In Re:

MEMORANDUM in Support of MOTION to Strike TESTIMONY OF ANGELA E. WATSON 382

C.D. Cal.July 26, 2013

2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 MILBERG LLP DAVID E. AZAR (SBN 218319) dazar milberg .c~~om NICO E DUCKETT (SBN 198168) ndfricke milberg.com 300 Sout Grand, Suite 3900 Los Angeles, California 90071 Telephone: 213 617-1200 Facsimile: 213 617-1975 MILBERG LLP ARIANA J. TADLER atadler@milberg .com 1 Pennsylvania Plaza New York, NY 10119 Telephone: 212 594-5300 Facsimile: 213 868-1229 ~ Interim Lead Class Counsel [Additional Counsel on Signature Page] KLEIN KAVANAGH COSTELLO, GARY KLEIN SHENNAN KAVANAGH KEVIN COSTELLO 85 Merrimac Street, 4th Floor Boston, Massachusetts 02114 Telephone: 617~) 357-5500 Facsimile: 6171357-5030 klein@kkc1T~p .com kavanagh kkcllp.com Costello@~kcllp.com UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA WESTERN DIVISION IN RE: CITIMORTGAGE INC. HOME AFFORDABLE MODIFICATION PROGRAM ("HAMP") LITIGATION This document relates to: Beverly King, et al. v. CitiMortgage, Inc., CV 10-3792 DSF (PLAx) Balbir Singh v. CitiMortgage, Inc., CV 11-8322 DSF (PLAx) Leslie Barry, et al. v. CitiMortgage, Inc., CV 11-8323 DSF (PLAx) Davidson Calfee, et al. v. CitiMortgage, Inc., CV 11-8324 DSF (PLAx) DOCS\664823v1 Case No. 11-m1-2274 DSF (PLAx) PLAINTIFFS' MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO STRIKE TESTIMONY OF ANGELA E. WATSON DATE: TIME: CRTRM.: JUDGE: MAGISTRATE JUDGE: Sep tember 16, 2013 1:30 pm 840 Hon. Dale S. Fischer Hon. Paul L. Abrams PLAINTIFFS' MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO STRIKE TESTIMONY OF ANGELA E. WATSON Case 2:11-ml-02274-DSF-PLA Document 383 Filed 07/26/13 Page 1 of 22 Page ID #:12687 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Juan Silva, et al. v. CitiMortgage, Inc., CV 11-8325 DSF (PLAx) Jo Ann Gastineau v. CitiMortgage, Inc., CV 11-8326 DSF (PLAx) William T. Whiting v. CitiMortgage, Inc., CV 11-8327 DSF (PLAx) David G. DeRosa, et al. v. CitiMortgage Inc., CV 11-8328 DSF (PLAx) Robert Coons, et al. v. CitiMortgage Inc., CV 11-01655 DSF (PLAx) Joaquin Sequeira, et al. v. CitiMortgage Inc. CV 11- 9179 DSF(PLAx) DOCS\664823v1 PLAINTIFFS' MEMORANDUM OF POINTS AI~TD AUTHORITIES IN SUPPORT OF MOTION TO STRIKE TESTIMONY OF ANGELA E. WATSON Case 2:11-ml-02274-DSF-PLA Document 383 Filed 07/26/13 Page 2 of 22 Page ID #:12688 1 2 3 4 5' 6 7 8 9 10 11 12 13 iC~ 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TABLE OF CONTENTS Page I. INTRODUCTION ...........................................................................................1 II. BACKGROUND .............................................................................................2 A. Plaintiffs' Theory Of The Case .............................................................2 B. Ms. Watson's Background ....................................................................3 C. Scope of the Report ...............................................................................4 III. LEGAL STANDARD .....................................................................................5 IV. ARGUMENT ...................................................................................................7 A. Ms. Watson is Not Qualified to Testify as an Expert ...........................7 B. Ms. Watson's Methods Are Irrelevant, Unreliable, Unsubstantiated, and Unduly Prejudicial ..............................................8 1. Ms. Watson's Opinions as to Eligibility and "The General Industry' are Irrelevant .................................................8 2. Ms. Watson's Opinion on the Appropriateness of Citi's inUnderwriting Delay Lacks a Sufficient Foundation Facts, Data, or Experience ........................................................10 3. Ms. Watson's Evaluations of Plaintiffs' RAMP Eligibility are Imprecise and Biased .........................................11 V. CONCLUSION ..............................................................................................15 DOCS\664823v1 -i- MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO STRIKE TESTIMONY OF ANGELA E. WATSON Case 2:11-ml-02274-DSF-PLA Document 383 Filed 07/26/13 Page 3 of 22 Page ID #:12689 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TABLE OF AUTHORITIES FEDERAL CASES Pages) Cabrera v. Cordis Corp., 134 F.3d 1418 (9th Cir. 1998) .............................................................................11 Clam v. Burlington Northern R. Co., 29 F.3d 499 (9th Cir. 1994) ................................................................................11 Daubert v. Merrell Dow Pharm. Inc., 509 U.S. 579 (1993) ..........................................................................................6, 8 Daube~t v. Merrell Dow Pha~ms. Inc., 43 F.3d 1311 (9th Cir. 1995), cent. denied 516 U.S. 869 (1995) ("Daubert II") .....................................................................................................................6, 9 Gallagher v. Southern Source Packaging, LLC, 568 F. Supp. 2d 624 (E.D.N.C. 2008) ..................................................................7 General Electric Co. v. Joiner, 522 U.S. 136 (1997) ........................................................................................6, 10 Guidroz-Brault v. Missouri Pacific R. Co., 254 F.3d 825 (9th Cir. 