Judge: Peter Wilson, Case: 2021-01233435, Date: 2022-09-29 Tentative Ruling

Interested Parties Bayview Asset Management, LLC, HBK Master Fund L.P., Pacific Investment Management Company LLC, NAV, LLC and Stephen Finkelstein (collectively, Certificateholders) seek an order compelling

a.    Email communications and other electronically stored information responsive to Requests 3, 5, 6, and 9-19, including all documents relating to Respondent PHH Mortgage Corporation’s (PHH) use or understanding of the term “unpaid principal balance” (Request 9) and “moratorium or similar waiver or grace period” (Request 16), as well as PHH’s calculation of the Stated Principal Balance (Request 11), Call Price (Request 18), and market value of the Deferred Amounts (Requests 3 and 6);

b.    “Business plans,” to the extent they are responsive to any of Requests 3 and 6-10, including documents made available in the “data room” referenced in the Offering Memorandum (Request 7);

c.    All documents and communications responsive to Requests 5 and 6, relating to the amortization schedules, including the amortization schedules themselves and any policies, procedures, or manuals concerning the “MSP/Black Night” or “Real Servicing” servicing programs;

d.    A snapshot of the database used to generate the spreadsheets PHH has produced, or other documents sufficient to show the quantum and composition of Deferred Amounts as sought in Request 1; and

e.    A representative for a Person Most Qualified deposition, with topics to be determined at a later time.

ROA 350, P&A, p. 20.

PHH contends that all but one of the issues are moot, specifically the request for PHH’s “business plans”. ROA 370, Opp., p. 1. As to the business plans, PHH contends they are wholly irrelevant since they have no bearing on the interpretation of the PSAs. PHH represents it has produced or has agreed to produce responsive documents on all the other issues. ROA 370, Opp., pp. 2-3.

In contrast, Certificateholders contend the only issue that is moot is presenting a corporate witness for deposition; all other issues (categories a through d above) are still in dispute. ROA 375, Reply, pp. 1-2.

Emails [RPD Nos. 3, 5, 6, 9-19]: As for Category a, the issue is not whether emails should be produced, but what the appropriate scope of the production of emails should be. ROA 371, Rubin Decl., ¶8; ROA 369, Opp. SS, Nos. 3, 5, 6, 9-19 [agreeing to produce emails “reflecting its use of the key issues and terms in this case in connection with its servicing of loans in the Trust and the planned exercise of its Termination Rights under the PSAs” but disputing the relevance of documents and communications regarding how PHH would price the loan after exercising its Terminations and is no longer serving the loans in the Trust]. Based on the parties’ meet and confer emails, PHH proposed a search protocol that was much narrower in scope than requested in RPD Nos. 3, 5, 6, 9-19. PHH seeks to limit the responsive emails to the 3-month period of July 25, 2021 to October 25, 2021 where the custodian is Michael Yanniello and “to only those emails and attachments that reference (i) a loan number for any of the loans that were active as of October 25, 2021, in the seven trusts at issue in the above-captioned trust instruction proceeding (the “Trusts”); (ii) the name of any of the Trusts; or (iii) PHH’s unique investor number assigned to any of the Trusts.” From that set of responsive documents, PHH has agreed to produce documents containing certain additional search terms. ROA 371, Rubin Decl., Exs. F and G.

Certificateholders contend PHH’s offered search parameters are too narrow and that despite their counteroffer requesting PHH to run search terms across a reasonable set of custodians and provide hit counts in order for Certificateholders to assess the burden of the production, PHH has failed to do so. ROA 375, Reply, p. 2. Certificateholders do not identify exactly what search terms they agreed to or a proposed set of custodians or a time frame.

