On June 29, 2011 a
Order to Show Cause
was filed
involving a dispute between
Aegon Usa Investment Management Llc, Authorized Signatory For Transamerica Life Insurance Company, Aegon Financial Assurance Ireland Limited, Transamerica Life International,
American Fidelity Assurance Company,
Bayerische Landesbank, Prudential Investment Management, Inc.,
Blackrock Financial Management Inc,
Eric T. Schneiderman, The Attorney General Of The State Of New York,
Federal Home Loan Bank Of Atlanta,
,
Goldman Sachs Asset Management, L.P.,
Ing Bank Fsb,
Ing Capital Llc,
Ing Investment Management Llc,
In The Matter Of The Application Of The Bank Of New York Mellon,,
Invesco Advisers, Inc.,
Kore Advisors, L.P.,
Landesbank Baden-Wuerttemberg,
Lbbw Asset Management,
Maiden Lane Iii, Llc,
Maiden Lane Ii, Llc,
Maiden Lane, Llc,
Metropolitan Life Insurance Company,
Nationwide Mutual Insurance Company And Its Affiliated Companies,
Neuberger Berman Europe Limited,
New York Life Investment Management Llc,
Oriental Bank And Trust,
Pacific Investment Management Company Llc,
Teachers Insurance And Annuity Association Of America,
Thrivent Financial For Lutherans,
Trust Company Of The West And Affiliated Companies Controlled By The Tcw Group, Inc.,
Western Asset Management Company,
and
American International Group, Inc.,
Ballantyne Re Plc,
Bankers Insurance Company,
Bankers Life Insurance Company,
Bankers Specialty Insurance Company,
City Of Grand Rapids General Retirement System,
City Of Grand Rapids Police And Fire Retirement System,
Clayhill Investors, Llc,
Columbus Life Insurance Company,
Commonwealth Advisors, Inc.,
Cranberry Park Ii Llc,
Cranberry Park Llc,
Delaware Department Of Justice,
Federal Home Loan Bank Of Boston,
Federal Home Loan Bank Of Chicago,
,
Federal Home Loan Bank Of Pittsburgh,
Federal Home Loan Bank Of San Francisco,
Federal Home Loan Bank Of Seattle,
First Community Insurance Company,
For An Order, Pursuant To Cplr 7701, Seeking Judicial Instructions And Approval Of A Proposed Settlement,
Fort Washington Investment Advisors, Inc.,
Good Hill Partners Lp,
Integrity Life Insurance Company,
Knights Of Columbus,
Maine State Retirement System,
Monarch Alternative Solutions Master Fund Ltd.,
Monarch Capital Master Partners Ii-A Lp,
Monarch Capital Master Partners Ii Lp,
Monarch Capital Master Partners, Lp,
Monarch Cayman Fund Limited,
Monarch Debt Recovery Master Fund Ltd,
Monarch Opportunities Master Fund Ltd,
Monarch Structured Credit Master Fund Ltd.,
National Integrity Life Insurance Company,
Oakford Mf Limited,
Pension Trust Fund For Operating Engineers,
P Monarch Recovery Ltd,
Policemen'S Annuity & Benefit Fund Of Chicago,
Sterling Federal Bank, F.S.B.,
Stone Creek Llc,
The Western And Southern Life Insurance Company,
Tm1 Investors, Llc,
Triaxx Prime Cdo 2006-1, Ltd.,
Triaxx Prime Cdo 2006-2, Ltd.,
Triaxx Prime Cdo 2007-1, Ltd,
United States Debt Recovery Viii, L.P.,
United States Debt Recovery X, L.P.,
Vermont Pension Investment Committee,
V Re-Remic, Llc,
Walnut Place Llc, Walnut Place Ii Llc, Walnut Place Iii Llc, Walnut Place Iv Llc Walnut Place V Llc, Walnut Place Vi Llc, Walnut Place Vii Llc, Walnut Place Viii Llc, Walnut Place Ix Llc, Walnut Place X Llc, Walnut Place Xi Llc,
Washington State Plumbing & Pipefitting Pension Trust,
Western-Southern Life Assurance Company,
Westmoreland County Employee Retirement System,
for Commercial Division
in the District Court of New York County.