2001) ............................................................................6, 7 Keegan v. American Honda Motor Co., Inc., 284 F.R.D. 504 (C.D. Cal. 2012) ..........................................................................5 Kumho Tire Co. v. Carmichael, 526 US 137 (1999) ..........................................................................................6, 15 LuMetta v. United States Robotics, Inc., 824 F.2d 768 (9th Cir. 1987) ..............................................................................5, 8 Nationwide Transp. Fin. v. Cass Info. Sys., 523 F.3d 1275 (9th Cir. 1993) .............................................................................10 Primiano v. Cook, 598 F.3d 558 (9th Cir. 2010) ................................................................................6 DOCS\664823v1 -ii- MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO STRIKE TESTIMONY OF ANGELA E. WATSON Case 2:11-ml-02274-DSF-PLA Document 383 Filed 07/26/13 Page 4 of 22 Page ID #:12690 1' 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Rogers v. Raymark Industries, Inc., 922 F.2d 1426 (9th Cir. 1991) ...........................................................................7, 9 U.S. v. 99.66 Acres of Land, 970 F.2d 651 (9th Cir. 1992) ............................................................................5, 8 U.S. v. Kahn, 711 F.Supp.2d 9 (D.D.C. 2010) ........................................................................5, 8 Rtri.Es Federal Rule of Evidence 104(a) .................................................................... 2, 5, 15 Federal Rule of Evidence. 702 ....................................................................... 5, 6, 7, 8 Federal Rules of Evidence 403 ............................................................................2, 15 DOCS\664823v1 -iii- MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO STRIKE TESTIMONY OF ANGELA E. WATSON Case 2:11-ml-02274-DSF-PLA Document 383 Filed 07/26/13 Page 5 of 22 Page ID #:12691 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16, 17 18 19 20 21 22 23 24 25 26 27 28 I. INTRODUCTION On May 28, 2013, Defendant CitiMortgage submitted the "Expert Report" of Angela E. Watson, a salesperson for the consulting firm Cross Check Compliance. See Expert Report of Angela E. Watson ("Report") at ¶ 1, Docket No. 347.1;' Ex. 1 at 30:13-15.2 Defendant relies on the Report to support its contentions that (1) HAMP rules varied over time and by investor, (2) Citi's RAMP servicing was comparable to its peers, (3) Citi's decision-making processes were not uniform for all Plaintiffs, and (4) the modification- effective date ("MED") was not a deadline for denying or approving a RAMP modification. See Mem. in Opp'n to Pls.' Mot. for Class Certification ("Opp.") at 4-5, 7-8, 12-13, 20-21, Docket No. 345. Ms. Watson is not qualified to testify as an expert on these issues. She is a 32-year old salesperson for a consulting company, who now asserts that aone-year stint in a Fannie Mae call center provided her with expert knowledge of RAMP. Ex. 1 at 10:19-10:20, 116:16-116:18. Yet, she has no education or formal training in mortgage servicing or RAMP. Id. at 10:21-16:11. She has never published anything concerning the mortgage industry. Id. at 10. She has never spoken at any seminars on issues in the mortgage industry. Id. She has never before offered an expert report or opinion. Id. Prior to working at Fannie Mae, she worked in a non- management position for the now-bankrupt Thornburg Mortgage, whose directors are under investigation by the Securities and Exchange Commission. Press Release, SEC, "SEC Charges Three Mortgage Executive With Fraudulent Accounting Maneuvers in Midst of Financial Crisis" (March 13, 2012) available at http://www.sec.gov/news/press/2012/2012-42.htm. After Fannie Mae, she worked 1 References herein to "Docket No." refer to this MDL, Case No. 11-m1-2274 (C.D. Cal.). 2 References herein to "Ex." refer to the Exhibits attached to the Declaration of David Azar, which is filed contemporaneously. DOCS\664823v1 -1- MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO STRIKE TESTIMONY OF ANGELA E. WATSON Case 2:11-ml-02274-DSF-PLA Document 383 Filed 07/26/13 Page 6 of 22 Page ID #:12692 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18' 19 20 21 22 23 24 25 26 27 28 for a few months in Bank of America's Government Sponsored Entity Exam Management Department, during a time in which Bank of America was sanctioned by Treasury for its poor RAMP performance. Press Release, Dept. of the Treasury, "Obama Administration Releases May Housing Scorecard Featuring New Making Home Affordable Servicer Assessments, Regional Spotlight on Phoenix Housing Data" (June 9, 2011) available at http://www.treasury.gov/press- center/press-releases/Pages/tg1205.aspx. While at Bank of America, her HAMP- related work consisted of reviewing a single Fannie Mae audit of Bank of ~ America's loss mitigation practices. Ex. 1 at 74:04-74:09. Even if she were qualified to testify as an expert, her report consists wholly of irrelevant, unsupported, and inadequate information. Among other things, Ms. Watson testified that she did not consider the TPP Agreement (defined below) as' the basis for Plaintiffs' claims, and her testimony is founded, contrary to basic contract principles, on the faulty assumption that the TPP Agreement has no relevance to