UNITED STATES OF AMERICA et al v. Homeward Residential Inc et al
MEMORANDUM OPINION AND ORDER - DENYING 196 SEALED MOTION /for Protective Order to Protect the Privacy of Their Borrowers filed by Ocwen Financial Corporation, Homeward Residential Inc.. Signed by Judge Amos L. Mazzant, III on 1/22/2016. (baf, )
United States District Court
EASTERN DISTRICT OF TEXAS
UNITED STATES OF AMERICA
Ex rel. Michael J. Fisher, Brian Bullock and
Michael Fisher, Individually and Brian
HOMEWARD RESIDENTIAL, INC., f/k/a
American Home Mortgage Servicing, Inc.,
CASE NO. 4:12-CV-461
MEMORANDUM OPINION AND ORDER
Pending before the Court is Defendants’ Ocwen Loan Servicing, LLC and Homeward
Residential, Inc.’s Motion for Protective Order to Protect the Privacy of Their Borrowers (Dkt.
#196). After reviewing the relevant pleadings, the Court finds that the motion should be denied.
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 (See 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 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).
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
On February 9, 2015, the parties filed their Joint Motion for Entry of Protective Order
(Dkt. #96). The Court granted the motion, and entered the Protective Order on February 9, 2015
On March 3, 2015, Relators filed their Second Amended Complaint (Dkt. #101). The
complaint added Ocwen Financial Corporation (“OFC”) as a defendant, alleging that OFC
violated the False Claims Act (“FCA”) by making false representations to the government, which
induced the government to enter into Servicer Participation Agreements (“SPA”) with OFC (Dkt.
#101 at ¶ 141).
The Second Amended Complaint also claims that OFC is the parent of
Homeward, and that OFC expressly or impliedly agreed to assume the obligations of its
subsidiaries (Dkt. #101). Additionally, OFC operated Homeward as a mere continuation of the
selling entity (Dkt. #101).
On October 27, 2015, Defendants Homeward Residential, Inc. and Ocwen Loan
Servicing, LLC filed their Motion for Protective Order to Protect the Privacy of their Borrowers
(Dkt. #196). On November 13, 2015, Relators filed their response (Dkt. #200). On November
23, 2015, Defendants filed their reply (Dkt. #203). On December 3, 2015, Relators filed their
sur-reply (Dkt. #211).
Rule 26(b)(1) 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). The discovery
rules are accorded broad and liberal treatment to achieve their purpose of adequately informing
litigants in civil trials. Herbert v. Lando, 441 U.S. 153, 177 (1979). However, discovery does
have “ultimate and necessary boundaries.” Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340,
351 (1978) (quoting Hickman v. Taylor, 329 U.S. 495, 507 (1947). The “control of discovery is
committed to the sound discretion of the trial court…” Williamson v. United States Dep’t of
Agric., 815 F.2d 368, 382 (5th Cir. 1987) (citing Mayo v. Tri-Bell Indus., 787 F.2d 1007, 1012
(5th Cir. 1986)).
Likewise, “[t]he decision to enter a protective order is within the Court’s discretion.”
Johnson v. Mixon, No. 13-2629, 2014 WL 1764750, at *2 (E.D. La. May 2, 2014) (citing
Thomas v. Int’l Bus. Mach., 48 F.3d 478, 482 (10th Cir. 1995)). Federal Rule of Civil Procedure
A party or any person from whom discovery is sought may move for a protective
order in the court where the action is pending—or as an alternative on matters
relating to a deposition, in the court for the district where the deposition will be
taken…The court may, for good cause, issue an order to protect a party or person
from annoyance, embarrassment, oppression, or undue burden or expense…
FED. R. CIV. P. 26(c). “Rule 26(c)’s requirement of a showing of good cause to support the
issuance of a protective order indicates that ‘[t]he burden is upon the movant to show the
necessity of its issuance, which contemplates a particular and specific demonstration of fact as
distinguished from stereotyped and conclusory statements.’” In re Terra Int’l, Inc., 134 F.3d
302, 306 (5th Cir. 1998) (quoting United States v. Garrett, 571 F.2d 1323, 1326, n. 3 (5th Cir.
