Robinson v. Quicken Loans, Inc.
Filing
156
MEMORANDUM OPINION AND ORDER denying Plaintiff's 133 MOTION to Compel Production of Settlement Agreement and Related Documents Regarding the 2008 Litigation Between Defendants. Signed by Magistrate Judge Cheryl A. Eifert on 5/10/2013. (cc: attys) (mkw)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF WEST VIRGINIA
HUNTINGTON DIVISION
JANET R. ROBINSON,
Plaintiff,
v.
Case No.: 3:12-cv-00981
QUICKEN LOANS, INC.,
WELLS FARGO BANK, N.A., and
JOHN DOE HOLDER,
Defendants.
MEMORANDUM OPINION AND ORDER
Pending before the Court is Plaintiff’s Motion to Compel Production of
Settlement Agreement and Related Documents Regarding the 2008 Litigation Between
Defendants. (ECF No. 133). Defendants have filed memoranda in opposition of
production, and Plaintiff has replied. (ECF Nos. 138, 139, 149). On May 8, 2013, the
Court conducted a hearing on the matter. During the hearing, Defendants submitted the
settlement agreement to the Court for in camera review. Having now considered the
positions of the parties and the relevant submissions, the Court DENIES Plaintiff’s
Motion to Compel.
I.
Relevant Facts
This civil action involves claims by Plaintiff that the Defendants, Quicken Loans,
Inc. (“Quicken”) and Wells Fargo Bank, N.A. (“Wells Fargo”), engaged in a joint venture
to fraudulently induce her to procure an unconscionable, high-interest home equity
loan. According to Plaintiff, in 2001, the Defendants entered into an agreement, called
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the Home Equity Loan/Home Equity Purchase Line Agreement and Wells Fargo Home
Equity Seller Guide (the “HELOC Agreement”), under which Quicken could originate
home equity loans and lines of credit for sale to Wells Fargo. (ECF No. 133). In 2003,
Plaintiff obtained a loan through Quicken, which she later learned was a “stated income
loan” made pursuant to the HELOC Agreement.
In June 2008, Wells Fargo filed suit against Quicken for breach of the HELOC
Agreement. Wells Fargo complained that Quicken had made inaccurate or untrue
representations and warranties regarding some of the loans purchased by Wells Fargo.
Wells Fargo contended that under the HELOC Agreement, Quicken was required to
repurchase these loans; however, when Wells Fargo demanded that Quicken repurchase
them, Quicken refused. Wells Fargo sought damages in the amount of $4,047,000.
In response to the complaint, Quicken filed an answer and counterclaim. In the
counterclaim, Quicken alleged that when it originated loans under the HELOC
Agreement, it followed guidelines provided by Wells Fargo. Quicken indicated that
Wells Fargo created a “stated income loan” program, which allowed homeowners with a
FICO score of at least 700 to borrow up to $100,000 without documentation of income.
Quicken claimed that Wells Fargo fully expected that some of the borrowers would
overstate their income and some would default. However, Wells Fargo was willing to
assume the risk given the large profits it enjoyed from the program. According to
Quicken, when home values began to drop in 2007, Wells Fargo experienced unexpected
losses in its stated income loan portfolio; accordingly, it began to demand that Quicken
repurchase loans.
Four months after initiation of the litigation, and before any discovery was
conducted, Quicken and Wells Fargo reached a settlement agreement in the case. On
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December 3, 2008, the case was dismissed.
Plaintiff subsequently learned about the 2008 litigation between the Defendants
and recently obtained copies of the pleadings, the HELOC Agreement, and the order of
dismissal, all of which were public record. She now asks the Court for an order
compelling the Defendants to provide her with any documentation reflecting their
negotiations in the case and with a copy of the confidential settlement agreement.
II.
Relevant Law
Federal Rule of Civil Procedure 26(b)(1) provides that “[p]arties may obtain
discovery regarding any matter, not privileged, that is relevant to the claim or defense of
any party, including the existence, description, nature, custody, condition, and location
of any books, documents, or other tangible things and the identity and location of
persons having knowledge of any discoverable matter ... Relevant information need not
be admissible at the trial if the discovery appears reasonably calculated to lead to the
discovery of admissible evidence.” Although the Federal Rules of Civil Procedure do not
define what is “relevant,” Rule 26(b)(1) makes it clear that relevancy in discovery is
broader than relevancy for purposes of admissibility at trial.1 Caton v. Green Tree
Services, LLC, Case No. 3:06-cv-75, 2007 WL 2220281 (N.D.W.Va. Aug. 2, 2007) (the
“test for relevancy under the discovery rules is necessarily broader than the test for
relevancy under Rule 402 of the Federal Rules of Evidence”); Carr v. Double T Diner,
272 F.R.D.431, 433 (D.Md. 2010) (“The scope of relevancy under discovery rules is
broad, such that relevancy encompasses any matter that bears or may bear on any issue
Under the Federal Rules of Evidence, relevant evidence is ‘evidence having any tendency to make the
existence of any fact that is of consequence to the determination of the action more probable or less
probable than it would be without the evidence.’ Boykin Anchor Co., Inc. v. Wong, Case No. 5:10-cv-591FL, 2011 WL 5599283 at * 2 (E.D.N.C. Nov. 17, 2011), citing United Oil Co., v. Parts Assocs., Inc, 227
F.R.D. 404. 409 (D.Md. 2005).
