U.S. ex rel. Bibby v. Wells Fargo Bank, N.A.
U.S. ex rel. Bibby v. Wells Fargo Bank, N.A.
2017 WL 11635481 (N.D. Ga. 2017)
January 30, 2017
Totenberg, Amy, United States District Judge
Summary
The court found that Wells Fargo had not fully responded to the underlying discovery requests and had not scoured its business and financial records for closing attorney invoices. After a motion to compel, Wells Fargo produced 827 documents not previously produced, including invoices, documents from title policies, and other documents indicating that unallowable fees were bundled into allowable title charges. The court warned that if further discovery misconduct was found, sanctions, up to or including a sanction of default, would be considered.
Additional Decisions
UNITED STATES OF AMERICA ex rel., VICTOR E. BIBBY and BRIAN J. DONNELLY, Relators/Plaintiffs
v.
WELLS FARGO BANK, N.A., individually and as s/b/m with WELLS FARGO HOME MORTGAGE, INC., et al., Defendants
v.
WELLS FARGO BANK, N.A., individually and as s/b/m with WELLS FARGO HOME MORTGAGE, INC., et al., Defendants
CIVIL ACTION NO. 1:06-CV-0547-AT
United States District Court, N.D. Georgia, Atlanta Division
Filed January 30, 2017
Counsel
Amy L. Berne, Paris A. Wynn, Office of United States Attorney, Atlanta, GA, for Relator/Plaintiff United States of America Ex Rel.James Edward Butler, Jr., Robert Henry Snyder, Jr., Butler, Wooten & Peak, LLP, Marlan Bradley Wilbanks, Tyrone M. Bridges, Wilbanks & Gouinlock, Atlanta, GA, Joel Orba Wooten, Jr., Brandon L. Peak, Butler, Wooten & Peak, LLP, Joseph Marshall Colwell, Butler, Wooten, Fryhofer, LLP, Columbus, GA, Mary Louise Cohen, Pro Hac Vice, Phillips & Cohen, LLP, Washington, DC, for Relator/Plaintiff Victor E. Bibby.
James Edward Butler, Jr., Robert Henry Snyder, Jr., Butler, Wooten & Peak, LLP, Marlan Bradley Wilbanks, Tyrone M. Bridges, Wilbanks & Gouinlock, Atlanta, GA, Brandon L. Peak, Butler, Wooten & Peak, LLP, Joseph Marshall Colwell, Butler, Wooten, Fryhofer, LLP, Columbus, GA, Mary Louise Cohen, Pro Hac Vice, Phillips & Cohen, LLP, Washington, DC, for Plaintiff Brian J. Donnelly.
Amy Pritchard Williams, Pro Hac Vice, Troutman Sanders, LLP, Charlotte, NC, Charles T. Huddleston, Nelson Mullins Riley & Scarborough, LLP, Atlanta, GA, Lawrence Coe Lanpher, Soyong Cho, K & L Gates, LLP, Robert W. Manoso, Morrison & Foerster, LLP, Washington, DC, for Defendant Wells Fargo Bank, National Association (Inc.).
Andrew J. Ceresney, Pro Hac Vice, Shannon Rose Selden, Pro Hac Vice, DeBevoise & Plimpton, LLP, New York, NY, William Vance Custer, IV, Bryan Cave Leighton Paisner LLP, Atlanta, GA, for Defendant JPMorgan Chase Bank, National Association.
Totenberg, Amy, United States District Judge
ORDER
*1 This matter is before the Court on Relators' Motion for Sanctions (“Motion”) [Doc. 969]. Relators allege that Wells Fargo concealed that it charged veterans illegal closing fees in violation of a Veterans' Administration insured loan refinance program, and then falsely certified to the Government that the loans complied with the program's fee requirements. Relators now argue in their Motion that Wells Fargo concealed critical evidence in the form of invoices for illegal closing fees that prove Relators' allegations. Relators argue that Wells Fargo should be sanctioned as a result.
For the following reasons, the Court finds that Relators have not established the predicate grounds required for the imposition of sanctions but have established that Defendants did not fully respond, as required, to the underlying discovery requests at issue. Therefore, the Court DENIES the sanctions requested in Plaintiff's motion. However, it GRANTS relief requiring Defendant to retrieve and produce documents requested in Relators' First Request for Production of Documents (specifically, Request Number 26) and authorizes additional depositions, if necessary.
