John E. Waites, U.S. Bankruptcy Judge.
This matter comes before the Court upon the Motion to Quash Subpoena ("Motion
1. Debtors filed a petition for relief under chapter 13 of the Bankruptcy Code on April 7, 2014.
2. On June 7, 2016, Vanderbilt filed a Motion for Relief from Stay based on Debtors' failure to make ongoing post-petition payments directly to Vanderbilt as required under Debtors' confirmed chapter 13 plan.
3. Debtors and Vanderbilt agreed to a settlement of the Motion for Relief from Stay in which the parties agreed to conduct a Loss Mitigation/Mortgage Modification ("LM/MM") review in the portal. As a term of the settlement, the parties agreed that upon a final disposition and denial of all available types of LM/MM, Vanderbilt could file an affidavit of default, and the Court may grant relief from the stay without a further hearing. The settlement was memorialized by a consent order entered on July 26, 2016.
4. On July 29, 2016, the Court entered a Consent Order Requiring Loss Mitigation/Mortgage Modification. This consent order directed Debtors and Vanderbilt to participate in good faith in the Loss Mitigation/Mortgage Modification Portal Program.
5. On August 29, 2016, Vanderbilt issued a loan modification denial stating that they "reasonably believe [Debtors] have the ability to repay [their] loan under its current terms from [their] current income."
6. Later that day on August 29, 2016, Debtors appealed the denial and requested Vanderbilt's consent to participate in mediation.
7. On September 1, 2016, Debtors filed a Request for Mediation, and a LM/MM Mediator was appointed on September 9, 2016. The LM/MM mediation concluded without a resolution on November 28, 2016.
8. On December 16, 2016, Debtors filed a Motion to Enforce the Loss Mitigation/Mortgage Modification Order ("Motion to Enforce LM/MM"), alleging that Vanderbilt did not act in good faith during the LM/MM review in that Vanderbilt gave vague reasons for the denial of Debtors' LM/MM request, and that Vanderbilt's "loan evaluation process is objective or subjective depending on which way will enable [Vanderbilt] to deny the loan [modification]."
9. On January 19, 2017, Debtors' counsel issued a subpoena to the Vanderbilt commanding the production of several items, including:
10. On January 19, 2017, Vanderbilt filed the Motion to Quash, alleging that discovery is not available to Debtors, and that the requested documentation was not relevant to the matters before the Court, was an undue burden on Vanderbilt to produce, and was better suited for testimony at the hearing on the Motion to Enforce LM/MM. A hearing was held on the Motion to Quash on January 26, 2017.
Subpoenas are governed by Fed. R. Civ. P. 45, made applicable herein by Fed. R. Bankr. P. 9016. Fed R. Civ. P. 45 provides the requirements for commanding the production of relevant documents and electronically stored information. Section (d)(3) of the Rule indicates that:
Neither party has raised an issue regarding the applicability of Fed. R. Civ. P. 45 or the service of Debtors' subpoena.
As an initial matter, Vanderbilt alleges that because the undersigned's LM/MM Guidelines do not include specific guidance on the use of discovery during the LM/MM process, Debtors are prohibited from seeking discovery in the prosecution of their Motion to Enforce LM/MM. While the LM/MM guidelines do not specifically address the procedures to conduct discovery, a motion to enforce a loss mitigation/mortgage modification order is nonetheless a contested matter under Fed. R. Bankr. P. 9014. Consequently, the parties are permitted to conduct discovery regarding the motion as provided under Fed. R. Bankr. P. 9014(c), as well as issue subpoenas under Fed. R. Bankr. P. 9016. Therefore, the Court rejects Vanderbilt argument, and Debtors are permitted to seek discovery from Vanderbilt to the extent allowed by the Bankruptcy Rules.
