHA’) guidelines incorporated into the note and
mortgage.”

Motion to Compel, p. 3.

As an initial matter, defendant argues that plaintiffs’ Motion to

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Compel should be denied because plaintiffs “never formally requested
the documents they now seek” and because they failed to make a good
faith effort to resolve this discovery dispute prior to filing the
Motion to Compel.

Defendant’s Response, pp. 2, 7, 12-14.

Without

addressing the merits of defendant’s arguments, the Court concludes
that the parties are at impasse on the matter and that judicial
intervention is necessary to resolve this discovery dispute.

Notably,

discovery is still proceeding and, after conducting a discovery
conference on September 25, 2013, the Court directed plaintiffs to
file a motion to compel.

See Order, Doc. No. 34.

The Court will

therefore address the substance of plaintiffs’ Motion to Compel.
As discussed supra, plaintiffs seek to compel “discovery from
Defendant on the underwriting guidelines of Defendant’s foreclosure
alternative programs available from 2009 to 2011” and “information and
documents on Defendant’s efforts to comply with the [FHA] guidelines
incorporated into the note and mortgage.”

Motion to Compel, p. 3.

The parties disagree as to the relevance of the requests.

Defendant

argues that the requested discovery is not “relevant to any claim or
defense at issue in this case.”

Defendant’s Response, p. 8.

Specifically, defendant argues that “whether or not the Neffs actually
qualified for a specific loan modification program that Flagstar had
is not the issue.”

Id. at p. 9.

Defendant takes the position that

plaintiffs’ claims survived defendant’s motion to dismiss only “on the
assumption that ‘but for’ Flagstar’s statements that it would modify
[plaintiffs’] loan, the Neffs would have cured their default ‘without

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Flagstar’s assistance.’”
omitted).

Id. at p. 11 (citations and emphasis

“The actual content of Flagstar’s programs and the validity

of defenses that the Neffs could have raised in the Foreclosure
Action,” defendant argues, “will not make proof of that issue before
the Court more or less likely.”

Id.

Defendant’s argument is without

merit.
The Complaint, Doc. No. 1, asserts claims for fraudulent
misrepresentation and promissory estoppel.

In Ohio,1

[t]he elements of fraud or fraudulent misrepresentation are
(1) a representation or, where there is a duty to disclose,
concealment of a fact, (2) which is material to the
transaction at hand, (3) made falsely, with knowledge of
its falsity, or with such utter disregard and recklessness
as to whether it is true or false that knowledge may be
inferred, (4) with the intent of misleading another into
relying upon it, (5) followed by justifiable reliance upon
the representation or concealment by the other party, and
(6) a resulting injury proximately caused by the reliance.
Funk v. Durant, 799 N.E.2d 221, 224 (Ohio App. 5 Dist. 2003) (citing
Friedland v. Lipman, 429 N.E.2d 456 (Ohio App. 8 Dist. 1980)).
Promissory estoppel requires a showing of: “(1) a clear and
unambiguous promise; (2) reliance on that promise; (3) reliance that
was reasonable and foreseeable; and (4) damages caused by that
reliance.”

Current Source, Inc. v. Elyria City Sch. Dist., 813 N.E.2d

730, 737 (Ohio App. 9 Dist. 2004) (citations omitted).
As previously determined by the Court in resolving defendant’s
motion to dismiss,

1

When sitting in diversity, this Court applies the substantive law the of
the forum state. Hayes v. Equitable Energy Res. Co., 266 F.3d 560, 566 (6th
Cir. 2001) (citing Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496
(1941); Macurdy v. Sikov & Love, P.A., 894 F.2d 818, 820 (6th Cir. 1990)).

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the Neffs specifically pled that a representative of
Flagstar informed them on numerous occasions, specifically
laid out in the complaint, that a loan modification was
being considered, for the Neffs to make certain payments,
to continue to provide the requested information, and to
not obtain counsel for the Foreclosure Action.
The Neffs
suggest that Flagstar's representations were false in that
it had no intention of modifying the loan, just in keeping
the Neffs from responding in foreclosure or seeking to
remedy the delinquency through other avenues so that it
could obtain the Property. The Neffs aver that they relied
on these representations by taking no action in the
Foreclosure Action, in which a default judgment had been
entered but no sheriff sale had yet been ordered or
conducted.
The Neffs had previously arranged certain
payments with Flagstar, which they made.
The Court can
reasonably infer that absent Flagstar's representations,
the Neffs would have addressed the delinquency of their
mortgage and/or the Foreclosure Action without Flagstar's
assistance but did not do so in detrimental reliance on
Flagstar's representations.
Neff, 2013 WL 3872115 at *5.
As noted supra, to prevail on their fraudulent misrepresentation
claim, plaintiffs must prove, inter alia, that there was a material
representation of fact that was “made falsely, with knowledge of its
falsity, or with such utter disregard and recklessness as to whether
it is true or false that knowledge may be inferred.”
N.E.2d at 224 (citations omitted).

