Stewart Title Guaranty Company v. Credit Suisse
Filing
260
MEMORANDUM DECISION AND ORDER Credit Suisse's motion for reciprocal discovery (docket no. 216 ) is GRANTED. The motion for leave to file a motion for summary judgment (docket no. 246 ) is GRANTED. The motion to strike (docket no. 218 ) is DENIED. Signed by Judge B. Lynn Winmill. (caused to be mailed to non Registered Participants at the addresses listed on the Notice of Electronic Filing (NEF) by (jp)
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF IDAHO
STEWART TITLE GUARANTY
COMPANY, a Texas corporation,
Case No. 1:11-cv-00227-BLW
MEMORANDUM DECISION
AND ORDER
Plaintiff,
v.
CREDIT SUISSE, Cayman Islands Branch,
Defendant.
INTRODUCTION
The Court has before it the following motions filed by Credit Suisse: (1) for leave
to conduct reciprocal discovery; (2) for leave to seek summary judgment; and (3) to strike
material in Stewart Title’s supplemental pleadings. The motions are fully briefed and at
issue. For the reasons explained below, the Court will (1) grant the motion to conduct
reciprocal discovery; (2) grant the motion for leave to seek summary judgment; and (3)
deny the motion to strike.
BACKGROUND
Defendant Credit Suisse loaned $250 million to Tamarack Resort, LLC to build a
ski resort. Credit Suisse secured its loan with two mortgages on the resort property, and
obtained title insurance from plaintiff Stewart Title. With the resort only partially
completed, Tamarack defaulted on the loan, leaving most of the contractors unpaid. The
Memorandum Decision & Order – page 1
contractors filed liens on the resort property, and those liens were later determined to be
superior to Credit Suisse’s two mortgages.
Credit Suisse sought to recoup its losses by making a claim on the title insurance
provided by Stewart Title. Stewart Title responded by filing this action seeking a
declaratory judgment that it is not required by the title insurance policy to indemnify
Credit Suisse for any loss due to these superior liens.
As the litigation proceeded, the discovery deadline expired. About a month later,
Stewart Title filed a motion to reopen discovery. It argued that an event occurring after
the discovery deadline was especially relevant to Stewart Title’s claim that Credit Suisse
failed to mitigate damages. More specifically, Stewart Title argued that Credit Suisse’s
failure to accept its tender to redeem two properties – known as the Trillium and Village
Plaza II properties – constituted a failure to mitigate.
Credit Suisse’s refusal was communicated to Stewart Title by Credit Suisse
official, Megan Kane. Stewart Title sought to depose her and others who directed or
participated in that decision to refuse the tender. Stewart Title also sought to submit a
supplemental expert report on Credit Suisse’s refusal to redeem the foreclosed properties.
Stewart Title’s motion to reopen discovery was referred to Judge Benson. He
granted that request, and reopened discovery for 60 days for Stewart Title to (1) depose
Kane; (2) depose any Credit Suisse employee(s) and individual lender(s) who directed or
participated in the decisions communicated by Ms. Kane regarding Credit Suisse’s
refusal to redeem; (3) submit a supplemental expert report on the issue; and (4) obtain
production of all correspondence related to the failure to accept the tender for the
Memorandum Decision & Order – page 2
redemption of the two properties. All of this discovery is limited to the mitigation of
damages issue.
Credit Suisse has now filed a motion for reciprocal discovery on the mitigation
issue, and has also filed a motion to be allowed to seek summary judgment on that issue
after the discovery is completed. Credit Suisse has also filed a motion to strike material
in Stewart Title’s supplemental pleadings. The Court will consider each motion below.
ANALYSIS
Credit Suisse’s Motion for Reciprocal Discovery
Credit Suisse argues that discovery is not a one-way street, and that if Stewart
Title is entitled to inquire into the mitigation of damages issue, Credit Suisse should be
entitled to reciprocal discovery. The Court agrees. Credit Suisse should be allowed
discovery within the same boundaries granted to Stewart Title. Stewart Title was allowed
to inquire into Credit Suisse’s reasons for rejecting Stewart Title’s offer to redeem the
two properties; Credit Suisse must be allowed discovery into Stewart Title’s reasons and
ability to perform its offer to redeem the two properties. For example, it would be unjust
to allow Stewart Title to argue that Credit Suisse should have mitigated its damages by
accepting Stewart Title’s offer to redeem the two properties if in fact Stewart Title was
unable to perform that offer. Stewart Title’s ability to perform is hence a proper subject
of discovery.
