The opinion of the court was delivered by: Matsumoto, United States District Judge:
Plaintiff Mary Lodge ("plaintiff" or "Lodge") moves pursuant to Federal Rules of Civil Procedure 56(a) and 37(c) to strike the holder-in-due-course defense asserted by defendants Bayview Loan Servicing, LLC, Bayview Asset Management, LLC, U.S. Bank, N.A. as trustee for Bayview Asset-Backed Securities Trust Series 2007-30, Bayview Financial, L.P., and Bayview Financial Management Corp. (the "Bayview Defendants").*fn1 (See ECF No. 535, Notice of Motion to Strike Holder-In-Due-Course Defense ("Mot.").) For the reasons set forth below, plaintiff's motion to strike the holder-in-due-course defense is denied. The court instead orders that: (1) the Bayview Defendants compensate plaintiff for the costs and fees incurred in pursuing the discovery relating to the ownership of the Lodge mortgage, responding to the Bayview Defendants' two motions (one motion to dismiss and/or for summary judgment, and one motion for summary judgment) on their holder-in-due-course defense, and in making the instant motion to strike the holder-in-due-course defense, and (2) the Bayview Defendants are precluded from introducing evidence produced on or after January 13, 2011 and any testimony relating to the documents produced on or after January 13, 2011.
The undisputed facts, as set out in plaintiff's Local Civil Rule 56.1 Statement, are as follows.*fn2
Plaintiff commenced this action in January of 2005, alleging that certain defendants conspired to conduct a property-flipping scheme whereby she was targeted based on her race and deceived into purchasing an overvalued, defective home, financed with predatory loans. (ECF No. 1, Complaint ("Compl."); see also ECF No. 537, Plaintiff Mary Lodge's Rule 56.1 Statement of Facts ("Pl. 56.1 Stmt.") ¶ 6.) This action has since been consolidated with five related actions, all brought by Brooklyn homeowners alleging that they were victims of the property-flipping scheme. (ECF No. 472, Memorandum & Order dated 9/13/10 ("9/13/10 Order") (consolidating actions).) In her original complaint, plaintiff named the seller of her property, the lawyer who purportedly represented her in the transaction, and the lender that originated her two "piggyback" mortgage loans. (Compl. ¶¶ 9-12.) Plaintiff also named, as necessary parties pursuant to Federal Rule of Civil Procedure 19, the servicer of her First Note and First Mortgage (the "Lodge mortgage") and Wachovia Bank, N.A. ("Wachovia"). (Id. ¶¶ 13-14.) Wachovia was named because public records showed that the originating lender had sold the Lodge mortgage and that it had been assigned to Wachovia. (Id. ¶ 13.) Bayview Loan Servicing, LLC ("BLS") was substituted as a party in the action after it assumed servicing rights to the Lodge mortgage. (ECF No. 32, Stipulation Substituting Party.) In their answer to the original complaint, dated July 13, 2005, Wachovia and BLS admitted that in 2003 Wachovia had become the trustee of a trust containing the Lodge mortgage, and that it was a necessary party. (ECF No. 34, Answer to Complaint by Wachovia Bank, N.A. and Bayview Loan Servicing, LLC. ¶¶ 13-14.)
Plaintiff filed an amended complaint in December 2005, asserting claims against BLS as a Rule 19 party. (ECF No. 62, Amended Complaint.) On February 8, 2006, plaintiff propounded a set of discovery requests, requesting, inter alia, the following: "[a]ny agreement(s) that concerned, related to, encompassed, referred to or included the subject mortgages, including but not limited to warehouse lines of credit, bulk sales, repurchase agreements, investment agreements, securitization agreements, credit agreements, and/or loan sale agreements" and "[a]ll secondary market purchase agreements to which Wachovia is a signatory as Trustee on behalf of any trust into which the subject mortgages were transferred." (Pl. 56.1 Stmt. ¶ 11.)