Defendants request that the Court prohibit Relators from contacting Defendants’
borrowers absent leave of Court, or alternatively, the Court should prescribe specific rules that
govern Relators’ contacts with Defendants’ borrowers (Dkt. #196 at p. 1). Defendants assert that
that documents produced to Relators include “their customers’ nonpublic, personal
information[;]” and therefore, Defendants’ borrowers should be protected from potential
communications with Relators (Dkt. #196 at p. 1).
Relators assert that Defendants’ motion
should be denied for the following reasons:
(1) Relators have not served discovery requests or subpoenas on the borrowers;
(2) Relators are entitled to contact individuals with knowledge relevant to the
claims and defenses in [this case]; (3) Defendants lack standing to seek protection
on behalf of third parties; and (4) Defendants have not established the good cause
necessary for entry of a protective order.
(Dkt. #200 at p. 1). Additionally, Relators allege that “privacy concerns raised by Defendants on
behalf of the third-party borrowers are moot because Defendants already produced borrowers’
private and confidential information.” (Dkt. #200 at p. 1) (emphasis omitted).
First, Relators assert that Defendants lack standing to “raise the legal rights of the
borrowers.” (Dkt. #200 at p. 8). Under Rule 26(c), only “[a] party or any person from whom
discovery is sought may move for a protective order.” FED. R. CIV. P. 26(c)(1). Therefore, a
As a preliminary matter, in their response, Relators request that the Court take Judicial Notice of the New York
Consent Order dated December 19, 2014. Federal Rule of Evidence 201 governs judicial notice of adjudicative
facts, or the facts of a particular case. It provides that “[a] judicially noticed fact must be one not subject to
reasonable dispute in that it is either (1) generally known within the territorial jurisdiction of the trial court or (2)
capable of accurate and ready determination by resort to sources who accuracy cannot reasonably be questioned.”
FED. R. EVID. 201(b); see also Taylor v. Charter Med. Corp., 162 F.3d 827, 829 (5th Cir. 1998). It is unclear to the
Court whether Relators seek judicial notice of the fact that the New York Consent Order was issued, or whether they
request the Court to take judicial notice of the contents of the New York Consent Order. The concept of Rule 201 is
to take judicial notice of a fact whose accuracy cannot be reasonably questioned. Relators have not established that
the findings in the New York Consent Order cannot reasonably be questioned, nor do they address the two prongs of
the Rule 201(b) test and why they are met in the present case. Therefore, the Court does not believe it would be
appropriate to take notice of the contents of the report. If Relators would like to admit certain statements from the
New York Consent Order in a later dispositive motion or at trial, they will have to go through the proper evidentiary
party seeking a protective order “must show not only good cause but also—in the case of a party
who objects to another party’s discovery request aimed at a third party—standing to object on
behalf of them.” Southard v. State Farm Fire & Cas. Co., No. CV 411-243, 2012 WL 1951652,
at *2 n. 3 (S.D. Ga. Mar. 22, 2012) (citations omitted).
Courts have recognized “the general prohibition against litigants raising another person’s
legal rights.” Heller v. City of New York, No. 06-cv-2842, 2008 WL 2965474, at *2 (E.D.N.Y.
