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DOJ Moves To Stop Evidence Gathering In Texas Capital Bank Case

Attorneys for the U.S. Department of Justice (DOJ) have filed a motion in the U.S. District Court for the Northern District of Texas that aims to temporarily halt the evidence-gathering process in a lawsuit brought by Texas Capital Bank (TCB) against Ginnie Mae. This is according to court documents reviewed by RMD.

The suit, filed in October over loans TCB made to now-bankrupt lender Reverse Mortgage Funding (RMF), recently saw the presiding magistrate judge impose deadlines on all pretrial processes that extend into 2025, a point when it’s possible that new leaders — and, potentially, new priorities — will be steering the government-owned Ginnie Mae.

The government contends that TCB’s discovery targets are overly broad and also would be burdensome in terms of gathering documents and information. There is also the potential that TCB would seek to schedule formal depositions for both the Federal Housing Administration (FHA) commissioner and the president of Ginnie Mae.

Motion to stay evidence gathering

Lawyers for the government want to stay the process of discovery until after a motion to dismiss the case is considered by the judge. The attorneys say that prior legal cases have established that such questions must be considered before commencing with discovery.

“The United States previously filed a motion to dismiss all three counts in the complaint,” the motion stated. “The motion to dismiss demonstrates that two counts should be dismissed because the United States is immune from the claims asserted, and that all three counts should be dismissed for failure to state a claim as a matter of law.”

Commencing with discovery before the dismissal is considered would be needlessly burdensome, government attorneys argued.

“The Court should stay discovery pending resolution of the motion to dismiss because it is well-established that questions of immunity should be decided before proceeding with discovery, the United States has asserted meritorious grounds to dismiss all claims that moot any need for discovery, and discovery in this case would be unduly broad and burdensome,” the filing read.

Claims in the original lawsuit allege that TCB was given certain assurances about its rights to RMF collateral by high-ranking housing officials, including both the FHA commissioner and the president of Ginnie Mae. The government has provided documentation related to these claims, according to the latest filing.

“The parties have since exchanged initial disclosures,” it reads. “As required, the United States disclosed witnesses that may have information relevant to its defenses, including the high-ranking officials described in the complaint. TCB disclosed 17 witnesses, again including high-ranking officials at HUD and Ginnie Mae.”

Deposing high-ranking federal housing leaders could itself be disruptive, the government contends.

“Before proceeding further with discovery, almost certainly including requests to depose the highest-ranking officials at HUD and Ginnie Mae, the United States moves to stay discovery until its motion to dismiss is resolved. […] TCB is certain to seek to depose these officials, which courts recognize as especially intrusive discovery.”

Discovery requests deemed ‘incredibly broad’

In addition to reiterating its contention that Ginnie Mae was within its full authority to seize the RMF portfolio, government attorneys contend that TCB’s discovery requests are “incredibly broad” for three reasons.

One request “seeks all documents relating to any time Ginnie Mae has extinguished any right or interest of any issuer or third party,” while another “seeks all documents related to the collateral, which includes hundreds of loans and securities.”

Third, one of the TCB discovery requests also “seeks all documents related to HUD’s, Ginnie Mae’s, and the FHA’s (among others) obligations under [section] 255 of the National Housing Act, which covers the entire Home Equity Conversion Mortgage program.”

Government attorneys cite a 1993 court case which read in part that “high-ranking government officials have greater duties and time constraints than other witnesses,” and as a result, “should not, absent extraordinary circumstances, be called to testify regarding their reasons for taking official actions.”

The same day the government requested to stay discovery, presiding Magistrate Judge Lee Ann Reno granted TCB’s request for a 21-day extension to respond to the government’s motion that aims to dismiss the complaint. Final responses are due on Feb. 21.

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