Opinion

FREEDOM MORTGAGE CORPORATION v. LOANCARE, LLC

Court: District Court, D. New Jersey
Filed: Mar 20, 2023
Cited by: 0 cases
Authority: More cited than 25.5%

“These conventional devices, rather than wholesale exclusion . . . , are the appropriate safeguards where the basis of scientific testimony meets the standards of Rule 702.”

How later courts described this case

“These conventional devices, rather than wholesale exclusion . . . , are the appropriate safeguards where the basis of scientific testimony meets the standards of Rule 702.”
“an expert cannot be presented to the jury solely for the purpose of constructing a factual narrative based on record evidence”
explaining that invasive cardiologist’s academic background, teaching position, and prior experience advising interventional cardiologists demonstrated that he could provide opinion about cardiology, no matter the sub-specialty
excluding expert who was “unable to articulate with any degree of specificity the basis for his cost calculations” or “explain how his experience led to his conclusion, or even why his experience is a sufficient basis for the conclusion”

Written by the judges who cited it.

The opinion

UNITED STATES DISTRICT COURT

DISTRICT OF NEW JERSEY

CAMDEN VICINAGE

FREEDOM MORTGAGE

CORPORATION,

Plaintiff-Counterclaim Defendant, Civil No. 16-02569 (RMB/AMD)

OPINION

LOANCARE, LLC (as successor to

FNF Servicing, Inc. and LoanCare, a

Division of FNF Servicing, Inc.),

Defendant-Counterclaimant.

APPEARANCES:

LANDMAN CORSI BALLAINE & FORD, P.C.

By: Jerry A. Cuomo, Esq.; Timothy Collazzi, Esq.;

Mark S. Landman, Esq. (pro hac vice)

One Gateway Center, 4th Floor

Newark, New Jersey 07102

Counsel for Freedom Mortgage Corporation

FRIEDMAN KAPLAN SEILER ADELMAN & ROBBINS LLP

By: Robert J. Lack, Esq.; Andrew M. Englander, Esq.

One Gateway Center, 25th Floor

Newark, New Jersey 07102

Counsel for LoanCare, LLC

BOIES SCHILLER FLEXNER LLP

By: Stuart H. Singer, Esq. (pro hac vice); Sabria A. McElroy, Esq. (pro hac vice);

Pascual A. Oliu, Esq. (pro hac vice)

401 East Las Olas Boulevard, Suite 1200

Fort Lauderdale, Florida 33301

Counsel for LoanCare, LLC

RENÉE MARIE BUMB, Chief United States District Judge:

This matter comes before the Court upon two motions to preclude expert

testimony in this breach-of-contract action. On February 14, 2022, Defendant-

Counterclaimant LoanCare, LLC (“LoanCare”) filed a motion to preclude the expert

testimony of Susan Connally and Robert Lyons. [Docket No. 212 (“LoanCare’s

Motion”).] On the same day, Plaintiff-Counterclaim Defendant Freedom Mortgage

Corporation (“Freedom”) filed a motion to preclude the expert testimony of

Christopher Sicuranza, Genger Charles, Marcel Bryar, and Nigel Brazier. [Docket

No. 213 (“Freedom’s Motion”).] On July 26, 2022, indicating that it would hold a

Daubert hearing, the Court administratively terminated the parties’ Motions pending

the hearing, [Docket No. 234], which occurred on October 24 and 25, 2022, [see

Transcript of Daubert Hearing, Docket Nos. 247, 248 (“Hrg. Tr.”).] Thereafter, the

Court received the parties’ Post-Daubert Briefs. [Docket Nos. 245 (“Def.’s Post-

Daubert Br.”), 246 (“Pl.’s Post-Daubert Br.”).] As these Motions are fully briefed,1

and live testimony has been taken, they are ripe for adjudication.

For the reasons stated on the record of October 24 and 25, 2022, and more

specifically below, LoanCare’s Motion will be GRANTED and Freedom’s Motion

1 The Court refers to the parties’ principal submissions as follows: Def.’s Br.

Supp. LoanCare’s Mot., Docket No. 214 (“Def.’s Br.”); Pl.’s Opp’n to LoanCare’s

Mot., Docket No. 226 (“Pl.’s Opp’n”); Def.’s Reply Br. Supp. LoanCare’s Mot.,

Docket No. 228 (“Def.’s Reply Br.”); Pl.’s Br. Supp. Freedom’s Mot., Docket No.

213-1 (“Pl.’s Br.”); Def.’s Opp’n Freedom’s Mot., Docket No. 227 (“Def.’s Opp’n”);

Pl.’s Reply Br. Freedom’s Mot., Docket No. 229 (“Pl.’s Reply Br.”).

will be GRANTED, IN PART, and DENIED, IN PART.

I. BACKGROUND

The Court assumes the parties’ familiarity with the factual and procedural

history of this long-running matter and recites only those details it deems necessary to

dispose of the pending Daubert Motions.2

Freedom is a full-service residential mortgage lender and LoanCare is a

mortgage subservicer. Both are in good standing with the Federal Housing

Administration (“FHA”), the Department of Veterans Affairs (“VA”), the Federal

National Mortgage Association (“Fannie Mae”), and the Government National

Mortgage Association (“Ginnie Mae”). For approximately 15 years, LoanCare

serviced a portfolio of Freedom’s mortgage loans. Between February 2010 through

June 2016, the parties’ relationship was governed by the Amended and Restated

Subservicing Agreement, effective February 1, 2010 (the “Subservicing Agreement”).

For a variety of reasons, that relationship eventually deteriorated.

In January 2016, Freedom advised LoanCare that it planned to terminate the

Subservicing Agreement on June 30, 2016, and it instructed LoanCare to transfer back

to Freedom all loans that LoanCare was servicing. Freedom contends that LoanCare

committed repeated errors and omissions while subservicing Freedom’s FHA, VA,

Fannie Mae, and Ginnie Mae loans—on which the relevant borrowers had defaulted.

2 The Joint Final Pretrial Order and the Court’s prior Opinions adequately set

forth the factual background of this action, which the Court incorporates herein by

reference. [Docket Nos. 84, 116, 177, & 196.]

Freedom believes that LoanCare’s errors and omissions constituted material breaches

of the Subservicing Agreement, causing Freedom some $38 million in damages.

Additionally, during the process of unwinding the relationship, and pursuant to

Freedom’s instruction, LoanCare attempted to return to Freedom around $111 million

from shared custodial accounts at various banks. Simultaneously, however, Freedom

worked directly with the banks to block LoanCare’s access to these accounts, and,

through a series of transactions, the banks ultimately transferred the $111 million from

LoanCare’s own cash accounts. While LoanCare recovered a substantial portion of

this amount, Freedom withheld some $23 million because LoanCare allegedly could

not establish its entitlement to the funds. LoanCare believes that Freedom

fraudulently obtained and converted this sum. Separately, LoanCare asserts that

Freedom breached the Subservicing Agreement by failing to notify LoanCare of

Freedom’s breaches of warranties concerning its origination of “subprime” loans that

LoanCare agreed to service. LoanCare believes that origination deficiencies directly

impacted or “hampered” its ability to service Freedom’s loans.

This litigation soon commenced. On May 6, 2016, Freedom asserted breach of

contract, breach of the implied covenant of good faith and fair dealing, fraud, unjust

enrichment, and tortious interference with contract claims against LoanCare. After

motion practice, on December 31, 2018, LoanCare filed a Second Amended

Counterclaim asserting fraudulent inducement, conversion, breach of contract, and

unjust enrichment claims against Freedom. On September 23, 2019, the Court

dismissed one of LoanCare’s conversion claims, [Docket No. 117], and on July 23,

2020, the Court granted summary judgment in favor of LoanCare on Freedom’s

tortious interference claim, [Docket No. 177]. As a jury trial approaches, the parties

filed the pending Daubert Motions seeking to exclude each other’s expert witnesses.

