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

Filing 504

ORDER regarding RBS disclosures and expert reports. Signed by Magistrate Judge James P. O'Hara on 4/20/2015. (ah)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
----------------------------------------X
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: ______________
4/20/15

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:
A March 31, 2015 Order entered in these coordinated actions
called for RBS, by April 10, to disclose to NCUA the loans other
than the Sampled Loans that it “intends” to reunderwrite, to
identify the securitizations from which they are drawn, and to
state the purpose of the reunderwriting.

The March 31 Order

further required that RBS, by May 16, provide notice of the
specific loans that will be the subject of its affirmative
expert reports, and explain the method it used for the selection
of those loans.
In April 10 correspondence between counsel, RBS did not
explicitly disclose any “intent” to engage in reunderwriting,
and with the exception of the Harborview 2007-4 securitization,
did not identify the specific loans or securitization for which

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it might engage in reunderwriting.

Instead, RBS made three

disclosures about the loans that it “may reunderwrite”:
First, RBS may reunderwrite the U.S. Central
loans collateralizing the Harborview 2007-4
securitization for purposes of determining if those
loans comply with underwriting guidelines. . . .
Second, RBS may reunderwrite loans
collateralizing certain of the securitizations at
issue in these actions for purposes of a due diligence
expert report(s). The precise loans RBS may
reunderwrite, and the precise securitizations those
loans collateralize have not yet been
determined. . . .
Third, RBS may reunderwrite loans collateralizing
certain of the securitizations at issue in these
actions for purposes of a loss causation report(s).
The precise loans RBS may reunderwrite, and the
precise securitizations those loans collateralize have
not yet been determined. . . .
(Emphasis supplied.)
In a letter of April 15, NCUA requests that, with the
exception of the identified loans in the Harborview 2007-4
securitization, RBS be precluded from reunderwriting any set of
loans other than the Sampled Loans for purposes of an expert
report.

By letter of April 19, RBS opposes NCUA’s request.

RBS reports that it does not intend to reunderwrite loans
in the New York Action (other than potentially those contained
in the NCUA Sample), but may do so in the Kansas and California
Actions.

It contends both that it did not violate the March 31

Order and that, even if it had, the requested relief is
unwarranted.

RBS maintains that there is “no substantive
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difference” between a statement concerning what RBS “may” do,
and what RBS currently intends to do.

RBS does not address its

failure to identify the loans or securitizations for which the
loss causation and due diligence reunderwriting may occur.
Finally, RBS repeats its prior requests, each of which has been
denied, to extend the time for filing rebuttal expert reports,
arguing inter alia that no prejudice would accrue to NCUA since
trial dates have not been set for the Kansas or California
Actions and RBS will at some future time provide copies of loan
files to NCUA if it possesses them.
To assist all parties, and to provide for the efficient
management of this complex litigation, the April 9, 2014 MDP set
a schedule for fact and expert discovery in these coordinated
actions.

It also advised the parties that conferences will be

held in September 2015 to schedule trials in each of our
actions.

It provided two dates for the trials of the New York

Actions, and dates by which the Kansas and California Actions
will be completed.
Accepting RBS’s explanation that it has disclosed to NCUA
an “intent” to reunderwrite unidentified loans for purposes of
either a due diligence or loss causation defense, but having
determined that RBS violated the March 31 Order by failing to
identify the loans and their securitizations, it is hereby

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ORDERED that RBS shall, by May 1, disclose to NCUA the
loans other than the NCUA Sample Loans and the loans within the
Harborview 2007-4 securitization that it intends to
reunderwrite, identify the securitizations from which they are
drawn, and state the purpose of the reunderwriting.
IT IS FURTHER ORDERED that the March 31 Order’s May 16
deadline for RBS to provide notice of the specific loans that
will be the subject of its affirmative expert reports and to
explain the method it used for the selection of those loans
remains in effect.
IT IS FURTHER ORDERED that, should RBS fail to meet the May
1 or the May 16 deadlines, RBS shall be precluded from
reunderwriting any set of loans other than the Sampled Loans or
the Harborview 2007-4 loans for purposes of an expert report.
The identification and collection of loan files is a difficult,
expensive and time consuming process.
year of notice of NCUA’s samples.

The defendants have had a

NCUA is also entitled to

notice of the specific loans that will be subject to any RBS
reunderwriting project.

Among other things, NCUA must have

sufficient time to permit it to designate a counter-sample
should it choose to do so.

Moreover, NCUA is not required to

rely only on any loan files that RBS may later produce to it as
the best current representation of the originating loan file for
any RBS sample loan.

Unless the parties make timely disclosures
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to each other, this complex, coordinated litigation will be
substantially delayed and made even more expensive to conduct.
IT IS FURTHER ORDERED that RBS’s renewed request to alter
the date for filing expert rebuttal reports is again denied.
See January 15, 2015 Order.
IT IS FURTHER ORDERED that RBS’s request for oral argument
is denied as unnecessary to our Courts’ resolution of the
instant dispute.

Dated: April 20, 2015

__/s/ Denise Cote _______________
United States District Judge

Dated: April 20, 2015

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

Dated: April 20, 2015

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

Dated: April 20, 2015

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

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