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CASE NUMBER: CASE NAME: LOS ANGELES, CA DEPARTMENT 307 APPEARANCES: REPORTER: TIME:

BC 409 444 PAUL RONALD VS. BANK OF AMERICA TUESDAY, JANUARY 11, 2011 HON. WILLIAM F. HIGHBERGER, JUDGE (AS NOTED ON TITLE PAGE.) ELSA BANDA LARA, CSR NO. 3226 A.M. SESSION ---O---

THE COURT:

ON THE RECORD BC 409444, RONALD AND

MANY OTHERS VERSUS BANK OF AMERICA AND OTHERS. STATE YOUR APPEARANCES. MR. SPIVAK: YOUR HONOR. MR. STEIN: GOOD MORNING, YOUR HONOR, MITCHELL KENIN SPIVAK FROM THE PLAINTIFFS

STEIN ON BEHALF OF PAUL AND LISA RONALD ET AL., ON BEHALF OF ALL PLAINTIFFS. MR. DAVIS: PLAINTIFFS. MR. TOMASZEWSKI: FOR PLAINTIFFS. MS. JONES: PLAINTIFFS. MR. KLEIN: GOOD MORNING, YOUR HONOR. HAPPY NEW BRIDGET JONES, YOUR HONOR, FOR CHRIS TOMASZEWSKI, YOUR HONOR, ERIKSON DAVIS, YOUR HONOR, FOR

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YEAR, YOUR HONOR.

KEITH KLEIN, BRYAN CAVE ON BEHALF OF

DEFENDANTS ACCEPT FOR JAMES AGATE. MR. CEKIRGE: GOOD MORNING, YOUR HONOR, NAFIZ

CEKIRGE, FOR ALL DEFENDANTS, EXCEPT FOR AGATE.

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MR. SHAW:

GOOD MORNING, YOUR HONOR, KAMAO SHAW,

ON BEHALF OF ALL DEFENDANTS EXCEPT AGATE. THE COURT: TENTATIVE. I'M GOING TO GIVE YOU A LONG SPOKEN

I HAVE ANOTHER MATTER AT 11:30 AND HAVE TO I THINK I'M GOING TO

BE AT LUNCH MEETING DOWNTOWN.

INVITE YOU FOLKS TO COME BACK AT 1:30 TO ARGUE. SINCE THE NEED TO DEAL WITH THE 11:30 AND TO GET TO A LUNCH MEETING IN ANOTHER BUILDING, LIMIT THE TIME PRESENTLY AVAILABLE. THE ISSUES PRESENTED TODAY BY THIS FIRST DEMURRER OR TEST OF THE PLEADING AND BY THEIR RELATED MOTION TO STRIKE, PROVIDE THE FIRST PRACTICAL OPPORTUNITY FOR THE PARTIES TO TRY TO CALIBRATE THE STRENGTH OF THE CASE. BUT, HAVING SAID THAT, BY THE NATURE OF THE DEMURRER AND MOTION TO STRIKE, IT'S NOT A TERRIBLY PRECISE CALIBRATION MECHANISM. AND SO, ONE SHOULD NOT

READ TOO MUCH INTO HOW THESE RULINGS TURN OUT. I'M INCLINED TO THINK THAT AT LEAST AS TO SOME CAUSES OF ACTION THE DEMURRER'S GOING TO BE OVERRULED, WHICH IS TO SAY THAT THE PLEADING IS ALREADY ADEQUATE. IT IS CONCEIVABLE THAT THERE WILL BE SOME THE ONLY

CAUSES OF ACTION WHERE REPLEADING IS NEEDED.

CAUSE OF ACTION THAT I BELIEVE IS GOING TO DIE TODAY, IS ONE THAT BY IMPLICATION THE PLAINTIFFS ARE WILLING TO

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LET GO, WHICH IS THE 5TH CAUSE OF ACTION.

THERE WAS NO

WRITTEN OPPOSITION TO THE DEMURRER TO THE 5TH CAUSE OF ACTION.

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SO, WE'LL LEAVE TODAY WITH AN AWARENESS THAT SOME CAUSES OF ACTION ARE ALREADY GOOD TO GO AND OTHERS ARE GOING TO GET A CHANCE FOR LITTLE REHAB. I THINK THAT WE SHOULD ALLOW FURTHER DISCOVERY TO GO FORWARD, ALTHOUGH I WANT TO REGULATE DISCOVERY DISPUTES. DISCOVERY. THE ISSUES PRESENTED BY THE MANY PLAINTIFFS IN THIS CASE AS AGAINST THEIR CURRENT MORTGAGE LENDER AND/OR LOAN SERVICER ARE PART OF A LARGER SOCIOECONOMIC PROBLEM THAT CONFRONT OUR SOCIETY IN CALIFORNIA AND ALL OF THE OTHER STATES IN THIS UNION AN ISSUE OF GREAT CONCERN TO THE U.S. CONGRESS, STATE LEGISLATURE, AND THE BANK REGULATORS, GIVEN THAT IN OUR BANKING SYSTEM THE BANKS ARE INSURED BY THE FULL FAITH AND CREDIT OF THE UNITED STATES GOVERNMENT FOR ALL INTENTS AND PURPOSES. SO THE CONTINUED SOLVENCY OF THE BANKING INDUSTRY AS A WHOLE IS A MATTER OF INTENSE INTEREST TO THE U.S. CONGRESS AS WELL AS THE CENTRAL BANK A PRACTICAL QUESTION THAT CONTINUES TO BE IMPORTANT FOR CASE MANAGEMENT AND POSSIBLE CASE RESOLUTION IS WHAT IS REALLY INTENDED BY PLAINTIFFS AND THEIR COUNSEL IN THIS CASE? SOME OF THE CLAIMS AS SO I HOPE TO AVOID WORLD WAR III OF

PRESSED, IF ACTUALLY SUCCESSFUL, AND TRIED TO A JURY WITH A REQUEST FOR PUNITIVE DAMAGES COULD,

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THEORETICALLY, IF THE PLAINTIFFS GET THINGS TO GO THE WAY THEY SAY THEY WANT THEM TO GO, TO LEAD TO SUCH -CAN POTENTIALLY, I'M NOT BY ANY STRETCH OF THE

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IMAGINATION GUARANTEEING THIS OR SAYING IT WILL BE THE MORE LIKELY OR REASONABLE OUTCOME, BUT IF PLAINTIFFS GET THIS CASE WHERE THEY THINK THEY WANT TO PUT THIS CASE THEY ARE PRESUMABLY GOING TO GET A JUDGMENT FOR BILLIONS OF DOLLARS AGAINST BANK OF AMERICA, POTENTIALLY CREATING A PROBLEM OF SUCH GRAVITY THAT ACTION BY THE CENTRAL BANK OR A STATE OR FEDERAL LEGISLATIVE BODY MIGHT THEORETICALLY BE NEEDED. BUT I HAVE A SNEAKY SUSPICION THAT THE REAL AMBITIONS OF WHAT THE CASE IS TO ACCOMPLISH MAY NOT BE TO PUT BANK OF AMERICA INTO RECEIVERSHIP, BUT RATHER, TO ACCOMPLISH SOME MORE MODEST AND PRACTICAL SOLUTION FOR MANY PLAINTIFFS, IN A WAY THAT'S COST EFFECTIVE TO THE PLAINTIFFS, WHICH IS TO SAY SUCH THAT THEY CAN AFFORD THEIR COUNSEL. I HAVEN'T YET SEEN ACTUAL, PRACTICAL FORECLOSURE RELIEF OR DEBT RESTRUCTURING COME THROUGH IN ANY MEANINGFUL FLOW TO INDICATE THAT I CAN WATCH THE PATTERN OF CASE RESOLUTION, BECAUSE WHAT'S BEEN RUMORED ABOUT AS SUPPOSEDLY GOING TO HAPPEN IF ONLY THE PLAINTIFFS WOULD SUBMIT RELEVANT INFORMATION ACCORDING TO THE DESCRIPTION OF DEFENSE COUNSEL, AND IF, ACCORDING TO PLAINTIFFS, THE DEFENDANT WOULD ONLY ACTUALLY RESPOND FROM TIME TO TIME TO REQUESTS FOR ASSISTANCE AS COMPARED TO JUST DANGLING FALSE HOPE.

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SO, I MAKE THAT COMMENT BECAUSE, NOT SO MUCH IN CONNECTION WITH ARGUING THE DEMURRER, AS THE LARGER QUESTION OF WHERE THE CASE IS REALLY GOING TO GO,

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IT'S USEFUL TO BEAR IN MIND SORT OF WHAT THEORETICALLY ONE IS TRYING TO ACCOMPLISH WITH THE CASE, AS OPPOSED TO WHAT PRACTICALLY ONE WANTS TO ACCOMPLISH WITH THE CASE. I'M WILLING TO DEAL WITH THE CASE ON ITS THEORETICAL BASIS, JUST AT THE NEAR TERM RIGHT NOW. I'M GOING TO ASK DEFENDANT EVENTUALLY TO GIVE NOTICE OF RULINGS, SO DEFENDANT SHOULD PROBABLY GET A PAD AND PENCIL AND TRACK SOME OF WHAT'S OCCURRING OR AT LEAST BUY A TRANSCRIPT WHEN WE'RE DONE. I'VE NOTED ALREADY THAT THE FIRST RULING I EXPECT TO MAKE IS TO SUSTAIN THE DEMURRER TO 5TH CAUSE OF ACTION WITHOUT LEAVE TO AMEND FOR THE VERY REASON THAT THE DEMURRER IS UNOPPOSED. I MAKE THE FURTHER OBSERVATION TO THE PLAINTIFFS THAT I BELIEVE THAT, HAVING FILED A WRITTEN OPPOSITION TO THE USE OF A DECLARATION OF NON-MONETARY STATUS BY TWO OF THE APPEARING DEFENDANTS, UNLESS THE DEFENDANTS HAVE A DIFFERENT SUGGESTION OF WHAT OUGHT TO HAPPEN NEXT, I WOULD RECOMMEND TO PLAINTIFFS THAT THEY SERIOUSLY CONSIDER FILING A MOTION TO STRIKE THAT RESPONSIVE PLEADING BECAUSE AS I UNDERSTAND THE PLAINTIFF'S VIEW OF THINGS, THESE PARTIES NEED TO ANSWER OR OTHERWISE BE FULLY INVOLVED IN THE DEMURRER. I WILL TAKE A MOMENT AND DOUBLE CHECK. I'M LOOKING AT THE DEMURRER THAT I HAVE,

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AND ALTHOUGH THE COUNSEL BRINGING IN THE DEMURRER ARE COUNSEL FOR RECONTRUST AND C.T.C. WHEN I LOOK AT THE DEMURRER AS SUCH, THE DEMURRER HAS NOT BEEN BROUGHT

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FORTH ON BEHALF OF RECONTRUST OR C.T.C.. SO THE ONLY RESPONSIVE PLEADING AT THE MOMENT, AS I UNDERSTAND IT, IS THE DECLARATIONS OF NON-MONETARY STATUS. SO IF THE PLAINTIFFS ARE CORRECT

THAT BASED ON THE ALLEGATIONS THAT IS NOT A SUFFICIENT RESPONSIVE PLEADING, I WOULD THINK THE PLAINTIFFS WOULD WANT TO MAKE A MOTION TO STRIKE THAT AND ESSENTIALLY FORCE THE APPEARING DEFENDANT RECONTRUST AND C.T.C. REAL ESTATE'S HAND TO EITHER JUSTIFY, IN THE FACE OF A CONTESTED MOTION, THE USE OF THE DECLARATION ON NON-MONETARY STATUS OR ALTERNATIVELY IF YOU PREVAIL AND GET THE ONLY RESPONSIVE PLEADINGS FROM THOSE TWO ENTITIES STRICKEN, THEY PRESUMABLY FIND IN THEIR SELF INTEREST TO INTERPOSE SOME OTHER RESPONSIVE PLEADING SUCH AS DEMURRER OR ANSWER OR MOTION FOR JUDGMENT. THINK AT THE MOMENT WE HAVE AN UNRESOLVED ISSUE PRESENTED BY THAT. I'VE GOT A LOT MORE TALKING, DON'T JUMP UP AND EXPECT TO TALK TO ME YET. YOURSELVES ANY FAVORS. YOU ARE NOT DOING BUT

JUST WRITE YOUR NOTES, BE

PATIENT AND THINK ABOUT THIS OVER LUNCH. IF YOU HAVE AN AGREED POSITION AFTER LUNCH ABOUT WHAT'S TO HAPPEN TO THOSE PARTIES, I'D BE PLEASED TO KNOW. PLAINTIFF OBJECTS TO ITEM ONE IN

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DEFENDANT'S REQUEST FOR JUDICIAL NOTICE. THE BALANCE OF DEFENDANT'S REQUEST FOR JUDICIAL NOTICE IS HELD FORTH AS RECORDED DOCUMENTS AND

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THERE'S NO FORMAL OBJECTION, AS SUCH, TO ITEMS TWO THROUGH 57, BUT THERE IS OBJECTION TO ITEM ONE. BECAUSE THE EVIDENCE CODE ALLOWS FOR THE ADMISSION OF SUMMARIES AND RECAPITULATION OF EVIDENCE, AND BECAUSE THERE'S NO ACTUAL OBJECTION TO THE RECAPITULATIONS ACCURACY, BUT JUST TO THE FACT THAT SOME POOR DRONE AT BANK OF AMERICA OR BRYAN CAVE HAD TO DO IT, I'M INCLINED TO OVERRULE THE OBJECTION TO EXHIBIT 1 AND THE REQUEST FOR JUDICIAL NOTICE, BELIEVING THAT AS A MERE RECAP OF OTHERWISE ADMISSIBLE EVIDENCE, HERE ADMISSIBLE BECAUSE IT COMES WITHIN THE AMBIT OF A REQUEST FOR JUDICIAL NOTICE, THAT EXHIBIT 1 IS JUST AS GOOD AS THE REST. BECAUSE I CAN SAY BRIEFLY, AND I WILL JUMP TO THE MOTION TO STRIKE FOR A MOMENT, ALTHOUGH ON THE THE MOTION FOR DEMURRER IS THE THING TO WHICH I'VE GIVEN MORE ATTENTION. BUT, SIMPLY PUT -- OH, A DIFFERENT

PRELIMINARY COMMENT, BECAUSE WE ARE DEALING IN THE DEMURRER CONTEXT WITH THE ADEQUACY OF A PLEADING, AND ARE GENERALLY SPEAKING NOT IN A POSITION TO LOOK AT FACTS, PARTICULARLY FACTS THAT ARE SUPPLEMENTARY TO OR IN THE DEFENDANTS' VIEW ANTITHETICAL TO THE ASSERTIONS MADE IN THE PLEADING, THE FACT THAT CERTAIN CAUSES OF ACTION OR THEORIES ADVANCED TODAY IS NOT INTENDED TO BE MUCH OF A TEST MARKETING OF THE ACTUAL VIABILITY OF THE

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DEFENDANTS' ASSERTIONS AS TO CERTAIN CAUSES OF ACTION, AS AND WHEN, BASED ON A MOTION FOR SUMMARY ADJUDICATION OR OTHERWISE, THE DEFENDANT CAN ACTUALLY TEE UP THE

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FACTUAL PREDICATE NEEDED TO FULLY ADVANCE THOSE ARGUMENTS. I COMMENTED EARLIER THAT I DIDN'T THINK

TODAY'S PROCEEDINGS WERE NECESSARILY GOING TO BE A TERRIBLY PRECISE CALIBRATION OF THE STRENGTHS AND WEAKNESSES OF THE CASE AND THIS IS, BY WAY OF EXAMPLE, ONE OF THE REASONS WHY TODAY'S EXERCISE WILL BE OF ONLY LIMITED UTILITY IN TRYING TO UNDERSTAND WHAT THIS ALL MEANS IN THE GRAND SCHEME OF THINGS FOR LONG TERM CASE VALUE. NOW, HAVING MADE THAT COMMENT IN PASSING, WHICH IS EQUALLY GERMANE TO SOME OF THE QUESTIONS PRESENTED BY THE MOTION TO STRIKE, I DON'T SEE ANY NEAR TERM UTILITY IN GRANTING THE MOTION TO STRIKE AS TO ANY OF THE POINTS RAISED, BUT THAT'S OBVIOUSLY WITHOUT PREJUDICE TO THE DEFENDANT IN DUE COURSE, THROUGH A MOTION FOR SUMMARY ADJUDICATION OR OTHERWISE, TRYING TO WHITTLE A WAY AT SOME OF THE MANY ASSERTED COMPLEXITIES TO THIS CASE TO TRY TO GET IT DOWN TO THE NUBBING OF WHAT NEEDS TO BE RESOLVED, ASSUMING THAT IT DOES NOT COMPROMISE IN WHOLE OR IN PART. LET ME TURN NOW TO THE STATUS OF THE 64 OR SO BORROWERS WHICH THE DEMURRING DEFENDANTS ASSERT DID NOT ORIGINATE THEIR LOAN THROUGH COUNTRYWIDE, OR AN AFFILIATE IN THE MARKETPLACE ACKNOWLEDGED TO BE THEN AND THERE AN AFFILIATE OF COUNTRYWIDE.

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I WOULD HOPE IN MANY WAYS THAT AS A SHOW OF THE WILLINGNESS TO PARE DOWN THE MULTITUDE OF CLAIMS OF THE MULTITUDE OF PLAINTIFFS TO THE STRONGEST AND MOST

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VIABLE CLAIMS, FOR THE SAKE OF LITIGATION EFFICIENCY, THAT PLAINTIFFS THROUGH THEIR COUNSEL WOULD BE WILLING, WHEN THE CIRCUMSTANCES ARE AS OBVIOUS AS THEY SEEM TO BE THROUGH REQUESTS FOR JUDICIAL NOTICE, TO ACCEPT REALITY AND TRIM THEIR SAILS. CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 128.7 ATTEMPTS TO PUT ON COUNSEL AND STATE COURT A DUTY AKIN TO RULE 11 IN THE FEDERAL COURTS TO BE SURE THAT AS YOU PRESS FORWARD WITH VARIOUS CLAIMS, FACTUALLY AND LEGALLY, THAT WHEN COUNSEL PUSH ON, THAT IF THEY ARE INFORMED OF NEW FACTS OR CHANGED CIRCUMSTANCES, THAT MAKE WHAT MAY HAVE BEEN IN GOOD FAITH AN APPARENTLY BONA FIDE CLAIM AT THE INCEPTION OF A SUIT, NO LONGER NECESSARILY IT IS SUCH A GOOD CLAIM, THAT COUNSEL ACTUALLY ARE WILLING TO HAVE A FEEDBACK LOOP AND LEARN FROM WHAT THEY READ AND THEY ARE TOLD, AND TO MODIFY THEIR ALLEGATIONS. AND WITH THAT THOUGHT IN MIND, ALTHOUGH IT DOES ESSENTIALLY REQUIRE RESORT TO THE REQUEST FOR JUDICIAL NOTICE, AND IS NOMINALLY CONTRARY TO WHAT PLAINTIFFS PURPORT TO ASSERT IN BOILERPLATE PLEADING IN THEIR COMPLAINT WHICH IS THAT ALL OF THESE LOANS ORIGINATED IN SOME FASHION WITH COUNTRYWIDE AND/OR ITS CHIEF EXECUTIVE OFFICER MR. MOZILO CONSPIRING BEHIND THE CURTAIN WITH ANYBODY AND EVERYBODY WHO MIGHT HAPPEN TO

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HAVE BEEN INVOLVED AS TO ANY OF THESE LOANS. THAT DOES NOT NECESSARILY SEEM TO BE A CLAIM THAT CAN BE PRESSED FORWARD AT THIS TIME AS TO

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THESE 64 BORROWERS IN BONA FIDE GOOD FAITH.

AND I WOULD

HOPE THAT THE PLAINTIFFS WOULD BE PREPARED TO DISMISS THE FRAUD ORIGINATION CLAIMS OR I GUESS ONE MIGHT CALL THEM THE LOAN ORIGINATION CLAIMS, WHICH I UNDERSTAND TO BE COLLECTIVELY THE FIRST THROUGH THIRD CAUSES OF ACTION AS TO THESE 64 BORROWERS, WITHOUT PREJUDICE. THE POINT OF WITHOUT PREJUDICE BEING IF SOME POINT LATER IN THE SEQUENCE ONE WERE TO LEARN HYPOTHETICALLY, THAT WHEN BORROWER HELIDORO, H-E-L-I-O-D-O-R-O, BECERRA, B-E-C-E-R-R-A, ORIGINATED A LOAN IN MARCH OF 2007, WITH AN OUTFIT CALLED ADVANTIX, A-D-V-A-N-T-I-X, LENDING INC., WHICH AT PRESENT SEEMS TO HAVE NOTHING TO DO WITH COUNTRYWIDE; THAT THEY LATER LEARN THAT, INDEED, THEY DID HAVE A CONNECTION DOWN THERE WITH COUNTRYWIDE THAT THEY COULD SEEK LEAVE TO AMEND TO BRING THE CLAIM BACK BEFORE THE COURT. BUT I'M CERTAINLY GIVEN TO INFER THAT IT'S NOTHING BUT A WILD GUESS AT THE MOMENT THAT COUNTRYWIDE SOMEHOW WAS DOING BUSINESS WITH OR THROUGH ADVANTIX WHEN THEY SEEMED QUITE CAPABLE OF DOING BUSINESS AS COUNTRYWIDE AND RATHER FANCIED THAT THAT WAS A GOOD WAY TO DO BUSINESS AT THE RELEVANT TIME. SO, I GUESS IN THAT REGARD, I'M INCLINED TO SUSTAIN THE DEMURRER OF THE APPEARING DEMURRING DEFENDANTS AS TO THOSE APPROXIMATE 64 LOANS AS TO THE

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FIRST THREE CAUSES OF ACTION OVER THE PLAINTIFF'S APPARENT BUT UNFORTUNATE OBJECTION. I SAY UNFORTUNATE BECAUSE TO GO BACK AND

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REFER TO ONE'S PRIOR PLEADING AND SAY, WELL, WE WANT TO SAY THAT COUNTRYWIDE MADE THE LOAN, WHEN THE LAND RECORDS SHOW THAT COUNTRYWIDE DIDN'T MAKE THE LOAN, MAKES ONE WONDER ABOUT THE PRACTICALITY OF PLAINTIFF'S COUNSEL AND/OR THEIR AWARENESS OF CCP 128.7. SUSPECT THAT'S REALLY NOT AN ISSUE. THE SAME QUESTION IN MANY OF THE SAME WAYS ARISES AS TO ANOTHER GROUP OF BORROWERS, NOT SO TIDILY DEFINED BY THE DEMURRER DEFENDANTS, BUT THESE CAN BE REFERRED TO AS THE PERSONS WHOSE LOANS WITH COUNTRYWIDE OR OTHERWISE WERE MADE FOR SOME DATE IN 2005 OR PERHAPS BEFORE JANUARY 1 OF 2005, GIVEN THAT SO FAR THE PLEADING IS DEPICTING FRAUDULENT CONDUCT BY COUNTRYWIDE, ITS OFFICERS, DIRECTORS AND AGENTS FROM SOME DATE IN 2005 AND THEREAFTER. THIS IS NOT A VERY TIDILY BROUGHT FORWARD DEMURRER, TO MY UNDERSTANDING, BECAUSE WE DON'T TO THE BEST OF MY UNDERSTANDING HAVE THE NAMES OF THE BORROWERS WHO ARE SUPPOSED TO BE STRICKEN AT THIS TIME SO NEATLY ARRAYED AS THE 64 BORROWERS WHO APPARENTLY DIDN'T GO THROUGH COUNTRYWIDE FOR LOAN ORIGINATION. CONCEPT AGAIN SEEMS TO HAVE SOME VALIDITY. THE SUSPENSION, WHICH IS AN INTERESTING PROCEDURAL DEVICE, AS STYLED BY PLAINTIFF'S COUNSEL, THROUGH THEIR "AMENDMENT TO THIRD AMENDED COMPLAINT" BUT THE BUT I

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FILED NOVEMBER 22, 2010, IS INTRIGUING AND IN SOME WAYS I DON'T QUARREL WITH WHAT PLAINTIFF'S COUNSEL ARE TRYING TO DO, BUT IN THE NICETIES OF IT, I WOULD BE INCLINED TO

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THINK THAT THIS SHOULD BE AT THIS JUNCTURE, A DISMISSAL OF THE CLAIMS AS TO SUCH PARTIES WITHOUT PREJUDICE. IT CAME TO MY COMMENTS ABOUT MR. BECERRA AND HIS LOAN WITH ADVANTIX, AND ITS APPARENT LACK OF CONNECTION AT THE TIME OF ORIGINATION TO COUNTRYWIDE. BUT THEN AS TO THESE BORROWERS WHO HAVE PRE-2005 LOANS, THE POINT OF DISMISSING THESE CLAIMS WOULD BE WITHOUT PREJUDICE, IS THAT IF LATER EVIDENCE SUPPORTING THAT THE FRAUD WAS EARLIER IN TIME IN 2004 OR EARLIER, THAT A DISMISSAL AT THIS JUNCTURE WITHOUT PREJUDICE WOULD NOT ESTOP THE PLAINTIFFS FROM TRYING TO AMEND THOSE CLAIMS BACK IN AS AND WHEN THE CLAIM CAME FORWARD, WHICH IN MY VIEW IS TIDIER THAN SOMETHING I DON'T THINK I'VE READ ABOUT IN WITKIN OR WEIL AND BROWN, OR THE CALIFORNIA CASES WHICH IS THIS THING DESCRIBED IN THE AMENDMENT THE THIRD AMENDED COMPLAINT AS A "SUSPENSION" OF THE CLAIM. THE THREE FRAUD CLAIMS ARE COMMON LAW CLAIMS, AND BECAUSE THEY ARE FRAUD CLAIMS, ALBEIT ON BEHALF OF, I GUESS SCORES GOING ON HUNDREDS OF PEOPLE, INVOLVING SCORES OR HUNDREDS OF DIFFERENT LOANS, WE HAVE THE UNAVOIDABLE BURDEN GIVEN THE DESIRE OF THE PLAINTIFFS TO SUE IN CONJUNCTION WITH EACH OTHER AND/OR OTHER COUNSEL TO HAVE AS MANY SEPARATE PLAINTIFFS BEFORE THE COURT IN A SINGLE DOCKET AS HAPPEN TO BE IN THIS DOCKET AT THE MOMENT, NEVERTHELESS, PRESENT A MONUMENTAL

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PROBLEM OF FULFILLING THE STILL-RESPECTED COMMON LAW REQUIREMENT THAT FRAUD BE PLED WITH PARTICULARITY. IN MY VIEW THAT'S A PROBLEM AS TO THE

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SECOND AND THIRD CAUSES OF ACTION ONLY FOR REASONS I'LL EXPLAIN FURTHER. AND FOR THAT REASON I'M INCLINED TO

SUSTAIN THE DEMURRER TO THE SECOND AND THIRD CAUSES OF ACTION WITH LEAVE TO AMEND TO TRY TO BRING FORWARD WITH PARTICULARITY. BUT LET ME STAY WITH THE FIRST CAUSE OF ACTION AT THE MOMENT, WHERE I'M INCLINED TO OVERRULE THE DEMURRER. THE PERLAS, P-E-R-L-A-S, V. GMAC CASE CITED I'M GOING TO DECISION.

BY THE DEFENDANTS IS VERY INTERESTING.

TAKE A SECOND TO GET MY HANDS ON THE PHYSICAL

(PAUSE IN THE PROCEEDINGS.)