I. Background
On January 16, 2013, Relators served Wells Fargo with their First Request for Production of Documents. Among this first batch of discovery, Request Number 26 sought “all documents including but not limited to the disbursement ledger, log, or report reflecting or relating to all payments, without regard to which line on the HUDs the payment was reflected, made to the closing agent or attorney or title insurance company and/or reflecting the reason for those payments.” (Doc. 969, Ex. I.)[1]
Relators and Wells Fargo had a discovery dispute over these initial requests for production and interrogatories. Relators filed a motion to compel on October 2, 2013. On November 19, 2013, the Court issued an Order granting in part and denying in part that motion to compel. There, the Court addressed the parties' “fundamental disagreement about the scope of discovery authorized by the Relators' Second Amended Complaint.” (Order, Doc. 379 at 2.) The Court did not specifically address Request Number 26, but did find that the “allegations in the [amended complaint] support[ed] discovery into the bundling of” both attorney's fees and other unallowable fees into title charges. (Id. at 4.) The Court also compelled Wells Fargo to respond to Relators' interrogatories that asked Wells Fargo to identify loans where a fee should have been charged on one of the lines of 1100-1113 of the HUD-1 form, but was instead rolled into a different charge on one of the 1100-1113 lines.[2] (Doc. 379 at 8 (compelling answers to Interrogatories 3 and 4 on Relators' First Interrogatories).) And the Court ordered production of preliminary HUD documents. (Id.) The Court cannot recall and neither party has pointed to a place in the record where the term “invoices” was used in connection with this dispute.
*2 This initial dispute led to something of a reframing of discovery, as Relators pursued a strategy where they served Requests for Admission to Wells Fargo, asking Wells Fargo to admit that certain loans violated VA fee rules. Relators also served follow-up interrogatories asking Wells Fargo to explain any of its denials. Those requests came in the form of Relators' 3rd Requests for Admission and 2nd Interrogatories, which were served in 2015.
Wells Fargo admitted that some of the loans identified by Relators violated VA fee regulations, but denied that the vast majority of them did. So, several months later, Relators served its 7th Requests for Admission and 4th Request for Production of Documents. The 7th RFAs sought the following admissions:
1. As to each loan identified on Relators' Exhibit A and the Addendums thereto, (the loans that Relators contend are at issue), please admit that WF did not pay a settlement fee, closing fee, or attorney fee to the settlement agent or closing attorney for that loan.
2. As to each loan identified on Relators' Exhibit A and the Addendums thereto, please admit that the settlement agent or closing attorney did not close the loan without being compensated for performing the loan closing.
The 4th RPDs sought documents that supported Wells Fargo's contention that (1) it paid a settlement, closing, or attorney's fee for loans at issue; or (2) that settlement agents or closing attorneys were not compensated for closing the loans; or (3) that someone other than Wells Fargo or the borrower paid settlement agents or closing attorneys an attorney, closing, or settlement fee. Thus the 7th RFAs and 4th RPDs were broadly aimed at determining whether or not a settlement agent or closing attorney was compensated for closing a given loan.
Wells Fargo sought a protective order against Relators' 7th Request for Admissions and 4th Request for Production of Documents. Wells Fargo contended that Relators were asking the same questions they'd previously asked in their 3rd RFAs, in only a slightly different way, and that answering these requests for several thousand loans would be burdensome and unproductive. The Court referred this dispute to the Special Master, who held an all-day hearing regarding the dispute on December 22, 2015.
There, the Special Master tried to drill down into the question of whether or not Wells Fargo had failed to produce any documents in the loan files that might be relevant to Relators' case.[3] During the hearing, the Special Master asked, “You said to me that they have the loan files, but not necessarily the complete loan files?” (Transcript of Dec. 22, 2015 Hearing before the Special Master, p. 45:11-13 (“Special Master Transcript”).) Wells Fargo responded, “They have all the documents that they've asked for ...” The Special Master continued, after noting that Wells Fargo was contending it faced a million-dollar burden in answering the 4th RPDs and 7th RFAs, “My question is, do they have those files.” (Id. at 46:7-8.) Defense counsel responded, “They have the parts of the files that are germane to the fee question.” (Id. at 46:9-10; Doc. 969-7 at 4.) Defense counsel added, “What's not in [our productions]? Well, the Note and the Deed of Trust and documents that don't pertain to the question, because they didn't ask for them, are not there.” (Id. at 48:1-4.)
