Professional Documents
Culture Documents
10010
March 8, 2012
VIA ELECTRONIC MAIL
MBIA Insurance Corp. v. Countrywide Home Loans, Inc., et. al., No. 08-602825
BAC has engaged in a pattern of conduct throughout the course of discovery that has
consistently led to the same result - delay. Having failed to obtain a stay of MBIA's successor
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liability claims - from this Court or the First Department - BAC has successfully interposed its
own delay by twice making enormous supplemental productions of documents on the eve of the
commencement of depositions, notwithstanding its previous repeated representations that its
document production was complete.
As the Court is aware, BAC disclosed, just before depositions were to commence in
February, that it had identified a purported "coding error" that had resulted in responsive
documents being identified as non-responsive, and thus withheld from production. MBIA opted
nevertheless to continue with scheduled depositions and receive supplemental productions from
BAC on a rolling basis. To MBIA's surprise, what followed was a flood of new documents,
which has not abated. BAC has produced 170,000 pages of new documents in total, 115,000 of
which were produced in just over the last week and a half. BAC's productions typically included
several thousand pages per custodian and took place only days before a witness was to be
deposed. Given the volume and timing, it was impossible to review these document productions
meaningfully prior to the custodians' depositions. As a result, all five of the successor liability
depositions conducted to date have been held open. Ultimately, it became clear that there was no
point in continuing with depositions when BAC was producing thousands of pages per witness
that could not be adequately analyzed in advance of the witnesses' depositions.
Incredibly, although BAC agreed to suspend and reschedule those depositions set to take
place over a two week period (between March 5 and 16), it complained that MBIA had sufficient
time to review BAC's deluge of new documents and that MBIA was seeking to review this
deluge at a "leisurely pace." Not only does this turn the facts on their head, but BAC has not
even completed its production of these documents, despite having told the Court at the February
9 hearing that it would do so in two to three weeks. MBIA has not received supplemental
productions for at least five scheduled witnesses. In addition, BAC has revealed that there is also
a further collection of successor liability documents to be produced relating to agreed-upon
document custodians who have not been noticed for deposition. Thus, notwithstanding the
production of 170,000 pages of new documents, BAC's supplemental productions will continue,
at this stage indefinitely. 1
Importantly, this is not BAC's first eleventh-hour document dump. As the Court is well aware, in
November and late December of 2011, BAC produced more than 160,000 pages of new documents that
had been improperly withheld as privileged, again as MBIA was preparing to commence successor
liability depositions. That production came about only after MBIA repeatedly questioned BAC as to why
its privilege logs - then including 20,000 entries - identified no redacted documents, suggesting that BAC
had improperly withheld documents that could have been redacted and produced in part. Only after
MBJA complained to the Court did BAC acknowledge this issue and commence review of its entire
privilege log, which resulted in BAC producing 160,000 pages of new documents, a substantial portion of
which had no redaction at all, reflecting that they should not have been withheld in the first place. BAC
has never explained how it could have - inadvertently or otherwise - assembled such a massive privilege
log without establishing a procedure for redacting documents that could be produced in part. Indeed, it is
(footnote continued)
Whatever BAC's explanation for these purported "errors," none has been provided, and
errors of this magnitude should not be excused without a full explanation. BAC's productions
over the last three months have put it on pace to double the total size of its production of
successor liability documents. As a result, MBIA has twice been prepared to commence
depositions only to have BAC make massive supplemental document productions that have not
only caused delay but required MBIA to bear considerable expense in reconstituting teams of
lawyers to review and analyze large volumes of documents in short periods of time. MBIA
should not be forced to bear the prejudice such extraordinary conduct has imposed. BAC's
repeated delays and obstructionist conduct warrant sanctions.
1.
2.
Countrywide's counsel harassed and bullied one of the whistleblowers - who was
unrepresented by counsel at her deposition - to such an extent that she eventually felt compelled
to adjourn her deposition until her counsel could be present. In a transparent attempt to
intimidate and control the unrepresented witness and to prevent her from giving testimony
harmful to Countrywide, counsel adopted a disrespectful, bullying and unprofessional manner,
asked inappropriate, irrelevant and repetitive questions, and made repeated improper objections.
