BofA Comparison: Conference Call vs Court Transcripts

LETS COMPARE COMMENTS MADE ON BAC’S 3Q 2010 EARNINGS CALL YESTERDAY:

“…we execute repurchases on a loan by loan basis…”

“And as we learn more, and again, our perspective on this – we’re going to be quite diligent as I said in defending the interest of our shareholders.  This really gets down to a loan-by-loan determination and we have, we believe, the resources to deploy against that kind of a review.”

WITH DEVELOPMENTS IN COUNTRYWIDE/BAC LITIGATION:

To quote from actual court transcripts of the proceedings in MBIA v. Countrywide (the full transcript is attached) – June 16 2010:

Judge Bransten: I think that it makes all the sense in the world that you can use a sample to prove the case because otherwise I can’t imagine a jury listening to 386 thousand cases. Even if you have that available, nevertheless you are not going to present that to a jury or even to a judge. I’m patient but not that patient. So therefore it is going to be a sample in the end…”


More silliness, and a PDF of the court proceedings, after the jump

MBIA vs Country Wide Transcript June 16 2010

On Countrywide’s (BAC) attempts to stymie discovery – Judge is unhappy with Countrywide’s attempts at dragging its feet:

MBIA Counsel: We have been litigating this case since September of 2008. The loan files are the key documents that plaintiff needs to establish its case. In order to show that Countrywide breached its representations in the transaction documents we need the loan files. We need to compare what is in the loan file with what is in the underwriting guidelines, and without having any assurance that the loan files produced in discovery are complete, we’re unable to do our job; we are unable to prepare this case for trial.

And defendants have stone walled on this for over a year, had made false representations that the loan files are complete. And, moreover, they have produced documents or loan files that have repetitive pages, they are scattered across multiple productions. We have to go to great time and expense to take what they have produced and reorganize it.  We have taken the meta data and we tried to make one cohesive document to create an index. Even when the defendants produced these files prior to the complaint they were organized, they had a link where you can go to a file, click on the index and it would take you to the title. Now in discovery they are scattered across multiple –

THE COURT: I don’t like to hear those things.

I really consider that — I’ll put it to you this way.

When I was just a student, a law student, I worked in the U.S. Attorney’s office. And I spent countless hours carefully organizing all the files, so that indeed when it was our turn over the files it would be in some sort of an order. And I came in on Monday morning and the person I worked for said, what did you do, and I said I organized it so it said this and that.  You did? And then he proceeded to take everything out of the files and threw it in the air and said, now put it together and give it to them.

And that’s what happened way back when I was a student. On the other hand, now that I am hearing and not a student, I am saying that is not appropriate. If indeed which I can not imagine that Countrywide does not have files indeed with hyperlinks and with everything organized properly, if indeed that is then turned over in a disorganized manner, I consider that not to be appropriate discovery. And I don’t like to be in a position to having to say really what is going on?

MS. SHETH: If they want to tell us what they produced to us in discovery, if it is complete then that’s fine. We have written them since we were notified that there was an issue with additional documents in the loan file being available only in hard copy.

THE COURT: That’s July of 2009.

MS. SHETH: That’s in May of 2010 when they told us that the loan files that they produced were not complete or may not be complete because they were also located in hard copy. This was the first time they told us that.

THE COURT [TO COUNTRYWIDE’S COUNSEL]: Yes and no. Right now if you know that a file is incomplete, your own suspicion, then the paper file should follow without anybody having to go to warehouses around the country to figure out whether or not that is true or not.

After you receive all this data I do believe that there will come a time that you will have to tell me, Miss Sheth, whether or not you believe you have a complete document. I can’t tell.

MS. SHETH: We would not be able to tell except 16 to rely on defendants’ representation.

THE COURT [TO COUNTRYWIDE’S COUNSEL]: I have a problem with that. I know the allegations made by MBIA, I know the answers that have been made. But surely there is a master list that somebody should have been following to say check in we the bank credit report or –

MS. CONCANNON: You are right, and under the transaction documents the defendants are obligated to keep files and they are obligated under the contract to make these files available to MBIA under the contract.

