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Mortgage Resolution Servicing, LLC v. JP Morgan Chase Bank, N.A.

United States District Court, S.D. New York

July 6, 2017

MORTGAGE RESOLUTION SERVICING, LLC. 1ST FIDELITY LOAN SERVICING, LLC, and S&A CAPITAL PARTNERS, INC., Plaintiffs,
v.
JPMORGAN CHASE BANK, N.A., CHASE HOME FINANCE LLC, and JPMORGAN CHASE & CO., Defendants.

          Brent S. Tantillo, Esq. Mary Jane Fait, Esq. Tantillo Law PLLC, Gary F. Eisenberg, Esq. Perkins Coie LLP, Robert D. Wick, Esq. Michael M. Maya, Esq. Christian J. Pistilli, Esq. Covington & Burling LLP, Michael C. Nicholson, Esq. Covington & Burling LLP, Glen A. Silverstein, Esq. Daniel A. Johnson, Esq. Leader & Berkon LLP, William F. Jung, Esq. Jung & Sisco, PA

          MEMORANDUM AND ORDER

          JAMES C. FRANCIS IV UNITED STATES MAGISTRATE JUDGE

         This action arises from the sale by the defendants of thousands of residential mortgages to the plaintiffs. The plaintiffs have filed a motion to compel compliance with their subpoena to depose a third-party witness, Erika Lance, who refused to answer certain questions on the basis that they called for the disclosure of trade secrets.[1] The motion is granted in part and denied in part.

         Background

         As I noted in a recent decision, discovery in this action is currently limited to the plaintiffs' tort and breach of contract claims, which concern “(1) the alleged misrepresentations and omissions by the defendants about loans sold to the plaintiffs and (2) the defendants' practice of retaining payments made on the loans, forgiving loans, or releasing liens on loans sold to the plaintiffs.” Mortgage Resolution Servicing, LLC v. JPMorgan Chase Bank, N.A., No. 15 Civ. 293, 2017 WL 2305398, at *1 (S.D.N.Y. May 18, 2017) (quoting Mortgage Resolution Servicing, LLC v. JPMorgan Chase Bank, N.A. (“Mortgage Resolution II”), No. 15 Civ. 293, 2016 WL 3906712, at *2 (S.D.N.Y. July 14, 2016)). Information relevant to other claims, such as the plaintiffs' (now dismissed) claim under the Racketeer Influenced Corrupt Organizations Act (“RICO”), is not subject to discovery. See id.; see also Mortgage Resolution Servicing, LLC v. JP Morgan Chase Bank, N.A., No. 15 Civ. 293, 2017 WL 570929, at *4-5 (S.D.N.Y. Feb. 13, 2017) (dismissing civil RICO claim). [2]

         Ms. Lance is an employee of Nationwide Title Clearing, Inc. (“NTC”), a non-party that allegedly prepared and filed on behalf of the defendants lien releases for mortgages actually owned by the plaintiffs. (Pl. Memo. at 3-5). These included releases prepared in connection with the “DOJ Lien Release Process” (also known as the “Pre-DOJ Lien Release Project”), a program the defendants established to “excise from their books loans that would otherwise require compliance with anti-blight programs.” (Pl. Memo. at 5-6); Mortgage Resolution II, 2016 WL 3906712, at *1. Documents produced pursuant to subpoena revealed that Ms. Lance prepared many of the allegedly “fraudulent lien releases and subsequent Vacations of Modifications of Mortgages” that injured the plaintiffs. (Pl. Memo. at 7).

         In February 2017, the plaintiffs served Ms. Lance with a subpoena in her individual capacity, rather than as a witness on behalf of the company pursuant to Rule 30(b)(6) of the Federal Rules of Civil Procedure. (Pl. Memo. at 7). Her deposition was eventually scheduled for March 21, 2017. (Pl. Memo. at 8). Ms. Lance (on the advice of counsel) refused to answer certain questions that would purportedly elicit NTC's proprietary information, such as questions about (1) NTC's clients or types of clients, and (2) the types of systems Ms. Lance used to create certain documents on which her name appears and the manner of creating certain such documents. (Pl. Memo. at 9-12; Deposition of Erika Lance dated March 21, 2017, in 15 Civ. 293 (“Lance Dep.”) at 10-11, 21).[3] When Ms. Lance asserted that she would refuse to answer similar questions, plaintiffs' counsel terminated the deposition. (Pl. Memo. at 12; Lance Dep. at 21-22).

         Discussion

         A. Governing Law

         Ms. Lance asserts that Florida law applies to this privilege dispute, and the plaintiffs do not argue otherwise. (Non-Parties' Response to Plaintiffs' Motion to Compel Compliance with Subpoena of Third-Party Witness Erika Lance and for Sanctions (“Lance Memo.”) at 11; Plaintiffs' Reply to Non-Parties' Response to Plaintiffs' Motion to Compel Compliance with Subpoena of Third- Party Witness Erika Lance and for Sanctions (“Reply”) at 1, 5); Stephens v. American Home Assurance Co., No. 91 Civ. 2898, 1995 WL 230333, at *7 (S.D.N.Y. April 17, 1995) (employing New York choice-of-law rules in diversity case and applying law of jurisdiction where conduct subject to privilege occurred); but see Del Giudice v. Harlan, No. 15 Civ. 7330, 2016 WL 6875894, at *2 (S.D.N.Y. Nov. 21, 2016) (“Pursuant to Federal Rule of Evidence 501, ‘in a civil case, state law governs privilege regarding a claim or defense for which state law supplies the rule of decision.'”).[4] I will not disturb the parties' (implicit) agreement here.

         Florida's Uniform Trade Secrets Act defines a trade secret as information, including a formula, pattern, compilation, program, device, method, technique, or process that:

(a) Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and
(b) Is the subject of efforts that are reasonable under the circumstances to ...

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