Preview
FILED: NEW YORK COUNTY CLERK 08/30/2013 INDEX NO. 651786/2011
NYSCEF DOC. NO. 926 RECEIVED NYSCEF: 08/30/2013
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
In the matter of the application of
Index No. 651786/2011
THE BANK OF NEW YORK MELLON (as Trustee under
various Pooling and Servicing Agreements and Indenture Trustee Assigned to: Kapnick, J.
under various Indentures),
Petitioner,
for an order, pursuant to C.P.L.R. § 7701, seeking judicial
instructions and approval of a proposed settlement.
MEMORANDUM OF LAW IN SUPPORT OF THE ORDER TO SHOW
CAUSE WHY THE COURT SHOULD NOT CONTINUE THE TRIAL FOLLOWING
THE SEPTEMBER TRIAL DATES TO ALLOW DISCOVERY CONCERNING NEWLY
DISCLOSED EVIDENCE
The undersigned respectfully move under CPLR § 4402 for a continuance following the
September trial dates the Court has already set to allow discovery concerning newly disclosed
evidence.
INTRODUCTION
It is well-established that a court can continue a trial if, during the trial, one party waives a
privilege it relied upon in discovery to allow the other party the opportunity to obtain discovery
into the matter. Bank of New York Mellon (BNYM) drew a bright line during discovery that its
witnesses would not be permitted to disclose any investigation or evaluation of claims conducted
by their in-house or outside counsel. The Steering Committee made repeated efforts to obtain
this discovery in order to test the findings sought by BNYM in the proposed final order and
judgment (PFOJ). These efforts included inquiry into the bases for the proposed findings that the
“Settlement Agreement is the result of factual and legal investigation by the Trustee” and that
the “Trustee appropriately evaluated the terms, benefits and consequences of the Settlement and
the strengths and weaknesses of the claims being settled.” Doc. No. 7 ¶¶ h, i. BNYM repeatedly
refused to produce documents or allow testimony concerning this information. The Court
accepted BNYM’s position because, as the Court recognized, BNYM bore the risk that without
the requested evidence the record might lack sufficient facts to support the requested findings.
BNYM now seeks to have it both ways. BNYM has selectively leaked information
concerning its factual and legal investigation and evaluation of claims during trial that it has
previously refused to provide in discovery. Such selective disclosure constitutes a waiver of the
attorney-client privilege. By waiving its privilege during trial, BNYM has subjected the
1
Respondents to trial by ambush: Respondents are hearing testimony for the first time live on the
witness stand, despite having tried to obtain this information during discovery.
In light of BNYM’s clear waiver, the trial should be continued for a brief period to enable
the Respondents to conduct targeted discovery into the full extent of BNYM’s factual and legal
investigations and evaluation of claims sought to be resolved by the settlement. While BNYM
will undoubtedly (again) accuse the undersigned of seeking to delay these proceedings, the
undersigned do not seek a continuance until after the dates the Court has currently set for trial in
September. The requested discovery could even begin during the September trial dates and need
not slow down the proceedings in any significant way. Further, this motion is necessitated
entirely by BNYM’s own conduct. Had BNYM disclosed during discovery the information it has
now volunteered live on the witness stand at trial, no such request would be needed.
Alternatively, had BNYM drawn the same line with respect to its privilege during trial as it did
during discovery, there would be no basis for this motion. Instead, BNYM seeks strategic
advantage by disclosing information for the first time at trial,thereby precluding Respondents
from having the opportunity to prepare to address the new evidence. In light of this prejudicial
conduct, the undersigned Respondents respectfully request a brief continuance of the trial
following the September trial dates to conduct additional discovery related to BNYM’s
investigation.
FACTUAL BACKGROUND
A brief chronology of the Steering Committee’s repeated attempts to obtain evidence
relating to BNYM’s investigation and evaluation of claims information that has now been
partially disclosed at trial illustrates that BNYM is subjecting the Respondents to trial by ambush.
