First Tennessee Bank National Association v. Republic Mortgage Insurance Company et al
Filing
85
ORDER granting in part and denying in part 46 Plaintiff's Motion to Compel Responses to Interrogatories and Document Requests. Signed by Magistrate Judge Charmiane G. Claxton on 7/5/2011. (Claxton, Charmiane)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TENNESSEE
WESTERN DIVISION
FIRST TENNESSEE BANK NATIONAL
ASSOCIATION,
Plaintiff,
v.
Case No. 2:10-cv-02513-JPM-cgc
REPUBLIC MORTGAGE INSURANCE
COMPANY and REPUBLIC MORTGAGE
INSURANCE COMPANY OF NORTH
CAROLINA,
Defendants.
ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF’S MOTION TO
COMPEL RESPONSES TO INTERROGATORIES AND DOCUMENT REQUESTS
Before the Court is Plaintiff First Tennessee Bank National Association’s (“First Tennessee”)
Motion to Compel Responses to Interrogatories and Document Requests (Docket Entry (“D.E.”)
#46). The instant motion was referred to United States Magistrate Judge Charmiane G. Claxton for
determination. (D.E. #47). For the reasons set forth herein, First Tennessee’s Motion is hereby
GRANTED IN PART AND DENIED IN PART.
I. Introduction
On July 9, 2010, First Tennessee filed its Complaint against Defendants Republic Mortgage
Insurance Company and Republic Mortgage Insurance Company of North Carolina (collectively
“RMIC”). First Tennessee’s allegations arise from an insurance policy—Master Policy No. 48873
(“Policy”)—issued by RMIC to First Tennessee with an effective date of June 1, 1983. (Compl. ¶
1
8). The Policy is a flow mortgage insurance policy which insures First Tennessee against default
in connection with individual mortgage loans it generates or acquires. (Compl. ¶ 10). Under the
Policy, the loans are not insured as a pool or group but on a loan-by-loan basis. (Id.). First
Tennessee asserts that the Policy of mortgage insurance is critical to its business and its investors
to protect against the risk of default by borrowers. (Compl. ¶¶ 13-15).
First Tennessee further alleges that, as the United States economy has experienced
substantial weakness in recent years, including losses in employment and decreases in home values,
there have been a significant increase in loan defaults and foreclosures nationwide. (Compl. ¶¶ 2526). First Tennessee claims that before the economic downturn, RMIC honored its coverage
obligations on an overwhelming percentage of claims. (Compl. ¶ 28). However, after the economic
downturn, First Tennessee argues that RMIC “decided to adopt a policy and practice to break the
coverage promises it made in the Policy to salvage and improve its financial position at the expense
of its insured.” (Compl. ¶ 29). As part of this new policy and practice, First Tennessee alleges that
RMIC “unilaterally rescinded millions of dollars of coverage for hundreds of loans insured” without
basis and in violation of the Policy. (Compl. ¶¶ 27-49).
Based upon these allegations, First Tennessee’s Complaint contains five counts. In Counts
I and II, First Tennessee alleges that RMIC violated the Policy’s terms and breached its duty of good
faith and fair dealing by rescinding coverage based on inadequate evidence of misrepresentation,
immaterial misrepresentations by borrowers, or both. (Compl. ¶¶ 32, 39, 50-57). In Counts III and
IV, First Tennessee alleges that RMIC violated the Policy’s terms and breached its duty of good
faith and fair dealing by rescinding coverage before First Tennessee submitted claims to RMIC.
(Compl. ¶¶ 68-86). In Count V, First Tennessee seeks a declaratory judgment that, inter alia,
2
“RMIC may not rescind coverage before a Claim is submitted under the Policy and RMIC must
reinstate coverage for all loans where it rescinded coverage before a Claim was presented.” (Compl.
¶ 88).
On September 24, 2010, RMIC filed a Motion to Dismiss Counts II-V of Plaintiff’s
Complaint. (D.E. #23). The District Court entered its Order Granting in Part and Denying in Part
Defendants’ Motion to Dismiss Counts II-V of Plaintiff’s Complaint on February 25, 2011. (D.E.