THE COURT:

THIS IS A DECISION OUT OF DIVISION

FIVE OF OUR COURT OF APPEALS IN NORTHERN CALIFORNIA, JUSTICE SIMMONS, THAT BASICALLY SAID IT WASN'T THE BORROWER'S PREROGATIVE TO BLAME THE LENDER IF THE BORROWER, UNDER WHATEVER CIRCUMSTANCES THAT GAVE RISE TO IT HAPPENING, FILLS OUT A LOAN APPLICATION OVERSTATING THEIR INCOME AND THEREFORE GETS PUT INTO A LOAN THEY CAN'T AFFORD BECAUSE, ESSENTIALLY, THE BORROWER IS SUPPOSED TO PROTECT THE BORROWER ABOUT DISCLOSING THE INCOME AND THE LOAN APPLICATION IS NOT FOR THE BENEFIT OF THE BORROWER, BUT FOR THE BENEFIT OF THE LENDER, AND SO AN OVERSTATEMENT OF THE INCOME IN THE LOAN

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APPLICATION, MADE PURPORTEDLY BY THE BORROWER TO THE LENDER IS NOT SOMETHING ON WHICH THE BORROWER CAN RELY TO THEN TURN AROUND AND TRY TO BLAME THE LENDER FOR

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BEING PUT IN THE LOAN IN QUESTION. I PERSONALLY AGREE AS A MATTER OF JURISPRUDENCE WITH THE PLAINTIFFS THAT THE PERLAS CASE DOESN'T NECESSARILY SUPPORT THE APPLICATION TO WHICH THE DEMURRING DEFENDANTS WANT TO PUT IT. BUT I ALSO BELIEVE THAT IN ALL OF THE THINGS THAT ARE IMPORTANT ABOUT THIS CASE, AND I MENTIONED EARLIER THAT IN MANY WAYS THE PLAINTIFFS ARE HOPING TO AT LEAST THEORETICALLY CREATE THE POSSIBILITY OF TRULY ASTRONOMICAL EXPOSURE ON THE APPEARING DEFENDANTS, INCLUDING THE FEDERALLY INSURED BANK, BANK OF AMERICA, THAT THE QUESTION OF WHETHER OR NOT PERLAS SHOULD APPLY, AS ARGUED BY THE DEFENDANTS, PRESENTS A VERY IMPORTANT QUESTION, WHICH SHOULD BE IF POSSIBLE, ADDRESSED BY OUR OWN COURT OF APPEAL THROUGH A WRIT PROCEEDING, CERTIFIED BY MYSEF PURSUANT TO CCP SECTION 166.1, AS AS SOON AS A RULING ON TODAY'S DEMURRER IS FINALIZED, TO SEE WHETHER OR NOT, CONTRARY TO JUDGE HIGHBERGER'S VIEW, THE RELEVANT APPELLATE PANEL THAT GETS THIS CASE, MIGHT INDEED THINK THAT THE LARGER LESSONS OF PERLAS IN SOME SENSE SHOULD BE APPLIED TO THIS CASE. PERLAS HAD TO DO WITH REPRESENTATIONS ABOUT A BORROWERS EARNING STREAM. THE PRESENT CASE DOESN'T

INVOLVE THE EARNING STREAM OF THE BORROWERS, BUT IT DOES

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INVOLVE THE VALUE OF THE ASSET TO BE FINANCED. NOW NORMALLY THE BORROWER HAS HIS, HER OR ITS OWN RESPONSIBILITY FOR DETERMINING WHETHER THEY WANT

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TO PAY FOR A PIECE OF REAL ESTATE BEFORE THEY MAKE A CONTRACT, AND/OR DETERMINING HOW MUCH DEBT THEY THINK THEY SHOULD PUT UPON THEIR REAL ESTATE IF THEY ARE DOING A REFINANCE, AND THE WILLINGNESS OF A LENDER TO OVER LEND, IN ESSENCE, DOES NOT NECESSARILY OBVIATE THE RESPONSIBILITY OF THE BORROWER TO MAKE HIS, HER OR ITS OWN INFORMED JUDGMENT OF WHAT THE COLLATERAL IS ACTUALLY WORTH BEFORE THE FINANCING TRANSACTION OCCURS. TIME DIDN'T PERMIT, BUT I WAS GOING TO TRY TO FIND THE LATIN EQUIVALENT OF CAVEAT EMPTOR, CAVEAT EMPTOR IN THEORY IS AN ADMONITION THAT BUYERS SHOULD BE CAREFUL BEFORE THEY BUY AND IF ONE IS BUYING THE REAL ESTATE IN THE FIRST INSTANCE AND THE FINANCING IS A NEW PURCHASE FINANCING, THE PHRASE PERHAPS HAS QUITE APPROPRIATE APPLICATION HERE. BUT FOR THOSE WHO ARE REFINANCING, BY WAY OF EXAMPLE, IT WOULD BE WHATEVER THE LATIN EQUIVALENT IS, MAYBE IT'S CAVEAT DEBITOR; BUT I HAVEN'T HAD A CHANCE TO CHECK MY LATIN FOR WHAT A BORROWER WOULD BE IN THE LATIN. BUT MY POINT BEING, THE GENERAL PHILOSOPHY OF THE PERLAS CASE MIGHT LEAD AN APPELLATE COURT TO TAKE THE VIEW THAT THE BASIC PREMISE OF THE PLAINTIFFS HERE THAT THEY HAD SOME RIGHT TO RELY UPON DEFENDANT COUNTRYWIDE'S STATEMENTS AND LACK OF STATEMENTS TO COME

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TO THE CONCLUSION THAT THE PRICING OF RESIDENTIAL REAL ESTATE IN THE UNITED STATES AND VARIOUS MARKETS, PARTICULARLY HERE IN VARIOUS PORTIONS OF CALIFORNIA, WAS

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REASONABLY AND ACCURATELY PRICED, WAS NOT TRUE BUT THEY REASONABLY RELIED UPON IT, NOT REALIZING THAT ACCORDING TO THE PLAINTIFF'S ALLEGATIONS, ROBUST AS THEY ARE, THAT, ESSENTIALLY, COUNTRYWIDE AND ITS EXECUTIVES AND VARIOUS OFFICERS, AGENTS, EMPLOYEES, ETCETERA, WERE ACTUALLY CAPABLE OF KNOWINGLY INFLATING THE VALUES OF RESIDENTIAL REAL ESTATE TO SUCH A DEGREE THAT THEY NO LONGER WERE IN ANY WAY, SHAPE OR FORM FAIR OR ACCURATE VALUATIONS, BUT BECAUSE THE SEVERAL PLAINTIFFS IN THIS DOCKET WERE UNAWARE THAT THIS HAD BEEN UNDERTAKEN SUCCESSFULLY BY DEFENDANT COUNTRYWIDE, THEY WENT AHEAD AND MADE THESE TRANSACTIONS IN REASONABLE RELIANCE UPON THE ASSUMPTION THAT THE PRICING IN THE MARKET WAS REASONABLE AND HAD NOT BEEN DISTORTED BY THE INTENTIONAL ACTS OF DEFENDANT COUNTRYWIDE AND THE OTHER DEMURRING DEFENDANTS. AND THAT THEY THEREFORE HAVE IN SUCH

RELIANCE MADE THESE TRANSACTIONS AND BEEN HARMED. I REFERRED A MOMENT AGO TO THE ROBUSTNESS OF PLAINTIFFS CLAIMS, AND THAT IS A WAY OF SAYING WHAT PLAINTIFF HAS SET OUT TO TRY TO PROVE, PLAINTIFFS HAVE SET OUT TO TRY TO PROVE IS AN AMBITIOUS PROJECT. BUT

THE FACT THAT IT'S AMBITIOUS DOES NOT NECESSARILY MEAN IN MY VIEW THAT THE MERE FACT THAT WE HAVE THE PERLAS CASE OUT THERE AUTOMATICALLY SAYS THAT THE PLAINTIFFS AREN'T EVEN ALLOWED TO TRY TO ADVANCE THE PREMISE.

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BUT, GIVEN THAT THE CURRENT STATE OF OUR POLITICAL AND JURISPRUDENTIAL ECONOMY, I WOULDN'T NECESSARILY DISMISS OUT OF HAND THE POSSIBILITY THAT AN

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APPELLATE COURT EXTENDING THE BASIC SORT OF PHILOSOPHY OF PERLAS VERSUS GMAC MIGHT NOT DETERMINE THAT AS A LEGAL PROPOSITION THEY JUST SIMPLY AREN'T GOING TO COUNTENANCE ONE TRYING TO MAKE A COMMON LAW CLAIM FOR FRAUD AGAINST A DEFENDANT LENDER OR LOAN ORIGINATOR THAT ONE WAS ESSENTIALLY ALL TOO WILLING TO LOAN YOU TOO MUCH MONEY, WHEN YOU IN THEORY SHOULD HAVE BEEN A BIG BOY OR BIG GIRL AND PROTECTED YOURSELF IN FIGURING OUT HOW MUCH MONEY YOU REALLY SHOULD BORROW, WHEN ACCORDING TO PLAINTIFF'S ALLEGATIONS, ALL OF THE PRICING WAS DISTORTED BY THE FRAUDULENT CONDUCT OF THE DEFENDANT AND, THEREFORE, IN ESSENCE HOW COULD ONE KNOW? THE FIRST CAUSE OF ACTION, I THINK, NOTWITHSTANDING ITS GREAT AMBITION AND THE MULTITUDE OF PLAINTIFFS ACTUALLY SURVIVES THE DEMURRER, BECAUSE ON THE QUESTION OF RELIANCE, THIS IS A FRAUDULENT CONCEALMENT CLAIM. AND THE GENERALIZED ALLEGATIONS

APPLICABLE TO EACH AND EVERY PLAINTIFF SUBJECT OBVIOUSLY TO CROSS-EXAMINE AT DEPOSITION AND OTHER FACTUAL TESTING, IS THAT THEY NEVER HEARD ANYTHING TELLING THEM HOW WRONG AND INACCURATE REAL ESTATE PRICING HAD BECOME AS A RESULT OF THE DEFENDANTS' CONDUCT, WHICH WAS ADVANCED BY THE ALLEGED FRAUDULENT CONCEALMENT. AND SO,

I DON'T BELIEVE THERE'S ANYTHING FURTHER ON WHICH PARTICULARITY IS ACTUALLY REQUIRED, BECAUSE EACH OF THE

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PLAINTIFFS HAVE, ALBEIT IN RELATIVELY SUCCINCT WAY OF EXPRESSING IT THROUGH COUNSEL AND THE PLEADING, SAID, IT'S ECHOING SILENCE.

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 SILENCE?

SO WHAT ARE THE PARTICULARS OF ECHOING IT WAS ECHOING SILENCE LIKE IN THEIR WHOLE

LIFE OR DURING THIS PERIOD OF TIME WHERE WE DON'T NEED A DATE, TIME OR PLACE WHO SPOKE TO THEM. ECHOING SILENCE. THE SECOND AND THIRD CAUSES OF ACTION AREN'T SO EASY FOR PLAINTIFFS FROM A PLEADING POINT OF VIEW BECAUSE THAT WORKS BACKWARDS FROM INTENTIONAL OR NEGLIGENT MISREPRESENTATIONS. AND THERE I THINK THE DEFENDANTS ARE RIGHT THAT BECAUSE THESE ARE COMMON LAW CLAIMS, AND BECAUSE WE CONTINUE TO HAVE A HEIGHTENED PLEADING STANDARD, THE DEFENDANT IS ENTITLED BEFORE THESE COMMON LAW CLAIMS GO FORWARD TO HAVE MORE OF THE WHO, WHAT, WHERE, WHEN, THAT PARTICULARIZED PLEADINGS SHOULD REQUIRE OF WHAT, BY WAY OF EXAMPLE, NAMED PLAINTIFF HELIDORO BECERRA HEARD FROM AGENTS OF COUNTRYWIDE, WHICH WAS FRAUDULENT WHEN SO HEARD BY HIM. IT'S INTERESTING AND I THINK SMART FROM A PLEADING AND PROOF POINT OF VIEW FOR PLAINTIFF'S COUNSEL TO MAKE SUBSTANTIAL RELIANCE ON THE MANDATORY FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION, BY COUNTRYWIDE DOCUMENTS WHICH WOULD HAVE HAD TO BE SIGNED BY ITS OFFICERS AND DIRECTORS AND FILED AS AN OFFICIAL ACT WITH THE GOVERNMENT, WHICH, FROM THE POINT OF VIEW IT'S JUST

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OF CHARGING THE CORPORATION OF THE RESPONSIBILITY FOR THOSE STATEMENTS IS ABOUT AS CLEAR-CUT, SIMPLE AS YOU ARE GOING TO COME TO. IT IS NOT SOME RANDOM ROOKIE

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DRIVER OUT IN THE FIELD ON THE FIRST DAY OF WORK, MAKING STATEMENTS THAT ONE IS TRYING TO ATTRIBUTE BACK TO THE ENTITY FOR PUNITIVE DAMAGES LIABILITY OR OTHERWISE. THESE ARE VERY MUCH THE ACTS OF THE CORPORATION. BUT, I DON'T THINK YOU GET TO A COMMON LAW CLAIM FOR NEGLIGENT OR INTENTIONAL MISREPRESENTATION BASED ON SOME THEORY OF CONSTRUCTIVE NOTICE. YOU GET

THERE BECAUSE FOR RELIANCE YOU HAVE TO, IN THEORY, HAVE HEARD THE STATEMENT OR READ THE STATEMENT BEFORE ONE REASONABLY RELIED UPON IT. AND THERE'S NOT AN ASSERTION AS TO EACH OF THE PLAINTIFFS THAT THEY SPENT THEIR NIGHTS GOING ON THE EDGAR WEBSITE LOOKING FOR 10-K OR 10-Q FILINGS OF COUNTRYWIDE, WHICH WOULD SEEM PASSING CURIOUS IF THAT'S ACTUALLY WHAT HAPPENED. BUT, THEREFORE, THE STATEMENTS

MADE, HOWEVER OFFICIALLY THEY MAY BE MADE BY COUNTRYWIDE TO THE SECURITIES AND EXCHANGE COMMISSION OF THE UNITED STATES GOVERNMENT, DO NOT NECESSARILY CONNECT WITH SOMETHING THAT ONE OR MORE OF THESE PLAINTIFFS READ OR BECAME COGNIZANT OF ON WHICH THEY THEREFORE REASONABLY RELIED. SO THAT IS THE BIG GAP IN THE PLAINTIFF'S CURRENT FACT OR ALLEGATIONS FROM MY POINT OF VIEW THAT MEANS THE SECOND AND THIRD CAUSES OF ACTION HAVE TO GO BACK TO THE DRAWING BOARD FOR ELABORATION, SO THAT THE

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BURDENS OF THE COMMON LAW PLEADING STANDARD ARE MET. AND THERE'S NO DENYING THAT THOSE BURDENS ARE DIFFICULT. THEY ARE DIFFICULT IF THERE'S ONLY ONE PLAINTIFF, THEY

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ARE MORE DIFFICULT IF THERE ARE SIX PLAINTIFFS.

AND

HERE WHERE WE HAVE, I GUESS HUNDREDS OF PLAINTIFFS, IT'S OBVIOUSLY MORE BURDEN THAN THAT. THERE'S NO DENYING

IT'S BURDENSOME, BUT I THINK IT'S STILL REQUIRED BY THE COMMON LAW. I WOULD NOTE IN PASSING THAT AT THAT POINT IN THE PLAINTIFF'S OPPOSITION BRIEF, THERE WAS VERY MINIMAL, CLOSE TO NOT EXISTENT CITATION OF LEGAL AUTHORITY, WHICH I THINK HELPS REINFORCE THEIR PROPOSITION THAT WE REALLY NEED MORE. SO THAT BRINGS ME TO THE FOURTH CAUSE OF ACTION INVOLVING THE PRIVACY CLAIM. HERE THE DEFENDANT

IS BASICALLY TRYING TO PREVIEW A MOTION FOR SUMMARY ADJUDICATION ABOUT THE ALLEGED ROGUE EMPLOYEE THAT GAVE RISE TO THE CLASS ACTION SETTLEMENT IN KENTUCKY. I DON'T THINK I CAN USE THE DEMURRER AS A WAY TO DO AN ADVANCE TESTING OF THE VIABILITY OF ANY SUCH MOTION FOR SUMMARY ADJUDICATION IT BROUGHT. THE PLEADING ITSELF ON IT IS FACE I THINK IS SUFFICIENT. WE DON'T HAVE A HEIGHTENED PLEADING STANDARD, AS I UNDERSTAND IT, FOR THE CONSTITUTIONAL RIGHT OF PRIVACY. AND I THINK IT IS A SUFFICIENT PLEADING AT THIS JUNCTURE, WITHOUT PREJUDICE TO WHAT HAPPENS NEXT ON MOTIONS FOR SUMMARY ADJUDICATION OR OTHERWISE. ONE PASSING COMMENT TO COUNSEL, TO ME IT

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WILL BE AN INTERESTING QUESTION, AND MAYBE IT'S A QUESTION OF RESPONDEAT SUPERIOR OR RESPONSIBILITY OF AN EMPLOYER FOR THE CONDUCT THEY HAVE GIVEN WORKER AND

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WHETHER OR NOT THAT'S A FACT QUESTION.

IT COULD BE

OBVIOUS IN SOME CIRCUMSTANCES, BUT WHETHER THE RECORD IN THIS CASE WILL MAKE THAT A TRIABLE ISSUE OF MATERIAL FACT AS TO WHETHER THE ROGUE EMPLOYEE WAS ACTING IN THE COURSE AND SCOPE OF EMPLOYMENT. ANOTHER WAY OF LOOKING AT IT IS WHETHER OR NOT ONE GETS TO AN INVASION OF RIGHT TO PRIVACY CLAIM BASED ON NOTHING MORE THAN NEGLIGENCE BY THE DEFENDANT TO BE CHARGED, WHETHER IT HAS TO BE INTENTIONAL ACT. DON'T PRETEND TO KNOW THE ANSWER TO THAT QUESTION LEGALLY, BUT I POINT IT OUT TO YOU BECAUSE IT IS PROBABLY WORTH BRIEFING WHEN THIS QUESTION COMES BACK LATER. THE 5TH CAUSE OF ACTION WE'VE ALREADY REFERENCED. I THINK IT'S CONCEDED TO FAIL. THE CLAIM I

FOR THE BENEFIT OF DELAY IN FORECLOSURE, THE RECORD IS CRISP AS TO APPROXIMATELY FIVE PLAINTIFFS WHO HAVE FORMAL NOTICES OF RESCISSION. PLAINTIFF PAUL RONALD AND

PLAINTIFF LISA RONALD; PLAINTIFF PRICILLA BOWIN, B-O-W-I-N, PLAINTIFF TRACEY, T-R-A-C-E-Y, HAMPTONSTEIN; AND PLAINTIFF RENE, R-E-N-E, MINNAAR, M-I-N-N-A-A-R, TO MY UNDERSTANDING. THE DEFENDANT WISHES TO ASSERT THAT AS TO THE OTHER PLAINTIFFS WHO JOINED THIS CAUSE OF ACTION, WHICH IS A RELATIVELY SMALL SUBSET OF ALL OF THE

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PLAINTIFFS IN THIS CASE, THAT THE 6TH CAUSE OF ACTION MUST FAIL. BUT I DON'T THINK AS A HYPER-TECHNICAL

MATTER THAT THE STATEMENTS MADE ON THE RECORD BY DEFENSE

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COUNSEL, ATTEMPTING TO SHOW PATIENCE BY BANK OF AMERICA AND A WILLINGNESS TO DELAY ANY FORECLOSURES ARE NECESSARILY SOMETHING WITH ENOUGH OFFICIAL QUALITY AS TO NEGATE THE CURRENT PLEADING AND, THEREFORE, WITHOUT INDICATING THAT THERE'S ANY FINAL VIEW THAT THERE'S BEEN A VIOLATION OF THE STATUTE, I WOULD THINK AS A TECHNICAL MATTER, THE 6TH CAUSE OF ACTION SHOULD BE OVERRULED AS TO ALL PLAINTIFFS EXCEPT THE FIVE I'VE JUST MENTIONED. THE 7TH CAUSE OF ACTION I THINK IS ADEQUATELY MADE OUT, AS WELL AS THE 8TH CAUSE OF ACTION. THE 8TH CAUSE OF ACTION MAY INCLUDE -FIRST OFF, AS TO THE 8TH CAUSE OF ACTION, IF THE PLAINTIFFS HAVE PLED A VALID CLAIM AT LEAST FOR INJUNCTIVE RELIEF, UNDER THE 8TH CAUSE OF ACTION, IT DOESN'T MATTER WHETHER OR NOT THEY WILL HAVE A RIGHT TO MONETARY RESTITUTION. AND I THINK AS ARGUED BY THE

PLAINTIFFS IN THEIR OPPOSITION THERE IS SUCH A CLAIM FOR INJUNCTIVE RELIEF, AND I THINK THAT'S MORE THAN ENOUGH TO MAKE IT GO FORWARD. IF THIS WAS A SMALLER, SIMPLER CASE, AND A MOTION FOR STAY MIGHT REALLY HELP MOVE THE CASE TO PROMPT CASE RESOLUTION, PERHAPS THE MOTION TO STRIKE IN THIS REGARD WOULD HAVE SOME UTILITY, BUT AT THE MOMENT, THERE IS SO MUCH BIGGER, MORE IMPORTANT STUFF IN THE CASE, THAT I DON'T HAVE THE RESOURCES, FRANKLY, TO TRY

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TO USE THE MOTION TO STRIKE AS A WAY TO START TRIMMING AROUND SOME OF THE POSSIBLE SURPLUSAGE THAT AT THE MOMENT IS SLATHERED ON THE 8TH CAUSE OF ACTION FOR

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UNFAIR COMPETITION AND, THEREFORE, IN OVERRULING THE DEMURRER TO THE 8TH CAUSE OF ACTION, NOT NECESSARILY INDICATING THAT IT ALL HAS MERIT. I'LL MAKE ONE OTHER PASSING COMMENT AS AN ASIDE, BEFORE I TURN TO THE UNRELATED SINGH V. WINDMILL ESTATES MATTER, WHERE COUNSEL ARE WAITING IN ANTICIPATION THAT I'LL TALK TO COUNSEL IN RONALD AFTER LUNCH, AND THAT IS THAT AS I'M COMING TO UNDERSTAND THE CASE, AND RECOGNIZING THAT IT IS AT MOST PLED IN PASSING AND RAISED, PERHAPS BY THE PAPERS, MORE THAN IN THE PLEADING, THE CONCERNS RAISED BY PLAINTIFF'S COUNSEL UNDER THE PATRIOT ACT AND FROM THE NON-TRANSPARENT NATURE OF THE M.E.R.S., THAT'S AN ACRONYM, M-E-R-S, ENTITY IS THE PURPORTED NOMINEE OF THE HOLDER IN DUE COURSE OF THE PAPER, MAY RAISE SOME SIGNIFICANT QUESTIONS, PARTICULARLY SINCE THIS CASE ARISES IN THE CONTEXT OF A DISPUTE ABOUT THE RIGHT OF THE DEFENDANTS AS LOAN SERVICERS AT A MINIMUM, TO FORECLOSURE ON DEBT, WHICH IS CLOSE TO BUT NOT THE SAME QUESTION AS THE RIGHT OF A PURPORTED OWNER OF A LOAN TO FORECLOSE ON SUCH DEBT AS A CREDITORS RIGHT FOR ALLEGED NONPAYMENT OF THE DEBT. WHETHER IT'S THE SERVICER ACTING AS AGENT FOR THE HOLDER OF THE DEBT OR THE PARTY PURPORTING TO HOLD THE DEBT, IF IT'S NECESSARY TO KNOW THAT IT IS NOT AN IMPERMISSIBLE HOLDER OF THE DEBT, THE INABILITY TO

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KNOW WHO THE HOLDER OF THE DEBT IS -- PRESENTS A HUGE PROBLEM. AND PERHAPS THAT GETS ME BACK TO WHERE I

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STARTED AND THAT IS THAT IN MANY WAYS, THE PROBLEMS PRESENTED HERE, INCLUDING THOSE OF A LENDING INDUSTRY THAT APPARENTLY ALLOWED THESE LOAN PACKAGES TO BECOME AS COMPLICATED AS THEY DID, PARTICULARLY IN TERMS OF CUTTING THEM INTO MULTIPLE PARTS AND TRANSFERRING THEM IN VARIOUS WAYS PRESENTS MASSIVE SOCIOECONOMIC PROBLEMS THAT ARE PRESENTLY IN PART IN THIS COURT IN THIS DOCKET, BUT ARE ACTUALLY MUCH MORE AMENABLE TO A BROADER FIX. I DON'T KNOW WHETHER THAT WILL BE THROUGH LEGISLATIVE EFFORTS OR PERHAPS THROUGH THE ATTEMPTS OF ONE OR SEVERAL ATTORNEYS GENERAL TO INDUCE ACCOMMODATIONS WHICH ARE SUFFICIENT TO SATISFY THE BORROWERS THAT THEY ARE WILLING TO FOREGO THEIR MAXIMUM LEGAL REMEDIES IN COURT IN THE INTEREST OF OBTAINING A SUITABLE HALF A LOAF SOONER, WITH MUCH LESS FUSS AND BOTHER, AS COMPARED TO PRESSING FOR THE LAST OUNCE OF FLESH THROUGH FORMAL LITIGATION. BUT AT THE MOMENT WHAT I HAVE BEFORE ME, AT LEAST FOR PURPOSES OF TESTING THE PLEADING, IS WITH NO CRITICISM INTENDED AN UNDERSTANDABLE EFFORT OF LITIGANTS TO PRESS FORWARD ALL BONA FIDE CLAIMS AT THIS POINT TO THE MAXIMUM DEGREE BECAUSE WE ARE NOT HERE ABOUT TO IMPLEMENT SOME KIND OF WORKOUT PURSUANT TO SOME SCHEME SATISFACTORY TO THE FEDERAL RESERVE OR THE FEDERAL TRADE COMMISSION, THE U.S. CONGRESS, OR OTHERS WHO FEEL THEY

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HAVE AN INTEREST IN THE EFFORT. I'LL SEE YOU AT 1:30. AND TIME MAY NOT I KNOW

PERMIT -- I HAVE A 2:00 IN AN UNRELATED MATTER.

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SOME OF YOU HAVE TRAVELED THOUGH, SO PERHAPS AFTER THE 2:00 I CAN GIVE YOU SOME MORE TIME BUT BACK INTO THAT SO I DON'T ASK YOU TO COME BACK TOMORROW, RECOGNIZING SOME OF YOU HAVE TRAVELED FROM OTHER PARTS OF THE STATE, IN THE HOPES OF GETTING IT DONE TODAY RATHER THAN MAKING THIS A 2-DAY EXERCISE. MR. STEIN: IT? THE COURT: NO BAILMENT IS CREATED, BUT YOU MAY CAN WE LEAVE OUR STUFF HERE OR TAKE

LEAVE IT IF YOU WISH. COURT'S IN RECESS.

(A RECESS WAS TAKEN IN THIS MATTER UNTIL 1:30 P.M. OF THE SAME DAY.)

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THE COURT:

THIS IS JUDGE HIGHBERGER ER WE ARE ON ^ SING ^ SINK V. WINDMILL

THE RECORD N. KC 053084. ESTATES.

I'LL TAKE APPEARANCES STARTING WITH

PLAINTIFF'S COUNSEL. RIGHT 1: GOOD MORNING, YOUR HONOR, KIM ROBERTS ON

BEHALF OF PLAINTIFF. THE COURT: COUNSEL FOR WINDMILL ESTATES AND

AFFILIATED PARTIES. MR. KLEIN: THE COURT: THIS MORNING. SPEAKER #: SPEAKER #: YES, YOUR HONOR. /TKPWAORPBG YOUR HONOR BILL PENNY STON DOUGLAS HARDY. ANY OTHER COUNSEL MAKING AN APPEARANCE

FOR /SKWR-S CUSTOM PAINT I KNOW. SPEAKER #: /TKPWOPBG YOUR HONOR, MONDAY TEE

RICHARDS FOR WIND SUPPLY. SPEAKER #: GOOD MORNING, YOUR HONOR, KIRK OLSON

ON COURT CALL FOR R. AND R. SPECIALTIES. SPEAKER #: BUILDERS. SPEAKER #: GOOD MORNING, YOUR HONOR, JASON HER JUST CONTINUE BOOB YAN FOCUS TOM

SHY FOR ^ BLANK ^ PLANNING ^ BLANK ^ PLANNING DRYWALL. THE COURT: ANYBODY ELSE WISH TO MIKE APPEARANCE.