[Docket Nos. 212, 213.]

II. LEGAL STANDARDS

Federal Rule of Evidence 702 governs the admissibility of expert testimony,

permitting a witness “qualified as an expert by knowledge, skill, experience, training,

or education” to testify in the form of an opinion, provided that:

(a) the expert’s scientific, technical, or other specialized knowledge

will help the trier of fact to understand the evidence or to

determine a fact in issue;

(b) the testimony is based on sufficient facts or data;

and

(d) the expert has reliably applied the principles and methods to the

facts of the case.

FED. R. EVID. 702; see also Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579 (1993).

Because Rule 702 “clearly contemplates some degree of regulation of the subjects and

theories” to which an expert may testify, the Supreme Court has stated:

[I]n order to qualify as “scientific knowledge,” an inference or assertion

must be derived by the scientific method. Proposed testimony must be

supported by appropriate validation—i.e., “good grounds” based on

what is known. In short, the requirement that an expert’s testimony

pertain to “scientific knowledge” establishes a standard of evidentiary

reliability.

Daubert, 509 U.S. at 590; see also Oddi v. Ford Motor Co., 234 F.3d 136, 144–45 (3d Cir.

2000). In practice, this requires the court to act as a “gatekeeper” to prevent expert

testimony running afoul of Rule 702 from ever reaching the jury. See Daubert, 509 U.S.

at 596–97. Thus, the court “must determine . . . whether the expert is proposing to

testify to (1) scientific knowledge that (2) will assist the trier of fact to understand or

determine a fact in issue.” Id. at 592. “This entails a preliminary assessment of

whether the reasoning or methodology underlying the testimony is scientifically valid

and of whether that reasoning or methodology properly can be applied to the facts in

issue.” Id. at 592–93.

The Third Circuit has described Rule 702 as embodying a “trilogy of restrictions

on expert testimony: [1] qualification, [2] reliability, and [3] fit.” Calhoun v. Yamaha

Motor Corp., U.S.A., 350 F.3d 316, 321 (3d Cir. 2003) (quoting Schneider v. Fried, 320

F.3d 396, 405 (3d Cir. 2003)). First, the witness must be qualified to testify as an

expert, which requires “that the witness possess specialized expertise.” Id. This

requirement, however, has been interpreted liberally to encompass “a broad range of

knowledge, skills, and training.” In re Paoli R.R. Yard PCB Litig., 35 F.3d 717, 741 (3d

Cir. 1994) (hereinafter, “In re Paoli”).

Second, the testimony must be reliable, which demands that “the expert’s

opinion must be based upon the ‘methods and procedures of science,’ rather than on

‘subjective belief or unsupported speculation.’” Calhoun, 350 F.3d at 321 (quoting In

re Paoli, 35 F.3d at 742). In other words, the Court must ensure that the evidence

adduced is scientifically valid. Daubert, 509 U.S. at 590. In determining the reliability

of expert testimony, the Court is guided by the following factors:

(1) whether a method consists of a testable hypothesis; (2) whether the

method has been subject to peer review; (3) the known or potential rate

of error; (4) the existence and maintenance of standards controlling the

technique’s operation; (5) whether the method is generally accepted; (6)

the relationship of the technique to methods which have been established

to be reliable; (7) the qualifications of the expert witness testifying based

on the methodology; and (8) the non-judicial uses to which the method

has been put.

Calhoun, 350 F.3d at 321 (quoting In re Paoli, 35 F.3d at 742 n.8). However, the Court

is not restricted to any “definitive checklist or test.” Daubert, 509 U.S. at 593. This

inquiry is “a flexible one” focusing “solely on the principles and methodology, not on

the conclusions that they generate.” Id. at 595.

While reliability does not require “correctness,” it does prohibit “too great a gap

between the data and the [expert’s] opinion proffered.” Oddi, 234 F.3d at 146 (quoting

Gen. Elec. Co. v. Joiner, 522 U.S. 136, 146 (1997)). Thus, the court “must examine the

expert’s conclusions in order to determine whether they could reliably flow from the

facts known to the expert and the methodology used.” Id. (quoting Heller v. Shaw

Indus., Inc., 167 F.3d 146, 153 (3d Cir. 1999)).

Third, the expert’s testimony must “fit” the case. Daubert, 509 U.S. at 592.

Otherwise known as the “helpfulness” standard, this requires there to be “a valid

scientific connection to the pertinent inquiry as a precondition to admissibility.” Id. at

591–92. The fit requirement “goes primarily to relevance.” Id. “[T]he expert’s

testimony must be relevant for the purposes of the case and must assist the trier of

fact.” Schneider, 320 F.3d at 404 (citations omitted). The party that proffers the expert

testimony bears the burden of establishing its admissibility by a preponderance of the

evidence. Daubert, 509 U.S. at 592 n.10 (citing Bourjaily v. United States, 483 U.S. 171,

175–76 (1987)).

III. DISCUSSION

Cognizant of the foregoing principles, the Court considers the parties’

challenges to their respective experts in the order in which they were presented to the

Court during the Daubert hearing—thus first addressing LoanCare’s Motion before

turning to Freedom’s Motion. At LoanCare’s request, the Court also considers

whether the reports of Susan Connally and Robert Lyons may be presented as

summary evidence.

A. LoanCare’s Motion to Exclude Susan Connally and Robert Lyons

LoanCare requests that Freedom’s expert witnesses—Susan Connally and

Robert Lyons—be excluded from testifying in this action. Connally is Freedom’s

expert on VA-guaranteed loans, and Lyons is Freedom’s expert on all other loans.

Generally, LoanCare contends that Connally and Lyons assign fault to LoanCare for

any error or omission Freedom could identify in connection with LoanCare’s

subservicing of its loan portfolio, notwithstanding the applicable standards of the

Subservicing Agreement. LoanCare raises other issues concerning their methodology

too. While LoanCare bases its challenges to the opinions of Connally and Lyons on

Daubert’s “fit” and reliability requirements, the Court notes that these principles

overlap and merge when applied to Freedom’s experts. LoanCare does not dispute

the experts’ qualifications, and in any case the Court finds that Connally and Lyons

are sufficiently qualified to testify. See Daubert, 509 U.S. at 592 & n.10.

1. Whether Susan Connally Should be Excluded

Susan Connally, Freedom’s expert on VA-guaranteed loans, offers an

affirmative report and a rebuttal report. Freedom offers Connally’s affirmative

opinions to establish that LoanCare’s alleged misconduct in servicing Freedom’s

portfolio of VA-guaranteed loans caused it $4,790,707.35 of losses in foregone interest

and expense reimbursements. [Freedom Mortgage VA Claim Review 3, 10, Docket

No. 215-13 (“Connally Rpt.”).] In reaching this conclusion, Connally and her team

reviewed servicing files for 1,318 VA-guaranteed loans with VA claims filed by

LoanCare on behalf of Freedom between 2010 and 2016.3 [Id. at 3.] Of the loans

reviewed, Connally determined that Freedom sustained losses on 1,137 solely because

of LoanCare’s “errors and omissions” concerning compliance with “applicable

servicing requirements”—principally, LoanCare’s apparent failure to observe VA-

established deadlines and to successfully obtain reimbursement for eligible expenses.

[Id. at 4, 7–8.] These errors and omissions resulted in the VA’s assessment of “claim

curtailments,” which refers to the reduction in a claim for reimbursement of eligible

expenses due to an “infraction or violation” of a VA requirement. [Id. at 5, 6; Hrg. Tr.

