United States ex rel. Mitchell v. CIT Bank

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

April 26, 2022

MEMORANDUM OPINION AND ORDER

AMOS L. MAZZANT UNITED STATES DISTRICT JUDGE

Pending before the Court is Defendants' Motion to Exclude Proposed Expert Testimony of Nelson Locke (Dkt. #217). Having considered the motion and the relevant pleadings, the Court finds that the motion should be DENIED.

BACKGROUND

The background of this lawsuit is more thoroughly set forth in the Court's Memorandum Opinion and Order on Defendants' motion for summary judgment (Dkt. #271). Highly summarized, this case arises out of allegations made by Relator Andrew Mitchell (“Mitchell”) that One West Bank (“OWB”)^[1] violated the False Claims Act (“FCA”) by submitting false claims to the Government to obtain payment under three different Government loan-modification programs. These three programs were Treasury's Home Affordable Modification Program (“HAMP”), the Department of Housing and Urban Development (“HUD”)'s Federal Housing Administration (“FHA”) mortgage insurance program (“FHA-HAMP”), and the Department of Veteran Affairs (“VA”)'s mortgage insurance program (“VA-HAMP”). Mitchell contends that OWB certified to these agencies that it was in material compliance with relevant laws and regulations, while OWB knew it was not. These false certifications allegedly caused the government to make payments to OWB that it would not have otherwise made.

On October 21, 2021, OWB filed the present motion, seeking to exclude Mitchell's expert, Nelson Locke, Esq. (“Locke”), from testifying at trial (Dkt. #217). On November 4, 2021, Mitchell filed his response (Dkt. #227). On November 10, 2021, OWB filed its reply, (Dkt. #231), and on November 17, 2021, Mitchell filed his sur-reply (Dkt #238). On December 7, 2021, Mitchell submitted a letter to the Court, notifying the Court of an error in Locke's declaration that was submitted in support of Mitchell's sur-reply. On the same day, Locke filed a supplemental declaration, correcting the misstatement (Dkt. #246). On December 8, 2021, OWB submitted a letter to the Court in response to Locke's supplemental declaration, arguing that Mitchell's need to correct Locke's misstatements, which Mitchell only did after OWB raised the issue, further supports the present motion.

LEGAL STANDARD

Federal Rule of Evidence 702 provides for the admission of expert testimony that assists the trier of fact to understand the evidence or to determine a fact in issue. Fed.R.Evid. 702. In Daubert v. Merrell Dow Pharmaceuticals, Inc., the Supreme Court instructed courts to function as gatekeepers and determine whether expert testimony should be presented to the jury. 509 U.S. 579, 590-93 (1993). Courts act as gatekeepers of expert testimony “to make certain that an expert, whether basing testimony upon professional studies or personal experience, employs in the courtroom the same level of intellectual rigor that characterizes the practice of an expert in the relevant field.” Kuhmo Tire Co v. Carmichael, 526 U.S. 137, 152 (1999).

The party offering the expert's testimony has the burden to prove that: (1) the expert is qualified; (2) the testimony is relevant to an issue in the case; and (3) the testimony is reliable. Daubert, 509 U.S. at 590-91. A proffered expert witness is qualified to testify by virtue of his or her “knowledge, skill, experience, training, or education.” FED. R. EVID. 702. Moreover, to be admissible, expert testimony must be “not only relevant but reliable.” Daubert, 509 U.S. at 589. “This gate-keeping obligation applies to all types of expert testimony, not just scientific testimony.” Pipitone v. Biomatrix, Inc., 288 F.3d 239, 244 (5th Cir. 2002) (citing Kuhmo, 526 U.S. at 147).

In deciding whether to admit or exclude expert testimony, the Court should consider numerous factors. Daubert, 509 U.S. at 594. In Daubert, the Supreme Court offered the following, non-exclusive list of factors that courts may use when evaluating the reliability of expert testimony: (1) whether the expert's theory or technique can be or has been tested; (2) whether the theory or technique has been subjected to peer review and publication; (3) the known or potential rate of error of the challenged method; and (4) whether the theory or technique is generally accepted in the relevant scientific community. Id. at 593-94; Pipitone, 288 F.3d at 244. When evaluating Daubert challenges, courts focus “on [the experts'] principles and methodology, not on the conclusions that [the experts] generate.” Daubert, 509 U.S. at 595.

