National Credit Union Administration Board et al v. HSBC Bank US, National Association

Filing 407

ORDER denying without prejudice 402 Letter Motion to Compel. Plaintiffs' motion to compel, ECF No. 402, is DENIED without prejudice for failure to comply with the Court's Individual Rules, which require that parties meet and confer befor e addressing discovery disputes to the Court and include evidence of that meet-and-confer process in any letter to the Court. During their next meet and confer, the parties should make best efforts to reach a compromise on this issue. The Clerk of Court is directed to terminate the motion at ECF No. 402. So Ordered. (Signed by Magistrate Judge Sarah Netburn on 8/11/2020) (js)

Case 1:15-cv-02144-LGS-SN Document 407 Filed 08/11/20 Page 1 of 5

8/11/2020

LAUREN H UHLIG
[phone]
luhlig@wc com

August 3, 2020

Via Email
Honorable Sarah Netburn
United States District Court
Southern District of New York
40 Foley Square, Room 430
New York, NY 10007
Re:

HSBC Bank USA, N.A. v. NCUA, No. 15-cv-02144

Dear Judge Netburn:
I write on behalf of Defendant HSBC Bank USA, N.A. (“HSBC”), in response to
Plaintiffs’ letter motion demanding the production of expert reports and transcripts from 16
unrelated RMBS repurchase cases. Those repurchase cases were filed by HSBC as a nominal
plaintiff after certificateholders directed and indemnified the trustee to pursue claims in those
trusts. None of those cases involved the bellwether trusts at issue in this action or HSBC’s
testifying experts here. Accordingly, Plaintiffs’ motion seeks materials that are not properly
subject to expert discovery and that are neither relevant nor admissible here.
I.

Background

Fact discovery in the bellwether trusts1 closed on May 1, 2017.2 See Mar. 23, 2017 Order
(ECF 234). The parties now are conducting expert discovery related to those trusts. On March
2, 2020, HSBC propounded expert discovery requests for the production of a discrete set of prior
reports and testimony from Plaintiffs’ testifying experts in this case. Specifically, HSBC sought
reports submitted by Plaintiffs’ experts Leonard A. Blum, Christopher J, Milner, and Gary Shev
in seven RMBS cases brought by Plaintiffs. Both the Federal Rules and SDNY case law support
HSBC’s entitlement to this discovery. Rather than make a straightforward production of this
information, which already is in Plaintiffs’ possession, Plaintiffs refused to provide any of the
discovery and further refused to convey HSBC’s subpoenas (seeking the same material) to their
expert witnesses, whom Plaintiffs’ counsel stated they represent.

By order of the Court and agreement of the parties, this case has been proceeding initially only
with respect to certain bellwether trusts. See Order (ECF 11); June 24, 2015 Hr’g Tr. 5:1-24.

1

2

The Court previously granted a limited extension of fact discovery to June 16, 2017, related to
party depositions. See May 5, 2017 Order (ECF 255).

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Honorable Sarah Netburn
August 3, 2020
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The parties met and conferred about HSBC’s expert discovery requests on May 13,
2020.3 Plaintiffs continued to refuse to provide the requested expert discovery related to their
testifying experts, which exacerbates a fundamental fairness problem that arises in the unique
procedural posture of this case. The parties here do not have equal access to the prior reports of
the opposing party’s testifying experts. As the Court knows, Plaintiffs have sued a number of
RMBS trustees. Many of the experts testifying on behalf of HSBC in this case already have
submitted reports in those other RMBS cases, to which Plaintiffs have access. In contrast, HSBC
was not a party to the other RMBS litigation brought by Plaintiffs and thus does not have access
to Plaintiffs’ experts’ reports in those cases.
In light of Plaintiffs’ blanket refusal to provide the above expert discovery and the
unequal access to information, HSBC proposed a compromise that would have leveled the
playing field with regard to testifying experts and avoided burdening the Court with a discovery
motion. HSBC proposed that if Plaintiffs would agree not to seek or use prior testimony and
reports from HSBC’s testifying experts, then HSBC would do the same with respect to Plaintiffs’
testifying experts.4 On May 28, 2020, Plaintiffs rejected HSBC’s offer of compromise and
demanded instead that HSBC produce expert reports and transcripts from 16 RMBS repurchase
cases that involve none of HSBC’s testifying experts here and none of the trusts at issue in this
case. HSBC previously informed Plaintiffs that HSBC’s experts in this litigation had no role in
the 16 repurchase cases, Ex. A (May 27, 2020 12:59 p.m. Email) (relevant language highlighted
for reference), but Plaintiffs propounded discovery requests seeking the information anyway.
II.

