Rescap Liquidating Trust v. Home Loan Ctr., Inc. (In re RFC & Rescap Liquidating Trust Action), Case No. 13-cv-3451 (SRN/HB)

Decision Date12 June 2019
Docket NumberCase No. 13-cv-3451 (SRN/HB), Case No. 14-cv-1716 (SRN/HB)
Citation399 F.Supp.3d 827
Parties IN RE: RFC and ResCap Liquidating Trust Action This document relates to: ResCap Liquidating Trust v. Home Loan Center, Inc.
CourtU.S. District Court — District of Minnesota
MEMORANDUM OPINION AND ORDER RE: ATTORNEYS' FEES

SUSAN RICHARD NELSON, United States District Judge

Before the Court is the Motion for Attorneys' Fees and Costs [Doc. No. 4852] filed by Plaintiff ResCap Liquidating Trust ("ResCap"). For the reasons set forth below, Plaintiff's motion is granted in part and denied in part.

I. BACKGROUND

The Court has previously discussed the uniquely complex legal issues undergirding this contractual indemnification suit in numerous orders and opinions, most notably in its 182-page summary judgment opinion. See In re ResCap Liquidating Trust Action , 332 F. Supp. 3d 1101 (D. Minn. 2018). Accordingly, the Court will not revisit the many, and varied, legal issues that have arisen over the course of this five-year litigation.

However, for purposes of this attorneys' fees decision, the Court will recount the equally complex procedural history of this case. Such background is necessary in light of HLC's repeated and extraordinary contention that an unusually high fees award is not warranted because this case, and this jury trial, involved nothing more than a standard "two-party contract case" between commercial entities. (Def.'s Opp'n [Doc. No. 4979] at 1, 4; see also Expert Decl. of Sam Hanson [Doc. No. 4997] ("Hanson Decl.") at 3 (describing this case as a "single-plaintiff, single-defendant contract case").) For the reasons detailed below, this characterization is completely off the mark and omits a great deal of context.

A. Following a Multi-Billion Dollar Bankruptcy, the ResCap Liquidating Trust Brings Dozens of Related Contract Suits in this District

As this Court has explained before, the roots of this case lie in the bankruptcy of the Minnesota company formerly known as the Residential Funding Corporation ("RFC"). To briefly recap: following the collapse of the housing market in 2008, RFC was sued by various "Trusts" and "Monoline Insurers" for breaching the "representations" and "warranties" ("R&Ws") RFC made when selling those entities (or their insureds) "residential mortgage-backed securities" ("RMBS"), i.e. , bundles of home mortgages. In re ResCap , 332 F. Supp. 3d at 1122-24. Faced with tens of billions of dollars in liability, RFC filed for bankruptcy in May 2012. While in Bankruptcy Court, and after much negotiation, RFC reached a series of settlements, totaling approximately $9 billion, with the RMBS Trusts and several of the Monoline Insurers. Id. at 1124. In December 2013, in a 134-page order, Judge Martin Glenn of the Bankruptcy Court of the Southern District of New York approved these settlements as "fair and reasonable." Id. at 1124-25. Moreover, at the hearing in which Judge Glenn approved the settlements, he observed that "this case is certainly the most legally and factually complicated case that I've presided over in my seven years on the bench," and that "ResCap presented more unsettled legal issues than I've seen in one case before, whether during my seven years on the bench or thirty-four years in law practice before that." (Dec. 11, 2013 Hr'g Tr. Excerpts [Doc. No. 5013] at 43-44.)

However, the conclusion of RFC's "legally and factually complicated" bankruptcy marked only the beginning of the present case(s). Id. As part of the bankruptcy settlements, RFC's creditors formed the ResCap Liquidating Trust to sue the dozens of banks and mortgage lenders that had sold RFC the loans bundled into RFC's securities, on grounds that those lenders breached their (corresponding) R&Ws to RFC, and thus directly caused RFC to breach its R&Ws to the Trusts and Monoline Insurers, which, in turn, contributed to RFC incurring $9 billion in liabilities. In re ResCap , 332 F. Supp. 3d at 1144. ResCap grounded its claims against the lenders in the "Client Contract" those lenders had signed with RFC, which itself incorporated another, lengthier contract called the "Client Guide." Id. at 1118.

Importantly, the Client Guide not only contained a series of R&Ws that lenders made to RFC upon each loan sale, such as a promise that all of the borrower information the lender provided RFC was accurate, but it also contained a broad "indemnification" provision requiring the originating lender to indemnify RFC from "all losses or liabilities" arising from the lender's R&W breaches. See generally id. at 1151-54 (describing the stringency of the Client Guide's indemnification provisions for breached R&Ws, which afforded RFC "considerable discretion" in determining whether a breach had occurred, as well as "wide-ranging remedies"). Notably for present purposes, the Client Guide also included a "wide-ranging remedy" in the form of a fee-and-cost-shifting provision. (See Client Guide § A212 [Doc. No. 3244-2] at 68 ("The Client also shall indemnify GMAC-RFC and hold it harmless against all court costs, attorney's fees and any other costs, fees and expenses incurred by GMAC-RFC in enforcing the Client Contract.").)