The Daubert factors are not “a definitive checklist or test.” Id. at 593. As the Supreme Court has emphasized, the Daubert framework is “a flexible one.” Id. at 594. The test for determining reliability can adapt to the particular circumstances underlying the testimony at issue. Kuhmo, 526 U.S. at 152. Accordingly, the decision to allow or exclude experts from testifying under Daubert is committed to the sound discretion of the district court. St. Martin v. Mobil Expl. & Producing U.S., Inc., 224 F.3d 402, 405 (5th Cir. 2000) (citations omitted).

ANALYSIS

Mitchell retained Locke as an expert to assess “whether the servicing of residential mortgage loans by [OWB] complied with mortgage loan servicing industry customs, practices and standards of care, and complied with the requirements of” of MHA Treasury HAMP, HUD's FHA Loss Mitigation Program, and the VA Home Loan Guaranty Program” (Dkt #217, Exhibit 1 at p. 6). In its motion, OWB asserts that Locke's testimony should be excluded for two main reasons. First, OWB contends that Locke's opinions result from unreliable methods “because they hinged on factors beyond [OWB]'s control, and thus resulted in findings of non-compliance even when [OWB] did nothing wrong” (Dkt. #217 at p. 7). Second, OWB argues that Locke's methods were unreliably applied because his analysis contained egregious errors, his team was inexperienced and had inadequate time to complete their review, and Locke ignored more than 12 gigabytes of data that OWB produced (Dkt. #217 at p. 15-17). Further, OWB attacks Locke's and his team's credentials throughout its briefing (Dkt. #217 at p. 14). In response, Mitchell contends that none of OWB's arguments support excluding Locke's testimony. Rather, OWB's criticisms of Locke's report are areas that are best addressed with cross-examination (Dkt. #227 at p. 5). Moreover, according to Mitchell, OWB's attacks are premised on “erroneous factual statements and incomplete characterizations of his testimony” (Dkt. #227 at p. 11).

“When expert testimony has been challenged, it is incumbent upon the court to conduct a preliminary fact-finding to determine whether the expert is qualified to render the proffered opinions and whether the substance of the testimony is both reliable and relevant.” Allison v. NIBCO, Inc., No. 9:02-CV-172, 2003 WL 25685229, at *1 (E.D. Tex. May 21, 2003). The court must also articulate its basis for admitting expert testimony. See Rodriguez v. Riddell Sports, Inc., 242 F.3d 567, 581 (5th Cir. 2001). To be reliable, and therefore admissible under Rule 702 of the Federal Rules of Evidence, expert testimony as to a scientific, technical or other specialized area must: (1) assist the trier of fact to understand the evidence or to determine a fact in issue; (2) be based upon sufficient facts or data; (3) be the product of reliable principles or methods; (4) and have reliably applied the principles and methods to the facts. FED. R. EVID. 702. “The reliability analysis applies to all aspects of an expert's testimony: the methodology, the facts underlying the expert's opinion, the link between the facts and the conclusion, et. alia.” Knight v. Kirby Inland Marine Inc., 482 F.3d 347, 355 (5th Cir. 2007).

The party offering the expert testimony has the burden of establishing by a preponderance of the evidence that the challenged testimony is admissible. Moore v. Ashland Chem., Inc., 151 F.3d 269, 276 (5th Cir. 1998). It is not necessary for the proponent to prove that the expert's testimony is correct, but the proponent must prove the testimony is reliable. Id. The Court examines OWB's arguments in turn, beginning with the credentials of Locke and his team. The Court then will address OWB's argument that Locke's opinions result from unreliable methods and then OWB's argument that Locke unreliably applied his methodology.

I. Qualifications of Locke and His Team

“Whether an individual is qualified to testify as an expert is a question of law.” Williams v. Manitowoc Cranes L.L.C., 898 F.3d 607, 614-15 (5th Cir. 2018) (citingMathis v. Exxon Corp., 302 F.3d 448, 459 (5th Cir. 2002)). Pursuant to Rule 702, “[a] witness who is qualified as an expert by knowledge, skill, experience, training, or education may testify in the form of an opinion.” FED. R. EVID. 702; see also United States v. Bourgeois, 950 F.2d 980, 987 (5th Cir. 1992) (“To qualify as an expert, ‘the witness must have such knowledge or experience in [his] field or calling as to make it appear that his opinion or inference will probably aid the trier in his search for truth.'”); Kumho Tire Co., 526 U.S. at 151 (stating that a witness may be an expert even if his or her expertise is based purely on experience). Rule 702 does not require “that an expert be highly qualified in order to testify about a given issue.” Williams, 898 F.3d at 614-15. Indeed, “[a]lthough an expert's qualifications may be less-than-sterling, she may still be certified.” Id. For all a Court must find “are ‘sufficient indicia' that an...