Vanderbilt also alleges that the documentation requested by Debtors is not relevant to the Motion to Enforce LM/MM. In support of this position, Vanderbilt argues that Debtors have failed to state any facts in their Motion to Enforce LM/MM that would demonstrate that Vanderbilt did not act in good faith during the LM/MM process. Further, Vanderbilt asserts that information related to the modifications of other loans by Vanderbilt is
A review of the Motion to Enforce LM/MM shows that Debtors have alleged that Vanderbilt has not acted in good faith, including the assertions that Vanderbilt gave vague answers in explaining the reasons for denial, and that Vanderbilt's "loan evaluation process is objective or subjective depending on which way [it] will enable [Vanderbilt] to deny the loan [modification]." At the hearing, Vanderbilt's counsel attempted to refute Debtors' allegations by explaining his understanding of Vanderbilt's internal LM/MM procedures; however, through this line of argument, Vanderbilt is asking the Court to reach the ultimate issue and conclude the Motion to Enforce LM/MM before allowing Debtors to conduct permissible discovery.
For the Motion to Enforce LM/MM, the central issues involve the parties' conduct during Debtors' LM/MM review and Vanderbilt's LM/MM policies. Therefore, it would appear that both Debtors' request for Vanderbilt's case file on Debtors' LM/MM review and their request for Vanderbilt's written policies on the loan modification process would be relevant to the determination of the Motion to Enforce LM/MM.
In regards to Debtors' request for historical data on Vanderbilt's loan modification approvals and denials, Debtors' counsel indicated at the hearing that from her experience as well as the experience of other members of the bar, few, if any, LM/MM requests made to Vanderbilt result in a modification. Debtors believe that it is a policy and practice of Vanderbilt to deny debtors after conducting a faithless LM/MM review in order to comply with the Court's guidelines; and therefore, the historical data is necessary to demonstrate a pattern or business practice that Vanderbilt does not conduct its LM/MM reviews in good faith.
The Court notes that a creditor that reviews a debtor for LM/MM with an intention of not offering LM/MM would not be acting in good faith and would needlessly cause debtor, debtor's counsel, and for that matter the Court, additional work and expense.
In the initial stages of the LM/MM program in this District, Vanderbilt asserted a policy of not conducting LM/MM reviews when the debtor has a pending bankruptcy case.
At the hearing, counsel for Vanderbilt indicated that Vanderbilt's LM/MM review is a subjective procedure in that its LM/MM representative will review a debtor's financials and in the sole judgment of the representative, determine if the debtor should be offered a loan modification.
While Debtors' request for production may be relevant, Vanderbilt would not be required to provide the documentation if production would create an undue burden. In their Motion to Quash, Vanderbilt generally alleges that complying with Debtors' request for production would be an undue burden.
At the hearing, Vanderbilt did not specify how production of Vanderbilt's case file on Debtors' LM/MM review would create an undue burden.
In light of this order directing Vanderbilt to produce its case file on Debtors' LM/MM review, Debtors' request for "documentation substantiating all of the mediation programs considered for [Debtors] according to the portal message dated 11/16/16" appears to be duplicative and unnecessary because this documentation should be evidenced in Vanderbilt's case file.
As to Vanderbilt's written policies pertaining to Vanderbilt's loan modification process, Vanderbilt's counsel indicated at the hearing that he has produced these policies previously to the Court in other cases. It would appear that the written policies are readily available and would not be difficult to provide to Debtors' counsel. Therefore, the Court does not find that it would be an undue burden for Vanderbilt to produce these policies.
As to Debtors' request for the "dates and description of any in-house or external training sessions [Vanderbilt] employees attended since 1/1/15 on loan modifications," it appears this request would impose an undue burden on Vanderbilt. For instance, the scope of Debtors' request is overly broad because it seeks the information regarding all employees of Vanderbilt, not just those who within their scope of duties review for LM/MM. Considering that Vanderbilt's representative who reviewed Debtors for LM/MM can testify at the hearing on the extent of his training, the Court finds that Debtors' request for the details of the LM/MM training for all of its employees would be an undue burden on Vanderbilt.
The total number of Completed Reviews, broken down by:
Finally, Vanderbilt asserts that all of the information requested by Debtors in the subpoena could be solicited during the testimony of Vanderbilt's witness at the hearing on the Motion to Enforce LM/MM and that the better course is to quash Debtors' subpoena and proceed directly to the hearing on that motion. Debtors' counsel indicated that she issued the subpoena in part to ensure that both she and Vanderbilt's witness would be familiar with all of the topics that she intends to address during her cross-examination.
Based on the foregoing, the Court grants in part and denies in part Vanderbilt's Motion to Quash. Vanderbilt is ordered to produce the following no later than February 17, 2017:
