| Followers | 18 |
| Posts | 2204 |
| Boards Moderated | 0 |
| Alias Born | 03/05/2014 |
Monday, May 01, 2017 2:19:12 PM
yet ANOTHER Greenpoint filing today -- TRANSCRIPT http://iapps.courts.state.ny.us/iscroll/SQLData.jsp?IndexNo=600352-2009 …
05/01/2017 11:51 AM
=======
Yes, that's correct, Mister Greeeeeenpoint
"And again, Syncora stands to make hundreds of
millions of dollars in windfall profits as a result of
this litigation."
=======
1
1 SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK - CIVIL TERM - PART: 60
2 X
IN RE : PART 60 RMBS PUT-BACK LITIGATION,
3
U.S. BANK NATIONAL ASSOCIATION, as Indenture
4 Trustee for the Benefit of the Insurers and
Noteholders of GreenPoint Mortgage Funding
Trust 2006-HEl, Home Equity Loan Asset-Backed
Notes
5
Series 2006-HEl,
6 Plaintiff,
7 - against
8 GREENPOINT MORTGAGE FUNDING, INC.,
Defendant.
9 X
Ind. No.: 600352-09 60 Centre Street
10 New York, New York
11 April 27, 2017
Before:
12 HON. MARCY S. FRIEDMAN,
Justice
13
APPEARANCES:
14
QUINN EMANUEL
51 Madison Avenue
New York, New York 10010
BY: YELENA KONANOVA, ESQ.
and
ANDREW DUNLAP, ESQ.
and
SEAN BALDWIN, ESQ.
Attorneys for the Plaintiff
15 22nd Floor
16
17
18
19
MURPHY & MCGONIGLE
4870 Sadler Road -
Glen Allen, Virginia 23060
BY: CAMERON S. MATHESON, ESQ.
Attorney for the Defendant
20 Suite 301
21
22
23
24
25
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
1 of 43
2
1
APPEARANCES (Cont'd):
2
ALLEGAERT BERGER & VOGEL LLP
111 Broadway - 20th Floor
New York, New York 10006
BY: MICHAEL S. VOGEL, ESQ.
and
LAUREN PINCUS, ESQ.
and
JOHN S. CRAIG, ESQ.
Attorneys for Syncora Guaranty
3
4
5
6
/ Inc .
7
8
Michael Barfield
9 Official Court Reporter
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
2 of 43
Proceedings
3
1 THE COURT: Good morning.
2 May I have counsels appearance, please.
3 MR. MATHESON: Cameron Matheson from Murphy &
4 McGonigle on behalf of the defendant GreenPoint
5 Mortgage Funding, Inc. I
6 MR. VOGEL: Your Honor, Michael Vogel of
7 Allegaert Berger & Vogel. My firm is also co-counsel
8 to plaintiff U.S. Bank in this action. For today I
9 will be appearing on behalf of a non-party, Syncora
10 Guaranty, Inc.
11 For the second motion it will be counsel
12 will announce herself from Quinn Emanuel representing
13 U.S. Bank.
14 MS. PINCUS: Good morning.
15 Lauren Pincus from Allegaert Berger & Vogel
16 on behalf of non-party Syncora Guaranty, Inc.
17 MR. CRAIG: John Craig, Allegaert Berger &
18 Vogel, for Syncora.
19 THE COURT: Thank you.
20 So you would like to have the Syncora motion
21 heard first.
22 How much time would you like?
23 MR. MATHESON: Ten minutes.
24 MR. VOGEL: Agreed.
25 THE COURT: Please.
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
3 of 43
Proceedings
4
1 MR. MATHESON: Good morning, your Honor.
2 GreenPoint is seeking a motion to compel
3 Syncora to produce documents regarding its damages.
4 These are documents it has previously produced in a
5 different action, an adversary proceeding in Lehman's
6 bankruptcy.
7 GreenPoint sold about 30,000 loans to Lehman
8 Brothers Bank. Those loans were put into a secure
9 securitization. U.S. Bank is the trustee of the
10 securitization and it was insured by Syncora and CIFG.
11 Syncora and CIFG, it was fully insured. There were two
12 traunches; one insured by Syncora, one insured by CIFG.
13 There were uninsured traunches and Syncora and CIFG
14 have been paying.
15 So in this case the investors aren't out any
16 money. The losses have been to the two insurers.
17 The complaint was filed back in 2009. The
18 plaintiffs were U.S. Bank, Syncora and CIFG. All three
19 of them were suing under the same contract same
20 operative facts seeking the same damages.
21 On the motion to dismiss Syncora and CIFG
22 were dismissed because they were not third-party
23 beneficiaries to the contract under which they were
24 attempting to sue GreenPoint. But as a result of them
25 being dismissed out of the case it is still the same
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
4 of 43
Proceedings
5
1 contract at issue, still the same operative facts at
2 issue, still the same damages at issue, which are the
3 payments that have been made by Syncora and CIFG, which
4 are essentially the equivalent of prepurchase price.
5 because what they were in insuring was principal and
6 interest payments by the borrowers on the loans.
7 U.S. Bank remains the plaintiff, but it is
8 not suing on its own behalf. It is suing for the
9 benefit of and at the direction of Syncora. In fact
10 U.S. Bank and Syncora have the same counsel in this
11 case and Syncora is the one instructing U.S. Bank as to
12 how to conduct the litigation.
13 After the complaint was filed Syncora entered
14 into some transactions. As a result of those
15 transactions a large portion of the insurance payments
16 that Syncora makes to the trust are paid back to it.
17 What that means is that Syncora stands to make a
18 windfall of several hundred million dollars in this
19 case . We are seeking discovery regarding that.
20 We know it is true because we have already
21 received the documents. Lehman went bankrupt. U.S.
22 Bank and Syncora filed proofs of the claim against
23 Lehman. Lehman filed an adversary proceeding against
24 U.S. Bank, Syncora, and GreenPoint.
25 With respect to U.S. Bank and Syncora, Lehman
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
5 of 43
Proceedings 6
1 was arguing that they were essentially -- their proofs
2 of the claim were duplicative. They were both suing
3 for the same damages.
4 There was discovery taken in that case and
5 Syncora produced documents regarding these transactions
6 that had been entered into that resulted in it
7 receiving the insurance proceeds back to it.
8 GreenPoint as a party in the adversary
9 proceeding received those documents as well, but they
10 were produced pursuant to a confidentiality agreement
11 and so GreenPoint is not at liberty to use them in this
12 case.
13 The adversary proceeding settled. Under the
14 terms of the confidentiality order GreenPoint had to
15 destroy the documents that it had received from
16 Syncora. But we had them in the other case. We
17 reviewed them and we know what they say. We simply
18 want to have them so that they can be used in this
19 case .
20 GreenPoint made a motion to compel to Special
21 Master Katz. He denied the motion. What he ruled was
22 that there was an undue burden on Syncora. And he
23 given that, he didn't rule on whether or not the
24 documents were discoverable. However, just a few days
25 later in two other cases, FGIC versus Morgan Stanley
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
6 of 43
Proceedings 7
1 and Ambac versus Countrywide, he ruled that,
2 essentially, identical types of documents were
3 discoverable in those cases.
4 So the only issue as we see it, the only
5 issue is the burden issue.
6 Syncora had already produced the documents.
7 What they are now arguing, though is that when they
8 produced them they didn't have the opportunity to
9 review them for relevance and privilege before
10 producing them because they were on an expedited
11 schedule in the bankruptcy proceeding.
12 We were surprised, frankly, to read that
13 argument in their papers because, again, we did receive
14 those documents and reviewed them and they were
15 massively redacted for privilege and relevance. So it
16 seems that they must have reviewed them in order to be
17 able to redact them.
18 That being said. our goal here is not to
19 place a burden on Syncora. That is why we had asked
20 that they merely deem produced what they had previously
21 produced so there would be no burden.
22 So to the extent that there was some review
23 they would need to do, we don't want to place we
24 don't want documents that aren't relevant, we don't
25 want documents that are privileged. As I have said, we
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
7 of 43
Proceedings
8
1 have already reviewed the production that they did. We
had to destroy 2 it. But what we do have is a list, by
3 Bates number, of the documents that are relevant to the
4 issue we are interested in. There are 223 documents we
5 care about. I have a list by Bates number of those
6 documents. That's really all we need.
7 So I don't think it would be an undue burden
8 for them to produce those 223 documents to us. We are
9 happy to provide that list to your Honor and to them.
10 We don't see that there is undue burden.
11 Frankly, we think they have already reviewed these
12 documents because of the significant numbers of
13 redactions. In fact, there were a large numbers of
14 pages that were just blank. All it said on the page
15 was II redacted for relevance".
16 We were unable to provide you with examples
17 in our moving papers because we were - we had
18 previously been required to destroy those documents so
19 we no longer have them.
20 But again, we are looking for 223 documents.
21 These are categories of documents that Special Master
22 Katz has ruled in two other decisions are discoverable.
23 They have an argument as to whether or not
24 these should be admissible in the case. I think that's
25 a different question.
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
8 of 43
Proceedings
9
1 They cite to Ambac versus Countrywide. That
2 was being decided on summary judgment. It was not a
3 discovery issue. And the Court ruled that actually
4 defendant couldn't get summary judgment in that case
5 because it didn't have sufficient evidence of the
6 transactions the types of transactions we are
7 discussing here because they didn't get those documents
8 in discovery. We are seeking those documents in
discovery so we don't have the same fate where we try
to make a legal argument and don't have the evidentiary
9
10
11 basis to back it up.
12 Syncora makes a lot in their papers about the
13 point that they are not currently a party in the case.
14 However, they are in fact directing the activities of
15 the plaintiff. They formerly were a plaintiff. And it
16 is undisputed that they will be the primary beneficiary
17 of the recovery in this case. The overwhelming
18 majority of any recovery goes to them with some portion
19 of it going to CIFG. But they are the ones who are
driving this case, they are controlling this case, they
will recover the funds paid in this case.
20
21 We are just
22 seeking discovery related to the windfall that they are
23 seeking to recover.
24 Thank you.
25 THE COURT: Thank you.
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
9 of 43
Proceedings 10
MR. 1 VOGEL: Your Honor, this is an appeal of
2 the Special Master's entirely correct denial of
3 GreenPoint's application for burdensome discovery for
4 damages of the non-party.
5 I will address the fact that they suddenly
6 have a proffer that instead of 4 million pages of
7 documents comprising 225,000 individual documents.
8 which is the basis that this was briefed and argued
9 both to the Special Master and to your Honor, this is
10 the first I have heard of it and I don't know what
11 those 223 documents entail. But nonetheless, it
12 doesn't change the fact that these are completely
13 irrelevant documents.
14 I am going to get into that, but I want to
15 clarify what GreenPoint's counsel said.
16 They said that the Special Master didn't rule
17 on the, quote / discoverability of these documents.
18 THE COURT: Excuse me. Let's just get that
19 clarified.
20 I heard 225 documents. Is that what you are
21 seeking?
22 MR. MATHESON: 223.
23 THE COURT: Not 223,000.
24 MR. MATHESON: Correct.
25 MR. VOGEL: Well, if I may clarify?
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
10 of 43
Proceedings 11
1 Before Special Master Katz they were seeking
2 225,000 . When we addressed the burden of that they
3 said this in their papers to your Honor -- well, it is
4 only 125,000. Which we didn't really think was much
5 less of a burden. This is literally the first I have
6 heard it was 223 documents and not 125,000 or 250,000.
7 THE COURT: Could this potentially change
8 your position on the issue?
9 MR. VOGEL: It potentially changes the burden
10 argument but it doesn't change the relevance argument.
