CMFG Life Insurance Company et al v. Morgan Stanley & Co., LLC
Filing
103
DECISION AND ORDER Signed by District Judge Rudolph T. Randa on 6/28/2016 GRANTING 99 Plaintiffs' Motion to Institute Loan File Reunderwriting Protocol and GRANTING 101 Plaintiffs' Motion for Leave to File a Reply Brief. (lmz)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WISCONSIN
CMFG LIFE INSURANCE COMPANY,
CUMIS INSURANCE SOCIETY, Inc., AND
MEMBERS LIFE INSURANCE COMPANY,
Plaintiffs,
-vs-
Case No. 13-C-577
MORGAN STANLEY & Co., LLC,
Defendant.
DECISION AND ORDER
This is an action seeking to rescind the purchase of residential
mortgage-backed securities (RMBS). The Court entered a scheduling order
on January 14, 2016. Expert and fact discovery is currently ongoing. The
plaintiffs, collectively CUNA Mutual, move for an order instituting a loan
file re-underwriting protocol (LFRP).
Reunderwriting involves examining the collection of documents used
to originate each mortgage loan to determine whether the loan was
originated in accordance with applicable underwriting guidelines and was
accurately represented in the Offering Documents. Courts have instituted
LFRPs in other RMBS litigation, some of which involve Smith Barney as a
defendant. See ECF No. 99-1, Exhibit A (Joint order in a series of cases,
generally the NCUA Litigation).
CUNA Mutual’s primary and most persuasive argument is that a
LFRP would minimize the burdens of discovery by requiring the parties to
stipulate to the appropriate loan file and guideline for each mortgage
before undertaking the re-underwriting process. Morgan Stanley counters
that the LFRPs in the NCUA Litigation proved to be burdensome and
wasteful in practice because the stipulation process was a logistical
challenge costing millions of dollars. The relevant question, however, is
whether using a LFRP is more or less costly than the alternative.
Importantly, both parties proceed on the assumption that their experts will
engage in re-underwriting. If the parties’ experts are re-underwriting
different loans and guidelines, then the whole process is rendered useless
and a waste of time. The stipulation process, even if costly, appears to be a
necessary evil.
NOW, THEREFORE, BASED ON THE FOREGOING, IT IS
HEREBY ORDERED THAT:
1. CUNA Mutual’s motion to institute a Loan File Reunderwriting
Protocol [ECF No. 99] is GRANTED; and
2. CUNA Mutual’s motion for leave to file a reply brief [ECF No.
101] is GRANTED.
-2-
Dated at Milwaukee, Wisconsin, this 28th day of June, 2016
BY THE COURT:
__________________________
HON. RUDOLPH T. RANDA
U.S. District Judge
-3-
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