Case 1:15-cv-00293-LTS-JCF Document 156 Filed 03/20/17 Page 1 of 12

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

-------------------------------------- x
MORTGAGE RESOLUTION SERVICES, LLC, 1ST :
FIDELITY LOAN SERVICING, LLC, and S & A :
CAPITAL PARTNERS, INC., :
:
Plaintiffs, :
: No. 15 CV 293-LTS-JCF
-against- :
:
JPMORGAN CHASE BANK, N.A., CHASE HOME :
FINANCE LLC, and JPMORGAN CHASE & CO., :
:
Defendants. :
----------------------------------- x

PLAINTIFFS’ REPLY MEMORANDUM OF LAW IN FURTHER SUPPORT OF

MOTION TO COMPEL DISCOVERY AND MEMORANDUM OF LAW IN
OPPOSITION TO DEFENDANTS’ CROSS-MOTION FOR PROTECTIVE ORDER

Tantillo Law PLLC

100 Church Street
8th Floor
New York, NY 10007
786.506.2991

Attorneys for Plaintiffs

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Plaintiffs S&A Capital Partners, Inc. (‘S&A”), Mortgage Resolution Services, LLC

(“MRS”), and 1st Fidelity Loan Servicing, LLC (“1st Fidelity”)(collectively, “Plaintiffs” or the

“Schneider Entities”) submit this Reply Memorandum of Law in support of their motion to compel

production of discovery from Defendants JPMorgan Chase Bank, N.A., Chase Home Finance,

LLC, and JPMorgan Chase & Co. pursuant to Fed. R. Civ. P. 37 and in opposition to Defendants’

Cross-Motion for Protective Order.

ARGUMENT

I. PLAINTIFFS’ MOTION TO COMPEL PRODUCTION OF ADDITIONAL

DOCUMENTS SHOULD BE GRANTED.

A. Plaintiffs explicitly identified the document requests at issue in its

Memorandum of Law In Support of Motion to Compel Discovery, and the
Court already ordered Defendants to produce those documents by its July 14,
2016 Order (DE No. 111).

Defendants have argued that Plaintiffs have not complied with Local Rule 37.1 by not

setting forth each document request at issue in the Memorandum, followed by Defendants’

response to each document request. Defendants have further argued that the absence of this

information in the Memorandum has “materially prejudiced . . . its . . . ability to discern which

specific document request purportedly applies to the ill-defined categories of documents sought in

the motion.” Defendants’ Memorandum in Opposition (DE No. 153) at 9.

Defendants have ignored the plain language of the July 14, 2016 Order on the prior motion

to compel. In that Order, the Court specifically stated that Defendants shall produce:

“Documents focused on the loans that the defendants sold to the plaintiffs”, which the
Court recognized as being “relevant to ‘the private, commercial dispute between the
parties’;

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“Documents relating to communications, investigations, research, policies, or selection

criteria connected to loan forgiveness letters sent on September 13, 2012, December
13, 2012, and January 13, 2012,” which the Court also held were relevant, “as are
similar documents relating to the pre-DOJ Lien Release Program, even though these
documents relate also to loans not sold to the plaintiffs.” July 14, 2016 Memorandum
and Order, at 11-12 (DE No. 111).

This discovery dispute is not a dispute in which the parties are going back and forth for the

first time about the completeness of a party’s document production. Plaintiffs have filed the

Motion to Compel to address Defendants’ non-compliance with this Court’s July 14, 2016 Order,

which Order identified the specific categories of documents that Defendants were ordered to

produce, which categories Defendants inexplicably characterize as “ill-defined.”

B. Plaintiffs disagree that Chase has produced all responsive loan data and
documents.

Defendants’ Opposition to Plaintiffs’ Motion to Compel as it relates to the production of

the loan data and loan documents is misplaced in several respects. First, Defendants assert in their

Opposition that “[Plaintiffs’] main concern appears to be that the documents at issue are hard to

interpret and do not include all the information that Plaintiffs were hoping to obtain.” Contrary

to Defendants’ condescending assessment of Plaintiffs’ competence to review documents that have

been produced to date, Plaintiffs’ position has been, and continues to be, the same. Namely,

Defendants continue to fail to produce all the data in its possession regarding the loans it sold to

Plaintiffs. The 3,529 loans sold to MRS and the over 1,000 loans sold to S&A and 1st Fidelity are

Plaintiffs’ property, and Chase has no right to withhold data that it clearly possesses and that is

needed to service these loans, as well as the relevant data to determine how and which of these

loans received forgiveness letters or had their liens released.

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Defendants disingenuously claim that “it is unclear what documents or data are part of a

‘loan file’ and what specific information they claim to be lacking.” Defendants’ assertion is most

troubling, given its standing as a professional mortgage loan servicer. Defendants should be

intimately familiar with the information required to legally service and or sell or transfer a loan.