11 There is zero relevance to this. I think it
12 is important to address that. My adversary indicated
13 that they had not before the Special Master -- he
14 didn't rule on, quote, discoverability. But he did
15 address relevance. He said several important things.
16 He said at most the relevance is, quote.
17 tangential. And then in his footnote he said. Because
18 the burden so overwhelms the tangential relevance I
19 will not rule on whether there is zero relevance. n
20 He didn't reach that. But he says, I note.
21 in footnote 1, II I note GreenPoint has not cited a
22 single case supporting the relevance of this material. II
23 That's what I would like to focus on. There
24 is literally no relevance to this case.
25 They are seeking the information about the
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
11 of 43
Proceedings
12
1 losses of a non-party to this case. So in particular
2 GreenPoint is focusing discovery in what it argues are
3 GreenPoint losses.
4 Now, what Syncora has paid into the trust is
5 undisputed. It is in the trustee reports. They are
6 circulated each month. They are in Mr. Matheson's
7 affidavit submitted to the Court. There is no dispute
8 as to what the insurance payments made by Syncora are.
9 Syncora is one of the two insurers in this
10 litigation, one of multiple parties that has a
11 potential interest in a recovery. There are two
12 insurers. There are note holders. There actually are
13 contrary to what my adversary said. there is a class
14 of uninsured residual noteholders, as well. There is
15 the servicer, indentured trustee. There is an entire
16 waterfall provision that addresses who recovers under
17 the waterfall.
18 Indeed, when they moved to dismiss Syncora
19 and convinced Justice Freed that Syncora was not going
20 to be a party in this action, they said, quote. M The
21 insurers, which simply insure the parties who might be
22 affected by the accuracy of the representations and
23 warrantees benefit only indirectly from GreenPoint's
24 performance of its representation and warranty
25 obligations. II
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
12 of 43
Proceedings 13
1 So that's the role of Syncora here. There is
2 no dispute Syncora will benefit indirectly if there is
3 a recovery, will have a share of a recovery under the
4 trust waterfall documents which, again, are fully in
5 the record.
6 So the situation could not be clearer. U. S .
7 Bank as trustee is suing for the trust's damages not
8 for Syncora's
9 THE COURT: Excuse me.
10 Is the waterfall only that which is provided
11 in Article 5 of the August 1, 2006 transfer and
12 servicing agreement?
13 MR. VOGEL; Yeah. Beginning at page 69.
14 That's the waterfall. Those are the waterfall
15 provisions. That's correct.
16 So Syncora has done nothing to explain other
17 than to assert the conclusion that Syncora's damages
18 are the Trust damages. They have done nothing to
19 explain why the fact that Syncora is one party that
20 recovers under the waterfall makes Syncora's damages in
21 any way relevant to the Trust damages.
22 GreenPoint has offered nothing to meet its
23 burden. They don't cite a single case that suggests
24 that that sort of evidence might be relevant.
25 Indeed, your Honor's March 27th order
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
13 of 43
Proceedings
14
1 specifically directed the parties to submit, quote, a
2 joint list setting forth all RMBS decisions which have
3 determined issues relating to the discovery of monoline
4 insurer's damages and actions brought against trustees
5 on behalf of monoline insurers. as well as others.
6 The parties agreed already; no such cases. I
7 submit that is precisely because this discovery is so
8 palpably out of bounds. However, unlike GreenPoint we
9 do cite several case that support the conclusion that
10 the discovery is not relevant. I would like to
11 emphasize 2, your Honor.
12 One is Home Equity versus DLJ, 2014 Westlaw,
13 385 3657. That is another RMBS case. In that case
14 Justice Schweitzer denied as irrelevant discovery
15 multiple categories of documents from a non-party
16 controlling certificate holder. So it was not a
non-party insurer but it was a non-party controlling
That included discovery concerning
17
18 certificate holder.
19 the certificate holder's investment in the
20 certificates.
21 Presumably, like the discovery there, similar
22 to here, they were seeking to get at the financial
23 interest of the controlling party in the event of
24 j udgment. Justice Schweitzer held that discovery was
25 irrelevant. Defendant's request concerning the
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
14 of 43
Proceedings 15
1 directing certificate holder's investments strategies
2 has no bearing on the merits of the breach of contract
3 claim asserted against DLJ.
4 I would submit it is the same. The fact that
5 Syncora may have other investments or contractual
6 arrangements or agreements is completely tangential and
7 irrelevant to this case, which is a case between U.S.
8 Bank and GreenPoint.
9 Second case I would like to refer your Honor
10 to is Ambac versus Countrywide 2015 Westlaw, 647 1943.
11 That's another RMBS case. This is a case brought by
12 monoline insurers.
13 In that case Justice Bransten held that
14 evidence of monoline insurer's supposed mitigation of
15 its damages by buying bonds and securitizations --
16 something very similar to what they argue happened here
17 was irrelevant as a matter of law because defendant
18 was not entitled to a credit for those purchases even
19 if they reduced insurer costs. M
20 To be clear, that was not merely a holding
21 that there was a lack of evidence. which is what
22 GreenPoint has argued, but there is a three-paragraph
23 discussion of the merits of the defense that holds that
24 mitigation -- the doctrine of mitigation is unavailable
25 as a matter of law because the breach does not free up
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
15 of 43
Proceedings 16
1 any resources, in this case GreenPoint's breach. The
2 breach of representations and warrantees don't free up
3 resources because there is no duty to undertake these
4 separate transactions. So mitigation fails as a matter
5 of law. And that's in a case where the monoline
6 insurer was the plaintiff. In this case Syncora is not
7 the plaintiff. We are non-party. It is double
8 irrelevant for that reason.
9 Now, presumably because of Ambac V
10 Countrywide GreenPoint specifically disclaims reliance
11 on the doctrine of mitigation, which is what one would
12 normally think of when a defendant arguments that a
13 party has recovered its losses elsewhere. But the
14 problem for GreenPoint is they don't they deny they
15 are relying on mitigation because they don't offer
16 anything instead. All we get are conclusory
17 assertions. But I read their brief and I can't figure
18 out why Syncora's damages are possibly relevant other
19 than Syncora, just like any potential beneficiary of a
20 trust, has a share of the has a share of the
21 recovery if there is one, under contract terms that
22 are free for everyone to read.
23 An example at page 4. "The compensatory
24 damages sought in the complaint are Syncora's losses. n
25 It is an assertion without support.
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
16 of 43
Proceedings 17
1 Page 6. GreenPoint argues that it needs the
2 information it seeks II to calculate Syncora's losses
3 THE COURT: Excuse me. Can you slow down a
4 little, please?
5 Can you repeat the last sentence, please?
6 MR. VOGEL: Page 6 of their brief they argue
7 that they need the information to II calculate Syncora's
8 losses. (The losses that U.S. Bank is attempting to
9 recover in this case.) It
10 So that's the connection they draw. But
11 there is no explanation for why there is an identity
12 between those. And we know what the relationship is.
13 There is an interest under the waterfall. It is not
14 disputed. So those assertions are simply not true.
15 Plaintiff seeks plaintiff's damages and
16 GreenPoint never explains why it needs to calculate
17 Syncora's losses.
18 THE COURT: What are the damages that the
19 trustee is seeking in this case?
20 MR. VOGEL: The primary damages are
21 repurchase damages.
22 There is in fact a formula for calculating
23 the repurchase price that considers, essentially, three
24 elements, which is; 1, the principal amount of the
25 loan; 2, interest on the loan; 3, certain costs and
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
17 of 43
Proceedings 18
1 expenses.
2 That's the primary remedy.
3 We have a remedy for putting back all the
4 loans. We have a no exclusive remedy provision. So we
5 certainly want to keep our options open.
6 But that's the primary theory of this case.
7 It is a repurchase case. And that - there is nothing
8 in that formula that has anything to do with any side
9 transaction that Syncora might have undertaken or what
10 Syncora's supposed economic losses are or what they
11 might argue they are because, again, legally. Justice
12 Bransten's decision says that's not even relevant.
13 THE COURT: What does that mean that you have
14 a no exclusive remedy provision? Is there something in
15 the PSA that doesn't limit the remedy to the repurchase
16 protocol?
17 MR. VOGEL: In the flow agreement. In the
18 original flow agreements.
19 THE COURT: In the flow agreements.
20 MR. VOGEL: So I suppose common-law damages
21 could be available.
22 We are a year and-a-half out from trial, so I
23 think in the context of a discovery motion I am a
24 little reluctant to say that I can imagine or cannot
25 imagine that that would be used.
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
18 of 43
Proceedings 19
1 It is different from many security agents
2 because inclusive remedy provisions are fairly common.
3 So we view that as a significant cannot variation from
4 the norm in this case. But again, this is primarily a
5 repurchase case and that's. I think, how it is
6 principally being litigated.
7 I would like to also address this notion that
8 somehow Syncora would be getting a windfall if this
9 information is not produced.
10 Again, I think Justice Bransten's decision on
11 mitigation addresses that directly. But I would also
12 say that it is just factually not true.
13 The Trust is seeking to recover the Trust's
14 damages. How that recovery is allocated is a question
15 under the waterfall agreements, again, which they
16 already have.
17 Now, GreenPoint seems to be complaining that
18 Syncora has entered into separate transactions with
19 third parties that I suppose they think allow Syncora
20 to keep more of the money than it is entitled to, and
21 the waterfall rather than, I suppose, paying that
22 money over to the third parties with whom they have
23 agreements.
24 Respectfully, your Honor, those are
25 completely side matters between parties that are not in
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
19 of 43
Proceedings 20
1 this litigation if there are agreements as to the
2 entitlement to funds that Syncora is entitled to under
3 the waterfall. That has nothing to do with this case
4 at hand, which is between U.S. Bank and GreenPoint.
5 I just don't see how GreenPoint potentially
6 has any kind of standing to have discovery of those
7 third-party agreements, but that seems to be the nature
8 of what they are saying is a windfall. Legally, that's
9 just not a windfall.
10 Moreover, so there is no windfall. They
11 don't explain how the supposed windfall would be
12 legally relevant given their concession that mitigation
13 is an irrelevant doctrine. They simply don't explain
14 any or give you any basis for concluding there is any
15 relevance whatsoever to this information.
16 So, your Honor, I would submit that even with
17 this last minute proffer, they reduced the burden, any
18 burden exceeds the zero relevance that these documents
19 have .
20 That said. I don't know what the potential
21 burden is. And obviously if there is a new proffer we
22 have to reserve on that because that wasn't presented
23 to us beforehand.
24 But to clarify, since counsel suggested that
25 we have done a review. We don't dispute there had been
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
20 of 43
Proceedings 21
1 a review. There is a targeted computer review using
2 metadata. Certain documents were reviewed and
3 redacted. I don't know if those are included in this
4 category they are now referring or to what extent. So
5 there would still need to be some work. I can't
6 dispute the 223 documents is fewer than 125,000, but.
7 frankly, any amount of burden is going to be
8 substantial.
9 Finally, one last point on burden, your
10 Honor.
11 We pressed them in front of the Special
12 Master as to the fact that we don't think the burden is
13 going to end with this production. That they are then
14 going to use these documents to have deposition
15 discovery. They pointedly in oral argument decline to
16 say they are not going to do that.
17 So there is going to be substantial burden.
18 And if your Honor were to rule, well, 223 documents
19 aren't very much, give it to them, I don't need to
20 reach the issue of relevance? I hate to tell your
21 Honor I will be back here arguing the same thing for
22 depositions.
23 So, regretfully, I do have to press the point
24 that this information is irrelevant and really
25 encourage you to read the brief. see if you can figure
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
21 of 43
Proceedings 22
1 out why it is relevant, because I really can't.