establishing the time deadline for Citi's performance. This makes her testimony irrelevant to the legal questions at issue. Even if the Court were to find Ms. Watson's opinion relevant, her self- serving and biased methods of evaluating plaintiffs' RAMP eligibility are too unreliable to be admissible. At best, her report's imprecise methods highlight the problems Citi caused with its underwriting delays. For these reasons, Plaintiffs seek to strike the report under Rules 104(a), 702, and 403. Ms. Watson is unqualified; and her report is irrelevant and unreliable. II. BACKGROUND A. Plaintiffs' Theory Of The Case In this Multi-District Litigation, Plaintiffs seek to enforce their Trial Period Plan ("TPP") Agreements, which are enforceable contracts they made with Citi. Mem. in Support of Pls.' Mot. for Class Certification and Appointment of Class DOCS\664823v1 -2- MEMOREINDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO STRIKE TESTIMONY OF ANGELA E. WATSON Case 2:11-ml-02274-DSF-PLA Document 383 Filed 07/26/13 Page 7 of 22 Page ID #:12693 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Counsel ("Mot") at 1, Docket No. 316. As stated in their Memoranda in Support of Class Certification, "[t]he central common question is whether Citi breached TPPs by failing to act within the Trial Period expressly set forth in each agreement." Id. at 1. The TPP agreement is a contract of finite duration, which requires Citi to provide the borrower with either a permanent HAMP modification or a written notice that the borrower does not qualify, before the MED specified in the TPP. Id. at 3. Treasury directed servicers to timely deny those borrowers who did not satisfy their obligations. Azar Decl. Ex. 13 at 4, 14 at 6, 15 at 1, Docket No. 317.3. Citi delayed underwriting to the point that the required borrower documents frequently became stale and required borrowers to submit updated documentation. Mot at 4-5. This problem was further exacerbated by rampant document processing problems. Id. at 5. The central issues in this action revolve around Citi's obligation to make an underwriting decision before a borrower's MED, which was prevented by its delayed underwriting and unresolved document processing problems. B. Ms. Watson's Background Ms. Watson works in sales for Crosscheck Compliance, a consulting firm. Report ¶ 1. The curriculum vitae she submitted with her report states, among other things, that she was "a key member of the National Servicing Organization at Fannie Mae." Report, Attachment 2, at 106. That statement, which refers to an experience that Ms. Watson conceded to be a one-year stint in a Fannie Mae call center with over 20 other Portfolio Managers, is an overstatement of her role and credentials. Ex. 1 at 80:16-81:06, 83:19-84:02. Ms. Watson, along with the other Portfolio Managers, answered questions from servicers about Fannie Mae general servicing guidelines not limited to RAMP-related issues. Ex. 1 at 79:16-81:06. Although that is Ms. Watson's most significant RAMP-related experience, it did not include any evaluation of whether servicers acted according to guidelines about DOCS\664823v1 -3- MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO STRIKE TESTIMONY OF ANGELA E. WATSON Case 2:11-ml-02274-DSF-PLA Document 383 Filed 07/26/13 Page 8 of 22 Page ID #:12694 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 time frames for action under HAMP, whether they were complying with their agreements with customers, or whether they were meeting their obligations to homeowners. Ex. 1 at 87:06-87:24. She concedes in her report that her HAMP knowledge is limited to "Fannie Mae RAMP announcements and related guidance." Report ¶ 3. After this brief stint, Ms. Watson transferred to a different Fannie Mae job, ~ which had nothing to do with servicers' compliance with HAMP guidelines. Ex. 1 at 88:04-91:09, 92:09-12. At this later job, she assisted in issuing repurchase demands due to servicers not following Fannie Mae guidelines, including ~ situations where the servicer's foreclosure process took too long. Id. Aside from answering telephone inquiries in a Fannie Mae call center, Ms. Watson's experience with HAMP is coincidental and cursory: She reviewed one' Fannie Mae loss mitigation audit of Bank of America that contained a HAMP- related portion and she reviewed less than ten loan portfolios, which were not specific to RAMP, to evaluate an undisclosed servicer's liability to its investors. Ex. 1 at 32:08-12, 34:05-16. She currently works for Cross Check Compliance as a Director of Business Development, which she acknowledges to be a sales job. Ex. 1 at 30:13-15. Indeed, she has recently described herself in a public profile as a salesperson. Ex. 2. C. Scope of the Report Ms. Watson's Report states that she was asked to provide her opinion on (1) servicer performance, (2) "the general industry practice regarding the modification effective date contained in HAMP Trial Period Plans (`TPPs')," and (3) every plaintiff's individual loan file to determine whether Citi's ultimate underwriting decision was justified. Report ¶ 5. Notably, Defendant does not rely on any of Ms. Watson's opinions regarding Plaintiffs' eligibility in its Opposition to Plaintiffs' Motion for Class Certification. It merely uses Ms. Watson's report as a DOCS\664823v1 -4- MEMORANDUM OF POINTS AND AUTHORITIES