THE COURT: I understand that. The statement just made to me by Miss Concannon was that we don’t know without going back to the original file, etc., etc. I don’t know whether it is a complete file or not. And only an expert can tell me that.

Well, my statement is surely Countrywide had a master list you might say or what had to be or what should have been in each one of these files. I can’t imagine it was made up every single time you did another loan, all 386 thousand of them. So that doesn’t make sense to me.

MS. SHETH: We would ask if that’s the case, then the defendant should not come into this Court or after the close of discovery with decisional documents that pertain to loan files they previously represented as being complete based on their —

THE COURT: That is called a Jackson affidavit. You may call it something else but the affidavit is basically that we have searched high and low and under every bed cover and every nook and cranny of every single warehouse there is and we have now completed the turn over of all the documents that we are responsible to turn over. That’s a Jackson affidavit. You can’t then come in a couple of months later and say, Judge, I have this wonderful piece of paper and 1 want to introduce it into evidence. The answer is, no.

So Jackson, if at the end of all your work you produce a Jackson affidavit saying you have done everything you can to turn over every document, you can not then supplement it later on with something that might be interesting and may be very, very pertinent, but if it hasn’t been turned over in discovery it is not going to be turned over at trial, it is not going to be something new that happens.

MS. CONCANNON: It is the case that the only way that defendants could prepare such an affidavit would be to look at each individual file which would require ten minutes per file for approximately 389 thousand files before we are capable of submitting something to plaintiff in a case in which the contents of the files is a disputed issue of fact to be decided by the fact finder.

THE COURT: Well, that’s what is required under the CPLR. Either you turn it over or you produce what is called a Jackson affidavit saying basically, I have looked high and low and under every little crevice that I can and I don’t believe there is any further documentation.

MS. SHETH: May I be heard on two issues, the loan origination file issue as well as the Bank of America issue with regard to the pre-merger document?

THE COURT: Yes.

MS. SHETH: First of all the issue with the loan origination file is much more serious than I think your Honor has expressed. First of all, there have been thousand loan origination files produced in discovery.  Out of those we have expressed serious concerns about whether those files are complete and we have expressed these concerns since July of 2009.  It wasn’t until May 17th of this year that — and that’s two months after the deadline. There was an April 30th deadline under the scheduling orders that these documents would be produced. Two months after that and ten months after we first raised the issue defendants for the first time informed us that the loan origination files that they produced in discovery may not be complete.

Prior to that time they told us you should rely on these loan origination files we are giving you in discovery, don’t rely on the documents and the loan files that we gave to your litigation consultant. Those are not reliable. Rely on these; they are full and complete that we gave you in discovery.

And we find out that not only do these documents not have the requisite number of pages, we’ve been told by defendants when they come to this Court in the context of prior discovery motions and their burden associated with producing these files that a typical loan file is between 150 and 200 pages.

Now, when we’re confronting that with the number of pages that we’re seeing there, they are telling us that these loan files, the red flag for whether a loan file is complete or not is only 85 pages, so we’ve taken them at their word.

We have gone back and looked at the files that they have produced in discovery and over nine thousand of those files have been less than 85 pages. And out of that nine thousand over two thousand only ten pages. So what we are looking at are incomplete loan files. They have told us for the first time that these loan files are in places other than the electronic  electronic system, that they are also in hard copy. And this is the first time we’re hearing this. And what is really troubling is that these loan files are the most basic — of discovery in this case.

We have been litigating this case since September of 2008. The loan files are the key documents that plaintiff needs to establish its case. In order to show that Countrywide breached its representations in the transaction documents we need the loan files. We need to compare what is in the loan file with what is in the underwriting guidelines, and without having any assurance that the loan files produced in discovery are complete, we’re unable to do our job; we are unable to prepare this case for trial.

And defendants have stone walled on this for over a year, had made false representations that the loan files are complete. And, moreover, they have produced documents or loan files that have repetitive pages, they are scattered across multiple productions. We have to go to great time and expense to take what they have produced and reorganize it.  We have taken the meta data and we tried to make one cohesive document to create an index. Even when the defendants produced these files prior to the complaint they were organized, they had a link where you can go to a file, click on the index and it would take you to the title. Now in discovery they are scattered across multiple –

THE COURT: I don’t like to hear those things.

