Plaintiff appeals from the order of the Supreme Court, New York County (Bernard J. Fried, J.), entered October 13, 2010, and April 13, 2010, which, insofar as appealed from, required plaintiff to bear the cost incurred in the production of discovery.
The opinion of the court was delivered by: Acosta, J.
U.S. Bank N.A. v GreenPoint Mtge. Funding, Inc.
Appellate Division, First Department
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and subject to revision before publication in the Official Reports.
Decided on February 28, 2012
David B. Saxe, J.P. John W. Sweeny, Jr. Rolando T. Acosta Leland G. DeGrasse Sheila Abdus-Salaam, JJ.
This case requires us to determine which party is to incur the cost of searching for, retrieving and producing both electronically stored information and physical documents that have been requested as part of the discovery process. Consistent with this Court's recent decision in Voom HD Holdings LLC v Echostar Satellite LLC ( ___ AD3d ___, NY Slip Op 00658 [January 31, 2012]), which adopted the standards articulated by Zubulake v UBS Warburg LLC (220 FRD 212 [SD NY 2003]) in the context of preservation and spoliation, we are persuaded that Zubulake should be the rule in this Department, requiring the producing party to bear the cost of production to be modified by the IAS court in the exercise of its discretion on a proper motion by the producing party. Accordingly, the matter is remanded to the motion court for further proceedings. Background
The complaint alleges that prior to August 2007, when its operations were allegedly shut down, defendant GreenPoint Mortgage Funding, Inc. was in the mortgage loan origination business, specializing in what were called "no-doc" and "low-doc" loans, i.e., mortgages for individuals with little to no documentation of income and assets. GreenPoint securitized these loans by pooling them into a trust and then offering for sale notes that were secured by and to be paid down by the cash flow received from the underlying loans.
In accordance with these practices, from 2005 to 2006, GreenPoint sold notes on approximately 30,000 residential mortgages it had securitized, valued at $1.83 billion, to non-party GMAC Mortgage Corporation. Subsequently, GMAC assigned these notes to Lehman Brothers Bank; which, in turn, subsequently assigned them to its parent company, Lehman Brothers Holding; which, in turn, assigned the notes to an affiliated special purpose entity, the Structured Asset Securities Corporation; which, in turn, assigned them to plaintiff-appellant herein, U.S. Bank, NA, as the Indenture Trustee for the benefit of the insurers and noteholders of GreenPoint Mortgage Funding Trust 2006-HE1, Home Equity Loan Asset-Backed Notes, Series 2006-HE1. In addition, certain payments of the notes were guaranteed by two insurance companies, Syncora Guarantee, formerly known as XL Capital Assurance, Inc., and CIFG Assurance North America (CIFG).
According to U.S. Bank, less than two years after the transaction closed, approximately $530 million worth of the loans had been completely charged off as a total loss, or were severely delinquent. U.S. Bank now acts for the benefit of the noteholders and the insurers, which have been making payments to the noteholders. The Litigation
U.S. Bank, by summons and complaint dated February 5, 2009, brought this action against GreenPoint for what it alleged were "gross violations" of the representations and warranties regarding the attributes of the loans and the policies and practices under which the loans were originated, underwritten and serviced. U.S. Bank further alleged that in its original agreement to sell the loans, GreenPoint promised it would cure any breaches of its representations and warranties that materially and adversely affected the value of the loans by repurchasing and replacing the non-complying loans at agreed-to prices. U.S. Bank also alleged that GreenPoint agreed that if the breaches were severe enough, GreenPoint would buy back all 30,000 mortgages.*fn1 Discovery Motion
Concurrently with its original complaint in February 2009, U.S. Bank served its first request for the production of documents. In response, GreenPoint did not produce documents, but rather, on April 28, 2009, submitted a letter to the court pursuant to rules 11, 14 and 24 of the Rules of the Commercial Division of the Supreme Court (22 NYCRR § 202.70), as well as CPLR 3214(b) and 3103, seeking a ruling on whether discovery should be stayed pending the motion to dismiss, whether or not a protective order should issue governing the confidentiality and scope of disclosure, and whether production should be conditioned on U.S. Bank's confirmation it would pay the cost ...