#52). In the Order, the District Court initially considered the threshold issue of which state’s law
governs First Tennessee’s claims, as First Tennessee contends that Texas law applies and RMIC
contends that Tennessee law applies. (Feb. 25, 2011 Order at 4-5). The District Court determined
that it need not decide which state’s law applies at that stage of the proceedings and instead analyzed
First Tennessee’s claims under both Tennessee and Texas law. (Feb. 25, 2011 Order at 5).
Ultimately, the District Court dismissed Count III because the Policy does not prohibit pre-claim
rescissions but did not dismiss the remaining Counts. (Feb. 25, 2011 Order at 5-11).
On February 9, 2011, First Tennessee filed the instant Motion requesting that the Court
compel RMIC to respond to First Tennessee’s First Set of Interrogatories (“Interrogatories”) and
First Tennessee’s First Request for Production of Documents (“Requests for Production”). RMIC
responded on March 9, 2011 that First Tennessee’s Motion should be denied because the categories
of documents at issue are not relevant to any of the claims in this case, because RMIC has already
produced certain discovery, and because RMIC does not have certain responsive documents that
First Tennessee requests. On March 30, 2011, First Tennessee filed its Reply providing further
support for its Motion. On April 14, 2011, a hearing was held before the undersigned on First
Tennessee’s Motion, at which time the Court took the Motion under advisement.
3
II. Analysis
Rule 26 of the Federal Rules of Civil Procedure provides that parties may obtain discovery
regarding any nonprivileged matter that is relevant to any party’s claim or defense—including the
existence, description, nature, custody, condition, and location of any documents or other tangible
things and the identity and locations or persons who know of any discoverable matter. Fed. R. Civ.
P. 26(b)(1). Further, for good cause, the court may order discovery of any matter relevant to the
subject matter involved in the action. Id. Relevant information need not be admissible at the trial
if the discovery appears reasonably calculated to lead to the discovery of admissible evidence. Id.
With respect to First Tennessee’s remaining breach-of-contract claims in Count I, the
essential elements under Tennessee law include (1) the existence of an enforceable contract, (2)
nonperformance amounting to a breach of the contract, and (3) damages caused by the breach of
contract. See ARC Lifemed, Inc. v. AMC-Tennessee, Inc., 183 S.W.3d 1, 26 (Tenn. Ct. App. 2005).
Likewise, under Texas law, a breach-of-contract claim requires (1) the existence of a valid contract,
(2) that plaintiff performed or tendered performance, (3) that the defendant breached the agreement,
and (4) that the plaintiff was damaged as a result of the breach. See Landrum v. Davenport, 616
S.W.2d 359, 361 (Tex. Ct. App. 1981).
With respect to First Tennessee’s claims of breach of the duty of good faith and fair dealing
in Counts II and IV, the District Court has already determined that Texas law and Tennessee law
differ on this point. Tennessee law does not recognize such a claim as “a cause of action in and of
itself.” See Lyons v. Farmers Ins. Exch., 26 S.W.3d 888, 894 (Tenn. Ct. App. 2000). However,
Texas courts have “long recognized a common law duty of good faith and fair dealing in insurance
4
relationships.” Rice v. Metro. Life Ins. Co., 324 S.W.3d 660, 672 (Tex. Ct. App. 2010); see also
Viles v. Sec. Nat’l Ins. Co., 788 S.W.2d 566, 567 (Tex. 1990) (holding that a breach of the common
law duty of good faith and fair dealing “give[s] rise to a cause of action in tort . . . separate from any
cause of action for breach of contract.”). Under Texas law, an insurer may not favor its own
interests over those of an insured. P.G. Bell Co. v. United States Fid. & Guar. Co., 853 S.W.2d 187,
190 (Tex. Ct. App. 1993). An insurer breaches its duty of good faith and fair dealing if it
“wrongfully cancels an insurance policy without a reasonable basis” and if it “knew or should have
known of that fact.” Rice, 324 S.W.3d at 672 (citing Union Bankers Ins. Co. v. Shelton, 889.