Argument

Plaintiffs’ May 28 discovery demand was a transparent attempt to go on the offensive, in
the face of legitimate expert discovery requests from HSBC, in order to seek irrelevant fact
discovery long after the time authorized to do so. Plaintiffs’ requests are neither proper expert
discovery nor relevant, and their motion should be denied.
As a threshold matter, Plaintiffs’ motion does not comply with the Court’s Individual
Rules, which require that “[a]ny party wishing to raise a discovery dispute with the Court must
first confer in good faith with the opposing party, in person or by telephone,” and that any
subsequent letter to the Court “must include evidence that the meet-and-confer process
occurred, including when and whether it was in person or over the telephone.” Indiv. R. II(C)
(Jan. 31, 2020) (emphasis in original). Plaintiffs have not complied with the Court’s directive.
Instead, when HSBC’s counsel proposed dates for a telephonic meet and confer, Plaintiffs’
counsel summarily declared that Plaintiffs would proceed to immediately file their motion,
3

At that time, Plaintiffs had not served the discovery demand that is the subject of their instant
motion. That demand was not made until May 28, 2020. The parties did not hold any meet and
confer calls after May 13. Thus, Plaintiffs mischaracterize the facts when they state in their letter
that “the parties have met and conferred” regarding Plaintiffs’ demand. Attaway Ltr. at 5.
4

HSBC reserves the right to file a separate letter motion concerning its discovery requests
should Plaintiffs continue to refuse to agree to HSBC’s compromise.

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Honorable Sarah Netburn
August 3, 2020
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claiming the parties already had met and conferred regarding Plaintiffs’ demand. See Ex. B (July
28–29, 2020 Emails). In fact, the parties had not met and conferred in person or by telephone
concerning Plaintiffs’ demand. Likely for this reason, Plaintiffs failed to include in their letter
the required statement of “when and whether [the meet and confer] was in person or over the
telephone.” Indiv. R. II(C). For this reason alone, Plaintiffs’ motion should be denied. In any
event, Plaintiffs’ motion also should be denied on the merits.
A.

Plaintiffs’ Discovery Requests Are Not Proper Expert Discovery Under the
Federal Rules.

Plaintiffs’ requests do not comply with the federal rules for expert discovery because they
do not seek material from any experts in this case. As Plaintiffs are well aware, none of HSBC’s
experts in this case submitted reports in any of the 16 repurchase actions. Accordingly, none of
the requested material is properly the subject of expert discovery. See Fed. R. Civ. P. 26(a)(2)
(permitting expert discovery only of designated experts in the case at issue).
The rules provide for discovery only as to disclosed experts, including their prior cases,
so the opposing party can obtain the prior reports and testimony of the disclosed experts. See id.;
Fed. R. Civ. P. 26(a)(2)(B)(v). The federal rules on expert discovery do not permit discovery of
reports and transcripts from individuals who are not experts in the case. Plaintiffs fail to cite any
rule showing otherwise, and Plaintiffs’ three cases do not support Plaintiffs’ position. Indeed,
Plaintiffs do not even attempt to argue that Surles v. Air France, 2001 WL 815522 (S.D.N.Y July
19, 2001), supports their argument, and with good reason: that case addresses the production of
prior reports only from experts in the case at issue. Id. at *6–*7. Likewise, Evanko v. Electronic
Systems, 1993 WL 14458 (S.D.N.Y. Jan. 8, 1993), concerns discovery only from experts in the
case at issue. Id. at *3–*4. Finally, Blackrock v. Wells Fargo, 2017 WL 3610511, at *10
(S.D.N.Y Aug. 21, 2017), does not address discovery of prior expert reports at all.
Plaintiffs argue in the alternative that, if the Court finds their requests are not proper
expert discovery, the requests should be construed instead as “a limited exception to the close of
fact discovery” because, Plaintiffs assert, “the expert reports sought here are likewise covered by
the scope of multiple fact discovery requests” propounded in 2015. This assertion, which fails to
identify a single relevant fact discovery request, is meritless. Fact discovery closed over 3 years
ago and was limited to the bellwether trusts, none of which were at issue in the 16 repurchase
cases. See Order (ECF 11); June 24, 2015 Hr’g Tr. 5:1-24 (limiting discovery to bellwether
trusts). Furthermore, in purported support for their alternative request, NCUA again
misrepresents the facts, incorrectly claiming that HSBC “has produced these expert reports in its
other cases.” Attaway Ltr. at 5. HSBC has not produced any expert reports from these 16
RMBS repurchase cases in any of the coordinated SDNY cases.
B.