(NO RESPONSE.) THE COURT: IT APPEARS THAT NOTICE IS GOOD BASED

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ON FILING OF JANUARY THREE FOR MR. HARDY'S OFFICIALS AND I ALSO /STPES AND I HAVE CASE MANAGEMENT ORDER NUMBER 3 PROPOSED LODGED ON JANUARY SICK FOR MR. HARDY (6TH?? (IN

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REVIEWING PAPERWORK BEFORE ME I DO NOT FIND ANY WRITTEN OPPOSITION OR OBJECTIONS TIMELY FILED OR OTHERWISE. ANY OBJECTIONS COME TO YOUR ATTENTION MR. HARDY. MR. KLEIN: NO, YOUR HONOR. EVERYONE HAS SIGNED IF

IN EXCEPT FOR MR. PER ROSS WHO RENTS A ROOFER AND TURNS OUT HE HAVE WAS OUT OF TOWN AND JUST UNTIL A DAY AGO HE SENT E-MAIL TO BOTH ME AND PLAINTIFF'S COUNSEL INDICATING HE HAD NO OBJECTION. THE COURT: HAS ANYBODY ELSE JUST /SKWROEPBD US TO

THE ON THE PHONE FORLT SINGH VERSUS WINDMILL MATTER I HEARD A CHIME. (NO RESPONSE.) THE COURT: APPARENTLY NOT.

IS THERE ANYBODY ON THE PHONE WHO WISHES TO BE HEARD WHY I SHOULD NOT ADOPT CMO NUMBER FLEE? IF SO SPEAK YOU HAVE GIVE ME YOUR NAME. (NO RESPONSE.) THE COURT: HEARING NO OBJECTION, THE ORDER TO CMO NUMBER 3 IS ADOPTED. THE

SHOW CAUSE IS DISCHARGED. CLERK WILL FILE IT.

AS WELL AS A CONFORMED COPY.

WE

HAVE AN ENVELOPE TO MAIL A COPY TO MR. HARDY AS COUNSEL FOR WINDMILL. H ESTATES. IF YOU'D BE KIND ENOUGH TO

GIVE NOTICE /PHRO HARDY /STPHAO*F YES, I WILL. THE COURT: TO MY UNDERSTANDING NEXT DATE BEFORE

ME PREVIOUSLY SCHEDULED WAS FOR APRIL 15 AT 9:00 A.M..

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/P UNLESS THERE'S OBJECTION, I'LL LEAVE THAT ON CALENDAR AS OUR ONLY NEXT DATE IN THIS CASE. HEARING NO

OBJECTION THAT'S THE ORDER OF THE COURT ANYTHING IS I

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CAN DO TO HELP YOU THIS MORNING ^ MILLS ^ MILLIONS ROBBED. MS. BROWN: THE COURT: ATTY 5: NO THAT'S EVERYTHING YOUR HONOR. MR. HARDY.

THANK YOU, YOUR HONOR. ANY OTHER COUNSEL HAVE ANYTHING ELSE?

THE COURT:

(NO RESPONSE.) THE COURT: HEARING NOTHING COURT'S IN RECESS END END

DEFENDANT WINDMILL ESTATES GIVE NOTICE.

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CASE NUMBER: CASE NAME: LOS ANGELES, CA DEPARTMENT 307 APPEARANCES: REPORTER: TIME:

BC 409 444 PAUL RONALD VS. BANK OF AMERICA TUESDAY, JANUARY 11, 2011 HON. WILLIAM F. HIGHBERGER, JUDGE (AS NOTED ON TITLE PAGE.) ELSA BANDA LARA, CSR NO. 3226 P.M. SESSION ---O---

THE COURT:

BACK ON THE RECORD IN REGARD TO RONALD

V. BANK OF AMERICA. AS I INDICATED TO COUNSEL A MOMENT AGO OFF THE RECORD, SINCE I HAVE TO JUMP TO A DIFFERENT CASE AT 2:00, I'D LIKE TO HEAR FROM EACH SIDE FOR 10 MINUTES. I'M GOING TO RECESS YOUR CASE, DEAL WITH THE OTHER CASE AT 2:00, THEN COME BACK AND DEVOTE SUCH TIME AS SEEMS APPROPRIATE AFTER THAT. SO LET'S START WITH PLAINTIFFS. MR. SPIVAK: THANK YOU, YOUR HONOR.

YOUR HONOR, WHEN WE WERE OFF THE RECORD, ASKED IF WE'D TALK A BIT ABOUT WHAT IT IS WE SEE DOING WITH THE CASE. AND THE ANSWER IS THAT WE SEE -- UNLESS

THINGS CHANGE -- TAKING THIS CASE ALL THE WAY AND TRYING IT IN FRONT OF A JURY AND, YES, TRYING TO GET THAT BILLION DOLLAR VERDICT OR WHATEVER THE APPROPRIATE

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VERDICT IS AT THE TIME, IN BEHALF OF OUR CURRENTLY NAMED PLAINTIFFS AND THE ROES THAT WE ARE GOING TO BE ADDING, AS WE SAID WE WOULD.

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AND WE SEE THE CASE GETTING LARGER AND, WITH YOUR HONOR'S HELP, MORE FOCUSED. IF YOU WILL, AND BEFORE TURNING -- AND I DO WANT TO TURN TO SOME OF THE COMMENTS YOUR HONOR MADE. ONE OF THE MOST IMPORTANT COMMENTS YOUR HONOR MADE IS THAT THIS CASE IS VIEWED IN A LARGER SOCIAL ECONOMIC AND LEGISLATIVE CONTEXT. AND IT MAY BE

THAT THE LEGISLATURE OR CONGRESS WILL STEP IN AND TAKE STEPS THAT EITHER IMPACT THIS CASE OR HELP TO RESOLVE THESE ISSUES. AND WE ARE ALL AWARE OF STEPS BEING TAKEN

IN THAT DIRECTION. BUT IT IS UP TO THE COURT, IN MY OPINION, IN THE ABSENCE OF LEGISLATION THAT SOMEHOW RESOLVES INDIVIDUAL CLAIMS, WHICH IS HARD TO DO, OR THE MACRO ISSUES, TO ADDRESS THIS ISSUE AND SOME OF THE LARGER SOCIETAL CHANGES, ROE V. WADE, OTHERS, ARE COURT-ORDERED CHANGES OR COURT-ORDERED REMEDIES. AND THIS CASE MAY,

IN FACT, BECOME ONE OF THOSE CASES THAT BECOMES THAT LARGE AND THAT SIGNIFICANT. TWO RECENT EVENTS, ONE AS RECENT AS THIS MORNING, EMPHASIZE THIS. IN THE FIRST, THE

MASSACHUSETTS SUPREME COURT THIS MORNING, IN THE CASE OF U.S. BANK V. IBENEZ HELD THAT ONLY THE OWNER OF A MORTGAGE CAN FORECLOSURE ON A MORTGAGE. AND THAT WAS IN

A CASE BROUGHT IN THAT STATE IN WHICH A SERVICING AGENT

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AND OTHERS HAD PURPORTED TO FORECLOSURE ON MORTGAGES. AND THE SUPREME COURT IN MASSACHUSETTS SAID "NO." A NUMBER OF FEDERAL COURTS IN THAT -- IN

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MASSACHUSETTS, FEDERAL COURTS HAD STAYED CASES AWAITING THE OUTCOME OF THIS CASE, AND EVEN THIS MORNING, A NUMBER OF THOSE CASES WERE UNSTAYED. AND ONE OF THOSE CASES MANSON V. GMAC MORTGAGE, THE FEDERAL DISTRICT COURT IN BOSTON PROHIBITED GMAC FROM FORECLOSING ON MORTGAGES BECAUSE HE COULD NOT PROVE IT WAS THE OWNER. WHEN WE TALK ABOUT M.E.R.S. WHEN WE TALK ABOUT ISSUES IN DISCOVERY AS TO REALLY UNDERSTANDING WHO OWNS THESE MORTGAGES, WHO IS THE ORIGINATING BANK, AN ISSUE YOUR HONOR RAISED THAT WE'LL COME BACK TO. THE SERVICING BANK? MORTGAGES? WHO IS FORECLOSING ON THESE WHO IS

THESE ISSUES ARE IMPORTANT. YESTERDAY I WAS READING SOME CASES IN

NEW YORK, NOT AT THE SUPREME COURT LEVEL IN NEW YORK, BECAUSE THEY ARE CALLED THE COURT OF APPEALS, BUT SOME CASES IN NEW YORK COMING OUT THE EXACT SAME WAY. THERE IS CLEARLY A TREND IN THIS COUNTRY NOW REACHING STATE SUPREME COURTS AND FEDERAL COURTS, FOR TRYING TO STOP WHAT HAS BEEN HAPPENING. THE OTHER ITEM I WANTED TO CALL TO YOUR HONOR'S ATTENTION IS THAT BANK OF AMERICA REPORTED THIS WEEK THAT ON DECEMBER 31ST OF LAST YEAR, IT HAD PAID 2.5 BILLION DOLLARS TO SETTLE CLAIMS MADE BY FANNY MAY AND FREDDIE MAC, HAVING TO DO WITH REPURCHASING OF

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MORTGAGES FROM THE COLLATERALIZED MORTGAGE POOLS THAT ARE THE MIRROR PART OF THE SAME SCHEME, AND COMMITTING TO PAY UP TO ANOTHER 500 MILLION DOLLARS, POTENTIALLY.

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POTENTIALLY BRINGING IT IS TO A 3 BILLION DOLLAR SETTLEMENT. THERE ARE SOME CONTINGENCIES. BUT THEY

HAVE ALREADY PAID JUST SHORT OF 2. 6 BILLION AND -- ON DECEMBER 31ST. SO, THERE'S A TRAIN ROLLING IN THIS NATION JUDICIALLY, THROUGH COURT DECISIONS, THROUGH SETTLEMENTS THAT DEAL DIRECTLY WITH WHAT'S AT ISSUE HERE. AND THE LAST POINT I WANTED TO MAKE, BEFORE I DEAL DIRECTLY WITH THESE ISSUES IS REALLY WHAT IS THIS CASE ABOUT? AND IT'S NOT ABOUT LEGISLATION, AND IT'S AND

NOT ABOUT THE GOVERNMENT, IT'S ABOUT PEOPLE.

MR. KLEIN AND A LOT OF THE PAPERS RECENTLY SUBMITTED BY THE DEFENDANTS HAVE GONE TO PAINS, ALMOST, TO SAY THAT THEY SHARE THE PAIN OF THESE PEOPLE. THEY WANT TO WORK

WITH THEM AND US ON LOAN MODIFICATIONS AND ON PUTTING ASIDE FORECLOSURES AND ALL SORTS OF THINGS. WELL, IN AN UNCHARACTERISTICALLY DIRECT AND ACERBIC PLEADING, MAYBE SOME DIFFERENT PEOPLE WROTE IT, BUT, PLEADING THE REPLY BRIEF AND THE DEMURRER, THE THIRD SENTENCE OF THE INTRODUCTION TAKES OFF THE MASK AND TELLS US WHAT IS AT STAKE HERE. AND THIS IS NOT

ABOUT A SPECIFIC POINT TO THE DEMURRER, BUT IT SHOWS US, THIS IS ABOUT PEOPLE. AND THE THIRD SENTENCE OF THE INTRODUCTION SAYS:

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AT THIS POINT, THESE BORROWERS WHO ALLEGEDLY ARE EXPERIENCING FINANCIAL DIFFICULTIES WOULD BE BETTER SERVED

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EXPLORING LOAN MODIFICATIONS THAT MAY OFFER THEM A WAY OUT OF THEIR TRYING CIRCUMSTANCES -NOW HERE'S THE KEY: -- RATHER THAN CONTINUING WITH THIS LAWSUIT, WHICH AT BEST MERELY DELAYS THE EVENTUAL FORECLOSURE OF THEIR PROPERTIES.

THAT'S WHAT THIS IS ABOUT.

SHOULD THIS

CASE COME TO AN END, AND, OF COURSE, IF THE LAW IS IT WILL COME TO END, THEN IT WILL. BUT SHOULD THIS CASE

COME TO END WITHOUT GIVING THE BENEFIT OF EVERY DOUBT TO THESE PLAINTIFFS, THIS BANK INTENDS TO FORECLOSURE ON AND TAKE THEIR PROPERTIES. POINT. AND IT'S REALLY A MINOR

I'LL OBSERVE THAT FEWER THAN HALF OF OUR CURRENT

PLAINTIFFS, NAMED PLAINTIFFS, ARE SITTING THERE WITH NOTICES OF DEFAULTS, BUT APPARENTLY FOR THE BANK, THEIR MAIN POINT IS THEY ARE STILL GOING TO FORECLOSURE ON ALL THESE PROPERTIES. SO THAT'S OUR SETTING, THAT'S THE CONTEXT. NOW, IN THE FOUR MINUTES I HAVE REMAINING TO ME, I'M GOING TO TRY TO BE SPECIFIC. AND I'M GOING TO GO IN THE SAME ORDER YOUR HONOR WENT, JUST BECAUSE THAT'S AS GOOD AN ORDER AS ANY.

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WE DIDN'T HAVE TIME TO CONVERSE OVER LUNCH ON YOUR FIRST POINT AS TO THE 64 PLAINTIFFS FOR WHOM THERE'S THE REQUEST FOR JUDICIAL NOTICE. I WANTED TO

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MAKE A COUPLE OF OBSERVATIONS. FIRST, OUR ACTUAL CLAIM ON THOSE 64 IS BROADER THAN THE CORPORATE AFFILIATION OR CORPORATE OWNERSHIP. OUR CLAIM, AND IT'S MADE IN THE ATTACK AND

MORE BROADLY IN THE AMENDMENT IS THAT THOSE PLAINTIFFS EITHER HAVE THEIR LOANS ORIGINATED BY BANKS THAT WERE IN SOME WAY OWNED OR PART OF THE ENTERPRISE WITH COUNTRYWIDE OR THAT ON AN AGENCY THEORY, INDUCING COMMON CONSPIRACY THEORY, RESPONDEAT SUPERIOR, THAT COUNTRYWIDE IS LIABLE FOR HAVING PARTICIPATED IN THE INITIATION OF THOSE LOANS. FOR EXAMPLE, A LOAN INITIATED WITH THE

INTENT TO THEN ASSIGN TO COUNTRYWIDE FOR SERVICING AS PART OF THIS OVERALL SCHEME. AND I WANT TO HASTEN TO ADD THAT WE HAVE SPECIFIC EVIDENCE OF THIS TYPE OF SCHEME, INCLUDING -AND THIS IS A PARTICULARLY IMPORTANT POINT, AND IT WILL COME BACK UP LATER. MR. SIERACI, WHO IS THE FORMER

C.F.O. OF COUNTRYWIDE, HIS NAME IS ALL OVER THE THIRD AMENDED COMPLAINT, HE JUST RECENTLY SIGNED A SETTLEMENT WITH THE GOVERNMENT ON THE INVESTOR FRAUD SIDE OF THIS SAME SCHEME. THE COURT: MR. SPIVAK: THE COURT: MR. SPIVAK: HE WAS THE COMPLIANCE OFFICER? HE WAS CHIEF FINANCIAL OFFICER. C.F.O. HE WAS THE C.F.O. OF COUNTRYWIDE.

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MAZILLO, SENDECKI AND SIECKI AND -THE COURT: MR. SPIVAK: MAZILLO I CAN DISTINGUISH. SAMBOL IS THE C.O.O., S-A-M-B-O-L,

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WAS THE C.O.O. AND SIEKI MR. STEIN: MR. SPIVAK: THE COURT:

S-I-E-K-I --

S-I-E-R-A-C-K-I. I DON'T THINK SO. SAMBOL, C.O.O., SIERAKCI, C.F.O.. WHO

IS COMPLIANCE OFFICER? MR. SPIVAK: THE COURT: I DON'T KNOW. BECAUSE IF IT'S QUOTED SOME E-MAILS OF

THE COMPLIANCE OFFICER SAYING WHAT PROBLEMS WERE -MR. SPIVAK: THAT'S ANOTHER PERSON. I'LL LOOK IT

UP BEFORE MY NEXT 10 MINUTES. IN ANY EVENT, WE HAVE EVIDENCE THAT HE OWNS AT LEAST -- HAS FINANCIAL INTERESTS IN, THAT HE OWNS PART OF THE GRANADA NETWORK WHICH IS IN OUR COMPLAINT. AND WE HAVE EVIDENCE THAT HE OWNS PART OF THE MARINERS BANK AND AT LEAST ONE OTHER BANK THAT OUR ORIGINATING LENDERS HERE, THE -- THAT PERTAIN TO TWO OF THE PLAINTIFFS. INTEREST. WE ALSO HAVE EVIDENCE OF OTHER HIGH RANKING OFFICERS, THOUGH NOT NECESSARILY HIM, HAVING INTEREST IN THESE BANKS. AND WE HAVE EVIDENCE OF THE GRANADA AND THAT IS HIM DIRECTLY. HAS A FINANCIAL

NETWORK WORKING WITH SOME OF THESE BANKS ON THE LOAN ORIGINATIONS FOR THE PURPOSE THAT WE'VE ALLEGED. SO THE POINT I'M MAKING IS THAT THE ISSUE IS BROADER THAN SIMPLY OWNERSHIP.

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WHAT WE ARE PREPARED TO DO, AND WE CAN DO IT AFTER ALL OF THIS HALF HOUR IS SIT DOWN WITH THE DEFENSE COUNSEL AND GO THROUGH THEIR EXHIBIT, AND THERE

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ARE A COUPLE OF VERY LARGE SEPARATE BANKS, HSBC COMES TO MIND. AND, YOUR HONOR, MINDFUL OF THE POINT YOU MADE,

WE ARE PREPARED TO DISMISS SOME OF THOSE WITHOUT PREJUDICE. AND IF THE EVIDENCE ESTABLISHES THAT THEY WERE, IN FACT, PART OF A -- I'M USING THE WORD "CONSPIRACY" LOOSELY, BUT THEY WERE INDUCED PART OF THE SCHEME, WE WILL BRING THEM BACK IN. BUT WE DO NOT SEE

THAT WE SHOULD BE DISMISSING WITH PREJUDICE OR OTHERWISE THOSE WHOSE LOANS WERE ORIGINATED BY A SERIES OF UNKNOWN, UNKNOWABLE ENTITIES, MANY OF WHICH WE HAVE DIRECT EVIDENCE, HAD AFFILIATION WITH THE GRANADA NETWORK OR THE BANK, MEANING COUNTRYWIDE, AND OTHERS OF WHICH, BASED ON WHAT WE KNOW, WE BELIEVE THEM TO HAVE HAD AFFILIATIONS. IF IT TURNS OUT THERE'S NO AFFILIATION ONE WAY OR ANOTHER, WE HAVE ALREADY SAID IN OUR PAPERS WE WOULD DISMISS THE ORIGINATION CLAIMS AS TO THOSE PLAINTIFFS. THE COURT: OKAY. SAVE YOUR OTHER THOUGHTS FOR

AFTER WE GET BACK, BUT I DO APPRECIATE YOUR WILLINGNESS TO AT LEAST VIEW HSBC AS PERHAPS MORE OF A COMPETITOR OF COUNTRYWIDE THAN THE FELLOW FROM SPIRE WOULD. LET ME HEAR FROM DEFENDANTS NOW. MR. KLEIN: THANK YOU, YOUR HONOR, I WOULD LIKE

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TO QUICKLY ADDRESS THOSE TWO POINTS RAISED BY MR. SPIVAK, THEN I'LL GO TO THE DEMURRER. FIRST OF ALL, EVERY SINGLE CASE SINCE WE'VE

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BEEN IN THIS COURTROOM, DISCUSSING M.E.R.S. AND COURT'S ABILITY TO FORCLOSE HAS COME FROM ANOTHER STATE, FLORIDA OR MASSACHUSETTS, AND STATE COURT OPINIONS THERE. I HAVE NOT READ ALL THOSE DECISIONS, BUT I CAN TELL YOU THAT THESE OPINIONS THAT THEY ARE TALKING ABOUT, AS I UNDERSTAND IT ARE COMING FROM JUDICIAL FORECLOSURE STATES, OR DIFFERENT STATUTORY SCHEMES, WITH DIFFERENT REQUIREMENTS THAN WHAT'S HERE IN CALIFORNIA. AND I'M NOT GOING TO TRY TO OPINE AS TO WHAT'S GOING ON IN THOSE STATES, THAT'S NOT MY AREA TODAY. CASE. AND IN THIS CASE, WE HAVE A NON-JUDICIAL FORECLOSURE STATE, SO ALL THESE REFERENCES TO A TREND OR TRAIN THAT MR. SPIVAK MAKES, HAVE NO BEARING ON WHAT'S HAPPENING IN THE STATE OF CALIFORNIA AND WHAT'S HAPPENING WITH THESE PLAINTIFFS. THE SECOND POINT, I WOULD LIKE TO ADDRESS, REALLY QUICKLY, IS WITH RESPECT TO THESE 64 PLAINTIFFS, I ACTUALLY BELIEVE IT'S SIGNIFICANTLY MORE. WE WERE TODAY IS TO FOCUS ON WHAT'S HAPPENING IN THIS

LIMITED ON TIME, ABILITY OF PRIOR TO FILING THE DEMURRER, TO ACTUALLY GATHER EVERYONE WHO'S NOT ORIGINATED FROM THE BANK, BUT TAKING -- LET'S TAKE FOR EXAMPLE A BORROWER WHO ORIGINATED A LOAN AT MARINERS CAPITAL BANK, WHICH IS WHAT MR. SPIVAK RAISED.

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HOW ARE REPRESENTATIONS BY THE BANK OR BY COUNTRYWIDE FOR CONCEALMENTS, HOW CAN COUNTRYWIDE ENGAGE IN SOME SORT OF CONCEALMENT WITH A BANK IT'S -- WITHIN A

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LENDER OR BORROWER HAS NO CONTACT WITH?

THERE'S JUST --

THE CONCEPT OF EVERY THEORY IN THIS PLEADING, AS CURRENTLY PLED, DOESN'T JIVE WITH THE CONCEPT THAT SOMEHOW THERE'S SOME BANK OUT THERE IN ORIGINATING A LOAN THAT'S ULTIMATELY SOLD SOMEHOW TO THE BANK, BUT THERE'S ANOTHER LENDER OUT THERE THAT'S ORIGINATING A LOAN, THAT WE HAVE SOME SORT OF DUTY OR MADE SOME SORT OF REPRESENTATION TO IN CONNECTION WITH A LOAN TRANSACTION. THE COURT: WELL, YOUR ADVERSARY IS WILLING TO

TELL ME IN OPEN COURT, ON THE RECORD, THAT HE BELIEVES IN GOOD FAITH AS AN ADVOCATE, THAT HE EXPECTS TO PROVE A CIVIL CONSPIRACY AS BETWEEN COUNTRYWIDE AND MARINERS, THROUGH VARIOUS HUMANS AND THAT THEREFORE IT MAKES COUNTRYWIDE CHARGEABLE WITH THE BUSINESS OF MARINERS AND PLACING LOANS, VIS-A-VIS ANY FRAUDULENT CONDUCT OR OTHER TORTIOUS CONDUCT OF COUNTRYWIDE THAT'S PART OF THE CONSPIRACY. SO, THE PROOF IS A QUESTION FOR ANOTHER DAY, BUT I BELIEVE THAT MR. SPIVAK IS PREPARED TO SET UP THAT LARGE TASK AHEAD OF HIMSELF IN THE BELIEF HE CAN PROVE THEM. MR. KLEIN: NICELY -THE COURT: SO, I MEAN, YOU HAVE A KIND OF -- I WELL, YOUR HONOR, THAT DOVETAILS

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DON'T MEAN IT PERJORATIVELY, BUT IT'S SORT OF, I GUESS THERE'S PROBABLY NO MORE APT TERM FOR IT THAN WHAT'S SOMETIMES CALLED THE LAUGHING DEFENSE, WHICH IS SORT OF

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THIS IS JUST SO GRANDIOSE AND AMBITIOUS A CLAIM BROUGHT AGAINST MY CLIENT THAT IT CAN'T POSSIBLY BE REAL. BUT THAT'S A DIFFERENT QUESTION THAN WHEN THEY ARE PUT TO THE PROOF, WHETHER IT HOLDS TOGETHER, AS TO WHETHER OR NOT THIS KIND OF ATTACK ON THE PLEADING IS BEING ESSENTIALLY JUST SO AMBITIOUS AS TO THEREFORE SOMEHOW BE ABSURD AND THEREFORE BECAUSE IT'S ABSURD FAILS, ISN'T NECESSARILY A WELL-TAKEN DEMURRER. IT MAY PRESAVE SOME INTERESTING FACTUAL DISPUTES AT LATER DATE, BUT I'M NOT SURE THAT THAT NECESSARILY JUST KNOCKS IT -- YOU KNOW, SHOOTS IT OUT BELOW THE WATERLINE. BUT I DO RECOGNIZE IT'S A VERY

AMBITIOUS PROJECT MR. SPIVAK HAS SET OUT FOR HIMSELF. MR. KLEIN: THAT DOVETAILS, YOUR HONOR, WITH

OTHER POINTS I'D LIKE TO MAKE WHICH DEAL WITH THE DEMURRER. AND I'D LIKE TO FOCUS THE COURT ON TWO ISSUES

BASED ON THE COURT'S TENTATIVE THIS MORNING. THE FIRST ONE IS DUTY IN CONNECTION WITH THE CONCEALMENT CLAIM. THE COURT: THAT'S WHY MY PROPOSED WRIT IN THE

PERLAS CASE IS SO INTERESTING, BECAUSE I THINK THAT'S THE RIGHT QUESTION FOR THE COURT OF APPEALS EARLY. MR. KLEIN: I APPRECIATE THAT, AND I'D LIKE TO

ADDRESS THAT A LITTLE BIT WITH FULL RECOGNITION OF THE COURT'S DEFERENCE TOWARDS THE COURT OF APPEAL AND

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POSSIBLY THAT PROCESS. THE SECOND PART DEALS WITH CAUSATION, WHICH IS ALSO AN ELEMENT OF BOTH THE FRAUD CLAIM OR

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CONCEALMENT CLAIM. 17200 CLAIM.