S.W.2d 278, 283 (Tex. 1994)).1
A. Discovery Concerning RMIC’s Actions Under the Policy
I. Setting Premiums, Establishing Reserves for Expected Claims, Analyzing Claims and
Loan Performance
First Tennessee contends that RMIC has refused to respond to discovery about certain
activities under the Policy which it argues would demonstrate why RMIC decided to rescind
coverage. Specifically, First Tennessee claims that RMIC has not adequately responded to Requests
for Production 3, 5, 6, 19, 21 and 42 and Interrogatories 3, 4, and 5. These discovery requests
pertain to how RMIC set premiums, recorded and reserved funds for expected claims, calculated
expected claims, losses, and loan performance, and handled claims and rescissions under the Policy.
With respect to Request for Production 3, which seeks the manner of setting premiums under
1
As the District Court determined that it need not decide which state’s law applies at
this stage of the proceedings, the District Court declined to dismiss First Tennessee’s claims of
breach of the duty of good faith and fair dealing under Counts II and IV even though the cause of
action is only recognized in Texas and not in Tennessee.
5
the Policy, the parties do not rely on any Texas or Tennessee law for the premise that such
information is discoverable.2 However, First Tennessee does rely upon Transcap Association, Inc.
v. Euler Hermes American Credit Indemnity Co., 2009 WL 1543857 (N.D.Ill. June 3, 2009), for the
premise that a court may “compel documents related to . . . the calculation of Policy premiums.”
Id. at *4. The Court finds this reasoning persuasive, as evidence of the calculation of premiums is
relevant and is reasonably calculated to lead to the discovery of admissible evidence as to First
Tennessee’s claims. Specifically, such information is relevant to whether RMIC had not anticipated
the potential risks of its loans and developed financial motivations to place its interests above the
interests of its insured in the face of economic difficulty, which is precisely what First Tennessee
alleges in its Complaint. Accordingly, the Court compels RMIC to respond to Request for
Production 3.
With respect to Requests for Production 5 and 6, which pertain to RMIC’s calculation of
claims, losses, and profits before and after the issuance of the Policy, RMIC affirms that it has
already produced all responsive documents to these requests. Although First Tennessee argues that
RMIC has only made a limited production that fails to come close to an adequate response to these
requests, the Court does not find it appropriate to order RMIC to produce further discovery when
it has affirmed that it has produced all responsive documents. Accordingly, the Court will not
compel further discovery as to Requests for Production 5 and 6. However, RMIC remains under a
2
RMIC does rely upon Texas Insurance Code Section 3502.101 for the proposition that
it was required to file its premium rate with the Texas Department of Insurance and charge all
insureds those rates. However, the Court agrees with First Tennessee that, despite this
requirement, the manner in which RMIC sets its premiums as to all insureds may demonstrate
whether RMIC expected low levels of claims as First Tennessee asserts and, as such, may have
had a motivation to breach the Policy and breach its duties to the insured during adverse
economic conditions.
6
duty to supplement discovery in accordance with Rule 26(e)(1), and if any other portions of this
Order regarding the overarching objections would render other documents responsive to Requests
for Production 5 and 6, see, infra, Sections (II)(D)(ii) & (iii), RMIC shall produce those documents
in accordance with this Order.
With respect to Request for Production 19, which seeks documents demonstrating how
RMIC calculated expected claims, expected losses, and performance of loans insured under the
Policy, First Tennessee argues that such information is critical to its claims as it is reasonably
calculated to lead to the discovery of admissible evidence showing the difference between RMIC’s
original financial expectations under the Policy with what actually unfolded following the economic
downturn. RMIC responds that it has already produced all responsive documents to this request.
Accordingly, the Court will not compel RMIC to respond to Request for Production 19. However,
First Tennessee argues that RMIC has limited its production by refusing to provide responsive
documents outside its claims files. As discussed below, see, infra, Sections (II)(D)(ii) & (iii), RMIC
is not permitted to impose limitations on the discovery and must produce all responsive information
to the requests as drafted. In the event that any previous production has been limited to claims files
or otherwise, RMIC is compelled to produce any supplemental discovery in accordance with this
Order.