Plaintiffs’ Discovery Requests Seek Information That Is Neither Relevant
Nor Admissible.

Because Plaintiffs’ requests are not proper expert discovery, their motion should be
denied. But even if construed as late fact discovery, Plaintiffs’ motion still should be denied.

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Honorable Sarah Netburn
August 3, 2020
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First, Plaintiffs’ requests do not seek information relevant to any claim at issue. See Fed.
R. Civ. P. 26(b)(1). As the Court previously held, establishing HSBC’s “discovery” of breaches
requires showing that HSBC had actual knowledge “with respect to a specific defect, in a
specific loan, in a specific trust.” Mar. 10, 2017 Order (ECF 225) at 13. Other courts
unanimously have agreed. “[I]t remains the law in RMBS cases of this kind that ‘[t]o prevail
ultimately on the breach of contract claim, a plaintiff does have to demonstrate breach on a loanby-loan and trust-by-trust basis.’” BlackRock, 2017 WL 3610511, at *7 (quoting BlackRock v.
Wells Fargo, 247 F. Supp. 3d 377, 389 (S.D.N.Y. 2017), objections overruled, WL 3610511
(S.D.N.Y. Aug. 21, 2017)); see also Phoenix Light SF Ltd. v. Deutsche Bank Nat’l Tr. Co., 172
F. Supp. 3d 700, 713 (S.D.N.Y. 2016) (same); Royal Park Invs. SA/NV v. Deutsche Bank Nat’l
Tr. Co., 14-CIV-4394 (AJN), 2016 WL 439020, at *6 (S.D.N.Y. Feb. 3, 2016) (same)); see also
Ret. Bd. of the Policemen’s Annuity & Ben. Fund of the City of Chicago v. Bank of New York
Mellon, 775 F.3d 154, 162 (2d Cir. 2014). Opinions offered by experts in different cases about
different loans from different originators in different trusts have no probative value in this case,
particularly where such experts have no role in the current case.
It makes no difference that Deutsche Bank Structured Products (“DB”) was a warrantor
in the 16 repurchase case trusts and also is a warrantor in some of the bellwether trusts. None of
the 16 repurchase cases involve the bellwether trusts.5 Plaintiffs offer no support (and there is
none) for the proposition that if HSBC properly was directed and indemnified by
certificateholders to file suit as to a group of loans in one trust, then that direction somehow
triggers a duty for HSBC to investigate different loans in different trusts. Such a proposition
runs directly counter to the no-investigation provisions in the PSAs, among many other
provisions. Moreover, the 16 repurchase actions were all brought in 2012 and 2013, and any
expert reports would not have been created until years later, which would have been long after
any deadline for filing additional repurchase actions, including in the bellwether trusts.
Accordingly, such reports could not be probative of HSBC’s knowledge for trusts in this action.6
Second, Plaintiffs’ suggestion that reports and testimony from experts unrelated to this
case regarding non-bellwether trusts could constitute “admissions” by HSBC in this case also is
meritless. Plaintiffs’ argument is based in part on a mischaracterization of HSBC’s role in the
putback actions. For example, Plaintiffs incorrectly claim that “HSBC’s own forensic review[s]”
in these 16 cases “revealed numerous breaching loans.” Attaway Ltr. at 1. As Plaintiffs are well
aware, however, the “forensic review[s]” underlying the Complaints in those matters were
5

