UNITED STATES OF AMERICA et al v. Homeward Residential Inc et al
Filing
155
MEMORANDUM OPINION AND ORDER - DENYING 131 Motion to Compel Discovery from Relators. Signed by Judge Amos L. Mazzant, III on 7/31/2015. (baf, )
United States District Court
EASTERN DISTRICT OF TEXAS
SHERMAN DIVISION
UNITED STATES OF AMERICA
Ex rel. Michael J. Fisher, and Michael Fisher,
Individually, and Brian Bullock, and Brian
Bullock, Individually
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v.
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HOMEWARD RESIDENTIAL, INC., f/k/a
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American Home Mortgage Servicing, Inc., ET. §
AL.
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CASE NO. 4:12-CV-461
Judge Mazzant
MEMORANDUM OPINION AND ORDER
Pending before the Court is Defendant Homeward Residential Inc.’s Motion to Compel
Discovery from Relators (Dkt. #131). After reviewing the relevant pleadings, the Court finds
that the motion should be denied.
BACKGROUND
On July 25, 2012, Relator Michael J. Fisher (“Fisher” or “Relator”) filed his original
complaint under seal (Dkt. #1).
In his original complaint, Fisher alleged that Homeward
Residential, Inc. (“Homeward”) did not provide disclosures required by the Truth in Lending Act
(“TILA”) and Regulation Z with any of its Home Affordable Modification Program (“HAMP”)
or non-HAMP modifications (Dkt. #1).
On June 4, 2014, the Court ordered that the complaint be unsealed and served upon
Defendant, after the United States declined to intervene (Dkt. #27). On October 9, 2014,
Defendant filed its Rule 12(b)(6) and Rule 9(b) Motion to Dismiss (Dkt. #33) and its Rule
12(b)(1) Motion to Dismiss and Rule 56 Motion for Summary Judgment (Dkt. #34).
On October 16, 2014, Relators filed their Sealed Motion to Seal Qui Tam Relators’ First
Amended Complaint (Dkt. #38) and Qui Tam Relators’ First Amended Complaint (Dkt. #39).
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The first amended complaint incorporated new allegations including: (1) Federal Housing
Administration (“FHA”) violations, (2) Dodd-Frank Act violations, (3) Real Estate Settlement
Procedures Act (“RESPA”) violations, and (4) Texas, New York, and Massachusetts state law
violations (Dkt. #39). It also added a new relator, Brian Bullock (“Bullock” or “Relator”) (Dkt.
#39). On October 31, 2014, the Court denied Relators’ Sealed Motion to Seal Qui Tam Relators’
First Amended Complaint (Dkt. #54).
On March 3, 2015, Relators filed their Second Amended Complaint (Dkt. #101). The
Second Amended Complaint added a new defendant, Ocwen Financial Corporation (“Ocwen
Financial”) (Dkt. #101).
On July 2, 2015, Homeward filed its Motion to Compel Discovery from Relators (Dkt.
#131). On July 7, 2015, the Court ordered an expedited briefing schedule. On July 8, 2015,
Relators filed their response (Dkt. #136). On July 9, 2015, Homeward filed its reply (Dkt. #138).
Also on July 9, 2015, Relators filed their sur-reply (Dkt. #140).
ANALYSIS
Homeward is seeking production of the disclosure statements made under 31 U.S.C. §
3730(b)(2) and other communications made between Relators and the United States
Government.1 (Dkt. #131 at p. 2). Homeward also seeks the production of the following: (1)
communications with former Homeward and Ocwen employees relating to the claims and
allegations in the First Amended Complaint, and (2) any witness statements obtained from
current or former Homeward or Ocwen employees. (Dkt. #131 at p. 2). Realtors object to both
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Homeward also subpoenaed the Government to present documents identical to the ones addressed within the
present motion. The Government moved to quash the subpoena and for a protective order (See Dkt. #133).
Although the Court has already addressed and ruled on the Government’s motion, the broader arguments within the
Government’s Motion are addressed herein.
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requests, claiming attorney-client privilege, common interest privilege, and/or the work product
doctrine. (Dkt. #131 at p. 2).
Production of Disclosure Statements
Homeward asserts that the Court should compel disclosure of the disclosure statements
and correspondence with the Government because they are not protected from disclosure and
they are necessary to Homeward’s defenses (Dkt. #131 at p. 3). Relators contend that they have
provided Homeward with the following information: (1) the names of all persons mentioned
within the disclosure statements, (2) all underlying documents used in creating and/or referenced
within the disclosure statements, (3) all underlying documents provided by Relators to the United
States under 31 U.S.C. § 3730(b)(2), and (4) all factual information used to create or referred to
within the statements (Dkt. #136 at p. 1). Relators assert that they are only withholding the
actual disclosure statements because those are protected by attorney-client privilege, common
interest privilege, and the work product doctrine (Dkt. #136 at p. 1).