With respect to Requests for Production 21 and 42, which pertain to RMIC’s calculation of
reserves, the parties do not rely on any Texas or Tennessee law for the premise that such information
is discoverable. First Tennessee relies upon Bernstein v. The Travelers Insurance Company, 447
F. Supp. 2d 1100 (N.D.Cal. 2006), for the proposition that the manner in which the insurer sets
reserves shows “what [the insurer] actually knew and thought, and what motives animated its
7
conduct” and thus are “critical areas of inquiry in bad faith cases” and are “fully fair game for
discovery.” Id. at 1107. RMIC responds that reserve policy is established by legislative and
administrative bodies and, thus, that “a reserve cannot accurately or fairly be equated with an
admission of liability or the value of any particular claim.” Heights at Issaquah Ridge Owners
Assoc. v. Steadfast Ins. Co., 2007 WL 4410260, at *3-4 (W.D.Wash. 2007); see also Leski, Inc. v.
Federal Ins. Co., 129 F.R.D. 99, 106 (D.N.J. 1989). Further, RMIC argues that reserves “do not
normally entail an evaluation of coverage based upon a thorough factual and legal consideration
when routinely made as a claim analysis.” Indep. Petrochemical Corp. v. Aetna Cas. & Sur. Co.,
117 F.R.D. 283, 288 (D.D.C. 1986). Thus, RMIC argues that courts have found discovery regarding
the manner of setting reserves to be irrelevant, even in cases of bad-faith claims. See id.; Fidelity
and Dep. Co. of Md. v. McCulloch, 168 F.R.D. 516, 525 (E.D.Pa. 1996). Upon review, the Court
finds the reasoning of Bernstein persuasive, as First Tennessee seeks to demonstrate in its bad faith
claims that RMIC did not properly evaluate its risks and, following the economic downturn,
operated in a manner that placed its interests above its insured. Accordingly, the Court compels
RMIC to respond to Requests for Production 21 and 42.
With respect to Interrogatories 3, 4, and 5, which pertain to RMIC’s experience handling
claims and rescissions under the Policy, the parties do not rely upon any Texas or Tennessee law or
persuasive authority on the issue. Upon review, the Court finds that such information is probative
of the issue of how RMIC generally administered its duties under the Policy. Therefore, such
discovery is relevant to First Tennessee’s claims and is reasonably calculated to lead to the
discovery of admissible evidence with respect to how the Policy was administered. Accordingly,
the Court compels RMIC to respond to Interrogatories 3, 4, and 5.
8
ii. RMIC’s Knowledge of and Experience with the Loans it Insured
Next, First Tennessee requests that RMIC be compelled to respond to Requests for
Production 29, 30, and 38 regarding its knowledge of the risks it decided to insure under the Policy.
With respect to Requests for Production 29 and 30, which pertain to the manner in which it or others
analyzed or studied stated-income loans, First Tennessee argues that this information is central to
the litigation because a large number of loans insured by RMIC under the Policy were stated-income
loans in which the borrower’s income is not independently verified. First Tennessee posits that
RMIC was well aware of the risks it was insuring yet later purported to rescind coverage by claiming
it was unaware of those risks. RMIC responds that borrowers were required to provide truthful
information and that it relied upon that information to assess its risks. RMIC further argues that
Section 2.2 of the Policy states that RMIC is relying on the accuracy of the information submitted
by First Tennessee and that Section 2.3 of the Policy permits RMIC to rescind coverage at any time
based upon materially false or misleading information. Upon review, the Court finds that Requests
for Production 29 and 30 are relevant to First Tennessee’s claims of bad faith, as evidence that
would demonstrate that RMIC was aware of risks of materially false or misleading stated-income
loans may be pertinent in establishing First Tennessee’s claims of bad faith. Accordingly, the Court
will compel RMIC to respond to Requests for Production 29 and 30.