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that is or may be in the case”). Nevertheless, discovery is not without limits. While a
party is entitled to discovery that is focused on the claims and defenses raised in the
pleadings, discovery into matters relevant to the broader subject matter of the litigation
is restricted to occasions when a party demonstrates “good cause” for the discovery.
Johns Hopkins University v. Datascope Corp., Case No. WDQ-05-759, 2007 WL
1450367 (D.Md. May 16, 2007).
In the case of confidential settlement agreements, some courts have recognized a
“settlement privilege” that protects the agreements from disclosure. Others courts have
required a “particularized showing that admissible evidence will be generated” before
allowing discovery of a confidential settlement agreement. See USAA Cas. Ins. Co. V.
Smith, Case No. 1:10-cv-115, 2012 WL 967368 (N.D.W.Va. Mar. 21, 2012). In contrast,
courts in the Fourth Circuit have generally declined to recognize a federal settlement
privilege. National Union Fire Ins. Co. of Pittsburgh, PA v. Porter Hayden Co., Case No.
CCB-03-3408, 2012 WL 628493 (D.Md. Feb. 24, 2012) (citing Equal Rights Ctr. V.
Archstone-Smith Trust, 251 F.R.D. 168, 170 (D.Md. 2008). Moreover, when
determining whether a settlement agreement is producible in discovery, courts in this
circuit have found that “relevance not admissibility, is the appropriate inquiry.”
Herchenroeder v. Johns Hopkins Univ. Applied Physics Lab., 171 F.R.D. 179, 181
(D.Md. 1997) (emphasis in original). Thus, a particularized showing related to potential
admissibility of evidence is not necessary to justify production of a confidential
settlement agreement.
III.
Analysis
Plaintiff argues that the settlement agreement and related documents are
relevant in five ways. First, she argues that the documents may help establish her claim
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that the Defendants were engaged in a joint venture. Defendants argue in response that
Plaintiff has the HELOC Agreement and the pleadings from the litigation, and those
documents provide the best information about the relationship between the parties.
Having reviewed the settlement agreement, the Court agrees with Defendants that it
provides no information even remotely relevant to the issue of joint venture.
Second, Plaintiff contends that the settlement agreement may apportion liability
in a way that will shed light on who was “driving the train” in the Defendants’ business
dealings with Plaintiff. According to Quicken, however, it was the only party that
communicated directly with Plaintiff during the origination of the loan. Therefore, the
bulk of Plaintiff’s claims implicate only Quicken. Defendants are not relying upon the
settlement agreement as proof of their respective responsibility in the instant action,
and the Court fails to see how apportionment of liability, even if it was expressed in the
agreement, is relevant to Plaintiff’s claims. In the event that a jury concludes that the
Defendants participated in a joint venture to defraud Plaintiff, or that Quicken was
Wells Fargo’s agent in a predatory lending scheme, Defendants will be jointly and
severally liable to Plaintiff regardless of Defendants’ perceptions of their individual
responsibility. Short v. Wells Fargo Bank Minnesota, N.A., 401 F.Supp.2d 549, 563
(S.D.W.Va. 2005). In any event, the undersigned’s in camera review revealed the
document to be a standard settlement agreement and general release. Consequently, the
document is neither relevant to Plaintiff’s claims nor to the Defendants’ defenses.
For her third, fourth, and fifth grounds, Plaintiff suggests that the settlement
agreement and related documents may be relevant to the “willfulness” and
unconscionability of Defendants’ actions and for impeachment purposes. While this is a
reasonable idea, the reality does not sustain it. In its written response and oral
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argument, Quicken emphasizes that Plaintiff’s loan was not one of the 90 or so loans
that triggered the litigation and was not specifically addressed during the proceedings.
No discovery was conducted and no finding of wrongdoing or breach of contract was
made by a court or a jury. Given that Plaintiff did not file her lawsuit until 2012 and
admittedly did not know of any problem with the valuation of her property until June
2011, it makes perfectly good sense that her loan was not one that figured prominently
in the 2008 litigation. More importantly, having reviewed the settlement agreement, the
undersigned finds nothing in it that is relevant to the issues of unconscionability or
willfulness and nothing that would create a basis for impeachment. Plaintiff has already
obtained the HELOC Agreement, pleadings, and testimony pertaining to the litigation
between the Defendants. In addition, Plaintiff has obtained testimony from the
Defendants specific to her loan and whether its origination complied with the terms of
the HELOC Agreement. The undersigned sees nothing in the agreement that
contradicts, explains, supplements, or addresses the evidence of record.
In view of the Court’s finding that the documents sought by Plaintiff do not
pertain to her loan or otherwise provide information relevant to the claims and defenses
in this case, Plaintiff’s motion to compel the settlement documents is denied.
The Clerk is instructed to provide a copy of this Order to counsel of record.
ENTERED: May 10, 2013.
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