2
Mr. Kravitt’s deposition was taken on September 19 and 20, 2012. Ms. Lundberg’s
deposition was taken on October 2 and 3, 2012. Throughout both depositions, Mr. Kravitt and
Ms. Lundberg were repeatedly instructed not to disclose the investigation performed by Mayer
Brown or BNYM’s in-house counsel. See Appendix to this motion; Exs. 2, 4.
On October 9, 2012, the Steering Committee sent the Court a letter informing it of the
Trustee’s position and stating that BNYM was using the privilege as a sword and a shield by
putting “its investigation, deliberation, and conduct at issue” while “withholding the discovery
necessary to evaluate the findings sought in the PFOJ.” Doc. No. 368 at 9.
At a hearing on October 12, 2012, the Court commented on this problem, directing its
comments to counsel for the Trustee:
I also see that you want me to sign a very, very comprehensive order
approving, rubber stamping after the fact your negotiations[,] your investigations,
everything you did as being okay, good, excellent, you get an A plus.
I have to see things. So to the extent that you objected to every single
question through this deposition, many, many, many of the questions. I mean,
everything you guys read to me had objections that were longer than the answers.
It is going to be a long process. It is going to be problematic.
I think you might have to rethink just a little bit what you might think
might be more reasonable to let him answer, and you have to think about how you
may want to conduct it so that you get the most out of the depositions.
Ex. 5 (10/12/12 Hearing Tr.) at 123:20-124:8.
Despite the Court’s statements, BNYM took the same positions with respect to privilege
at Mr. Bailey’s deposition on December 3, 2012. See Appendix; Ex. 3.
On January 14, 2013, the Steering Committee filed a narrowly-tailored order to show
cause seeking documents because, in part, the “Trustee’s request for approval of its ‘legal
investigation’ and its ‘deliberations’ has placed much of its communications with counsel and
documents generated by counsel at issue.” Doc. No. 430 at 10.
3
At the April 12, 2013 hearing, after hearing argument on this order to show cause, the
Court stated “If they [BNYM] don’t prove it to me they are not getting that finding. That’s the
risk they are going to bear. I don’t know if it’s going to fall apart if half of those findings aren’t able
to be made or not.” Ex. 6 (4/12/13 Hearing Tr.) at 114:2-5 (emphasis added). In response,
Trustee’s counsel stated “The risk is [ours], there is a proposed final order of judgment, your
Honor is going to hear the evidence, it’s going to involve nonprivileged information. You are going to
go through the proposed final order of judgment and decide which of those findings your Honor
is going to accept.” Id. at 114:6-11 (emphasis added).
Apparently to avoid the risk that its discovery tactics could limit its ability to obtain the
findings contained in the PFOJ, BNYM has presented new evidence of its investigation and
evaluation of claims at trial that it previously blocked during discovery. The Respondents are
thus subject to trial by ambush, having heard answers for the first time at trial regarding subjects
on which they sought full discovery.
ARGUMENT
“The CPLR directs that there shall be ‘full disclosure of all evidence material and
necessary in the prosecution or defense of an action.’ . . . This statute embodies the policy
determination that liberal discovery encourages fair and effective resolution of disputes on the
merits, minimizing the possibility for ambush and unfair surprise.” Spectrum Systems Int’l Corp.
v. Chemical Bank, 78 N.Y.2d 371, 376 (1991) (quoting CPLR § 3101(a)).
“At any time during the trial, the court, on motion of any party, may order a continuance
or a new trial in the interest of justice on such terms as may be just.” CPLR § 4402. “Liberality
should be exercised in granting postponements or continuances of trials to obtain material
4
evidence and to prevent miscarriages of justice.” DiMauro v. Met. Suburban Bus Auth., 105
A.D.2d 236, 241 (2d Dep’t 1984) (quotations omitted). “It is an abuse of discretion to deny a
continuance where the application complies with every requirement of the law and is not made
merely for delay, where the evidence is material and where the need for a continuance does not
result from the failure to exercise due diligence.” Id. (quotations omitted).
