The opinion
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
INDIANAPOLIS DIVISION
DEMONA FREEMAN, )
)
Plaintiff, )
)
v. ) Case No. 1:18-cv-03844-TWP-DLP
)
OCWEN LOAN SERVICING, LLC, and )
BANK OF NEW YORK MELLON, )
)
Defendants. )
ORDER ON DEFENDANT'S RULE 72 OBJECTION TO
MAGISTRATE JUDGE'S MARCH 4, 2022 ORDER
This matter is before the Court on Defendant Ocwen Loan Servicing, LLC's ("Ocwen")
Rule 72 Objection to Magistrate Judge's March 4, 2022 Order (Filing No. 237). For the reasons
stated below, the Court overrules Ocwen's Objection to the Magistrate Judge's Order and grants
in part Plaintiff's Motion to Compel (Filing No. 170), as stated in the Report and Recommendation.
I. PROCEDURAL BACKGROUND
Plaintiff Demona Freeman ("Freeman") initiated this action against Ocwen and co-
defendant Bank of New York Mellon ("BONY") (collectively, "Defendants") for their alleged
violation of numerous federal statutes—the Real Estate Settlement Procedures Act ("RESPA"),
Truth in Lending Act, Fair Debt Collection Practices Act ("FDCPA"), Telephone Consumer
Protection Act, and Fair Credit Reporting Act—as well as for breach of contract and other state
law claims. After Freeman twice amended her Complaint, the Defendants filed motions to dismiss,
asking the Court to dismiss each of the claims asserted in Freeman's Second Amended Complaint.
The Court granted in part and denied in part the motions to dismiss (Filing No. 133). The parties
then continued to litigate the remaining claims, engaging in further discovery and discovery
disputes. Freeman filed a motion to compel the production of "Risk Convergence Reports"
("RCRs") by Ocwen. The motion to compel was referred to the Magistrate Judge for decision, and
on March 4, 2022, the Magistrate Judge granted the motion to compel the production of the RCRs
(Filing No. 227). Ocwen then filed the pending Rule 72 Objection to Magistrate Judge's March 4,
2022 Order (Filing No. 237).
II. LEGAL STANDARDS
A district court may refer for decision a non-dispositive pretrial motion to a magistrate
judge under Federal Rule of Civil Procedure 72(a). Rule 72(a) provides:
When a pretrial matter not dispositive of a party's claim or defense is referred to a
magistrate judge to hear and decide, the magistrate judge must promptly conduct
the required proceedings and, when appropriate, issue a written order stating the
decision. A party may serve and file objections to the order within 14 days after
being served with a copy. A party may not assign as error a defect in the order not
timely objected to. The district judge in the case must consider timely objections
and modify or set aside any part of the order that is clearly erroneous or is contrary
to law.
After reviewing objections to a magistrate judge's order, the district court will modify or
set aside the order only if it is clearly erroneous or contrary to law. The clear error standard is
highly differential, permitting reversal of the magistrate judge's ruling only when "the district court
is left with the definite and firm conviction that a mistake has been made." Weeks v. Samsung
Heavy Indus. Co., 126 F.3d 926, 943 (7th Cir. 1997). "An order is contrary to law when it fails to
apply or misapplies relevant statutes, case law, or rules of procedure." Coley v. Landrum, 2016
U.S. Dist. LEXIS 13377, at *3 (S.D. Ind. Feb. 4, 2016) (citation and quotation marks omitted).
The federal discovery rules are liberally construed. Spier v. Home Ins. Co., 404 F.2d 896,
899 (7th Cir. 1968). Magistrate judges (and district judges) "enjoy extremely broad discretion in
controlling discovery." Jones v. City of Elkhart, 737 F.3d 1107, 1115 (7th Cir. 2013).
"Relevance in discovery is broader than relevance at trial; during discovery, a broad range of
potentially useful information should be allowed when it pertains to issues raised by the parties'
claims." Advanced Magnesium Alloys Corp. v. Dery, 2021 U.S. Dist. LEXIS 140217, at *15–16
(S.D. Ind. Apr. 19, 2021) (internal citations and quotation marks omitted). "Information within
this scope of discovery need not be admissible in evidence to be discoverable." Fed. Rule of Civ.