iN SUPPORT OF MOTION TO STRIKE TESTIMONY OF ANGELA E. WATSON Case 2:11-ml-02274-DSF-PLA Document 383 Filed 07/26/13 Page 9 of 22 Page ID #:12695 1 2 3 4 5 6 7 8 9'' 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 conduit to communicate irrelevant and disputed facts based on a biased reading of documents of Ms. Watson's choosing. See e.g., Opp, §III at 7-8. Based on a selective review and often absurd reading of Plaintiffs' files; Ms. Watson always finds Citi's actions to have been both timely and correct. Report ¶ 63. Even if relevant, these documents, of course, speak for themselves and, therefore, Ms. Watson's report is offered for an improper purpose. III. LEGAL STANDARD Under Federal Rule of Evidence 702, "a witness who is qualified by knowledge, skill, experience, training, or education may testify in the form of an opinion or otherwise if: (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; (c) the testimony is the product of reliable principles and methods; and (d) the expert has reliably applied the principles and methods to the facts of the case." The burden of showing admissibility is on the proponent of the expert testimony. Keegan v. American Honda Motor Co., Inc., 284 F.R.D. 504, 515 (C.D. Cal. 2012). When determining whether Ms. Watson's expert report is admissible, "[t]he court must decide any preliminary question about whether a witness is qualified." Fed. R. Evid. 104(a). An expert must be qualified "by knowledge, skill, experience, training, or education" in order to "testify in the form of an opinion or otherwise." FRE 702. Where the witness lacks formal training and has limited experience with the topic on which she is testifying, the Court has the discretion to exclude her testimony. LuMetta v. United States Robotics, Inc., 824 F.2d 768, 771 (9th Cir. 1987). Even a witness with extensive experience may be excluded if that experience does not relate to the topic of her testimony. U.S. v. 99.66 Acres o~ Land, 970 F.2d 651, 656 (9th Cir. 1992) (affirming district court's exclusion of testimony by accountant with no training or practice as an appraiser); U.S. v. Kahn. DOCS\664823v1 -5- MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO STRIKE TESTIMONY OF ANGELA E. WATSON Case 2:11-ml-02274-DSF-PLA Document 383 Filed 07/26/13 Page 10 of 22 Page ID #:12696 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 711 F.Supp.2d 9, 12 (D.D.C. 2010) (witness with experience and knowledge regarding fictitious notes was not qualified to testify regarding how the IRS identifies fraudulent documents). Daubert articulated factors to guide a court's determination of whether expert testimony is admissible, including the reliability of the testimony, the relevancy of the testimony, and the risk of unfair prejudice. Daubert v. Merrell Dow Pharm. Inc., 509 U.S. 579, 590-591, 598 (1993). The objective of this analysis "is to ensure the reliability and relevancy of expert testimony. It is to make certain that an expert, v~hether basing testimony upon professional studies or personal experience, employs in the courtroom the same level of intellectual rigor that characterizes the practice of an expert in the relevant field." Kumho Tire Co. v. Carmichael, 526 US 137, 152 (1999). The reliability inquiry questions whether the testimony is "supported by appropriate validation." Daubert -509 U.S. at 590. Expert testimony must be "properly grounded, well-reasoned, and not speculative." Fed. R. Evid. 702 (Advisory Committee's Notes). It is not enough to be "presented with only the experts' qualifications, their conclusions and their assurances of reliability." Daube~t v. Merrell Dow Pharms. Inc., 43 F.3d 1311, 1319 (9th Cir. 1995), cent. denied 516 U.S. 869 (1995) ("Daubert II"). The court need not admit opinion that is "connected to existing data only by the ipse dixit of the expert," and "may conclude that there is simply too great an analytical gap" between data and opinion. General Electric Co. v. Joiner, 522 U.S. 136, 146 (1997); see also Guidroz-Brault v. Missouri Pacific R. Co., 254 F.3d 825, 830-831 (9th Cir. 2001) (excluding experts' opinions that were based on assumed facts not in the record). The proposed expert testimony must be "relevant to the task at hand," meaning that it "logically advances a material aspect of the proposing party's case." Daubert II, 43 F.3d at 1315. "What is relevant depends on what must be proved." DOCS\664823v1 -6- MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO STRIKE TESTIMONY OF ANGELA E. WATSON Case 2:11-ml-02274-DSF-PLA Document 383 Filed 07/26/13 Page 11 of 22 Page ID #:12697 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18' 19 20 21 22 23 24 25 26 27 28 Primiano v. Cook, 598 F.3d 558, 567 (9th Cir. 2010). A report that does not address the issues at hand should be stricken. Guidroz-Brault, 254 F.3d at 830 (engineer's testimony "to establish a fact never really in dispute" was properly excluded); Gallagher v. Southern Source Packaging, LLC, 568 F. Supp. 2d 624, 634 (E.D.N.C. 2008) (striking expert report after he repeatedly stated that he had no opinion regarding the primary issue in the case). Further, the court "may still exclude testimony under Rule 403" if it risks confusing the issues. Rogers v. Raymark Industries, Inc., 922 F.2d 1426, 1430 (9tn Cir. 1991). Federal Rule of Evidence 403 states, "[t]he court