2 Accordingly, I speak respectfully request
3 that the Special Master's decision be affirmed.
4 THE COURT: Thank you.
5 Would you like to reply?
6 MR. MATHESON: Again, they are relying on one
7 of the cases -- one of the cases they are relying on is
8 Ambac versus Countrywide which was, again, summary
9 j udgment. The question was not discoverability of the
10 documents. It was summary judgment.
11 On discoverability Special Master Katz has
12 ruled, and they don't deny, and it didn't even address
13 the fact that he has ruled in two separate cases.
14 including Ambac versus Countrywide, I am assuming it
15 must be a different Ambac versus Countrywide case, that
16 these documents are in fact discoverable.
17 The DLJ cases involving a certificate holder.
18 that is not an analogous situation to the insurer.
19 What's happened here. the transactions that
20 Syncora has entered into resulted in their saying that
21 GreenPoint knows how the waterfall works. That's
22 correct.
23 The issue isn't the waterfall. They have
24 already received hundreds of millions of dollars as a
25 result of the transactions they have entered into.
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
22 of 43
Proceedings 23
1 They have already got that money. We want the
2 documents about that. Because then when they get the
3 payments in the waterfall they are basically profiting
4 from their insurance agreement to the tune of hundreds
5 of millions of dollars. That's the evidence we are
6 looking for.
7 You say what's the damages?
8 The damages that Syncora was seeking in the
9 original complaint were identical to the damages that
10 U.S. Bank was seeking. They haven't explained what was
11 Syncora looking for that was different. They were both
12 plaintiffs. They were both suing for the same
13 contract, same facts, same damages. So Syncora is
14 seeking the same damages U.S. Bank is seeking. U.S.
15 Bank is seeking to recover for Syncora to get at that
16 money through the waterfall to reimburse it for
17 insurance payments for which it has already been
18 reimbursed. That's how this is relevant.
19 So they are saying how is there an identity
20 of damages. The original complaint establishes the
21 identity of the damages.
22 You are saying this is about repurchase
23 price. The repurchase price formula is principal
24 interest, which is precisely what Syncora was in
25 insuring; principal and interest. The two are the
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
23 of 43
Proceedings 24
1 same . And again, Syncora stands to make hundreds of
2 millions of dollars in windfall profits as a result of
3 this litigation. We are seeking discovery into that
4 fact. This is just a question of discoverability.
5 In terms of burden? Again, we are talking
6 about 223 documents. That is not an undue burden.
7 In terms of the deposition -
8 THE COURT: Excuse me.
9 Is there a reason why you didn't say in your
10 papers on this motion what these transactions were?
11 MR. MATHESON: Because of the
12 confidentiality.
13 THE COURT: That's what we thought. Okay.
14 MR. MATHESON: We didn't feel we were at
15 liberty to explain the details of the transactions.
16 And we don't have the documents anymore so we couldn't
17 put them in as exhibits.
18 THE COURT: You do not have the documents
19 because you had to destroy them.
20 MR. MATHESON: Correct. Correct.
21 Under the terms of the confidentiality order
22 in the bankruptcy proceeding we were obligated to
23 destroy the documents a certain number of days after
24 that proceeding concluded. So at the time we made the
25 motion to Special Master Katz we still were in
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
24 of 43
Proceedings 25
1 possession of the documents. Our goal was to minimize
2 the burden on Syncora. So what we had said is we don't
3 need you to do anything other than let us use the
4 documents we currently have. Once they insisted that
5 we destroy those documents, we then had to ask them to
6 give them to us.
7 Again, our thought was they could resend us
8 the disc they sent us last time and there is almost no
9 burden. They then brought up this what to us was
10 this new argument that they hadn't reviewed them. which
11 never would have occurred to us given the massive
12 amount of redactions on the documents that we had seen.
13 So again, our goal here is minimize the
14 burden.
15 Frankly, in terms of the deposition, we are
16 going to be deposing Syncora no matter what, whether
17 this issue is whether we have the documents or not.
18 Because there is other litigation from Syncora. They
19 were involved in due diligence in preparation for the
20 securitization. So there is going to be a deposition
21 of Syncora. The outcome of this motion will not change
22 that. So this is not going to add to their burden.
23 There is going to be a one-day seven-hour deposition of
24 Syncora one way or the other.
25 Thank you.
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
25 of 43
Proceedings 26
1 THE COURT: Thank you.
2 (Whereupon, there was a pause in the
3 proceedings.)
4 I am going to request that you obtain a copy
5 of the transcript e-file it, and file two hard copies I
6 with the clerk of the part.
7 If I so order the transcript I may make
8 corrections of anything I might have said that is not
9 accurately recorded. So if the transcript is needed
10 for any further purpose you should use the so-ordered
11 copy.
12 We will close the record for today's
13 proceedings. There will be a decision in the near
14 future.
15 (Whereupon, the case was laid aside to be
16 recalled.)
17 THE COURT: Back on the record.
18 Good morning.
19 May I have counsels I appearance, please.
20 MS. KONANOVA: Yelena Konanova for plaintiff
21 trustee.
22 MR. DUNLAP: Andrew Dunlap for plaintiff.
23 MR. BALDWIN: Sean Baldwin for plaintiff.
24 MR. MATHESON: Cameron Matheson for defendant
25 GreenPoint.
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
26 of 43
Proceedings 27
1 THE COURT: Is this the only appearance I
2 have for this?
3 How long would you like for oral argument.
4 MS. KONANOVA: Ten minutes, your Honor.
5 MR. MATHESON: Ten minutes.
6 MS. KONANOVA; Thank you, your Honor.
7 We seek an order compelling GreenPoint to
8 produce origination files for 272 associated loans.
9 The two questions are; are these files relevant? The
10 answer is yes. And does GreenPoint have any basis to
11 withhold them? The answer is no.
12 There is no dispute between the parties that
13 the loan files are relevant. GreenPoint agrees.
14 GreenPoint has already produced hundreds of
15 these associated loan files. These files are in fact
16 relevant because sometimes more than one loan is made
17 to the same borrower at the same time by the same
18 lender on the same property.
19 A borrower may have sought a mortgage to buy
20 her house and a line of credit from GreenPoint
21 simultaneously. In such case GreenPoint would evaluate
22 the credit characteristics of that borrower the house.
23 for both loans at the same time. When the borrower
24 brings in her paperwork GreenPoint employees may file
25 that paperwork in just one of the two loan files. When
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
27 of 43
Proceedings 28
GreenPoint 1 employees discuss the files they may do so
2 using only one of the loan numbers.
3 So the loans that are trust are all second
4 lien loans, like the lines of credit. And when we
5 re-underwrite those loans, meaning when we look at the
6 credit of the borrower, at the house at the
7 correspondence, we need to have access to both the
8 at-issue second lien loan file and this associated
9 first lien loan file. That insures a more accurate and
10 a more conservative re-underwriting. That works in
11 GreenPoint's favor.
12 GreenPoint also doesn't have a burden
13 argument about producing just 272 remaining files. The
14 only reason GreenPoint has not produced them is because
15 it objects to our supplemental disclosure of January
16 10th of this year. That is not a basis to withhold
17 those files.
18 I would like to start with the key language
19 of the second CMO, which is exhibit 2, and a bit of
20 context.
21 That CMO requires plaintiffs to It disclose the
22 contents of any proposed sample, or if a plaintiff does
23 not intend to seek to proceed via sampling to identify
24 the loans it intends to re-underwrite.
25 This deadline was set six months before the
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
28 of 43
Proceedings 29
1 end of fact discovery. We met that deadline on July
2 28, 2016.
3 We disclosed the loans that we intended to
4 re-underwrite this is at exhibit 4 - including the
5 primary loans that we would re-underwrite and the
6 back-up loans that we may re-underwrite.
7 We also put GreenPoint on notice that we may
8 supplement or modify that disclosure. We "reserved all
9 rights to further modify or alter the sample as
10 needed. n So we put GreenPoint on notice from Day 1.
11 GreenPoint did not object. It had all the
12 time in the world to say something to us about it and
13 it did not object.
14 Then in early January of this year,
15 consistent with that reservation, we disclosed a
16 modification. We added some back-up loans, we added
17 some loans that we intended to re-underwrite outside of
18 the sample. and then GreenPoint asked if there were any
19 loans that we were no longer intended to re-underwrite.
20 We told them.
21 As a result, GreenPoint now knows and has
22 known since January, the roughly 550 loans that we are
23 intending to re-underwrite and the roughly 325 back-up
24 loans, some of which we are intending to re-underwrite,
25 others that we won't.
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
29 of 43
Proceedings
30
1 That supplemental disclosure was entirely
2 proper under the governing First Department background
3 rule .
4 The First Department has said that II a court
5 cannot preclude expert evidence even on the basis of a
6 late disclosure without finding that the disclosing
7 party either acted willfully or that the receiving
8 party was prejudiced. II That is the Haynes decision
9 from last year at 145 AD3d at 606.
10 We read the CMOs entirely consistent with
11 that governing First Department case.
12 The CMO said, IINothing in this order will be
13 deemed or construed as a determination by the Court as
14 to whether or to what extent sampling is or is not
15 appropriate. II It also reserved IIall rights and
16 arguments regarding plaintiff's potential use of
17 sampling. II
18 So the plain language of the CMO makes clear
19 that this Court has not at this time reached a decision
20 on sampling. The CMO sets no substantive limit as to
21 how the parties will conduct their sampling, and it
22 cannot be read to preclude inconsistently with the
23 governing First Department law amendments of expert
24 disclosures in the absence of undue prejudice.
25 Your Honor, GreenPoint has never quantified
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
30 of 43
Proceedings
31
1 that undue prejudice. For the first time in its papers
2 to your Honor it said it would have to go back to the
3 servicers for servicing files. That is not true. We
4 have all the servicing files for loans that we are
5 going to re-underwrite from the January disclosure.
6 GreenPoint now has all the servicing files for the
7 loans that we are going to re-underwrite from the
8 January disclosure.
9 As to experts, GreenPoint says its expert
10 work has been hamstrung. Not only is this not
11 substantiated or quantified but frankly it is not
12 quite believable given that plaintiff's expert reports
13 are not due until July of this year and defendants -
14 THE GOURT: You know, I am sorry, but the
15 tone of the papers was rather nasty and this argument
16 is repeating it.
17 I mean. I don't really think that's
18 necessary.
19 MS. KONANOVA: Absolutely, your Honor. I
20 will stick with the facts.
21 The facts are the plaintiff's reports are due
22 in July and defendant's expert reports are due well
23 into 2018 in February. So that supplemental
24 disclosure, the January disclosure was served 13 months
25 before defendant's expert reports were due.
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
31 of 43
Proceedings
32
1 THE COURT: The fact is, though, this isn't
2 just a supplemental disclosure, is it? It is a
3 material change to the sample.
4 Can you address that?
5 MS. KONANOVA: Absolutely.
6 We are continuing to finesse or sample
7 together with our experts. Our goal is to present this
8 Court at trial and to present GreenPoint with the most
9 state-of-the-art, simplest, most straight-forward.
10 valid, and reliable sample. So we did make a
11 modification to our sample in order to be able to make
12 that straight-forward presentation to the Court.
13 We have told GreenPoint starting in January
14 exactly which loans we are going to re-underwrite,
15 which loans we may re-underwrite. And to reiterate.
16 they will have 13 months from that sampling disclosure
17 to put in their own expert reports. About 18 months
18 from that sampling disclosure.
19 Expert depositions are set to take place
sometime around the middle of next year,
will have plenty of time to work with their experts to
20 So GreenPoint
21
22 address the loans that we disclosed we needed and we
23 intended to underwrite.