AND ALSO IT'S AN ELEMENT OF THE

AND I THINK BOTH OF THEM ARE LACKING HERE

WITH RESPECT TO DUTY, IT'S 30 YEARS OF CALIFORNIA CASE LAW STARTING WITH WAGNER V. BENSON; GOING TO CRUZ V. BANK OF AMERICA; TO PRICE VERSUS WELLS FARGO, ALL ESTABLISH THAT EXCEPT FOR BORROWING STATUTORY EXPRESS -STATUTORY PROVISIONS OR ESTABLISHED DUTIES, A LENDER OWES NO DUTY TO THE BORROWER. AND I GUESS WHAT I'M TRYING TO GET IS SOME CLARITY FROM THE COURT IN TERMS OF WHAT EXACTLY THE ISSUE IT'S PROPOSING TO BRING TO THE COURT OF APPEAL, IF THERE'S NO -- IF THE BASELINE IS THERE'S NO DUTY THERE NEEDS TO BE AN ALLEGATION OF SOMETHING THAT ESTABLISHES THAT DUTY. THE COURT: WELL, IN MY ANALYSIS, IN PREPARING

MYSELF TO ISSUE THE SPOKEN TENTATIVE, I WAS RATHER PERSUADED BY THAT PORTION OF YOUR ADVERSARY'S BRIEF THAT SAID THAT THERE WAS NO AUTOMATIC IMMUNITY ON A BANK. NOW, ARGUABLY, THE ABSENCE OF A DUTY IS ANOTHER WAY OF SAYING IMMUNITY. BUT I SORT OF WENT BACK

TWO PACES TO THE MORE FUNDAMENTAL COMMON LAW PRINCIPLE THAT ONE CAN'T ENGAGE IN INTENTIONAL FRAUD THROUGH CONCEALMENT WITH SOMEBODY WITH WHOM ONE IS DOING BUSINESS, AND BE AUTOMATICALLY IMMUNIZED TO THE VIEW THAT THAT IS THE CORRECT STARTING POINT FOR ANALYSIS,

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RATHER THAN SAYING THAT THE CASES ARE CLEAR THAT AS BETWEEN BANKS AND THEIR CUSTOMERS, THERE IS SUCH A CLEAR RECOGNITION OF NON-DUTY THAT EVEN KNOWING FRAUDULENT

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CONCEALMENT IS IMMUNIZED. BUT TO ME THAT'S THE INTERESTING QUESTION FOR THE COURT OF APPEALS, BECAUSE YOUR ADVERSARY IN THEIR OPPOSITION GO BACK TO SORT OF THE FIRST PRINCIPLES ON PROSSER ON TORTS OR WITKIN ON TORTS, WHICH IS AS YOU ENTER INTO A COMMERCIAL RELATIONSHIP YOU CAN'T ENGAGE IN THIS INTENTIONAL TORT. AND WHETHER IT IS A FRAUDULENT MISREPRESENTATION, OR A FRAUDULENT CONCEALMENT, IT STRUCK ME THAT ONCE YOU HAVE A BUSINESS RELATIONSHIP, WHICH, KNOCKING ASIDE THE 64 PLAINTIFFS, HYPOTHETICALLY, AND DEALING WITH SOMEBODY WHO REALLY HAD AN ORIGINATION WITH COUNTRYWIDE, IF MOZILO AND HIS TROUPS ARE INTENTIONALLY INFLATING THE VALUE OF ALL OR MUCH AMERICAN RESIDENTIAL REAL ESTATE, IN ORDER TO GENERATE MORE LOANS, IN ORDER TO GENERATE SHORT-TERM PROFITS AND BONUSES, AND THEY KNOW THEY ARE DOING IT, BUT CHOOSE NOT TO TELL THEIR CUSTOMERS AS THEY APPROACH, THAT THEY ARE BEING SUCKED INTO THIS MAW; AND THE PLAINTIFF OR ANYONE OF THEM ARE SUCKED INTO THE MAW, AS PART OF KNOWING FRAUDULENT CONCEALMENT AND ENTERING INTO A CONTRACT WITH COUNTRYWIDE TO ORIGINATE A LOAN, AT LEAST UNDER MY FIRST THEORY OF FIRST PRINCIPLES OF WHAT I WOULD THINK TO BE THE LAW UNDER PROSSER ON TORTS OR WITKIN ON TORTS OR WITKIN SUMMARY OF CALIFORNIA LAW THE SECTION RELATED TO

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TORTS, AND THE APPELLATE CASES ON WHICH THEY WOULD OF COURSE RELY, THAT THAT DUTY MIGHT BE RECOGNIZED. BUT, YOU MAY BE RIGHT, THAT CASES LIKE

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PERLAS AND/OR THE OTHER CASES YOU REFER TO ACTUALLY ADOPT A JURISPRUDENTIAL VIEW THAT BANKS SHOULD BE FUNCTIONALLY IMMUNIZED IN THIS ASPECT OF THE RELATION WITH CUSTOMERS. AND IF THAT IS THE VIEW OF THE COURT OF

APPEALS OR I HAVE GOT IT WRONG, IT WOULD BE BETTER TO KNOW THE ANSWER TO THAT EARLY, BECAUSE PROBABLY IN MANY WAYS THE HIGH STAKES CLAIM IN THIS CASE, ARE THE COMMON LAW TORTS FOR FRAUDULENT ORIGINATION, BECAUSE THEY ATTACKED A PUNITIVE DAMAGES. THE PRIVACY CLAIMS VERY DIFFERENT. HAVE A DIFFERENT FACTUAL UNDERPINNING. THEY

I DON'T THINK

YOU GET TO NEAR THE SAME ORDER OF MAGNITUDE OF DAMAGES IF THEY ARE GOING TO WORK AT ALL. YOUR DEMURRER HAS

ALREADY PREVIEWED WHAT MAY BE SOME RATHER EFFECTIVE DEFENSES TO EITHER WHITTLE DOWN EXPOSURE OR TOTALLY ELIMINATE EXPOSURE. SO RELATIVE TO CASE VALUE, AND

MR. SPIVAK'S HOPE TO TRY THE CASE TO THE JURY AND HAVE A LOT OF ZEROS UP ON THE BOARD, IT WOULD BE REALLY NICE TO GET THE COURT OF APPEALS TO TELL US WHETHER YOUR NO DUTY PREMISE AS TO THE COMMON LAW CLAIMS REALLY DOES HOLD TIGHT NO MATTER HOW EGREGIOUS THE ALLEGED CONDUCT IS, BECAUSE YOUR ADVERSARIES COMEBACK IS, WAIT A MINUTE, THIS IS EGREGIOUS INTENTIONAL TORT AND WE DON'T THINK THE LAW ESTABLISHES IMMUNITY. AND YOU ARE SAYING ESSENTIALLY, NO, A

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COUPLE OF DECADES OF THE LAW SAY THAT BETWEEN BANK AND ITS CUSTOMER IT HAS IMMUNITY IN THE FORM OF NO DUTY AS TO THE POSSIBILITY OF ENGAGING IN FRAUD IN CONNECTION

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WITH A LOAN TRANSACTION. AND I GUESS I'M NOT YET PREPARED IN THE FACE OF A DEMURRER THAT SAYS THIS IS AN INTENTIONAL TORT, TO FIND THAT THE NO DUTY CASES GO THAT FAR. BUT

IT'S VERY MUCH A DEBATABLE POINT, WHICH IS WHY I WOULD LIKE THE WRIT. AND, CANDIDLY, IF I WERE TO RULE THE OTHER WAY I'D WANT A WRIT JUST AS FAST, IF -- ALTHOUGH I GUESS FRANKLY IF I FOUND NO DUTY, THE PROBLEM THERE IS WE WOULDN'T HAVE A FINAL JUDGMENT. WE'D NEED A WRIT TO GET

EARLY REVIEW OF IT ANYWAY, BECAUSE WE HAVE OTHER CLAIMS, IMPEDING THE ENTRY OF FINAL JUDGMENT, SO IT WOULD STILL TAKE A WRIT TO TEST THE MERITS OF THE CONTRARY RULING. MR. KLEIN: THE COURT: WELL, I APPRECIATE -BUT SO FAR I'M INCLIENT TO THINK THAT

YOUR ADVERSARY'S SORT OF HORNBOOK LAW AS TO THEIR WILLINGNESS TO ESTABLISH THAT THIS IS A VERY INTENTIONAL TORT COMMITTED BY COUNTRYWIDE AND ITS VARIOUS PEOPLE DOESN'T GET TO IMMUNITY. MR. KLEIN: YOUR HONOR. WE CAN CERTAINLY TAKE THAT WRIT,

AND AS I UNDERSTAND IT, THE QUESTION IS

WHICH YOUR HONOR IS LOOKING TO CERTIFY FOR A WRIT, IS WHETHER -- UNDER THE CIRCUMSTANCES OF ALLEGATIONS OF CONDUCT TO ENGAGE IN SOME SORT OF FRAUDULENT SCHEME, WHETHER THERE'S A DUTY BY THE LENDER TO DISCLOSE THAT TO

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THE PROSPECTIVE BORROWER OR EXISTING BORROWER. IS THAT SAFE TO SAY? THE COURT: YES.

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MR. KLEIN:

THANK YOU, YOUR HONOR.

I APPRECIATE

THE CLARIFICATION ON THAT. CAUSATION, I RECOGNIZE -THE COURT: OTHER CASE. MR. KLEIN: THE COURT: GREAT.

I WOULD LIKE TO GO INTO

GOOD TIME TO TAKE A BREAK FOR THE

COURT'S IN RECESS.

(RECESS.)

THE COURT:

BACK ON THE RECORD.

WE HAVE ABOUT AN

HOUR AND 15 MINUTES. BECAUSE IT IS A DEFENSE DEMURRER AND MY TENTATIVE SO FAR IS TO, IN LARGE PART, OVERRULE, I THINK AT THIS POINT, I'LL GIVE THE NEXT 40 MINUTES TO DEFENSE COUNSEL, RESERVING SUCH TIME AS YOU WANT AND THEN 40 MINUTES TO PLAINTIFF'S COUNSEL. YOU WERE MIDSTREAM. MR. KLEIN: THANK YOU, YOUR HONOR. YOU CAN PICK UP WHERE

AS I MENTIONED IN OUR PRIOR SESSION, THERE WERE TWO ISSUES I'D LIKE TO ADDRESS. THE FIRST ONE WAS

DUTY WITH RESPECT TO CONCEALMENT, I THINK WE'VE HAD A DISCUSSION ON THAT, I APPRECIATE THE COURT'S INPUT, WITH RESPECT TO THAT ISSUE. THE SECOND ISSUE I MENTIONED THAT WE'D LIKE

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TO ADDRESS, IS CAUSATION.

AND IT DEALS WITH BOTH ON THE

CONCEALMENT CLAIM AND ON THE 17200 CLAIM, BOTH WHICH REQUIRE AN ALLEGATION OF CAUSATION BETWEEN THE ALLEGED

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WRONGFUL ACT AND THE HARM THAT'S OCCURRED. I CAN -THE COURT: AS I UNDERSTAND IT, BASICALLY,

DEFENDANTS GOT REAL ESTATE PRICES GENERALLY AND SPECIFIC TO EACH PLAINTIFF'S PURCHASE OR REFI ARTIFICIALLY HIGH. THEY RELIED UPON THE APPARENT PRICING ON THE MARKET TO THEIR DETRIMENT, EITHER BY SOMETHING TOO EXPENSIVE WITH FINANCING OR SADDLING THEIR PROPERTY WITH MORE FINANCING THAN IT JUSTIFIED. AND NOW THEY FIND THEMSELVES UNDER-

WATER, THAT'S THE HARM. CORRECT, MR. SPIVAK? MR. SPIVAK: YOUR HONOR, YES, IN PART. WE ARE

ALSO ASSERTING THAT BECAUSE OF THE SCHEME, PLAINTIFFS ENTERED INTO MORTGAGES THAT THEY SHOULD NOT HAVE ENTERED INTO WITH COUNTRYWIDE AT ALL. THAT WOULD HAVE PREVENTED

COUNTRYWIDE FROM EMBARKING ON THE OTHER HALF OF ITS SCHEME WHICH LED TO THE REAL ESTATE COLLAPSE. SO THAT THEIR PROPERTY VALUES DECLINED IN PART BECAUSE TAKING THEM IN BULK, BECAUSE THEY ALL, NOT KNOWING WHAT WAS OWING OCCURRING, TOOK A COUNTRYWIDE MORTGAGE. HAD THEY TAKEN THEIR MORTGAGES ELSEWHERE

COUNTRYWIDE WOULD NOT HAVE BEEN ABLE TO IMPLEMENT ITS SCHEME WITH THE RESULTING LIQUIDITY CRISIS. THE COURT: SO, TO SOME EXTENT, BY BEING FODDER

FOR COUNTRYWIDE MILL, THEY LET COUNTRYWIDE INFLATE THE

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MARKET GENERALLY BY BEING A COUNTRYWIDE CUSTOMER, RATHER THAN JUST BEING AN HSBC CUSTOMER. MR. SPIVAK: YES, YOUR HONOR.

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THE COURT:

BUT, BASICALLY, THE MAIN HARM WAS THAT

THE MARKET GOT OVER INFLATED AND THEY GOT INTO THE MARKET AT WRONG TIME AND/OR SADDLED THEIR PROPERTY EVEN IF THEY BOUGHT IT EONS AGO OR INHERITED IT, WITH A MORTGAGE BEYOND WHAT IT WOULD TOLERATE. MR. KLEIN: I THINK THAT FAIRLY IDENTIFIES MY

UNDERSTANDING OF WHAT THE HARM IS, IS BASICALLY IF YOU LOOK AT THE FACTORS OVERALL, SOMEHOW, SOME SORT OF CONDUCT BY THE BANK WOULD IN TURN LED TO THE GLOBAL DOWNTURN IN THE ECONOMY, WHICH LED TO THE CREDIT CRISIS, WHICH LED TO THE COLLAPSE -THE COURT: I THINK IT'S ENOUGH FROM THEIR POINT

OF VIEW THAT IT LED TO THE HOUSING BUBBLE, WHICH WAS GOING TO BE INHERENTLY SELF-DESTRUCTIVE OF ITS OWN ACCORD, WITHOUT REGARD OF THE NICETIES OF YEN, EXCHANGE RATIOS OR THE INABILITY OF GENERAL MOTORS TO SUPPORT ITS HIGH COST STRUCTURE DOING BUSINESS OR SPENDTHRIFT HABITS OF CERTAIN GOVERNMENTS TO SPEND MORE THAN THEY TOOK IN TAX REVENUE, WHICH HAVE BEEN COMPOUNDING FACTORS IN ECONOMIC PROBLEMS, BUT BASICALLY THE HOUSING BUBBLE IN AND OF ITSELF WAS DOOMED TO FAIL. MR. KLEIN: I WON'T TRY TO BE AN EXPERT ON THE

HOUSING BUBBLE TODAY, BUT I CAN TELL, I CAN IDENTIFY THROUGH, YOU KNOW, A NUMBER OF FACTORS, COMPLEX, AND SOPHISTICATED FACTORS, THAT ARE AT PLAY HERE, THAT DON'T

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INVOLVE THE BANK THAT ALL CONTRIBUTED IN SOME WAY, IF YOU LOOK AT, YOU KNOW, WHAT IS PUBLISHED OUT THERE, TO THE HOUSING BUBBLE STARTING WITH THE FED AND AL

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GREENSPAN'S DESIRE TO KEEP INTEREST RATES LOW FOLLOWING 911 AND THE DOTCOM BUBBLE THAT BURST. THEN YOU CAN GO TO THE CLINTON ADMINISTRATION WITH DEREGULATION, WITH ROBERT RUBIN AND PHIL GRAHAM, WHICH ALLOWED BROKERAGE FIRMS TO USE BANK DEPOSITOR FUNDS TO ENGAGE IN INVESTMENT ACTIVITIES FOR THEIR OWN ACCOUNT. YOU CAN LOOK AT OF GOVERNMENT POLICIES AND EXPANSION OF G.S.E.'S. THE COURT: MR. KLEIN: WHAT'S A G.S.E? GOVERNMENT SUBSIDIZED ENTITIES SUCH

AT FREDDIE MAC AND FANNY MAY, AND THE 500 BILLION DOLLAR COMMUNITY REDEVELOPMENT ACT. YOU CAN LOOK AT EXCESSIVE LEVERAGE BY INVESTMENT BANKS SUCH AS BEAR STEARNS AND LEHMAN BROTHERS. THERE'S FINANCIAL ENGINEERING GOING ON WITH

A.I.G., AND THE EXPONENTIAL GROWTH OF CREDIT DEFAULT SWAPS. THE COURT: BUT SEE NOW THE CHALLENGE AT THE

MEMENT IS I'VE GOT A PLEADING THAT SAYS THAT MR. MAZILO AND HIS TEAM WERE WITHIN THE IDEA OF THE TORT LAW, IN TERMS OF SUBSTANTIAL CAUSE, WHICH DOESN'T HAVE TO BE SOLE CAUSE, BUT DOES HAVE TO BE SUBSTANTIAL CAUSE, CAPABLE OF MAKING A HOUSING BUBBLE. IS IT ARGUABLY IMPLAUSIBLE AT SOME POINT?

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MAYBE, BUT THAT'S WHERE I REFER TO -- AT THE MOMENT -AND I DON'T MEAN THE PHRASE LAUGHING DEFENSE IN A PERJORATIVE SENSE. IT IS REALLY IN A SENSE OF SAYING

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THEY ARE REALLY JUST HEAPING TOO MUCH ON POOR LITTLE OLD COUNTRYWIDE TO BE ABLE TO CAPABLE, SO DISTORTING HOUSING PRICES ON THE ECONOMY. BUT I DON'T THINK I'D TEST IT ON DEMURRER. INTERESTINGLY, IT'S NOT CLEAR I'D TEST IT ON SUMMARY JUDGMENT MUCH BETTER. BUT, YET A COURT OF APPEALS WILL

PROBABLY AT SOME POINT, FACTOR THIS ALL TOGETHER WITHOUT GOING THROUGH TRIAL TRANSCRIPTS, LISTENING TO 28 WITNESSES AND WONDERING WHETHER THEY WERE CREDIBLE OR NOT. BECAUSE THESE ARE THE LARGER ISSUES INVOLVED AS TO

EXACTLY HOW IT CAME TO BE IN THE PRICKED HOUSING BUBBLE THAT WE HAPPEN TO BE IN NOW. BUT, AGAIN, I'M TESTING ON DEMURRER, AT THE MOMENT, WHICH IS WHY I STARTED THE DISCUSSION SAYING, NEITHER SIDE SHOULD WALK OUT OF HERE THINKING THAT THIS HAS BEEN A HUGELY VALUABLE EXERCISE IN CALIBRATING HOW STRONG OR WEAK THE CASE IS, BECAUSE THE CONSTRAINTS OF WHAT I HAVE TO DO IN RULING ON DEMURRER, KEEP ME FROM COMING IN HERE AND SORT OF REALLY WHACKING AWAY AT THE CASE TO GET TO ITS ULTIMATE CASE VALUE. HAVE THE RIGHT PROCEDURAL TOOL. RECORD. BECAUSE I DON'T

I DON'T HAVE THE FULL

I CERTAINLY DON'T MEAN TO SUGGEST TO PLAINTIFFS

THAT FOR CERTAINTY THIS CASE IS GOING TO IMPLODE LIKE ITS OWN HOUSING BUBBLE, BUT SIMPLY THAT WE ARE TOO EARLY IN THE PROCESS TO BE DOING A VERY ACCURATE JOB OF

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CALIBRATING HOW THE CASES ARE GOING TO COME OUT. MR. KLEIN: MY CONCERN, YOUR HONOR, IS I

APPRECIATE THE STAGE IN THE LITIGATION WHERE WE'RE AT.

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AND I APPRECIATE THE RESTRAINTS ON THE COURT IN TERMS OF WHAT IT CAN ACTUALLY DECIDE AT THE PLEADING STAGE AS OPPOSED TO SUMMARY JUDGMENT. BUT EVEN IF WE LOOK AT THE PEOPLE IN THIS COURTROOM, WE CAN -- THE LAW WILL DEMONSTRATE AS A MATTER OF LAW, THAT THEY CAN'T ALLEGE THAT THE BANK IS THE CAUSE OF THEIR LOSS IN PROPERTY. FOR EXAMPLE, THE COURT MAY HAVE A HOME, THE COURT REPORTER MAY HAVE A HOME, THE COURT CLERK MAY HAVE A HOME, SOME OF WHICH ARE NOT FINANCED BY THE BANK. AND

YET, WE'VE ALL SUFFERED A LOSS IN VALUE ON OUR HOMES. AND I THINK THE CASE -- LET ME READ FROM DARO VS. SUPERIOR COURT, 151 CAL.APP.4TH, 1079, WHICH BASICALLY SAYS -- IT WILL BE ONE PARAGRAPH, SO -THE COURT: BUT GO AHEAD. MR. KLEIN: I WON'T. JUST DON'T ACCELERATE YOUR PACE,

WHEN A U.C.L. ACTION, IS BASED ON AN UNLAWFUL BUSINESS PRACTICE, AS HERE, A PARTY MAY NOT PREMISE ITS STANDING TO SUE UPON INJURY CAUSED BY A DEFENDANT'S LAWFUL ACTIVITY, SIMPLY BECAUSE THE LAWFUL ACTIVITY HAS SOME CONNECTION TO AN UNLAWFUL PRACTICE THAT DOES NOT OTHERWISE AFFECT THE PARTY.

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IN SHORT, THERE MUST BE A CAUSAL CONNECTION BETWEEN THE HARM SUFFERED AND THE UNLAWFUL BUSINESS ACTIVITY.

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THAT CAUSAL CONNECTION IS BROKEN WHEN COMPLAINING PARTY WOULD SUFFER THE SAME HARM, WHETHER OR NOT A DEFENDANT COMPLIED WITH THE LAW.

AND WHAT WE HAVE HERE, YOUR HONOR, IS PEOPLE IN THE COURTROOM WHO HAVEN'T FINANCED THEIR HOME THROUGH THE BANK HAVE SUFFERED A LOSS IN VALUE. AND THE

BORROWERS WHO ARE PLAINTIFFS IN THIS CASE, HAVE SUFFERED A LOSS IN VALUE, MAKING -- BREAKING THE CAUSAL CONNECTION. AND, IMPORTANTLY, WHAT THAT EXCERPT ALSO IDENTIFIES FOR THE COURT IS THAT THIS ISN'T JUST A CAUSATION ISSUE. THIS IS A PROP 64 STANDING ISSUE.

YOU HAVE TO BE ABLE TO ALLEGE A HARM CAUSED BY THE CONDUCT OF THE BANK IN ORDER TO HAVE STANDING TO PURSUE A U.C.L. CLAIM. AND HERE THAT CAUSAL CONNECTION

IS BROKEN UNLESS THEY CAN ARTICULATE A CAUSAL RELATIONSHIP THAT ESTABLISHES THAT SOMETHING THAT THE BANK DID OR IS SOMEHOW CAUSALLY CONNECTED TO THE LOSS IN VALUE OF THEIR HOME. YOU KNOW, WHEN YOU LOOK AT -- WE HAVE SEVERAL DIFFERENT KINDS OF BORROWERS HERE AND WE WON'T GO INTO THE DETAILS OF THEM, BUT SOME ARE NEW HOMEOWNERS WHO USED PURCHASE MONEY LOAN. OTHERS ARE REFINANCERS

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WHO ALREADY HAD THE HOME. YOU KNOW. CERTAINLY WITH THE BORROWERS WHO

PURCHASE THE HOME, IF WE THINK ABOUT HOW THE PURCHASE

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PROCESS TYPICALLY GOES, THE BORROWER DECIDES ON A PURCHASE PRICE WELL BEFORE WE GET TO THE BANK FOR AN APPRAISAL OR WHETHER THEY QUALIFY ULTIMATELY BASED ON THE LOAN THEY ARE GOING TO TAKE OUT. SO THAT'S A FREE MARKET THAT'S DECIDING THE PURCHASE PRICES. NOT WHAT THE BANK'S DOING WITH RESPECT

TO WHETHER THEY DECIDE TO PURCHASE THE HOME AT THAT PRICE. THE COURT: BUT THEIR PLEADING ALLEGATIONS ARE

AMBITIOUS OR ROBUST ENOUGH TO SAY THAT THE FREE MARKET WAS ESSENTIALLY IN A GENERAL SENSE DISTORTED BY THE CONDUCT OF THESE DEFENDANTS, DISTORTING THE ENTIRETY OF THE MARKET THROUGH INFLATING REAL ESTATE PRICES. ESSENTIALLY, WHEN YOU WENT INTO THE STORE EVERYTHING WAS MISS PRICED. SO PICKING BETWEEN SEVEN DIFFERENT ITEMS

TRYING TO FIND THE RIGHT LOAF OF BREAD, HYPOTHETICALLY, WHEN THEY ARE ALL MIS-PRICED, YOU ARE STILL GOING TO GET THE WRONG PRICE ON A LOAF OF BREAD WHEN YOU PICK LOAF SIX OUT OF SEVEN, INSTEAD OF LOAF THREE OUT OF SEVEN, BECAUSE THE DEFENDANT'S CONDUCT HAS MIS-PRICED EVERYTHING. CORRECT, MR. SPIVAK? MR. SPIVAK: THE COURT: YES, YOUR HONOR. I MEAN, IT'S AN AMBITIOUS ASSERTION OF

ALMOST GLOBAL POWERS BY THE DEFENDANTS, BUT HAVING DARED

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TO PLEAD THAT THIS IS WHAT HAPPENED, THEY SORT OF GET PAST SOME OF THESE SMALL PROBLEMS THAT WOULD OTHERWISE HAVE A CERTAIN LOGIC IF WE WERE DEALING WITH A SMALL

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PART OF THE ORDINARY MARKET WITH ADAM SMITH'S INVISIBLE HAND EFFECTIVELY AT WORK. MR. KLEIN: YOUR HONOR, THE PROBLEM IS STILL IS

THAT THE CAUSAL CONNECTION IS BROKEN, BECAUSE WE ALL ARE IN THE SAME -- SOME OF US ARE ALL IN THE SAME BOAT. HOMEOWNERS THAT TOOK OUT -- THAT BOUGHT HOMES OR OWNED HOMES AND DIDN'T BUY IT, DIDN'T TAKE OUT A LOAN, THEY OWNED THEM SINCE 1985, WHATEVER IT MAY BE. THE COURT: WELL, THEIR SERENDIPITY IS THEY

ENTERED INTO A COMMERCIAL RELATIONSHIP WITH COUNTRYWIDE, WHICH GIVES THEM SOME KIND OF NEXUS IN WHICH TO LITIGATE IS, CONCEDEDLY, WOULD BE HARDER TO FIGURE OUT WHY YOU COULD SUE COUNTRYWIDE, APART FROM CONFLICT ISSUES, JUST BECAUSE YOUR HOME HAS LOST VALUE COMPARED TO WHAT YOU PAID FOR IT IN 2007, HYPOTHETICALLY. MR. KLEIN: BUT THE DARROW CASE ACTUALLY HITS

THAT HOME SAYING WHERE TWO PARTIES CAN SUFFER THE SAME HARM -- AND I CAN GIVE THE COURT THE PAGE NUMBER CITE. THE COURT: MR. KLEIN: PLEASE. 151 CAL.APP.4TH. THE CASE CITE IS

1079, THE PAGE NUMBER OF THAT EXCERPT IS 1099. I THINK IT'S A PROBLEM, AND I'LL LEAVE THAT PART OF IT AND GO ONTO THE NEXT ISSUE, WHICH IS EQUALLY DIFFICULT. THE COURT: I WILL ASK PLAINTIFFS TO RESPOND TO

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THE SPECIFIC POINT, NOT JUST DARROW, BUT TO THE POINT MR. KLEIN HAS BEEN MAKING. YOUR CHANCE TO SPEAK. NOT NOW, BUT WHEN YOU GET

MAKE NOTES TO YOURSELVES.