*3 The Special Master persisted, “What I'm trying to find out here is as we sit here today, do both sides have the same documents now available to them to go ahead and do this file by file search that you're saying would cost a million dollars, or another million dollars, to answer these questions?” (Special Master Transcript at 48:8-13.) Defense counsel responded, “Yes.” (Id. at 48:14.) Defense counsel continued: “they have the documents; or potentially the documents are in the hands of closing lawyers, settlement agents. But they're not in our hands, because if we had communications with settlement agents, we produced them. So ... that goes particularly to this notion of, well, prove to us what the settlement agent did or didn't charge. Well, the information that we've had, we've produced ... So, yes, we're all working from the same documents.” (Id. at 49:13-25; 50:1-3; 10-11.)
The Special Master recommended granting Wells Fargo's motion for a protective order, relying in part on the fact that both sides agreed that “WF has previously produced to Relators all of the loan files at issue.” (Special Master's Report & Recommendation, Doc. 765 at 5.) The Special Master also relied on Wells Fargo's contention that information about settlement fees “is in the possession of the settlement agents ... not Wells Fargo.” (Id. at 6.) The Special Master also noted that “if WF has financial records, periodic disbursement reports from settlement agents, or other information of documents that might indicate payment by a VA borrower of a non-allowable fee” that its strategy of denying that certain loans violated VA fee regulations “would likely not end well.” (Id. at 7 (implying Wells Fargo might be liable for costs incurred by Relators in proving admissions).)
The Court adopted the Special Master's R&R, over the objections of Relators. The Court made two important assumptions relevant to the underlying motion for a protective order: first, that Wells Fargo, in answering the earlier 3rd RFAs, “had to reach (or should have reached) the questions posed by the 7th RFAs (Was the closing attorney paid? Did the borrower pay the attorney?) before it could reach the ... issue of concealment posed by the 3rd RFAs.” In other words, Wells Fargo should have already examined its own files for invoices or other documents indicating an unallowable fee had been paid in order to answer Relators' 3rd RFAs and related interrogatories.
The Court also stated in its March 2, 2016 Order that it “assumes that Wells Fargo answered the 3rd RFAs and accompanying [other discovery requests] in good faith, and that it has already scoured its business and financial records for closing attorney invoices and other documents that might not have been in the actual loan files that might have indicated whether or not a closing attorney was paid.” (Doc. 828 at 11.) The Court believes its assumptions were entirely warranted based on Wells Fargo's representations to the Special Master and Court in connection with its responses to the 3rd RFAs and its Motion for Protective Order regarding Relators' 7th RFAs. And based on these assumptions, the Court reached the conclusion that the 7th RFAs and 4th RPDs were duplicative, because Wells Fargo had already done all the work necessary to answer the 3rd (and in effect 7th) RFAs and had provided Relators with the fee-related documents WF itself had reviewed.
Just like no good deed goes unpunished, no reasonable assumption goes unrebutted. It turns out Wells Fargo had not in fact “scoured its business and financial records for closing attorney invoices” or similar documents that may well be direct evidence of bundling for certain “loans at issue” in the case. (Order, Doc. 828 at 11.) On April 29 2016, Wells Fargo produced some 827 documents not previously produced, pertaining to 561 loans,[4] including invoices, documents from title policies, and other documents indicating that unallowable fees were bundled into allowable title charges for some mortgage files. This production compelled Wells Fargo to amend its responses to Relators' 3rd RFAs and admit that 48 additional loans violated VA fee regulations. (Response, Doc. 999 at 33.) Wells Fargo only produced additional documents for loans placed “at issue” by Relators. It did not produce new documents for some 10,000 VA IRRRLs that went to claim but that Relators did not identify as containing an alleged fee violation (out of roughly 14,000 total mortgages that went to claim and were within the scope of the case).
*4 Roughly three months later, Relators filed this Motion.
II. Standard
District courts have broad discretion to fashion appropriate sanctions for violations of discovery orders. See Ins. Corp. of Ireland, Ltd. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 707 (1982); BankAtlantic v. Blythe Eastman Paine Webber, Inc., 12 F.3d 1045, 1048 (11th Cir. 1994). “A primary aspect of that discretion is the ability to fashion an appropriate sanction for conduct which abuses the judicial process.” Chambers v. NASCO, Inc., 501 U.S. 2, 44-45 (1991).