With respect to Request for Production 38, First Tennessee seeks RMIC’s practice and
experience providing underwriting to mortgage lenders. First Tennessee argues that this information
will demonstrate that “RMIC was fully knowledgeable about the loans it was insuring and the risks
they posed, and that RMIC willingly insured those risks.” RMIC asserts that First Tennessee’s
Complaint is incorrect in alleging that RMIC performed contract underwriting services for First
9
Tennessee and contends that it contracted with a separate company, RMIC Corporation, to perform
underwriting services. As RMIC has affirmed that it did not perform contract underwriting services
for First Tennessee, and First Tennessee has not contested this assertion in its Reply, the Court will
not compel RMIC to respond to Request for Production 38.
iii. The Incontestability Clause
First Tennessee requests that RMIC be compelled to respond to Requests for Production 17
and 18 regarding the Incontestability Clause in Section 2.4 of the Policy, which prevents RMIC from
rescinding coverage when First Tennessee or others involved in the loan origination process did not
participate in any misrepresentations.
With respect to Request for Production 17, First Tennessee argues that Count I of its
Complaint specifically alleges that RMIC breached the Incontestability Clause and that RMIC acted
in bad faith by frequently ignoring this restriction on its rights when it rescinded coverage. (Compl.
¶¶ 43, 58, 60, 61). RMIC argues that this request is overly broad as it seeks documents relating to
loans whose rescissions of coverage under the Policy are not alleged to be improper as well as
documents regarding numerous other mortgage guaranty policies issued by RMIC to third-party
lenders. RMIC further asserts that First Tennessee should have adequate discovery from the
information regarding the 309 loans at issue in this lawsuit to establish its claims. Upon review, the
Court concludes that Request for Production 17 is not overly broad as drafted, as it requests
documents concerning RMIC’s consideration of the Incontestability Clause when rescinding loans
under First Tennessee’s Policy.
This discovery may lead to admissible evidence on First
Tennessee’s claims of breach of contract as well as First Tennessee’s claims of bad faith.
Accordingly, the Court will compel RMIC to respond to Request for Production 17.
10
With respect to Request for Production 18, RMIC has already affirmed that it produced all
responsive documents to this request before the instant motion was filed. Accordingly, the Court will
not compel further discovery as to Request for Production 18. However, RMIC remains under a
duty to supplement discovery in accordance with Rule 26(e)(1), and if any other portions of this
Order regarding the overarching objections would render other documents responsive to Request
for Production18, see, infra, Sections (II)(D)(ii) & (iii), RMIC shall produce those documents in
accordance with this Order.
B. Discovery Seeking Information to Show RMIC Rescinded Coverage Solely for
Financial Reasons
First Tennessee contends that RMIC has refused to respond to discovery seeking information
to show that it rescinded coverage solely for financial reasons. Specifically, First Tennessee argues
that RMIC has not responded to Request for Production 39 regarding RMIC’s efforts to protect
against losses under the Policy and Request for Production 41 regarding RMIC’s financial condition.
With respect to Request for Production 39, First Tennessee asserts that this information could
lead to discovery of admissible evidence regarding how RMIC managed its financial position,
whether it sought reinsurance, and if so, whether it suffered claims denials leading to the rescissions.
Upon review, the Court finds that such information regarding RMIC’s financial position is relevant
to First Tennessee’s claims of bad faith, specifically whether RMIC had a reason to place its
interests over the interests of its insured following the economic downturn. Accordingly, the Court
will compel RMIC to respond to Request for Production 39.