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MR. KLEIN:

THE NEXT ELEMENT OF THIS IS ALSO, AS

I UNDERSTAND IT, PART OF THE PLAINTIFF'S CLAIM IS THAT THEY ARE ALLEGING THAT THE MORTGAGES WITH THE BANK AND SOMEHOW THIS SECURITIZATION PROCESS, AND THIS GOES TO 17200 WITH THE M.E.R.S. ISSUE AND THE PATRIOT ACT ISSUE, FIRST OF ALL, WHAT IS THE CONNECTION? THERE IS NO CONNECTION, YOUR HONOR, BETWEEN M.E.R.S. AND WHETHER THESE BORROWERS CAN PAY THEIR MORTGAGES. THE FACT THAT M.E.R.S. IS ON A DEED OF TRUST

DOESN'T CHANGE WHETHER THESE BORROWERS CAN PAY THEIR MORTGAGE OR NOT. PATRIOT ACT. AND THE SAME THING IS TRUE FOR THE

WHERE THESE FUNDS COME -- THEY ALLEGE THEY

COME FROM SOME NEFARIOUS SOURCE, BUT WHERE THOSE FUNDS COME DON'T AFFECT WHETHER THESE BORROWERS CAN PAY THEIR MORTGAGES OR GO INTO DEFAULT. AND THAT, YOUR HONOR, IS PROVEN IN TWO DIFFERENT WAYS. ONE, IN THE GENERAL BORROWING PUBLIC,

PARTICULARLY WITH RESPECT TO THE BANK, THERE'S OVER 85 PERCENT OF THE BORROWERS ARE CURRENT ON THEIR MORTGAGE. IF EVERYONE -- IF IT -- IF EVERYONE HAS M.E.R.S. ON THEIR MORTGAGE AND IT APPEARS A LARGE PART OF THEM DO, BASED ON THE SLICE HERE BEFORE THE COURT, EVERYONE WOULD HAVE TO HAVE BEEN AFFECTED SO THAT THEY COULDN'T PAY THEIR MORTGAGE. AND THE SAME THING IS TRUE, EVEN IN THIS

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CASE, YOUR HONOR, WHERE I THINK COUNSEL HERE EVEN EARLIER TODAY -THE COURT: SAVE YOUR GESTURES FOR THE COURT, NOT

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YOUR ADVERSARY. MR. KLEIN: THE COURT: MR. KLEIN: THE COURT: COUNSEL TABLE. MR. KLEIN: THE -- WHERE YOU GET TO THE PARTIES I'M SORRY. THIS ISN'T JURY CLOSING ARGUMENT. I'LL GO LIKE THIS. OR JUST STAY ON YOUR SIDE OF THE

IN THIS CASE, COUNSEL THIS MORNING INDICATED THAT OVER 50 PERCENT OF THE BORROWERS IN THIS CASE ARE CURRENT ON THEIR MORTGAGE. AND SO, THERE'S A MAJOR BREAK IN THE CAUSAL LINK TO ALLEGE THAT ANY OF THE HARM -- ANY OF THE MISCONDUCT SET FORTH IN THE THIRD AMEND COMPLAINT IS SOMEHOW RELATED TO EITHER THESE BORROWERS' LOSS IN THE VALUE OF THEIR HOME OR THEIR INABILITY TO PAY THEIR MORTGAGE. IT'S JUST NOT THERE. AND I THINK THE FACT THAT THERE ARE THESE TWO TYPES OF PEOPLE, PEOPLE CURRENT ON THEIR MORTGAGE AND PEOPLE WHO AREN'T CURRENT ON THEIR MORTGAGE AND THERE'S PEOPLE WHO HAVE LOANS WITH THE BANK WHO HAVE LOST THE VALUE ON THEIR HOME, AND THERE ARE PEOPLE WITHOUT LOANS WITH THE BANK HAVE LOST VALUE ON THEIR HOME, IT MAKES THE BANK NOT A SUBSTANTIAL FACTOR IN THE HARM ALLEGED, WHICH IN OUR VIEW, YOUR HONOR, MAKES THE 17200 CLAIM AND THE CONCEALMENT CLAIM FAIL AS A MATTER

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OF LAW AT THE PLEADING STAGE. THE COURT: THE FACT THAT THE SAME ALLEGED HARM

HAS BEEN PERPETUATED ON ADDITIONAL PEOPLE THEN SAVE THE

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BANK FROM EXPOSURE TO THE PEOPLE WITH WHOM IT HAD A RELATIONSHIP? MR. KLEIN: NO. THERE ARE PEOPLE HERE WHO HAVE A

RELATIONSHIP WITH THE BANK AND THERE ARE PEOPLE WHO DON'T. I'M WILLING TO SUBMIT TO THE COURT THAT THERE

ARE SUBSTANTIALLY MORE PEOPLE WHO DON'T HAVE THE MORTGAGE WITH THE BANK THAN THERE ARE THAT DO. AND THOSE PEOPLE HAVE SUFFERED THE SAME LOSS. WITHOUT HAVING ANY INTERACTION WITH THE BANK.

AND IF WE ARE BOTH PARTIES -- AND I USE THAT DESCRIBING THE TWO DIFFERENT KINDS OF PEOPLE, WITH THE BANK AND WITHOUT THE BANK, ARE SUFFERING THE SAME HARM, IT BREAKS THE CAUSAL LINK. THE COURT: AND SO, AS A MATTER OF LAW -IF I RULE AGAINST YOU THIS IS SOME OF

THE ARGUMENT YOU HAVE TO TRY OUT ON THE COURT OF APPEAL. MR. KLEIN: I -- AND, YOUR HONOR, WHICH I

APPRECIATE YOU MENTIONING THAT, IF THE COURT IS INCLINED TO RULE AGAINST US, WE WOULD RESPECTFULLY REQUEST THE COURT CERTIFY THIS PORTION OF THE DECISION FOR THE COURT OF APPEAL AS WELL. THE COURT: I DON'T -I PLAN TO DO SO. IT'S THAT IMPORTANT,

I MEAN, IN ALL CANDOR, WHETHER THESE MAKE GOOD COMMON LAW TORT CLAIMS OR NOT, IT IS SOMETHING WE NEED TO KNOW ABOUT BECAUSE IT'S SO IMPORTANT FOR CASE VALUATION. MR. KLEIN: I WILL RESERVE THE REST OF MY TIME,

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YOUR HONOR, UNLESS I'M MISSING THE POINT HERE, BUT I THINK THEY ARE GOING TO KICK ME UNDER THE TABLE, I'LL PROBABLY LOSE A TOE.

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THE COURT:

THAT'S WHY YOU WERE GOING TO THE OTHER

MR. KLEIN:

IT'S SAFER OVER THERE.

I'LL RESERVE MY TIME AND THEN I'LL -- I MAY HAVE MORE TO ADD, BUT I'LL LET COUNSEL ADDRESS THE ISSUES THAT WE'VE DISCUSSED AND COME BACK. AND I THINK

THERE MAY BE AN OPPORTUNITY FOR SOME ADMINISTRATIVE ISSUES IF THERE ARE ISSUES TO BE RAISED, WE ARE HAPPY TO ADDRESS THOSE AS WELL. THE COURT: MR. SPIVAK: OKAY. THANK YOU, YOUR HONOR. AND MR. KLEIN

CAN HAVE HIS RESERVE TIME AFTER I'M DONE WITH MY PART OF THE TIME. THE COURT: DO YOU WISH TO SHARE YOUR TIME WITH

ANY OF YOUR COHORTS AMONGST THE PLAINTIFF'S COUNSEL, JUST SO I KNOW IN ADVANCE? MR. SPIVAK: NOT RIGHT NOW, BUT I MAY GIVE LIKE IN CONGRESS, IN FIVE OR

MR. STEIN PART OF MY TIME. TEN MINUTE INCREMENTS. THE COURT:

BUT THE JUDGE IS NOT ALWAYS AS

COOPERATIVE AS THE SPEAKER OF THE HOUSE. MR. SPIVAK: I WILL KEEP IT WITHIN MY 40 MINUTES,

AND I DIDN'T TAKE MR. KLEIN AS CEDING ANY OF HIS 40 MINUTES, I WAS JUST INTERRUPTING HIS 40 MINUTES. OKAY. I DIDN'T FINISH GOING THROUGH SOME

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OF YOUR HONOR'S DISCUSSION THIS MORNING AND I THINK I'M GOING TO PERHAPS WORK THE TWO IN TOGETHER. BUT MAYBE

I'LL START WITH SOME OF THE THINGS MR. KLEIN HAS SAID.

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INTERESTINGLY ENOUGH, MR. KLEIN HAS MADE TWO SIGNIFICANT OBSERVATIONS TODAY THAT WERE NOWHERE IN THEIR PAPERS. THEY WERE NOT IN THE DEMURRER, THEY WERE

NOT IN THEIR REPLY, THEY WERE NOT IN THEIR FEDERAL -MOTION TO DISMISS, THEY ARE NEW. THE FIRST BEING THAT THERE IS A BROAD BASED IMMUNITY TO BANKS, THAT THEY ARE NOT LIABLE FOR FRAUD OR DECEIT. VERSION. THEIR PAPERS HAVE ACTUALLY HAD A MUCH NARROWER THEY CITED ONE CASE IN THEIR PAPERS, NOT THE

THREE OR FOUR THAT WERE MENTIONED TODAY, WHICH I WASN'T ABLE TO WRITE DOWN BECAUSE THEY WERE SAID TOO QUICKLY. THEY HAVE CITED ONE CASE HAVING TO DO WITH A LOAN APPLICATION, HAVING TO DO WITH THE DECISION THAT ABSENT SPECIAL CIRCUMSTANCES, THE BANK WASN'T LIABLE FOR THE AFFORDABILITY OF A LOAN. THE COURT: MR. SPIVAK: THAT WAS PERLAS VERSUS GMAC. YES. AND, INTERESTINGLY IN THEIR

FEDERAL COURT 12(B)6 MOTION, THEY CITED EXACTLY ONE CASE, IT WAS A FEDERAL CASE, THAT MORE OR LESS SAID THE SAME THING. SO I JUST DON'T KNOW WHERE THIS 30-YEAR HISTORY OF ASSERTING THAT BANKS ARE IMMUNIZED FROM COMMON LAW OR STATUTORY LAW. ANY CASE THAT SAYS THAT. I'VE CERTAINLY NOT SEEN

I'VE SEEN CASES THAT SAY,

ABSENT SPECIAL CIRCUMSTANCES, OR NYMARK, WHICH IS A CASE

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DEALING WITH THE LIABILITY OF A BANK FOR MISREPRESENTATION AND FRAUD. I THINK ONE USES SPECIAL

CIRCUMSTANCES, THE OTHER ONE USES CONVENTIONAL

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CIRCUMSTANCES, AND OTHER THAN CONVENTIONAL CIRCUMSTANCES, THAT A BANK IS NOT LIABLE FOR COMPUTING THE AFFORDABILITY OF ITS CUSTOMERS' LOANS. I MEAN, THERE'S CLEARLY CASES THAT SAY THAT. THAT'S WHAT CASES SAY, THEY DON'T -- IF YOU WILL,

IT'S A QUALIFIED, LIMITED -- I DON'T EVEN KNOW IF IT'S IMMUNITY. IT'S A QUALIFIED, LIMITED STATEMENT THAT A

BANK'S NOT LIABLE FOR ONE ACTIVITY, IN NORMAL CIRCUMSTANCES. WHAT WE HAVE HERE, NOT ONLY FALLS INTO THE EXCEPTION FOR NOT NORMAL CIRCUMSTANCES, BUT IT AT MOST OVERLAPS THAT ONE LITTLE ISSUE WHERE MAYBE BANKS SOMETIMES AREN'T LIABLE. AND, AS I SAID, THERE'S NEVER

BEEN AN ARGUMENT MADE IN ANY PAPER I'VE EVER SEEN IN THIS CASE BEFORE OR AFTER I JOINED IT ABOUT A GLOBAL 30-YEAR IMMUNIZATION OF BANKS FROM LIABILITY FOR DECEIVING PEOPLE OR DEFRAUDING PEOPLE. LET'S TALK ABOUT WHAT WE HAVE, WHY WE ARE IN THIS SPECIAL CIRCUMSTANCE EXCEPTION. WE ARE IN THIS

SPECIAL CIRCUMSTANCE EXCEPTION BECAUSE WHAT THEY ALL TALK ABOUT, WHAT THE CASES TALK ABOUT IS A BANK ACTING ONLY IN THE TRADITIONAL ROLE OF LENDER. WHAT WE HAVE ALLEGED, AND AT DEMURRER STAGE, WHAT WE HAVE ALLEGED IS TAKEN AS TRUE -- WHAT WE HAVE ALLEGED IS A SCHEME IN WHICH THE PLAINTIFFS WERE

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THE PAWNS, THEY WERE THE FODDER, FOR THE SCHEME TO SELL SECURITIZED MORTGAGE OBLIGATIONS AT HIGH VALUE. THE BANKS WERE NOT ACTING AS BANKS IN THE

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CONVENTIONAL ROLE OF BANKS GIVING MORTGAGES AND RECEIVING INTEREST AND FEES FOR GIVING MORTGAGES. WERE USING THESE PLAINTIFFS AS PAWNS. WE ALLEGE THAT THEY KNEW SINCE 2004 THAT THIS WOULD LEAD TO THE DEMISE OF THEIR BANK AND TO THE DECLINE IN MORTGAGE VALUES, WHICH WE HAD SEEN AS A RESULT OF THE LIQUIDITY CRISIS CAUSED BY THEIR BANK. THEY DIDN'T CARE. THE BANK'S C.E.O.; THE THEY

BANK'S C.F.O.; THE BANK'S C.O.O., OTHER BANK OFFICERS WERE ENGAGED IN INSIDER TRADING, CHARGES THEY HAVE JUST RECENTLY SETTLED WITH THE FCC ON THE CIVIL SIDE. WERE ENGAGED IN THE SALE OF SECURITIZED MORTGAGE OBLIGATIONS AND DEFRAUDING INVESTORS FOR WHICH THEY HAVE BEEN SUED REPEATEDLY BY STATES ATTORNEYS GENERAL, BY THE FCC AND IN PRIVATE ACTIONS. AND OUR CLIENTS WERE THEIR PAWNS. AND THAT THEY

IS NOT A BANK ACTING IN THE CONVENTIONAL ROLE OF BANK. BIZZARELY, IN THE REPLY TO THE OPPOSITION ON THE DEMURRER, THE DEFENDANTS SAID THAT WE WERE SOMEHOW ARGUING THIS EXCEPTION MEANT THAT THERE WAS A FIDUCIARY RELATIONSHIP. THEY SAID THAT WE'D WRITTEN WE

THAT THIS HAD CREATED A FIDUCIARY RELATIONSHIP. NEVER SAID ANYTHING OF THE KIND. FIDUCIARY RELATIONSHIP.

WE KNOW THERE WAS NO

WHAT WE HAVE SAID, WHAT LI MANDRI SAYS,

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WHAT NYMARK SAYS, WHAT WARNER SAYS IS THAT THERE ARE EXCEPTIONS UNDERSTAND 1572, 1709; 1710, THE DECEIT AND FRAUD STATUTES.

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THERE ARE EXCEPTIONS AS TO WHEN CONCEALMENT OR FRAUD, WHEN THERE ARE DUTIES NOT TO CONCEAL, NOT TO DEFRAUD. AND ONE OF THE TIMES THAT DUTY EXISTS IS IN A ANOTHER TIME THAT DUTY EXISTS ANOTHER TIME THAT

FIDUCIARY RELATIONSHIP.

IS WHEN ENTERING INTO A CONTRACT.

DUTY EXISTS IS WHEN MAKING A PARTIAL DISCLOSURE. ANOTHER TIME THAT DUTY EXISTS IS WHEN MAKING AN INACCURATE DISCLOSURE TO SOMEONE WHO IS NOT IN POSSESSION OF THE SAME FACTS YOU ARE IN POSSESSION OF. LIKE THAT YOU ARE ENGAGED IN A SCHEME TO LIE ABOUT THE QUALITY OF YOUR MORTGAGES, ASSEMBLE THEM INTO COLLATERALIZED MORTGAGE OBLIGATIONS AND SELL THEM AT A FRAUDULENT VALUE, KNOWING THAT IN THE PROCESS YOU ARE GOING TO DESTROY THE MORTGAGE MARKET AND CREATE A LIQUIDITY CRISIS. THAT IS WHAT WE HAVE ALLEGED. NOT A

FIDUCIARY RELATIONSHIP, WHICH NOT ONCE APPEARS IN OUR OPPOSITION. AND AS I SAY JUST APPEARED -- THEY CREATED THEIR ARGUMENT

A STRAWMAN AND ARGUED AGAINST IT.

AGAINST THE STRAW WAS PROBABLY CORRECT, JUST NOT WHAT WE ALLEGED. THERE'S A DUTY. THE DUTY IS CREATED BY THE

INACCURATE DISCLOSURES, THE PARTIAL DISCLOSURES; BY BEING IN POSSESSION OF INFORMATION THAT THE PLAINTIFFS WERE NOT IN POSSESSION OF, AND BY ENTERING INTO A

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CONTRACT UNDER 1572. THERE IS NO CASE I HAVE SEEN, THERE IS NO CASE CITED BY THE BANK, WHICH I THINK IS A SUM TOTAL OF

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TWO CASES ONE IN THE FEDERAL CASE AND ONE IN THE STATE CASE, BUT IF I'M MISTAKEN, NO OTHER CASES THAT THEY CITED THAT I'VE LOOKED AT THAT SAYS THAT 1572 DOES NOT APPLY TO BANKS. SO, I THINK WE SHOULD JUST TAKE THAT, IF YOU WILL, OFF THE TABLE AND I FRANKLY THINK -THE COURT: MR. SPIVAK: WHAT ABOUT HIS CAUSATION ARGUMENT? I'M GOING TO TURN TO THAT.

THE SECOND ARGUMENT THAT NEVER APPEARS IN THEIR DEMURRER OR REPLY, BRAND NEW ARGUMENT TODAY, DOESN'T MAKE IT RIGHT OR WRONG, BUT IT'S CERTAINLY NOT SOMETHING WE BRIEFED. CAUSATION ARGUMENT. FIRST HE SAYS THESE ARE SOPHISTICATED, COMPLICATED MATTERS OF CAUSATION. THAT'S NORMALLY WHAT BUT LET'S TALK ABOUT THE

I'D BE SAYING TO ARGUE AS TO WHY THE DEMURRER IS THE INAPPROPRIATE STAGE IN WHICH TO RESOLVE THE MATTER. IT'S A SOPHISTICATED, COMPLICATED MATTER. A SOPHISTICATED, COMPLICATED MATTER. SECOND, HE MAKES THE ARGUMENT THAT NON-COUNTRYWIDE CUSTOMERS MAY ALSO HAVE BEEN DAMAGED BY COUNTRYWIDE'S IMPROPER ACTIVITIES AND THAT THEREFORE THOSE WHO MAY HAVE A CAUSE OF ACTION BECAUSE THEY ENTERED INTO A CONTRACT AND THEY CAN USE 1572 OR FOR SOME OTHER REASON SHOULDN'T HAVE THEIR DAY IN COURT WE AGREE IT'S

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BECAUSE THE PERSON WHO DIDN'T ENTER INTO THE CONTRACT MIGHT NOT ALSO HAVE HIS DAY IN COURT. NOW, I DON'T REPRESENT ANYONE AGAINST

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COUNTRYWIDE WHO DIDN'T HAVE A CONTRACT WITH COUNTRYWIDE, SO I'VE NEVER EVALUATED WHETHER THAT OTHER PERSON MIGHT NONETHELESS HAVE A CAUSE OF ACTION UNDER 1709 OR 1710, THOUGH NOT UNDER 1572 AND, PERHAPS HE DOES, AND PERHAPS HE DOESN'T. IF THE COURT WANTS ME TO FIGURE OUT MY ANSWER I WILL, BUT I DON'T REPRESENT THOSE PEOPLE. THE COURT: MR. SPIVAK: LIFE'S TOO SHORT. I DO KNOW THE FACT THAT COUNTRYWIDE

MAY HAVE HURT SOMEONE ELSE AND THAT OTHER PERSON CAN'T SUE COUNTRYWIDE, IF THAT'S THE CASE, DOESN'T MEAN MY CLIENT IS DEPRIVED OF HIS DAY IN COURT BECAUSE HE FORTUITOUSLY WAS INDUCED INTO ENTERING INTO A CONTRACT CLEARLY GIVING HIM CAUSES OF ACTION FOR CONCEALMENT; SUBJECT TO YOUR HONOR'S POINT -- WELL, CAUSES OF ACTION FOR FRAUD IF PROPERLY ALLEGED AND PROVEN, YOUR POINT ON THE SECOND AND THIRD CAUSES OF ACTION; AND CAUSES OF ACTION UNDER THE U.C.L.. BREAK IN CAUSATION DOES NOT OCCUR BECAUSE SOMEONE ELSE WAS ALSO HARMED WHO MAY NOT HAVE STANDING TO BRING A CASE ALLEGING HIS HARM. OUR CLIENTS ENTERED INTO CONTRACTS WITH COUNTRYWIDE. UNDER THOSE CONTRACTS THEY PAID INTEREST I DON'T EVEN UNDERSTAND, WHICH

AND FEES TO COUNTRYWIDE.

MAY BE MY NAIVETE, WHY THERE'S ANY DOUBT THAT IN A

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RESTITUTIONARY POOL AND A BASIS FOR RESTITUTIONARY DAMAGES, THE BANK IN THEIR RESPONSE SAID, YEAH, BUT WE GOT THOSE INTEREST PAYMENTS, THEY ARE OURS.

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YEAH, BUT IF WE ARE RIGHT, THEY GOT THOSE INTEREST PAYMENTS IN -- BY VIOLATING A NUMBER OF LAWS AND STATUTES THEY SHOULD NOT HAVE VIOLATED. IT FAIR AND SQUARE, NOW GIVE IT BACK. AND IF WE PROVE THEY STOLE IT FAIR AND SQUARE, THEY SHOULD GIVE IT BACK. IT, THEN THEY WILL KEEP IT. RESTITUTIONARY POOL. AND IF WE DON'T PROVE THEY STOLE

BUT THAT'S THE

THE INJUNCTIVE RELIEF WE HAVE

ALREADY TALKED ABOUT OR LOSS OF MONDAY OR PROPERTY. THE COURT: WHAT ABOUT THE ONE TASK I PROPOSE TO

PUT UPON YOU, WHICH IS TO TRY TO GIVE ME THE WHO, WHAT, WHERE, WHEN FOR THE SECOND AND THIRD CAUSE OF ACTION? MR. SPIVAK: OKAY. TURNING TO THAT, YOUR HONOR, I

WANT TO COMBINE THAT WITH THE ISSUE OF THE PRE-2005 -THAT THERE ARE SOME PLAINTIFFS, NO ONE SUPPLIED A LIST SO WE DON'T HAVE OUR THEIR NAMES WITH US, THERE ARE SOME PLAINTIFFS WHO, WE SUGGESTED WE SUSPEND PURSUING THE SECOND AND THIRD CAUSES OF ACTION ON BEHALF OF, AND YOUR HONOR -THE COURT: MR. SPIVAK: AND THE FIRST. NO, NO. BECAUSE OF CONCEALMENT,

MAYBE -- NO, YOUR HONOR, NOT THE FIRST. THE COURT: YOU DIDN'T PROPOSE TO SUSPEND THE

MR. SPIVAK:

SECOND AND THIRD, BECAUSE CONCEALMENT

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WAS OCCURRING IN 2004 -- CONCEALMENT WAS THE NON-STATEMENT. THE DIFFERENCE OR A DIFFERENCE BETWEEN

THE FIRST CAUSE OF ACTION, THE SECOND AND THIRD, IS THE

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FIRST TALKED ABOUT WHAT SOMEONE DIDN'T SAY WHEN UNDER A DUTY TO SAY IT. THE DUTY COMING -THE COURT: AN ADVOCATE -MR. SPIVAK: THE COURT: YES. -- KNEW THEY WERE COMMENCING TO ENGAGE WHEN THEY ALREADY, IN YOUR VIEW OF AS

IN FRAUDULENT CONCEALMENT. MR. SPIVAK: YES. THE TACK ALLEGES THAT THEY KNEW THE TACK DOES

AND ENGAGED IN THE CONCEALMENT FROM 2004.

NOT ALLEGE WITH PARTICULARITY ANY AFFIRMATIVE MISREPRESENTATIONS MADE 2004. HENCE THE 2005 ISSUE

UNDER THE SECOND AND THIRD CAUSES OF ACTION RAISED BY THE DEFENDANTS, AND WE ACKNOWLEDGE THAT THAT ISSUE DOES EXIST UNDER THE SECOND AND THIRD CAUSES OF ACTION. OUR PROPOSED RESOLUTION WAS SUSPENSION. YOUR HONOR INSTEAD SAID, "INTERESTING, MAYBE IT DOESN'T EXIST, DISMISS WITHOUT PREJUDICE, AND IF YOU FIND IT COME BACK." YOUR HONOR, WE'D LIKE TO PROPOSE A THIRD ALTERNATIVE. YOUR HONOR WANTS GREATER PARTICULARITY AS

TO THE PLAINTIFFS AND ROES TO BE ADDED AS TO WHERE THEY RELY, EVEN POST 2005. THEY MAY HAVE RELIED BECAUSE THEY

DID, IN FACT, OWN COUNTRYWIDE STOCK AND DID READ THE 10-K OR 10-Q. YOUR HONOR SAID PROBABLY NOT TRUE OF 249,

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IT'S TRUE WHATEVER IT'S TRUE OF. ISSUE.

