In Re: RFC and RESCAP Liquidating Trust Litigation

Background

ResCap Liquidating Trust and Primary Residential Mortgage, Inc. were scheduled for trial in the related action, ResCap Liquidating Trust v. Primary Residential Mortgage, Inc., No. 16-cv-4070 (SRN/HB). ResCap filed three motions in limine, which are requests for pretrial rulings about evidence and arguments, and also raised additional issues in a January 21, 2020 letter. The order resolved many issues but deferred some until trial.

Motion in Limine No. 1: Cumulative expert testimony

ResCap sought to exclude overlapping opinions from PRMI’s experts Phillip Burnaman, Steven Schwarcz, and Kori Keith under Federal Rule of Evidence 403, which permits exclusion of relevant evidence when its value is substantially outweighed by dangers such as wasting time or needlessly presenting cumulative evidence.

The court held that the experts’ opinions overlapped, but their backgrounds differed: Schwarcz offered a securitization perspective, Burnaman an RMBS transactional perspective, and Keith an underwriting perspective. The court therefore allowed their testimony subject to objections at trial if their testimony proved excessively repetitive. However, it excluded portions of Keith’s testimony that merely repeated or adopted Burnaman’s and Schwarcz’s opinions without independent analysis. The court granted in part and denied in part Motion in Limine No. 1.

Motion in Limine No. 2: Corporate designee Teresa Farley

ResCap sought permission for Teresa Farley, its corporate representative during a deposition under Federal Rule of Civil Procedure 30(b)(6), to testify at trial about RFC’s corporate knowledge and her own knowledge concerning representations, warranties, and disclaimers. PRMI argued that her testimony should be limited by the rules governing personal knowledge and hearsay.

The court deferred ruling on the precise scope of Farley’s testimony. It stated that she could testify about non-hearsay matters within her personal knowledge if ResCap laid a sufficient foundation. The court would exclude testimony based on hearsay outside an applicable exception, including evidence learned solely from Plaintiff’s counsel while preparing for her deposition. The court also explained that Farley could offer certain opinions as a lay witness if they were based on her perceptions and business experience, but she could not offer an undisclosed expert opinion. Motion in Limine No. 2 was deferred.

Motion in Limine No. 3: Previously decided issues

ResCap sought to prevent PRMI from presenting evidence or arguments that conflicted with earlier rulings concerning breach, causation, bankruptcy settlements, allocation, and related issues. The court ruled on the motion in separate categories and ultimately granted in part, denied in part, denied as moot in part, and deferred in part Motion in Limine No. 3.

The court deferred ruling on objections to previously undisclosed evidence opposing ResCap’s reunderwriting findings, directing the parties to address specific objections at trial. It denied as moot ResCap’s request concerning reunderwriting evidence disputing ResCap’s exercise of sole discretion to identify breaches under the Client Guide, except that PRMI could present evidence related to its estoppel and waiver defenses for certain loans.

The court denied ResCap’s request to exclude anecdotal underwriting evidence simply because it was anecdotal. It stated that PRMI could present relevant and admissible evidence supporting estoppel or waiver, including evidence about Assetwise and a Countrywide-underwritten loan. But the evidence had to concern relevant, time- and place-specific communications or silence between RFC and PRMI, and hearsay required an applicable exception. Generalized beliefs, “common sense” understandings, and vague references to communications were not relevant to those defenses.

The court granted ResCap’s request to exclude Homecomings evidence concerning breach and causation. It granted ResCap’s request to exclude evidence concerning a supposed separate $250 million settlement allocation for the Additional Settling Trusts. The court also reaffirmed that Dr. McCrary could not testify about opinions in his late Supplemental Report on that issue. The court denied as moot several requests because PRMI stated it would not make the challenged arguments, including arguments about the allocation of $96 million to servicing claims, the value of Allowed Claims differing from their face amount, full satisfaction of RFC creditors’ claims, the benefit of the litigation to RFC’s creditors, unproven misconduct allegations, claims against RFC affiliates, and the limited use of proofs of claim and their annexes.

The court denied as moot in part ResCap’s request concerning the reasonableness and good faith of the Bankruptcy Settlements, because PRMI said it would not offer evidence disputing that point. It granted in part that request to the extent PRMI sought to use bankruptcy documents that the court had already ruled irrelevant to circumvent summary-judgment rulings. The court also granted ResCap’s request to exclude evidence about non-indemnifiable claims against Ally and evidence concerning the Allowed Fee Claim, concluding that those matters were irrelevant to the damages allocation as a matter of law.

Additional evidentiary rulings

The court excluded evidence about Ally’s reserve disclosures and financial modeling concerning the Original RMBS Settlement because it was irrelevant to allocation and reasonableness. It deferred ruling on objections to specific unsworn expert reports, briefs, and annexes to proofs of claim, directing the parties to meet and confer and leaving remaining objections for trial.

The court granted ResCap’s request to exclude former RFC employee Brenda Evans from testifying about Assetwise because she lacked sufficient knowledge and foundation. It denied the request to exclude former RFC underwriter Sharon Maki, allowing her to testify about the daily workings of Assetwise despite finding that her testimony had limited relevance to estoppel and waiver.

The court permitted James Crawford to testify about specific communications between RFC and PRMI concerning the Countrywide loan and Assetwise-approved loans, but barred generic “common sense” testimony and general discussions of competition between RFC and Countrywide. It excluded former RFC employee Dorian Whealdon’s testimony as only tangentially relevant and also excluded Megan Gallagher’s testimony because she lacked the necessary personal knowledge about the disputed trust representations and fraud disclaimer.

Administrative matters and order

The court directed the parties to meet and confer about exhibits, deposition designations, damages calculations, and unresolved evidentiary disputes. It set procedures for deposition testimony and trial exhibits. Regarding ResCap’s breach-of-contract claim, the court directed ResCap to respond in writing to PRMI’s arguments about dismissal and whether ResCap sought voluntary dismissal or permission to amend; the order did not itself state a disposition of that claim.

Judge Susan Richard Nelson’s final order provided that Motion in Limine No. 1 was granted in part and denied in part; Motion in Limine No. 2 was deferred; Motion in Limine No. 3 was granted in part, denied in part, denied as moot in part, and deferred in part; and the issues in ResCap’s January 21 letter were addressed as stated in the opinion.