With respect to Request for Production 41 regarding to RMIC’s financial condition from
January 1, 2005 to the present, First Tennessee argues that documents evidencing RMIC’s financial
condition before, during, and after the financial meltdown may explain the reasons for RMIC’s
11
change in practices towards First Tennessee and its motivations for increasing rescissions. First
Tennessee argues that this discovery is relevant to its claims of bad faith. RMIC argues that a cause
of action for bad faith under Texas law has nothing to do with the purported motivation of the
insurer, but instead only whether the insurer knew or should have known that it lacked a reasonable
basis for denying a claim. See State Fire Farm & Cas. Co. v. Woods., 925 F. Supp. 1174, 1177
(E.D.Tex.1996) (“To prevail in a bad faith claim, an insured claiming bad faith must prove that the
insurer had no reasonable basis for denying . . . payment of the claim, and that it knew or should
have known that fact.”). However, as the District Court has already concluded, Texas’s cause of
action for bad faith is premised upon the principle that “an insurer may not favor its own interests
over those of an insured.” See P.G. Bell, 853 S.W.2d at 190. First Tennessee’s Complaint and
theory of the case alleges precisely that RMIC faced financial hardship and improperly denied
coverage to avoid further financial harm, regardless of the consequences to its insured. Accordingly,
the Court will compel RMIC to respond to Request for Production 41.
C. Discovery Regarding RMIC’s Actions Under Other Similar Policies
First Tennessee contends that RMIC should be compelled to respond to Interrogatory 7,
which pertains to the issuance of coverage and rescissions of loans under other policies issued by
RMIC, and Requests for Production 20, 22, 26, 28, 43, 44, and 47, which pertain to the financial
effect of rescinding coverage under these other policies, the reserves for liabilities under these
policies, the internal communications and communications with third parties about the policies, and
the lawsuits filed against RMIC concerning rescission of coverage. Upon review, the Court finds
that these Interrogatories and Requests for Production regarding other policies are not relevant or
likely to lead to the discovery of admissible evidence as to the issues presented in First Tennessee’s
12
claims under the Policy. Although First Tennessee would argue that discovery related to these other
policies would show RMIC’s overall financial position and its overarching practices in response to
the economic downturn, the Court finds that the scope of this requested exceeds the necessary
bounds under the Rules. Accordingly, the Court will not compel RMIC to respond to Interrogatory
7 or Requests for Production 20, 22, 26, 28, 43, 44, and 47.
D. Discovery on Entire Categories of Discovery To Which RMIC Has Objected
I. Communications About the Lawsuit
First Tennessee contends that RMIC has refused to respond to Request for Production 40,
which seeks documents reflecting external and internal communications about the lawsuit, including
communications to and from its Board of Directors. RMIC has affirmed that it does not have any
internal documents that are responsive to Request for Production 40. Further, RMIC asserts that all
external communications that would be responsive are protected by the attorney-client privilege and
work product doctrine. Accordingly, the Court will not compel RMIC to respond to Request for
Production 40. However, RMIC remains under a duty to supplement discovery in accordance with
Rule 26(e)(1), and if any other portions of this Order regarding the overarching objections would
render other documents responsive to Request for Production 40, see, infra, Sections (II)(D)(ii) &
(iii), RMIC shall produce those documents in accordance with this Order.
ii. Matters Outside RMIC’s “Claims Files”
As an overarching matter, First Tennessee asserts that RMIC has refused to respond to
numerous categories of discovery requests that seek information not found in RMIC’s claims files.
First Tennessee argues that RMIC is imposing an improper and unfounded limitation on discovery.
Upon review, the Court finds that RMIC cannot limit its discovery responses to its claims files but
13
must produce all responsive information and documents to First Tennessee’s Requests for
Production and Interrogatories as drafted. Additionally, in this Order, the Court has not compelled
further production to certain discovery requests based upon RMIC’s affirmations that it has
produced all responsive documents. In the event that RMIC’s previous productions to any requests
have been limited to claims files, RMIC is compelled to produce any supplemental discovery in
accordance with Rule 26(e)(1) and this Order.