I. BNYM has waived any privilege covering its legal and factual investigation by
selectively disclosing parts of that investigation at trial
A party waives its privilege when it selectively discloses counsel’s advice. See Orco Bank
v. Proteinas Del Pacifico, 179 A.D.2d 390, 390 (1st Dep’t 1992) (trial court “properly found
plaintiff had waived the attorney-client privilege by placing the subject matter of counsel’s advice
in issue and by making selective disclosure of such advice”); Jakobleff v. Cerrato, Sweeney &
Cohn, 97 A.D.2d 834, 835 (2d Dep’t 1983) (“A client who voluntarily testifies to a privileged
matter, who publicly discloses such matter, or who permits his attorney to testify regarding the
matter is deemed to have impliedly waived the attorney-client privilege.”) (internal quotations
omitted). “[S]elective disclosure is not permitted as a party may not rely on the protection of the
privilege regarding damaging communications while disclosing other self-serving
communications.” Village Bd. of Pleasantville v. Rattner, 130 A.D.2d 654, 655 (2d Dep’t 1987).
This rule “reflects the principle that the privilege is a shield and must not be used as a sword.”
American Re-Insurance Co. v. U.S. Fidelity & Guaranty Co., 40 A.D.3d 486,493 (1st Dep’t 2007).
Here, BNYM has selectively disclosed information about its attorneys’ investigation and
evaluation of the claims after blocking discovery into these matters. A full list of the questions
and answers that were blocked during discovery and improperly volunteered at trial is attached as
5
an appendix to this motion. To provide a few examples here, BNYM answered questions at trial
on the following topics, despite refusing to answer questions on those topics during discovery:
Whether Mayer Brown did its own analysis of the matters for which it hired
advisors. During his deposition, Mr. Kravitt refused to answer the question,
, Ex. 2 (Kravitt Dep.) at 177:7-14, but at trial, Mr. Kravitt testified that “the Trustee,
through its counsel, performed its own legal analysis” before hiring the experts. Ex. 1 (7/12/13
Trial Tr.) at 1860:16-1861:5.
Why the Trustee did not value Bank of America’s liability for servicing. Ms.
Lundberg was not permitted to answer why BNYM did not “evaluate the exposure of Bank of
America for its own independent servicing conduct.” Ex. 4 (Lundberg Dep.) at 332:21-333:10.
However, on both his direct and redicrect examinations, Mr. Kravitt provided lengthy
explanations as to why the Trustee chose not to “seek[] monetary damages for alleged past
servicing breaches.” Ex. 1 (7/15/13 Trial Tr.) at 2132:24:2134:24; Ex. 1 (7/8/13 Trial Tr.) at
1450:7-1451:22.
Why the Trustee did not review loan files. Ms. Lundberg was not permitted to answer
Ex. 4 (Lundberg Dep.) at 151:15-152:7, although the
Trustee’s counsel elicited this testimony from Mr. Kravitt during his direct examination. Ex. 1
(7/8/13 Trial Tr.) at 1346:20-1347:6.
The Trustee’s understanding of the Notice of Non-Performance. Mr. Bailey was not
allowed to answer the question
Ex. 3 (Bailey Dep.) at 46:25-48:2. Once again, at trial, the
6
Trustee’s own counsel elicited this exact testimony from both Mr. Kravitt and Mr. Bailey. Ex. 1
(7/8/13 Trial Tr.) at 1321:8-18 (“And in this letter there is reference to a ‘Notice of Event of
Default,’ and in the context of this letter, what did you understand that to mean?”); Ex. 1
(7/18/13 Trial Tr.) at 2487:14-2488:8 (“What’s your understanding of whether the Trustee
agreed with any of the allegations from the letters that Mr. Reilly highlighted for you during his
examination?”).