However, if Defendants are not familiar with the information that an established mortgage loan

servicer should maintain while servicing loans and in turn selling or transferring loans, Plaintiffs

would remind Defendants that they are obligated to provide the original loan documents, including

the note and mortgage, that the borrowers would have signed with Chase, which documents would

have set forth such details as the borrower’s first and last name, tax ID number or Social Security

Number, a complete mailing address, the address of the property that secures the mortgage, and

the original principal amount, the interest rate and agreed payment schedule on the loan (with

amounts and dates). In addition, the records would show the payment history, amortization

schedule showing payments made and payments missed, as well as accruals for unpaid principal,

interest and fees. The Court ordered Defendants to produce this data in its July 14, 2016 Order,

and Defendants have failed to do so.1

Defendants have asserted in their Opposition at page 12 that “Chase has already produced

responsive data regarding, for example, borrowers’ names and addresses, original principal

amounts, borrower’s total payments to Chase, payment date information, and charge off amounts.”

1
An example of Defendants’ bad faith in evading production of the Court-ordered loan data is Defendants’ purported
production of an unsupported, conclusory spreadsheet of certain loans which Chase represented was prepared from
data contained in Chase’s databases. See Dec. 22, 2016 letter from C. Pistilli to B. Tantillo, Ex. 18 to B. Tantillo
Declaration (DE No. 148). Plaintiffs wrote back asking for the backup data that was the basis for the spreadsheet and
for an explanation why Defendants provided a spreadsheet rather than the underlying loan data. See Jan. 6, 2017 letter
from B. Tantillo to C. Pistilli, Ex. 5 to B. Tantillo Declaration (DE No. 148). To date, Plaintiffs have not received a
response.

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However, this is not wholly accurate. Chase has not produced the original principal amounts,

payment information and addresses for all of the loans, nor have they produced a comprehensive

list of loans that received forgiveness letters or had their liens released, despite Defendants’

repeated inquiries of Plaintiffs to produce information related to damages, when such an effort is

an impossibility without the loan data information requested by Plaintiffs from Defendants and not

produced to date. Unfortunately, the information Defendants have produced is not comprehensive,

nor is it even all in the same spreadsheet. Instead, we have dozens of spreadsheets that all contain

a different number of loans and different data and labeling, causing the Plaintiffs to spend hundreds

of man hours and tens of thousands of dollars analyzing the data.

Defendants further assert in their Opposition at page 11 that the law does not require the

parties to create new documents to help their adversaries understand the materials produced in

discovery. Plaintiffs are not asking for Defendants to produce new documents, but are asking for

Defendants to produce the documents Plaintiffs are entitled to receive pursuant to the Court order

and as the buyers of the various loans at issue in this case. Defendants are governed by numerous

laws that set forth the requirements for servicing a federally related mortgage, which requirements

mandate that certain documents be kept in the ordinary course of business for each such federally

related mortgage loan, including, but not limited to, the Real Estate Settlement Procedures Act, 12

U.S.C. § 2601 et seq. It strains credulity that Chase does not have these documents, and if they do

not have them, they should say so (which would constitute prima facie evidence that the loans sold

to Plaintiffs violated federal laws and were in breach of the various contracts entered into between

the parties). These are documents it was required to maintain, even if Chase had never sold or

transferred a single one of these loans to Plaintiffs.

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Further, Defendants’ Opposition ignores this Court’s July 14, 2016 Order, in which the

Court rejected Defendants’ contention that “it is plaintiffs’ responsibility to identify specific loans

that form the basis of their claims.” Plaintiffs are entitled to the loan data, records and documents

on all of the loans sold to Plaintiffs, not just the loans Plaintiffs can identify2. Defendants have

failed to do this, and they should be ordered to do so.

C. The material sought from Chase’s counsel, Robert Wick, is covered by the
Court order, and is relevant and non-privileged.

As stated in greater detail in Plaintiffs’ Memorandum at pages 12 through 14, the material

sought from Chase’s outside counsel, Robert Wick, is both relevant and not privileged. Plaintiffs

have not sought any attorney-client privileged communications, nor have Plaintiffs sought

counsel’s work product generated in anticipation of litigation. Plaintiffs are merely seeking the

underlying factual documentation that counsel used to investigate whether Chase lien released

loans owned by Plaintiffs, similar to the data sought supra. Defendants have previously

represented to the Court that they cannot search the loans sold to Plaintiffs. However, that

representation does not reconcile with counsel’s assertion in the two Wick letters that Chase did

not claim credit for or lien release loans owned by Plaintiffs.