Proc. 26(b)(1).
III. DISCUSSION
On March 18, 2021, Freeman filed a motion to compel the production of Ocwen's RCRs1
as well as a request for sanctions against Ocwen. The RCRs are a set of twenty-two spreadsheets
containing non-loan-specific information that were created on a monthly basis between January
2014 and February 2016. The RCRs were used by Ocwen to track regulatory and servicing issues.
The motion to compel was fully briefed by the parties and referred to the Magistrate Judge for
decision. On March 4, 2022, the Magistrate Judge granted the motion to compel the production of
the RCRs but denied the request for sanctions (Filing No. 227). Then on March 18, 2022, Ocwen
timely filed its pending Rule 72 Objection to the Magistrate Judge's Order, arguing that it should
not be compelled to produce any of its RCRs (Filing No. 237).
Ocwen describes the Magistrate Judge's March 4, 2022 Order in this manner:
In the Order, the Magistrate Judge held that portions of the RCRs were relevant to
Plaintiff's claim under RESPA and Ocwen's bona fide error defense under the
FDCPA. (Id. at 7-8). However, the Magistrate Judge found that the RCRs were not
relevant to Plaintiff's FDCPA claim. (Id. at 7). The Order also concluded that the
RCRs were not disproportionate to the needs of the case under Federal Rule of Civil
Procedure 26(b), and that the RCRs were not protected by the self-critical analysis
or work-product privileges. (Id. at 9-15). The Magistrate Judge ultimately
concluded that production of the RCRs "should be limited to certain subjects that
relate to this litigation." (Id. at 8). To that end, the Magistrate Judge ultimately
ordered that on or before March 11, 2022, Plaintiff was "required to submit a list of
relevant RCR categories to Defendant," and that "Defendant w[ould] be required to
produce the relevant RCR categories on or before March 18, 2022." (Id.).
1 Freeman's request for production and motion to compel seek all of Ocwen's RCRs created between January 1, 2014,
and August 31, 2018.
(Filing No. 237 at 3.)
In its Objection, Ocwen argues the Order is contrary to law because it directed Freeman to
provide Ocwen with a list of relevant RCR categories that Ocwen then was required to produce,
which gives Freeman unilateral control over determining what is relevant. Ocwen argues the point
of the motion to compel was to have the Magistrate Judge determine what was relevant and
discoverable, not to hand the decision back to Freeman to decide relevancy.
Ocwen further argues the Order is contrary to law and clearly erroneous because it compels
the production of documents that are not relevant. The Order states that the RCRs are not relevant
to Freeman's FDCPA claim, but they are relevant to Ocwen's FDCPA bona fide error defense.
Ocwen asserts the Magistrate Judge misapprehended the nature of the bona fide error defense as
well as misunderstood the information contained in the RCRs. The Magistrate Judge explained
that neither party clarified the policies and procedures that existed at the time the RCRs were
created and at the time the alleged violations occurred, so the she concluded the RCRs could
contain relevant evidence. Ocwen argues this was legally and factually erroneous.
The bona fide error defense protects a debt collector "if the debt collector shows by a
preponderance of evidence that the violation was not intentional and resulted from a bona fide
error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error."
15 U.S.C. § 1692k(c). Thus, Ocwen argues, all that is relevant is the violation and the maintenance
of procedures at the time of that alleged violation. In this case, the FDCPA claim is limited to
violations that occurred on or after December 6, 2017, which is nearly two years after the creation
of the last RCR in February 2016. Ocwen asserts that any policies and procedures in existence
prior to December 6, 2017, are not relevant to the bona fide error defense, so the Order compelling
production of earlier RCRs is erroneous.
Next, Ocwen argues that the Order is contrary to law because the RCRs are not relevant to
Freeman's Real Estate Settlement Procedures Act ("RESPA") claim or any allegation of a "pattern
or practice" of RESPA violations. The RESPA claim arises under the dispute resolution provisions
of 12 U.S.C. § 2605 and focuses on whether Ocwen properly investigated and responded to
Freeman's qualified written requests, which were sent to Ocwen in 2018. Ocwen contends that
non-loan-specific information about its loan servicing practices between 2014 and 2016 could
never provide relevant information about how Ocwen investigated and responded to Freeman's
qualified written requests in 2018 because the investigation and response is specific to the
consumer. RESPA does not create a private right of action for the underlying servicing error but
rather focuses on the investigation and response to a qualified written request. Therefore, Ocwen
argues, information in the RCRs about Ocwen's loan servicing practices in 2014, 2015, and 2016
could never be relevant to Freeman's remaining RESPA claim because nothing in a document from
2014, 2015, or 2016 could provide information about how Ocwen investigated and responded to
Freeman's notices of error in 2018.
