Rescap Liquidating Trust v. Home Loan Ctr., Inc. (In re RFC & Rescap Liquidating Trust Action)

• Decision Date: 12 June 2019
• Docket Number: Case No. 14-cv-1716 (SRN/HB),Case No. 13-cv-3451 (SRN/HB)
• Citation: 399 F.Supp.3d 804
• Parties: IN RE: RFC AND RESCAP LIQUIDATING TRUST ACTION This document relates to: ResCap Liquidating Trust v. Home Loan Center, Inc.
• Court: U.S. District Court — District of Minnesota

399 F.Supp.3d 804

IN RE: RFC AND RESCAP LIQUIDATING TRUST ACTIONThis document relates to: ResCap Liquidating Trust

v.Home Loan Center, Inc.

Case No. 13-cv-3451 (SRN/HB)

Case No. 14-cv-1716 (SRN/HB)

United States District Court, D. Minnesota.

Signed June 12, 2019

Amroh Faisal Idris, Pro Hac Vice, Jonathan Eser, Pro Hac Vice, Lauren Weeman Misztal, Pro Hac Vice, Quinn Emanuel Urquhart & Sullivan LLP, Washington, DC, Danielle Marie Shrader-Frechette, Pro Hac Vice, David Michael Grable, Pro Hac Vice, Robert Jason Becher, Pro Hac Vice, Dawn Utsumi, Pro Hac Vice, Kenneth John Shaffer, Pro Hac Vice, Sarah J. Cole, Pro Hac Vice, Duane R.A. Lyons, Pro Hac Vice, Quinn Emanuel Urquhart & Sullivan, Los Angeles, CA, Linda J. Brewer, Pro Hac Vice, Christina Wu, Pro Hac Vice, Quinn Emanuel Urquhart & Sullivan LLP, San Francisco, CA, Michael N. Beekhuizen, Pro Hac Vice, Carpenter Lipps & Leland LLP, Columbus, OH, Darren Mitchell Goldman, Pro Hac Vice, Deborah Kay Brown, Pro Hac Vice, Sascha N.Rand, Pro Hac Vice, Kate E.Cassidy, Matthew A. Lee, Pro Hac Vice, Serafina Concannon, Pro Hac Vice, Thomas D. Pease, Pro Hac Vice, Tyler Whitmer, Pro Hac Vice, Quinn Emanuel Urquhart & Sullivan LLP, Joshua S. Margolin, Pro Hac Vice, Selendy & Gay PLLC, Richard I. Werder, Jr., Pro Hac Vice, Quinn Emanuel, New York, NY, Valerie Jon Ramos, Richard R Voelbel, Scott D. Blake, Felhaber, Larson, Fenlon & Vogt, PA, Donald G Heeman, Jessica J.Nelson, Randi J.Winter, Spencer Fane, Minneapolis, MN, Ryan A Olson, Felhaber Larson, Mpls, MN, Pro Hac Vice, Quinn Emanuel Urquhart & Sullivan LLP, Redwood Shores, CA, for In Re: RFC and ResCap Liquidating Trust Action.

OMNIBUS ORDER RE: RULE 50(a) JMOL MOTIONS

SUSAN RICHARD NELSON, United States District Judge

From October 15 to November 7, 2018, the parties tried this highly complex contractual indemnification case to a jury.¹ The jury heard the testimony of 29 witnesses (some live, others videotaped), including seven experts, and received over 75 exhibits; most of this evidence was introduced by Plaintiff, the ResCap Liquidating Trust (hereinafter "ResCap"). The Court entertained a multitude of oral arguments from counsel outside the presence of the jury, primarily concerning evidentiary disputes, and issued numerous written and oral decisions resolving those disputes. See, e.g. , In re ResCap , 2018 WL 5257641 (D. Minn. Oct. 22, 2018) (addressing "sole responsibility" causation argument and related evidence).² Ultimately, following approximately two-and-a-half hours of deliberation, the jury rendered a $28.7 million verdict in favor of ResCap.