Other subjects of Mayer Brown’s legal investigation. Ms. Lundberg refused to answer
the question “What legal investigation did Mayer Brown engage in?” Ex. 4 (Lundberg Dep.) at
243:4-244:2. At trial, Messrs. Kravitt and Bailey repeatedly discussed Mayer Brown’s legal
investigation. For example, Mr. Kravitt volunteered that “we did our own study” that compared
the representations and warranties Countrywide made when it sold loans to the GSEs with the
representations and warranties Countrywide made when it sold loans to the Covered Trusts. Ex.
1 (7/15/13 Trial Tr.) at 2014:14-26. This information was not disclosed during discovery.
Mayer Brown and the Trustee’s interpretation of the PSAs. BNYM repeatedly
prevented Mr. Kravitt from testifying during his deposition as to what he understood the PSAs to
mean. Ex. 2 (Kravitt Dep.) at 53:15-25 (BNYM counsel stated “Dan, I assume you’re not asking
this witness to give his opinion on his interpretation of the PSA, correct?” and then issued an
instruction to the witness not to give his interpretation of the PSAs). At trial, however, he often
gave his—and by extension, the Trustee’s—interpretation of various provisions of the PSAs. E.g.
Ex. 1 (7/8/13 Trial Tr.) at 1327:2-1328:5 (“in this case the Pooling and Servicing Agreements and
the applicable indentures provide that . . . .”). The Trustee’s evaluation of the claims at issue in
this settlement is of course intertwined with its interpretation of the governing agreements, so all
7
of Mr. Kravitt’s interpretation of the PSAs during trial was newly disclosed evidence that was
blocked during discovery.
BNYM has thus selectively disclosed information during trial that it blocked during
discovery, giving Respondents and the Court no meaningful opportunity to determine the full
nature and extent of BNYM’s factual and legal investigation and analysis of the claims sought to
be released by the settlement. See Village Bd. of Pleasantville, 130 A.D.2d at 655. This selective
disclosure waives any privilege with respect to the entire topics. See Orco Bank, 179 A.D.2d at
390.
II. The Court should continue the trial following the September trial dates to permit
discovery of BNYM’s factual and legal investigation
In light of BNYM’s improper use of the privilege, the Court should continue the trial
after the dates the Court has already set in September and permit further discovery. A brief
continuance to permit the undersigned to conduct discovery is “in the interest of justice.” CPLR
§ 4402. The Court should grant a continuance “where the application complies with every
requirement of the law and is not made merely for delay, where the evidence is material and
where the need for a continuance does not result from the failure to exercise due diligence.”
DiMauro, 105 A.D.2d at 241. The Steering Committee’s repeated attempts to obtain the very
information that BNYM has now chosen to leak out during trial demonstrates both that this
motion is not made merely for delay and that the undersigned have exercised due diligence in
their request for this information. In addition, because the undersigned are not seeking the
continuance until after the dates currently set for trial, the discovery could begin during trial to
reduce any delay. The request for discovery is also narrowly focused on the precise relief that
8
BNYM itself has requested in the PFOJ, and so is plainly material. Therefore, the Court should
order a brief continuance to permit the requested discovery.
The fact that the trial has already begun does not change this analysis. It is well
established that a court can continue the trial if during trial a party waives a privilege it relied on
during discovery. See La Plante v. Garrett, 282 A.D. 1096, 1097 (3d Dep’t 1953) (“The court
upon the trial will be free to decide whether the proof offered by plaintiff constitutes a waiver [of
privilege] and will allow appropriate time and opportunity to defendant in the event a waiver
results to subpoena, examine and test the correctness of such . . . records as may then become
material to the issue tendered.”); Rubin v. Equitable Life Assur. Soc’y of U.S., 269 A.D. 677, 677
(2d Dep’t 1945) (“If disclosure is made at the trial by plaintiff . . . defendant may apply, in the
light of such waiver, for suspension for a reasonable length of time . . . .”); Lorde v. Guardian Life
Ins. Co. of Am., 252 A.D. 646, 648-49 (1st Dep’t 1937) (“If plaintiff upon the trial should waive
the privilege she had theretofore consistently asserted . . . [the waiver and defendant’s inability to
obtain other evidence] might, in certain circumstances, furnish sufficient grounds to warrant a
reasonable adjournment or perhaps a mistrial on the ground of surprise.”); Jaffe v. City of N.Y.,
196 Misc. 710, 711-12 (Kings Cnty. 1949) (“If the privilege be waived at the trial . . . defendant
may apply in the light of such waiver for a suspension for a reasonable length of time”); see also
Granite Partners, LP v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 2002 WL 737482, at *3
(S.D.N.Y. 2002) (permitting discovery, in the two weeks before trial, to explore defendants’
advice of counsel defense after defendants had previously “made strenuous objections to any
such questioning”).