The False Claims Act (“FCA”) authorizes a person to file a civil action alleging a
violation on behalf of the person and the government. See 31 U.S.C. § 3730(b)(1). However,
the FCA requires that the person serve on the government a “written disclosure of substantially
all material evidence and information the person possesses.” 31 U.S.C. § 3730(b)(2). “The
purpose of the written disclosure requirement ‘is to provide the United States with enough
information on the alleged fraud to be able to make a well reasoned decision on whether it
should participate in the filed lawsuit or allow the relator to proceed alone.’” United States ex
rel. Bagley v. TRW, Inc., 212 F.R.D. 554, 555 (C.D. Cal. 2003) (quoting United States ex rel.
Woodard v. Country View Care Ctr., Inc., 797 F.2d 888, 892 (10th Cir. 1986)).
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“The FCA is silent as to if the written disclosure is protected from discovery.” U.S. ex
rel. Cericola v. Ben Franklin Bank, No. 99 C 6311, 2003 WL 22071484, at *2 (N.D. Ill. Sept. 4,
2003); see, e.g., United States ex rel. O’Keefe v. McDonnell Douglas Corp., 918 F. Supp. 1338,
1345-46 (E.D. Mo. 1996); United States ex rel. Burns v. A.D. Roe Co., 904 F. Supp. 592, 593-94
(W.D. Ky. 1995); United States ex rel. Stone v. Rockwell Int’l Corp., 144 F.R.D. 396, 398 (D.
Colo. 1992). However, the courts have found that the written disclosure statement may be
protected under the work product doctrine. See, e.g., Bagley, 212 F.R.D. at 559-61; O’Keefe,
918 F. Supp. at 1346; United States ex rel. Robinson v. Northrop Corp., 824 F. Supp. 830, 83839 (N.D. Ill. 1993); Stone, 144 F.R.D. at 400-401.
Federal Rule of Civil Procedure 26(b)(3) states in relevant part:
[A] party may not discover documents and tangible things that are prepared in
anticipation of litigation or for trial by or for another party or its representative
(including the other party’s attorney, consultant, surety, indemnitor, insurer, or
agent). But…those materials may be discovered if: (i) they are otherwise
discoverable under Rule 26(b)(1); and (ii) the party shows that it has substantial
need for the materials to prepare its case and cannot, without undue hardship,
obtain their substantial equivalent by other means.
FED. R. CIV. P. 26(b)(3)(A).
“The work-product doctrine provides qualified protection of
documents and tangible items prepared in anticipation of litigation, including ‘a lawyer’s
research, analysis of legal theories, mental impressions, notes, and memoranda of witnesses’
statements.’” Ferko v. Nat’l Ass’n for Stock Car Auto Racing, Inc., 219 F.R.D. 396, 400 (E.D.
Tex. 2003) (quoting Dunn v. State Farm Fire & Cas. Co., 927 F.2d 869, 875 (5th Cir. 1991)).
Rule 26(b)(3) distinguishes between opinion work product, which consists of the “mental
impressions, conclusions, or legal theories of an attorney or other representative of a party,” and
ordinary work product, which consists of the “factual material prepared in anticipation of
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litigation or trial.” Bagley, 212 F.R.D. at 559; see, e.g., United States ex. rel. Burroughs v.
DeNardi Corp., 167 F.R.D. 680, 684 (S.D. Cal. 1996); Stone, 144 F.R.D. at 401 (D. Colo. 1992).
“If a party proves that materials merit work-product protection, the party seeking
discovery must prove why those materials should still be produced.” Ferko, 219 F.R.D. at 400.
The party seeking production must establish (1) a substantial need of the privileged materials and
(2) an inability to obtain the information through other means without undue hardship. Id.
However, “[a]bsent a waiver, opinion work product enjoys nearly absolute protection and is
discoverable only in ‘rare and extraordinary circumstances.’” Bagley, 212 F.R.D. at 559 (citing
Burroughs, 167 F.R.D. at 683-684).
The Fifth Circuit has not directly addressed whether FCA disclosure statements constitute
opinion work product or ordinary work product. However, in Bagley, a California district court
found that the disclosure statements exchanged between relators and the government constituted
opinion work product and were subject to absolute privilege. See Bagley, 212 F.R.D. 554 (C.D.
Cal. 2003). The Bagley court found that disclosure statements constituted opinion work product
because
[t]o meet [the FCA’s disclosure] obligation, the relator and his or her counsel
must engage in a process of selecting and winnowing from the totality of
information known to the relator only those facts and evidence that are material to
the relator’s legal claims. Therefore, the factual narratives in the disclosure
statements reveal “the mental impressions, conclusions, opinions, or legal theories
of” the relator and his or her counsel.