38.] Specifically, Connally identified several trends in LoanCare’s performance:

delays in completing foreclosures due to missing documentation or

miscommunications with foreclosure counsel, untimely and mistaken referrals of

3 A claim is filed with the VA following the occurrence of a “terminating event,”

such as a foreclosure, to obtain reimbursement of eligible fees, costs, and losses up to

a maximum figure allowed by the VA (the “Maximum Guaranty”). [Connally Rpt.

5.]

defaulted loans to counsel, failure to submit title documents to the VA, and other

issues, to name a few. [Connally Rpt. 8–10.] The bulk of the monetary loss that

Connally attributed to LoanCare appears to be loss arising from the VA’s rejection of

expenses for reimbursement that were incurred after VA-mandated deadlines to

terminate a loan or prior to default, were ineligible for some other reason, or exceeded

the Maximum Guaranty. [Id. at 8.] In total, she found that these errors and omissions

represented $4,790,707.35 in foregone interest and reimbursements that Freedom

would have been entitled to had LoanCare complied with the VA requirements. [Id.

at 10.]

Additionally, Connally offers opinions rebutting LoanCare’s experts to

demonstrate that LoanCare did not perform its contractual obligations as a “prudent”

subservicer would have during the applicable period. [See generally Freedom Mortgage:

Clayton’s Response to LoanCare LLC’s Expert Rpts., Docket No. 215-14 (“Connally

Rebuttal Rpt.”).]

LoanCare challenges the relevance and reliability of these opinions. It first

argues that Connally did not consider applicable contractual standards when

analyzing LoanCare’s performance servicing Freedom’s portfolio of VA-guaranteed

loans. [Def.’s Br. 8.] LoanCare explains that § 8.3 of the Subservicing Agreement

limits LoanCare’s liability for “willful misconduct or gross negligence” and specifically

excludes liability for actions taken (or not taken) in good faith, or for “good faith errors

in judgment.” [Id.] According to LoanCare, because Connally assigned fault for any

activity that resulted in a delay beyond the VA’s timelines and disregarded the

Subservicing Agreement, she adopted a “you erred, you’re liable” standard that would

mislead a jury. [Def.’s Reply Br. 1; Def.’s Br. 8.]

In opposition, Freedom argues that Connally applied the correct standard to

assess LoanCare’s conduct. Specifically, Freedom contends that the relevant

provision of the Subservicing Agreement is § 2.2, which requires LoanCare to service

Freedom’s loans in compliance with the “Applicable Requirements” (including the

VA Handbook and other servicing guides). Accordingly, Freedom believes that

Connally’s analysis is consistent with the correct contractual standard. [Pl.’s Opp’n

1.] Freedom also contends that Connally was precluded from opining whether

LoanCare’s errors resulted from “willful misconduct” or “gross negligence,” and not

“good faith” mistakes, as such ultimate issues involve legal conclusions within the

province of the jury. [Id.] Next, Freedom claims that Connally in fact considered the

relevant language of § 8.3 by assigning fault to LoanCare only for damages solely

resulting from its failure to comply with the VA Guide, leaving the question of

egregiousness to the jury’s evaluation. [Id. at 1–2 & n.2.] Finally, Freedom says that

LoanCare’s generalized violation of industry practices is a violation of the VA Guide

and the Subservicing Agreement because the VA Guide requires loans to be serviced

“consistent with industry standards.” [Id. at 2.]

The Court finds Freedom’s opposition unpersuasive and agrees with

LoanCare’s first argument. It concludes that Connally’s opinions are the product of

an unreliable methodology and must be excluded as a result. See In re Paoli, 35 F.3d

at 746 (explaining that a court should exclude an expert’s opinion where a

methodological flaw is “largen enough that the expert lacks ‘good grounds’ for his or

her conclusions”). Relatedly, the Court finds that Connally’s opinions cannot assist a

jury to determine liability because they do not apply the relevant limitations of the

Subservicing Agreement. See Oddi, 234 F.3d at 145–46 (explaining that expert

testimony must “fit” the case to assist the trier of fact). Indeed, one of the fatal flaws

in Connally’s analysis is that she did not construct a method of evaluating the VA

loans to attribute Freedom’s losses to LoanCare that properly considered the text of

the Subservicing Agreement. Section 8.3 is clear about the scope of LoanCare’s

liability:

[LoanCare] shall be liable to [Freedom] only for [LoanCare’s] willful

misconduct or gross negligence arising solely from its own acts or omissions

and shall not be under any liability to [Freedom] for any action taken or

for refraining from the taking of any action in good faith pursuant to this

Agreement, or for good faith errors in judgment, . . . . In no event shall

[LoanCare] be held liable for any special, indirect, punitive or

consequential damages, resulting from any action taken or omitted to be

taken by it hereunder or in connection herewith.

[Subservicing Agreement § 8.3, Docket No. 1-2 (emphasis added).] As Connally

herself admitted, she defined an error to be “a servicing delay that was caused by

something that was done outside of standard servicing practice” or “the VA Guide

requirements,” [Hrg. Tr. 41], and she looked for “anything [she] viewed as a LoanCare

error” when assigning losses to LoanCare, [id. at 42 (emphasis added)]. But she did

not connect the dots for the jury to conclude whether LoanCare’s conduct fell within

the language of the contract. Importantly, she did not consider whether an error was

intentional or deliberate, or the result of recklessness, or made in good faith. [See id.]

Nor does her methodology measure servicing errors against an objective standard by

which a jury could reliably weigh whether an identified error was, for instance, the

result of bad faith. Based on Connally’s opinions, a reasonably jury could not infer

gross negligence or recklessness either because Connally does not compare LoanCare’s

performance against others using accepted metrics to determine whether LoanCare

was out-of-step with its industry peers. In other words, she simply attributed to

LoanCare all losses for which it was arguably “solely” responsible and failed to parse

LoanCare’s conduct any more specifically. Without this issue addressed, Connally’s

expert testimony may explain the magnitude of Freedom’s losses due to LoanCare’s

mistakes, but not that for which LoanCare is contractually liable. Accordingly, it is

both irrelevant and unreliable. See Oddi, 234 F.3d at 145; In re Paoli, 35 F.3d at 746.

Section 8.3 limits LoanCare’s liability notwithstanding its agreement in § 2.2 to service

Freedom’s loans in compliance with the “Applicable Requirements.”

This critical distinction was lost on Connally in her written reports, but not in

her testimony during the Daubert Hearing. For example, the Court inquired about the

good faith limitation of § 8.3:

THE COURT: Do you see a difference in your analysis of looking at

practices done in good faith versus practices done pursuant to industry

standards?

[CONNALLY]: I think there can be scenarios in which there is a

servicing error that does not align with industry best practice even though

it is done in good faith. . . . But ultimately, failure to identify and

remediate that issue before it becomes a delay or an error impacts the loss

to whoever holds that loan.

THE COURT: [T]here’s no way that your analysis is able to . . .

determine whether it was done in good faith . . . ?

[CONNALLY]: Correct.

[Hrg. Tr. 42–43.] The Court concludes from this testimony that Connally recognized

that her analysis does not differentiate between servicing errors in the relevant sense.

It merely infers that a purported LoanCare error results in a Freedom loss for which

LoanCare is liable. But liability is partly dependent on custom and industry

practices—issues that Connally did not build into her methodology. Rather, she

documented each and every LoanCare error and omission irrespective of the

contractual standard. The Court also asked Connally how her testimony would assist

a jury to understand whether LoanCare was, for instance, grossly negligent when she

did not consider this standard in tallying LoanCare’s errors:

[CONNALLY]: I think my testimony by understanding some of the

nuances of these servicing issues and the number of issues would help the

jury decide whether it rises to that standard of gross negligence.

THE COURT: But how would they take your report and do that?

[CONNALLY]: (No response.)