24 The third argument GreenPoint has made in its
25 case formation is the fact that its case strategy
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
32 of 43
Proceedings
33
1 formation depended on the trustee's initial sample.
2 But, your Honor, the parties are still producing
3 documents. We are still in active fact discovery.
4 GreenPoint has produced one witness for a deposition.
5 GreenPoint has not noticed any witnesses for a
6 deposition.
7 The initial deadline for the sampling
8 disclosure was six months before the end of fact
9 discovery. We made our ours in January, about 5 months
10 before the current end of fact discovery. So again.
11 plenty of time to formulate its case strategy in
12 response to that supplemental disclosure.
13 We were willing to work with GreenPoint on
14 guideline matching for those loans. As I said, they
15 have all the servicing files for those loans. We are
16 happy to continue working with them productively to
17 address that January disclosure.
18 Your Honor, I would submit that the CMO must
19 be read consistently with the First Department
20 guidelines. The CMO should not be allowed to block
21 plaintiff's prosecution of its case.
22 THE COURT: I take it that none of the other
23 plaintiffs in the put-back or monoline litigation
24 submitted briefs to the Special Master in connection
25 with this issue; is that correct?
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
33 of 43
Proceedings 34
1 MS. KONANOVA: That is correct, your Honor.
2 THE COURT: And do we have liaison counsel
3 here today from the Ambac and monoline cases.
4 A VOICE: Your Honor, I represent Ambac but
5 not for this motion.
6 THE COURT: I just didn't I just am
7 curious to know whether this has been an issue in any
8 of the other put-back or monoline cases.
9 Let me think for a minute since we don't have
10 liaison counsel here about how we will get an answer to
11 that question.
12 But is there anything else you would like to
13 say before we conclude your argument?
14 MS. KONANOVA: Sure, your Honor.
15 I would like to note that we did ask other
16 Part 60 plaintiffs if this issue has come up and we
17 have addressed this issue with liaison counsel. We
18 understand, as we set forth in our papers, that at
19 least one other put-back plaintiff has reserved the
20 rights to modify their sample and that at least one
21 plaintiff has supplemented their sample disclosure.
22 THE COURT: I don't remember reading that in
23 your papers.
24 That is a representation that you are making
25 here now?
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
34 of 43
Proceedings
35
1 MS. KONANOVA: Yes, your Honor.
2 We ask that you reverse the order of the
3 Special Master and order the production of the loan
4 files.
5 THE COURT: Thank you.
6 MR. MATHESON: Good morning.
7 As Special Master Katz correctly noted, this
8 is not a discovery dispute. This is about plaintiff's
9 violation of the second case management order.
10 That order set out a deadline for the
11 plaintiffs to disclose the loans they plan to
12 re-underwrite. Plaintiff did that on July 28, 2016.
13 They provided a list of 67676 loans they plan to
re-underwrite and then in January of this year they
fundamentally changed the nature of that sample.
14
15
16 The CMO has a provision for requesting an
17 extension of time. Judge Katz's order suggested that
18 plaintiff do that and they have chosen still not to do
19 that. I submit that may be because the good cause
20 standard that the CMO requires, they may not be able to
21 satisfy.
22 I haven't heard them actually explain their
23 change other than to suggest that this one will be
24 better somehow. But what they haven't told you is what
25 they actually did.
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
35 of 43
Proceedings
36
1 Their original sample of 676 loans was a
2 randomly drawn sample of the loans in the trust. What
they have 3 done is they have removed all of the loans
4 that didn't liquidate. So now they have a random
5 sample of only liquidated loans. That's what they have
6 done.
7 You also heard from Miss Konanova that now we
8 know exactly which loans they plan to re-underwrite.
9 That's not the case. Plaintiff said today they still
10 don't know which of the back-up loans they will
11 re-underwrite. They told Special Master Katz they
12 didn't know which of those loans they would
13 re-underwrite. So at this point we still don't know
14 what loans they plan to re-underwrite.
15 They have the 351 from the original sample.
16 They have 250 back-up loans. They have yet to tell us
17 which, if any of those, they intend to re-underwrite.
18 We asked that question because they wanted to
19 add 75 additional back-up loans. Our assumption was if
20 they need 75 more back-up loans they must be using some
21 of the ones they have already identified and run out of
22 those.
23 So we asked them that question and to this
24 day they haven't told us a single one of those back-up
25 loans that they plan to re-underwrite. And they are
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
36 of 43
Proceedings
37
1 still reserving their rights to modify the sample
2 further. So we don't know when we will actually know
3 which loans are being re-underwritten in this case when
4 as I understood the point of the second CMO was so that
5 we would know early in fact discovery and we could gear
6 our fact discovery towards the loans that would be at
7 issue at trial.
8 That's what we have been doing. GreenPoint
9 has been gearing its discovery efforts toward the 676
10 loans that plaintiff identified last July. We have
11 retained a re-underwriting expert. We are doing an
12 affirmative re-underwrite of the loans. We are not
13 waiting to receive their expert's re-underwriting
14 report. We have an expert who is doing a from-scratch
15 re-underwrite of those sample loans which now are a
16 moving target for us. So we are no longer sure which
17 loans he should be re-underwriting.
18 We have in negotiations with third parties
19 over discovery, they object to the volume of the
20 documents we are asking for when we ask for documents
21 regarding 30,000 loans and so we then agree to narrow
22 it to the 676, which is now again a moving target which
23 requires us to go back to those third parties to ask
24 for different documents than we asked for before.
25 Miss Konanova suggested that language in the
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
37 of 43
Proceedings 38
1 CMO at the end of that section about sampling somehow
2 permits plaintiff to modify their sample whenever they
3 want . However, there was actually a transcript of the
4 hearing at which you instructed liaison counsel to
5 insert that language into the second CMO.
6 The issue there was defendants were concerned
7 that the language about sampling was a sign that you
8 had decided that sampling would be permitted in all
9 these cases. And so you asked that -- you said that
10 the defendants reserve their rights, the language you
11 already have, but also that nothing in this order will
12 be deemed a determination will be construed as
13 determining as to what extent sampling is or is not
14 appropriate.
15 So it was not put in there to permit
16 plaintiffs to change their sample. It was put in there
17 to protect defendants from that language being used to
18 suggest a ruling had already been made by the Court
19 that sampling would be permitted at trial.
20 There is nothing in that order that allows
21 plaintiff to change their sample. It allows them to
22 request an extension. It has a provision in there
23 about needing more time as a result of discovery issue.
24 So I can give some context there of how our
25 case is a little different from most of the other RMBS
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
38 of 43
Proceedings
39
1 cases before you. In most of those cases the defendant
2 is the sponsor of the securitization not the loan
3 originator. So the defendant doesn't necessarily have
4 in its possession the loan files. And so the parties
5 would need to subpoena third parties to get the loan
6 files. So there was language in there suggest that if
7 there was a problem, getting the loan files in time to
8 make the disclosure required by the second CMO that the
9 parties could get more time because of that difficulty
10 in getting loan files from third parties.
11 That didn't happen in our case. GreenPoint
12 is the defendant. it is the loan originator. and it had
13 the loan files for all 30,000 loans. In fact.
14 plaintiff contacted us and said in order for them to
15 meet their deadline to disclose a sample they needed us
16 to produce all 30 loan files sufficiently in advance of
17 deadline. So we did.
18 They actually have all 30,000 files. So
19 there is no issue of not having files as a reason why
20 they need more time.
21 We are also sort of confused as to why they
22 need back-up loans. The typical reason for back-up
23 loans is when they draw the sample before they have the
24 loan files and it would be possible that some of the
25 loan files in the sample, they wouldn't be able to get
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
39 of 43
Proceedings 40
to 1 those loans and would drop out and then back-up
2 loans would be promoted to sample loans if they had the
3 loan files for those. That also isn't the case here.
4 So we are unclear what the issue is with the
5 back-up loans, why they don't know which ones they are
6 using why they need them at all, given that they are
7 already in possession of every loan file.
8 They have not provided the good cause
9 required by the second CMO for an extension of time.
10 These loans are not properly part of their sample or
11 properly being re-underwritten. The only use of the
12 first lien file they are asking for is to be used in
13 connection with the re-underwrite that shouldn't be
14 happening here because these loans have been disclosed
15 many, many months too late.
16 Thank you.
17 MS. KONANOVA:: Your Honor, a few brief
18 points.
19 We met the initial deadline. So we submit
20 that to require us to demonstrate good cause for the
21 extension of that deadline now would turn the First
22 Department law on its head. It is the receiving party
23 that needs to demonstrate undue prejudice before an
24 amended expert disclosure is precluded, not the
25 producing party.
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
40 of 43
Proceedings
41
1 Point number 2 . The reason for the revised
2 sample is, again, to make it state-of-the-art, valid
3 and reliable.
4 Mr. Matheson has recognized that we have now
5 a version of our sample that focuses on liquidated
6 loans. That is one of the reasons why we needed to
7 disclose additional back-ups. Again, that is to make
8 that sample valid, reliable, state-of-the-art.
9 GreenPoint knows the 550 loans that we are
10 going to re-underwrite, that we are intending to
11 re-underwrite as to the back-up loans
12 THE COURT: They are not all liquidated
13 loans, are they?
14 MS. KONANOVA:: There is a version of our
15 sample that focuses on liquidated loans and then
16 certain additional loans that are active loans but with
17 losses where we are underwriting outside of the sample.
18 As to the back-up loans, we did disclose 325
19 back-up loans that we may re-underwrite. As time has
20 passed we have been continuing to work on those loans.
21 We now have a better idea as to which of those we are
22 planning to re-underwrite.
23 I can tell you that it will be well south of
24 that number. Currently there are about 60 of those
25 back-up loans that we are intending to re-underwrite.
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
41 of 43
Proceedings
42
1 We are glad to provide that list to GreenPoint and to
2 work with them on guideline matching for those
3 approximately 60 back-up loans at this time.
4 Lastly, the prejudice point, I would like to
5 submit is also kind of being turned on its head.
6 GreenPoint has all this time before its
7 expert reports are due, before expert depositions
8 happen. 18 months after the time of our sampling
9 disclosure. They are not prejudiced here. But if the
10 trustee weren't permitted to supplement its sample the
11 trustee would be precluded from litigating its case in
12 the manner that it chooses, again, to get the most
13 state-of-the-art sampling disclosure possible.
14 If your Honor has any questions?
15 THE COURT: You have decided that your
16 original sample was not statistically reliable or
17 viable. Is that what happened?
18 MS. KONANOVA: Not exactly, your Honor.
19 We decided to refine it to make it more valid
20 and more reliable and to create a version of the sample
21 that focuses specifically on liquidated loans.
22 THE COURT: All right.
23 I am going to reserve decision on this
24 motion. There will be a decision shortly.
25 I am modifying my previous directive to
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
42 of 43
Proceedings 43
1 GreenPoint to obtain the transcripts.
2 Since both sides have challenged Special
3 Master rulings the parties can jointly obtain the
4 transcript, e-file it, and file two hard copies with
5 the clerk of the part.
6 Again, I reserve the right to correct errors
7 in the transcript. So if it is needed for any further
8 purpose you should have a copy so ordered by me and not
9 merely signed by the court reporter.
10 Thank you. The record is closed for today's
11 proceedings.
12 •k'k'k'k'k'k'k'k'k'k'k'k'k'k'k'kic-k'k-k-k'k'k'k'k-k'k'k'k'k'k'k'k'k
13 April 27, 2017
14 The above is certified to be a true and
15 accurate transcript of the proceedings.