9
Although courts may strike improperly disclosed trial testimony, granting a continuance
to conduct further discovery is more fair to all parties because it allows the matter to be decided
on a full record with all parties having an opportunity to develop the record. “[T]he interests of
justice will probably best be served by allowing the proponent to introduce the privileged
information but only after granting the opponent an opportunity to conduct the necessary
investigation to gather rebuttal evidence.” See Edward Imwinkelried, The New Wigmore: A
Treatise on Evidence § 6.12.18 (2013); see also Developments in the Law—Discovery, 74 Harv. L.
Rev. 940, 1009 (Mar. 1961) (“But if the holder of the privilege asserts it during discovery and
then waives it at trial, making his earlier claim of privilege binding seems an inappropriate
sanction if the waiver was not anticipated. Instead, his opponent should be granted a continuance
and given the opportunity to discover the material previously protected by privilege.”).
Accordingly, the undersigned respectfully request that the Court continue the Article 77
proceeding following the trial dates the Court has already cleared in September to permit
discovery into the previously shielded topics. Such discovery should begin with a production of
all documents reflecting, discussing, or otherwise evidencing BNYM’s factual and legal
investigation and evaluation of the claims sought to be released by the settlement. The
undersigned should then be permitted to notice and take the necessary depositions based on that
production. The undersigned also request leave to recall any witnesses to provide additional
testimony based on the newly disclosed evidence.
10
III. BNYM’s arguments merely distract from its own conduct
BNYM has filed a brief arguing that the Respondents have waived any objection to the
trial testimony when they did not immediately object after BNYM disclosed matters it previously
deemed privileged. Doc. No. 908. BNYM misses the point.
The cases cited by BNYM are inapposite for several reasons. First, they all concern a
motion to strike, rather than a motion for a continuance. Further, with one exception, the cases
cited by BNYM concern run-of-the-mill evidentiary objections, not privilege objections. BNYM
does not cite a single case in which the party questioning the witness was required to make
privilege objections on behalf of the witness. On the contrary, the holder of the privilege and his
attorney are obligated to protect his privilege. His opponent is under no such obligation. See Scott
v. Beth Israel Med. Ctr. Inc., 17 Misc. 3d 934, 938 (N.Y. Cnty. 2007) (“As with any other
confidential communication, the holder of the privilege and his or her attorney must protect the
privileged communication; otherwise, it will be waived.”); CPLR § 3101(b) (“Upon objection by
a person entitled to assert the privilege, privileged matter shall not be obtainable.”) (emphasis
added). BNYM points to no authority requiring Respondents to be armed and ready to anticipate
and identify any improper testimony based on BNYM’s privilege abuse. BNYM’s baseless
position would penalize the Respondents for BNYM’s strategic about-face. This is especially
unfair when the Respondents have argued throughout discovery that they should be entitled to
the discovery which has been presented for the first time on the witness stand.
The only case cited by BNYM that actually concerns a privilege claim has no bearing on
BNYM’s conduct here. In Parkhurst v. Berdell, the defendant permitted plaintiff to examine
defendant’s wife, cross-examined her, and then moved to strike the testimony as covered by the
11
spousal privilege. 110 N.Y. 386, 393 (1888). The court held that the defendant, as the holder of
the privilege, “could not lie by, tacitly consent to the examination, and take his chances as to the
evidence, and, when itproved unsatisfactory to him, complain of its admissibility.” Id. Here,
BNYM, not the Respondents, held the privilege. This case cited by BNYM fails to address this
situation, where the holder of the privilege has prevented access to this information throughout
discovery despite diligent efforts by the non-holder to obtain such evidence, and then permits the
testimony for the first time during trial.