WE UNDERSTAND THE

OTHERS MAY HAVE HAD OTHER REPRESENTATIONS. WE'D LIKE TO TAKE IT AS OUR JOB IN AMENDING

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THE SECOND AND THIRD CAUSES OF ACTION TO DO TWO THINGS. IT'S REALLY ONE THING: SHOW THE RELIANCE FOR THOSE WHO

GOT THEIR LOANS BEFORE 2005, WE'D HAVE TO FIGURE OUT THE LIST OURSELVES SO THAT DEFENDANTS DON'T HAVE TO. FOR THOSE WHO GOT THEIR LOANS BEFORE 2005, IF WE CANNOT FIND ADDITIONAL SECURITIES FILINGS TO SHOW THEY READ IT, THEN WE BETTER SHOW SOMETHING ELSE THEY RELIED ON OR WE WILL DISMISS THOSE PLAINTIFFS FROM THE SECOND AND THIRD CAUSE OF ACTION. SIMILARLY, FOR ANY OF THE PLAINTIFFS WHO MAY HAVE GOTTEN THEIR LOAN IN 2005 OR '06, EVEN THOUGH THERE WERE A MILLION OF THESE SECURITIES FILINGS, IF WE CANNOT BY INTERVIEWING THEM, GETTING THE FACTS, TIE IT BACK, WE'LL DISMISS AS TO THOSE AS WELL. SO WE'D LIKE TO TAKE THIS AS A SINGLE JOB THAT SAYS TO US, TO DO OUR JOB PROPERLY WE HAVE TO ADD AS MANY AS 249, PLUS WHEN WE ADD THE ROES, WHATEVER NUMBER. 800 MORE PARAGRAPHS, YOU KNOW, ONE PARAGRAPH

PER PLAINTIFF SAYING -- I THINK THIS IS WHAT YOUR HONOR WANTS -THE COURT: I SAT THERE FOR HOURS READING YOUR

PLEADING, FORTUNATELY, I WAS IN A PLEASANT CHAIR IN FRONT OF THE FIRE, UP IN THE SNOWY MOUNTAINS, LAST WEEKEND, BUT IT WAS TEDIOUS, BUT IT'S THE NATURE OF THE BEAST, IF ALL THESE PLAINTIFFS HAVE THEIR OWN

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INDIVIDUALIZED FRAUD CLAIM. MR. SPIVAK: I THINK IT'S LIKE THE VERY LENGTHY

200 PARAGRAPHS AT THE BEGINNING, WE NEED A LENGTHY --

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AND TO THE EXTENT WE CAN'T, BY INTERVIEWING OUR CLIENT, COME UP WITH A PROPER PARAGRAPH FOR EACH CLIENT, WE WILL DISMISS, AT LEAST AT THIS POINT WITHOUT PREJUDICE. THE COURT: WOULD THE SAME BE TRUE OF THE SUBSET

OF THE 64 WHO IN THE NEAR TERM SEEM TO HAVE ORIGINATED WITH PEOPLE YOU ARE PREPARED TO CONCEDE DON'T SEEM TO BE CO-CONSPIRATORS SUCH AS HSBC? MR. SPIVAK: YES, YOUR HONOR. WE HAVE TRIED TO --

WE DIDN'T HAVE WITH US A COPY OF THE EXHIBIT 1, BECAUSE OF THE SCHEDULE DIDN'T HAPPEN, WE WILL IN THE NEXT DAY OR TWO WHEN -- WE'VE HAD A CONVERSATION WITH COUNSEL -WE WILL PROPOSE TO THEM A LIST OF THOSE WE ARE GOING TO DISMISS WITHOUT PREJUDICE NOW. THE COURT: PARTIES. YOUR REPLEADING CAN GET TO THE SAME

IT TAKES PRECISION, WHICH FOR WHATEVER LUCKY

PERSON AMONGST THE FOUR OF YOU, OR SOME OTHER SOUL YET TO BE ROPED INTO THE EXERCISE -MR. SPIVAK: MISS JONES. THE COURT: -- HAVING TO BE EVER SO PRECISE ABOUT IT WILL BE MR. TOMASZEWSKI AND

IT, BUT, YOU KNOW, IT WILL ONLY BE 410 PAGES LONG AS A PLEADING. MR. SPIVAK: RIGHT. AND WHAT WE'RE GOING TO DO,

YOUR HONOR, IS THERE WILL BE SOME NUMBER, I DON'T KNOW IF IT'S 5 OR 20, WE WILL DISMISS THOSE WITHOUT PREJUDICE

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NOW. MR. KLEIN DOESN'T AGREE WITH THE PROCESS AS TO THE OTHER 44, BUT HE UNDERSTANDS AND HE KNOWS WE'LL

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GET AT LEAST SOME OF THEM OUT OF THE CASE NOW, WITHOUT PREJUDICE. WE MAY EVEN, ON THOSE WHO ARE NOT HSBC, MAY EVALUATE SOME OF THE OTHERS WE HAVE -THE COURT: BEFORE WE'RE DONE, I ALSO WANT TO HEAR WE

FROM BOTH YOU AND MR. KLEIN ON WHAT IF ANYTHING IS HAPPENING ON THE ONE-OFF PERSON BY PERSON ATTEMPTS AT LOAN MODIFICATIONS OR OTHERWISE. YOU PROBABLY HAVE DIFFERENT VIEWS AS IN, WE GAVE THEM ALL OF THE INFORMATION THEY WANT AND THEY WON'T TALK TO US. OR, WE ARE WAITING TO HEAR FROM

PLAINTIFFS AND THEY WON'T GIVE US ANYTHING. BUT I'LL TAKE EACH OF YOUR VERSIONS OF WHAT'S HAPPENING, BECAUSE IF I WERE A BETTING MAN, WHICH IS DANGEROUS AS A JUDGE, I'D STILL GUESS THAT THE ODDS ARE BETTER THAN 50 PERCENT THAT MANY OF THE CLAIMS IN THIS CASE WILL BE WORKED OUT BY INDIVIDUAL COMPROMISES OR SMALL GROUP PACKAGE COMPROMISES, BUT I HAVEN'T SEEN THAT PROCESS START FLOWING YET. I KNOW AN ANTICIPATED MOTION FOR PRELIMINARY INJUNCTION IS ANTICIPATED IN THE NOT TOO DISTANT FUTURE AND PERHAPS THAT WILL FOCUS THE MIND OF ONE OR BOTH SIDES. BUT I AM EVER SO HOPEFUL AS A CASE

MANAGEMENT TO TRY TO CREATE BEHAVIORS WHERE THIS BEGINS TO BECOME, NOT JUST A MIRAGE ON THE HORIZON BUT AN

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ACTUAL WELL FROM WHICH PEOPLE ARE DRINKING, AND ONCE THEY START DRINKING, PERHAPS THOSE ARE RESOLUTIONS SUFFICIENT TO SOME, IF NOT ALL OF THE PLAINTIFFS. AND

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IF IT'S SUFFICIENT TO THOSE PLAINTIFFS, THEN PRESUMABLY WE MAY ACTUALLY PROVIDE PRACTICAL JUSTICE THAT SERVES YOUR CLIENTS AND THEREFORE ACTUALLY MOVES THE CASE FORWARD TO A PRACTICAL RESOLUTION WITHOUT MAKING IT A HIGH STAKES POKER IN FRONT OF A JURY IN TWO OR THREE YEARS. MR. SPIVAK: YOUR HONOR, WHEN WE GET TO THAT

POINT, I'M GOING TO YIELD PART OF MY TIME TO MR. MR. STEIN AND MISS JONES, WHO IN OUR GROUP HANDLE THAT. THE COURT: CONDONE THAT. MR. SPIVAK: THE COURT: OKAY. TO CONTINUE FOR A MOMENT -FOR THAT I'M HAPPY TO, AS THE SPEAKER,

ANY TIME YOU ARE TALKING COMPROMISE,

I'LL BE VERY COOPERATIVE. MR. SPIVAK: THE COURT: GOOD. TO CONTINUE FOR A MOMENT --

SO YOU ARE PREPARED TO AMEND THE

SECOND AND THIRD CAUSES OF ACTION. MR. SPIVAK: WE ARE PREPARED TO AMEND THE SECOND WE'D LIKE TO INCLUDE WITH

AND THIRD CAUSES OF ACTION.

THAT THE ISSUE OF THE PRE-2005, AND WE WILL DISMISS AT THIS STAGE WITHOUT PREJUDICE, SHOULD DISCOVERY ASSIST US LATER ON, WE'LL DISMISS WITHOUT PREJUDICE ANY OF THOSE FOR WHOM WE CAN'T MAKE THE SPECIFIC ALLEGATION UNDER RELIANCE, WHICH WOULD THEREFORE MEAN ON THE PRE-2005

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ORIGINATIONS, IT WOULD INCLUDE SHOWING WHAT THEY RELIED ON. AND IF WE CAN'T FIND WHAT THEY RELIED ON THEN WE

WILL NOT BE ABLE TO ALLEGE RELIANCE.

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THE COURT:

I DEDUCE CORRECTLY THAT THERE'S NO

FIGHT ABOUT THE 5TH CAUSE OF ACTION? MR. SPIVAK: THE COURT: THERE IS NOT. SO FAR THE REST OF THE TENTATIVE IS IN

YOUR FAVOR, UNLESS I'M MISSING SOMETHING. MR. SPIVAK: THE COURT: MR. SPIVAK: ONE POINT ON 2923.5, YOUR HONOR. AS TO A FEW PEOPLE. YES. AS TO THOSE FEW PEOPLE,

ALTHOUGH THEY MAY HAVE CURRENTLY, VOLUNTARILY RESCINDED THE NOTICES OF DEFAULT, THEY DID VIOLATE, IN OUR VIEW, THE STATUTE AND THE RELIEF OF THE VIOLATION OF THE STATUTE IS AN INJUNCTION, NOT A VOLUNTARY RESCISSION THAT THEY CAN AT ANY POINT CHOOSE TO UNRESCIND. AND IF

THEY WOULD ACCEPT THE VOLUNTARY ENTRY OF AN INJUNCTION, WE WOULD BE HAPPY TO DISMISS AS TO THOSE FIVE OR SIX PEOPLE. BUT IF THEY ARE NOT GOING TO ACCEPT THAT, WE DON'T WANT A SITUATION WHERE THEY JUST ISSUE ANOTHER NOTICE AND WE ARE BACK IN THE SAME SITUATION, BECAUSE THEY HAVE ONLY DONE SOMETHING VOLUNTARILY. THE COURT: WELL, WHERE IS THE CURRENT VIOLATION?

IF THERE'S NO NOTICE OF FORECLOSURE IN THE ABSENCE OF THE RIGHT OF THE MEET AND CONFER? MR. SPIVAK: THE COURT: THE -MAYBE YOU HAVE THE THEORETICAL CLAIM

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FOR A SUIT FOR DECLARATORY RELIEF AS TO THAT, BASED ON THE RECENT EXPERIENCE AND THE FEAR THAT IT MIGHT OCCUR AGAIN.

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MR. SPIVAK:

I THINK IT'S NOT JUST THEORETICAL, AND I'M JUST AS HAPPY TO NOT

YOUR HONOR, I THINK WE DO. EXPAND THE LITIGATION.

IF THEY ARE SAYING THEY ARE NOT

GOING TO PURSUE THESE FIVE -- I THINK IT'S FIVE PEOPLE, THEN THEY HAVE SHOULD ACCEPT, VOLUNTARILY ACCEPT THE ENTRY OF AN INJUNCTION. IT CAN BE LIMITED IN NATURE,

NOT GO INTO ANYONE ELSE, AND WE MOVE ON FROM THOSE PEOPLE. THE COURT: I GUESS PRESUMPTIVELY IT'S NOT AN

INJUNCTION TO WITHHOLD FORECLOSURE, IT IS ONLY AN INJUNCTION TO FORECLOSURE AFTER THE MEET AND CONFER PROCESS HAS OCCURRED. MR. SPIVAK: RIGHT. AND WE ARE THE COUNSEL FOR

THESE PEOPLE, SO WHAT 2923.5 REQUIRES IS THAT THEY FIRST PROCEED TO CONSULT WITH THE CLIENT OR THEIR COUNSEL, WE'RE THEIR COUNSEL, AND REALLY ALL THEY WOULD HAVE TO DO IS CONSULT WITH US. THE COURT: I'LL HEAR FROM YOUR ADVERSARY BEFORE

WE WRAP IT UP TODAY. SO ON THAT, THE COURT'S TENTATIVE IS NOT AGREEABLE TO YOU. OKAY, YOU WANT TO DEFER TO THE PEACEMAKERS AMONGST YOUR TEAM? MR. SPIVAK: THE COURT: NO, I JUST -BLESSED ARE THE PEACEMAKERS.

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MR. SPIVAK:

THE ISSUE THAT THERE'S NO PROTECTION

IN M.E.R.S. IN THE PATRIOT ACTS AND WHETHER OF PLAINTIFFS DO OR DON'T PAY THEIR MORTGAGES AS RELATES TO

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THE U.C.L., IT'S NOT THE WAY THE U.C.L. WORKS. THE WAY THE U.C.L. WORKS IS THAT YOU ESTABLISH THERE'S A VIOLATION OF LAW THAT RELATES TO THE INTERACTS BETWEEN THE PARTIES AND YOU CAN THEN EITHER ENJOIN THE VIOLATION OR YOU OBTAIN RESTITUTIONARY DAMAGES. SO, IF BECAUSE OF THE PATRIOT ACT THEY MADE MORTGAGE LOANS WITH MONEY THEY SHOULD NOT HAVE HAD, OR IF IN VIOLATION OF M.E.R.S. THEY HAVE ASSIGNED OR TRANSFERRED MORTGAGES OR ARE ATTEMPTING TO FORECLOSE WITHOUT OWNERSHIP, THOSE ALONG WITH THE LIST OF -- I DON'T KNOW, 10 OR 15 OTHER VIOLATIONS THAT ARE IN THE 8TH CAUSE OF ACTION, ARE ALL APPROPRIATE, AND IT'S SOMETHING TO DO WITH THIS CAUSATION CHAIN, WHICH DOESN'T MAKE SENSE. AND I HAVE ONE LAST COMMENT ONLY BEFORE I DEFER. THE COURT: THE ONE RESPONSE I'LL MAKE WHICH IS

MORE FOR MR. KLEIN'S EARS, THAN YOURS, BUT CONCEPTUALLY SPRINGS FROM WHAT YOU JUST SAID. AS I UNDERSTAND IT, GIVEN THAT AT LEAST AT A THEORETICAL LEVEL, ALL OF THE LOANS ORIGINATED WITH COUNTRYWIDE OR PERHAPS ON REPLEADING WE'LL DISCOVER THAT A SUBSTANTIAL SUBSET OF THE PLAINTIFF'S LOANS ORIGINATED WITH COUNTRYWIDE. I DON'T UNDERSTAND COUNTRYWIDE, WHICH

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IS A FICTITIOUS ENTITY WITH SHELL OIL OWNERSHIP TO THE OPEN MARKET, S.E.C. REGISTRATION AND ALL THE REST, WAS ITSELF A LENDER THEN AT THE TIME OF LOAN ORIGINATION

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VIOLATING THE PATRIOT ACT. BUT WHAT I POSIT MAY EXIST THROUGH THE LACK OF TRANSPARENCY OF M.E.R.S. IS BY THE TIME THE LOANS ORIGINATED BY COUNTRYWIDE GET COLLATERALIZED AND PUSHED THROUGH M.E.R.S. TO MULTIPLE DIFFERENT FINGERS, THE DAY-TO-DAY, HOUR-TO-HOUR, MINUTE-TO-MINUTE IDENTITY WHICH IS NOT KNOWN BECAUSE OF THE LACK OF TRANSPARENCY, THAT THERE IS THE THEORETICAL POSSIBILITY THAT INAPPROPRIATE LENDERS HAVE BOUGHT THE PAPER AND THEREFORE BECOME THE OWNERS OF THE PAPER; BUT, AS SUCH, ARE NOT ALLOWED PURSUANT TO THE PATRIOT ACT, TO EXERCISE CREDITORS RIGHTS, BECAUSE THEY ARE NOT PROPER HOLDERS OF THE PAPER. AND THAT DOESN'T GIVE EVERY BORROWER A DEBTOR'S HOLIDAY, AS I UNDERSTAND IT, BUT IT PRESUMABLY BURDENS THE CREDITOR WITH DEMONSTRATING THE NEGATIVE PREGNANT PROPOSITION WHICH IS THAT THE CURRENT HOLDER, AND PERHAPS EVERYBODY IN THE CHAIN OF OWNERSHIP, HAS BEEN A PROPER OWNER, NON-VIOLATIVE OF THE PATRIOT ACT, AND TO, ESSENTIALLY FORCE TRANSPARENCY WHERE M.E.R.S. DOES NOT CONTEMPLATE IT, SO THAT AT THE TIME ONE DOES EXERCISE CREDITOR'S RIGHTS, ONE CAN DEMONSTRATE THAT THERE'S NOT A PATRIOT ACT PROBLEM, WHICH IS A NICE HOOP TO FORCE YOUR ADVERSARY THROUGH, BECAUSE THEY HAVEN'T STRUCTURED THEIR ORGANIZATION TO DO THAT SO FAR.

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AND, PRESUMABLY, IT MIGHT MAKE THEM A LITTLE MORE MALLEABLE IN MANY REGARDS. THEORETICALLY. BUT,

IF AND WHEN THEY COULD DEMONSTRATE AS TO

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A GIVEN LOAN, THAT IT WAS HELD BY A SWISS BANK -- WELL, THAT MAY BE A POOR EXAMPLE -- WAS HELD BY J. P. MORGAN CHASE OR THE INDIANA TEACHERS PENSION FUND, OR BILL AND LINDA GATES FOUNDATION, THAT THAT WOULD DEMONSTRATE THOSE ARE PERMISSIBLE CREDITORS WHO MAY FORECLOSURE. BUT IF THEY WERE TO DEMONSTRATE THAT THIS IS ACTUALLY OWNED BY OSAMA BIN LADEN FOR THE BENEFIT OF AL-QAEDA, THAT THAT WOULD ACTUALLY THEN LET US TUMBLE TO THE FACT THAT THAT LOAN ESSENTIALLY HAS BEEN LOST AND THE BORROWER HAS GOT A BANK HOLIDAY THROUGH THEIR DUMB LUCK OF HAVING THE WRONG PERSON BUY THEIR PAPER. MR. SPIVAK: YOUR HONOR, WHAT YOU HAVE SAID IS

PROBABLY 97 PERCENT ALMOST WHAT I WOULD HAVE SAID IN EXPLAINING THE ISSUE. THE COURT: MR. SPIVAK: CORRECT ME OR EDUCATE ME. THE OTHER THREE PERCENT IS -- YOU

KNOW, WE ARE BEGINNING TO SEE WHAT WE'VE BEEN THROWING AROUND IS ALMOST THE ENRONIZATION, THE ENRONIZATION OF THE BANKING INDUSTRY IN THE COUNTRYWIDE PERIOD, THE SELLING OF COLLATERALIZED LOANS; SOME PERHAPS TO OFF-SHORE MONIES AND FUNDS; PERHAPS THE BUYING INTO AND THE SELLING OF INTEREST IN THOSE OFF-SHORE MONIES AND FUNDS AND IT'S SOMETHING THAT DISCOVERY MAY HELP US DEVELOP AND THAT I DON'T WANT TO SPEND A LOT OF TIME ON BECAUSE WE'RE NOT YET AT THE POINT WHERE WE WOULD, YOU

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KNOW, ASK TO AMEND AND PUT IT IN A COMPLAINT.

BUT IT'S

SOMETHING THAT EVEN THE LIMITED DISCOVERY WE'VE BEEN GIVEN HAS RAISED SOME CONCERNS.

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THE ISSUE THAT'S A LITTLE BIT DIFFERENT IS THAT EVEN COUNTRYWIDE FROM THE BEGINNING WAS SELLING THE SECURITIZED MORTGAGE OBLIGATIONS AND TRANSACTIONS THAT INVOLVED MONEY GOING BACK AND FORTH, AND THAT TOO IS SUBJECT TO THE PATRIOT ACT. THERE'S ALSO SOMETHING THAT DROPS OUT, IT WAS IN THE AMENDED COMPLAINT, THE TRUTH IN LENDING ACT, WHICH ALSO PERTAINS TO SOME OF THIS. SO EVERYTHING

YOUR HONOR SAID IS RIGHT, BUT I THINK WE MAY DISCOVER THAT THE PATRIOT ACT PROBLEMS ACCELERATED IN CONNECTION WITH THE BANK OF AMERICA MERGER, AND ACCELERATED LATER INTO THE PERIOD, BUT THAT THEY BEGAN BACK IN THE COUNTRYWIDE ERA. MAYBE NOT AS FAR AS BACK AS 2004, BUT

AS WE ENTER 2005, 2006. THE COURT: BUT IF ALL THIS COLLATERALIZED DEBT OR

FROM A CREDITOR'S POINT OF VIEW, ASSET MOVES BACK AND FORTH BETWEEN THE INDIANA TEACHERS PENSION FUND, J. P. MORTGAGE CHASE, THE GATES FOUNDATION AND SOME FARMER IN NEBRASKA, HYPOTHETICALLY, AND OTHER PEOPLE WHO ARE CREDITORS UNDER THE PATRIOT ACT, IS THERE ANY FURTHER PROBLEM OR IS IT JUST THE FACT THAT M.E.R.S.' LACK OF TRANSPARENCY MEANS WE DON'T KNOW THAT THAT'S THE UNIVERSE THAT OWNS THIS PAPER. MR. SPIVAK: AS WE SIT HERE TODAY, YES, WE DON'T

BUT YOU ASKED IS THERE ANY FURTHER PROBLEM? A

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VIOLATION OF THE PATRIOT ACT, IT'S LIKE NOT FILING YOUR TAXES. IF YOU DON'T FILE YOUR TAXES, BUT YOU DIDN'T OWE

ANY TAXES IS THERE ANY FURTHER PROBLEM?

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THE ANSWER IS YES.

THE MERE FACT YOU YOU ARE

DIDN'T FILE YOUR TAXES VIOLATES THE LAW.

SUBJECT TO A FINE, THOUGH NOWHERE NEAR AS HIGH AS IF YOU OWED TAXES. THE COURT: SO THE PATRIOT ACT IN YOUR VIEW

REQUIRES DISCLOSURE FROM TIME TO TIME, OF WHO THE REAL OWNER OF THE DEBT IS? MR. SPIVAK: IT REQUIRES DUE DILIGENCE AS TO WHO

MONEY IS COMING FROM AND WHO THE REAL OWNER OF THE DEBT IS. IT REQUIRES CERTAIN REPORTS THOUGH NOT ALWAYS IT

PUBLIC REPORTS, THEY MAYBE REGULATORY REPORTS.

PROHIBITS TAKING MONEY FROM PEOPLE ON VARIOUS LISTS FROM WHICH MONEY CANNOT BE TAKEN. THE COURT: SO YOU START WITH THE PREMISE THAT YOU

LOOK AT THE NOMINEE AND NOT LOOK PAST THE NOMINEE, IN YOUR VIEW, A VIOLATION IS MADE OUT BY THAT, IF NOTHING MORE. MR. SPIVAK: THE COURT: PEACEMAKERS. MR. SPIVAK: THE COURT: MR. SPIVAK: EXCUSE ME? I WANT TO HEAR FROM THE PEACEMAKERS. YES, I JUST WANTED TO MAKE SURE OF YES, YOUR HONOR. OKAY. I WANT TO HEAR FROM THE

ONE THING AND THEN I THINK THE PEACEMAKERS CAN GET UP. THE COURT: NOW WE'VE ROLLED THE ARMAMENT THROUGH

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RED SQUARE, AND I'D LIKE TO HEAR FROM THE PEACEMAKERS ON THE PLAINTIFFS SIDE. MR. STEIN: YOUR HONOR, THANK YOU FOR ALLOWING

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THE UNUSUAL CIRCUMSTANCES OF TWO PLAINTIFFS LAWYERS ARGUING. IT IS A COMPLEX CASE. I GET CONFUSED AT TIMES, I CONFESS. I EXPECT TO TALK FOR 5 TO 7 MINUTES.

THE COURT: MR. STEIN:

AND ALTHOUGH WHAT I HAVE TO SAY AT THE BEGINNING WILL APPEAR ADVOCATIVE, IT IS ABSOLUTE -THE COURT: MR. STEIN: I WOULDN'T EXPECT LESS FROM YOU, SIR. THANK YOU, YOUR HONOR.

IT IS ABSOLUTELY DESIGNED TO IDENTIFY THOSE PLAINTIFFS AND ROE PLAINTIFFS, THAT WE KNOW, THAT WISH TO MAKE PEACE AND THAT PEACE COULD BE MADE WITH. BUT BEFORE WE MAKE PEACE, WE HAVE TO IDENTIFY WHAT IS IN FRONT -- WHAT THE PROBLEM IS OR WHAT I THINK IS THE HURDLE TO MAKING PEACE. AND THEN I WILL

DESCRIBE THE ROAD THAT I THINK WE CAN GO ON TO STOP -THE CASE STARTED WITH 20 PEOPLE AND NOW IT'S 300, AND THERE ARE 150 MILLION PEOPLE IN THE UNITED STATES OUT OF A POPULATION OF 300 MILLION THAT ARE IN DEFAULT AND ARE SCHEDULED FOR FORECLOSURE. THE COURT: MR. STEIN: WILL -THE COURT: PEOPLE -MR. STEIN: NOT RESIDENTIAL REAL ESTATE. 150 MILLION RESIDENTIAL REAL ESTATE NOT 150 MILLION. 150 MILLION. AND I WILL PROVIDE -- I

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THE COURT: CREDIT CARD. MR. STEIN:

YOU'VE GOT EVERY TOM, DICK AND HARRY

NO.

THESE ARE ALL MORTGAGES, WHETHER

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THEY BE RESIDENTIAL, MULTIPLE RESIDENTIAL PROPERTIES, SECONDS ON PROPERTIES, ETCETERA. THE COURT: I FIND THE NUMBER 150 MILLION

IMPLAUSIBLE, BUT SINCE WE'RE DEALING WITH THINGS NOT ON THE RECORD, LET'S HAVE A WHIRL OF IT. MR. STEIN: WE CAN CUT THE NUMBER IN HALF TO

75 MILLION, WHICH IS A NUMBER REPORTED BY BANKS, SO, AND WE CAN LODGE THAT WITH THE COURT. BECAUSE OF THAT NUMBER, SHEER NUMBER, IT IS -- THE ADVOCATIVE ARGUMENTS THAT THERE ARE OTHER FINANCIAL INSTITUTIONS AND PEOPLE ARE IN DEFAULT OF THEIR MORTGAGE AND ON THEIR FINANCIAL INSTITUTIONS, WELL, IT'S HARD TO IMAGINE THAT IF COUNTRYWIDE IS SECURITIZING AND GETTING MARKET SHARE IN 2004 AND MAKING MONEY, THAT ANOTHER BANK SUCH AS WELLS FARGO IS NOT GOING TO FIGURE OUT HOW TO DO IT, TOO. THE BROKERS WORK FOR BOTH BANKS AND SO THERE ARE NATURALLY, BANKS ACROSS THE BOARD THAT ARE DOING THIS. WHEN, THIS MORNING, THE MASSACHUSETTS FEDERAL COURT FOLLOWED THE MASSACHUSETTS SUPREME COURT AND SAID THAT THE OWNER OF THE MORTGAGE IS THE ONE WHO HAS TO FORECLOSE, AND I UNDERSTAND MR. KLEIN INDICATED THAT'S MASSACHUSETTS, NOT CALIFORNIA. BUT WE ALSO HAVE

THE EASTERN DISTRICT BANKRUPTCY COURT IN CALIFORNIA,

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NEITHER OF WHICH ARE BINDING ON THIS COURT, BUT EVENTUALLY ENOUGH DOMINOES FALL AND IT IS WHAT IT IS. I FIND THAT I, AT THIS POINT. AFTER THE

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COURT HAS BEEN INVOLVED IN THE CASE FOR A SIGNIFICANT PERIOD OF TIME, SOMETIMES I LEARN MORE FROM LISTENING TO THE COURT FROM THE RESEARCH ITS DONE AND READING THE PAPERS, THAN THINKING ALOUD TO MYSELF, PARTICULARLY THIS MORNING. YOUR HONOR, THE PROCESS OF THE ONE-OFF, WHICH IS SPECIFICALLY WHAT THE COURT ASKED ME TO ADDRESS, BECOMES MORE DIFFICULT. I THINK THERE IS A

SINGLE HURDLE, AND THAT HURDLE IS THAT IF, IN FACT, IT ALWAYS SHOULD HAVE BEEN TRANSPARENT -- AND I'M NOT GOING TO ADVOCATE THAT, EITHER -- EITHER IT WAS SUPPOSED TO BE TRANSPARENT OR IT WASN'T. BUT IF IT WAS AND THESE

PEOPLE LITIGATED IN GOOD FAITH BECAUSE IT WASN'T, BECAUSE THEY WENT TO MODIFY, AND IF YOU READ THE LEGISLATIVE HISTORY OF 2923.5, THEY ARE SAYING TO BANKS, GET TRANSPARENT NOW. THESE FORECLOSURES ARE GOING TO

RUIN THE STATE OF CALIFORNIA. AND THEY HAVE. LEGISLATION MAY BE ISSUED. AND THE COURT HAS SAID, AND IT MIGHT. OKAY, BUT

RIGHT NOW WE ARE IN A COURT OF LAW. IF TWO YEARS HAVE PASSED AND IF THESE PEOPLE HAVE BEEN LITIGATING FOR TWO YEARS, WHICH THEY HAVE, AND THEN WITH A LOT OF THEM, THERE ARE TWO YEARS OF BACK DUE PAYMENTS; BACK DUE INTEREST; BACK DUE PRINCIPL. IN THEORY, ON THE BANK'S SIDE, WHICH THE BANK

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WILL BRING TO THE TABLE DAY ONE, THEY WILL SAY, THIS -THE COURT: AND THE LATE CHARGES AND THE OTHER

NUISANCE CHARGES THAT RAMP IT UP QUICK.

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MR. STEIN:

CORRECT.

THIS IS WHAT YOU OWE, HOW

ARE YOU GOING TO PAY IT?

IF THAT'S THE DISCUSSION, I'M

SURE THE COURT CAN UNDERSTAND, IF A HUMAN BEING READS THE MASSACHUSETTS SUPREME COURT OPINION AND THE FEDERAL COURT OPINION THAT CAME OUT TODAY, AND THEY READ THIS TRANSCRIPT, WHERE MR. KLEIN SAYS IT'S NOT BINDING IN CALIFORNIA, WHICH IS CORRECT, BUT THOSE HUMAN BEINGS ARE GOING TO SAY, WELL, IT'S STILL THE UNITED STATES OF AMERICA. IT'S STILL A SUPREME COURT OPINION, IT'S NOT A

LOWER COURT OPINION. AND THEY WOULD SAY, WHY AM I SITTING HERE WITH THEM, BEING ASKED FOR A CHECK FOR $300,000, 400,000 -- 2 MILLION FOR SOME OF THE PLAINTIFFS. THAT'S A HURDLE. JUMP OVER. IT'S AN EASY HURDLE TO

WITH SOME OF THESE HOLDERS OF HOMES THAT

WISH TO STAY IN POSSESSION, TO THE EXTENT THE BANK CAME IN WITH SOMEONE WITH THE AUTHORITY THAT SAID, LOOK, WE UNDERSTAND RIGHT NOW, WE SAY IT'S POTATO, YOU SAY IT'S POTATO, NOW IT'S OBVIOUS THAT THIS IS A REAL DONNIE BROOK ACROSS THE UNITED STATES. IT'S NOT -- NO FRIVOLOUS ARGUMENTS ARE BEING MADE. I'M SURE THE MASSACHUSETTS SUPREME COURT, OKAY?