1. Communications and Witness Statements
First Tennessee requests that RMIC be compelled to produce certain communications and
witness statements responsive to Requests for Production 8, 27, and 48. With respect to Request
for Production 8, which seeks certain communications between RMIC and First Tennessee in
connection with the Policy, and Request for Production 27, which seeks discovery regarding
RMIC’s communications with third parties regarding the Policy, RMIC has affirmed that it has
produced all responsive documents. Accordingly, the Court will not compel RMIC to produce
further discovery. However, RMIC remains under a duty to supplement discovery in accordance
with Rule 26(e)(1), and if any other portions of this Order regarding the overarching objections
would render other documents responsive to Requests for Production 8 and 27, see, supra, Section
(II)(D)(ii) &, infra, (II)(D)(iii), RMIC shall produce those documents in accordance with this Order.
With respect to Request for Production 48, which seeks statements obtained from witnesses
about First Tennessee, the Policy, the loans, or the matters discussed in the Complaint, First
Tennessee argues that this discovery will demonstrate whether RMIC breached the Policy and acted
in bad faith in response to the economic downturn. RMIC responds that the requested discovery is
irrelevant and overly broad because it pertains to rescissions and claims denials that are not being
14
challenged as improper or bad faith in this case. RMIC argues that, with 309 loans at issue in the
lawsuit, First Tennessee has sufficient discovery to prove its claims. First Tennessee responds that
RMIC has attempted to limit its production to this request to its claims files and should not be
permitted to do so. Upon review, the Court finds that Request for Production 48, as drafted, is
relevant and reasonably calculated to lead to the discovery of admissible evidence as to First
Tennessee’s claims. Specifically, the request is narrowly tailored to statements about First
Tennessee, the Policy, loans insured under the Policy, and matters discussed in the Complaint.
Accordingly, the Court will compel RMIC to respond to Request for Production 48. Further, RMIC
will not be permitted to impose any self-limitations on the scope of the request, see, supra, Section
(II)(D)(ii) &, infra, (II)(D)(iii), and shall respond to the request as drafted.
2. Board Materials
First Tennessee requests that RMIC be compelled to produce Board of Directors’ materials,
including minutes, materials sent or presentations made to the Board, and communications among
Board members, in response to Request for Production 45. RMIC has stated that it has no
responsive documents to this request, which First Tennessee has argued is not plausible and is an
improper attempt to limit the scope of First Tennessee’s request. As RMIC asserts that it has already
produced all responsive documents to Request for Production 45, the Court will not compel further
production. However, if RMIC has self-imposed any of its own limitations on what it deems to be
responsive, including an overly narrow reading of First Tennessee’s Request for Production or First
Tennessee’s Complaint, see, supra, Section (II)(D)(ii) &, infra, (II)(D)(iii), RMIC should
supplement its production to fully respond to Request for Production 45 as propounded by First
Tennessee.
15
3. Procedures for Investigating Claims, Reviewing Loan Performance, and Making
Rescissions Under the Policy
First Tennessee requests that RMIC be compelled to respond to Requests for Production 15,
16, and 31 regarding the guidance, policies, and procedures RMIC provides to its employees and
to third parties for investigating claims, reviewing loan performance, and gathering information
about loans insured under the Policy. RMIC has stated that it will respond but will only produce
materials regarding specific loans First Tennessee has identified. First Tennessee asserts that this
limitation is arbitrary and should be rejected because a corporation would not typically enact policies
and procedures for direct subsets of specific loans as to one lender or one policy.
Upon review, the Court finds that Requests for Production 15, 16, and 31 are relevant to the
overarching training, policies and procedures utilized at RMIC in its administration of its policies,
including the Policy at issue in this case. The Court finds First Tennessee’s argument persuasive
that the information responsive to this request would likely not pertain to a specific loan or a specific
lender, but instead would be general information utilized in RMIC’s business. Such information is
vital so that First Tennessee can assess the policies and procedures RMIC used for assessing loans
and coverage under the Policy. Accordingly, the Court compels RMIC to respond fully to Requests
for Production 15, 16 and 31.
