United States ex rel. Mitchell v. CIT Bank, N.A.

UNITED STATES OF AMERICA ex rel. ANDREW MITCHELL, AND ANDREW MITCHELL, Individually, Plaintiffs/Relator, v. CIT BANK, N.A., d/b/a ONEWEST BANK, and CIT GROUP, INC., Defendants.

Civil Action No. 4:14-CV-00833

United States District Court, E.D. Texas, Sherman Division

July 28, 2021

MEMORANDUM OPINION AND ORDER

AMOS L. MAZZANT, UNITED STATES DISTRICT JUDGE

Relator Andrew Mitchell raised a discovery issue with the Court when he filed his Request for Expedited Abatement of the June 7 Destruction Deadline (Dkt. #172). This issue revolves around CIT Bank, N.A., d/b/a OneWest Bank, and CIT Group, Inc. (collectively referred to as “CTI”) withholding documents CIT claims it inadvertently produced.

BACKGROUND

In 2008, the United States faced a housing crisis caused, in part, by mortgage fraud and predatory lending. The crisis caused home prices to plummet and foreclosures to skyrocket leaving homeowners with negative equity in their homes. Distressed homeowners were unable to sell or refinance their homes to meet their mortgage obligations. In response to this crisis, the Government enacted the Emergency Economic Stabilization Act of 2008 (“EESA”).

The Home Affordable Modification Program (“HAMP”) administered by the Treasury Department, was a voluntary program under EESA designed to prevent avoidable foreclosures by providing homeowners with affordable mortgage-loan modifications and other alternatives to eligible buyers. HAMP's primary goal was to relieve the burden on homeowners by lowering their mortgage payments to 31% or less of their gross monthly income. Investors would receive payments and a guarantee that no modification would result in a mortgage worth less than the net-present value of the property. In return, mortgage servicers, in addition to their annual servicing fees, received HAMP incentive payments to complete the modifications. Each successful modification entitled the servicer from $1, 200-2, 000 depending on how long the mortgage was delinquent. From the program's start in 2009 through the second quarter of 2016, HAMP generated more than 1.6 million permanent modifications. In addition to HAMP, the Fair Housing Administration's (“FHA”) and Veterans Administration (“VA”) each had companion HAMP programs “FHA-HAMP” and “VA-Hamp, ” respectively.

In 2009, OneWest Bank (“OWB”) enrolled in the HAMP FHA-HAMP, and VA-HAMP programs. On August 18, 2009, OWB Executive Vice President and Chief Operating Officer Tony Ebers expressly certified OWB's compliance with HAMP guidelines and applicable federal laws in signing the initial Servicer Participation Agreement (“SPA”). The SPA named OWB as the servicer and Fannie Mae as Financial Agent of the United States. The SPA required OWB to provide annual certifications of compliance with the specified terms and conditions.

Defendant expressly represented in the SPAs and annual certifications that: (1) it was in compliance with the terms and guidelines of HAMP; (2) it was in compliance with all applicable laws and requirements; (3) it created and maintained an effective HAMP program and committed the resources needed to employ enough trained, experienced personnel with the tools and technology necessary to provide quality service to homeowners; and (4) it had adequately documented and monitored its compliance and immediately reported to the Government any credible evidence of material violations of these certifications. Each annual certification included an express statement certifying that OWB continued to meet the terms and conditions of the SPA, including the representation of compliance with applicable laws.

On April 13, 2011, the Office of Thrift Supervision (“OTS”) entered into a consent order with OWB (“2011 Consent Order”). Pursuant to the consent order, “a monitor was tasked to work with [OWB] to identify and remedy all deficiencies with its mortgage servicing and lending modification programs” (Dkt. #60). The terms of the 2011 Consent Order were reaffirmed by a consent order entered on March 11, 2014 (“2014 Consent Order”). On July 14, 2015, the Office of the Comptroller of the Currency terminated the 2011 and 2014 Consent Orders after finding that the Consent Orders were no longer required for the “protection of the depositors, other customers, and shareholders of the Bank, as well as its safe and sound operation” (Dkt. #60, Exhibit 8).

On May 21, 2021, CIT discovered it had inadvertently produced documents (Dkt. #175 at p. 5). On May 26, 2021, CIT requested that Relator return the documents under the February 6, 2020 Protective Order (Dkt. #175 at p. 5). Relator, however, believes the May 26 “snapped back” documents are non-privileged factual compilations of business records (Dkt. #173 at p. 2). Believing that the documents were not privileged, on June 4, 2021, Relator filed a motion requesting the Court to abate the June 7 destruction deadline until further order of the Court (Dkt. #172). Relator also filed a letter (Dkt. #173) (the “June 3 Letter”) with the motion.