BNYM also argued that the undersigned cannot complain about Mr. Kravitt’s and Mr.
Bailey’s testimony because it was provided in response to questions asked by Respondents’
counsel. However, as the Appendix shows, both Mr. Kravitt and Mr. Bailey gave numerous
answers in response to questions on direct and redirect examination that also waived the privilege
that attached to BNYM’s communications with counsel. E.g. Ex. 1 (7/18/13 Trial Tr.) at
2487:14-2488:8 (“Q: What is your understanding of whether the Trustee agreed with any of the
allegations from the letters that Mr. Reilly highlighted for you during his examination?”).
Further, Mr. Kravitt and Mr. Bailey frequently volunteered information about Mayer Brown’s
investigation that was not directly requested by the cross-examiner. E.g. Ex. 1 (7/15/13 Trial Tr.
at 2014:14-19) (“Q: And, sir, is this the chart that you had mentioned earlier that compared the
representations and warranties in the GSE contracts versus the governing agreements for the
private label securitization trusts? A: This is the chart that BofA presented, but we did our own
study.” (emphasis added)).
In short, BNYM’s arguments merely distract from a simple fact: BNYM has waived its
privilege by allowing its witnesses to testify at trial to matters about which it prevented
12
Respondents from obtaining discovery. This is unfair to Respondents and prevents the Court
from obtaining a full record on which to base its ultimate decision in this matter. Accordingly, a
continuance should remedy the prejudice suffered by Respondents and increase the chances the
Court has all relevant information in front of it when it makes its decision, rather than having just
the information that BNYM selectively chooses to disclose. The undersigned therefore request a
brief continuance following the September trial dates to complete discovery into the topics that
were first disclosed during trial.
CONCLUSION
For the reasons above, the undersigned respectfully request a continuance following the
September trial dates to obtain documents and take depositions regarding BNYM’s factual and
legal investigation and evaluation of the claims sought to be settled.
13
DATED: August 30, 2013
REILLY POZNER LLP MILLER & WRUBEL P.C.
By: __s/ Michael A. Rollin_________ By: __s/ John G. Moon__________
Daniel Reilly John G. Moon
Michael Rollin 570 Lexington Avenue
1900 Sixteenth St., Ste. 1700 New York, New York 10022
Denver, Colorado 80202 Telephone: (212) 336-3500
Telephone: (303) 893-6100 Fax: (212) 336-3555
Fax: (303) 893-1500 jmoon@mw-law.com
dreilly@rplaw.com chuene@mw-law.com
mrollin@rplaw.com
Attorneys for the Triaxx Entities
Attorneys for AIG Entities
KELLER ROHRBACK LLP
By: __s/ Derek W. Loeser________
Derek W. Loeser
David J. Ko
1201 Third Avenue, Suite 3200
Seattle, Washington 98101
Telephone: (206) 623-1900
Fax: (206) 623-3384
dloeser@kellerrohrback.com
dko@kellerrohrback.com
Gary A. Gotto
3101 North Central Avenue
Phoenix, Arizona 85012
Telephone: (602) 248-0088
Fax: (602) 248-2822
ggotto@krplc.com
Attorneys for Federal Home Loan Banks of
Boston, Chicago, and Indianapolis
14
Appendix
BNYM’s evaluation of potential claims against Bank of America 1
BNYM’s investigation of loan files 6
BNYM’s evaluation of the Notice of Non-Performance 8
Other aspects of BNYM’s legal investigation 10
BNYM’s belief as to its duties 13
BNYM’s view of whether an instruction had been given 18
BNYM’s understanding of the settlement agreement 20
BNYM’s interpretation of the PSAs 23
BNYM’s evaluation of potential claims against Bank of America
Deposition Blocks (Exs. 2-4) Trial Testimony (Ex. 1)
Lundberg Dep. (Ex. 4) at 332:21-333:10 7/15/13 Trial Tr. (Kravitt redirect examination) at 2132:24-2134:24
21 "QUESTION: In the process that the 24 Q Could you tell us why did the Trustee choose, as you
22 trustee engaged in, did the trustee 25 described it, a forward-looking remedy, rather than a remedy
23 evaluate the exposure of Bank of America 26 seeking monetary damages for alleged past servicing breaches?