However, “a default judgment sanction requires a willful or bad faith failure to obey a discovery order.” Malautea v. Suzuki Motor Co., 987 F.2d 1536, 1542 (11th Cir. 1993). A party demonstrates bad faith by “delaying or disrupting the litigation or hampering enforcement of a court order.” Eagle Hospital Physicians, LLC v. SRG Consulting, Inc., 561 F.3d 1298, 1306 (11th Cir. 2009).
Under Malautea, there must be a predicate discovery order that is “definite enough to support” dismissal or default under Rule 37. 987 F.2d at 1543. This “severe sanction” is appropriate “only as a last resort, when less drastic sanctions would not ensure compliance with the court's orders.” Id. at 1542.[5]
A court may also “impose sanctions for litigation misconduct under its inherent power.” Eagle Hospital Physicians, 561 F.3d at 1306. This power “derives from the court's need to manage its own affairs so as to achieve the orderly ... disposition” of a case, but must be “exercised with restraint and discretion.” Id. (internal punctuation and citations omitted). “The key to unlocking a court's inherent power is [also] a finding of bad faith.” Id. (quotation marks and citation omitted). Two common fact patterns reappear in cases involving findings of bad faith: willful misconduct that corrupts the adversary process or repeated failures to obey the court's discovery orders.
For example, in Eagle Hospital, the Eleventh Circuit held that a district court appropriately entered a default judgment in favor of the plaintiff and struck the defendant's answer and counterclaims after finding that a defendant had been “secretly monitoring [the plaintiff's] confidential e-mail communications.” Id. at 1301. Although the defendant had not violated any court order in particular, the harsh sanction of a default judgment was necessary because permitting the case to continue would be “an open invitation to others to abuse the judicial process” and because it would be “untenable for [the plaintiff] to continue litigating against the” defendant after its confidential communications had been intercepted. Id. at 1306-07; see also In re Sunshine Jr. Stores, Inc., 456 F.3d 1291, 1304 (11th Cir. 2006) (describing federal courts' inherent power to impose sanctions and upholding bankruptcy court's use of inherent power to enter default against Bank of New York over objection that it was not properly notified of consequences of its actions; bank had failed to comply with multiple court orders over the span of eighteen months in an attempt to block discovery into whether or not it complied with its fiduciary obligations to provide an accounting of debtor's funds and pay interest on those funds).
*5 In Haeger v. Goodyear Tire & Rubber Co., the Ninth Circuit upheld the district court's award of several million dollars in sanctions pursuant to its inherent authority. 813 F.3d 1233, 1246 (9th Cir.), cert. granted in part, 137 S. Ct. 30, 195 L. Ed. 2d 902 (2016). The case involved a family who was injured when the Goodyear tire on the front of their motor home failed while they were driving on the highway. Goodyear conducted a number of tests on the relevant tire model, which plaintiffs sought in discovery. However, Goodyear withheld much of the test data relevant to the plaintiffs' claims until after the case had already settled, despite being “repeatedly” asked for that information on numerous occasions. Id. at 1238; 1245-46. The plaintiffs only learned of the missing tests after one of their attorneys noticed that Goodyear had produced missing test data in a separate case involving the same tire. Id. at 1240. The Ninth Circuit affirmed the award, noting that Goodyear had repeatedly affirmed that it was complying with its discovery obligations, and that its 30(b)(6) witness had lied about the availability of the test data. Id. at 1246.
The Court finds that Wells Fargo's behavior, while extremely problematic in some respects, does not rise to the level of bad faith under either standard, and that the harm to Relators suffered can be remedied by means other than a sanction of dismissal.
III. Discussion
Relators' primary focus, both in its motion and at oral argument, has been obtaining the sanction of default. The Court focuses its analysis accordingly. First, the Court addresses whether Relators' discovery requests covered the late-produced invoices and related documents. Second, the Court addresses whether Wells Fargo violated a discovery order so that a default sanction could be ordered under Rule 37. Finally, the Court addresses whether or not Relators have made the showing of bad faith necessary to invoke the Court's inherent powers to sanction misconduct.