Throughout the litigation, Wachovia and BLS made the following inaccurate and conflicting representations relating to the identity of the holder of the Lodge mortgage:
In their Memorandum of Law in Support of a Motion to
Dismiss and/or Summary Judgment, dated February 28, 2006, Wachovia and BLS asserted that "Wachovia is the holder of a mortgage as an assignee thereof," that "Wachovia is a holder of the [Lodge] mortgage in due course," and that "by holding the note and mortgage in issue, Wachovia qualifies as a holder in due course of the [Lodge] mortgage." (ECF No. 136, Memorandum in Support of Motion to Dismiss and/or Summary Judgment at 1, 4--5.) In their Reply Memorandum of Law in Further Support of a Motion to Dismiss and/or Summary Judgment, dated May 19, 2006, Wachovia and BLS asserted the following: "There can be no controversy that Wachovia is the holder of the note, and Plaintiff's counsel's attempts to create such controversy must fail." (ECF No. 140, Response in Support of Motion to Dismiss and/or Summary Judgment at 6.) In a foreclosure action brought in Kings County
Supreme Court, filed on July 30, 2007, BLS asserted that it "is now the sole, true and lawful holder of the said bond(s)/note(s) and mortgage(s)." (Pl.
56.1 Stmt. ¶ 18.) On September 21, 2007, after the denial of their Motion to Dismiss and/or Summary Judgment, Wachovia and BLS filed an Amended Answer in which they denied that Wachovia was the trustee of the trust into which the Lodge mortgage had been sold and that it was a necessary party, but simultaneously asserted that "Wachovia is a holder in due course as it took the [Lodge] mortgage . . . in good faith and without notice or actual knowledge of any defense thereto." (ECF No. 237, Answer to Amended Complaint by Wachovia Bank, N.A. and Bayview Loan Servicing, LLC at ¶¶ 17, 217.) In their Memorandum of Law in Opposition to
Plaintiff's Motion for a Temporary Restraining Order and Preliminary Injunction, dated January 4, 2008, Wachovia and BLS asserted that "Wachovia is a holder in due course of the [Lodge mortgage] . . . ." (ECF No. 296, Memorandum in Opposition to Motion for Preliminary Injunction and Temporary Restraining Order at 6.) On November 20, 2008, Jack Silver, an officer of BLS, appeared for a deposition pursuant to Federal Rule of Civil Procedure 30(b)(6), and testified that "US Bank" had succeeded to Wachovia's interest in the Lodge mortgage, that the Lodge mortgage was in the custody of Wachovia/US Bank, that "Wachovia/US Bank" are "the same entity, just a different name now," and that Wachovia/US Bank were located in "the same place . . . [t]hey just changed names. . . . The operation, the location is the same." (Pl. 56.1 Stmt. ¶ 23; ECF No. 538, Declaration of Sara Manaugh in Support of Motion to Strike Holder-in-Due-Course Defense ("Manaugh Decl."), Ex. D, Deposition of Jack Silver ("Silver Dep.") at 97-98.) Silver further testified that "Bayview itself is not the owner of [the Lodge] loan," that "[t]he loan had been securitized more than once," that the Lodge mortgage "was in security and then moved to security so Wachovia as trustee is the owner of the loan so the loan is in a security," and the current security was in 2007. (Pl. 56.1 Stmt. ¶ 23; Silver Dep. at 106.) Following the Silver deposition, plaintiff requested, on the record, documentation of the successive securitizations of the Lodge mortgage, and counsel for Wachovia and BLS acceded to the request. (Pl. 56.1 Stmt. ¶ 24; Silver Dep. at 107.) Plaintiff, however, did not receive such documentation until January of 2011. Following the deposition, Wachovia and BLS made the following additional conflicting and incorrect representations relating to the identity of the holder of the Lodge mortgage:
In a Declaration in Support of the Motion for Summary Judgment by Wachovia and BLS, dated December 11, 2009, Silver swore that "Bayview Financial purchased the [Lodge mortgage] from Olympia," the originating lender, that the mortgage loan was securitized shortly after the purchase by Bayview Financial into a trust of which Wachovia was the trustee, and that "US Bank and Trust is the successor to Wachovia having purchased [its] custodian rights as well as the [Lodge mortgage]." (ECF No. 454-1, Declaration of Jack Silver in Support of Motion for Summary Judgment ¶ 5.) In their Rule 56.1 Statement in Support of a Motion for Summary Judgment, dated December 14, 2009, Wachovia and BLS asserted the following: "On June 25, 2003, for value received, Olympia assigned its interest in the [Lodge mortgage] to Wachovia." (ECF No. 454, Wachovia Bank, N.A. and Bayview Loan Servicing, LLC's Rule 56.1 Statement in Support of Motion for Summary Judgment ¶ 8.) In a Reply Declaration in Further Support of a Motion for Summary Judgment, dated February 17, 2010, Robert Hodapp, another BLS officer, swore that "[BLS] . . . has continuously been in possession, custody and control of the original documents, including the [Lodge mortgage]," that "U.S. Bank, as trustee, the successor to Wachovia as Trustee, is the holder of the [Lodge mortgage]," and that "US Bank is now the successor trustee of the securitization trust which owns the [Lodge mortgage]". (ECF No. 455-1, Declaration of Robert E. Hodapp in Support of Motion for Summary Judgment at ¶¶ 2, 8-9.)