24 for its own independent servicing 2 A Notwithstanding the cross-examination that we have had
25 conduct?" 3 today --
2 A. No. 4 MR. REILLY: Can we -- I think it's an
3 Q. And why not? 5 inappropriate comment. Move to strike.
4 MR. INGBER: You can answer -- well, 6 THE COURT: Let it go. Let it go.
5 I'll instruct Ms. Lundberg not to disclose 7 A I believe and still believe, that any damages -- we
6 any communications with counsel on the 8 believe that actually look at the servicing standard, look at
7 grounds that it's covered by the 9 the level of liability that the Master Servicer had, look at the
8 attorney-client and/or work product 10 damages that could be proved, that we were much better off
9 privileges. 11 focusing on the future remedies that we were going to get
10 A. I can't answer. 12 because they would be worth a lot more than any damages we could
13 get for the alleged past violations of servicing.
14 We didn't feel that -- first of all, we did the
15 investigation of what documents were missing and we analyzed how
16 serious it was, how serious were the missing documents or not.
17 We decided that documents that made the most difference were the
18 mortgaging, excuse me, were the mortgage, something wrong with
19 the mortgage file and/or the title insurance policy.
20 When we looked at the lost documents or missing
21 documents, excuse me, we didn't feel that missing notes would
22 have made that big a difference. There weren't that many to
23 begin with, and they could be cured through lost note
1
24 affidavits.
25 So we, first of all, with regard to the document cures,
26 we focused on what would actually make a difference.
2 Secondly, with regard to the servicing standard, as I
3 have stated before, we actually got, to my mind, the best
4 servicing relief we could possibly get.
5 If you didn't even have to negotiate with, but just was
6 able to pick your most effective servicing relief, the problem
7 we had with trying to decide whether or not to replace the
8 Master Servicer was balancing the job demands the Master
9 Servicer was probably doing, versus the tremendous dislocation
10 that would occur if you tried the replace a Master Servicer
11 pursuant to a fight.
12 What we were able to do was replace the Master
13 Servicer, about whom everybody was concerned not being
14 sufficiently effective, with what we consider to be some of the
15 best specialist servicers in the United States, who could deal
16 with high risk loans and produce cash flow that would be
17 superior to the average in the United States.
18 We negotiated the time period so that these could be
19 phased in without dislocation, and for the loans that didn't go
20 to the specialty servicers, we forced the, we negotiated to pay
21 a cash, the equivalent of a cash penalty by having a credit
22 against servicing compensation, otherwise owed them, to the
23 extent that they didn't meet what we took as a proxy to the
24 industry standards.
7/8/13 Trial Tr. (Kravitt direct examination) at 1450:7-1451:22
7 Q What do you recall about those discussions?
8 A Well, if -- there's several ways to go about
9 looking at servicing remedies. One thing you could try to
10 do is get compensation for what you believe was breached in
2
11 the past. Okay? A different way to focus on them would be
12 to focus on what will occur in the future.
13 Now, the way Pooling and Servicing Agreements
14 were written, the ones in this case and the way they are
15 generally written, but the way they were written in this
16 case is that the servicing standard was a very vague,
17 general standard which was for the most part that the Master
18 Servicer will service the portfolio in accordance with
19 prudent servicing standards, in effect where the property
20 was located.
21 So that is a very amorphous standard. It's
22 very difficult to prove when or how much that's violated.
23 For example, if you could compare servicing between two
24 servicers, it's very difficult to because everybody has a
25 different portfolio. But if you could, if one servicer were
26 10 percent less effective than another is that a breach of
2 employing prudent servicing standards?
3 You could argue about what their protocols
4 were, what their processes were, how fast they did things et
5 cetera, but that would only try to get you a measurement, it