National Credit Union Administration Board v. RBS Securities, Inc. et al

Filing 495

ORDER denying RBS's March 24, 2015 applications regarding new custodians and loan files. Signed by Magistrate Judge James P. O'Hara on 3/27/2015. (ah)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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NATIONAL CREDIT UNION ADMINISTRATION
:
:
BOARD, etc.,
:
Plaintiff,
-v:
:
MORGAN STANLEY & CO., et al.,
:
:
Defendants.
:
:
And other NCUA Actions.
:
----------------------------------------X
UNITED STATES DISTRICT COURT
DISTRICT OF KANSAS
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NATIONAL CREDIT UNION ADMINISTRATION
:
BOARD, etc.,
:
Plaintiff,
:
-v:
:
RBS SECURITIES, INC., f/k/a GREENWICH
:
CAPITAL MARKETS, INC., et al.,
:
:
Defendants.
:
:
And other NCUA Actions.
:
----------------------------------------X

13cv6705
13cv6719
13cv6721
13cv6726
13cv6727
13cv6731
13cv6736

(DLC)
(DLC)
(DLC)
(DLC)
(DLC)
(DLC)
(DLC)

USDC SDNY
DOCUMENT
ELECTRONICALLY FILED
DOC #: _________________
DATE FILED: ______________
/ /
3/27/15

11cv2340
11cv2649
12cv2591
12cv2648
13cv2418

(JWL)
(JWL)
(JWL)
(JWL)
(JWL)

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
WESTERN DIVISION
----------------------------------------X
NATIONAL CREDIT UNION ADMINISTRATION
:
BOARD, etc.,
:
Plaintiff,
:
-v:
:
RBS SECURITIES, INC., f/k/a GREENWICH
:
CAPITAL MARKETS, INC., et al.,
:
:
Defendants.
:
:
:
And other NCUA Actions.
----------------------------------------X

11cv5887 (GW)
11cv6521 (GW)
ORDER

HON. DENISE COTE, HON. JOHN W. LUNGSTRUM, and HON. GEORGE H. WU,
District Judges; and HON. JAMES P. O’HARA, Magistrate Judge:
RBS requests in a March 24, 2015 letter that NCUA add eight
new custodians and produce fourteen outstanding loan files.
NCUA submitted an opposition letter on March 26.

RBS’s

applications are denied.
NCUA’s actions against RBS, filed on behalf of failed
corporate credit unions, encompass thirty-seven securitizations
backed by more than 200,000 loans.

Forty-nine of those loans

(“49 Loans”) were originated by Navy Federal Credit Union (“Navy
Federal”).

After origination, Navy Federal sold those 49 Loans

to Charlie Mac LLC (“Charlie Mac”).

Charlie Mac’s parent, U.S.

Central, then re-sold the 49 Loans to RBS’s sponsor affiliate.
RBS securitized the 49 Loans originated by Navy Federal
into Harborview Mortgage Loan Trust (“HVMLT”) 2007-4 and sold a
certificate backed by these loans to WesCorp, one of four failed
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corporate credit unions for which NCUA is the liquidating agent.
The 49 Loans constituted about 2% of the loans backing the
purchased certificate.

NCUA has brought suit based on that

certificate, among others, against RBS (and other defendants) in
California (the “WesCorp Action”).
U.S. Central, which briefly held the 49 Loans, is another
one of the four failed credit unions for which NCUA acts as a
liquidating agent.

NCUA has also filed actions arising from the

certificates bought by U.S. Central.

Those actions are pending

in Kansas and are brought against RBS and other defendants.
The WesCorp Action was filed on July 18, 2011.

Since early

2014, the actions brought by NCUA on behalf of the four failed
credit unions have been coordinated among our three Courts.

The

April 9, 2014 Master Discovery Protocol (“MDP”) entered in these
coordinated actions required the parties to use best efforts to
agree on a list of document custodians by April 18, 2014,
although it provided that the parties could request, and
negotiate in good-faith, the supplementation of custodians.
§ 8(c)-(d).

MDP

The MDP also called for the parties to have

substantially completed document production by October 31, 2014.
Id. § 12(a).

Pursuant to the MDP, fact discovery is to be

completed by July 17, 2015.

Id.

In April 2014, NCUA agreed to produce documents from three
U.S. Central custodians with responsibilities related to Charlie
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Mac in addition to five other U.S. Central custodians.

NCUA

substantially completed its document production in these actions
in October 2014.

In that production, it provided RBS with over

600,000 documents from the eight U.S. Central custodians.

NCUA

also searched for all of the 49 Loan Files originated by Navy
Federal and has produced thirty-five of them.
A November 21, 2014 Order -- entered by our Courts in
response to a November 14 request from defendants for additional
document discovery -- stated that a party may make a request for
further targeted production of documents if (1) it represents
that it has substantially completed review of produced documents
and uncovered material deficiencies; (2) it explains why the
request is timely and could not have been made earlier; and (3)
it represents that it has exhausted the meet and confer process
on the issue.

The principles underlying the imposition of those

three requirements on requests for further document production
apply with equal force to requests for new document custodians.
RBS has not shown that its March 24, 2015 request is
reasonable or timely.

At their core, these actions concern the

representations made by the defendants in the Offering Documents
about the mortgage loans backing the securitizations.

Those

representations include descriptions of the origination process.
Charlie Mac did not originate the 49 Loans; Navy Federal did.
While Charlie Mac briefly held the 49 Loans, to the extent
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evidence from Charlie Mac’s files may be relevant to the issues
at stake here, RBS has not shown that the designation of three
U.S. Central custodians was inadequate to accomplish that task.
Increasing the number of U.S. Central document custodians from
the eight already designated to sixteen is unwarranted.

The

request would impose excessive burdens and costs on the parties
to this litigation and is entirely out of proportion to the role
played by Charlie Mac.

It is noteworthy that defendants in

these actions at one time advocated for imposing a threshold on
their duty to search for files related to originators whose
loans are in a supporting loan group to originators who
contributed more than 10% of the loans.
The RBS request is also untimely.

To address the timing of

this request, RBS asserts that the Second Amended Complaint
(“SAC”) placed in issue certain representations made by U.S.
Central when it sold the loans to RBS.
November.

The SAC was filed last

Moreover, RBS has been aware of the representations

made by U.S. Central to RBS concerning the 49 Loans since RBS
purchased the loans.

The filing of the SAC has not made those

representations more relevant.
In addition to seeking eight new custodians, RBS also
requests that NCUA be ordered to explain (1) the precise
contours of its search for fourteen outstanding loan files for
U.S. Central loans underlying the HVMLT 2007-4 offering, and (2)
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what happened to those fourteen files.

RBS has not shown that

there is any reason to believe that NCUA’s search for files has
been less than diligent.

Accordingly, it is hereby

ORDERED that RBS’s March 24 requests are denied.

Dated: March 27, 2015

__/s/ Denise Cote _______________
United States District Judge

Dated: March 27, 2015

__/s/ George H. Wu________________
United States District Judge

Dated: March 27, 2015

___/s/ John W. Lungstrum__________
United States District Judge

Dated: March 27, 2015

___/s/ James P. O’Hara____________
United States Magistrate Judge

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