MR. KLEIN WOULD SAY IS NOT A FRIVOLOUS THING. SO, IT'S A DONNIE BROOK.

SO GIVEN THAT, WE WISH TO COMPROMISE.

SO,

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ACCORDINGLY, IF YOU TAKE THOSE PAYMENTS OWED, YOU PUT THEM ON THE BACK END OF THE MORTGAGE; WE REAMORTIZE THE MORTGAGE; SOME PEOPLE MAY NEED TO GO THROUGH A

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FORECLOSURE; IF THERE'S A REASONABLE, RATIONAL PERSON ON THE BANK'S END, AND THE COURT SAYS, "ARE THERE PLAINTIFFS THAT WOULD SIT AT THE TABLE AND SAY, YES, YES, THAT'S WHAT I'M WAITING FOR." AND NOW THERE'S A NEW MORTGAGE, IT'S A NEW FRESH MORTGAGE, IN WHAT TYPE OF INITIAL PAYMENT DO YOU WANT? COULD THAT HAPPEN ON A ONE-OFF BASIS? ANSWER IS, YOUR HONOR, ABSOLUTELY. HAD MEETINGS REGARDING THIS. THE

AND I THINK -- WE

THEY ARE CONFIDENTIAL,

THERE WAS A CONFIDENTIALITY AGREEMENT WITH MR. KLEIN, AND WE APPROACHED THIS AT THE BEGINNING OF THE CASE. AT THE BEGINNING OF THE CASE, THE LAW HADN'T DEVELOPED. IN FACT, AT THE BEGINNING OF THE

CASE, AS THE COURT MAY RECALL, 2923.5 THERE WAS NO LAW WHETHER THAT COULD BE A DAMAGES LAWSUIT OR NOT. THE MABRY CASE MADE IT CLEAR THAT WAS ONLY AN INJUNCTION STATUTE, ALTHOUGH THAT STATUTE BEFORE THE NEXT HEARING MAY BE AMENDED, MAYBE IT WILL SAY SOMETHING ELSE. I DON'T KNOW WHAT'S GOING TO HAPPEN. BUT CERTAINLY, THERE ARE ONE-OFF PEOPLE, THAT GIVEN A ROBUST DISCUSSION, UNDERSTANDING THERE'S A DONNIE BROOK, WOULD HAVE THEIR CHECKBOOKS THERE AND BE READY TO HAVE A FRESH MORTGAGE SIGNED TO STAY IN THEIR HOUSE.

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THE COURT:

SO, TO CUT IT TO THE CHASE, IF THE

BANK GOT THE LATE CHARGES OFF THE TABLE, CROSSED THE COLLECTION COSTS OFF THE TABLE, BANK ATTORNEY'S FEES OFF

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THE TABLE, AND FOCUSED ON THE PRINCIPAL THAT REMAINS UNPAID AND, AT LEAST FROM THE POINT OF VIEW OF THE STARTING POINT FROM WHICH TO BARGAIN DOWN, THE ACCRUED INTEREST ONLY WHICH WAS ON THE TABLE, THAT'S THE RIGHT NUMBER TO START FROM AND THEN FIGURE OUT HOW TO TAKE A SUBSTANTIAL BUT NOT ENTIRE PORTION OF THAT ACCUMULATED DEBT AND REPACKAGE IT FOR PAYMENT IN AN ECONOMICALLY VIABLE FASHION, OVER A LONGER PERIOD OF TIME, SO THAT THE BORROWERS CAN ACTUALLY AFFORD TO DO THE DEBT SERVICE. MR. STEIN: WHICH IS A MUCH LESS VERBOSE

DESCRIPTION THAN I JUST GAVE AND MUCH MORE ACCURATE. THAT'S EXACTLY CORRECT. THE COURT: YOUR LADY COLLEAGUE IS NODDING HER

HEAD AFFIRMATIVELY, SO PRESUMABLY SINCE SHE'S THE OTHER PEACEMAKER, IT'S NOT TOO FAR OFF THE TARGET. MR. STEIN: THE COURT: AND MISS JONES -I'M TRYING TO QUANTIFY IT WITHOUT

ENDORSING IT FOR MR. KLEIN, BECAUSE IT WAS A LITTLE PROLIX. AND SEEING IF I COULD CUT TO THE CHASE. I APPRECIATE THAT, YOUR HONOR. THAT'S NOT TO SAY THEY HAVE TO DO IT,

MR. STEIN: THE COURT:

BUT IT'S ONLY TO TRY TO ENCAPSULATE WHAT IS ESSENTIAL FROM YOUR SITUATION OF A PLAUSIBLE STARTING POINT. MR. STEIN: THERE ARE CERTAINLY THOSE PLAINTIFFS

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WHO WISH TO DO THAT.

WE CAN -- I REPRESENT TO THE COURT

AS AN OFFICER OF THE COURT -THE COURT: ON MY WAY TO AND FROM THE SNOW, I

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HEARD ONE OF YOUR COMPETITORS IN THE BAY AREA, "1800 ASK STEVE" OR WHATEVER, RADIO ADS NON-STOP ON ONE RADIO IN SACRAMENTO, JUST BEGGING YOU TO CALL FOR FREE LEGAL ADVICE. AND THEN ON OCCASION, "UNITED LEGAL SERVICES" I

THINK WAS THE TRADE NAME, THEY HAD ANOTHER AD RUNNING LOOKING TO HIRE LAWYERS, BUT BASICALLY WAS OFFERING FORECLOSURE AVOIDANCE SERVICES. MR. STEIN: WELL, IT'S LIKE A PLAGUE. IT'S TAKEN

OVER THE COUNTRY, SO IT'S HARD TO STOP. BUT, YOUR HONOR -THE COURT: BUT IT WASN'T YOUR OFFICE OR

MR. TOMASZEWSKI'S OFFICE OR MISS JONES, WHICH I TOOK AS A SIGN THAT AT LEAST YOU ARE SORT OF TRADITIONAL, LESS STOREFRONT LAWYERS THAN "1800 ASK STEVE" OR WHATEVER THAT WAS. MR. STEIN: YOUR HONOR. I'VE BEEN IN A COURTROOM BEFORE,

YOUR HONOR, THERE ARE THOSE -YOU HAD TO HAVE TWO YEARS LITIGATION

THE COURT:

EXPERIENCE TO GET HIRED, ACCORDING TO THE RADIO AD. MR. STEIN: COURT SAYS IT. THE COURT: THAT WAS UNITED LEGAL'S THOUGHT BEFORE I PRESUME THAT IS STANDARD, IF THE

THEY HIRED YOU AT THE JOB FAIR. MR. STEIN: YOUR HONOR, WITH REGARD TO ONE-OFF,

THE ONE-OFF CONCEPT, OUTSIDE OF THE LOAN MODIFICATION,

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THERE ARE PRIVACY CLAIMS, ETCETERA.

THOSE PLAINTIFFS, AND

ALSO SOME OF THEM ARE WORN OUT BY THE TWO YEARS.

THOSE PLAINTIFFS ALSO COULD COME -- COULD HAVE EXPRESSED

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AN INTEREST IN COMPROMISING THEIR CLAIM. FOR EVERY FIVE OF THOSE, AS THE CASE PROCEEDS AND LAW DEVELOPS AROUND US, AND THE BANK IS DOING ACTIVITIES THAT THEY ARE REPORTING AROUND US THAT ARE SUPPORTING THE ALLEGATIONS THAT I STARTED MAKING TWO YEARS AGO, WHEN NOBODY WAS SUING THE BANK, BUT I HAVE REPRESENTED THESE BANKS GOING BACK 25 YEARS. SO, THOSE PEOPLE, AS THE LAW DEVELOPS AROUND THEM AND AS TWO YEARS PASSES, THOSE PEOPLE ARE TIRED. THEY SAY, I'M OUT OF BREATH, I'M TIRED. BUT CAN

THIS LAW KEEPS DEVELOPING I'M GOING TO STAND HERE. WE TALK TO THE BANK? I CAN BE REASONABLE. THE COURT: I HAVE TO SORT OF CUT YOU OFF.

MISS JONES, ANYTHING TO ADD OR TO CORRECT ABOUT WHAT YOUR COHORTS JUST SHARED WITH ME? MS. JONES: THE COURT: NOTHING FURTHER, YOUR HONOR. MR. KLEIN, YOU'VE BEEN WAITING

PATIENTLY, SO I AM INTERESTED ON THE PEACEMAKING SIDE OF THINGS, BUT YOU CAN RESPOND MORE GENERALLY BECAUSE I'M CURRENTLY INCLINED TO STAND ON THE TENTATIVE EXCEPT THAT AS TO THE 64 AND THE PRE-2005 CROWD, BY SUSTAINING WITH LEAVE TO AMEND AS TO THE ENTIRETY OF THE SECOND AND THIRD CAUSES OF ACTION. I THINK THAT'S A SUFFICIENT BASIS ON WHICH THEY CAN COME BACK AND COME TO GRIPS WITH IT. I'M

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TRUSTING THAT AS OFFICERS OF THE COURT AS TO THE FIRST CAUSE OF ACTION, THEY WOULD BE PREPARED TO BACK OFF THE PEOPLE WHO REALLY DON'T HAVE A LOAN ORIGINATION CLAIM AS

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AGAINST COUNTRYWIDE, BECAUSE THEY WANT TO MAINTAIN THE COURT'S RESPECT THAT THEY RECOGNIZE THEIR DUTIES UNDER CCP 128.7. MR. KLEIN: YOUR HONOR, I'D LIKE TO SPEAK FOR TWO

OR THREE MORE MINUTES ON DUTY, WHICH IS A SUBJECT OF THE CONCEALMENT CLAIM. THE COURT: THAT AND ANYTHING ELSE YOU WANT TO

TALK ABOUT FOR THE NEXT 20 MINUTES. MR. KLEIN: THANK YOU, YOUR HONOR. I'LL TRY NOT

TO USE ALL THAT TIME. DURING -- AT SOME POINT, AND I CAN'T REALLY IDENTIFY THE SPECIFIC POINT TODAY, THE BANK'S ARGUMENT REGARDING NO DUTY TO THE BORROWERS HAS SOMEHOW BEEN TRANSLATED INTO SOME SORT OF A REFERENCE TO SOME SORT OF IMMUNIZATION. THE COURT: MR. KLEIN: APPRECIATE THAT. THE ARGUMENT WE'VE MADE, YOUR HONOR, IS THAT THE BANK OWES NO DUTIES TO THE BORROWER IN A LENDER/BORROWER RELATIONSHIP. AND -THE COURT: IN REGARD TO THEORETICAL CLAIMS OR I USED THE WORD. I AM NOT LOOKING TO ATTRIBUTE IT. I

FRAUDULENT CONCEALMENT. MR. KLEIN: THEY OWE NO DUTIES TO A LENDER -- TO

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A BORROWER IN A LENDER/BORROWER RELATIONSHIP. AND THAT IS THE CASE OF PRICE VIEWS WELLS FARGO. IT IS ON PAGE 6 OF OUR DEMURRER. IT'S

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REFERENCED THERE. AND FROM THERE, AND THE BIGGEST PROBLEM I THINK WITH THE CLAIM IS THAT IF THERE'S NO DUTY AND THERE'S A LOT OF TALK ABOUT SPECIAL CIRCUMSTANCES THAT MAY CAUSE A DUTY TO ARISE, NONE OF THEM HAVE BEEN PLED IN THIS CASE. YOU KNOW, IT'S INTERESTING THEY MENTION PARTIAL DISCLOSURES, BUT THERE ARE NO PARTIAL DISCLOSURES THAT THESE BORROWERS HAVE ALLEGED TO HAVE HEARD. THEY MENTION OMISSIONS, THERE ARE NO OMISSIONS THAT THESE BORROWERS -- THESE BORROWERS HAVE ALLEGED TO HAVE OCCURRED AT THIS POINT, THAT SOMEHOW THEY RELIED UPON IN -- WITH DETRIMENTAL RELIANCE. THE COURT: YOU SAY PRICE V. WELLS FARGO SIMPLY TO

NEGATE THE PREMISE THAT YOU SET UP AS A FIDUCIARY DUTY. MR. KLEIN: DUTY. THE FOOTNOTE INDICATES FIDUCIARY

IT ACTUALLY -- IF THE WAGNER VERSUS BENSON CASE,

THE CRUZ VERSUS BANK OF AMERICA CASE, AND THE PRICE VERSUS WELLS FARGO CASE -- THE WELLS FARGO CASE ACTUALLY CONTAINS THE WAGNER VS. BENSON CASE, AND I BELIEVE IT ALSO CONTAINS THE CRUZ VERSUS BANK OF AMERICA CASE. THE COURT: SO ALTHOUGH CRUZ AND WAGNER ARE NOT

CITED YOU ARE NOW RELYING ON THEM BECAUSE THEY ARE CITED WITHIN PRICE.

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MR. KLEIN:

THEY ARE IN PRICE.

AND THEY ARE

DISCUSSED IN PRICE.

THOSE DO ESTABLISH THERE'S NO DUTY

TO A BORROWER IN A LENDER/BORROWER RELATIONSHIP.

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THE COURT:

NOT LIMITED TO FIDUCIARY DUTY, BUT NO

DUTIES WHATEVER, NO DUTIES IN NEGLIGENCE, NO DUTIES ABOUT FRAUDULENT CONCEALMENT, NO DUTIES WHATSOEVER. MR. KLEIN: NO DUTIES. THERE'S ABSOLUTELY NO

DUTIES, UNLESS THERE'S A STATUTE THAT PROVIDES A DUTY, LIKE PERHAPS TRUTH IN LENDING, OTHERWISE THERE'S NO DUTY. THERE'S NO DUTY OF CARE, NO DUTY TO DISCLOSE,

THERE'S NO DUTY. AND THE SPECIAL CIRCUMSTANCES AREN'T THE KIND OF CIRCUMSTANCES WHERE THERE'S AN ALLEGATION THAT THE BANK IS ENGAGING IN SOME MASSIVE SCHEME FRAUDULENT SCHEME. THE SPECIAL CIRCUMSTANCES ARE WHEN PERHAPS THE

LENDER IS PERHAPS AN INVESTOR IN A VENTURE FINANCED BY THE LOAN; OR WHEN THE BANK IS A TRUSTEE OF SOME SORT OF TRUST OF SOME SORT, WHERE THE TRUST IS THE BORROWER. THOSE ARE CIRCUMSTANCES WHERE PERHAPS A DUTY MAY ARISE. BUT IT'S BASED ON DIFFERENT IT'S

RELATIONSHIPS BETWEEN THE BANK AND THE BORROWER.

NOT THAT THERE'S SOME FRAUDULENT SCHEME OUT THERE THAT'S BEING ALLEGED. IN FACT, LI MANDRI WHICH IS CITED IN OUR PAPERS, REPUDIATES THE CONCEPT THAT THERE'S A DUTY TO DISCLOSE THAT YOUR ENGAGING IN SOME SORT OF FRAUDULENT OR SCHEME OR WRONGFUL CONDUCT. THE COURT: HELP ME OUT. IS LI MANDRI IN THE

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REPLY BRIEF?

I DON'T SEE IT. I BELIEVE IT'S IN BOTH. BUT I'LL GET

MR. KLEIN:

THE COURT THE CITE.

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IT'S NOT IN THE DEMURRER, SO IT MUST BE IN THE REPLY BRIEF. THE COURT: MR. KLEIN: IT'S IN THE REPLY. RIGHT. PAGE 3. V. JUDKINS.

SO LI MANDRI HOLDS THAT YOU DON'T HAVE A DUTY TO -- YOU HAVE A DUTY NOT TO ENGAGE IN WRONGFUL CONDUCT, ARGUABLY, OR THERE'S A TORT THAT'S THE CONCEPT OF THE TORT NOT TO ENGAGE IN WRONGFUL CONDUCT. YOU'VE GOT TO PLEAD THE WRONGFUL CONDUCT. BUT THE FACT THAT THERE'S SOME SORT OF CONCEALMENT OR DUTY TO DISCLOSE YOU'RE ENGAGING IN WRONGFUL CONDUCT, THAT'S ANOTHER STORY AND THAT DOESN'T EXIST HERE. THERE'S NO FACTS TO ESTABLISH THAT THERE'S BUT THEN

A DUTY -- THERE'S NO LAW TO ESTABLISH THAT THERE'S A DUTY TO DISCLOSE OR ENGAGING IN WRONGFUL CONDUCT. JUST -- THAT'S A DIFFERENT KIND OF TORT. THAT IS PARTICULARLY TROUBLESOME IN THE CONTEXT OF WHAT THESE BORROWERS ARE SEEKING TO DO WITH RESPECT TO THESE 64-PLUS NUMBER OF BORROWERS WHO DIDN'T ORIGINATE THEIR LOANS WITH THE BANK. THEY ARE ALLEGING, NOT ONLY FIRST IN A STRAIGHTFORWARD RELATIONSHIP, WHERE THE BANK ORIGINATES A MORTGAGE THERE'S NO DUTY. BUT NOW THESE BORROWERS WE'RE

WANT TO TAKE THAT EVEN -- TAKE IT EVEN FARTHER AND SAY: NOT ONLY DO YOU HAVE A DUTY UNSUPPORTED BY LAW WITH

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RESPECT TO BORROWERS WHO ORIGINATE LOANS WITH YOU, BUT NOW YOU HAVE A DUTY TO ANY OTHER BORROWER OUT THERE WHO ORIGINATES A LOAN TO DISCLOSE SOMETHING.

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THE COURT:

NO, THEY SAY WITHIN UNIVERSE OF PEOPLE

WHO TOOK A LOAN THROUGH A LARGER VERSION OF THE CIVIL CONSPIRACY. MR. KLEIN: AND WHAT TRIGGERED THAT DUTY? THERE'S

NOTHING THAT TRIGGERS THAT DUTY. THE COURT: SAME STANDARD. MR. KLEIN: THE COURT: MR. KLEIN: RIGHT -WITH OR WITHOUT A CIVIL CONSPIRACY. RIGHT. EVEN A CIVIL CONSPIRACY, A THE DUTY WOULD RISE AND FALL UNDER THE

CIVIL -- A CO-CONSPIRATOR HAS TO HAVE A DUTY. THE COURT: MR. KLEIN: I AGREE. SO I DON'T KNOW HOW -- THEY JUST

CAN'T GET PAST THIS ISSUE WITH RESPECT TO THE BORROWERS THAT ORIGINATED BY OTHER BANKS. THEY CAN'T EVEN GET IT

PAST IT, FRANKLY, WITH RESPECT TO AS -- THE COMPLAINT AS CURRENTLY PLED WITH RESPECT TO THE BORROWERS WHO DID ORIGINATE WITH THE BANK. SO, THAT'S TROUBLING. IN A SENSE THAT WE THERE'S NO

BELIEVE THAT THE LAW IS WELL-ESTABLISHED. DUTY BETWEEN A BORROWER AND LENDER. ON ANYMORE THAN THAT.

I DON'T WANT TO GO

I THINK THE COURT HAS PROBABLY

HEARD ENOUGH ON THAT PARTICULAR ISSUE. THE COURT: I'M GOING TO LOOK AT THE CASES BEFORE

I FINALIZE MY RULINGS, SO I WANT YOU TO BE A LITTLE MORE

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SUCCINCT SO I HAVE TIME TO PULL THE CASES OFF THE SHELF. MR. KLEIN: I APPRECIATE THAT. THE ONE ISSUE I

WANT TO CORRECT WITH RESPECT TO MABRY IS THAT THERE'S

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JUST A FLAT-OUT MISSTATEMENT ABOUT WHAT MABRY PROVIDES. I THINK IT'S VERY IMPORTANT TO CLEARLY COMMUNICATE, AS SET FORTH IN OUR PAPERS, WHAT THE LAW IS ON MABRY AND WHAT MABRY ALLOWS. AND I WILL QUOTE IT

REALLY QUICKLY SO WE'RE CLEAR. IT DOES NOT AUTHORIZE AN INJUNCTION AS IS ALLEGED BY THE PLAINTIFFS HERE. WHERE IS MABRY? THAT: THE RIGHT OF ACTION IS LIMITED TO OBTAINING A POSTPONEMENT OF AN IMPENDING FORECLOSURE TO PERMIT THE LENDER TO COMPLY WITH 2923.5. MABRY SPECIFICALLY SAYS

THAT'S NOT AN INJUNCTION, IT'S THE POSTPONEMENT OF A TRUSTEE SALE AND THAT'S IT IS. THE SUGGESTION THAT SOMEHOW UNDER MABRY THEY ARE ENTITLED TO INJUNCTION IS FLAT WRONG. AND I WANT TO SO,

MAKE THAT CLEAR FOR THE COURT SO THERE'S NO ROOM FOR CONFUSION. LET ME MAKE SURE I COVERED THE LEGAL ISSUES. THEN I WANT TO TALK ABOUT PEACEMAKING. ONLY IF YOU WISH TO. NO, I'D LIKE TO ADDRESS IT BRIEFLY. THE POINT BEING, I'M CURIOUS WHETHER

THE COURT: MR. KLEIN: THE COURT:

THERE IS AN INTEREST IN PEACEMAKING.

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MR. KLEIN:

WELL, YOUR HONOR, LET ME ADDRESS AND I'LL LET MR. CEKIRGE

PEACEMAKING FOR A MOMENT.

DOUBLE CHECK WHETHER I MISSED A LEGAL ISSUE.

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MR. STEIN COMES HERE TODAY, EXPRESSING AN INTEREST IN EXPLORING RESOLUTION. LOAN MODIFICATION. THE COURT: MR. KLEIN: CORRECT. THAT'S TRUE. IT SOUNDS LIKE IT'S

WE HAD OUR ARMS OPEN TO THAT FROM DAY THERE'S A LOAN YOU HAVE TO

AND THAT ARM'S STILL REMAIN OPEN.

MODIFICATION PROCESS THAT TAKES PLACE.

QUALIFY AND DEMONSTRATE THAT YOU CAN PAY AND FUND YOUR LOAN, OTHERWISE WE ARE GOING TO BE BACK IN CLAIMING THERE ARE DUTIES TO FIGURE THAT OUT, TOO. GOT TO PARTICIPATE IN THE PROCESS. THEY HAVE THE LOAN MODIFICATION APPLICATIONS. WE HAVE PROVIDED THEM SEVERAL TIMES. WE SO THEY HAVE

ONLY HAVE A CERTAIN NUMBER OF PEOPLE WHO HAVE COME FORWARD. THERE ARE RECENTLY -SOME HAVE COME FORWARD THOUGH. AND WE HAVE MODIFIED, IF I'M NOT

THE COURT: MR. KLEIN:

MISTAKEN IS IT 10, APPROXIMATELY 10 OF THE -- ABOUT 34 BORROWERS WHO SUBMITTED LOAN MODIFICATION APPLICATIONS. THE COURT: PREJUDICE? MR. KLEIN: HAVEN'T DONE SO. THE COURT: WE HAVEN'T ASKED THEM TO, BUT THEY WE'VE JUST MODIFIED THE LOAN. LET ME PAUSE. HAVE THEY AGREED TO DISMISS WITHOUT

MR. STEIN OR MISS JONES, IS IT TRUE THAT AT

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LEAST 6 OR MORE OF THE PLAINTIFFS HAVE AT LEAST OBTAINED A LOAN MODIFICATION SINCE THE FILING OF THE SUIT? MR. STEIN: YOUR HONOR, THE COURT WOULD BE WELL

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SERVED TO REVIEW THE LOAN MODIFICATION DOCUMENT.

THESE

LOAN MODIFICATIONS IN THIS PROCESS, WHICH IS NOW BEING INVESTIGATED BY 50 STATES ATTORNEY GENERAL, ARE TRIAL MODIFICATIONS THAT ARE EITHER BINDING OR MOST OF THEM ARE THEN, MONTHS LATER, THE RUG IS PULLED OUT FROM UNDER THE LOAN MODIFICATION. WE'RE NOT INTERESTED IN LOAN MODIFICATIONS. WE'RE -- THESE CLIENTS ARE INTERESTED IN THE SETTLEMENT AGREEMENT AND MUTUAL RELEASE, WHERE THEY WOULD NOT BE ABLE TO COME BACK INTO COURT AND ALLEGE A DUTY, AS MR. KLEIN SAID. THEY ARE INTERESTED -THE COURT: MR. STEIN: SO THEY WANT A LOAN MOD, PLUS MORE. NO, THEY -- NO, MR. KLEIN JUST

INDICATED THAT HE'S GIVEN A LOAN MODIFICATION, IF HE SHOWED YOU THE CONTRACTS, THE COURT CAN READ THEM, AND THOSE PEOPLE HAVEN'T DISMISSED THEIR LAWSUIT, BECAUSE THEY HAVE A LAWSUITS FOR DAMAGES, ETCETERA. I'M INDICATING THAT TO THE EXTENT THERE'S A BINDING IRONCLAD CONTRACT OF SETTLEMENT, THAT IT IS A LOAN MODIFICATION OR RESTRUCTURING OR SETTLEMENT AGREEMENT, I DON'T KNOW HOW IT'S CHARACTERIZED, THESE PEOPLE WOULD DISMISS THE COMPLAINT. SO THESE PEOPLE ARE

OFFERING MORE, BUT THE PROCESS THAT THE BANK HAS INITIATED TO FOLLOW THAT PROCESS, WHEN SINCE -- DURING

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THIS CASE, DURING THIS COURT'S TENURE IN THE CASE, SINCE OCTOBER 26TH, THERE'S BEEN 50 STATES ATTORNEY GENERAL INVESTIGATING --

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THE COURT:

THAT'S A DIFFERENT ISSUE.

YOU ARE

GOING ON AT GREATER LENGTH THAN I NEED. HAVE A FEW MINUTES TO READ YOUR CASES. BACK TO MR. KLEIN. MR. KLEIN:

I DO WANT TO

THE ANSWER IS WE HAVE MODIFIED THEM. THE BORROWERS ARE

THERE IS NO TRIAL MODIFICATION.

PERFORMING THERE'S BEEN NO DISMISSAL WITH RESPECT TO THEM. IF THEY WANT TO DISMISS THE CASE, GREAT. IF THEY

WANT TO PURSUE THE CASE, GREAT.

WE HAVE MODIFIED THE

LOAN WITHOUT CONDITION ON THAT ISSUE. THE COURT: DO YOU HAVE THOUGHTS IN YOUR OWN MIND

YOU ARE PREPARED TO SHARE WITH THE COURT OF WHAT YOU SEE HAPPENING NEXT, AS TO THOSE SPECIFIC PLAINTIFFS NOW THAT THEY HAVE THE BENEFIT OF THE LOAN MOD? DO YOU HOPE TO GO BACK AND SMOKE THE PEACE PIPE WITH THEM LATER OR SEE IF FOR SOME MODEST AMOUNT OF MONEY TO ESSENTIALLY OFFSET THE PRACTICAL EXPENSE OF ATTORNEY'S FEES OR OTHERWISE THEY MIGHT THEN BE PREPARED TO GO QUIETLY INTO THE NIGHT? OR YOU ANTICIPATE

SOMEBODY TO SET IT UP AS A KIND OF FACTUAL DEFENSE FOR A CLAIM FOR DAMAGES AT A LATER TRIAL? MR. KLEIN: YOUR HONOR, IF THESE PARTIES WANT TO

SIT DOWN AND TALK ABOUT -- ANY OF THEM WANT TO SIT DOWN TALK ABOUT SETTLEMENT, FOR A -- WHAT YOU HAVE DESCRIBED AS A MODEST AMOUNT, WHICH WE MAY HAVE OUR DIFFERENT

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VERSIONS OF WHAT MODEST AMOUNTS MAY BE, BUT, I MEAN, SO FAR, THE -THE COURT: I THINK THEY BELIEVE THEY HAVE GOT A

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TIGER BY THE TAIL. IDEA OF MODEST. MR. KLEIN:

YOUR IDEA OF MODEST MAY NOT BE YOUR

THERE'S A DISAGREEMENT.