A. Relators' Discovery Requests
Relators' discovery requests captured the invoice documents at issue. Request Number 26 (“RPD 26”) in Relators' First Request for production of Documents sought “all documents, including but not limited to the disbursement ledger, log, or report reflecting or relating to all payments ... made to the closing agent or attorney or title insurance company and[ ] reflecting the reason for those payments.”
Point blank, this request encompasses fee invoices or related documents demonstrating whether and how much “closing agents or attorneys” were paid. Wells Fargo argues that none of the documents that it produced “are similar to a disbursement ledger, log, or report.” (Response at 25.) But the request includes but is not limited to those types of documents. It does not cabin its scope to documents “similar to” disbursement ledgers or logs.
Wells Fargo also argues that the “invoices do not reflect payments made to settlement agents” because “[s]ettlement agents paid themselves and other title-related third parties based on the HUD-1,” and the documents instead “represent requests for payments ... [most of which] are directed to the settlement agent or mortgage broker and not Wells Fargo.” (Doc. 999 at 25.)
There is no reasonable reading of RPD 26 that is compatible with this position. RPD 26 does not limit itself to payments made only by Wells Fargo. It covers “all payments ... made to the closing agent or attorney or title insurance company.” The fact that “settlement agents paid themselves” is irrelevant. Even if true, that too is a “payment ... made to the closing agent” in connection with a mortgage closing, and thus covered by RPD 26.[6]
Also beside the point is Wells Fargo's argument that “the documents at most represent requests for payments,” “preliminary,” or “estimates” of requests for payment. From its inception this case has been about allegations that Wells Fargo was hiding unallowable fees on the final HUD-1 by concealing these fees within other, permitted title charges. Relators have alleged that “preliminary” or “estimated” HUD-1s sometimes reflected unallowable charges while the final HUD-1 did not. Similarly, the existence of invoice documents evidencing “preliminary” or “estimated” “requests for payments” that are mysteriously absent from the final HUD-1 is consistent with these allegations and tends to prove them.[7] RPD 26 plainly should have captured the kinds of documents produced at the last minute by Wells Fargo.
B. Did Wells Fargo Violate a Court Discovery Order?
*6 Relators have not shown that Wells Fargo violated a discovery order so that sanctions under Rule 37 are appropriate. Malautea, 987 F.2d at 1542 (bad faith violation of predicate discovery order necessary to impose default or dismissal sanctions under Rule 37). The Court's November 19, 2013 Order addressed the general scope of discovery, but it did not directly address the kinds of documents that are the subject of the sanctions order. The bulk of the order addressed what kinds of topics and issues on which Relators could properly pursue discovery. The Court ultimately held that Relators could pursue discovery on claims for “unallowable attorneys' fees concealed within title charges,” other unallowable fee items bundled within title charges, unallowable fee items plainly listed on the HUD-1, and loan certifications related to the preceding three subjects, but that Relators could not seek discovery on bundled unallowable fees located within charges other than title charges, Lender Loan Quality Certifications, and unsigned 26-1820 forms. (Doc. 379 at 4-6.)
The Court also directed Wells Fargo to respond to Interrogatories 3 and 4, which Relators contend should have captured the information eventually produced by Wells Fargo. Those interrogatories asked for certain information for each loan where “an amount was charged which was supposed to be disclosed in one of the lines 1100-1113 of the HUD but” was instead disclosed on one of the other 1100-1113 lines, (Doc. 387 at 5), and for certain information for each loan where attorney's fees, closing fees, or settlement fees were included within the title insurance amount disclosed on Line 1108 of the HUD-1.
The Court sees Relators' point, but, as Wells Fargo points out, the Court's subsequent February 27, 2014 teleconference muddied the waters as to how the Court expected Wells Fargo to respond to these requests. And no party mentioned the term “invoices” as a critical document at any point during these aforementioned 2013 and 2014 briefing and proceedings. The Court is mindful of its past admonishment to Wells Fargo that it did not like parties playing “word games,” but is also mindful that this issue was not teed up nearly as well as it was in say, Haeger v. Goodyear, where a plaintiff explicitly requested a type of document but the defendant nonetheless withheld it.
Nor does the Court find that Wells Fargo violated its March 2, 2016 Order by failing to disclose invoice documents for the 10,000 plus loans not put at issue by Relators. That Order assumed that Wells Fargo had produced “closing attorney invoices and other documents ... that might have indicated whether or not a closing attorney was paid for the Excessive Fee loans at issue.” (Doc. 828 at 11.) The Order was silent on loans not “at issue” and simply did not consider the problem that Relators had narrowed the group of loans “at issue” from a pool of roughly 14,000 potential mortgages, without the benefit of Wells Fargo's full disclosure of relevant fee-related documentation.