Following the presentation of evidence, but before closing arguments, both parties also moved for judgment as a matter of law on a number of issues. See Fed. R. Civ. P. 50(a). The Court heard argument on these motions, and received briefing from both sides.³

Specifically, Defendant Home Loan Center (hereinafter "HLC") moved for JMOL as to ResCap's "failure to prove a non-speculative allocation of the MBIA and FGIC settlements." (See HLC JMOL Br. [Doc. No. 4686]; ResCap Opp. Br. [Doc. No. 4699]; Trial Tr. at 3330-49.)⁴

For its part, ResCap moved for JMOL as to (1) "the reasonableness and good faith of RFC's bankruptcy settlements" (see ResCap Reasonableness & Servicing Br. ("R&S Br.") [Doc. No. 4673] at 1-14; HLC 1st Opp. Br. [Doc. No. 4675] at 3-26; Trial Tr. at 2912-43, 2947-59); (2) "the allowance and allocation of servicing claims" (see ResCap R&S Br. at 14-19; HLC 1st Opp. Br. at 29-33; Trial Tr. at 2925-27, 2943-46); (3) "causation" (see ResCap Causation Br. [Doc. No. 4674]; HLC 1st Opp. Br. at 26-29; Trial Tr. at 2889-2912); (4) the applicability of "the Client Guide [to] HLC's at-issue loans" (see ResCap Client Guide Br. [Doc. No. 4689]; HLC 2d Opp. Br. [Doc. No. 4687] at 3-36, 41-43; Trial Tr. at 3264-74, 3289-3313, 3324-30); (5) the relationship of the Assetwise Direct Criteria Agreement to the Client Guide (see ResCap Assetwise Br. [Doc. No. 4690]; HLC 2d Opp. Br. at 36-41; Trial Tr. at 3280-86, 3313-17); and (6) "HLC's affirmative defense of equitable estoppel (and waiver)" (see ResCap Estoppel Br. [Doc. No. 4691]; HLC 2d Opp. Br. at 44-52; Trial Tr. at 3274-80, 3317-24).

After carefully considering the parties' arguments, the Court ruled from the bench, in part on Monday November 5 and in part on Tuesday November 6. Specifically, the Court denied HLC's motion, and granted five of ResCap's six motions; the Court only denied ResCap's motion "that the Client Guide governs HLC's at-issue loans." (See generally Minute Entry for Nov. 5, 2018 [Doc. No. 4685] and Minute Entry for Nov. 6, 2018 [Doc. No. 4695].) Because the Court explained its reasoning from the bench at some length, the Court does not feel compelled to issue an elaborate written decision at this juncture. However, for the sake of a clear record, the Court will reprint those remarks in this Order, with additional citations, edits, and footnoted addendums, as needed. The Court will address each motion in turn.

I. Legal Standard for a Rule 50(a) Motion

Fed. R. Civ. P. 50(a) provides that, "[i]f a party has been fully heard on an issue during a jury trial and the court finds that a reasonable jury would not have a legally sufficient evidentiary basis to find for the party on that issue," "the court may resolve the issue against the party ... before the case is submitted to the jury." When considering such a motion, a court "must (1) resolve direct factual conflicts in favor of the nonmovant; (2) assume as true all facts supporting the nonmovant which the evidence tended to prove; (3) give the nonmovant the benefit of all reasonable inferences; and (4) deny the motion if the evidence so viewed would allow reasonable jurors to differ as to the conclusions that could be drawn." Roberson v. AFC Enters., Inc. , 602 F.3d 931, 933 (8th Cir. 2010) (quoting Larson ex rel. Larson v. Miller , 76 F.3d 1446, 1452 (8th Cir. 1996) (en banc) ). However, because a court "may not accord a party the benefit of unreasonable inferences or those at war with the undisputed facts," and because a "reasonable inference" is only "one which may be drawn from the evidence without resort to speculation ," a court may grant a party JMOL, and thereby remove an issue from the jury's province, if "the record contains no proof beyond speculation to support" a jury finding for the non-movant on that issue. Sip-Top, Inc. v. Ekco Grp., Inc. , 86 F.3d 827, 830 (8th Cir. 1996) (cleaned up) (affirming grant of pre-verdict JMOL); accord SL Montevideo Tech., Inc. v. Eaton Aerospace, LLC , 491 F.3d 350 (8th Cir. 2007) (same); Arabian Agric. Servs. Co. v. Chief Indus., Inc. , 309 F.3d 479 (8th Cir. 2002) (same); Fought v. Hayes Wheels Intern., Inc. , 101 F.3d 1275 (8th Cir. 1996) (same); see also Concord Boat Corp. v. Brunswick Corp. , 207 F.3d 1039, 1050 (8th Cir. 2000) (reversing a district court for failing to grant JMOL and noting that JMOL "must be granted when a non-movant's case rests solely upon speculation and conjecture lacking in probative evidentiary support") (emphasis added).