By Memorandum and Order dated September 13, 2010, the court denied Wachovia and BLS's motion for summary judgment, noting that their submissions were "seemingly contradictory and inconsistent" as to the identity of the holder of the Lodge mortgage and that, even if Wachovia was the holder, there were issues of material fact as to whether Wachovia took the Lodge mortgage without any notice as to the claims to or defenses against such mortgage. (9/13/10 Order.)
On January 5, 2011, in an e-mail responding to a request for information by counsel for plaintiff, counsel for Wachovia and BLS wrote that "US Bank and Trust is the owner of the loan." (Pl. 56.1 Stmt. ¶ 30.) In subsequent e-mails and in a letter dated January 7, 2011, counsel for plaintiff again requested that counsel for Wachovia and BLS provide documentation of the current ownership of the Lodge mortgage and confirm whether counsel represents "US Bank and Trust." (Id. ¶ 31.)
Plaintiff asserts that, on the basis of the representations by counsel for the Bayview Defendants, she filed and served a Second Amended Complaint on January 10, 2011, substituting "U.S. Bank and Trust Co., N.A." for "Wachovia Bank,
N.A." as a Rule 19 party as "trustee of the trust into which [the Lodge] mortgage was sold." (Id. ¶ 32; ECF No. 488, Second Amended Complaint ("Second Am. Compl.") ¶ 17.) Plaintiff also added as defendants Bayview Asset Management, LLC, f/k/a Bayview Financial Trading Group, L.P., as the original purchaser of the Lodge mortgage from the originating lender prior to securitization. (Pl. 56.1 Stmt. ¶ 32; Second Am. Compl. ¶ 18.)
Plaintiff asserts that by January 13, 2011, the court-ordered deadline for the parties' submission of any request for judicial intervention on a discovery dispute, she had received neither documentation of the current ownership of the Lodge mortgage, nor confirmation whether counsel for Wachovia and BLS also represented "US Bank and Trust." (Pl. 56.1 Stmt. ¶ 33.)
As a result, plaintiff filed a letter that day requesting inter alia court intervention on this discovery dispute. (Id.; ECF No. 492, Letter dated 1/13/11 for Discovery Dispute Resolution.) On January 13, 2011, counsel for the Bayview defendants stated in an e-mail to plaintiff's counsel that it represents "the interests of U.S. Bank, N.A. as trustee." (Pl. 56.1 Stmt. ¶ 34.) In the same correspondence, counsel for the Bayview
Defendants sent plaintiff's counsel an "Assignment and Assumption Agreement" between Wachovia Corporation and U.S. Bank, N.A. (Id.) That document, however, did not establish actual ownership of the Lodge mortgage, because it made no reference to the mortgage or the trust into which the mortgage was originally placed, nor did it identify the subsequent trust into which the Lodge mortgage may have been sold. (Id.)
On January 20, 2011, Magistrate Judge Mann held a telephone conference to address the discovery dispute raised by plaintiff in her January 13, 2010 letter, and ordered that counsel for the Bayview Defendants produce proof of current ownership of the Lodge mortgage and proof of chain of title from 2006. (ECF No. 497, Minute Order dated 1/20/11.) The Bayview Defendants produced the documents on January 28, 2011. (Pl. 56.1 Stmt. ¶ 37.) It is undisputed that the Bayview Defendants' newly disclosed documents show the following:
The Lodge mortgage was securitized into three separate trusts between 2003 and 2007.
Wachovia Bank, N.A., was the trustee of the Bayview
Financial Mortgage Pass-Through Certificates, Series 2003-E (the "2003 Trust"), the first trust into which the Lodge mortgage ...