Stewart Title argues that Credit Suisse has delayed too long, and should have
sought its own discovery as part of its attempt to block’s Stewart Title’s discovery. But
Credit Suisse was entitled to contest Stewart Title’s motion for additional discovery
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without simultaneously seeking in the alternative to obtain its own discovery. If a party
must advance a fallback position in every motion, it would dilute the persuasive power of
its principal argument, and so that cannot be adopted as a general rule. There was
nothing illegitimate about Credit Suisse attempting to block the discovery, and then,
when Judge Benson allowed it, immediately asking to conduct its own reciprocal
discovery. The Court cannot find the motion untimely.
Stewart Title argues that Credit Suisse is improperly attempting to expand
discovery beyond Judge Benson’s order that only allowed discovery into “Credit Suisse’s
refusal to redeem the foreclosed properties.” To now allow discovery into Stewart Title’s
ability to perform the tender would go far beyond Judge Benson’s boundaries, Stewart
Title argues. But, as explained above, Judge Benson only had Stewart Title’s motion in
front of him, so he was not asked to make the discovery a two-way street and hence did
not rule on that issue. Allowing reciprocal discovery does expand the scope of the
inquiry, but the alternative – to lock one party out of the discovery process on an issue
discovered only after the discovery deadline passed – is simply unjust.
The Court will therefore grant Credit Suisse’s motion. The Court will allow
Credit Suisse to pursue discovery through depositions and document production. More
specifically, the Court will allow Credit Suisse to take the deposition of Scott McBee, the
author of Stewart Title’s letter in which it made the tender to Credit Suisse, and two other
Stewart Title officials who were involved in the decision to make the tender. In addition,
the Court will allow Credit Suisse to seek documents from Stewart Title regarding the
decision to offer the tender of redemption. All of this discovery shall be limited to an
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inquiry into the intent, timing, purpose, and ability to perform the tender for the
redemption of the two properties.
Credit Suisse also asks to be allowed to file a rebuttal expert report to Stewart
Title’s supplemental expert report, allowed by Judge Benson, regarding the failure to
mitigate damages. Because Stewart Title was allowed to submit a supplemental expert
report, it is only fair to allow Credit Suisse an opportunity to rebut that report.
The Court will require Credit Suisse to conduct this discovery within 60 days of
this decision, and will require it to file its rebuttal expert report within 30 days of this
decision.1
Motion to Allow Filing of Summary Judgment
Credit Suisse argues that it should be entitled to file a motion for summary
judgment on the mitigation issue once the discovery, allowed above, is completed.
Stewart Title agrees, so long as the briefing is limited to ten pages and no oral argument
is allowed.
The Court will grant the motion, and will allow the standard page limits for an
opening brief, but will not permit any extension of the page limits set by our Local Rules.
The Court will determine whether it needs oral argument after examining the briefs.
Credit Suisse shall file its motion within 30 days after the additional discovery period
allowed in this decision has closed.
1
The Court assumes here that Stewart Title has already filed its supplemental expert report on the
mitigation issue, to which Credit Suisse will be responding. If that is not the case, counsel may contact
the Court to determine whether this deadline should be extended.
Memorandum Decision & Order – page 5
Motion To Strike
Judge Benson allowed Stewart Title to supplement its complaint with allegations
regarding Credit Suisse’s alleged failure to mitigate damages by accepting Stewart Title’s
tender for the redemption of the two properties. In its supplemental response, Stewart
Title not only included the new allegations but also repeated all allegations in the prior
complaint. Credit Suisse now seeks to strike any material other than the new allegations,
arguing that they will cause confusion because some of those claims and allegations are
no longer part of the case, having been dismissed by various motions.
The Court disagrees. The Court and counsel can guard against any confusion so
that should not be an issue. The parties also point to Local Rule 15.1, each interpreting
that Rule as supporting their case. Given that both interpretations are at least reasonable,
the Court is not going to punish Stewart Title for its reasonable interpretation of the Rule.
Consequently, the Court will deny the motion.
ORDER
In accordance with the Memorandum Decision set forth above,
NOW THEREFORE IT IS HEREBY ORDERED, that Credit Suisse’s motion for
reciprocal discovery (docket no. 216) is GRANTED. The Court will allow Credit Suisse
to conduct the discovery described above. The depositions and document discovery shall
be completed within 60 days of this decision, and the rebuttal expert shall be filed within
30 days of this decision.
IT IS FURTHER ORDERED, that the motion for leave to file a motion for
summary judgment (docket no. 246) is GRANTED. Credit Suisse shall file its motion –
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limited to the mitigation of damages issue and abiding by all page limits set by the Local
Rules – within 30 days from the close of the additional discovery allowed by this
decision.
IT IS FURTHER ORDERED, that the motion to strike (docket no. 218) is
DENIED.
DATED: March 31, 2015
_________________________
B. Lynn Winmill
Chief Judge
United States District Court
Memorandum Decision & Order – page 7
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