[Hrg. Tr. 87.] Later, in its colloquy with counsel, the Court described the crux of the

problem: Connally has not provided the “tools” with which a jury can decide whether

LoanCare’s errors and omissions rise to the level of gross negligence or otherwise

render it contractually liable. [Id. at 105.] In response, Freedom pointed to its second

argument, [id. at 105–06], that under governing Virginia law,4 LoanCare’s gross

negligence may be cobbled together from multiple instances of ordinary negligence.

[See Pl.’s Opp’n 2–3.] Freedom urged the Court to review the cases cited in its papers.

[Hrg. Tr. 112; see also Pl.’s Post-Daubert Br. 2–3.]

The Court has read and re-read those cases. They simply do not stand for such

a convenient proposition as applied here. In Virginia, gross negligence is described as

“utter disregard of prudence amounting to complete neglect of the safety of another,”

Frazier v. City of Norfolk, 362 S.E.2d 688, 691 (Va. 1987), and a “heedless and palpable

violation of legal duty respecting the rights of others,” Town of Big Stone Gap v. Johnson,

35 S.E.2d 71, 73 (Va. 1945) (citation omitted); see also Cowan v. Hospice Support Care,

Inc., 603 S.E.2d 916, 918 (Va. 2004) (defining gross negligence as “a degree of

negligence showing indifference to another and an utter disregard of prudence that

amounts to a complete neglect of the safety of such other person,” which would “shock

fair-minded persons, although demonstrating something less than willful

recklessness”) (citations omitted). “Several acts of negligence which separately may

not amount to gross negligence, when combined may have a cumulative effect

showing a form of reckless or total disregard for another’s safety.” Chapman v. City of

Virginia Beach, 475 S.E.2d 798, 801 (Va. 1996) (citing Kennedy v. McElroy, 81 S.E.2d

436, 439 (Va. 1954)). Some degree of deliberateness thus appears to be a touchstone

of gross negligence. See id.

4 The Subservicing Agreement provides for the application of Virginia law. [See

Subservicing Agreement § 10.6.]

In Chapman, bereaved parents filed a wrongful death action against the City of

Virginia Beach after their eight-year-old died, hanged between the metal bars of a gate

that the city maintained. 475 S.E.2d 798, 799–800 (Va. 1996). After a jury returned a

verdict in favor of one of the parents, the trial court ruled that the evidence did not

establish gross negligence. Id. at 800. Finding that the city was informed on multiple

occasions that the gate was broken and that it made a deliberate decision not to order

it repaired, the Chapman court reinstated the verdict. Id. at 801. “On this record,

reasonable persons could differ upon whether the cumulative effect of these

circumstances constitutes a form of recklessness or a total disregard of all precautions,

an absence of diligence, or lack of even slight care,” so the question was properly

submitted to the jury. Id.

In Finney v. Clark Realty Capital, two tenants sued their landlord for, inter alia,

negligent repair after they complained on several occasions about mold in their home.

2022 WL 303245, at *1 (E.D. Va. 2022). The complaints stretched over a year, and

an unsuccessful attempt to remediate the mold only aggravated respiratory problems

for one tenant, resulting in her hospitalization. Id. at *1–*2. Ultimately, the tenants

were relocated. Id. at *2. Denying the landlord’s motion for summary judgment as to

the tenants’ gross negligence claim, the Finney court found the following facts to be

disputed: that “there were repeated attempts and requests made for mold remediation

that were ignored”; that the landlord “had knowledge of mold in the residence . . .

from the complaints of other tenants”; that the mold was visible for over a year; and

that the landlord’s unsuccessful attempt at remediation led to the hospitalization of a

tenant. Id. at *4. Thus, a jury could find the landlord grossly negligent. Id.

The present case is unlike Chapman and Finney. The theory of gross negligence

that Freedom invokes to establish the relevance of Connally’s (and Robert Lyons’)

opinions involves the aggregation of dissimilar errors and omissions without the same

pattern of notice and deliberate action apparent in the “cumulative effects” cases.

Unlike in Chapman where the city received notice of the broken gate on at least three

separate occasions and deliberately chose not to repair it, 475 S.E.2d at 801,

Connally’s testimony does not establish that LoanCare deliberately and repeatedly

made the same set of errors servicing the same set of loans. The comparison to Finney

reveals the same conclusion. Freedom cannot treat losses arising from a LoanCare

error—such as a missed deadline—on one loan as gross negligence by focusing on

losses arising from other loans. The errors and the loan profiles are not necessarily the

same. Furthermore, deliberate conduct is a touchstone of gross negligence. See id. As

Connally admitted, her analysis was not designed to consider such questions. [See

Hrg. Tr. 42–43; see also supra page 13.] Finally, Chapman involves personal injury and

Finney landlord-tenant relations. In the instant contract dispute, a negotiated provision

specifically addresses the scope of one party’s liability, and it effectively excludes

ordinary negligence. Freedom’s expert testimony should not require such an inventive

theory to satisfy the standards of Daubert and Federal Rule of Evidence 702.

Next, LoanCare seeks to exclude Connally because she assigns damages to

LoanCare on loans for which Freedom received the VA’s Maximum Guaranty.

[Def.’s Br. 9–10.] Freedom apparently sustained losses on 721 loans solely because

the deficiency remaining on the loan after foreclosure was greater than the Maximum

Guaranty, and LoanCare argues that Freedom would have recovered the same figure

even if its alleged breaches of the Subservicing Agreement had not occurred. [Def.’s

Br. 9.] LoanCare thus claims that Connally’s methodological choice lacks an adequate

foundation for two reasons. First, LoanCare disputes Connally’s choice to attribute

Freedom’s foregone interest to LoanCare, as Freedom chose to advance interest to the

loan’s investor (Ginnie Mae) rather than buy out the loan. [Id. at 10.] Thus, arguably,

such losses do not arise “solely” from LoanCare’s acts or omissions. Second,

LoanCare emphasizes the lack of a nexus between Freedom’s claimed losses where

the Maximum Guaranty was recovered and LoanCare’s errors and omissions: even if

LoanCare made no errors for these loans, the VA would not reimburse eligible

expenses totaling more than the Maximum Guaranty. [Id.]

Freedom opposes. [Pl.’s Opp’n 4–5.] Freedom argues that, when a borrower

defaults on a VA loan, nonbanks (such as Freedom) infrequently buy out the loan. [Id.

at 5.] Rather, typically, they advance interest to Ginnie Mae until a foreclosure can be

completed. [Id.] Because LoanCare failed to timely process foreclosures, Freedom

sustained greater foregone interest than it otherwise would have. [Id.] Accordingly,

Connally assigns LoanCare responsibility for foregone interest for which its errors and

omissions are the “sole” cause. Similarly, Freedom claims that LoanCare is liable for

Freedom’s “pass-through” expenses that exceed the Maximum Guaranty, even

though such costs are not reimbursable by the VA, as such losses would not have been

incurred had LoanCare complied with § 2.2 of the Subservicing Agreement. [Id.]

Connally’s testimony during the Daubert Hearing is particularly instructive to

clarify these mechanics. She discussed an example loan that entered default: its

Maximum Guaranty was around $112,000, its sale proceeds from foreclosure were

over $260,000, and its unpaid principal balance was around $450,000. [Hrg. Tr. 49.]

Sale proceeds minus unpaid principal balance represents, in this particular case, a loss

of more than $182,000 to Freedom. [Id.] Because the Maximum Guaranty for this

loan was around $112,000, Freedom sustained the differential (around $70,000) as a

loss, as it could not recover more than $112,000 from the VA. [Id.] At the same time,

Freedom was also responsible for paying interest to Ginnie Mae and servicing

expenses until a foreclosure was completed. [Id. at 50–51.] While Connally explained

that she did not attribute the delta to LoanCare automatically—as property value

declines at this time appear to have been inherent to the loan’s negative value—she

did attribute the foregone interest and expenses to LoanCare where its error (such as a

foreclosure delay) resulted in additional cost to Freedom. [Id. at 49–52.]