THEIR IDEA

OF MODEST MAY BE $150 MILLION 998 OFFER I GOT IN JUNE. THAT'S NOT MODEST BY ANY STRETCH, CERTAINLY -- I MEAN, ONE OF US COMMENTED UPON -- I MAY BE CONFUSING, I THINK IT WAS AT THE START, THAT'S WHAT JUDGE JONES INDICATED, BUT THAT'S NOT AN AWARD WE'RE TALKING ABOUT. WE ARE NOT

EVEN IN THE -- I CAN'T EVEN FIGURE OUT SOMETHING IN THE UNIVERSE THAT WE'RE TALKING ABOUT HERE. THE COURT: WHAT IS IT THAT MAKES YOUR LITIGATION

BUDGET TO JUSTIFY TO THE CLIENT? MR. KLEIN: YOUR HONOR, THE BANK'S PRIORITY FROM

DAY ONE IN THIS CASE, HAS BEEN TO LOOK FOR WAYS TO KEEP THESE BORROWERS IN THEIR HOMES, IF THERE'S AN OPPORTUNITY. SO FAR 34 -- THAT'S BARELY 10 PERCENT OF

THESE BORROWERS, HAVE SUBMITTED LOAN MODIFICATION APPLICATIONS. SO IF THEY WANT TO SUBMIT LOAN THAT'S

MODIFICATION APPLICATIONS LET'S TALK ABOUT IT. EASY.

I HAVEN'T EVEN ASKED FOR A DISMISSAL ON THAT, I

WOULD THINK THERE WOULD BE INTEREST THERE. THE COURT: YOU'VE ANSWERED MY QUESTION, SO UNLESS

THERE MR. CEKIRGE, AS YOUR AUXILIARY BRAIN OR HARD DRIVE HAS SOMETHING TO ADD, I'D LIKE TO TAKE A MOMENT TO LOOK AT THESE CASES.

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MR. SPIVAK: THE COURT: MR. KLEIN:

YOUR HONOR -NOT YET. I'M GETTING THE GREEN LIGHT FROM

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MR. CEKIRGE, THAT I'VE DONE AN ADEQUATE JOB. MR. CEKIRGE: THE COURT: MR. SPIVAK: THAT'S TRUE, YOUR HONOR. MR. SPIVAK, I HEAR FROM YOU BRIEFLY. VERY BRIEFLY.

LI MANDRI SPECIFICALLY STATES THAT THE -THIS LACK OF DUTY IS OTHER THAN IN CONNECTION WITH ENTERING INTO A CONTRACT, UNDER 1572, WE'RE TALKING HERE ABOUT THE EXCEPTION THAT MAKES ALL OF THEIR USE OF LI MANDRI IRRELEVANT. I'D ALSO LIKE TO COMMENT TO, YOUR HONOR, A CASE THAT'S CITED BOTH IN SOME OF OUR BRIEFS AND IN THEIR REPLY BRIEF, NYMARK V. HEART FEDERAL SAVINGS AND LOAN ASSOCIATION 231 CAL.APP.3D 1089. THEY CITE IT FOR THEIR PURPOSES, BUT REASON I'M RAISING IT IS, IT MAKES CLEAR THAT THE BANK'S IMMUNIZATION, IF ANY, IS LIMITED, IT USES THE RULE ABOUT CONVENTIONAL RULE AS LENDER, AND LISTS ON PAGE 1098 A FIVE POINT BALANCING TEST TO DETERMINE WHEN A BANK SHOULD OR SHOULDN'T BE LIABLE TO A LENDER, SUGGESTING THERE IS NOT SOME BLANKET IMMUNITY OR THERE WOULDN'T BE A NEED FOR AFIVE POINT BALANCING TEST. THANK YOU. THANK YOU. COURT'S IN RECESS.

THE COURT: MR. SPIVAK:

(THE FOLLOWING PROCEEDINGS RESUMED

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IN OPEN COURT:) THE COURT: BACK ON THE RECORD. AND HAVING

REVIEWED SOME OF THE CASES, HAVE DISCUSSED AT THE

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ARGUMENT SUCH AS PRICE V. WELLS FARGO BANK, WHICH A PETITIONERS APPEARS TO BE FAIRLY RUN-OF-THE-MILL CASE DEALING WITH THE QUESTION OF WHETHER OR NOT THERE'S ESSENTIALLY LENDER LIABILITY FOR ENGAGING IN CREDITORS RIGHTS, WITH A RESULTING ALLEGED DAMAGES TO THE PLAINTIFF, WHICH IS NOT THE SAME FACT PATTERN AS ALLEGED HERE. AND NYMARK, N-Y-M-A-R-K, V. HEART FEDERAL SAVINGS

AND LOAN, WHICH IS A MISAPPRAISAL CASE, BUT AGAIN WITHOUT THE ALLEGATIONS THAT THE DEFENDANTS HAD TOTALLY DISTORTED THE VALUATIONS AND REAL ESTATE MARKET THAT'S DISTINGUISHABLE, ALTHOUGH CERTAINLY CITABLE BY THE DEFENDANT, AND IF A WRIT IS SOUGHT AS RELEVANT AS PERLAS IN RAISING THE MORE GENERAL QUESTION OF THE EXTENT TO WHICH THE COMMON LAW DOES WISH TO VISIT THE RISK OF THIS KIND OF LIABILITY ON SOMEBODY IN THE CIRCUMSTANCES OF COUNTRYWIDE OR NOW ITS NEW OWNER BANK OF AMERICA. AND, FINALLY, THE LI MANDRI V. JUDKINS CASE, L-I, CAP, M-A-N-D-R-I, V. J-U-D-K-I-N-S, INVOLVING RATHER DIFFERENT CIRCUMSTANCE WHERE THE DEFENDANT THERE WAS ACTUALLY COUNSEL FOR THE CREDITOR. I DON'T FIND ANY

OF THEM SO CLEARLY ON POINT AS TO REFUTE THE GENERAL APPLICATION OF THE COMMON LAW WHERE I THINK THE PLAINTIFF'S ARGUMENT CONTINUES TO BE PLAUSIBLE AND THEREFORE I DON'T CHANGE MY TENTATIVE, IN PARTICULAR, AS TO THE FIRST CAUSE OF ACTION.

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SO, TO RECAP, I'M ASKING DEFENDANT HOPING THAT MR. CEKIRGE OR MR. SHAW WILL BE AN APPROPRIATE SCRIVENER, WITH NO DISRESPECT MEANT TO PLAINTIFF'S

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COUNSEL, BUT I'M GOING TO STILL HAVE DEFENDANT GIVE NOTICE, ALTHOUGH THIS IS IN THE GRAND SCHEME OF THINGS A RULING PROBABLY MORE FAVORABLE TO PLAINTIFFS. IF PLAINTIFFS WANT TO PREPARE ANY ORDERS FOLLOWING HEREAFTER, I'LL ENTERTAIN THE REQUEST, BECAUSE I THINK THERE OUGHT TO BE A WRITTEN ORDER AS TO THE FIRST CAUSE OF ACTION, INCLUDING A LANGUAGE THEREIN UNDER CCP 166.1, WHICH IS WHAT RINGS THE BELL FOR THE COURT OF APPEALS THAT IT'S WORTH THEIR NEAR TERM ATTENTION. SO, DEMURRER OF BANK OF AMERICA, OVERRULED AS TO FIRST CAUSE OF ACTION, THOUGH THE COURT ANTICIPATES THAT PLAINTIFF'S COUNSEL WILL BE MINDFUL OF THEIR ETHICAL OBLIGATIONS UNDER CCP 128.7 IN REGARDS AS TO ANY BORROWERS WHO REALLY DON'T HAVE CONTACT WITH COUNTRYWIDE OR ANYBODY BELIEVED TO BE A CO-CONSPIRATOR WITH COUNTRYWIDE AT THE TIME THE LOAN WAS ORIGINATED. AND I TRUST YOU'LL BE IN DUE COURSE DISMISSING SUCH PARTIES WITHOUT PREJUDICE, MR. SPIVAK, AND COMPANY. THIS ALL APPLIES, OF COURSE, TO ITEM

NUMBER 2-A ON THE DOCKET, THE JOINDER, WHICH I GUESS IS THE ANSWER TO THE QUESTION. I MISSED THE FACT IT WAS A JOINDER, BUT I GUESS THAT'S HOW RECON AND C.T.C. DID COME BEFORE THE COURT. SO MAYBE WE DON'T NEED A MOTION TO STRIKE THEIR

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DECLARATION OF NON-MONETARY STATUS, BECAUSE THEY HAVE BROUGHT FORWARD AN APPEARANCE MORE PLENARY IN NATURE. SO YOU CAN DISREGARD MY EARLIER COMMENTS

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FROM THIS MORNING ABOUT THE POSSIBLE NEED TO MOVE TO STRIKE IT, BECAUSE ESSENTIALLY WHEN YOU GET A RESPONSIVE PLEADING FROM BANK OF AMERICA AND COUNTRYWIDE AND COUNTRYWIDE HOME LOANS, THE SAME THING WILL APPLY WITH EQUAL FORCE TO THE NEED TO GET A FURTHER RESPONSIVE PLEADING FROM RECONTRUST N.A. FROM C.T.C. REAL ESTATE SERVICES, ALTHOUGH WE HAVE AMENDMENT COMING FROM PLAINTIFFS, AMENDING BY PLAINTIFFS IS GOING TO PRECEDE THE RESPONDING BY THE DEFENDANTS. SO, FIRST CAUSE OF ACTION OVERRULED. SECOND CAUSE OF ACTION, THIRD CAUSE OF ACTION SUSTAINED WITH LEAVE TO AMEND. HOW MUCH TIME DO PLAINTIFFS WANT? MR. SPIVAK: THE COURT: THE LOGIC OF THAT. MR. SPIVAK: THE COURT: WHICH IS MARCH 11. MR. SPIVAK: THE COURT: THANK YOU, YOUR HONOR. FOURTH CAUSE OF ACTION, OVERRULED; 60 DAYS, YOUR HONOR. YOU HAVE A CHORE AHEAD OF YOU, I SEE NO QUARREL. THANK YOU, YOUR HONOR. 60 DAYS FROM TODAY'S CALENDAR DATE,

FIFTH CAUSE OF ACTION SUSTAINED WITHOUT LEAVE TO AMEND. SIXTH CAUSE OF ACTION OVER PLAINTIFF'S OBJECTION, SUSTAINED WITHOUT LEAVE TO AMEND, BUT WITHOUT PREJUDICE TO A FUTURE CLAIM IF A NEW CAUSE OF ACTION

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ACCRUES FOR PLAINTIFFS, PAUL RONALD; LISA RONALD; PRICILLA BOWIN; TRACEY HAMPTON-STEIN AND RENE MINNAAR, OTHERWISE OVERRULED.

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FIFTH CAUSE OF ACTION I THINK -- I ALREADY SAID, SUSTAINED WITHOUT LEAVE TO AMEND. 7TH AND 8TH CAUSE OF ACTION, OVERRULED. MOTION TO STRIKE DENIED, ALL THIS IS WITHOUT PREJUDICE TO RENEWING MANY OF THE ARGUMENTS MADE AS TO THE DEMURRER AND MOTION TO STRIKE IN THE CONTEXT OF FUTURE CHALLENGES TO THE MERITS OF THE CLAIM, SUCH AS A MOTION FOR SUMMARY ADJUDICATION OR SUCHLIKE. I WOULD -- DO PLAINTIFFS WANT TO PREPARE THE ORDER AS TO THE FIRST CAUSE OF ACTION OR DEFER TO YOUR ADVERSARIES TO START, FROM WHICH THEY WISH TO TAKE THE WRIT? MR. SPIVAK: WELL, PREPARE THE ORDER, YOUR HONOR. THE COURT: OKAY. BUT THEN YOU ARE DIRECTED TO

MEET AND CONFER WITH THE DEFENDANTS TO PREPARE AN APPROPRIATE ORDER SPECIFIC TO THE FIRST CAUSE OF ACTION, REFLECTING THE FACT THAT THE COURT HAS OVERRULED THE DEMURRER, BUT CERTIFIED THE QUESTION FOR THE COURT OF APPEALS, BECAUSE I THINK BASED ON AUTHORITIES SUCH AS PERLAS AND NYMARK, THAT REASONABLE MINDS CAN DIFFER AS TO WHETHER OR NOT THE DUTY DOES EXIST, EVEN BASED ON PLEADINGS OF THE PLAINTIFF AND THE ATTEMPT TO TETHER IT TO NORMAL COMMON LAW PRINCIPLES. THERE ARE SOCIOECONOMIC AND JURISPRUDENTIAL REASONS WHY ONE MAY NOT WANT TO SADDLE A BANK FOR THIS

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DUTY.

AND I THINK IT'S A FAIR QUESTION FOR OUR COURT OF

APPEALS TO ADDRESS SOONER, RATHER THAN LATER SO I BELIEVE REASONABLE MINDS CAN DIFFER AND IT'S HUGELY

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IMPORTANT TO THE OUTCOME OF THE CASE. MR. KLEIN: QUICKLY, YOUR HONOR, I THINK THAT

FROM MY UNDERSTANDING FROM THE COURT WAS ALSO CERTIFYING WITH RESPECT TO CAUSATION IN THE CLAIM AND CAUSATION ON THE U.C.L. CLAIM. THE COURT: I'M ONLY INTERESTED IN THE CONCEALMENT

CLAIM, AND AS TO THAT I'M HAPPY TO HAVE YOU ARGUE ANY REASON WHY YOU SHOULD HAVE HAD YOUR DEMURRER SUSTAINED WITHOUT LEAVE TO AMEND. AND IF YOU THINK CAUSATION IS A PERSUASIVE ARGUMENT, FINE. I'M NOT AT THIS MOMENT CERTIFYING AS TO I'M ONLY CERTIFYING AS TO THE FIRST

THE U.C.L. CLAIM. CAUSE OF ACTION. MR. KLEIN: THE COURT:

UNDERSTOOD. THE U.C.L. CLAIM IS A TOTAL QUAGMIRE AND IT IS NOT SUITABLE FOR BETTER IF YOU

LIKE A LAND WAR IN ASIA.

QUICK ATTENTION BY THE COURT OF APPEALS.

HOPE TO GET THEM TO EVEN FOCUS ON THIS, TO GIVE THEM A CLEAN PROJECT AND NOT SADDLE THEM WITH THAT. IT IS LIKE A -- THIS WHOLE CASE IS LIKE A LAND WAR IN ASIA, AT LEAST FROM MY POINT OF VIEW. SO, DEFENDANT'S GOING TO GIVE NOTICE OF RULING; THE PLAINTIFF, HOWEVER, IS TO PREPARE THE ORDER AS TO THE FIRST CAUSE OF ACTION AND THE CERTIFICATION. IF YOU CAN'T REACH YOUR ADVERSARIES' CONSENT AS TO THE

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FORM OF THE ORDER, LODGE YOUR PROPOSED ORDER WITH PROOF OF SERVICE BY NEXT TUESDAY, JANUARY 18. AND IF THERE'S

OBJECTION, PLAINTIFF CAN COME FORWARD WITH ITS OBJECTION

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AND ITS ALTERNATIVE PROPOSED ORDER. I'M FRANKLY NOT PROPOSING THAT IT BE A LONG, EXTENDED, WINDY OPINION ABOUT THE MERITS AS MUCH AS THE STATEMENT THAT "THIS IS THE RULING AND DESERVES ATTENTION INGS BY THE COURT OF APPEAL." BUT IF PLAINTIFFS WANT TO GET MORE CREATIVE, THE MORE CREATIVE YOU GET THE MORE OBJECTING YOU ARE GOING TO GET. MR. KLEIN: YOUR HONOR, WE WILL PAY FOR EXPEDITED

TRANSCRIPT AND PROVIDE IT TO COUNSEL FOR THE PLAINTIFFS. IF WE CAN DO THAT WITHIN 48 HOURS IT WOULD HELP PARTIES. THE COURT: I'M NOT GOING TO ORDER MISS LARA AS TO

WHEN IT'S READY, BUT I'M SURE SHE'LL BE HAPPY TO COOPERATE WITH YOU TO THE EXTENT POSSIBLE. MR. KLEIN: THE COURT: SHE ALWAYS DOES. ANY PRIOR STAYS ON DISCOVERY ARE

LIFTED, OBVIOUSLY, THE DEFENDANT'S TIME TO RESPOND, INCLUDING RECONTRUST AND C.T.C. IS GOING TO BE THE DAY AFTER THE AMENDED PLEADING COMES FORWARD AND FOR THE VERY REASON THAT THIS IS AN THORNY PLEADING, I WILL GIVE THE APPEARING DEFENDANTS UNTIL -- IT'S GOING TO BE SIX WEEKS, APRIL 22, IN WHICH TO ANSWER OR OTHERWISE RESPOND TO THE NEW PLEADING. I DON'T THINK THIS CASE IS GOING TO GO EASILY. I WISH OTHERWISE, AND I HOPE I WILL SEE AT

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LEAST PROFESSIONALISM AND COOPERATION AMONGST COUNSEL, RECOGNIZING THAT YOU DON'T GAIN EITHER SIDE ANYTHING BY JUST BEING CANTANKEROUS FOR THE SAKE OF SHOWING YOU'VE

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GOT MUSCLE. BUT I DO THINK I WILL PROBABLY NEED TO GIVE YOU MORE, RATHER THAN LESS ATTENTION. SO, CAN IT WAIT

UNTIL LIKE THE LAST WEEK OF JANUARY FOR THE NEXT TIME WE CHECK IN WITH EACH OTHER? AND I'M HAPPY TO HAVE PHONE APPEARANCES SO THOSE OF YOU WHO COME FROM THE DISTANCE DON'T FEEL A NEED TO TRAVEL. EVEN SOONER? MR. KLEIN: I THINK, PROBABLY, YOUR HONOR, IF I OR DO I NEED TO SEE YOU

DID MY MATH CORRECTLY, HIGHLY UNLIKELY THAT I HAVE, BUT IF THE 11TH, THE 18TH, THE COURT WERE TO ENTER AN ORDER BY THE 20TH OR 21ST, I CERTAINLY DON'T WANT TO PUT UNDUE BURDEN ON THE COURT. IT LOOKS LIKE IT'S THE END OF

JANUARY OR THE END OF THE FIRST WEEK OF FEBRUARY, MAY BE THE BEST TIME FOR THAT, AFTER WE HAVE GOT THE ORDER ENTERED. THE COURT: WHEN YOU SAY YOU HAVE THE ORDER, YOU I UNDERSTAND YOU WANT THE

ARE THEN TO TAKE A WRIT.

ORDER FIRST AND THAT'S WHEN HOPEFULLY YOU'LL HAVE THE DRAFT AND CAN MOVE AHEAD, BUT UNTIL YOU HAVE AN ORDER FROM WHICH TO TAKE A WRIT, IT'S UNREASONABLE TO EXPECT YOU TO PUT SOMETHING IN THE COURT OF APPEALS INBOX. MR. KLEIN: THE COURT: WHICH IS EXACTLY THE TIME -THEY ARE AMENABLE BY THE WAY OF

PUTTING ON THE FIRST PAGE OF THE RED CAPTION PAGE THE

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FACT THAT THE COURT HAS CERTIFIED IT, TO TRY CAPTURE THEIR ATTENTION. AND I SAY THAT TO BOTH SIDES, ANY TIME

YOU WANT TO TAKE A WRIT, IF YOU HAVE IT CERTIFIED YOU

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MIGHT AS WELL MAKE IT AS PLAIN AS THE NOSE ON YOUR FACE, HOPING THAT SOME WRIT ATTORNEY WILL GO PAY A LITTLE MORE ATTENTION TO YOUR PAPERWORK, RATHER THAN HAVING IT BURIED. WE HAVEN'T HAD AS MUCH SUCCESS IN GETTING THEM

TO PAY ATTENTION TO CERTIFIED WRITS AS WE'D LIKE, FRANKLY. HOW ABOUT A FURTHER STATUS CONFERENCE ON THURSDAY, FEBRUARY 3 AT 1:30 P.M.? MR. SPIVAK: MR. KLEIN: SHOULD BE FINE. THE COURT: FINE, YOUR HONOR. LET ME TURN ON MY PHONE, I THINK IT LOOKS GREAT TO ME, YOUR HONOR. OKAY. AND I'D LIKE EACH SIDE TO GIVE

ME FURTHER STATUS REPORT OF WHAT YOU THINK I NEED TO KNOW. DON'T FEEL YOU'VE GOT TO RECAP ALL OF THE MERITS

OF THE CLAIMS, JUST TELL ME WHAT'S NEW AND DIFFERENT THAT I WOULDN'T HAVE KNOWN BY MONDAY, JANUARY 31. MR. KLEIN: YOUR HONOR, ONE POINT, I THINK

FEBRUARY 4TH IS THE DATE THAT THE PLAINTIFFS WOULD BE FILING THEIR MOTION FOR PRELIMINARY INJUNCTION. THE COURT: MR. KLEIN: COULD BE. I FORGET.

MY ONLY POINT RAISING THAT IS IT MAY

BE BENEFICIAL IN THE INTEREST OF DISCLOSURE IF THEY HAVE AN OPPORTUNITY TO TELL US WHICH PLAINTIFFS ARE MOVING BEFORE THE PRELIMINARY INJUNCTION, AT THIS TIME, SO WE CAN GATHER THOSE DOCUMENTS AND GET THEM TO THEM SOONER.

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SINCE WE ARE GATHERING DOCUMENTS AND PRODUCING THEM, IF THEY ARE ABLE TO IDENTIFY THOSE BORROWERS, IT WOULD HELP US GATHER OUR DOCUMENTS AND NOT COME INTO COURT TO

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COMPLAIN THAT WE DIDN'T HAVE ENOUGH TIME. THE COURT: THAT'S A DIFFERENT QUESTION THAN

WHETHER OR NOT WE OUGHT TO HAVE A STATUS CONFERENCE FEBRUARY 3. NEW REQUEST? MR. KLEIN: DIFFERENT ISSUE. THE COURT: I APOLOGIZE, YOUR HONOR. YOU ARE CORRECT. SO WE'LL STAY WITH FEBRUARY 3. I'D IT IS A ARE YOU QUARRELING WITH THAT OR MAKING A

LIKE A REPORT BY JANUARY 31. IS IT FINE IF THE REPORT ON JANUARY 31 TELLS US WHO THEY EXPECT TO FILE FOR FOUR COURT DAYS LATER? MR. KLEIN: THE SOONER THE BETTER, BUT OBVIOUSLY

IF I CAN GET DOCUMENTS TO THEM PRIORITIZE DOCUMENTS PRODUCTION SOONER, THAT WOULD BE BETTER, OTHERWISE, YOU KNOW, THE MORE TIME I HAVE -- I'M GATHERING UMPTEEN -OVER 140,000 PAGES I'M LOOKING AT RIGHT NOW. MR. STEIN: THE COURT: I THINK IT'S MORE THAN THAT. I FORGET WHAT THE SOVIETS CALLED IT,

BUT YOU OBVIOUSLY WILL BE THE HERO WORKER FOR BRYAN CAVE THIS YEAR. MR. KLEIN: AGAIN, YOUR HONOR, THAT'S NOT PERHAPS THE OPPOSITE.

SOMETHING I ASPIRE FOR. THE COURT:

COMES WITH THE TERRITORY.

IT SHOULD BE OBVIOUS THAT IT BEHOOVES

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PLAINTIFFS TO SHARE THIS INFORMATION WHEN THEY CAN. NOT MAKING AN ORDER SPECIFIC TO IT.

I'M

IF YOU ARE GOING TO MOVE ON FEBRUARY 4TH

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IT'S GOING TO BE OBVIOUS ENOUGH THEN WHO SEEKS A RELIEF. BUT IF YOU'LL MAKE THE DISCLOSURES IN ADVANCE, THEN DISCOVERY SHOULD GO MORE SMOOTHLY. MR. STEIN: YOUR HONOR, EXTREMELY BRIEFLY. IN

VIEW OF THE CASE THAT WAS ISSUED TODAY, ALBEIT IN A DISTANT STATE, PLAINTIFFS WILL HAVE TO EXAMINE THAT CASE AND REEXAMINE IT, BECAUSE THAT CASE CRIES OUT FOR AND OTHER CASES, SIMILAR CRIES OUT FOR INJUNCTIVE RELIEF BECAUSE THE BANK MAY NOT HAVE STANDING TO FORECLOSE AS THEY ARE -- AS THEY HAVE SAID IN THEIR REPLY BRIEF THEY ARE GOING TO DO SO -THE COURT: THAT'S A POLITE WAY OF SAYING YOU MAY

MOVE AS TO ALL PLAINTIFFS. MR. STEIN: OR WE MAY MOVE AS TO NONE OF THEM.

WE MAY PUSH BACK THE PRELIMINARY -- WE HAVE TO EXAMINE THE OPINION, THE OPINION WAS JUST ISSUED TODAY, LITERALLY, LITERALLY, TODAY. THE COURT: I HAVEN'T READ IT.

DOES EITHER SIDE SUGGEST MY STATUS

CONFERENCE SHOULD BE SOONER THAN FEBRUARY 3, IN VIEW OF ALL THIS? I WILL SEE YOU SOONER IF YOU THINK IT HELPS OR ACTUALLY THAT MIGHT BE SOON ENOUGH. MR. KLEIN: YOUR HONOR, I THINK MR. STEIN

ACTUALLY HAS A VERY BUSY CALENDAR, SO THERE'S NO REASON -- PARDON THE WORD "DRAG", THERE'S NO REASON TO HAVE US ALL COME DOWN HERE DURING A HEAVY SCHEDULE.

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THE COURT:

IF ON FEBRUARY 3 YOU TELL ME

PLAINTIFFS DON'T INTEND TO FILE THE NEXT DAY, THEY ARE NOT GOING TO BE IN CONTEMPT OF COURT. THEY ARE

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PROTAGONISTS.

IF THEY TELL ME THEY NEED MORE TIME, I

DON'T KNOW WHY I'D CHASTISE THEM FOR TAKING MORE TIME. BUT I WOULD APPRECIATE KNOWING ON FEBRUARY 3 THAT CALENDERING EVENTS HAVE CHANGED AND WE'LL TRY TO WORK COOPERATIVELY. MR. KLEIN: I DON'T THINK YOU'D HEAR COMPLAINT

FROM ME EITHER, YOUR HONOR. THE COURT: OR ANOTHER. MY PURPOSE ISN'T TO RULE FOR ONE SIDE

I'M JUST HERE AS NEUTRAL TRYING TO BRING I DO RECOGNIZE,

FORWARD THE PEOPLE'S BUSINESS.

NOTWITHSTANDING SOME THE GENERAL COMMENTS I'VE MADE ABOUT THE LARGER SOCIOECONOMIC IMPACTS OF SOME OF THESE ISSUES THAT UNLESS AND UNTIL THE PARTIES ARE GIVEN AN ALTERNATIVE MODE OF RESOLVING THEIR DISPUTES THAT THEY FIND SATISFACTORY, WHICH FOR WHATEVER REASON LEGISLATIVE BODY ATTEMPTS TO CRAM DOWN IF THEY THINK THEY CAN CONSTITUTIONALLY DO SO, THAT MY PAID JOB IS TO PROVIDE TRADITIONAL ADJUDICATIVE JUSTICE ON THE MERITS. AND WHILE I EXPLORE AS CIVIL JUDGES ALWAYS DO WHAT THE SETTLEMENT ALTERNATIVES ARE, INCLUDING IN THE TRADITIONAL MODES WE USE HERE OR ALTERNATIVE PROCESSES THAT MAY BE NASCENT, I EXPECT TO GIVE YOU TRADITIONAL COMMON LAW AND STATUTORY AN ADJUDICATIVE PROCESSES TO CONSISTENT WITH THE CODE OF CIVIL PROCEDURE AND OTHERWISE GET THE CASE RESOLVED IF THERE'S NO

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COMPROMISE. SO IT MAY BE A CHORE, BUT IF IT LOOKS LIKE IT WILL BE AN INTERESTING CHORE FROM A NEUTRAL'S POINT

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OF VIEW. ALL COUNSEL: THANK YOU, YOUR HONOR.

(PROCEEDINGS CONCLUDED.)

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