Further, this Court’s July 14, 2016 Order explicitly ordered Defendants to produce

documents relating to investigations connected to loan forgiveness letters, as well as documents

relating to the criteria and process used by Chase to determine when loans would be placed in

2
It should be noted that despite the Judge’s Order, the Plaintiffs have sent Defendants lists of the loans purchased
from Chase, to the extent they had records of them, on numerous occasions, including prior to Plaintiffs’ First Motion
to Compel as far back as October 25, 2012, as reflected by JPMC-MRS 00018833-00018843.

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RCV1, and the factual documentation that Plaintiffs seek here is squarely encompassed by these

requests for which Defendants were ordered to produce documents.

D. Plaintiffs’ request for additional custodians’ files is not premature and is

proportionate to the needs of this case.

Plaintiffs satisfied the meet and confer requirement as a prelude to moving to compel the

depositions3 of additional records custodians’ files. Pursuant to this Court’s July 14, 2016 Order,

Plaintiffs’ counsel contacted Defendants’ counsel on December 6, 2016, requesting the relevant

custodial files for Robert Adamovic, Joy Palazzo, Nancy Rubino, Panickos Palletas, Steve

Hemperly, and Jonathan Driver. On December 12, 2016, Defendants’ counsel wrote back to

Plaintiffs’ counsel, informing him that Defendants had produced all they had for Robert Adamovic,

objecting to producing anything for Joy Palazzo on grounds of privilege, and asserting that for the

rest of the custodians, Defendants did not believe they had any material, non-cumulative

documents relating to the business dispute between the parties. Defendants made it clear they were

not going to produce anything further, so a motion to compel was appropriate.

Further, as discussed at greater length in Plaintiffs’ Memorandum at pages 15 through 18,

Defendants are wrong that these custodians’ files would not have relevant, non-cumulative, and

non-privileged information. First, with respect to Joy Palazzo, Defendants assert in their

Memorandum that “Plaintiffs . . . do not explain how Chase’s communications with the NMS

Monitor would be remotely relevant to the straightforward contract claims that remain in this

case.” Ms. Palazzo was uniquely involved in providing non-privileged information regarding the

RCV1 inventory and liens released from the RCV1 database, resulting in the Monitor providing

3
Defendants are also refusing to produce the depositions of Chase employees Jonathan Driver and Ingrid Whitty,
despite Plaintiffs having not taken the ten depositions allowed pursuant to FRCP 30(a)(2)(A)(i).

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the “green light” to release thousands of mortgage liens, resulting in damage to Plaintiffs. The

release of these liens is not a tangential issue, but instead a critical issue to the damages suffered

by Plaintiffs under its “straightforward” contract claims.

Second, with respect to Steve Hemperly, contrary to Defendants’ assertion, Plaintiffs have

not sought his custodial file merely because he served as Managing Director and Head of Mortgage

Originations at Chase. Based upon Plaintiffs’ review of the discovery provided by Defendants,

Steve Hemperly was directly involved in setting up the DOJ 2nd Lien Extinguishment Program,

and his custodial file would shed unique light on forgiveness letters sent to properties sold to

Plaintiffs by Defendants, as well as the release of which liens breached Plaintiffs’ contracts with

Defendants.

Third, with respect to Jonathan Driver, while Defendants have argued in their

Memorandum that in the course of document production they have produced some e-mail

communications to, from, or cc’d to Jonathan Driver, supposedly as part of their retrieval of

documents from a “shared drive” used by Chase employees in connection with the 2012-2013 lien

release project, Defendants have not asserted that those documents comprise the entirety of what

would be in his custodial file that would relate to the lien releases. As the Vice President of Lien

Management, Jonathan Driver is responsible for Chase’s processes and systems used to take a loan

targeted for lien release and then executing the lien release, and if done improperly, rescinding the

lien release. This unique information that Jonathan Driver would have in his custodial files is

relevant to the breach of contract action, and would not be cumulative of information in other files.

Fourth, with respect to Nancy Rubino, contrary to Defendants’ position in its Memorandum

in Opposition, the fact that other e-mails have been produced that were sent to, from, or cc’d to

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Nancy Rubino does not complete Chase’s discovery obligation and obviate the reason for seeking

her custodial file. As she was in charge of RCV1 administrative support, she would be in the

unique position to know what records were kept in RCV1 and would have oversight for which

loans were lien-released. Discovery of her custodial file is relevant and non-cumulative.

Fifth, with respect to Panickos Palettas, while Defendants have focused in their

Memorandum in Opposition on his job title, based upon Plaintiffs’ review of the documents

produced to date, he participated in the initial removal of RCV1 loans for lien release, and was

responsible for checking the availability of liens for the DOJ Lien Release Program. Again, his

custodial file would provide unique, detailed information as to how Defendants would be able to

confirm ownership of the loans to be released.