LoanCare’s argument thus appears to depend on its view that foregone interest

and expenses on loans that received the VA’s Maximum Guaranty constitute

“consequential damages” that are specifically excluded under § 8.3. [See Hrg. Tr. 54–

55; Def.’s Br. 5 n.7.] The provision reads: “In no event shall [LoanCare] be held liable

for any special, indirect, punitive or consequential damages, resulting from any action

taken or omitted to be taken by it hereunder or in connection herewith.” [Subservicing

Agreement § 8.3.] The Court does not necessarily agree with LoanCare’s assertion,

but as the Court previewed during the Daubert hearing, it need not definitively decide

this issue now. [Hrg. Tr. 101.] Similarly, the Court need not determine whether

foregone interest is a loss arising “solely” from LoanCare’s own acts or omissions.

Connally’s methodology is fundamentally flawed because she failed to correctly

distinguish between the acts and omissions that could render LoanCare contractually

liable, even assuming its sole responsibility.

Finally, LoanCare asserts that Connally’s rebuttal opinions must be excluded

because she never reviewed LoanCare’s policies and procedures and could not provide

the error rates of, or define, a “prudent” servicer. [Def.’s Br. 10.] Essentially, Freedom

replies that LoanCare’s arguments are irrelevant, as Connally opines on LoanCare’s

compliance with applicable servicing requirements in practice and her opinions are

based on her experience. [Pl.’s Opp’n 5.] The Court agrees with LoanCare.

Connally’s rebuttal opinions regarding LoanCare’s policies and procedures lack

foundation, as she never reviewed those policies and procedures and has not provided

a persuasive explanation why such review was unnecessary. See Oddi, 234 F.3d at 146.

While the Court recognizes that industry data regarding “prudent” servicing do not

appear to be available, [Hrg. Tr. 74], Connally was unable to provide objective support

for her opinion that LoanCare acted imprudently, [see id. at 73–76]. Moreover, her

firm’s internal data—on which she partially relied to form her opinions—do not

appear to have provided sufficiently detailed information regarding error rates specific

to VA loans. [Id. at 75.] Without the required foundation, Connally’s rebuttal

opinions are too speculative, despite her generalized industry experience. See In re TMI

Litig., 193 F.3d 613, 670 (3d Cir. 1999); James v. Harrah’s Resort Atl. City, 2016 WL

7408845, at *5 (D.N.J. Dec. 22, 2016). The Court thus finds that Freedom has not

met its burden to establish that Connally’s rebuttal opinions are sufficiently reliable.

See Daubert, 509 U.S. at 592 n.10.

Accordingly, LoanCare’s Motion will be granted as to the proffered testimony

of Connally, and the Court will exclude her opinions pursuant to Federal Rule of

Evidence 702.

2. Whether Robert Lyons Should be Excluded

Next, the Court considers the proposed testimony of Robert Lyons. Lyons is

Freedom’s expert concerning all loans except VA-guaranteed loans. Freedom offers

Lyons to demonstrate that LoanCare’s servicing errors and omissions caused it to

suffer $17,262,890.08 in financial losses. [Collingwood Grp. Am. FHA Analysis ¶

3.1(c), Docket No. 215-2 (“Lyons Rpt.”).] Specifically, Lyons opines that LoanCare

committed errors and omissions in connection with its (i) handling of FHA Part A and

Part B claims, (ii) property preservation and protection practices, (iii) reconveyances

and improper conveyances of properties to HUD, (iv) expense reimbursements, (v)

timely conveyance practices, (vi) vendor management, and (vii) compliance with FHA

requirements prior to loan assignment. [Id. ¶ 3.1.] Furthermore, it is Lyons’ opinion

that LoanCare’s errors and omissions required Freedom to advance “pass-through”

principal and interest payments to Ginnie Mae that it otherwise would not have done

had LoanCare complied with applicable servicing timelines. [Id. ¶ 3.2.] These errors

and omissions caused Freedom to sustain 13,086,386.01 in damages. [Id.]

Additionally, Lyons submits various reports rebutting the opinions of LoanCare’s

experts. [Docket Nos. 215-4, 215-5, 215-6.]

LoanCare’s arguments to exclude Lyons are nearly identical to those it

submitted to exclude Connally. First, it argues that Lyons’ opinions are fundamentally

flawed because he assigned fault to LoanCare for any error or omission it committed

in connection with servicing Freedom’s loan portfolio, not the applicable selection of

errors and omissions that § 8.3 permits. [Def.’s Br. 1–4.] Second, relatedly, LoanCare

argues that Lyons attributed damages to LoanCare for which it cannot be liable

because the damages did not result solely from LoanCare’s acts or omissions. [Id. at

4–5.] Third, LoanCare asserts that Lyons is an impermissible conduit for other experts

who are not testifying in this action. [Id. at 6.] Fourth, LoanCare argues that Lyons’

opinions are speculative, unrepresentative, and lack a proper foundation. [Id. at 7.]

Freedom counters. It first argues that Lyons applied the relevant contractual

standards. [Pl.’s Opp’n 6–7.] Second, Freedom argues that Lyons appropriately

assigned “pass-through” payments to LoanCare, as they directly resulted from

LoanCare’s servicing errors and omissions. [Id. at 7–9.] Third, Freedom points out

that while Lyons employed more than a dozen subject matter experts, he was involved

in “all of the drafting” and independently reviewed and analyzed his team’s work. [Id.

at 9–10.] Fourth, Freedom argues that Lyon’s opinions are based on his extensive

industry experience and that review of LoanCare’s policies and procedures was not

required to support his opinions. [Id. at 10–11.]

As before, the Court finds LoanCare’s primary argument to be convincing. The

Subservicing Agreement includes a limitation of liability that clearly defines the acts

and omissions for which LoanCare, in performing its obligations pursuant to the

agreement, would face liability. [See Subservicing Agreement § 8.3; see also supra

Section III.A.1.] In completing his analysis, however, Lyons did not instruct his team

to consider whether an identified error resulted from LoanCare’s willful misconduct,

gross negligence, good faith error of judgment, or otherwise. [Lyons Dep. Tr. 136:17–

137:19, Docket No. 215-7; Hrg. Tr. 148–49.] Nor did he construct a methodology that

appropriately accounts for these concepts either. Rather, he assigned fault to

LoanCare for all of its errors and omissions, including instances in which his team

found insufficient documentation in the loan file and assumed LoanCare was at fault.5

[Hrg. Tr. 150–51.] Though the Court certainly agrees with Freedom that Lyons cannot

opine that LoanCare acted willfully, with gross negligence, or in bad faith—as the

opinion would address an ultimate legal conclusion that is not appropriately within an

expert’s domain, see, e.g., Berckeley Inv. Grp., Ltd. v. Colkitt, 455 F.3d 195, 217 (3d Cir.

2006) (stating that, although Federal Rule of Evidence 704 permits an expert to give

5 Freedom believes that Lyons reasonably assumed LoanCare’s fault where a

loan file did not clearly indicate that another party was at fault since “LoanCare had

an obligation and a responsibility to document everything that they did in compliance

with Fannie and Freddie guidelines” and the Subservicing Agreement, [Hrg. Tr. 127],

so “[i]t was reasonable to conclude that [LoanCare] . . . caused the delay and losses,”

[Pl.’s Opp’n 6]. But this approach is highly suggestive of the underlying problem with

Lyons’ methodology. For instance, as he testified, Lyons included 78 loans in his

initial report that involved servicing errors that predated LoanCare’s engagement with

Freedom. [Hrg. Tr. 140, 157–59.] Though he subsequently amended his report and

removed the loans, the mistake reveals that his methodology generated an

overinclusive universe of errors and omissions. Lyons’ approach was not sufficiently

tailored to the relevant inquiry, i.e., whether an identified error or omission would

render LoanCare contractually liable pursuant to § 8.3.

testimony concerning an ultimate issue, the court must ensure that the expert does not

render a legal opinion)—Lyons’ opinions, like Connally’s, do not enable a jury to

make these determinations from the analysis provided. He fails to provide testimony

that a jury could reliably weigh to determine whether LoanCare is liable for the

relevant errors and omissions, consistent with the text of the Subservicing Agreement.