Apr. 11, 2008) (citing Allen v. Wright, 468 U.S. 737, 751 (1984), overruled on other grounds by,
Lexmark Int’l Inc. v. Static Control Components, Inc., 134 S. Ct. 1377 (2014)). The Fifth
Circuit, in Brown v. Braddick, 595 F.2d 961, 967 (5th Cir. 1979), stated that a party to a lawsuit
is without standing to attack a third party’s “amenability to the compulsory process of the district
court[,]” unless the party to the suit possesses the material requested…or asserts a “personal right
or privilege with respect to the material.” Raytheon Co. v. Indigo Sys. Corp., No. 4:07-cv-109,
2008 WL 2509367, at *1 (E.D. Tex. 2008) (quoting Brown, 595 F.2d at 967).
Defendants assert that they have standing because “they are obligated to protect their
borrowers’ information and the borrowers—who do not know that the Court ordered disclosure
of their loan files and personal financial information—are unable to meaningfully protect
themselves.” (Dkt. #203 at p. 2). The Court finds that the issue of whether or not Defendants
have standing to assert a claim regarding the disclosure of the borrowers’ information is now
moot as Defendants have already disclosed the borrowers’ information to Relators.
However, even if Defendants could demonstrate that they possess standing in relation to
Relators’ contacting the borrowers about the present case, the Court finds that Defendants have
not demonstrated a “particular and specific demonstration of fact” as to why a protective order is
necessary as is required under the federal balancing test. See In re Terra Int’l, Inc., 134 F.3d at
306; see also Shaw v. Experian Info. Solutions, Inc., 306 F.R.D. 293, 301 (S.D. Cal. 2015) (when
resolving a discovery-based privacy objection, a federal court balances the need for the particular
information against the claimed privacy right). In the present case, Defendants assert that a
protective order is needed in order to keep from disclosing borrowers’ non-public personal
information because such disclosure “would improperly and unnecessarily compromise
borrowers’ privacy, especially when less invasive alternatives are available.” (Dkt. #196 at p. 1).
Defendants further assert that “[b]ecause of its sensitivity, such nonpublic personal information
is shielded from discovery unless its relevance far outweighs the privacy interests of financial
institutions’ customers.” (Dkt. #196 at p. 4). However, Relators assert that no discovery is at
issue in the present case; instead, “the only information Defendants purportedly seek ‘to
protect’—personal borrower information—has already properly been produced to Relators by
Defendants (Dkt. #200 at p. 3). Relators further assert that they are entitled to contact the
borrowers because the information is relevant to Relators’ claims (Dkt. #200 at p. 3).
The Court agrees with Relators. Although federal courts recognize a general right to
privacy that can be raised in response to discovery requests, “the right to privacy is not an
absolute bar to discovery.” Shaw, 206 F.R.D. at 301; see Dowell v. Griffin, 275 F.R.D. 613, 617
(S.D. Cal. 2011). “The resolution of a privacy objection requires a balancing of the need for the
particular information against the claimed privacy right.” Shaw, 206 F.R.D. at 301. In the
present case, Relators are not seeking disclosure of the borrowers’ confidential or private
information, as that information has already been disclosed by Defendants.2 Relators are not
Defendants cite numerous cases under the Gramm-Leach-Bliley Act (the “GLBA”) for the proposition that a
protective order is necessary to protect the borrowers’ privacy information (See Dkt. #196 at pp. 3-5). However, the
GLBA implements procedures for financial institutions to ensure the security and confidentiality of consumer
records and information. See 15 U.S.C. § 6801(b) (2003). Even if the GLBA did apply in the present case, the
statute allows a party to disclose non-public personal information—including contact information—in litigation
under the statute’s “judicial process” exception. Marks v. Glob. Mortg. Grp., Inc., 218 F.R.D. 492, 496 (S.D. W.
Va. 2003) (authorizing discovery under GLBA’s “judicial process” exception); see Choate v. State Farm Lloyds,
attempting to contact the individuals as persons with knowledge relevant to Relators’ claims, but
to discuss what knowledge, if any, they have of the facts relating to this litigation.
The Court also finds that Defendants have not met their burden to show a “particular and
specific demonstration of fact” as to why a protective order is necessary. Gulf Oil Co. v.