Armed with this contract, and the $9 billion in "losses and liabilities" incurred by RFC in the bankruptcy settlements, in late 2013 and early 2014 ResCap1 proceeded to file dozens of materially identical lawsuits in Minnesota state and federal courts against a wide range of mortgage lenders, all alleging breach of contract and contractual indemnification under the Client Guide. (See Horner Decl., Ex. 3 [Doc. No. 4858-3] at 1 ("Consolidated Case Chart") (noting that ResCap filed 73 such "Phase I" lawsuits in 2013 and 2014, 67 of which were in Minnesota courts).)2 One of these lawsuits was against HLC. See Residential Funding Co., LLC v. Home Loan Center, Inc. , No. 14-cv-1716 (DWF/JJK).

At the outset of this litigation, ResCap was represented solely by attorneys at the Minneapolis firm Felhaber Larson (RFC's longstanding local counsel), as well as attorneys at the Columbus, Ohio law firm of Carpenter, Lipps & Leland LLP (RFC's bankruptcy counsel). However, early on in the process, ResCap, in conjunction with its existing counsel, realized that it "needed to obtain national counsel with significant RMBS litigation and RMBS-related bankruptcy expertise to represent [it] in [the HLC] case and the many dozens of other cases like it." (Heeman Decl. [Doc. No. 5010] ¶ 9 (emphasis added).) Indeed, "[ResCap] could not locate counsel in Minneapolis/St. Paul with the requisite expertise who were capable and able to litigate these cases, particularly in light of the many conflicts that law firms in this market had due to their ongoing representation of many of the defendant-originators in these cases." (Id. ) This need for national counsel was further amplified by the fact that the "overwhelming majority of Defendants in these cases, including Home Loan Center, [also] hired lead counsel from outside of Minnesota," often from some of the most prestigious law firms in the country. (Id. ¶ 11; see also Nesser Decl. [Doc. No. 4856] ¶ 6 (noting that, in addition to Williams & Connolly's representation of HLC, other defendants "engaged law firms including Jones Day; Munger, Tolles & Olson; Orrick, Herrington & Sutcliffe; Ropes & Gray; Simpson Thatcher & Bartlett; Sullivan & Cromwell; and Wachtell, Lipton, Rosen & Katz").)

As such, in early 2014, ResCap retained the nationally recognized litigation firm of Quinn, Emanuel, Urquhart & Sullivan, LLP, in addition to Felhaber Larson and Carpenter, Lipps, and Leland. (See Nesser Decl. ¶ 3.) ResCap did so because of Quinn Emanuel's well-regarded RMBS, bankruptcy, and insurance litigation work, including "its success in recovering over $25 billion for the Federal Housing Finance Agency in ground-breaking RMBS litigation." (Id. ¶ 2.) The representation agreement between ResCap and Quinn Emanuel called for Quinn Emanuel to discount its hourly billing rates by [redacted] in return for "an [redacted] contingency fee on any ‘recovery.’ " (Horner Decl. [Doc. No. 4857] ¶ 12 [redacted].

B. Pre-Trial Consolidation Through Summary Judgment

In the early days of this litigation, the ResCap cases were handled on an individual basis, with each judge in the District presiding over approximately two to seven cases. See, e.g. , Residential Funding Co. v. Academy Mortg., Corp. , 59 F. Supp. 3d 935 (D. Minn. 2014) (denying a joint motion to dismiss filed by the six defendant-originators whose cases were then pending before the undersigned). However, faced with the potential for conflicting decisions and inefficient discovery management in cases with overlapping fact patterns, in January 2015 the judges of the District jointly agreed to consolidate the then-59 active "ResCap cases" before the undersigned judge, Magistrate Judge Keyes, and Magistrate Judge Bowbeer "for all pre-trial purposes, including the coordination of all discovery matters, settlement discussions, nondispositive motions and dispositive motions, other than summary judgment and trial." (See Jan. 27, 2015 Consolidation Order [Doc. No. 100] at 3.)3 As part of this Order, all case activity was transferred to the consolidated case docket: 13-cv-3451 (D. Minn.). The case then proceeded through joint discovery for the next three years, with this Court and the two magistrate judges holding frequent, in-person, lengthy case management conferences with all participating counsel.4 During discovery, the complexity of these cases became readily apparent, as ResCap undertook the daunting task of attempting to apportion billions of dollars in liabilities across dozens of defendants, and among the tens of thousands of individual mortgage loans that defendants had sold to RFC over the course of the 2000s. Simultaneously, ResCap prepared a case against the many, and sometimes individualized, contract law defenses asserted by defendants, of which HLC was just...

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