Federal Housing Finance Agency v. Nomura Holding America, Inc. et al

Filing 1295

MEMORANDUM OPINION & ORDER....FHFA's January 30 motion in limine is governed by the standards articulated here. Decision on identified issues is reserved until oral argument. (Signed by Judge Denise L. Cote on 2/19/2015) (gr)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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:
FEDERAL HOUSING FINANCE AGENCY,
:
:
Plaintiff,
:
:
-v:
:
:
NOMURA HOLDING AMERICA, INC., et al., :
:
Defendants.
:
:
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11cv6201 (DLC)
MEMORANDUM
OPINION & ORDER

APPEARANCES:
For plaintiff:
Philippe Z. Selendy
QUINN EMANUEL URQUHART & SULLIVAN, LLP
51 Madison Ave., 22nd Fl.
New York, NY 10010
For defendants:
David B. Tulchin
SULLIVAN & CROMWELL LLP
125 Broad St.
New York, NY 10004
Thomas C. Rice
SIMPSON THACHER & BARTLETT LLP
425 Lexington Ave.
New York, NY 10017
DENISE COTE, District Judge:
Plaintiff Federal Housing Finance Agency (“FHFA”), the
conservator for Fannie Mae and Freddie Mac (together, the
“Government Sponsored Enterprises” or “GSEs”), moved in limine
on January 30, 2015 to exclude testimony and other evidence

presented in investigations by the SEC, in other litigation, and
in litigation that has been coordinated with this action.

This

Opinion provides guidance to the parties with respect to the
issues raised by this motion.
1. SEC Testimony
The defendants seek to offer the testimony given by two GSE
witnesses during the course of their employment in connection
with an SEC investigation. 1
Bisenius.

They are Raymond Romano and Donald

The application of Fed. R. Evid. 801(d)(2)(D) will

largely determine the admissibility of this testimony.
To the extent that these employees testified on matters
within the scope of their employment that are otherwise relevant
to the issues to be tried, their testimony will be received.
The testimony must have concerned issues on which they had the
authority to take action, to give advice, or to participate in a
significant manner in the decision-making process that is the
subject matter of their testimony.

See United States v.

Lauersen, 348 F.3d 329, 340 (2d Cir. 2003) (citation omitted),
as amended (Nov. 25, 2003), aff’d on reh'g, 362 F.3d 160 (2d
Cir. 2004), cert. granted and vacated on other grounds, 543 U.S.
1097 (2005); United States v. Rioux, 97 F.3d 648, 660-61 (2d

The defendants no longer seek to offer SEC testimony given by
witnesses after their employment with the GSEs had terminated.
They have also withdrawn their offer of testimony given to the
Financial Crisis Inquiry Commission by GSE witnesses.
1

2

Cir. 1996); Pappas v. Middle Earth Condo. Ass'n, 963 F.2d 534,
537-38 (2d Cir. 1992).

The parties will be given an opportunity

to address whether the testimony from these two individuals is
both relevant and meets the requirements of Rule 801(d)(2)(D).
2. Other Lawsuits
The defendants seek to offer statements made by counsel for
the GSEs either orally or in written submissions in In re Fannie
Mae 2008 Secs. Litig., No. 08cv7831 (PAC) (S.D.N.Y.), Kuriakose
v. Fed. Home Loan Mortg. Corp., No. 08cv7281 (JFK) (S.D.N.Y.),
Ohio Public Emps. Ret. Sys. v. Fed. Home Loan Mortg. Corp., No.
08cv160 (N.D. Ohio), as well as testimony given by Vicki Beal,
who testified as a Rule 30(b)6) witness for third party Clayton
Holdings, LLC in Fed. Home Loan Bank of Seattle v. Banc of Am.
Secs. LLC, No. 09-2-46319-1 (Sup. Ct. Wash.).

FHFA opposes

admission of these statements principally on the ground that
they are irrelevant.

According to FHFA, to be admissible on the

issues that remain to be tried here, the statements should be
tethered to the seven Certificates purchased by the GSEs that
form the basis for the claims in this lawsuit, and the
statements should be made by a person with more specialized
knowledge if offered on the issue of loss causation.
Statements relevant to loss causation are not confined to
those that relate precisely to any loss experienced on the seven
Certificates at issue here.

While it will be necessary for
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defendants in order to prevail on their affirmative defense of
loss causation to offer evidence linked directly to the seven
Certificates, less direct evidence may also be probative of the
existence or absence of facts supporting the theory of loss
causation tendered by the defendants.

Therefore, statements

that explain losses experienced by PLS instruments generally at
the relevant period of time will also likely be received as
relevant to the affirmative defense of loss causation.

The

further removed, however, that statements are from an
explanation of the cause of any “depreciation in value of the
subject security,” 15 U.S.C. §77l(b), the less likely it is that
the statements are relevant.

And conversely, the more likely it

is that their minimal if any probative value will be
substantially outweighed by Fed. R. Evid. 403 considerations.
Similarly, statements by a party opponent under Fed. R.
Evid. 801(d)(2) need not meet the standards for admissibility
imposed by Rule 702.

Statements by counsel during the course of

representing a party opponent are admissible, if relevant.

See

United States v. GAF Corp., 928 F.2d 1253, 1259 (2d Cir. 1991).
The admissibility of Beal’s testimony is governed by Fed.
R. Evid. 804(b)(1), 401 and 403.

As described in FHFA v.

Merrill Lynch & Co., No. 11cv6202 (DLC), 2014 WL 798385
(S.D.N.Y. Feb. 28, 2014), her testimony may be admissible if she
is unavailable as a witness at trial, and if FHFA (or its
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“predecessor in interest,” as that term of art has come to be
understood) had an opportunity and similar motive to crossexamine her in the prior proceeding.

Thus, to the extent the

defendants can show that the Federal Home Loan Bank of Seattle
would have had a similar motive to cross-examine Beal about the
same matters as would FHFA, and that it had an adequate
opportunity to do so, then the testimony may be admissible.
at *1.

Id.

To be “similar,” the motives to develop the testimony

should be “of substantially similar intensity to prove (or
disprove) the same side of a substantially similar issue.”
United States v. DiNapoli, 8 F.3d 909, 914-15 (2d Cir. 1993).
Since FHFA disputes that it had a similar motive and
opportunity, the parties will be given an opportunity to be
heard on the admission of this testimony.
3. Coordinated Litigation
FHFA seeks to exclude testimony from GSE witnesses given in
this coordinated litigation and related documents to the extent
that they refer specifically to certificates, defendants, and
loan originators that are not at issue in this action.
not appear that there is any dispute in this regard.

It does
If there

is a remaining dispute, counsel may record their objections on
this ground when the exhibits are offered.

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CONCLUSION
FHFA’s January 30 motion in limine is governed by the
standards articulated here.

Decision on identified issues is

reserved until oral argument.

SO ORDERED:
Dated:

New York, New York
February 19, 2015
____________________________
DENISE COTE
United States District Judge

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