16
17 MICHAEL ^^j^^RFIELD
18
19
20
21
22
23
24
25
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
43 of 43
05/01/2017 11:51 AM
=======
Yes, that's correct, Mister Greeeeeenpoint
"And again, Syncora stands to make hundreds of
millions of dollars in windfall profits as a result of
this litigation."
=======
1
1 SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK - CIVIL TERM - PART: 60
2 X
IN RE : PART 60 RMBS PUT-BACK LITIGATION,
3
U.S. BANK NATIONAL ASSOCIATION, as Indenture
4 Trustee for the Benefit of the Insurers and
Noteholders of GreenPoint Mortgage Funding
Trust 2006-HEl, Home Equity Loan Asset-Backed
Notes
5
Series 2006-HEl,
6 Plaintiff,
7 - against
8 GREENPOINT MORTGAGE FUNDING, INC.,
Defendant.
9 X
Ind. No.: 600352-09 60 Centre Street
10 New York, New York
11 April 27, 2017
Before:
12 HON. MARCY S. FRIEDMAN,
Justice
13
APPEARANCES:
14
QUINN EMANUEL
51 Madison Avenue
New York, New York 10010
BY: YELENA KONANOVA, ESQ.
and
ANDREW DUNLAP, ESQ.
and
SEAN BALDWIN, ESQ.
Attorneys for the Plaintiff
15 22nd Floor
16
17
18
19
MURPHY & MCGONIGLE
4870 Sadler Road -
Glen Allen, Virginia 23060
BY: CAMERON S. MATHESON, ESQ.
Attorney for the Defendant
20 Suite 301
21
22
23
24
25
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
1 of 43
2
1
APPEARANCES (Cont'd):
2
ALLEGAERT BERGER & VOGEL LLP
111 Broadway - 20th Floor
New York, New York 10006
BY: MICHAEL S. VOGEL, ESQ.
and
LAUREN PINCUS, ESQ.
and
JOHN S. CRAIG, ESQ.
Attorneys for Syncora Guaranty
3
4
5
6
/ Inc .
7
8
Michael Barfield
9 Official Court Reporter
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
2 of 43
Proceedings
3
1 THE COURT: Good morning.
2 May I have counsels appearance, please.
3 MR. MATHESON: Cameron Matheson from Murphy &
4 McGonigle on behalf of the defendant GreenPoint
5 Mortgage Funding, Inc. I
6 MR. VOGEL: Your Honor, Michael Vogel of
7 Allegaert Berger & Vogel. My firm is also co-counsel
8 to plaintiff U.S. Bank in this action. For today I
9 will be appearing on behalf of a non-party, Syncora
10 Guaranty, Inc.
11 For the second motion it will be counsel
12 will announce herself from Quinn Emanuel representing
13 U.S. Bank.
14 MS. PINCUS: Good morning.
15 Lauren Pincus from Allegaert Berger & Vogel
16 on behalf of non-party Syncora Guaranty, Inc.
17 MR. CRAIG: John Craig, Allegaert Berger &
18 Vogel, for Syncora.
19 THE COURT: Thank you.
20 So you would like to have the Syncora motion
21 heard first.
22 How much time would you like?
23 MR. MATHESON: Ten minutes.
24 MR. VOGEL: Agreed.
25 THE COURT: Please.
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
3 of 43
Proceedings
4
1 MR. MATHESON: Good morning, your Honor.
2 GreenPoint is seeking a motion to compel
3 Syncora to produce documents regarding its damages.
4 These are documents it has previously produced in a
5 different action, an adversary proceeding in Lehman's
6 bankruptcy.
7 GreenPoint sold about 30,000 loans to Lehman
8 Brothers Bank. Those loans were put into a secure
9 securitization. U.S. Bank is the trustee of the
10 securitization and it was insured by Syncora and CIFG.
11 Syncora and CIFG, it was fully insured. There were two
12 traunches; one insured by Syncora, one insured by CIFG.
13 There were uninsured traunches and Syncora and CIFG
14 have been paying.
15 So in this case the investors aren't out any
16 money. The losses have been to the two insurers.
17 The complaint was filed back in 2009. The
18 plaintiffs were U.S. Bank, Syncora and CIFG. All three
19 of them were suing under the same contract same
20 operative facts seeking the same damages.
21 On the motion to dismiss Syncora and CIFG
22 were dismissed because they were not third-party
23 beneficiaries to the contract under which they were
24 attempting to sue GreenPoint. But as a result of them
25 being dismissed out of the case it is still the same
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
4 of 43
Proceedings
5
1 contract at issue, still the same operative facts at
2 issue, still the same damages at issue, which are the
3 payments that have been made by Syncora and CIFG, which
4 are essentially the equivalent of prepurchase price.
5 because what they were in insuring was principal and
6 interest payments by the borrowers on the loans.
7 U.S. Bank remains the plaintiff, but it is
8 not suing on its own behalf. It is suing for the
9 benefit of and at the direction of Syncora. In fact
10 U.S. Bank and Syncora have the same counsel in this
11 case and Syncora is the one instructing U.S. Bank as to
12 how to conduct the litigation.
13 After the complaint was filed Syncora entered
14 into some transactions. As a result of those
15 transactions a large portion of the insurance payments
16 that Syncora makes to the trust are paid back to it.
17 What that means is that Syncora stands to make a
18 windfall of several hundred million dollars in this
19 case . We are seeking discovery regarding that.
20 We know it is true because we have already
21 received the documents. Lehman went bankrupt. U.S.
22 Bank and Syncora filed proofs of the claim against
23 Lehman. Lehman filed an adversary proceeding against
24 U.S. Bank, Syncora, and GreenPoint.
25 With respect to U.S. Bank and Syncora, Lehman
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
5 of 43
Proceedings 6
1 was arguing that they were essentially -- their proofs
2 of the claim were duplicative. They were both suing
3 for the same damages.
4 There was discovery taken in that case and
5 Syncora produced documents regarding these transactions
6 that had been entered into that resulted in it
7 receiving the insurance proceeds back to it.
8 GreenPoint as a party in the adversary
9 proceeding received those documents as well, but they
10 were produced pursuant to a confidentiality agreement
11 and so GreenPoint is not at liberty to use them in this
12 case.
13 The adversary proceeding settled. Under the
14 terms of the confidentiality order GreenPoint had to
15 destroy the documents that it had received from
16 Syncora. But we had them in the other case. We
17 reviewed them and we know what they say. We simply
18 want to have them so that they can be used in this
19 case .
20 GreenPoint made a motion to compel to Special
21 Master Katz. He denied the motion. What he ruled was
22 that there was an undue burden on Syncora. And he
23 given that, he didn't rule on whether or not the
24 documents were discoverable. However, just a few days
25 later in two other cases, FGIC versus Morgan Stanley
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
6 of 43
Proceedings 7
1 and Ambac versus Countrywide, he ruled that,
2 essentially, identical types of documents were
3 discoverable in those cases.
4 So the only issue as we see it, the only
5 issue is the burden issue.
6 Syncora had already produced the documents.
7 What they are now arguing, though is that when they
8 produced them they didn't have the opportunity to
9 review them for relevance and privilege before
10 producing them because they were on an expedited
11 schedule in the bankruptcy proceeding.
12 We were surprised, frankly, to read that
13 argument in their papers because, again, we did receive
14 those documents and reviewed them and they were
15 massively redacted for privilege and relevance. So it
16 seems that they must have reviewed them in order to be
17 able to redact them.
18 That being said. our goal here is not to
19 place a burden on Syncora. That is why we had asked
20 that they merely deem produced what they had previously
21 produced so there would be no burden.
22 So to the extent that there was some review
23 they would need to do, we don't want to place we
24 don't want documents that aren't relevant, we don't
25 want documents that are privileged. As I have said, we
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
7 of 43
Proceedings
8
1 have already reviewed the production that they did. We
had to destroy 2 it. But what we do have is a list, by
3 Bates number, of the documents that are relevant to the
4 issue we are interested in. There are 223 documents we
5 care about. I have a list by Bates number of those
6 documents. That's really all we need.
7 So I don't think it would be an undue burden
8 for them to produce those 223 documents to us. We are
9 happy to provide that list to your Honor and to them.
10 We don't see that there is undue burden.
11 Frankly, we think they have already reviewed these
12 documents because of the significant numbers of
13 redactions. In fact, there were a large numbers of
14 pages that were just blank. All it said on the page
15 was II redacted for relevance".
16 We were unable to provide you with examples
17 in our moving papers because we were - we had
18 previously been required to destroy those documents so
19 we no longer have them.
20 But again, we are looking for 223 documents.
21 These are categories of documents that Special Master
22 Katz has ruled in two other decisions are discoverable.
23 They have an argument as to whether or not
24 these should be admissible in the case. I think that's
25 a different question.
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
8 of 43
Proceedings
9
1 They cite to Ambac versus Countrywide. That
2 was being decided on summary judgment. It was not a
3 discovery issue. And the Court ruled that actually
4 defendant couldn't get summary judgment in that case
5 because it didn't have sufficient evidence of the
6 transactions the types of transactions we are
7 discussing here because they didn't get those documents
8 in discovery. We are seeking those documents in
discovery so we don't have the same fate where we try
to make a legal argument and don't have the evidentiary
9
10
11 basis to back it up.
12 Syncora makes a lot in their papers about the
13 point that they are not currently a party in the case.
14 However, they are in fact directing the activities of
15 the plaintiff. They formerly were a plaintiff. And it
16 is undisputed that they will be the primary beneficiary
17 of the recovery in this case. The overwhelming
18 majority of any recovery goes to them with some portion
19 of it going to CIFG. But they are the ones who are
driving this case, they are controlling this case, they
will recover the funds paid in this case.
20
21 We are just
22 seeking discovery related to the windfall that they are
23 seeking to recover.
24 Thank you.
25 THE COURT: Thank you.
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
9 of 43
Proceedings 10
MR. 1 VOGEL: Your Honor, this is an appeal of
2 the Special Master's entirely correct denial of
3 GreenPoint's application for burdensome discovery for
4 damages of the non-party.
5 I will address the fact that they suddenly
6 have a proffer that instead of 4 million pages of
7 documents comprising 225,000 individual documents.
8 which is the basis that this was briefed and argued
9 both to the Special Master and to your Honor, this is
10 the first I have heard of it and I don't know what
11 those 223 documents entail. But nonetheless, it
12 doesn't change the fact that these are completely
13 irrelevant documents.
14 I am going to get into that, but I want to
15 clarify what GreenPoint's counsel said.
16 They said that the Special Master didn't rule
17 on the, quote / discoverability of these documents.
18 THE COURT: Excuse me. Let's just get that
19 clarified.
20 I heard 225 documents. Is that what you are
21 seeking?
22 MR. MATHESON: 223.
23 THE COURT: Not 223,000.
24 MR. MATHESON: Correct.
25 MR. VOGEL: Well, if I may clarify?
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
10 of 43
Proceedings 11
1 Before Special Master Katz they were seeking
2 225,000 . When we addressed the burden of that they
3 said this in their papers to your Honor -- well, it is
4 only 125,000. Which we didn't really think was much
5 less of a burden. This is literally the first I have
6 heard it was 223 documents and not 125,000 or 250,000.
7 THE COURT: Could this potentially change
8 your position on the issue?
9 MR. VOGEL: It potentially changes the burden
10 argument but it doesn't change the relevance argument.
11 There is zero relevance to this. I think it
12 is important to address that. My adversary indicated
13 that they had not before the Special Master -- he
14 didn't rule on, quote, discoverability. But he did
15 address relevance. He said several important things.