Moreover, although "[d]etermining the credibility of a witness is the jury's province, whether the witness is lay or expert," Stevenson v. Union Pac. R. Co. , 354 F.3d 739, 745 (8th Cir. 2004), a jury may generally not "disregard arbitrarily the unequivocal, uncontradicted, and unimpeached testimony of an expert witness where ... the testimony bears on technical questions ... beyond the competence of lay determination." Quintana-Ruiz v. Hyundai Motor Corp. , 303 F.3d 62, 76-77 (1st Cir. 2002) (quoting Webster v. Offshore Food Serv., Inc. , 434 F.2d 1191, 1193 (5th Cir. 1970) ). "A jury in such a case must rely on expert testimony and cannot substitute its own experience." Id. at 77 (reversing district court for failing to grant JMOL and remanding for judgment in favor of the moving party); see also Cruz-Vargas v. R.J. Reynolds Tobacco Co. , 348 F.3d 271 (1st Cir. 2003) (affirming grant of JMOL on similar reasoning).

Finally, a "court's prior decision on summary judgment [does] not control the outcome of a Rule 50 motion." St. Louis Convention & Visitors Comm'n v. National Football League , 154 F.3d 851, 861 (8th Cir. 1998). This is especially so where "[t]he Rule 50 motion was made and considered after the court had had the benefit of over four weeks of trial," alongside "extensive legal arguments by the parties." Id. (affirming grant of pre-verdict JMOL motion, on issue where district court had previously denied summary judgment).

II. HLC's Allocation Motion

In this motion, HLC argued that, because the Monoline Insurer MBIA "brought and settled claims against RFC for aiding and abetting GMAC Mortgage in fraudulently inducing MBIA ... to insure GMAC-sponsored trusts" (as evidenced by MBIA's proof of claim), and because ResCap's "damages expert, Dr. Karl Snow, did not allocate any portion of the MBIA ... settlement to" this "non-indemnifiable claim," HLC was entitled to JMOL as to ResCap's "failure to prove a non-speculative basis to allocate the MBIA ... settlement between indemnifiable and non-indemnifiable claims." (HLC JMOL Br. at 2, 4, 6.)⁵

In response, ResCap argued that, not only did HLC fail to raise this issue at any point during trial or during its cross-examination of ResCap's relevant experts, but, under the UnitedHealth Group allocation standard, RFC was under no obligation to allocate this "immaterial" claim in order to articulate a "reasonably certain" measure of damages. (See generally ResCap Opp. Br. (referencing UnitedHealth Grp. Inc. v. Exec. Risk Spec. Ins. , 870 F.3d 856, 862 (8th Cir. 2017) ).)

The Court denied HLC's motion. (See generally Trial Tr. at 3356-57.) First, the only support for HLC's argument was a handful of sentences in MBIA's proof of claim. (See PX-79.) This evidence did not support HLC's argument, though, because the Court had already instructed the jury that they could not consider that proof of claim for the truth of...