Among other things, counsel repeatedly suggested that the witness was wrong to accept
compensation from Countrywide if she knew the company was fraudulently originating loansan ironic position given that her job was to investigate fraud, and she was fired for reporting
difficult to believe that such an omission could be inadvertent given that redacting tools and protocols are
a basic feature of electronic review platforms used for large scale document review projects.
what she discovered. Counsel also accused the unrepresented witness of refusing to answer his
questions when he did not receive the answer he wanted; improperly instructed her that she was
only to give a "yes" or "no" answer and was not permitted to give an explanation; made bullying,
unprofessional comments; and frequently stated "move to strike" and/or "nonresponsive" after
the witness gave an explanation in response to a question.
3.
As set forth in MBIA's recent motion to compel, Countrywide also failed to disclose for
over two and a half years an entire database of documents concerning allegations of fraud with
respect to more than 2,000 loans in the Securitizations (the "FACTS" database). This, despite a
May 2009 directive from this Court requiring Countrywide to disclose all such databases, and
Countrywide's representation to the Court at that time that it had already done so. In fact,
Countrywide did not disclose the existence of this database until December 2011, and then only
in response to MBIA's request for documents relating to two Countrywide departments
responsible for addressing fraud allegations which had come to light during depositions. 2 In
addition, Countrywide failed to disclose the existence of an internal Countrywide "Fraud
Hotline," of which MBIA only became aware during the deposition of another Countrywide
witness in August 2011 . Most recently, through the deposition of a former Countrywide
whistleblower employee, MBIA has been alerted to the existence of an "independent
appraisal/LandSafe hotline," which apparently also contains relevant and responsive documents.
When asked about this hotline during a meet-and-confer on March 7, 2012, Countrywide could
not confirm that all calls to this hotline were recorded in the FACTS database. Although
Countrywide agreed to look into whether there was another database that tracked information
derived from this appraisal hotline, Countrywide's continued insistence that it had no obligation
to disclose the existence of this appraisal hotline prior to MBIA's specific request further
evidences Countrywide's approach towards discovery - which places the burden on MBIA to
identify by name the specific sources of documents before Countrywide will even consider
producing relevant and responsive documents obtained from that source. Countrywide's
approach is entirely inconsistent with the rules of discovery which obligate the producing party
to identify all sources of responsive and relevant documents.
2
During a telephonic meet-and-confer held on March 7, 2012, Countrywide agreed to produce the
documents requested by MBIA relating to the over 2,000 loans in the Securitizations contained on the
FACTS database. Countrywide's agreement to produce these highly relevant and responsive documents
only after MBIA moved to compel their production belies any notion that it has acted in good faith.
Although Countrywide has now agreed to produce documents from the Fraud Hotline relating to the
loans in the Securitizations, it continued to refuse to produce such documents relating to HELOC and
CBS loans generally. Given that Countrywide's practice and policies for such loans did not vary by loan,
such documents are relevant to MBIA's allegations regarding suspected and confirmed fraud and
Countrywide's knowledge of the same.
MBIA has suffered substantial prejudice as a result of this and other similar conduct by
Defendants. That discovery in this case has been voluminous does not excuse a pattern of
conduct by Defendants that has sought to delay or avoid production of highly relevant
information. MBIA has been obliged to make extensive and costly motions to compel discovery
to which it is plainly entitled (including its pending motion to compel), in addition to countless
other applications to the Court for assistance in resolving disputes which should not have
required the Court's intervention. It has been denied documents and other information to which
it is entitled to prepare its case. It has been obliged to re-convene depositions and pay third
parties' attorneys' fees. And it has had to endure substantial delays in depositions and, more
importantly, in the ultimate resolution of its claims. Accordingly, sanctions against Countrywide
and BAC are warranted.
Respectfully submitted,
/~Z--
O-L,
Jonathan B. Oblak
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