16 He said at most the relevance is, quote.
17 tangential. And then in his footnote he said. Because
18 the burden so overwhelms the tangential relevance I
19 will not rule on whether there is zero relevance. n
20 He didn't reach that. But he says, I note.
21 in footnote 1, II I note GreenPoint has not cited a
22 single case supporting the relevance of this material. II
23 That's what I would like to focus on. There
24 is literally no relevance to this case.
25 They are seeking the information about the
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
11 of 43
Proceedings
12
1 losses of a non-party to this case. So in particular
2 GreenPoint is focusing discovery in what it argues are
3 GreenPoint losses.
4 Now, what Syncora has paid into the trust is
5 undisputed. It is in the trustee reports. They are
6 circulated each month. They are in Mr. Matheson's
7 affidavit submitted to the Court. There is no dispute
8 as to what the insurance payments made by Syncora are.
9 Syncora is one of the two insurers in this
10 litigation, one of multiple parties that has a
11 potential interest in a recovery. There are two
12 insurers. There are note holders. There actually are
13 contrary to what my adversary said. there is a class
14 of uninsured residual noteholders, as well. There is
15 the servicer, indentured trustee. There is an entire
16 waterfall provision that addresses who recovers under
17 the waterfall.
18 Indeed, when they moved to dismiss Syncora
19 and convinced Justice Freed that Syncora was not going
20 to be a party in this action, they said, quote. M The
21 insurers, which simply insure the parties who might be
22 affected by the accuracy of the representations and
23 warrantees benefit only indirectly from GreenPoint's
24 performance of its representation and warranty
25 obligations. II
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
12 of 43
Proceedings 13
1 So that's the role of Syncora here. There is
2 no dispute Syncora will benefit indirectly if there is
3 a recovery, will have a share of a recovery under the
4 trust waterfall documents which, again, are fully in
5 the record.
6 So the situation could not be clearer. U. S .
7 Bank as trustee is suing for the trust's damages not
8 for Syncora's
9 THE COURT: Excuse me.
10 Is the waterfall only that which is provided
11 in Article 5 of the August 1, 2006 transfer and
12 servicing agreement?
13 MR. VOGEL; Yeah. Beginning at page 69.
14 That's the waterfall. Those are the waterfall
15 provisions. That's correct.
16 So Syncora has done nothing to explain other
17 than to assert the conclusion that Syncora's damages
18 are the Trust damages. They have done nothing to
19 explain why the fact that Syncora is one party that
20 recovers under the waterfall makes Syncora's damages in
21 any way relevant to the Trust damages.
22 GreenPoint has offered nothing to meet its
23 burden. They don't cite a single case that suggests
24 that that sort of evidence might be relevant.
25 Indeed, your Honor's March 27th order
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
13 of 43
Proceedings
14
1 specifically directed the parties to submit, quote, a
2 joint list setting forth all RMBS decisions which have
3 determined issues relating to the discovery of monoline
4 insurer's damages and actions brought against trustees
5 on behalf of monoline insurers. as well as others.
6 The parties agreed already; no such cases. I
7 submit that is precisely because this discovery is so
8 palpably out of bounds. However, unlike GreenPoint we
9 do cite several case that support the conclusion that
10 the discovery is not relevant. I would like to
11 emphasize 2, your Honor.
12 One is Home Equity versus DLJ, 2014 Westlaw,
13 385 3657. That is another RMBS case. In that case
14 Justice Schweitzer denied as irrelevant discovery
15 multiple categories of documents from a non-party
16 controlling certificate holder. So it was not a
non-party insurer but it was a non-party controlling
That included discovery concerning
17
18 certificate holder.
19 the certificate holder's investment in the
20 certificates.
21 Presumably, like the discovery there, similar
22 to here, they were seeking to get at the financial
23 interest of the controlling party in the event of
24 j udgment. Justice Schweitzer held that discovery was
25 irrelevant. Defendant's request concerning the
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
14 of 43
Proceedings 15
1 directing certificate holder's investments strategies
2 has no bearing on the merits of the breach of contract
3 claim asserted against DLJ.
4 I would submit it is the same. The fact that
5 Syncora may have other investments or contractual
6 arrangements or agreements is completely tangential and
7 irrelevant to this case, which is a case between U.S.
8 Bank and GreenPoint.
9 Second case I would like to refer your Honor
10 to is Ambac versus Countrywide 2015 Westlaw, 647 1943.
11 That's another RMBS case. This is a case brought by
12 monoline insurers.
13 In that case Justice Bransten held that
14 evidence of monoline insurer's supposed mitigation of
15 its damages by buying bonds and securitizations --
16 something very similar to what they argue happened here
17 was irrelevant as a matter of law because defendant
18 was not entitled to a credit for those purchases even
19 if they reduced insurer costs. M
20 To be clear, that was not merely a holding
21 that there was a lack of evidence. which is what
22 GreenPoint has argued, but there is a three-paragraph
23 discussion of the merits of the defense that holds that
24 mitigation -- the doctrine of mitigation is unavailable
25 as a matter of law because the breach does not free up
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
15 of 43
Proceedings 16
1 any resources, in this case GreenPoint's breach. The
2 breach of representations and warrantees don't free up
3 resources because there is no duty to undertake these
4 separate transactions. So mitigation fails as a matter
5 of law. And that's in a case where the monoline
6 insurer was the plaintiff. In this case Syncora is not
7 the plaintiff. We are non-party. It is double
8 irrelevant for that reason.
9 Now, presumably because of Ambac V
10 Countrywide GreenPoint specifically disclaims reliance
11 on the doctrine of mitigation, which is what one would
12 normally think of when a defendant arguments that a
13 party has recovered its losses elsewhere. But the
14 problem for GreenPoint is they don't they deny they
15 are relying on mitigation because they don't offer
16 anything instead. All we get are conclusory
17 assertions. But I read their brief and I can't figure
18 out why Syncora's damages are possibly relevant other
19 than Syncora, just like any potential beneficiary of a
20 trust, has a share of the has a share of the
21 recovery if there is one, under contract terms that
22 are free for everyone to read.
23 An example at page 4. "The compensatory
24 damages sought in the complaint are Syncora's losses. n
25 It is an assertion without support.
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
16 of 43
Proceedings 17
1 Page 6. GreenPoint argues that it needs the
2 information it seeks II to calculate Syncora's losses
3 THE COURT: Excuse me. Can you slow down a
4 little, please?
5 Can you repeat the last sentence, please?
6 MR. VOGEL: Page 6 of their brief they argue
7 that they need the information to II calculate Syncora's
8 losses. (The losses that U.S. Bank is attempting to
9 recover in this case.) It
10 So that's the connection they draw. But
11 there is no explanation for why there is an identity
12 between those. And we know what the relationship is.
13 There is an interest under the waterfall. It is not
14 disputed. So those assertions are simply not true.
15 Plaintiff seeks plaintiff's damages and
16 GreenPoint never explains why it needs to calculate
17 Syncora's losses.
18 THE COURT: What are the damages that the
19 trustee is seeking in this case?
20 MR. VOGEL: The primary damages are
21 repurchase damages.
22 There is in fact a formula for calculating
23 the repurchase price that considers, essentially, three
24 elements, which is; 1, the principal amount of the
25 loan; 2, interest on the loan; 3, certain costs and
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
17 of 43
Proceedings 18
1 expenses.
2 That's the primary remedy.
3 We have a remedy for putting back all the
4 loans. We have a no exclusive remedy provision. So we
5 certainly want to keep our options open.
6 But that's the primary theory of this case.
7 It is a repurchase case. And that - there is nothing
8 in that formula that has anything to do with any side
9 transaction that Syncora might have undertaken or what
10 Syncora's supposed economic losses are or what they
11 might argue they are because, again, legally. Justice
12 Bransten's decision says that's not even relevant.
13 THE COURT: What does that mean that you have
14 a no exclusive remedy provision? Is there something in
15 the PSA that doesn't limit the remedy to the repurchase
16 protocol?
17 MR. VOGEL: In the flow agreement. In the
18 original flow agreements.
19 THE COURT: In the flow agreements.
20 MR. VOGEL: So I suppose common-law damages
21 could be available.
22 We are a year and-a-half out from trial, so I
23 think in the context of a discovery motion I am a
24 little reluctant to say that I can imagine or cannot
25 imagine that that would be used.
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
18 of 43
Proceedings 19
1 It is different from many security agents
2 because inclusive remedy provisions are fairly common.
3 So we view that as a significant cannot variation from
4 the norm in this case. But again, this is primarily a
5 repurchase case and that's. I think, how it is
6 principally being litigated.
7 I would like to also address this notion that
8 somehow Syncora would be getting a windfall if this
9 information is not produced.
10 Again, I think Justice Bransten's decision on
11 mitigation addresses that directly. But I would also
12 say that it is just factually not true.
13 The Trust is seeking to recover the Trust's
14 damages. How that recovery is allocated is a question
15 under the waterfall agreements, again, which they
16 already have.
17 Now, GreenPoint seems to be complaining that
18 Syncora has entered into separate transactions with
19 third parties that I suppose they think allow Syncora
20 to keep more of the money than it is entitled to, and
21 the waterfall rather than, I suppose, paying that
22 money over to the third parties with whom they have
23 agreements.
24 Respectfully, your Honor, those are
25 completely side matters between parties that are not in
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
19 of 43
Proceedings 20
1 this litigation if there are agreements as to the
2 entitlement to funds that Syncora is entitled to under
3 the waterfall. That has nothing to do with this case
4 at hand, which is between U.S. Bank and GreenPoint.
5 I just don't see how GreenPoint potentially
6 has any kind of standing to have discovery of those
7 third-party agreements, but that seems to be the nature
8 of what they are saying is a windfall. Legally, that's
9 just not a windfall.
10 Moreover, so there is no windfall. They
11 don't explain how the supposed windfall would be
12 legally relevant given their concession that mitigation
13 is an irrelevant doctrine. They simply don't explain
14 any or give you any basis for concluding there is any
15 relevance whatsoever to this information.
16 So, your Honor, I would submit that even with
17 this last minute proffer, they reduced the burden, any
18 burden exceeds the zero relevance that these documents
19 have .
20 That said. I don't know what the potential
21 burden is. And obviously if there is a new proffer we
22 have to reserve on that because that wasn't presented
23 to us beforehand.
24 But to clarify, since counsel suggested that
25 we have done a review. We don't dispute there had been
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
20 of 43
Proceedings 21
1 a review. There is a targeted computer review using
2 metadata. Certain documents were reviewed and
3 redacted. I don't know if those are included in this
4 category they are now referring or to what extent. So
5 there would still need to be some work. I can't
6 dispute the 223 documents is fewer than 125,000, but.
7 frankly, any amount of burden is going to be
8 substantial.
9 Finally, one last point on burden, your
10 Honor.
11 We pressed them in front of the Special
12 Master as to the fact that we don't think the burden is
13 going to end with this production. That they are then
14 going to use these documents to have deposition
15 discovery. They pointedly in oral argument decline to
16 say they are not going to do that.
17 So there is going to be substantial burden.
18 And if your Honor were to rule, well, 223 documents
19 aren't very much, give it to them, I don't need to
20 reach the issue of relevance? I hate to tell your
21 Honor I will be back here arguing the same thing for
22 depositions.
23 So, regretfully, I do have to press the point
24 that this information is irrelevant and really
25 encourage you to read the brief. see if you can figure
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
21 of 43
Proceedings 22
1 out why it is relevant, because I really can't.
2 Accordingly, I speak respectfully request
3 that the Special Master's decision be affirmed.
4 THE COURT: Thank you.
5 Would you like to reply?
6 MR. MATHESON: Again, they are relying on one
7 of the cases -- one of the cases they are relying on is
8 Ambac versus Countrywide which was, again, summary
9 j udgment. The question was not discoverability of the
10 documents. It was summary judgment.