Ocwen contends that even if any underlying errors alleged in Freeman's 2018 notices of
error were similar to servicing errors noted in the RCRs from 2014, 2015, and 2016, this
information still would be irrelevant because RESPA concerns the investigation and response, not
the underlying error. Ocwen argues RESPA damages are available if a consumer shows a pattern
or practice of noncompliance with the dispute resolution procedures set forth in § 2605, not by
showing that the underlying servicing error previously has occurred in a scenario wholly unrelated
to RESPA's dispute resolution requirements. Thus, Ocwen asserts, the RCRs' records of underlying
servicing errors are not relevant to a RESPA pattern or practice claim.
Next, Ocwen argues that the Order is clearly erroneous and contrary to law because the
RCRs are not proportional to the needs of the case. It argues that the Magistrate Judge was
incorrect in noting that Ocwen addressed only two of the factors regarding proportionality, when
Ocwen really addressed four of the factors. Ocwen points the Court to its brief at Filing No. 174
at 14–19 for this assertion. Ocwen reiterates that the RCRs simply are not relevant to any
remaining claims and to any calculation of potential damages, so they are not important to the
issues at stake and are not important to resolving the issues. The Magistrate Judge erred by not
considering its argument regarding the statutory damages cap for RESPA "pattern or practice"
claims. Additionally, the Magistrate Judge erred by not considering the "real" threat of significant
future discovery if the RCRs must be produced. Instead, the Magistrate Judge dismissed
consideration of "potential" future discovery, ignoring the subpoenas and deposition notices that
have already been served.
Next, Ocwen asserts that the Order was in error because it erroneously concluded that,
because the Seventh Circuit has explicitly declined to adopt the self-critical analysis privilege, the
Magistrate Judge reached the same conclusion. But this was an incorrect statement of law at the
time it was made because the Seventh Circuit has not affirmatively recognized the availability of
the self-critical analysis privilege, but it has also not specifically addressed the question of whether
to adopt it. Ocwen asserts that relying on this misstatement of the law to justify not even
considering whether the privilege applies is clearly erroneous and contrary to law.
Similarly, Ocwen asserts that the Order was in error because it failed to properly apply the
work-product privilege to the RCRs when it compelled their production. Ocwen argues that the
RCRs themselves and the source of their creation demonstrate that they were prepared because of
the prospect of litigation. The creation of the RCRs followed Ocwen's entry into a consent
judgment with the Consumer Financial Protection Bureau and States' Attorneys General in
December 2013. The fact that the RCRs did not exist prior to the consent judgment indicates that
the RCRs were not created in the ordinary course of Ocwen's business. The RCRs were developed
following the conclusion of a regulatory action in anticipation of potential litigation and/or
regulatory action in the future. Ocwen argues that this is patently obvious from the timing of their
creation and the subject matter which they covered. It is objectively clear that the RCRs came into
existence because of some articulable claim that would likely lead to litigation. Ocwen asserts that
to hold otherwise is erroneous, and the Magistrate Judge should have applied the work-product
privilege.
In response, Freeman contends,
Ocwen does not identify any misapplication of precedent it believes has
been overlooked in error, only an ill-defined belief Judge Pryor was wrong. This
type of objection is particularly disfavored. See, e.g., Directv, LLC v. Spina, 1:15-
cv-00104-JMS-TAB, 2016 WL 3097212, at *3 (S.D. Ind. June 3, 2016). This is
even more true in the context of discovery related disputes where the magistrate
judge was and remains in the best position to determine questions of relevancy and
proportionality. See, e.g., Jones v. City of Elkhart, Ind., 737 F.3d 1107, 1115 (7th
Cir. 2013); Garner v. St. Clair County, Illinois, Case No. 15-cv-00525-JPG-DGW,
2016 WL 1059238, at *2–3 (S.D. Ill. Mar. 17, 2016) ("[A] magistrate judge is in
the best position to gauge the extent to which discovery should be allowed in this
matter. Further, magistrate judges enjoy extremely broad discretion in controlling
discovery."). Here, Judge Pryor has presided over this litigation since its inception,
has commenced several discovery conferences in relation to the RCRs, and has
considered full briefing about whether the RCRs are discoverable.