4. Investigating and Auditing of Insured Loans
First Tennessee requests that RMIC be compelled to respond to Requests for Production 9,
10, 13, and 14 regarding the following topics: (1) how RMIC investigated the performance of the
loans insured under the Policy, (2) audits, quality assessments, and quality control reviews of loans
insured under the Policy; (3) documents from third parties that investigated loans for which RMIC
rescinded coverage; (4) and other loans which First Tennessee identified in dispute. Upon review,
16
the Court finds that Requests for Production 9, 10, 13 and 14 pertain to RMIC’s general business
administration and are relevant and reasonably calculated to lead to the discovery of admissible
evidence regarding First Tennessee’s claims under the Policy. Accordingly, the Court will compel
RMIC to respond to Requests for Production 9, 10, 13, and 14. Further, RMIC will not be permitted
to impose any self-limitations on the scope of the request, see, supra, Section (II)(D)(ii) &, infra,
(II)(D)(iii), and shall respond to the requests as drafted.
5. Coverage Rescissions and Claim Denials Under the Policy
First Tennessee requests that RMIC be compelled to respond to Requests for Production 11,
12, and 24 and Interrogatories 4 and 5 concerning its rescissions and claims denials under the Policy
and its practice of rescinding coverage before claims for a loss are submitted. Upon review, the
Court finds that Requests for Production 11, 12, and 24 and Interrogatories 4 and 5 are relevant and
likely to lead to the discovery of admissible evidence regarding First Tennessee’s claims,
particularly its claims of bad faith. Accordingly, the Court will compel RMIC to respond to Requests
for Production 11, 12, and 24 and Interrogatories 4 and 5.3
6. Organizational Charts
First Tennessee requests that RMIC be compelled to respond to Request for Production 23
regarding employees with involvement or knowledge of the lawsuit. RMIC has argued that they
should only be required to respond to the extent that the information regards loans First Tennessee
identified. Upon review, Rules 26 explicitly permits for discovery regarding the identity and
locations or persons who know of any discoverable matter. See Fed. R. Civ. P. 26(b)(1).
3
Additionally, the Court has already compelled First Tennessee to respond to
Interrogatories 4 and 5 on other grounds. See Section (II)(A)(I).
17
Accordingly, the Court finds that Request for Production 23 is relevant and likely to lead to the
discovery of admissible evidence regarding the individuals with knowledge of the matters the
instant case as well as the organizational structure of key individuals at RMIC. Accordingly, the
Court will compel RMIC to respond to Request for Production 23.
iii. E-mails
First Tennessee asserts that RMIC has taken an overarching position that it need not produce
e-mails in discovery unless they appear in RMIC’s “claim files.” RMIC asserts that it has not
limited discovery in such a manner. Upon review, the Court concludes that the Federal Rules do
not permit any such limitations upon discovery. Accordingly, RMIC shall be required to produce
e-mails whether or not they are part of RMIC’s claim files. Additionally, in this Order, the Court
has not compelled further production to certain discovery requests based upon RMIC’s affirmation
that it has produced all responsive documents. In the event that any previous production of e-mails
has been limited to claims files, RMIC is compelled to produce any supplemental discovery in
accordance with this Order.
E. Documents RMIC Agreed to Produce
Finally, First Tennessee asserts that RMIC has not provided certain discovery it has agreed
to produce. First Tennessee states that RMIC did make a recent additional production, which may
contain all the documents RMIC agreed to produce; however, First Tennessee requests that RMIC
be compelled to provide all documents it has previously agreed to produce to the extent that it has
not already done so. Upon review, the Court finds that this request is premature, particularly as it
is uncertain whether or not RMIC has not already produced all responsive documents that it has
agreed to produce. Accordingly, the Court will not compel RMIC to produce these documents.
18
However, the Court expects that RMIC and First Tennessee will continue to conduct good faith
discovery in accordance with the Rules and provide all responsive discovery in a timely fashion.
III. Conclusion
For the reasons set forth herein, First Tennessee’s Motion to Compel Responses to
Interrogatories and Document Requests is hereby GRANTED IN PART AND DENIED IN PART.
IT IS SO ORDERED this 5th day of July, 2011.
s/ Charmiane G. Claxton
CHARMIANE G. CLAXTON
UNITED STATES MAGISTRATE JUDGE
19
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?