11 On discoverability Special Master Katz has
12 ruled, and they don't deny, and it didn't even address
13 the fact that he has ruled in two separate cases.
14 including Ambac versus Countrywide, I am assuming it
15 must be a different Ambac versus Countrywide case, that
16 these documents are in fact discoverable.
17 The DLJ cases involving a certificate holder.
18 that is not an analogous situation to the insurer.
19 What's happened here. the transactions that
20 Syncora has entered into resulted in their saying that
21 GreenPoint knows how the waterfall works. That's
22 correct.
23 The issue isn't the waterfall. They have
24 already received hundreds of millions of dollars as a
25 result of the transactions they have entered into.
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
22 of 43
Proceedings 23
1 They have already got that money. We want the
2 documents about that. Because then when they get the
3 payments in the waterfall they are basically profiting
4 from their insurance agreement to the tune of hundreds
5 of millions of dollars. That's the evidence we are
6 looking for.
7 You say what's the damages?
8 The damages that Syncora was seeking in the
9 original complaint were identical to the damages that
10 U.S. Bank was seeking. They haven't explained what was
11 Syncora looking for that was different. They were both
12 plaintiffs. They were both suing for the same
13 contract, same facts, same damages. So Syncora is
14 seeking the same damages U.S. Bank is seeking. U.S.
15 Bank is seeking to recover for Syncora to get at that
16 money through the waterfall to reimburse it for
17 insurance payments for which it has already been
18 reimbursed. That's how this is relevant.
19 So they are saying how is there an identity
20 of damages. The original complaint establishes the
21 identity of the damages.
22 You are saying this is about repurchase
23 price. The repurchase price formula is principal
24 interest, which is precisely what Syncora was in
25 insuring; principal and interest. The two are the
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
23 of 43
Proceedings 24
1 same . And again, Syncora stands to make hundreds of
2 millions of dollars in windfall profits as a result of
3 this litigation. We are seeking discovery into that
4 fact. This is just a question of discoverability.
5 In terms of burden? Again, we are talking
6 about 223 documents. That is not an undue burden.
7 In terms of the deposition -
8 THE COURT: Excuse me.
9 Is there a reason why you didn't say in your
10 papers on this motion what these transactions were?
11 MR. MATHESON: Because of the
12 confidentiality.
13 THE COURT: That's what we thought. Okay.
14 MR. MATHESON: We didn't feel we were at
15 liberty to explain the details of the transactions.
16 And we don't have the documents anymore so we couldn't
17 put them in as exhibits.
18 THE COURT: You do not have the documents
19 because you had to destroy them.
20 MR. MATHESON: Correct. Correct.
21 Under the terms of the confidentiality order
22 in the bankruptcy proceeding we were obligated to
23 destroy the documents a certain number of days after
24 that proceeding concluded. So at the time we made the
25 motion to Special Master Katz we still were in
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
24 of 43
Proceedings 25
1 possession of the documents. Our goal was to minimize
2 the burden on Syncora. So what we had said is we don't
3 need you to do anything other than let us use the
4 documents we currently have. Once they insisted that
5 we destroy those documents, we then had to ask them to
6 give them to us.
7 Again, our thought was they could resend us
8 the disc they sent us last time and there is almost no
9 burden. They then brought up this what to us was
10 this new argument that they hadn't reviewed them. which
11 never would have occurred to us given the massive
12 amount of redactions on the documents that we had seen.
13 So again, our goal here is minimize the
14 burden.
15 Frankly, in terms of the deposition, we are
16 going to be deposing Syncora no matter what, whether
17 this issue is whether we have the documents or not.
18 Because there is other litigation from Syncora. They
19 were involved in due diligence in preparation for the
20 securitization. So there is going to be a deposition
21 of Syncora. The outcome of this motion will not change
22 that. So this is not going to add to their burden.
23 There is going to be a one-day seven-hour deposition of
24 Syncora one way or the other.
25 Thank you.
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
25 of 43
Proceedings 26
1 THE COURT: Thank you.
2 (Whereupon, there was a pause in the
3 proceedings.)
4 I am going to request that you obtain a copy
5 of the transcript e-file it, and file two hard copies I
6 with the clerk of the part.
7 If I so order the transcript I may make
8 corrections of anything I might have said that is not
9 accurately recorded. So if the transcript is needed
10 for any further purpose you should use the so-ordered
11 copy.
12 We will close the record for today's
13 proceedings. There will be a decision in the near
14 future.
15 (Whereupon, the case was laid aside to be
16 recalled.)
17 THE COURT: Back on the record.
18 Good morning.
19 May I have counsels I appearance, please.
20 MS. KONANOVA: Yelena Konanova for plaintiff
21 trustee.
22 MR. DUNLAP: Andrew Dunlap for plaintiff.
23 MR. BALDWIN: Sean Baldwin for plaintiff.
24 MR. MATHESON: Cameron Matheson for defendant
25 GreenPoint.
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
26 of 43
Proceedings 27
1 THE COURT: Is this the only appearance I
2 have for this?
3 How long would you like for oral argument.
4 MS. KONANOVA: Ten minutes, your Honor.
5 MR. MATHESON: Ten minutes.
6 MS. KONANOVA; Thank you, your Honor.
7 We seek an order compelling GreenPoint to
8 produce origination files for 272 associated loans.
9 The two questions are; are these files relevant? The
10 answer is yes. And does GreenPoint have any basis to
11 withhold them? The answer is no.
12 There is no dispute between the parties that
13 the loan files are relevant. GreenPoint agrees.
14 GreenPoint has already produced hundreds of
15 these associated loan files. These files are in fact
16 relevant because sometimes more than one loan is made
17 to the same borrower at the same time by the same
18 lender on the same property.
19 A borrower may have sought a mortgage to buy
20 her house and a line of credit from GreenPoint
21 simultaneously. In such case GreenPoint would evaluate
22 the credit characteristics of that borrower the house.
23 for both loans at the same time. When the borrower
24 brings in her paperwork GreenPoint employees may file
25 that paperwork in just one of the two loan files. When
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
27 of 43
Proceedings 28
GreenPoint 1 employees discuss the files they may do so
2 using only one of the loan numbers.
3 So the loans that are trust are all second
4 lien loans, like the lines of credit. And when we
5 re-underwrite those loans, meaning when we look at the
6 credit of the borrower, at the house at the
7 correspondence, we need to have access to both the
8 at-issue second lien loan file and this associated
9 first lien loan file. That insures a more accurate and
10 a more conservative re-underwriting. That works in
11 GreenPoint's favor.
12 GreenPoint also doesn't have a burden
13 argument about producing just 272 remaining files. The
14 only reason GreenPoint has not produced them is because
15 it objects to our supplemental disclosure of January
16 10th of this year. That is not a basis to withhold
17 those files.
18 I would like to start with the key language
19 of the second CMO, which is exhibit 2, and a bit of
20 context.
21 That CMO requires plaintiffs to It disclose the
22 contents of any proposed sample, or if a plaintiff does
23 not intend to seek to proceed via sampling to identify
24 the loans it intends to re-underwrite.
25 This deadline was set six months before the
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
28 of 43
Proceedings 29
1 end of fact discovery. We met that deadline on July
2 28, 2016.
3 We disclosed the loans that we intended to
4 re-underwrite this is at exhibit 4 - including the
5 primary loans that we would re-underwrite and the
6 back-up loans that we may re-underwrite.
7 We also put GreenPoint on notice that we may
8 supplement or modify that disclosure. We "reserved all
9 rights to further modify or alter the sample as
10 needed. n So we put GreenPoint on notice from Day 1.
11 GreenPoint did not object. It had all the
12 time in the world to say something to us about it and
13 it did not object.
14 Then in early January of this year,
15 consistent with that reservation, we disclosed a
16 modification. We added some back-up loans, we added
17 some loans that we intended to re-underwrite outside of
18 the sample. and then GreenPoint asked if there were any
19 loans that we were no longer intended to re-underwrite.
20 We told them.
21 As a result, GreenPoint now knows and has
22 known since January, the roughly 550 loans that we are
23 intending to re-underwrite and the roughly 325 back-up
24 loans, some of which we are intending to re-underwrite,
25 others that we won't.
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
29 of 43
Proceedings
30
1 That supplemental disclosure was entirely
2 proper under the governing First Department background
3 rule .
4 The First Department has said that II a court
5 cannot preclude expert evidence even on the basis of a
6 late disclosure without finding that the disclosing
7 party either acted willfully or that the receiving
8 party was prejudiced. II That is the Haynes decision
9 from last year at 145 AD3d at 606.
10 We read the CMOs entirely consistent with
11 that governing First Department case.
12 The CMO said, IINothing in this order will be
13 deemed or construed as a determination by the Court as
14 to whether or to what extent sampling is or is not
15 appropriate. II It also reserved IIall rights and
16 arguments regarding plaintiff's potential use of
17 sampling. II
18 So the plain language of the CMO makes clear
19 that this Court has not at this time reached a decision
20 on sampling. The CMO sets no substantive limit as to
21 how the parties will conduct their sampling, and it
22 cannot be read to preclude inconsistently with the
23 governing First Department law amendments of expert
24 disclosures in the absence of undue prejudice.
25 Your Honor, GreenPoint has never quantified
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
30 of 43
Proceedings
31
1 that undue prejudice. For the first time in its papers
2 to your Honor it said it would have to go back to the
3 servicers for servicing files. That is not true. We
4 have all the servicing files for loans that we are
5 going to re-underwrite from the January disclosure.
6 GreenPoint now has all the servicing files for the
7 loans that we are going to re-underwrite from the
8 January disclosure.
9 As to experts, GreenPoint says its expert
10 work has been hamstrung. Not only is this not
11 substantiated or quantified but frankly it is not
12 quite believable given that plaintiff's expert reports
13 are not due until July of this year and defendants -
14 THE GOURT: You know, I am sorry, but the
15 tone of the papers was rather nasty and this argument
16 is repeating it.
17 I mean. I don't really think that's
18 necessary.
19 MS. KONANOVA: Absolutely, your Honor. I
20 will stick with the facts.
21 The facts are the plaintiff's reports are due
22 in July and defendant's expert reports are due well
23 into 2018 in February. So that supplemental
24 disclosure, the January disclosure was served 13 months
25 before defendant's expert reports were due.
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
31 of 43
Proceedings
32
1 THE COURT: The fact is, though, this isn't
2 just a supplemental disclosure, is it? It is a
3 material change to the sample.
4 Can you address that?
5 MS. KONANOVA: Absolutely.
6 We are continuing to finesse or sample
7 together with our experts. Our goal is to present this
8 Court at trial and to present GreenPoint with the most
9 state-of-the-art, simplest, most straight-forward.
10 valid, and reliable sample. So we did make a
11 modification to our sample in order to be able to make
12 that straight-forward presentation to the Court.
13 We have told GreenPoint starting in January
14 exactly which loans we are going to re-underwrite,
15 which loans we may re-underwrite. And to reiterate.
16 they will have 13 months from that sampling disclosure
17 to put in their own expert reports. About 18 months
18 from that sampling disclosure.
19 Expert depositions are set to take place
sometime around the middle of next year,
will have plenty of time to work with their experts to
20 So GreenPoint
21
22 address the loans that we disclosed we needed and we
23 intended to underwrite.
24 The third argument GreenPoint has made in its
25 case formation is the fact that its case strategy
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
32 of 43
Proceedings
33
1 formation depended on the trustee's initial sample.
2 But, your Honor, the parties are still producing
3 documents. We are still in active fact discovery.