C. Have Relators Shown Bad Faith?
The Court also finds that Relators have not demonstrated bad faith on the part of Wells Fargo. But this is a closer question. The Court's biggest problem is Wells Fargo's clear misrepresentations to the Special Master during the December 22, 2015 discovery hearing. There, Wells Fargo repeatedly stated that Relators had access to the same documents it did, and that Relators had everything “germane to the fee question.” Those representations were inaccurate. Much of Wells Fargo's argument that Relators' 7th RFAs were duplicative was based on its contention that Relators had everything they needed to determine if a given loan had a fee violation. It turns out that some of the most important evidence was not produced because Relators did not use the magic word of “invoices.”
Wells Fargo's argument that it made clear to the Special Master (and the Court and Relators) that it “had not produced entire loan files but only the documents that were responsive to Relators' RPDs” is (a) not true, since RPD 26 plainly encompassed the documents in question and (b) not consistent with the straightforward affirmations it offered to the Special Master as he repeatedly tried to ensure Relators had access to the same important documents Wells Fargo had access to. And the Court agrees with Relators that the search terms used by Wells Fargo should have caught at least some of the documents that were produced late.[8] Additionally, Wells Fargo has represented to this Court that the separate law firm team contracted to review the mortgage files actually conducted a manual review of at least some of the mortgages – not just a digital search – so the relevant fee documents should have been clearly identified through that review process. (See Response at 5 (Wells Fargo initially conducted a “manual review[ ] of certain files); Declaration of Jill Crawley Griset, Ex. B ¶ 5.)
*7 But there are other facts to consider. First, the issue of invoices was not ever brought front and center through a motion to compel prior to Relators' Motion for Sanctions. As Relators were mortgage brokers, they might have been in the position to raise legitimate questions regarding whether fee documentation could be missing from the folders. On the other hand, the Court recognizes that it is difficult for a party to file a motion to compel documentation on the theory that it must exist, when there is no concrete information that documentation has actually been withheld. And the Court also recognizes Relators were attempting generally to address the attorney fee issue through their proposed 7th RFAs and related discovery requests.
Second, Wells Fargo has produced a large volume of documents in this case, such that the Court cannot find that it has consistently failed to observe its discovery obligations. And it included in its productions a number of draft HUD-1s and other documents where explicit instructions to bundle were written. The evidence does not suggest that Wells Fargo has shown a strong proclivity towards hiding evidence harmful to its case, even if it has aggressively defended itself during the course of discovery.
Third, Wells Fargo did in fact produce responsive documents within a reasonable amount of time after the Court's March 2, 2016 Order. Unfortunately, the March 2 Order was issued only several weeks ahead of the close of discovery. Thus, Wells Fargo's resulting production was made on the last day of discovery (and for some loans, a few days outside the discovery period). This means Relators were unable to follow up and obtain additional documents for loans not placed at issue. However, Relators have produced no evidence suggesting that Wells Fargo has failed to produce similar documents for the remaining 4,000 loans at issue that are the centerpiece of the case. Given these facts, the Court finds that (1) Wells Fargo did not inordinately delay its production of the invoice-related documents in response to the Court's Order, but that (2) Wells Fargo should have promptly flagged the issue and identified to the Court and Relators that it was searching for documents in response to the March 2, 2016 Order – especially given the looming close of discovery.
Fourth, Relators may overstate their position when discussing how they have been harmed. Relators suggest that it is likely that there are missing documents for a significant percentage of loans among the 10,000 or so loans not identified as having fee issues. Those loans were left out of this case because Relators believed they lacked sufficient evidence to prove those loans contained unallowable fees, and because, presumably, the loans lacked the indicia of fraud that Relators contend were present on other loans. Presumably loans that lack these indicia of fraud (like having high title fees) are less likely to carry bundled fees – and thus less likely to have attorney's fee invoices or other invoices in their loan files.[9]
The Court therefore concludes that Relators have not met their burden in showing bad faith that would warrant some form of default sanction. Malautea, 987 F.2d at 1542. The Court is troubled by the fact that important evidence was not produced by Wells Fargo for several years. The Court is also troubled by Wells Fargo's representations throughout the litigation that Relators had all the loan file documents they needed, when in fact Relators lacked obviously important documents like attorney fee invoices. If the Court is made aware of further discovery misconduct in connection with the issues covered by this Order or any other salient discovery production, the Court will strongly consider the imposition of sanctions, up to or including a sanction of default. This Order thus serves as a warning.