Having reviewed the letter, the Court temporarily abated the June 7 destruction deadline until further order of the Court (Dkt. #174). In the Order, the Court set a briefing schedule for the parties (Dkt. #174). With the issue briefed, the Court now addresses the merits of Relator's June 3 letter and motion.

LEGAL STANDARD

Under Federal Rule of Civil Procedure 26(b)(1), parties may “obtain discovery regarding any non-privileged matter that is relevant to any party's claim or defense…” Fed.R.Civ.P. 26(b)(1). “[A] party claiming privilege must (1) expressly claim privilege and (2) sufficiently describe the nature of documents or communications, without revealing the protected information such that the opposing party is able ‘to assess the claim.'” SmartPhone Tech. LLC v. Apple, Inc., No. 6:10-cv-74 LED-JDL, 2013 WL 789285, at *1 (E.D. Tex. Mar. 1, 2013) (quoting Fed.R.Civ.P. 26(b)(5)(A)).

Work Product Privilege

“Work product is not a substantive privilege within the meaning of Federal Rule of Evidence 501.” Navigant Consulting, Inc. v. Wilkinson, 220 F.R.D. 467, 476 (N.D. Tex. 2004) (citing Interphase Corp. v. Rockwell Int'l Corp., No. 3-96-CV-0290-L, 1998 WL 664969, at *4 (N.D. Tex. Sept. 22, 1998)); see also Pete Rinaldi's Fast Foods, Inc. v. Great Am. Ins. Co., 123 F.R.D. 198, 201 (M.D. N.C. 1998) (work product doctrine is merely qualified immunity from discovery “not having an intrinsic value outside the litigation arena.”). “The work-product doctrine ‘insulates a lawyer's research, analysis of legal theories, mental impressions, notes, and memoranda of witnesses' statements from an opposing counsel's inquiries.'” Adams v. Mem'l Hermann, 973 F.3d 343, 349 (5th Cir. 2020) (citing Dunn v. State Farm Fire & Cas. Co., 927 F.2d 869, 875 (5th Cir. 1991)). Therefore, the resolution of whether the documents fall within the work product doctrine is governed by federal law. Navigant, 220 F.R.D. at 476 (citing Interphase, 1998 WL 667969, at *4; Varuzza by Zarrillo v. Bulk Materials, Inc., 169 F.R.D. 254, 257 (N.D.N.Y. 1996); In re Combustion, Inc., 161 F.R.D. 51, 52 (W.D. La. 1995)).

Federal Rule of Civil Procedure 26(b)(3) provides that only documents prepared “in anticipation of litigation” are exempt from discovery. Navigant, 220 F.R.D. at 476; see Dunn v. State Farm Fire & Cas. Co., 927 F.2d 869, 875 (5th Cir. 1991); Elec. Data Sys. Corp. v. Steingraber, No. 4:02-cv-225, 2003 WL 21653414, at *4 (E.D. Tex. July 9, 2003); Robinson v. Tex. Auto. Dealers Ass'n, 214 F.R.D. 432 (E.D. Tex. 2003). Rule 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 Fifth Circuit has stated that the protection “can apply where litigation is not imminent, ‘as long as the primary motivating purpose behind the creation was to aid in possible future litigation.'” Mondis Tech., Ltd. v. LG Elec., Nos. 2:07-CV-565-TJW-CE, 2:08-CV-478-TJW, 2011 WL 1714304, at *2 (E.D. Tex. May 4, 2011) (quoting In re Kaiser Aluminum & Chem. Co., 214 F.3d 586, 593 (5th Cir. 2000) (citations omitted)).

“The work-product doctrine provides qualified protection of documents and tangible things 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, 927 F.2d at 875). Rule 26(b)(3) distinguishes between opinion work product, which consists of the “mental impressions, conclusions, or legal theories of any attorney or other representative of a party, ” and ordinary work product, which consists of the “factual material prepared in anticipation of litigation or trial.” United States ex rel. Bagley v. TRW, Inc., 212 F.R.D. 554, 559 (C.D. Cal. 2003); see, e.g., United States ex. rel. Burroughs v. DeNardi Corp., 167 F.R.D. 680, 684 (S.D. Cal. 1996); United States ex rel. Stone v. Rockwell Int'l Corp., 144 F.R.D. 396, 401 (D. Colo. 1992).

Attorney-Client Privilege

“The attorney-client privilege protects two related, but different communications: (1) confidential communications made by a client to his lawyer for the purpose of obtaining legal advice; and (2) any communication from an attorney...