The Court agrees that PHH has not justified why the search parameters should be as limited as PHH has proposed. By way of example, based on PHH’s Verified Response to the Petition, it appears there may be relevant emails going back at least 8 years. ROA 351, Ex. B, Verified Response, p. 2, lines 8-17. Although Certificateholders seem to recognize and agree that there should be reasonable parameters to limit the search for emails so that the production is not unduly burdensome, Certificateholders have not provided a counter-proposal for reasonable search parameters. ROA 375, Reply, p. 9. It appears the parties have not concluded their meet and confer efforts on this issue.

Accordingly, the Court orders the parties to meet and confer within 15 days hereof regarding an expanded time frame, additional custodians, and additional search terms. PHH is ordered to identify, within 5 days hereof, “(i) some PHH employees on the borrower/collateral side,” and “(ii) additional employees who would have used these key terms in the context of clean-up calls and the disputed termination price” as requested by Certificateholders (ROA 375, Reply, p. 5:1-4) or to produce an organization chart. If the parties cannot agree to the scope of the production, then the parties should provide a joint report within 30 days identifying where they disagree and their respective proposed search parameters. If the parties can agree to the scope of the production, PHH is ordered to produce the responsive documents and/or any privilege log within 60 days.

“Business Plans” [RPD Nos. 3, 6-10]: PHH contends these requests seeks PHH’s plans for the loans after it exercises its Termination Rights, takes over the loans and is no longer servicing the loans. ROA 370, Opp., p. 8. PHH contends that this information is not relevant and not reasonably calculated to lead to the discovery of admissible evidence because its plans for the loans are not subject to the PSAs and not related to the interpretation of any contractual provision in the PSAs. Id. PHH argues the Court has advised that this information is not relevant and outside the scope of the Petition. Id. at p. 9.

However, RPD Nos. 3, 6-10 do not reference “business plans” in the actual requests and PHH has already conceded that these RPDs seek information that is relevant and reasonably calculated to lead to the discovery of admissible evidence, and has produced documents or agreed to produce documents in response to these RPDs, e.g. emails responsive to these same RPDs. ROA 369, Opp. Sep. Stmt., pp. 6-7, 13-29. It appears that PHH is really seeking to prevent the production of any documents after the exercise of its Termination rights and that relate to its potential and anticipated sale of the loans. 

Certificateholders argue that the “business plans” referenced by PHH is a manufactured disagreement. Certificateholders argue that PHH is using the term “business plans” in order to shield documents, such as the offering and marketing materials for the sale of the loans in these Trusts, even though these documents use the disputed terms that go to the heart of this contract dispute and provide insight to the meaning of such terms. ROA 350, P&A, pp. 14-15; ROA 375, Reply, pp. 6-7.

The Court agrees with Certificateholders. Whether the responsive documents are characterized as “business plans” is not relevant. What matters is whether the responsive documents use the same terms that are at the heart of this dispute, e.g. “unpaid principle balance”, “Stated Principal Balance”, etc., and provide some indication of the meaning of Deferred Amounts in connection with selling the loans in the Trusts at issue. This information may be indicative of PHH’s understanding of those terms, whether PHH has a custom and practice regarding those terms and also whether there is a specific meaning of these terms based on PHH’s and the industry custom and practice. If PHH contends that those terms have a different meaning in the post-Termination context, and specifically in its offering and marketing materials, than in the PSAs, evidence that PHH has on that issue would also be relevant to whether such terms are ambiguous, whether the meaning can be determined by industry custom or practice, or whether parol evidence is necessary to determine the meaning of those words and the intent of the parties. 

The Court GRANTS this request and orders PHH to produce the documents PHH characterizes as “business plans” that are responsive to RPD Nos. 3, 6-10 to the extent that they use, reference and/or define any of the same contractual terms at issue in the PSAs. 