may exclude relevant evidence if its probative value is substantially outweighed by a danger of one or more of the following: unfair prejudice, confusing the issues, misleading the jury, undue delay, wasting time, or needlessly presenting cumulative evidence." It is particularly appropriate for the court to carefully "weigh the potential for confusion in the balance when expert testimony is proffered," to avoid undue focus "on the expert's issues to the detriment of issues that are in fact controlling." Rogers, 922 F.2d at 1431. IV. ARGUMENT A. Ms. Watson is Not Qualified to Testify as an Expert Ms. Watson's brief and narrow exposure to HAMP does not give her the "knowledge, skill, experience, training, or education" to opine on either "the general industry practice regarding the modification effective date contained in HAMP Trial Period Plans (`TPPs')" or Plaintiffs' eligibility for RAMP. Fed. R. Evid. 702; Report ¶ 5. If she has specialized knowledge regarding any servicer's practice regarding the MED, she has not disclosed it. Even her experience at Fannie Mae is irrelevant to this issue, given that she did not evaluate whether servicers complied with HAMP timelines or advise servicers of their obligations to borrowers. Ex. 1 at 87:06-24. She has coincidental exposure to aRAMP-related DOCS\664823v1 -7- MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO STRIKE TESTIMONY OF ANGELA E. WATSON Case 2:11-ml-02274-DSF-PLA Document 383 Filed 07/26/13 Page 12 of 22 Page ID #:12698 11, 2' 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 portion of a Bank of America audit by Fannie Mae and cursory experience with evaluating a handful of loans for servicer liability to its investors. Like the witnesses deemed unqualified to testify as experts in LuMetta, anything beyond a cursory examination of Ms. Watson's stated experience reveals little relevant experience, and her background falls far short of meeting Rule 702's threshold requirement of "knowledge, skill, experience, training, or education" related to the topic of her testimony. LuMetta, 824 F.2d at 771; see also U.S. v. 99.66 Acres of Land, 970 F.2d at 656; U.S. v. Kahn, 711 F. Supp. 2d at 12. Finally, Ms. Watson's lack of RAMP expertise is not mitigated or enhanced by other relevant work or life experience. She has never published an article, has never testified as an expert, and has never held a management position in any context. Ex. 1 at 10. Given the dearth of Ms. Watson's education, training, and given that her solitary year of relevant experience is limited to applying Fannie Mae servicing guidelines that were not limited to HAMP and unrelated to the timeliness of underwriting, her opinions should not be relied on by the Court, and should be stricken from the record. B. Ms. Watson's Methods Are Irrelevant, Unreliable, Unsubstantiated, and Unduly Prejudicial Ms. Watson's lack of relevant experience is reflected in her work product. Her methods are so unreliable, unsupported, and biased that they are not admissible under Rule 702 and the standards articulated in Daube~t. Even more importantly, her work is aimed at a question that is not at issue and is therefore irrelevant. 1. Ms. Watson's Opinions as to Eligibility and "The General Industry" are Irrelevant Ms. Watson's opinions regarding borrower eligibility do not assist the Court in determining a fact in issue because they ignore Plaintiffs' theory of the case. DOCS\664823v1 MEMORANDUM OF POINTS AND AUTHORITIES 1N SUPPORT OF MOTION TO STRIKE TESTIMONY OF ANGELA E. WATSON Case 2:11-ml-02274-DSF-PLA Document 383 Filed 07/26/13 Page 13 of 22 Page ID #:12699 1 2 3 4 5 6 7 8 9' 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Plaintiffs do not argue for the purposes of class certification that all plaintiffs and putative class members are substantively eligible for permanent RAMP modifications under HAMP. Rather, plaintiffs assert that all class members suffered a common injury when Citi breached the TPP Agreement by failing to render a decision at the close of the contractually defined Trial Period. Mot. at 1-3. Ms. Watson's report confuses substantive eligibility for permanent modification under RAMP with entitlement to damages for breach of contract. Her self-serving methods, which assumes that Citi could unilaterally extend the Trial Period either by oral statement or entirely without notice, discussed in Section IV(B)(3), serves only to distract the court from Plaintiffs' theory. See Daubert II, 43 F.3d at 1315; Rogers, 922 F.2d at 1430. Similarly irrelevant to the issues in this case, Ms. Watson chose to ignore the actual contract in this breach of contract action, and instead focused on how the "general industry" treated that contract. See Ex. 1 at 145:02-03 (she "was not asked to look at timeliness or the specific definition of the date in the TPP"), 52:25-153:07 (it is not within the scope of her report to "have any opinion about whether or not the trial period is defined in the TPP documents."). Whether or not other servicers extended borrower Trial Periods is irrelevant to whether Citi breached its obligations to its borrowers when it delayed underwriting or otherwise failed to render a decision by the MED stated in borrowers' TPP Agreements. Report ¶ 27, 29. Moreover, despite having every Plaintiff's loan file at her disposal, she refused to evaluate whether Citi actually worked in a timely way with each plaintiff to obtain the necessary documents, stating that it was outside the scope of her report. Ex. 1 at 169:11-13 ("looking at borrower notices was not part of the scope of my engagement"); see also Ex. 1 at 162:23-163:05 (not in the scope of her report to "look at the communication, whether it was appropriate between CitiMortgage and the borrower"). DOCS\664823v 1 -9- MEMORANDUM OF POINTS AND AUTHORITIES 1N SUPPORT OF MOTION TO STRIKE TESTIMONY OF ANGELA E. WATSON Case 2:11-ml-02274-DSF-PLA Document 383 Filed 07/26/13 Page 14 of 22 Page ID #:12700 1 2 3 4 SI 6'. 