(Filing No. 252 at 2–3 (emphasis in original).)
Regarding the RCRs' relevance to the bona fide error defense, Freeman points out that
Ocwen has not provided any legal support for its contention that any consideration is limited to
only the violation and the maintenance of procedures at the time of the violation. If Ocwen knew
and was tracking in its RCRs an ongoing failure to comply with the FDCPA, or of its propensity
to commit the servicing errors complained of by Freeman, and those failures continued on without
correction—which is what is allegedly contained in the RCRs—the documents would be relevant
to and probative of an absence of reasonable procedures and intentional conduct.
Concerning the RESPA claim, Freeman asserts that the RCRs are entirely relevant to her
claims and her allegations that Ocwen failed to conduct reasonable investigations in response to
her notices of error and engaged in a "pattern and practice" of servicing misconduct required for
an award of statutory damages. She notes that Ocwen has not provided any case law to support its
position that the Magistrate Judge's Order was erroneous regarding the RCRs' relevance to RESPA.
Regarding Ocwen's claim of privilege, Freeman asserts that Ocwen's "arguments continue
to be made with neither evidentiary support nor a corresponding entry within a privilege log. They
are also made without addressing how such a privilege could survive Ocwen's voluntary
production of partially redacted RCRs in Todd." (Filing No. 252 at 5.) Freeman acknowledges
that the Seventh Circuit has not explicitly declined to adopt the self-critical analysis privilege, but
the Seventh Circuit has considered the self-critical analysis privilege and has never adopted it, and
other district courts within the Circuit have considered it and declined to adopt it. Freeman argues,
the Seventh Circuit has more accurately implicitly declined to adopt the self-critical
analysis privilege. But this distinction without a difference is not a permissible basis
to set aside Judge Pyor's ruling as there was and remains no controlling authority,
or even persuasive authority within this District, calling for the adoption of the self-
critical analysis privilege.
Id. at 6 (emphasis in original). Additionally,
Judge Pryor's opinion cites to her holding in Todd and notes '[n]o relevant case in
this Circuit has addressed the self-critical analysis privilege since the issuance of
Todd and, thus, the analysis has not changed.' [D.E. 237 at 12-13]. Thus, it is quite
clear Judge Pryor did, in fact, consider whether the self-critical analysis privilege
'exists and applies to this case.'
Id. at 7.
As to the work-product privilege, Freeman asserts that Ocwen does nothing more than
repeat its rejected, threadbare assertion that the privilege applies based on the nature and context
of the RCRs' creation and their content. Ocwen simply disagrees with the Magistrate Judge's
conclusion about the privilege. There is nothing clearly erroneous about the Magistrate Judge's
factual findings nor is there anything contrary to law in her conclusion that the work-product
privilege does not apply to the RCRs.
Concerning proportionality of the discovery, Freeman contends that Ocwen's concerns do
not rise to the level of a failure to follow controlling precedent or a clear error regarding facts.
Freeman argues that Ocwen failed to establish any burden or expense associated with production
of the RCRs, and Ocwen also provided no legal support for its contention that the Court should
consider potential future discovery when weighing the burden of production of the RCRs. Freeman
argues it does not matter whether future discovery was "real" or "potential" because future
discovery is not a proper consideration for proportionality.
Finally, Freeman asserts,
Ocwen also argues Judge Pryor has erred in allowing Freeman to make
determinations of relevancy with respect to what portions of the RCRs are
ultimately produced. At the same time, Ocwen has and continues to take the
position that it may appropriately self-redact documents it believes are irrelevant.
