United States of America v. Academy Mortgage Corporation

Background

This qui tam lawsuit under the False Claims Act concerns allegations by Gwen Thrower, the relator, that Academy Mortgage Corporation falsely certified compliance with regulations of the U.S. Department of Housing and Urban Development. The alleged certifications allowed Academy to obtain government insurance on mortgage loans it underwrote and to make claims on those loans.

The order resolved two motions: Academy’s motion for relief from Magistrate Judge Sallie Kim’s August 6, 2021 non-dispositive pretrial order, and Thrower’s administrative motion for relief from the amended case management and pretrial order.

Academy’s discovery motion

The dispute concerned the format and completeness of Academy’s production of loan files. Academy had produced one static PDF for each loan file, averaging nearly 1,600 pages, without slips or bookmarks separating the documents. The files included materials such as paystubs, tax documents, credit reports, and bank statements.

After earlier discovery disputes, Judge Kim ordered Academy to produce the loan files in their entirety in their native format. Her August 6 order required Academy either to give Thrower access to its Encompass and IHM systems or to provide data files that could be loaded onto Thrower’s operating versions of those systems. Judge Kim also found monetary sanctions appropriate and directed Thrower to submit a declaration identifying the attorneys’ fees sought.

Academy argued that the PDFs were the only native format available, that access to its Encompass and IHM systems was unwarranted, and that it had produced all the loan documents. Thrower submitted information indicating that Encompass users routinely export loan-file data and argued that the PDFs omitted conversation logs, audit trails, and certain underwriting documents available only through Encompass. The court also noted testimony from Academy’s corporate representative that providing access to the systems was a viable option.

Under the standard governing objections to a magistrate judge’s non-dispositive pretrial order, the district court could modify or set aside the order only if it was clearly erroneous or contrary to law. The court concluded that Judge Kim’s order met neither condition. It also concluded that the monetary-sanctions ruling was proper. The court therefore denied Academy’s motion for relief.

Thrower’s scheduling motion

Thrower requested a six-month continuance of the trial and all pretrial deadlines so she could complete discovery, including an underwriter review and depositions of Academy’s underwriters. Academy would agree to only a two-month continuance. The court applied the good-cause standard for modifying a case-management order, considering the moving party’s diligence and any prejudice to the opposing party.

The court found good cause because Thrower had pursued discovery diligently by serving written requests, conferring with Academy, and filing multiple joint discovery letters. It found that Academy’s noncompliance with the Federal Rules and Judge Kim’s orders had obstructed production of the complete loan files. Without the files in a usable format, Thrower’s counsel could not complete the underwriting review or prepare for the underwriter depositions. The court also noted that Academy did not argue that a six-month delay would prejudice it.

The court granted Thrower’s administrative motion for a six-month continuance of the trial setting and all pretrial deadlines. The revised schedule set trial for September 26, 2022, and set the other deadlines between March 24 and August 30, 2022, as listed in the order.

Disposition

Judge Edward M. Chen denied Academy’s motion for relief from Judge Kim’s non-dispositive pretrial order and granted Thrower’s administrative motion for a six-month continuance. Academy was ordered to comply with Judge Kim’s order by September 24, 2021. Thrower was ordered to submit her attorneys’ fees declaration by September 27, 2021, with Academy’s challenge to the amount due October 7, 2021.