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2. Ms. Watson's Opinion on the Appropriateness of Citi's Underwriting Delay Lacks a Sufficient Foundation in Facts, Data, or Experience. Ms. Watson's opinion that "Citi acted appropriately in granting TPP extensions based on applicable guidelines" is misplaced and defies logic. Report ¶ 28. She fails to support her position with any of the facts available at her fingertips and leaves gaping holes in her analysis. For example, in her report, she states that RAMP guidelines do not state "that a final HAMP underwriting decision must happen by the MED." Report ¶27. This is not true. See Mot. at 3. When pressed at her deposition, she admitted that this statement is not accurate. Ex. 1 at 155:23- 157:07. She also stated that one reason servicers extended the Trial Period was because of "a delay in the gathering of documents," yet fails to cite any authority for allowing such extensions. Report ¶ 27. She failed to articulate the purported guideline that allowed Citi to unilaterally extend Ms. Grover's and Mr. Petrides' TPPs for at least five months after their MEDs without once communicating with them regarding documents it may have needed to complete its review. Declaration of David Azar Decl. Ex. 8 at 24:20-242:03, Docket No. 317.2; Ex 5 at 83:14- 87:25. In the 65 pages of the report devoted to evaluating individual Plaintiffs' files, she failed to state specifically how any alleged TPP extensions were justified or documented. Here, the analytical chasm between data and her opinion "is simply too great" for this testimony to assist the Court in its ultimate determination. General Electric Co. v..Ioiner, 522 U.S. 136, 146 (1997). Finally, the question of whether a particular extension is legally appropriate such that it generates a valid defense to breach of contract is a question for the Court and not for expert testimony. Nationwide Transp. Fin. v. Cass Info. Sys., 523 F.3d 1275, 1287 (9t'' Cir. 1993). DOCS\664823v 1 -10- MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO STRIKE TESTIMONY OF ANGELA E. WATSON Case 2:11-ml-02274-DSF-PLA Document 383 Filed 07/26/13 Page 15 of 22 Page ID #:12701 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Another example of her unfounded and vague assertions regarding the length of the Trial Period is that "Fannie Mae encouraged servicers to work with borrowers to obtain documentation, rather than deny borrowers by the MED." Report ¶ 35. Ms. Watson's report offers absolutely no support—evidentiary or otherwise—for this statement. She cites no guidance, formal or informal, official communication or public statement of any kind from Fannie Mae in support of this '' statement—which is directly contradictory to published HAMP guidance. See Mot. at 3; Azar Decl. Ex 13 at 4, 14 at 6, 15 at 1, Docket No. 317.3. Instead, she asks the Court to accept her testimony based on her brief experience at Fannie Mae; she offers neither an explanation nor an example of how or when Fannie Mae encouraged servicers in this regard. The Ninth Circuit has excluded testimony by witnesses who, like Ms. Watson, did not explain how they reached their conclusions, show peer-reviewed support for their conclusions, or failed to review the appropriate literature before forming their opinions. Cabrera v. Co~dis Corp., 134 F.3d 1418, 1422 (9th Cir. 1998); Claa~ v. Burlington Northern R. Co., 29 F.3d 499, 502-503 (9th Cir. 1994). 3. Ms. Watson's Evaluations of Plaintiffs' RAMP Eligibility are Imprecise and Biased Even if the Court were to find Ms. Watson's eligibility analysis relevant, it cannot be trusted as reliable because she designed her method to produce only results that justify Citi's ultimate underwriting decisions. Clary v. Burlington Northern R. Co., 29 F.3d 499, 502-503 (9th Cir. 1994) ("Coming to a firm conclusion first and then doing research to support it is the antithesis of [the scientific] method."). Ms. Watson's method repeats the same mistake Citi made when it delayed Plaintiffs' underwriting: She purports to have reviewed each Plaintiff according to documents Citi had at the time it underwrote the loan. Ex. 1 at 210:07-11. Delayed underwriting, however, is inconsistent with the primary purpose of having a trial period at all, i.e., to provide a finite underwriting period -11- MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO STRIKE TESTIMONY OF ANGELA E. WATSON DOCS\664823v1 Case 2:11-ml-02274-DSF-PLA Document 383 Filed 07/26/13 Page 16 of 22 Page ID #:12702 l 2 3 4 5 6 7 8. 9. 