Motion to Compel Data Denied as Burdensome and Costly in Servicing MDL
In re RFC and ResCap Liquidating Trust Actions, Case No. 13-3451 (D. Minn., June 21, 2017) is an MDL suit related to the servicing of mortgage loans. RFC was in the business of acquiring residential mortgage loans from certain lenders, who were responsible for underwriting the loans. The agreements between RFC and the lenders contained certain representations and warranties by the lenders. Unfortunately, many of the loans it purchased from these lenders were defective in that the borrowers clearly did not have the resources to repay the loans. As a result, many of the loans went into default, and RFC alleges that certain of the lenders from which it acquired the loans had violated the terms of their agreements and made false representations. RFC filed Chapter 11 bankruptcy in May 2012, and hundreds of claims were filed in the case over the defective loans. Under the confirmed Chapter 11 plan, the ResCap trust succeeded to RFC’s interests, including RFC’s claims against these lenders. Multiple lawsuits were filed, commencing the MDL.
One of the Defendants, Provident Funding, filed a Motion to Compel data during discovery, joined by Defendant First Guaranty Mortgage Corporation. Defendants noticed gaps in Plaintiff ResCap’s production of documents. The court ordered the parties to meet and confer prior to the filing of the Motion, and Plaintiff provided affidavits of its employees regarding the missing data. Defendants provided a missing documents spreadsheet indicating that it was missing documentation for 878 out of 889 loans. Counsel for Plaintiffs indicated that he and others at his firm had spent at least 750 hours assisting Defendants with gaining access to the discovery.
At issue was data compiled in various data servers that had been transferred from one servicer to the next over the course of several years. Before April 2007, RFC’s affiliate, Homecoming, undertook primary servicing responsibility for most loans in RFC’s residential mortgage backed securities (RMBS) using a loan servicing system called LSAMS. After April 2007, the servicing data for loans was moved to GMAC Mortgage, another RFC affiliate, for primary servicing. GMAC used a loan servicing platform called LoanServ. LoanServ is a commercially available platform, but GMAC used a customized and proprietary version of the software. LoanServ is sold and supported by FiServ, a third party service provider that stored managed and maintained the data. The inactive loans stored on LSAMS were archived and remained on the LSAMS system. GMAC accessed the data using LoanServ and stored a subset of the data at FiServ’s data warehouse utility, which was accessible through an application called Business Objects, which required extensive data knowledge and training to operate.
In February 2013, Ocwen Loan Servicing purchased GMAC as part of the bankruptcy proceedings and acquired all its books and records, equipment, fixtures, and real property. All the LSAMS data and LoanServ data were transferred to Ocwen as part of the sale.
Testimony from ResCap employee Colette Wahl indicates that ResCap has “no reason to believe that any LSAMS data that was not transferred to LoanServ in April 2007 was deleted” prior to the transfer to Ocwen. Wahl also testified that ResCap had no reason to believe that any LoanServ data was deleted during that time. ResCap requested from Ocwen a snapshot of the primary servicing data stored at the data warehouse as it existed at that time. Such data was not readily accessible, as it consisted of over 650 separate data tables with each table containing up to 577 fields and each field containing up to 100 million rows of data. Extracting the data would take more than 400 hours of work; further, the data would not be complete and would be difficult to review.
Defendants sought production of missing records, and Plaintiffs argued that the request was unduly burdensome. The parties did not dispute that the records were relevant. Defendants argued that they were “critical pieces of evidence”, but the court found that, based upon how slowly Defendants fought for the documents and how they did not obtain any testimony from Ocwen or Plaintiffs, their position was undercut. The court noted that it had to balance relevance with burden or expense to the producing party and determined that Plaintiffs’ efforts to search for the documents was “herculean” and reasonable. Plaintiffs were diligent and acted in good faith in their efforts to locate the documents. The court did order Plaintiffs to provide a sworn affidavit stating that they had conducted a reasonable search and have produced everything in their possession, custody or control.