Bernard, 452 U.S. 89, 101 n. 16 (1981) (citing In re Halkin, 598 F.2d 176, 193 (1979) (“To
establish ‘good cause’ for a protective order under [Rule] 26(c), ‘[t]he courts have insisted on a
particular and specific demonstration of fact, as distinguished from stereotyped and conclusory
statements…’”)). Defendants assert that a protective order is necessary to prevent the disclosure
of borrowers’ nonpublic personal information (See Dkt. #196). Specifically, Defendant allege
that Relators’ previous contacts with other potential information sources have bred confusion as
to whether Ocwen has authorized the Relators’ contact (Dkt. #196 at p. 6 n. 12) (“Exs. A (telling
former [Ocwen] employee that ‘Ocwen gave us your contact information as someone who would
potentially have information relevant to the case.’)”). Therefore, Defendants assert that
if Relators use the same approach with borrowers, inadvertent confusion could
result in borrowers feeling pressure to discuss private information they would not
ordinarily voluntarily disclose, which would harm Defendants’ reputations with
borrowers who would mistakenly believe that [Ocwen] and Homeward have
wrongly disclosed their sensitive personal financial information.
(Dkt. #196 at p. 6). The Court finds that Defendants have only offered conclusory statements
regarding how the “proposed contacts are likely to leave the borrowers feeling that their privacy
has been compromised” and how “confusion could result in borrowers feeling pressure to discuss
private information.” (Dkt. #200 at p. 7) (quoting Dkt. #196 at p. 6). The Court finds that these
statements are insufficient to establish the good cause necessary for entry of a protective order.
No. CIV. A. 3:03-CV-2111-M, 2005 WL 1109432, at *4 (N.D. Tex. May 5, 2005). Therefore, the Court finds that
contacting the borrowers would not be improper under the GLBA, and is not prohibited by law.
Additionally, Defendants assert that a protective order is necessary because “[t]here is no
material benefit to Relators that could outweigh the potentially coercive nature of these
communications. The additional information that Relators could obtain from borrowers about
their financial affairs would be irrelevant to Relators’ claims.” (Dkt. #196 at p. 6). Additionally,
Defendants allege that “the alleged borrower ‘financial and emotional harm’ Relators seek to
investigate is irrelevant to the claim at issue—whether Defendants falsely certified to the
government material complaint with various laws and regulations fraudulently to obtain HAMP
incentive payments.” (Dkt. #203 at p. 3). Relators assert that “the information Relators seek is
relevant to Relators’ claim and central to the dispositive issue at stake—whether Defendants
knowingly submitted false claims for payment to the government…” (Dkt. #211 at p. 2).
Specifically, Relators allege that “the information sought by Relators is relevant to their claims
and proportional to the needs in the cases. The borrowers likely can supplement and/or reveal
new details in support of Relators’ allegations, including details about Defendants’ practices that
did not comply with relevant laws or regulations…”
(Dkt. #211 at p. 3).
borrowers’ financial and other harm is relevant to the dispositive issue of whether Defendants
submitted false claims for payment to the government because financial and emotional harm is a
relevant element of an unfair act or practice under the Dodd Frank Act, which Relators allege in
their Complaint that Defendants violated.” (Dkt. #211 at p. 3).
The Court finds that the information that Relators could obtain from borrowers is relevant
to the claims at hand. The borrowers have dealt with Defendants on loan modifications, and
likely have first-hand knowledge about Defendants’ practices. Additionally, the borrowers could
have information relating to damages they suffered from Defendants’ alleged unfair practices.
Therefore, the Court finds that the information is relevant to Relators claims.