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 for Citi. Underwriting is, by necessity, a snapshot of the borrower's qualifications, not a moving picture, because its purpose is to predict the borrower's ability to make future payments as of a given point in time. To the extent that Ms. Watson takes a snapshot of borrowers' eligibility at the time Citi underwrote the loan, the delay has already caused changes in a borrower's eligibility. To the extent that Ms. Watson neglects her own method and picks and chooses documents that further Citi's interests—regardless of whether they are pertinent to a RAMP evaluation or even available to underwriters at the time Citi evaluated that borrower—she has ignored the fact that underwriting requires a snapshot of a borrower's eligibility, not a moving picture. Although Ms. Watson purports to use HAMP guidelines to evaluate' Plaintiffs' eligibility, she cites reasons for denying borrowers that are unrelated to RAMP guidelines. For example, Ms. Watson states, "the market value of the Glovers' property during the time period under review fluctuated between $125,000 and $143,000. The balance on the CitiMortgage first lien note was approximately $90,067.65, and there is a second lien note for $10,000. Thus, the Glovers could have paid off their loan by selling the property." Report ¶ 129. Only when she was specifically questioned about this reasoning at her deposition did she acknowledge that there is no RAMP rule preventing borrowers from qualifying because they had other options. Ex. 1 at 201:24-203:07. Indeed, Ms. Watson's opinion ignores the NPV test, which is designed to generate more precisely whether a modification, even if there is equity, would benefit or harm the investor in the loan. Azar Decl. Ex. 3 at 4, Docket No. 317.1. Ms. Watson's purported method of evaluating borrowers with documents available to Citi when it underwrote the loan, rather than with the documents provided to Citi within the Trial Period, is designed to create a post hoc justification for Citi's ultimate underwriting decisions. Many Plaintiffs' financial DOCS\664823v1 -12- MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO STRIKE TESTIMONY OF ANGELA E. WATSON Case 2:11-ml-02274-DSF-PLA Document 383 Filed 07/26/13 Page 17 of 22 Page ID #:12703 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 situations changed significantly between the time they started their Trial Periods i, and when their documents were finally evaluated. For example, Ms. Grover's unemployment benefits were active and slated to continue for the requisite period when she first submitted her benefits notice in September 2009, but by the time Citi evaluated her documents in June 2010, her benefits were set to expire. Ex. 4 at 183:23-187:05. Ms. Watson used the imminent expiration as a basis to opine that Citi correctly denied Ms. Grover a permanent modification, which is absurd and inconsistent with HAMP guidelines. Evaluating the documents as of the date of underwriting rather than as of the date of submission created a ridiculous Catch-22, particularly when underwriting did not begin—due to Citi's own delay—until nine months after the TPP commenced. Ms. Watson picks and chooses documents that will justify Citi's underwriting decision, regardless of when they were available to underwriters. For example, she used Mr. Whiting's entire 2010 profit and loss statement to determine that he "was not eligible for a RAMP modification because his income was insufficient," but Citi had denied his RAMP modification halfway through 2010, in August. Report ¶ 195. Although Mr. Whiting initially submitted income documentation in November 2009, he submitted a "profit and loss statement for the period of January–December 2010" a year later, to qualify for anon-RAMP modification. Id. Ms. Watson calculated his income based on that document, using profits and losses that occurred after Citi's denial. Id. at ¶ 198, 200, Attachment 7 at p. 112. This anachronistic underwriting indicates either sloppiness or bias—neither of which is acceptable. Ms. Watson also selectively and inconsistently evaluated the documents in order to provide convenient opinions that suit Citi's interests. For example, Ms. Grower's first submission of documents, in September 2009, included her bank statement. Ms. Watson stated, "[n]one of the bank statements Grover submitted DOCS\664823v1 -13- MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO STRIKE TESTIMONY OF ANGELA E. WATSON Case 2:11-ml-02274-DSF-PLA Document 383 Filed 07/26/13 Page 18 of 22 Page ID #:12704 1 2 3 4 5 6 7 8 9 10 11 12 ~'~ 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 with the TPP package contained all pages of each statement ... As a result, the TPP package was incomplete and Grover's HAMP application could not be forwarded to underwriting." Report ¶ 133. Yet, she also opined, "Grover was ineligible for HAMP based on the bank statements that Grover provided with the TPP" because they showed that her liquid asset ratio was higher than Treasury guidelines. Id. at ¶ 132. Moreover, Ms. Watson had already stated that Ms. Grover submitted those documents in September 2009, and that Citi did not review Ms. Grover's TPP package until 9 months later, in May 2010. Id. at ¶ 134. Put simply, she cannot have it both ways. Either the documents must be evaluated as of when they were submitted, or as of the date of underwriting, but not both. Finally, Ms. Watson asserts self-serving limits to the scope of her inquiry in a way that demonstrates her bias. For