Id. at 564. The Bagley court also found that classifying disclosure statements as opinion work
product fulfilled the purposes of 31 U.S.C. § 3730(b)(2). Id. at 565. However, many courts have
found that disclosure statements constitute ordinary work product, and thus, the material would
remain privileged unless the opposing party could demonstrate a substantial need for the material
and an undue hardship in obtaining the information through alternate means.
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See, e.g.,
Burroughs, 167 F.R.D. 680; Cericola, 2003 WL 22071484; United States ex rel. Yannacopoulos
v. General Dynamics, 231 F.R.D. 378 (N.D. Ill. 2005).
Additionally, the common interest privilege is an extension of the attorney-client
privilege and of the work product doctrine. Ferko, 219 F.R.D. at 401. It is “an exception to the
general rule that the [] privilege is waived upon disclosure of privileged information with a third
party.” Id. (quoting Katz v. AT&T Corp., 191 F.R.D. 433, 436 (E.D. Pa. 2000)). A number of
courts have held that relators’ disclosure statements are protected by the “common interest” or
“joint prosecution” privilege. See United States v. Medica-Rents Co., 4:01-CV-198-Y, 2002 WL
1483085 (N.D. Tex. June 21, 2002); see also, Burroughs, 167 F.R.D. at 685-686; United States
ex rel. Purcell v. MWI Corp., 209 F.R.D. 21, 26-27 (D.D.C. 2002); United States ex rel.
[Redacted] v. [Redacted], 209 F.R.D. 475, 478, 479 (D. Utah 2001).
The Court finds that the disclosure statements submitted to the Government by Relators
pursuant to 31 U.S.C. § 3730(b)(2) constitute at least ordinary work product for the purposes of
the work product doctrine. Public policy favors the full and frank communication between
Relators and the Government concerning the prosecution of the case, and as such, the
communications must be protected from disclosure. Therefore, protection was not waived when
Relators disclosed the information to the Government as the common-interest doctrine applies.
Additionally, the Court finds that Homeward has not established both a substantial need
for the documents and an undue hardship in obtaining the documents by other means.
Homeward argues that it has a substantial need for the disclosure statements so that it can
conduct its discovery in the present case. (Dkt. #131 at p. 6). Homeward also asserts that
forcing it “to compile information through interrogatories, document requests, and depositions
would place an undue burden on [it].” (Dkt. #131 at p. 7).
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The Court does not find Homeward’s argument to be persuasive.2 Relators assert that
they have produced to Homeward all the factual documents accompanying the disclosure
statements, as well as the identity of any persons named within the disclosure statements (Dkt.
#136 at p. 7). Additionally, Homeward has deposed Relators and had the opportunity to question
them regarding the information contained within their allegations and their investigative efforts
(Dkt. #136 at p. 7). Therefore, the Court finds that Homeward has not made the requisite
showing needed to compel the production of the documents protected under the work product
doctrine. Homeward’s motion to compel will be denied as to the production of the disclosure
statements.3
Non-Testifying Consulting Experts
Homeward also requests that Relators produce any communications with former
Homeward and Ocwen employees relating to the claims and allegations in the First Amended
Complaint, and any witness statements obtained from current or former Homeward or Ocwen
employees. (Dkt. #131 at p. 2). Relators claim the documents are privileged under the nontestifying consulting expert privilege (See Dkt. #136 at p. 9-10). Additionally, at the hearing
held on July 10, 2015, Homeward argued that it was challenging Relators’ designation of the exemployees as non-testifying consulting experts.
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Homeward asserts that it “is entitled, at the very least, to have the Court review in camera Relators’ disclosure
statements and require production of all non-privileged contents.” (Dkt. #131 at p. 5, n. 4) (citing Cericola, 2003
WL 22071484, at *3 (N.D. Ill. Sept. 4, 2003); Grand ex rel. United States v. Northrop Corp., 811 F. Supp. 333, 337
(S.D. Ohio 1992). As the Court stated during the July 10, 2015 hearing on this motion, Homeward has not shown
that it has a substantial need for the privileged disclosed statements, and therefore, the Court will not conduct an in
camera review.
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The Court will not address Relators’ claim that the disclosure statement is protected by attorney-client privilege.
However, reported decisions expressly addressing the issue have uniformly concluded that disclosure statements are
not protected by the attorney-client privilege. Bagley, 212 F.R.D. at 558; see, e.g., Burroughs, 167 F.R.D. at 68283; Burns, 904 F. Supp. at 594; Stone, 144 F.R.D. at 399-400.
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After reviewing the relevant pleadings, the Court finds that Relators have not made an
improper designation of the non-testifying consulting expert witnesses, and therefore,
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Homeward’s motion will be denied as to the issue of the non-testifying consulting experts.
CONCLUSION
It is therefore ORDERED that Homeward Residential Inc.’s Motion to Compel
Discovery from Relators (Dkt. #131) is hereby DENIED.
SIGNED this 31st day of July, 2015.
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AMOS L. MAZZANT
UNITED STATES DISTRICT JUDGE
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