I really consider that — I’ll put it to you this way.

When I was just a student, a law student, I worked in the U.S. Attorney’s office. And I spent countless hours carefully organizing all the files, so that indeed when it was our turn over the files it would be in some sort of an order. And I came in on Monday morning and the person I worked for said, what did you do, and I said I organized it so it said this and that.  You did? And then he proceeded to take everything out of the files and threw it in the air and said, now put it together and give it to them.

And that’s what happened way back when I was a student. On the other hand, now that I am hearing and not a student, I am saying that is not appropriate. If indeed which I can not imagine that Countrywide does not have files indeed with hyperlinks and with everything organized properly, if indeed that is then turned over in a disorganized manner, I consider that not to be appropriate discovery. And I don’t like to be in a position to having to say really what is going on?

MS. CONCANNON: It should absolutely not be the case that Countrywide is producing these files in a disorganized manner or any manner other than the way in which the files, the order in which they are kept in the ordinary course of business.

We have submitted to the Court two affirmations by people at the company who are responsible for the maintenance of the files. They describe in detail, as we have already done, the way in which the files are kept, the process for gathering those files and the information that Countrywide is capable of turning over to defendants.

It is also absolutely incorrect that plaintiff first raised this issue in July 2009. That’s a

13 misrepresentation to the Court. Although plaintiff has been complaining over a period of time regarding alleged differences between the files produced outside the context of discovery to plaintiff’s consultant versus the way in which files were being produced in discovery, those allegations were not as to the completeness of the files but rather as to the formatting of the files; and where smaller numbers of files were being produced to a consultant outside the context of litigation, it was perhaps possible to do, as the Court did back when you were a clerk and assembled the files in a different manner in which they are kept.

We’re downloading thousands of files as fast as we can. We are also producing for the plaintiff all the associated meta data at that time. So as the Court indicated at the beginning when you were stating your position with regard to this issue, this motion is in fact moot. We have produced thousand files to plaintiff already with Bates numbers of files in accordance with the parties’ E-discovery stipulation. We have also produced all the associated meta data. I also want to bring to the Court’s attention that plaintiff has yet to show that any file produced in this litigation is in fact incomplete.

What plaintiff wants the Court to believe is that because the average file length — some files can be ten pages, some files can be six hundred pages – because defendants have represented that the average file length is two hundred pages, that any file lower than that number of pages is automatically incomplete. That is not the case.

There are a variety of reasons that are detailed in the affidavits that we submitted to the Court as to why a file can be complete and contain considerably more than two hundred pages. What plaintiff is attempting to do is to shift their own burden to actually look at the files that have been produced onto the defendant who somehow certifies as to the completeness of files. That’s not required under the CPLR.

Defendants have certified in sworn affirmations as to the process with which these files have been pulled and produced and that is our obligation under the CPLR.

Also, your Honor detailed in an affirmation that was submitted last week from an expert consultant at Ernst and Young who has come in to evaluate the process through which these files are pulled, changes are being made at the company in order to make it possible to pull this unprecedented number of files that MBIA is demanding in the most efficient manner possible.

Those changes are happening as we speak and that it will become much faster and les burdensome to produce the files.

THE COURT: Miss Sheth?

MS. SHETH: Yes. Just to clear the record, if your Honor goes to Exhibit 22 of my affirmation that is a letter from plaintiff to defendant explaining about –

THE COURT: What date?

MS. SHETH: That is July 22nd of 2009. It is an e-mail informing the defendant that plaintiff believed that the defendants were producing incomplete loan files and asked the defendants to look into why —

THE COURT: July of 2009?

MS. SHETH: Right.

THE COURT: Today is June 16th of 2010. Are you telling this Court that there has been absolutely no attempt on the part of Countrywide or in fact no ability on the part of Countrywide to indeed amend that statement and say, produce documents?

MS. SHETH: Seven months after we wrote that letter the defendants responded, and in that letter the defendants told us you should not rely on the loan files that were produced to your litigation consultant but rely on – –

THE COURT: They basically said that, indeed, they are in the process of trying to get more documents to you in a better manner.