Amortization [RPD Nos. 5, 6 ]: PHH contends it has produced the amortization schedules for every loan for every Trust at all time periods, including versions sent to the borrowers, and all policies, procedures and manuals governing the loan modifications, Amortization schedules and for inputting Deferred Amounts (ROA 370, pp. 12-13; ROA 369, Opp. Sep. Stmt, pp. 12-16), but Certificateholders explain that the amortization schedule PHH actually produced is an Excel spreadsheet that was created specifically for this litigation and contains categories of data that are different from the “amortization schedule” identified in PHH’s Verified Answer to the Petition. ROA 350, P&A, pp. 16-17; ROA 351, Ex. G, pp. 3-4; ROA 375, Reply, p. 8.

PHH does not object to producing documents in response to RPD No. 5 (documents relating to changes, modifications or revisions of amortization schedules for the loans subject to the Clean-Up Call, including all policies, procedures and practices). It appears from Certificateholders’ side-by-side comparison, of the amortization schedules produced and the amortization schedules referred to in PHH’s Verified Answer, that what was produced is different from what was identified in the Verified Answer.  PHH has not provided any satisfactory explanation for why they are different or as to why it cannot produce the “amortization schedule” as it appears in the Verified Answer. Additionally, it appears that the Real Servicing and Black Knight manuals may also be responsive to this request but have not been produced. ROA 370, Opp., p. 17 fn. 4 [“PHH has made clear to the Investors on numerous occasions that PHH generated the spreadsheets (amortization schedules) by exporting the data from its MSP/Black Knight servicing program to Excel format.”] Therefore, the Court GRANTS this request and orders PHH to produce the amortization schedule referenced in its Verified Answer and “MSP/Black Knight” manuals or other documents to the extent they relate to changes, modifications or revisions of amortization schedules.

RPD No. 6 seeks documents related to “PHH’s determination of the market value of the LOANS and REO PROPERTIES subject to the CLEAN-UP CALL”. PHH contends it has produced responsive documents but objects to producing documents post-Termination. ROA 369, Opp. Sep. Stmt., pp. 15-17. For the reasons previously explained, to the extent that post-Termination documents include the same terms at issue in the PSAs, PHH’s position is unpersuasive, and as such, the Court GRANTS this request and orders the responsive documents to be produced.

Database [RPD No. 1]: RPD No.1 seeks documents showing the quantum and composition of the Deferred Amounts, including a breakdown of the principal and capitalized interest, as of October 25, 2021 to the present. ROA 369, Opp. Sep. Stmt., p. 1:2-5. PHH contends it has produced documents that show the quantum and composition of the deferred amounts, including the amortization schedules and has offered to produce the loan and servicing files (ROA 370, Opp., pp. 13-15), but Certificateholders disagree and contend they specifically “seek a snapshot of the database used to generate the spreadsheets PHH has produced, and additional documents sufficient to show the quantum and composition of the Deferred Amounts.” ROA 369, Opp. Sep. Stmt., pp. 1-3. In their Reply, Certificateholders argue RPD No. 1 seeks the underlying data and assumptions used to create the amortization schedules produced by PHH. ROA 375, Reply, p. 9.

Although this RPD seeks only post-Termination documents (ROA 309, Verified Answer, p. 6: 15-16 [termination was supposed to occur on October 25, 2021], the parties have not focused on this limitation. Certificateholders focus their argument on the underlying files for the amortization schedules PHH produced, which provides information pre-Termination and should be encompassed in the response to RPD No. 5. Also, it appears Certificateholders no longer seek a “snapshot” but the entire underlying data for the amortization schedules. However, the amortization schedules post-Termination are not relevant since they are not considered in determining the Stated Principal Balance, which is determined on the date PHH exercises its right to termination.

Therefore, the Court DENIES this request.

PMK: This issue is MOOT. The parties agree that PHH has agreed to produce its PMK.

Based on the above, the Motion is CONTINUED as to November 3, 2022 as to the emails in response to RPD Nos. 3, 5, 6, 9-19. PHH is ordered to supplement its responses as to the other categories of documents above, and/or provide a privilege log, within 30 days.   

Certificateholders are ordered to give notice.