4 GreenPoint has produced one witness for a deposition.
5 GreenPoint has not noticed any witnesses for a
6 deposition.
7 The initial deadline for the sampling
8 disclosure was six months before the end of fact
9 discovery. We made our ours in January, about 5 months
10 before the current end of fact discovery. So again.
11 plenty of time to formulate its case strategy in
12 response to that supplemental disclosure.
13 We were willing to work with GreenPoint on
14 guideline matching for those loans. As I said, they
15 have all the servicing files for those loans. We are
16 happy to continue working with them productively to
17 address that January disclosure.
18 Your Honor, I would submit that the CMO must
19 be read consistently with the First Department
20 guidelines. The CMO should not be allowed to block
21 plaintiff's prosecution of its case.
22 THE COURT: I take it that none of the other
23 plaintiffs in the put-back or monoline litigation
24 submitted briefs to the Special Master in connection
25 with this issue; is that correct?
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
33 of 43
Proceedings 34
1 MS. KONANOVA: That is correct, your Honor.
2 THE COURT: And do we have liaison counsel
3 here today from the Ambac and monoline cases.
4 A VOICE: Your Honor, I represent Ambac but
5 not for this motion.
6 THE COURT: I just didn't I just am
7 curious to know whether this has been an issue in any
8 of the other put-back or monoline cases.
9 Let me think for a minute since we don't have
10 liaison counsel here about how we will get an answer to
11 that question.
12 But is there anything else you would like to
13 say before we conclude your argument?
14 MS. KONANOVA: Sure, your Honor.
15 I would like to note that we did ask other
16 Part 60 plaintiffs if this issue has come up and we
17 have addressed this issue with liaison counsel. We
18 understand, as we set forth in our papers, that at
19 least one other put-back plaintiff has reserved the
20 rights to modify their sample and that at least one
21 plaintiff has supplemented their sample disclosure.
22 THE COURT: I don't remember reading that in
23 your papers.
24 That is a representation that you are making
25 here now?
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
34 of 43
Proceedings
35
1 MS. KONANOVA: Yes, your Honor.
2 We ask that you reverse the order of the
3 Special Master and order the production of the loan
4 files.
5 THE COURT: Thank you.
6 MR. MATHESON: Good morning.
7 As Special Master Katz correctly noted, this
8 is not a discovery dispute. This is about plaintiff's
9 violation of the second case management order.
10 That order set out a deadline for the
11 plaintiffs to disclose the loans they plan to
12 re-underwrite. Plaintiff did that on July 28, 2016.
13 They provided a list of 67676 loans they plan to
re-underwrite and then in January of this year they
fundamentally changed the nature of that sample.
14
15
16 The CMO has a provision for requesting an
17 extension of time. Judge Katz's order suggested that
18 plaintiff do that and they have chosen still not to do
19 that. I submit that may be because the good cause
20 standard that the CMO requires, they may not be able to
21 satisfy.
22 I haven't heard them actually explain their
23 change other than to suggest that this one will be
24 better somehow. But what they haven't told you is what
25 they actually did.
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
35 of 43
Proceedings
36
1 Their original sample of 676 loans was a
2 randomly drawn sample of the loans in the trust. What
they have 3 done is they have removed all of the loans
4 that didn't liquidate. So now they have a random
5 sample of only liquidated loans. That's what they have
6 done.
7 You also heard from Miss Konanova that now we
8 know exactly which loans they plan to re-underwrite.
9 That's not the case. Plaintiff said today they still
10 don't know which of the back-up loans they will
11 re-underwrite. They told Special Master Katz they
12 didn't know which of those loans they would
13 re-underwrite. So at this point we still don't know
14 what loans they plan to re-underwrite.
15 They have the 351 from the original sample.
16 They have 250 back-up loans. They have yet to tell us
17 which, if any of those, they intend to re-underwrite.
18 We asked that question because they wanted to
19 add 75 additional back-up loans. Our assumption was if
20 they need 75 more back-up loans they must be using some
21 of the ones they have already identified and run out of
22 those.
23 So we asked them that question and to this
24 day they haven't told us a single one of those back-up
25 loans that they plan to re-underwrite. And they are
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
36 of 43
Proceedings
37
1 still reserving their rights to modify the sample
2 further. So we don't know when we will actually know
3 which loans are being re-underwritten in this case when
4 as I understood the point of the second CMO was so that
5 we would know early in fact discovery and we could gear
6 our fact discovery towards the loans that would be at
7 issue at trial.
8 That's what we have been doing. GreenPoint
9 has been gearing its discovery efforts toward the 676
10 loans that plaintiff identified last July. We have
11 retained a re-underwriting expert. We are doing an
12 affirmative re-underwrite of the loans. We are not
13 waiting to receive their expert's re-underwriting
14 report. We have an expert who is doing a from-scratch
15 re-underwrite of those sample loans which now are a
16 moving target for us. So we are no longer sure which
17 loans he should be re-underwriting.
18 We have in negotiations with third parties
19 over discovery, they object to the volume of the
20 documents we are asking for when we ask for documents
21 regarding 30,000 loans and so we then agree to narrow
22 it to the 676, which is now again a moving target which
23 requires us to go back to those third parties to ask
24 for different documents than we asked for before.
25 Miss Konanova suggested that language in the
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
37 of 43
Proceedings 38
1 CMO at the end of that section about sampling somehow
2 permits plaintiff to modify their sample whenever they
3 want . However, there was actually a transcript of the
4 hearing at which you instructed liaison counsel to
5 insert that language into the second CMO.
6 The issue there was defendants were concerned
7 that the language about sampling was a sign that you
8 had decided that sampling would be permitted in all
9 these cases. And so you asked that -- you said that
10 the defendants reserve their rights, the language you
11 already have, but also that nothing in this order will
12 be deemed a determination will be construed as
13 determining as to what extent sampling is or is not
14 appropriate.
15 So it was not put in there to permit
16 plaintiffs to change their sample. It was put in there
17 to protect defendants from that language being used to
18 suggest a ruling had already been made by the Court
19 that sampling would be permitted at trial.
20 There is nothing in that order that allows
21 plaintiff to change their sample. It allows them to
22 request an extension. It has a provision in there
23 about needing more time as a result of discovery issue.
24 So I can give some context there of how our
25 case is a little different from most of the other RMBS
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
38 of 43
Proceedings
39
1 cases before you. In most of those cases the defendant
2 is the sponsor of the securitization not the loan
3 originator. So the defendant doesn't necessarily have
4 in its possession the loan files. And so the parties
5 would need to subpoena third parties to get the loan
6 files. So there was language in there suggest that if
7 there was a problem, getting the loan files in time to
8 make the disclosure required by the second CMO that the
9 parties could get more time because of that difficulty
10 in getting loan files from third parties.
11 That didn't happen in our case. GreenPoint
12 is the defendant. it is the loan originator. and it had
13 the loan files for all 30,000 loans. In fact.
14 plaintiff contacted us and said in order for them to
15 meet their deadline to disclose a sample they needed us
16 to produce all 30 loan files sufficiently in advance of
17 deadline. So we did.
18 They actually have all 30,000 files. So
19 there is no issue of not having files as a reason why
20 they need more time.
21 We are also sort of confused as to why they
22 need back-up loans. The typical reason for back-up
23 loans is when they draw the sample before they have the
24 loan files and it would be possible that some of the
25 loan files in the sample, they wouldn't be able to get
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
39 of 43
Proceedings 40
to 1 those loans and would drop out and then back-up
2 loans would be promoted to sample loans if they had the
3 loan files for those. That also isn't the case here.
4 So we are unclear what the issue is with the
5 back-up loans, why they don't know which ones they are
6 using why they need them at all, given that they are
7 already in possession of every loan file.
8 They have not provided the good cause
9 required by the second CMO for an extension of time.
10 These loans are not properly part of their sample or
11 properly being re-underwritten. The only use of the
12 first lien file they are asking for is to be used in
13 connection with the re-underwrite that shouldn't be
14 happening here because these loans have been disclosed
15 many, many months too late.
16 Thank you.
17 MS. KONANOVA:: Your Honor, a few brief
18 points.
19 We met the initial deadline. So we submit
20 that to require us to demonstrate good cause for the
21 extension of that deadline now would turn the First
22 Department law on its head. It is the receiving party
23 that needs to demonstrate undue prejudice before an
24 amended expert disclosure is precluded, not the
25 producing party.
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
40 of 43
Proceedings
41
1 Point number 2 . The reason for the revised
2 sample is, again, to make it state-of-the-art, valid
3 and reliable.
4 Mr. Matheson has recognized that we have now
5 a version of our sample that focuses on liquidated
6 loans. That is one of the reasons why we needed to
7 disclose additional back-ups. Again, that is to make
8 that sample valid, reliable, state-of-the-art.
9 GreenPoint knows the 550 loans that we are
10 going to re-underwrite, that we are intending to
11 re-underwrite as to the back-up loans
12 THE COURT: They are not all liquidated
13 loans, are they?
14 MS. KONANOVA:: There is a version of our
15 sample that focuses on liquidated loans and then
16 certain additional loans that are active loans but with
17 losses where we are underwriting outside of the sample.
18 As to the back-up loans, we did disclose 325
19 back-up loans that we may re-underwrite. As time has
20 passed we have been continuing to work on those loans.
21 We now have a better idea as to which of those we are
22 planning to re-underwrite.
23 I can tell you that it will be well south of
24 that number. Currently there are about 60 of those
25 back-up loans that we are intending to re-underwrite.
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
41 of 43
Proceedings
42
1 We are glad to provide that list to GreenPoint and to
2 work with them on guideline matching for those
3 approximately 60 back-up loans at this time.
4 Lastly, the prejudice point, I would like to
5 submit is also kind of being turned on its head.
6 GreenPoint has all this time before its
7 expert reports are due, before expert depositions
8 happen. 18 months after the time of our sampling
9 disclosure. They are not prejudiced here. But if the
10 trustee weren't permitted to supplement its sample the
11 trustee would be precluded from litigating its case in
12 the manner that it chooses, again, to get the most
13 state-of-the-art sampling disclosure possible.
14 If your Honor has any questions?
15 THE COURT: You have decided that your
16 original sample was not statistically reliable or
17 viable. Is that what happened?
18 MS. KONANOVA: Not exactly, your Honor.
19 We decided to refine it to make it more valid
20 and more reliable and to create a version of the sample
21 that focuses specifically on liquidated loans.
22 THE COURT: All right.
23 I am going to reserve decision on this
24 motion. There will be a decision shortly.
25 I am modifying my previous directive to
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
42 of 43
Proceedings 43
1 GreenPoint to obtain the transcripts.
2 Since both sides have challenged Special
3 Master rulings the parties can jointly obtain the
4 transcript, e-file it, and file two hard copies with
5 the clerk of the part.
6 Again, I reserve the right to correct errors
7 in the transcript. So if it is needed for any further
8 purpose you should have a copy so ordered by me and not
9 merely signed by the court reporter.
10 Thank you. The record is closed for today's
11 proceedings.
12 •k'k'k'k'k'k'k'k'k'k'k'k'k'k'k'kic-k'k-k-k'k'k'k'k-k'k'k'k'k'k'k'k'k
13 April 27, 2017
14 The above is certified to be a true and
15 accurate transcript of the proceedings.
16
17 MICHAEL ^^j^^RFIELD
18
19
20
21
22
23
24
25
FILED: NEW YORK COUNTY CLERK 05/01/2017 11:51 AM INDEX NO. 600352/2009
NYSCEF DOC. NO. 834 RECEIVED NYSCEF: 05/01/2017
43 of 43
Join the InvestorsHub Community
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