*8 For now, the Court will order Wells Fargo to live up to its compromise position, offered at the January 18, 2017 hearing. There, Wells Fargo offered to search for and provide similarly responsive documents for the 10,000 or so loans that Relators did not place at issue on their Exhibits A or B. The Court DIRECTS Wells Fargo to begin that process, and to start a rolling production of such documents by Friday, February 17, 2017, and ending no later than March 10, 2017. While Wells Fargo requested that the Court hold off on requiring this production until the Court has ruled on the parties' cross-motions for summary judgment, the Court declines to do so. To do otherwise would invite further delay. In the event that Relators believe that they must take any additional depositions in light of the new evidence produced in April and May of 2016 and discussed in this Order, they should identify for Wells Fargo, by February 13, 2017, new potential deponents and propose a schedule for such depositions. If further depositions are required in connection with the next batch of documents released by Wells Fargo, the Court provides to Relators similar deposition authorization. Any proposed deposition schedule and final deposition schedules should also be filed on the docket.
IT IS SO ORDERED this 30th day of January, 2017.
Footnotes
Relators' First Interrogatories sought arguably similar information. (See Doc. 387, Ex. A at 11-12.)
This includes where attorney's fees, closing fees, or settlement fees were rolled into the amount stated on Line 1108 for “title insurance.”
Wells Fargo did not produce entire loan files, and Relators did not ask for entire loan files.
Wells Fargo produced an additional 84 documents on May 3, 2016, relating to Exhibit B loans. (Doc. 999 at 2.)
Malautea had this to say about multiplying proceedings unreasonably and vexatiously: “Defense resistance to discovery required Judge Edenfield to issue three orders compelling the production of information that should have been produced without any judicial prompting. The defendants' delay in producing deposition transcripts required the Magistrate Judge to issue a second order compelling production of the transcripts. Countless motions, responses, briefs in support and opposition, and letters to the district court occupied far more of the court's time than the case itself required. Moreover, defense intransigence necessitated an evidentiary hearing regarding sanctions, a thirty-eight page order imposing sanctions, and this appeal. Therefore, we conclude that Judge Edenfield did not clearly err in finding that defense counsel's bad faith conduct multiplied the proceedings unreasonably and vexatiously. The judge was well within his discretion to sanction defense attorneys Freeman, Goldman, Becherer, and Siracuse pursuant to § 1927.” Malautea v. Suzuki Motor Co., 987 F.2d 1536, 1545 (11th Cir. 1993).
The Court understands that one of Wells Fargo's arguments at summary judgment is that it cannot be held responsible for payments made to or by third parties like settlement agents. That argument, which the Court has yet to rule on, does not justify withholding discoverable documents.
The Court is also not convinced by Wells Fargo's argument that 350 of the documents are contained within a title insurance policy or commitment, and that this justifies not producing them earlier because Relators did not seek such policies. Such a document can still reflect a request for payment, and RPD 26 was “not limited” to just a few specific types of documents. Its argument that 159 invoices are preliminary or estimated is irrelevant because preliminary or estimated HUD-1s are a key part of Relators' evidence, and preliminary invoices tend to show the same things as preliminary HUD-1s. The fact that a “significant number of invoices produced show no reallocation of fees” is also relevant to RPD 26 – it may tend to disprove Relators' claims, thus plainly meeting the relevance standard for discovery.
For example, Relators asked for documents that contained the words “fee” and “bundled” within five words of each other. (Doc. 999-5 at 5.) Some of the documents produced refer to “Bundled Closing and Commitment Fees” (Doc. 970-1 at 59). Others refer to “closing fees” (Doc. 970-1 at 157), which are plainly captured by the search terms list. (Doc. 999-5 at 5.)
And as Wells Fargo points out, Relators would not have had access to some of the loans with missing documents at certain loan closer depositions, because all of the documents for those loans – not just invoices and the like - were produced later in the case, after the depositions had already occurred.