These two positions are irreconcilable and evidence a dilatory motive. Nonetheless,
Ocwen does identify a potential problem the Order creates - albeit not in the way it
describes. While it is clear Judge Pryor has endeavored to strike a fair balance
between the parties['] competing interests, the Federal Rules do not provide a
mechanism for unilateral redactions or partial production, and it is frowned upon
by a weight of authority. . . . Here, the RCRs have been deemed discoverable and
Ocwen should not be afforded an opportunity to redact portions simply because it
believes them to be damaging.
Accordingly, if any action is taken with respect to the Order, Freeman asks
that it be amended so as to require Ocwen to produce the RCRs in their entirety.
Id. at 9–10 (emphasis in original).
The Court is persuaded that Ocwen has not shown that the Magistrate Judge's Order was
clearly erroneous or contrary to law to justify sustaining Ocwen's Objections. As noted above,
"[r]elevance in discovery is broader than relevance at trial; during discovery, a broad range of
potentially useful information should be allowed when it pertains to issues raised by the parties'
claims." Advanced Magnesium Alloys, 2021 U.S. Dist. LEXIS 140217, at *15–16. "Information
within this scope of discovery need not be admissible in evidence to be discoverable." Fed. Rule
of Civ Proc. 26(b)(1). The Magistrate Judge determined that the limited RCRs are relevant to the
remaining RESPA claim and to Ocwen's bona fide error defense. Ocwen did not support with case
law or authority its assertion that these are limited to the violations and the maintenance of policies,
procedures, and practices at the time of the violations. Ocwen also did not provide evidentiary
support showing that the Magistrate Judge made a clear error of fact concerning the RCRs. The
Court agrees with the Magistrate Judge that the RCRs very well may provide relevant information
concerning the RESPA claim and Ocwen's bona fide error defense.
Ocwen's proportionality argument opposing the motion to compel focused primarily on its
assertion that any amount of burden would be undue because the RCRs are not relevant. Ocwen
also primarily argued the RCRs' production is disproportional because of the small dollar amount
of potential damages. Ocwen now argues that it addressed in explicit detail the importance of the
issues at stake in the action and the importance of the discovery in resolving the issues in the case,
pointing to its brief at Filing No. 174 at 14–19. However, that portion of Ocwen's brief does not
clearly support its present argument. While Ocwen's argument about relevancy in that portion of
its earlier brief could arguably relate to the importance of the discovery in resolving the issues in
the case, Ocwen did not "explicitly address" these "proportionality factors," so it was not an error
for the Magistrate Judge to note that Ocwen addressed only two of the factors. Regarding the
statutory damages cap for RESPA "pattern or practice" claims, the Magistrate Judge noted that
this is not the only claim pending in this matter, so regardless of a RESPA "pattern or practice"
cap, there also are other damages at stake in the case. Furthermore, Ocwen did not point to any
case law or authority requiring the Magistrate Judge to consider the threat of (real or potential)
future discovery in weighing the burden of producing the presently requested RCRs. The Court
concludes there was no error regarding the proportionality analysis that would justify a different
outcome.
Concerning the self-critical analysis privilege, Ocwen argues the Magistrate Judge
committed error by refusing to even consider the privilege and by summarily dismissing its
potential application in this case. Ocwen bases its argument on the Magistrate Judge's quotation
from the Todd case: "Because the Seventh Circuit has explicitly declined to adopt the self-critical
analysis privilege, the Undersigned concludes the same." (Filing No. 227 at 12.) However,
Ocwen's argument disregards the rest of the Magistrate Judge's discussion about the privilege. The
Magistrate Judge also explained,
Defendant contends that the Seventh Circuit has not affirmatively recognized the
availability of the privilege, but that it has also not specifically addressed the
question of whether to adopt it. (Dkt. 174 at 20-21). Defendant is correct. The
Seventh Circuit has not recognized the self-critical analysis privilege, nor has it
explicitly stated whether the privilege even exists.
Id. The Magistrate Judge further explained, "No relevant case in this Circuit has addressed the
self-critical analysis privilege since the issuance of Todd and, thus, the analysis has not changed.
Accordingly, the Undersigned concludes that the self-critical analysis privilege does not apply."