Accordingly, the Court finds that Lyons’ opinions are the product of an unreliable

methodology and, as a result, do not “fit” this case. See Daubert, 509 U.S. at 591–92;

Oddi, 234 F.3d at 146; In re Paoli, 35 F.3d at 742.

Next, the Court addresses LoanCare’s second argument regarding “pass-

through” damages. [Def.’s Br. 4–5.] As explained above, because the Court finds that

Lyons should be precluded from testifying for the same reason as Connally, it need

not rule as to whether LoanCare is liable for “pass-through” damages given the

language of § 8.3 excluding special and consequential damages or, as pertinent here,

whether Lyons misapplies such standard. See supra Section III.A.1. Because Lyons’

methodology—by failing to identify the errors and omissions relevant pursuant § 8.3—

is flawed at a more fundamental level, the Court also need not determine whether

LoanCare is the “sole” cause of the “pass-through” losses.

Finally, the Court addresses LoanCare’s remaining arguments. LoanCare

contends that Lyons is an impermissible conduit for other undisclosed experts. [Def.’s

Br. 6.] But the Court observes that exclusion of an expert for serving as a conduit has

typically required a more egregious scenario. See In re TMI Litig., 193 F.3d at 715–16

(discussing exclusion of expert that “assumed the correctness” of other experts’

propositions without independent validation). Thus, the Court rejects this reason for

excluding Lyons. Next, to the extent LoanCare’s fourth argument—that Lyons

cannot opine on industry averages or policies he never reviewed—is focused on Lyons’

rebuttal opinions as distinct from his affirmative opinions, the Court finds that the

same reasons that preclude Connally’s testimony must preclude Lyons’ testimony. He

cannot testify as to policies he never reviewed absent a persuasive explanation that

review of such policies is not necessary. See Oddi, 234 F.3d at 146. Furthermore,

Lyons’ opinions regarding LoanCare’s performance must rest on “good grounds,” see

Daubert, 509 U.S. at 590; because his opinions are flawed for the foregoing reasons and

he cannot point to reliable industry data, as no such information exists, his intended

testimony is too speculative to survive scrutiny. See In re TMI Litig., 193 F.3d at 670;

James v. Harrah’s Resort Atl. City, 2016 WL 7408845, at *5 (D.N.J. Dec. 22, 2016).

Accordingly, LoanCare’s Motion will be granted as to the proffered testimony

of Lyons, and the Court will exclude his opinions pursuant to Federal Rule of

Evidence 702.

3. Whether Connally or Lyons May Serve as Summary Witnesses

In its post-Daubert brief, LoanCare submits that, assuming the Court excludes

the opinions of both experts (as it does), the expert opinions of Connally and Lyons

may not be used as summary evidence pursuant to Federal Rule of Evidence 1006.

[Def.’s Post-Daubert Br. 1–2.] The Court agrees.

Under Rule 1006, a “proponent may use a summary, chart, or calculation to

prove the content of voluminous writings, recordings, or photographs that cannot be

conveniently examined in court.” FED. R. EVID. 1006. But Rule 1006 is “not a back-

door vehicle for the introduction of evidence which is otherwise inadmissible.” Eichorn

v. AT&T Corp., 484 F.3d 644, 650 (3d Cir. 2007) (internal quotation marks and citation

omitted). To be admissible, summary evidence must not include the opinions of a

barred expert. See id. (explaining that evidence would be excluded where it “went

beyond the data they summarized and included several assumptions, inferences, and

projections,” which represented the expert’s opinion, “rather than the underlying

information”).

Here, the expert opinions of Connally and Lyons are embodied in their reports

and accompanying appendices. They used a similar approach regarding the selection

of LoanCare errors and omissions, and their judgment was employed at every stage.

The Court cannot discern a viable way to “scrub” their analyses such that they can be

presented in the form of summary evidence. Because the Court found their approach

fundamentally flawed, it further finds that any summary evidence extracted from their

reports would be a “synthesis rather than a summary,” and would mislead a jury as a

result. See id.

B. Freedom’s Motion to Exclude Christopher Sicuranza, Genger

Charles, Marcel Bryar, and Nigel Brazier

Next, the Court addresses Freedom’s Motion. Freedom moves to exclude

LoanCare’s four experts—Christopher Sicuranza, Genger Charles, Marcel Bryar, and

Nigel Brazier—for failing to comply with the requirements of Federal Rule of

Evidence 702. As with LoanCare’s Motion, Freedom’s arguments are directed to the

reliability of the experts’ methodologies and the relevance of their conclusions, not

their qualifications. As a preliminary matter, the Court finds that LoanCare’s proffered

experts are sufficiently qualified to testify. See Daubert, 509 U.S. at 592 & n.10.

1. Whether Christopher Sicuranza Should be Excluded

LoanCare offers Sicuranza’s testimony to show that it was servicing Freedom’s

portfolio of loans appropriately, in light of market circumstances and industry norms.

[Def.’s Opp’n 6.] His report summarizes several of his opinions, including that

“LoanCare exceeded or performed in line with other industry servicers during the

relevant period”; that “LoanCare acted in good-faith to reduce the amount of non-

reimbursable losses Freedom incurred on defective loans”; that “LoanCare faced

extraordinary circumstances resulting in uncontrollable delays on the loans in

question”; and that “LoanCare was not intentionally acting in a way to delay

foreclosure timelines or cause Freedom to incur non-reimbursable losses.” [Expert

Rpt. of Christopher Sicuranza ¶¶ 11, 12, 13, 16, Docket No. 218-2 (“Sicuranza Rpt.”);

see also id. ¶¶ 9–10, 14–15, 17–22.] Sicuranza further elaborated on his conclusions and

methodology during the Daubert hearing: “what I generally found was LoanCare was

performing at the typical standard I would find at any servicing shop, at or above that

standard.” [Hrg. Tr. 207.] Unlike Freedom’s experts, Sicuranza employed the

statistical tool of sampling: from the total population of loans for which Freedom is

claiming damages, he segmented them by “like characteristics” and designed samples

for each category (e.g., HUD FHA Part A and B claims, VA claims) after reviewing

the loan-level documentation. [Id. at 204.] This enabled him to extrapolate about the

entire population of loans. [Id. at 204–05; see also Sicuranza Rpt. ¶¶ 371–81.] He then

assessed the samples against relevant servicing requirements. [Sicuranza Rpt. ¶ 373.]

Freedom opposes Sicuranza’s testimony for four reasons. First, Freedom

contends that Sicuranza’s sampling methodology is unreliable because “no single loan

can be considered ‘representative’ of another,” so no conclusions can be reliably

extrapolated from Sicuranza’s samples. [Pl.’s Br. 7.] Second, Freedom argues that

Sicuranza impermissibly opines that LoanCare is not liable under the Subservicing

Agreement for losses arising from “third parties,” such as foreclosure counsel and

vendors. [Id. at 8–9.] Third, Freedom seeks to preclude Sicuranza from testifying that

LoanCare acted in “good faith,” as his opinion addresses an ultimate legal conclusion.

[Id. at 10.] Finally, Freedom argues that Sicuranza should be precluded from

“speculating” as to origination errors because he did not review Freedom’s origination

files. [Id.]