MS. SHETH: We have not gotten what we would consider to be complete files.

THE COURT: Ever? Then you show me where. Show me a file, bring me a file today that shows, that doesn’t have either the application, the review, the appraiser’s report or any of these things.

MS. SHETH: We can bring in nine thousand files which are less than 85 pages or we can bring in 2000 files —

THE COURT: Wait a second. Miss Concannon is right. It is not the question of the number of pages, it is the question of whether or not it would be a complete document. That’s the question.

MS. SHETH: If they want to tell us what they produced to us in discovery, if it is complete then that’s fine. We have written them since we were notified that there was an issue with additional documents in the loan file being available only in hard copy.

THE COURT: That’s July of 2009.

MS. SHETH: That’s in May of 2010 when they told us that the loan files that they produced were not complete or may not be complete because they were also located in hard copy. This was the first time they told us that. Since we got that letter we filed –

THE COURT: Wait a second. You are saying that you have received loan files in electronic form?

MS. SHETH: That is correct.

THE COURT: And now you have learned just recently that the same loan files can be done in paper form?

MS. SHETH: Part of the paper form was not turned into an electronic form. So a portion of the loan

files are electronic, the remainder may not be in paper. That’s what we’ve been told. We don’t have those paper files.

THE COURT: I assume you will be producing them, right?

MS. CONCANNON: We are going to be clear, the paper files are kept in archival systems in warehouses across the U.S. There is a process detailed in the affidavit for pulling these files. We are pulling these files as we speak, or any file where we have reason to believe that the full file was not imaged into the system. Also it is important to note again because of the unprecedented number and type of files that are being produced to MBIA as noted in our briefs it is far more probable that files that are not delinquent for performing loans that have been paid off by the borrower for which there are no potential damages for MBIA, those are the categories of loans where it is most likely that the electronic system does not contain a full file.

To date what we have produced is the 180-day delinquent files. These are the ones that were produced to MBIA. We have no reason to believe that the vast majority of the eight of the 180-day delinquent files have any missing documents whatsoever. So we have certified again the process that we used in order to pull documents from the electronic system and provide them to

plaintiff.

We have done so under oath and nothing further is required under the CPLR than for us to describe the process through which we have endeavored to get these files to plaintiff on a timely basis.

MS. SHETH: We are being, and the Court is being put in a position where plaintiff will conduct its review of the loan files produced under the assumption that they are complete. Defendants will then supplement the file as we get close in time to trial and each loan file that we decide to review and underwrite and present as evidence will become a moving target.

THE COURT: Forget the trial at this moment. You are far away from trial.  Have you done any depositions at all?

MS. SHETH: The bulk of the document discovery should be completed this week, June 18th. That’s one of the first deadlines. The remainder of document discovery I believe will be complete by August 3rd.

THE COURT: Are you going to be able to get these paper files over to the plaintiff by those dates?

MS. CONCANNON: We believe the first batch of paper files for the 30-day delinquent files were previously produced, should be produced next week. We are then gathering another 330 thousand electronic files for production to plaintiff. As we’re going through that process we will endeavor to identify any files that need to be pulled as paper.

Also, your Honor, should the Court wish we can  make the warehouses available to plaintiff so that for their own inspection and copying they can go in for any loan file where they questioned completeness of the file and examine at their leisure the hard copy of that file.

THE COURT: Yes and no. Right now if you know that a file is incomplete, your own suspicion, then the paper file should follow without anybody having to go to warehouses around the country to figure out whether or not that is true or not.

After you receive all this data I do believe that there will come a time that you will have to tell me, Miss Sheth, whether or not you believe you have a complete document. I can’t tell.

MS. SHETH: We would not be able to tell except 16 to rely on defendants’ representation.  And they are not willing to give it to us for those files which are over 200 pages.

THE COURT: Wait a second. I don’t care if a 20 file is 500 pages. You have to turn it over. If the file is only ten pages, you have to turn that over, but it doesn’t matter, the size of the file. The question is a complete file. So if indeed for some reason or another there is a 200 page file, I realize it is more voluminous, I don’t know, but if it is 200 pages then it is your duty to turn it over.