One repurchase case involved a non-bellwether trust covered by NCUA’s complaint. However,
the repurchase case for that trust, ACE 2006-FM1, was dismissed at the pleading stage and no
discovery was taken, so there are no expert reports or testimony relating to that trust.
6

Nor are Plaintiffs’ correct that Judge Schofield’s decision denying Plaintiffs’ motion for
reconsideration after affirming this Court’s opinion denying Plaintiffs’ attempt to use sampling
supports their request here. Much to the contrary, Judge Schofield held that “[g]iven the limited
and loan-specific nature of the trustee’s duties . . . the ‘discovery or receipt of notice’
requirement must require HSBC to have information about a specific loan, rather than
generalized knowledge or notice extrapolated from other loans.” Mar. 19, 2018 Order (ECF
314) at 5, Pls.’ mot. for further reconsideration denied, Apr. 24, 2018 (ECF 335) at 1–2.

Case 1:15-cv-02144-LGS-SN Document 407 Filed 08/11/20 Page 5 of 5
WILLIAMS €l CONNOLLY LLP
Honorable Sarah Netbum
August 3, 2020
Page 5
conducted by the directing ce1iificateholders, not HSBC. Moreover, the Complaints in the
putback actions were drafted by special litigation counsel that were retained at the direction of
the directing ce1iificateholders. Because such Complaints were filed by HSBC at the direction of
certificateholders only in a representative capacity as indenture tmstee of those specific tiusts,
any allegations in the pleadings and any opinions of expe1is in those cases-none of whom are
expe1is in this case-cannot be atti·ibuted to HSBC in this case. Cf Restatement (Second) of
Judgments § 36 ("A pa1iy appearing in an action in one capacity, individual or representative, is
not thereby bound by or entitled to the benefits of the mles of res judicata in a subsequent action
in which he appears in another capacity."); see also Tuper v. Tuper, 34 A.D.3d 1280, 1281 (4th
Dep't 2006) (explaining that "[i]t has been repeatedly held that persons suing or being sued in
their official or representative capacity are, in contemplation of law, distinct persons, and
sti·angers to any right or liability as an individual"); id. at 1281-82 (finding ti11stee in their
representative capacity not in privity with the ti11stee in their individual capacity); Teamsters v.
NY State Teamsters Council Health & Hosp. Fund, 999 F. Supp. 102, 110 (N.D.N.Y. 1995)
(finding statements made by party to be inadmissible as adinissions of a paiiy opponent when
made in a different representative capacity).
The actual facts finiher confom the disingenuousness of NCUA's litigation position in
this case. Ce1iificateholders in other ti11sts sponsored by DB could have directed HSBC as
tiustee to file suit, including in the bellwether tiusts in this case (ACE 2005-AGl, ACE 2006OP2, DBALT 2007-OAl, and MHL 2007-1). They did not. In fact, NCUA as certificateholder
did the exact opposite. After independently investigating alleged breaches of representations and
wairnnties in DB-sponsored tiusts (including the bellwether ti11sts), NCUA negotiated and
concluded its own direct settlement with DB. In con·unction with that settlement NCUA

It is equally
ironic and brazen, to say the least, that NCUA fmiher claims it now needs iITelevant fact
discove1y related to such putback litigations to advance its claims as to HSBC's pmpo1ied
knowledge of alleged breaches.
For the foregoing reasons, No. 402, is DENIED without prejudice for failure to comply
Plaintiffs' motion to compel, ECF HSBC respectfully requests that the Comi deny Plaintiffs'
letterthe Court’s Individual Rules, which require that parties meet and confer before addressing
motion.
with
Respectfully subinitted,
discovery disputes to the Court and include evidence of that meet-and-confer process in any
letter to the Court. During their next meet and confer, the parties should make best efforts to
reach a compromise on this issue. The Clerk of Court is directed to terminate the motion at
ECF No. 402.
SO ORDERED
Attachments: Exhibits A-C
cc: Counsel of Record via ECF

Dated: August 11, 2020
New York, New York