example, she repeatedly stated that the scope I, of the report was "to look at the ultimate underwriting eligibility and looking at' borrower notices was not part of the scope of my engagement." Ex. 1 at 169:11- 13, 162:23-163:05 (not in the scope of her report to "look at the communication, whether it was appropriate between CitiMortgage and the borrower"). She therefore does not consider that Citi's failure to request a particular document is relevant to whether Citi could properly deny a borrower based on the absence of that document. Yet, Ms. Watson uses the presence of document requests, even when made untimely, when she believes the requests favor Citi's position. Report ¶¶ 116, 192, 83. Moreover, she highlights circumstances where Plaintiffs' documents are incomplete, without acknowledging Citi's failure to timely request those 'J documents from Plaintiffs. For example, Ms. Watson emphasizes that Mr. Petrides' documents were incomplete seven months after his TPP began. Report ¶ 157. Yet she failed to identify the fact that Citi's first correspondence with Mr. Petrides after he submitted his documentation was a denial letter, which denied DOCS\664823v1 -14- MEMORANDUM OF POINTS AND AUTHORITIES 1N SUPPORT OF MOTION TO STRIKE TESTIMONY OF ANGELA E. WATSON Case 2:11-ml-02274-DSF-PLA Document 383 Filed 07/26/13 Page 19 of 22 Page ID #:12705 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 him due to incomplete documentation. Ex. 3. In other words, Citi failed to inform ~ Mr. Petrides of its belief that he was missing documentation prior to his denial. Ex 5 at 83:14-87:25. She repeats this maneuver in Ms. Grover's case as well, where, despite Ms. Grover's frequent calls to check up on the status of her RAMP underwriting, Citi did not inform Ms. Grover that she had incomplete documents until nine months after she initially submitted them. Azar Decl. Ex. 8 at 24:20- 242:03, Docket No. 317.2; Report ¶ 137. Nor does she acknowledge that it was Citi's own action that rendered Ms. Grover's documents incomplete. Mot. at 6-7. ~~ This is not "the same level of intellectual rigor that characterizes the practice of an expert in the relevant field," and thus Ms. Watson's report should be stricken. Kumho Tire Co., 526 US at 152. V. CONCLUSION For the reasons stated above, Plaintiffs request that the Court strike the report of Angela E. Watson pursuant to Federal Rules of Evidence 104(a), 702, and 403 because she is unqualified, the report is irrelevant, and her methods are unreliable and biased. The report confuses the issues while causing unfair prejudice. Date: July 12, 2013 MILBERG LLP DAVID E. AZAR NI DU DOCS\664823v1 One California Plaza 300 S. Grand Avenue Suite 3900 Los Angeles, CA 90471 Telephone: (213) 617-1200 Facsimile: (213) 617-1975 dazar@milberg .com nduckett@milberg.com -15- MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO STRIKE TESTIMONY OF ANGELA E. WATSON Case 2:11-ml-02274-DSF-PLA Document 383 Filed 07/26/13 Page 20 of 22 Page ID #:12706 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DOCS\664823v1 MILBERG LLP ARIANA J. TADLER 1 Pennsylvania Plaza New York, NY 10119 Telephone: 212 594-5300 Facsimile: 213 868-1229 atadler@mil erg.com WESTERMAN LAW CORP. JEFF WESTERMAN 1925 Century Park East Suite 2100 Los Angeles, CA 90067 Telephone: 310) 698-7450 Facsimile: ( 10) 201-9160 j Westerman@j swlegal.com Interim Lead Class Counsel Counsel for Plaintiffs Beverly King and Nancy Glennon KLEIN KAVANAGH COSTELLO, LLP GARY KLEIN SHENNAN KAVANAGH KEVIN COSTELLO 85 Merrimac Street, 4th Floor Boston, Massachusetts 02114 Telephone: (617) 357-5500 Facsimile: 617) 357-5030 klein@kkclp com kavanagh(a~ kkcllp.com Costello@kkcllp.com Interim Lead Class Counsel Counsel for Plaintiff Davidson Calfee -16- MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO STRIKE TESTIMONY OF ANGELA E. WATSON Case 2:11-ml-02274-DSF-PLA Document 383 Filed 07/26/13 Page 21 of 22 Page ID #:12707 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DECLARATION OF SERVICE BY ELECTRONIC MAIL I, the undersigned, declare: 1. That declarant is and was, at all times herein mentioned, employed in the County of Los Angeles, over the age of 18 years, and not a party to or interest in the within action; that declarant's business address is One California Plaza, '' 300 South Grand Avenue, Suite 3900, Los Angeles, California 90071-3149. 2. Declarant hereby certifies that on July 12, 2013, declarant served the PLAINTIFFS' MEMORANDUM OF POINTS AND AUTHORITIES IN ~ SUPPORT OF MOTION TO STRIKE TESTIMONY OF ANGELA E. WATSON ~ via electronic mail on: Elizabeth D. Mann Steven E. Rich MAYER BROWN LLP 350 South Grand Avenue 25th Floor Los Angeles, CA 90071-503 Telephone: 213) 229-9500 Facsimile: ( 13) 625-0248 Email: emann@mayerbrown.com srich@mayerbrown.com Lucia Nale Debra Bogo-Ernst Stephen J. Kane MAYER BROWN LLP 71 S. Wacker Drive Chicago, IL 60606 Telephone: 312 782-0600 Facsimile: (~312~ 701-7711 Email: hale@mayerbrown.com dernst mayerbrown.com skane mayerbrown.com I declare under penalty of perjury that the foregoing is true and correct. Executed this 12th day of July, 2013, at Los Angeles, California. DOCS\664823v1 ►1, ~ ~- - , -17- MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO STRIKE TESTIMONY OF ANGELA E. WATSON Case 2:11-ml-02274-DSF-PLA Document 383 Filed 07/26/13 Page 22 of 22 Page ID #:12708