Additionally, the Court finds that the current Protective Order and the Court’s contempt
powers are sufficient to provide borrowers with the protection they need. The current Protective
Order has provisions that protect borrower information from being disclosed or publicized in any
way outside of the litigation. Specifically, the Protective Order states that protected information
“shall not be used or shown, disseminated, copied, or in any way communicated to anyone for
any purpose whatsoever, except as [in this litigation]” and “parties receiving Protective
Information shall not under any circumstances sell, offer for sale, advertise, or publicize
Protected Information.” (Dkt. #98 at pp. 3, 5). Courts have agreed that such judicial restraints
are sufficient. In Washington v. Thurgood Marshall Acad., the court addressed the privacy rights
of third parties with a ruling, which required that “[d]ocuments produced and other information
gleaned from the subpoena shall be used only in this case and not otherwise disclosed.” 230
F.R.D. 18, 24 (D.D.C.), on reconsideration, 232 F.R.D. 6 (D.D.C. 2005). Likewise, in Seattle
Times Co. v. Rhinehart, after an organization was compelled to produce a list of its donors, the
trial court issued a protective order prohibiting the parties “publishing, disseminating, or using
the [non-party] information in any way except where necessary to prepare for and try the case.”
467 U.S. 20, 27 (1984). The same protective measures described in the cases are present in the
current Protective Order.3
Alternatively, Defendants assert that “Relators should be ordered to comply with the
limitations Defendants must observe when contacting their own customers, and to take other
steps necessary to mitigate against unnecessary confusion and inadvertent disclosure.” (Dkt.
As explained in the Court’s Order regarding Relators’ Motion for Modification of Protective Order [ECF #98] to
Allow Relators Access to Confidential Information (Dkt. #205), Relators propose the changes to the Protective
Order, including the following language: (1) requiring Relators to disclose that borrowers are not required to speak
to them and (2) stating that the Defendants did not voluntarily disclose borrower information. The Court finds that
these additional safeguards provide protection against any possible impropriety when contacting the borrowers.
#196 at p. 8).
Specifically, Defendants allege that Relators should be required to do the
(1) [e]nsure that borrowers’ information is only discussed with the borrower to
whom the information belongs; (2) [c]ease communications with borrowers at any
time upon request; (3) [c]omply with the same privacy and data security
obligations imposed on Defendants; (4) [c]omply with Texas’s information
security requirements; (5) [a]uthenticate the identity of any person with whom
they speak over the phone before discussing any borrower’s personal information;
(6) [a]void calling borrowers before 8 a.m. or after 9 p.m. local time or at
borrowers’ places of employment, sending letters suggesting the communications
are from debt collectors, and implying that their communications with borrowers
are vouched for or approved by the United States; (7) [o]nly contact borrowers by
landline telephone or mail sent to a borrowers’ primary residence, absent prior
consent; (8) [l]imit the persons who can contact borrowers directly to counsel of
record, counsel’s employees, and Relators’ retained experts…; (9) [d]isclose that
borrowers’ financial information may be discussed, that borrowers are not
obligated to provide such information to Relators, that borrowers are not under
investigation, and that Relators’ communications with borrowers are made under
a process intended to protect borrowers’ privacy; (10) [a]void making any false or
misleading representation regarding the status of [Ocwen] or Homeward or the
United States’ participation or intervention in the cases; (11) [p]romptly identify
any borrowers with whom they have communicated and produce any documents
provided to them by borrowers, and to treat as ‘Protected Information’ under the
Protective Order any documents or information borrowers provide.
(Dkt. #196 at pp. 8-9). The Defendants’ proposed procedures are not necessary to protect the
borrowers’ private information as the Court has already entered a Protective Order that protects
the borrowers’ nonpublic, private information. Additionally, the proposed procedures are not
applicable to Relators because they govern (1) a financial institution’s duty to safeguard its
customers’ financial information, and (2) protocols for debt collectors. The Court finds that the
current Protective Order, combined with Relators’ proposed changes as outlined in Relators’
Motion for Modification of Protective Order [ECF #98] to Allow Relators Access to
Confidential Information (Dkt. #205) ensure the protection of the borrowers’ nonpublic,
It is therefore ORDERED that Ocwen Loan Servicing, LLC and Homeward Residential,
Inc.’s Motion for Protective Order to Protect the Privacy of their Borrowers (Dkt. #196) is
SIGNED this 22nd day of January, 2016.
AMOS L. MAZZANT
UNITED STATES DISTRICT JUDGE
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