In response, LoanCare argues that Sicuranza’s methodology is reliable and that

Freedom fails to appreciate fundamental principles of statistical sampling. [Def.’s

Opp’n 7.] Next, LoanCare claims that §§ 7.1(h) and 8.3 preclude its liability for losses

caused by third parties, and that Sicuranza’s testimony demonstrates this point rather

than offers a legal opinion as to the interpretation of the Subservicing Agreement. [Id.

at 9.] Similarly, LoanCare argues that Sicuranza offers opinions as to industry norms,

not opinions regarding legal conclusions. [Id. at 10.] Finally, it contends that

Sicuranza’s opinions regarding origination errors are reliable because, while he did not

review the loans’ underwriting files, he did review sufficient documentation to

demonstrate that the errors occurred. [Id. at 10–11.]

The Court finds Sicuranza’s testimony to be reliable, relevant, and otherwise

permissible, except as set forth below. First, Freedom’s contention—that population-

wide conclusions cannot reliably be drawn from Sicuranza’s sampling methodology

because each loan requires individualized analysis—lacks merit. It is a truism in

statistics that conclusions about a population can be drawn from a valid sample that is

randomly selected and representative, notwithstanding differences in the

characteristics of the population. See David H. Kaye & David A. Freedman, Reference

Guide on Statistics, in FJC REF. MANUAL SCI. EVID. §§ 216, 223–230 (3d ed.); see also,

e.g., In re Chevron U.S.A., Inc., 109 F.3d 1016, 1019–20 (5th Cir. 1997) (“The essence of

the science of inferential statistics is that one may confidently draw inferences about

the whole from a representative sample of the whole.”); Nelson v. Am. Standard, Inc.,

2009 WL 4730166, at *3 (E.D. Tex. Dec. 4, 2009) (“The fundamental precept of

statistics and sampling is that meaningful differences among class members can be

determined from a sampling of individuals.”); United States ex rel. Customs Fraud

Investigations, LLC v. Victaulic Co., 839 F.3d 242, 261 (3d Cir. 2016) (Fuentes, J.,

concurring in part, dissenting in part) (“A valid statistical survey essentially has three

steps: (i) identify a population of interest, (ii) take a random sample from that

population, and (iii) use the observations in the sample to draw inferences about the

population as a whole.”). Accordingly, Sicuranza selected a valid scientific method

that is generally accepted in his field. See Calhoun, 350 F.3d at 321 (quoting In re Paoli,

35 F.3d at 742 n.8). Simply because the loans at issue here reflect unique

circumstances does not mean that a sample of them cannot be representative.

Sicuranza addressed this contention head-on in his testimony:

Q. And does the fact that a loan [i]s unique as you say here mean that

there’s no way to obtain a sample that is representative of the population

that you’re looking at?

A. No. So the loans are unique from where they’re located, the types

of property damage that may exist, the borrower that’s in the property.

But I’m evaluating LoanCare’s performance on those loans, and so

LoanCare is the one constant through all my samples.

[Hrg. Tr. 213.] The Court thus concludes that Sicuranza’s methodology is sound, see

Rosenbohm v. Cellco P’ship, 2019 WL 2141901, at *2 (S.D. Ohio May 16, 2019) (“[O]ne

can draw inferences about the larger population only if the sample is representative of

that larger population. And representatives is best ensured using random sampling.”),

and that his conclusions reliably flow from his methodology, see Oddi, 234 F.3d at 146.

[See also Hrg. Tr. 260–61.]

Next, the Court addresses Sicuranza’s testimony concerning losses arising from

third parties, such as foreclosure counsel and property preservation vendors. His

report separately identifies errors and delays attributable to these third parties, [see

Sicuranza Rpt. ¶¶ 277, 326], which he characterized as “uncontrollable” and “outside

of the direct control of LoanCare,” [Hrg. Tr. 217]. In LoanCare’s words, “Sicuranza

has permissibly determined, based on his review of the loan files, that many of the

losses were caused by third parties rather than LoanCare.” [Def.’s Opp’n 9.] His

assessment was informed by “discussions with counsel and [his] reading of the

[Subservicing Agreement].” [Hrg. Tr. 217.] While Sicuranza does not appear to be

opining that LoanCare is not liable for losses resulting from the acts and omissions of

foreclosure counsel and property preservation vendors,6 [see id. at 253–57], his

testimony identifying “third-party” “uncontrollable events” is only relevant insofar as

these “third parties” are not LoanCare’s agents. If they are, then losses resulting from

their action or inaction would be appropriately attributed to LoanCare, provided they

are not otherwise excluded by the limitation of liability. As in the parties’ summary

judgment briefing, Freedom and LoanCare each urge the Court to adopt different

readings of the relevant text of the Subservicing Agreement. [Compare Pl.’s Br. 9–10,

with Def.’s Opp’n 9.] Previously, the Court declined to grant summary judgment

concerning this issue based on the presence of genuine factual disputes. [Docket No.

177, at 4.] Now, the Court must determine whether Sicuranza can testify regarding

this issue. It concludes that he can, and that is all the Court decides at this juncture.7

The Subservicing Agreement provides that LoanCare is liable for losses arising

“solely from its own acts or omissions,” [Subservicing Agreement § 8.3], and it states

that LoanCare “does not guaranty [Freedom] the obligations or performance of any

third party,” [id. § 7.1(h)]. These provisions, however, do not permit LoanCare to

exclude from its liability any losses arising from its agents. See Miller v. Quarles, 410

6 Nor would the Court permit him to render an opinion in this regard. Ultimate

legal conclusions are not appropriate for expert testimony. Holman Enters. v. Fidelity

Guar. Ins. Co., 563 F.Supp.2d 467, 472 (D.N.J. 2008).

7 Freedom’s Brief includes a footnote indicating that it has reserved the right to

file a motion in limine to bar LoanCare from presenting evidence that LoanCare is not

responsible for the errors and omissions of its foreclosure counsel and vendors. [Pl.’s

Br. 10 n.14.] This Opinion should not be read to affect Freedom’s right to do so.

S.E.2d 639, 647–48 (Va. 1991) (“a principal is liable to the other contracting party who

has been damaged by the agent’s negligent performance of the principal’s contract with

the other party.”). Indeed, in Virginia, an agency relationship is defined as “a fiduciary

relationship resulting from one person’s manifestation of consent to another person

that the other shall act on his behalf and subject to his control, and the other person’s

manifestation of consent so to act.” Acordia of Va. Ins. Agency, Inc. v. Genito Glenn, L.P.,

560 S.E.2d 246, 249 (Va. 2002) (quotation and citation omitted) (emphasis added).

However, “whether an agency relationship exists is a question to be resolved by the

fact finder unless the existence of the relationship is shown by undisputed facts or by

unambiguous written documents.” Id. at 250 (cleaned up) (citation omitted). The

Court previously declined to find that the third parties at issue—the foreclosure

counsel and property preservation vendors—were LoanCare’s agents as a matter of

law, and it signaled that a jury must resolve the question. [Cf. Docket No. 177, at 4.]

Sicuranza’s opinions as to uncontrollable delays, then, are relevant in connection with

a jury’s determination of the agency question, insofar as a jury credits the notion that

the “third parties” at issue were not acting at LoanCare’s behest. For this reason, the

Court declines to exclude Sicuranza’s opinions concerning uncontrollable delays.

Freedom also argues that Sicuranza should be precluded from testifying that

LoanCare acted in “good faith.” [Pl.’s Br. 10.] LoanCare claims that Sicuranza is

merely testifying that LoanCare’s actions were consistent with industry norms and

demonstrate that any missed deadlines or extensions, for instance, are the result of

“good faith disagreements.” [Def.’s Opp’n 10.] It is well-established that an expert

witness is prohibited from rendering a legal opinion, see Berckeley, 455 F.3d at 217,

because it would usurp the role of the Court in explaining the law to a jury, First Nat’l

State Bank v. Reliance Elec. Co., 668 F.2d 725, 731 (3d Cir. 1981). But “[w]here an expert

is opining as to the custom and practice of a particular business, and where someone

who is an expert in a particular field would be expected to understand the ways in

which the laws affect the business, such testimony should be admitted.” Suter v. Gen.