Further, while Plaintiffs recognize discovery costs may impose a burden on Defendants,

they also impose a far more significant burden on Plaintiffs. Defendants’ persistent failure to

provide the discovery has caused Plaintiffs to lose out on more than $300 million in profits

Plaintiffs were in line to earn if the items requested in discovery were provided to Plaintiffs when

they should have been produced years ago. In addition, “Chase has more than 240,000 employees

and operations in more than 100 countries.” Opposition, at 2 (DE No. 150). Clearly, Chase has

the in-house resources to complete the searches without having to incur the costs for an outside,

third-party vendor as stated in the Declaration of Phil Verdelho. (DE No. 155).

II. THE PROBLEMS RAISED REGARDING DEFENDANTS’ PRIVILEGE LOG

ARE NOT MOOT.

Although Defendants sent Plaintiffs a Supplemental Privilege Log on February 28, 2017,

this submission does not cure the problems that Plaintiffs raised in its Memorandum for several

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reasons. First, Defendants have ignored the requirements of Local Rule 26.2(b), which required

Defendants to provide a privilege log at the same time that Defendants responded to a particular

discovery request, not later at a time of their choosing. If Defendants considered this rule

burdensome, they should have requested relief from the Court at the time, as envisaged by the

Local Rules. They did not, and the Court can and should treat this long-overdue privilege log as

late and deem the privileges waived.

Second, assuming the Court accepts the late filing of the privilege log, Defendants have

discounted and ignored the identification of problems with the initial privilege log (and repeated

in the supplemental log) produced by Defendants, which problems were recounted in Plaintiffs’

counsel’s letter to Defendants’ counsel of December 2, 2016, and set forth on pages 19 through 20

of Plaintiffs’ Memorandum. For several of the items identified, Plaintiffs still do not know if

Defendants have in fact remedied the deficiencies with the initial privilege log. For example, for

the seven documents that were purportedly withheld on the basis that they were a protected

“suspicious activity report”4, Defendants had responded that they were re-reviewing those seven

documents to determine if they should be produced. However, Plaintiffs still do not have a clear

answer from Defendants as to the outcome of that review, and Plaintiffs respectfully request the

Court to order Defendants to correct the deficiencies set out in Plaintiffs’ Memorandum.

4
In addition to the documents withheld as a protected “suspicious activity report,” Defendants have still not addressed
the other deficiencies in the initial privilege log, including the issues with the missing a “to” field, “from” field, or
both in one hundred twelve documents; the names of the attorneys involved in any document referenced by Defendants
to be a communication with counsel or the seeking or providing of legal advice, where there was no clear designation
that the document was “to” or “from” an attorney; for the sixteen documents purportedly withheld on the basis of
“confidential supervisory information”, the identification of the supervisor and the legal authority for the assertion of
the privilege; and the basis for the assertion by Defendants of a privilege on a communication with the US Department
of Justice between Robert Wick and AUSA Brian Hudak and Counsel to the Assistant Attorney General, William
Edgar.

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III. DEFENDANTS HAVE MISCHARACTERIZED THE PARTIES’ DISCUSSION

REGARDING THE IDENTIFICATION OF A RULE 30(B)(6) WITNESS.

Defendants have cross-moved for a protective order, and this cross-motion

mischaracterizes both the Court’s July 14, 2016 Order and the meet and confers between the parties

subsequent to the entry of that Order to secure the identification of a Rule 30(b)(6) witness by

Defendants.

As Plaintiffs discussed at greater length at pages 21 through 23 of its Memorandum, the

Court cited Defendants’ promise to provide a Rule 30(b)(6) witness to testify on certain topics,

including Defendants’ document retention policies, document retrieval procedures, and the

location, storage, and maintenance of communications with or regarding Plaintiffs, as well as

documents or data relating to loans that were sold or offered to Plaintiffs.

Based on the Court’s order, Plaintiffs’ counsel reached out to Defendants’ counsel,

beginning in November of last year, to get Defendants to identify such a witness solely as to

Defendants’ list of narrowed topics. Instead of complying with this request, Defendants reneged

on the agreement and insisted that they would not identify a witness to speak on these limited

topics, unless Plaintiffs agreed to forego, with prejudice, the right to seek the identification of a

Rule 30(b)(6) witness to testify at some later time regarding topics relevant to their RICO claim,

should the Court allow the claim to go forward. Plaintiffs were not prepared to do that nor were

they required to do that, and the unilateral condition that Defendants sought to impose on the

identification of a Rule 30(b)(6) witness to speak on the topics specifically mentioned in the July

14, 2016 Order, was and is simply not justified.

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Dated: New York, New York Respectfully submitted,

March 20, 2017
By: /s/ Brent Tantillo
Brent Tantillo
Tantillo Law PLLC
100 Church Street
8th Floor
New York, NY 10007
786.506.2991

Attorney for Plaintiffs

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