See Funk, 799

Evidence of defendant’s

foreclosure alternative guidelines and, specifically, whether
plaintiffs qualified for an alternative under defendant’s guidelines,
could serve as evidence of defendant’s intention (or lack thereof) to
modify plaintiffs’ loan.

Whether defendant intended to modify

plaintiffs’ loan when it made the alleged statements that it would,
see e.g., Complaint, ¶¶ 88, 112, is therefore relevant to whether the
alleged statements were “made falsely, with knowledge of its falsity,

10

or with such utter disregard and recklessness as to whether it is true
or false that knowledge may be inferred.”

Similarly, evidence of a

viable defense in the Foreclosure Action is relevant to whether the
Neffs would (or could) have addressed the delinquency of their
mortgage and/or the Foreclosure Action without Flagstar’s assistance
and whether they suffered injury proximately caused by their reliance
on the alleged statements.

Discovery related to “Defendant’s efforts

to comply with the [FHA] guidelines incorporated into the note and
mortgage,” which defendant concedes is related to the Neffs’ ability
to defend the Foreclosure Action, see Defendant’s Response, p. 11, is
therefore relevant in this action. It follows, then, that this
information falls within the ambit of discoverable information.

See

Fed. R. Civ. P. 26(b).
plaintiff seek an award of their expenses, including attorney’s
fees, incurred in connection with the Motion to Compel.

A court must

ordinarily award a movant’s reasonable expenses, including attorney’s
fees, if a motion to compel is granted.

Fed. R. Civ. P. 37(a)(5)(A).

However, a court should not award expenses if, among other things, the
opposing party’s nondisclosure was substantially justified or other
circumstances make an award of expenses unjust.

Id.

A court is

vested with wide discretion in determining an appropriate sanction
under Rule 37.

See Nat’l Hockey League v. Metro. Hockey Club, 427

U.S. 639 (1976).
Defendant argues that an award of expenses is unwarranted
because, inter alia, plaintiffs failed to make a reasonable attempt to

11

resolve this discovery dispute prior to filing the Motion to Compel.
Defendant’s Response, pp. 3, 12-14.

This Court agrees.

Plaintiff sent only one letter to defense counsel addressing the
substance of this discovery dispute prior to seeking Court
intervention.
Exhibit K.

See Motion to Compel, Exhibit H; Defendant’s Response,

Notably, that letter fails to address Document Requests

50, 52, or 53, or “information and documents on Defendant’s efforts to
comply with the [FHA] guidelines incorporated into the note and
mortgage,” issues that plaintiffs pursue in this motion.
to Compel, pp. 1-3.

See Motion

Moreover, defendant responded to plaintiffs’

letter with substantive responses and expressly sought further
clarification from plaintiffs regarding their position, see Motion to
Compel, Exhibit I; Defendant’s Response, Exhibit L, but plaintiffs
never responded to that request.
Under the circumstances, the Court cannot conclude that
plaintiffs made a good faith effort to confer with defendant, or that
plaintiffs exhausted all extrajudicial means for the resolution of
this dispute, prior to seeking Court intervention.
P. 37(a)(1); S.D. Ohio Civ. R. 37.1.

See Fed. R. Civ.

Although the Court has

overlooked that deficiency in considering the merits of the Motion to
Compel, nevertheless, an award of expenses would be unjust under these
circumstances.
WHEREUPON, plaintiffs’ Motion to Compel, Doc. No. 35, is GRANTED
in part and DENIED in part, consistent with the foregoing.
The Court suspended the expert report production dates pending

12

resolution of plaintiffs’ Motion to Compel.

See Order, Doc. No. 34.

The Scheduling Order, Doc. No. 25, is therefore MODIFIED as follows:
Primary expert reports must be produced by plaintiffs no later
than December 31, 2013 and by defendant (which expects to use only
rebuttal experts) no later than February 19, 2013.
All discovery must be completed by February 28, 2013.
Motions for summary judgment may be filed no later than March 31,
2014.

October 30, 2013

s/Norah McCann King_______
Norah McCann King
United States Magistrate Judge

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