Patton Boggs Reinsurance Newsletter - June 2013: California Federal Court Grants Motion to Compel Production of Reinsurance Documents and Strikes Eight of Reinsurer’s Affirmative Defenses


Munoz v. PHH Corp., No. 1:08-cv-0759-AWI-BAM, 2013 WL 684388 (E.D. Cal. Feb. 22, 2013) and Munoz v. PHH Corp., No. 1:08-cv-0759-AWI-BAM, 2013 WL 1278509 (E.D. Cal. Mar. 26, 2013).

In two separate rulings, a California federal court has granted plaintiffs’ motion for production of reinsurance documents in a putative RESPA class action and struck eight of the reinsurer’s affirmative defenses.  Plaintiffs allege that a mortgage lender received illegal referral fees from mortgage insurance companies who agreed to reinsure with the lender’s captive reinsurance company.  Ceded premiums allegedly funded reinsurance trusts, rather than funds from reinsurer, and, therefore, reinsurer allegedly assumed no real or commensurate risk.

The court’s order compelling production of reinsurance documents required reinsurer to produce documents given to the federal Consumer Financial Protection Bureau (“CFPB”) pursuant to a Civil Investigatory Demand into the mortgage lender’s captive reinsurance agreements.  The lender and reinsurer resisted plaintiffs’ request for the CFPB documents on grounds that they were not relevant to plaintiffs’ claims and that the request was unduly burdensome.  In response, plaintiffs narrowed the scope of their document request, but lender and reinsurer maintained that the narrowed request still reached non-relevant material and was unduly burdensome.  The court disagreed and ordered that the reinsurance documents requested under plaintiffs’ narrowed request be produced.

The court’s order striking eight affirmative defenses from mortgage lender’s and reinsurer’s answer to plaintiffs’ complaint rests on the law of the case doctrine.  The court previously denied defendants’ motion to dismiss and in so doing explicitly and implicitly ruled on some of the arguments raised by the affirmative defenses and therefore ordered that those affirmative defenses be struck from the record.