Id. at 13. While it was imprecise to state in the Todd case that the Seventh Circuit has "explicitly
declined to adopt the self-critical analysis privilege," it remains true that the privilege has not been
adopted, and the Magistrate Judge acknowledged Ocwen was correct that the Seventh Circuit has
not affirmatively recognized the availability of the privilege and it has not specifically addressed
the question of whether to adopt it. A review of the entirety of the Magistrate Judge's Order makes
it clear that she did not refuse to even consider the privilege and summarily declined to apply it.
She considered the privilege, recognized it has yet to be adopted, and determined that nothing in
the state of the law has changed since Todd, so she concluded the privilege does not apply.
Ocwen's Objection regarding a self-critical analysis privilege does not justify a different outcome.
Turning to the work-product doctrine, this privilege provides an exception to the liberal
discovery rules. To claim protection of the doctrine, a party must demonstrate that the materials
in question would otherwise be discoverable and were prepared in anticipation of litigation. The
burden is on the discovery opponent to establish that the work-product doctrine protects the
documents against discovery. The threshold determination is whether the documents sought to be
protected were prepared in anticipation of litigation or for trial. However, not all documents
generated from an internal investigation are protected by the work-product doctrine simply
because a company's internal investigation is coexistent with a present or anticipated lawsuit that
is the same subject matter of the litigation. Documents created in the ordinary course of business
that would have been created regardless of litigation are not under the protection of the work-
product doctrine. See Long v. Anderson Univ., 204 F.R.D. 129, 135–36 (S.D. Ind. 2001).
Ocwen argues that the RCRs themselves and the source of their creation demonstrate that
they were prepared because of the prospect of litigation. Ocwen argues that the RCRs came into
existence after the consent judgment because of some articulable claim that would likely lead to
litigation. The Magistrate Judge considered this argument presented by Ocwen, and Ocwen (the
party having the burden to show that the work-product doctrine applies) failed to convince the
Magistrate Judge by its argument. The Magistrate Judge considered the correct and applicable law
and determined that the privilege did not apply to the RCRs. When considering the discoverability
of Ocwen's RCRs, this same Magistrate Judge explained in Todd, "The consent decrees do not
mandate that Ocwen maintain RCRs — rather, it appears from the briefing that Ocwen prepared
the RCRs for internal use in order to track and prevent any further issues that may result in a
subsequent consent decree." Todd v. Ocwen Loan Servicing, 2020 U.S. Dist. LEXIS 52212, at *15
(S.D. Ind. Jan. 30, 2020). And "the RCRs appear to be spreadsheets created in the normal course
of Ocwen's business, in an attempt to track potential points of liability and forestall future
regulatory action." /d. The Court overrules Ocwen's Objection as to the work-product privilege
because Ocwen has not shown the decision was clearly erroneous or contrary to law.
Finally, regarding the Order's direction to Freeman to compile a list of relevant categories
in the RCRs and provide that list to Ocwen for its production of documents, the Court concludes
that such a direction was improper. The Magistrate Judge concluded, and the Court agrees, that
the RCRs are relevant to Freeman's RESPA claim and Ocwen's bona fide error defense. Thus, the
RCRs are to be produced to Freeman.
IV. CONCLUSION
For the foregoing reasons, Ocwen's Rule 72 Objection to Magistrate Judge's March 4, 2022
Order (Filing No. 237) is OVERRULED. The Stay requiring the production of RCRs is lifted
effective tomorrow, April 5, 2022.
SO ORDERED.
Date: _ 4/4/2022 Daten
Hon. Tan¥a Walton Pratt, Chief Judge
United States District Court
Southern District of Indiana
13
DISTRIBUTION:
Rusty A. Payton John Curtis Lynch
PAYTON LEGAL GROUP LLC TROUTMAN SANDERS LLP
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Nicholas H. Wooten Carter Randall Nichols
NICK WOOTEN, LLC TROUTMAN SANDERS LLP
nick@nickwooten.com carter.nichols@troutman.com
Travis W. Cohron Ethan Geoffrey Ostroff
CLARK QUINN MOSES SCOTT & GRAHN LLP TROUTMAN SANDERS LLP
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Michael P. Maxwell, Jr. Guerino Cento
CLARK QUINN MOSES SCOTT & GRAHN LLP CENTO LAW
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Olivia Anne Hess
CLARK QUINN MOSES SCOTT & GRAHN LLP
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