Acc. Ins. Co. of Am., 424 F. Supp. 2d 781, 792–93 (D.N.J. 2006) (citing United States v.

Leo, 941 F.2d 181, 196–97 (3d Cir. 1991)). Therefore, here, as the Court observed

during the Daubert hearing, Sicuranza “cannot testify that [LoanCare] acted in good

faith, but he can go up to the line . . . . He can talk about that LoanCare complied with

industry standards.” [Hrg. Tr. 260.] Accordingly, the Court agrees with both parties:

Freedom’s Motion carries insofar as Sicuranza may not testify as to an ultimate legal

conclusion, and LoanCare’s assertion is credited that he is not proffered in this regard.

Finally, the Court addresses whether Sicuranza may testify regarding

origination errors. The Court finds no basis to preclude him from doing so. Sicuranza

opines that Freedom originated “defective loans” through various “streamlined re-

finance programs that required little or no documentation and resulted in elevated

losses due to borrowers[] who could not afford the payment terms.” [Sicuranza Rpt.

¶ 20.] He further testified that “they tend to be higher risk with higher default rates

which lead to higher losses,” but he clarified that he was not offering an opinion that

Freedom thus breached any of the representations or warranties of the Subservicing

Agreement. [Hrg. Tr. 258–59.] From the Court’s review of the record, sufficient

documentation supports his opinions, and Freedom has not set forth a persuasive

reason to limit the opinions he intends to offer. The Court finds that he had a proper

foundation to support his opinions, and so his testimony is sufficiently reliable. See

Daubert, 509 U.S. at 597.

Accordingly, Freedom’s Motion will be granted, in part, and denied, in part, as

to the proffered testimony of Christopher Sicuranza; except as explained above, his

expert opinions meet the requirements of Federal Rule of Evidence 702 and LoanCare

has met its burden. See Daubert, 509 U.S. at 592 n.10.

2. Whether Genger Charles Should be Excluded

LoanCare proffers Genger Charles, a former Deputy FHA Commissioner, as a

servicing industry expert. [Def.’s Opp’n 16.] She was instructed to opine on (a) the

impact of deteriorating conditions in the housing market on FHA business operations,

programs, and policies and (b) the factors that affected claim curtailment rates during

the relevant period (between 2011 and 2016). [Expert Rpt. of Genger Charles ¶ 1,

Docket No. 223-4 (“Charles Rpt.”); see also Hrg. Tr. 275.] She formed the following

opinions:

[D]ue to the macroeconomic conditions resulting in higher default rates

across the FHA portfolio and FHA policy changes and governmental

action, from 2011 – 2016 most servicers of FHA insured loans did not

meet the claims timelines and consequently claim curtailments on FHA

Part A and Part B foreclosure conveyance claims were common.

[Charles Rpt. ¶ 4.] As applied to LoanCare, she opines that “LoanCare’s performance

. . . is thus consistent with the performance of other services during the Complaint

Period.” [Id. ¶ 87; see also id. ¶¶ 88–101.] She further testifies: “even if [] curtailment

rates were high [during the relevant period], it is not a reflection of the quality of the

servicing that LoanCare was conducting on behalf of Freedom.” [Hrg. Tr. 276.]

Freedom contends that Charles’ testimony is unreliable and her opinions do not

“fit” this case. [Pl.’s Br. 16.] Essentially, Freedom advances three arguments. First,

it contends that Charles impermissibly relies on the data and assertions of third parties

without independent validation and judgment. [Id. at 16–17.] According to Freedom,

Charles thus demonstrates “unblinking reliance,” which requires the Court to preclude

her from testifying that LoanCare’s performance was consistent with its peers. [Id. at

17–18.] Next, Freedom argues that Charles’ opinions do not “fit” this case because

LoanCare could have applied for extensions to avoid curtailments; failing to address

this condition, her opinions could mislead a jury. [Id. at 18–19.] Finally, Freedom

argues that Charles’ opinions are speculative: she could not provide a precise figure

representing the overall curtailment rate for FHA claims, [id. at 19], and she suggests

that potential liability under the False Claims Act impacted LoanCare’s decision

(among other servicers’ decisions) to seek extensions regarding applicable timelines,

[id. at 20].

During the Daubert hearing, the Court reserved as to Freedom’s challenges, but

it set forth its observations preliminarily:

I think Ms. Charles’ testimony is exactly what is expected of a witness

and is exactly what will assist the trier of fact. I think that she has the

specialized knowledge. There’s no dispute about that. I think that she’s

based her opinion upon sufficient data. She has relied upon that. She’s

given persuasive reasons as to these documents that are relied upon to

render these types of opinions, and then she takes those and she applies

them to the facts of this case, and it will be helpful to the jury. So I don’t

see any problem, other than the False Claims Act at this point[.] I don’t

see why her testimony wouldn’t be permitted.

[Hrg. Tr. 340.] The Court now finds that Charles’ proposed testimony is admissible,

except as it relates to the False Claims Act.

First, Charles appropriately relied on her professional experience and review of

third-party literature and data to set forth her expert opinions. Under Rule 702, a

testifying expert may base her opinions on her own specialized knowledge and

professional experience. See, e.g., Schneider, 320 F.3d at 406 (explaining that invasive

cardiologist’s academic background, teaching position, and prior experience advising

interventional cardiologists demonstrated that he could provide opinion about

cardiology, no matter the sub-specialty). Additionally, a testifying expert may rely

upon the statements or data of a non-testifying third party, provided that the testifying

expert independently assesses the validity of the opinions on which she relies. See In

re TMI Litig., 193 F.3d at 715–16 (explaining that expert’s opinions were unreliable

because he “assumed the correctness” of other experts’ propositions without further

engagement). The court in TMI characterized the expert’s failure in this regard as his

“unblinking reliance” on the other experts’ opinions. Id. at 716.

Here, Charles indicated that her opinions regarding curtailment rates and

LoanCare’s performance relative to other servicers in the industry were based on her

substantial experience at the FHA and HUD. [Hrg. Tr. 279–80.] Additionally, in her

roles as a senior policy adviser, Chief of Staff to the FHA Commissioner, and Deputy

FHA Commissioner, she was “intimately involved in the policymaking process” and

routinely evaluated third-party assertions and data in connection with notice-and-

comment rulemaking. [Id. at 279.] To that end, she cites in her report various letters

and “comments” from industry participants as additional support for the opinions she

bases on her experience, including, for example, a comment from Quicken Loans to

HUD that claims it took around 1,000 days on average to complete a foreclosure in

the State of Florida between 2011 and 2013 in the wake of the housing crisis. [Charles

Rpt. ¶ 46.] Freedom claims that, because Charles did not independently validate

Quicken Loans’ assertion, Charles’ opinions are unreliable. [Pl.’s Br. 17.] But unlike

the expert in TMI who deferred wholesale to the other witness “who is an expert in

that area,” 193 F.3d at 715, Charles indicated that the “primary basis” for her opinions

was her experience at HUD and the FHA and that the comments and data she cited

“merely reinforce[] [her] understanding from that time,” [Hrg. Tr. 293–94; see also id.

322–324]. Charles weighed and considered Quicken Loans’ assertion against other

letters and comments and in light of her experience and general expectations. [See id.

at 325–26.] As the Court explained, Freedom misreads In re TMI Litig. [Hrg. Tr. 334

(“[Charles] testified that these documents that she relied upon were consistent with

what her experience was and what was going on in the industry at the time. [TMI]

doesn’t mean that she has to then like probe deeper and go through all of the analysis”);