If it is and if there is an electronic file that is 180 pages and there is a paper file of 200 pages,  guess what? The 180 pages of electronic and the 200 page file has to be turned over. All right?  The question is timing. You have the first

deadline is July 18th, you told me?

MS. CONCANNON: The current deadline for production of all 389 thousand files that are at issue or that plaintiff has demanded production of is July 31st, 2010. That, your Honor, is a collection from the 13 non-archival systems.

Obviously to go back to the archival systems does take additional time, and again I feel that the loan files for the loans that truly are at issue in this case, the delinquent files have already been produced to plaintiff.

But, your Honor, in order to determine that a loan file does or does not have all of the contents of the loan file, the only way to definitively do that is to have someone who is an expert with regard to what the contents of the file should be and look at each and every file.

THE COURT: I have a problem with that. I know the allegations made by MBIA, I know the answers that have been made. But surely there is a master list that somebody should have been following to say check in we the bank credit report or –

MS. CONCANNON: You are right, and under the transaction documents the defendants are obligated to keep files and they are obligated under the contract to make these files available to MBIA under the contract.

THE COURT: I understand that. The statement just made to me by Miss Concannon was that we don’t know without going back to the original file, etc., etc. I don’t know whether it is a complete file or not. And only an expert can tell me that.

Well, my statement is surely Countrywide had a master list you might say or what had to be or what should have been in each one of these files. I can’t imagine it was made up every single time you did another loan, all 386 thousand of them. So that doesn’t make sense to me.

MS. CONCANNON: Your Honor, it is the case that the documents that should be contained in an individual loan file varies according to the type of the loan, whether a full doc loan, a reduced documentation loan, .. whether the loan has continued to be serviced over the lifetime of the loan which leads to many, many additional documents being included in the file.

As we stated in our affidavit, the only way to definitively determine plaintiff’s — are not effective for this purpose, whether a loan file contains all documents is to look at each and every one of the files. Defendants have produced and will produce complete copies of everything that is in our archival systems. We will also look for anything in our electric systems where there is any reason to believe that the paper copy would be more — we will produce those documents as well.

MS. SHETH: We would ask if that’s the case, then the defendant should not come into this Court or after the close of discovery with decisional documents that pertain to loan files they previously represented as being complete based on their —

THE COURT: That is called a Jackson affidavit. You may call it something else but the affidavit is basically that we have searched high and low and under every bed cover and every nook and cranny of every single warehouse there is and we have now completed the turn over of all the documents that we are responsible to turn over. That’s a Jackson affidavit. You can’t then come in a couple of months later and say, Judge, I have this wonderful piece of paper and 1 want to introduce it into evidence. The answer is, no.

So Jackson, if at the end of all your work you produce a Jackson affidavit saying you have done everything you can to turn over every document, you can not then supplement it later on with something that might be interesting and may be very, very pertinent, but if it hasn’t been turned over in discovery it is not going to be turned over at trial, it is not going to be something new that happens.

MS. CONCANNON: It is the case that the only way that defendants could prepare such an affidavit would be to look at each individual file which would require ten minutes per file for approximately 389 thousand files before we are capable of submitting something to plaintiff in a case in which the contents of the files is a disputed issue of fact to be decided by the fact finder.

THE COURT: Well, that’s what is required under the CPLR. Either you turn it over or you produce what is called a Jackson affidavit saying basically, I have looked high and low and under every little crevice that I can and I don’t believe there is any further documentation.

THE COURT: Thank you. That’s all in your papers and it is being marked submitted. And there will be a decision on that.  Now we get to motion sequence number 15 which by far is the most interesting of the three of them of the motions, and 15 has to do with what the plaintiff is requesting; that the Court order that they can establish both liability and damages through a statistical sampling method. And that this sampling method will be able to be used to establish both the liability and the damages.

And defendants’ argument in return is that in the first place it is premature, entirely premature, you might say, and that furthermore the plaintiff has not in any way defined what is the sample to be used and the mechanism of making the sample, and that indeed plaintiff has not cited any cases where the use of sampling can prove both the contract and the fraud claims and that sampling should not be used, not the only means used to streamline the presentation of the evidence.  And plaintiff in answer to that concedes that sampling is appropriate for some claims; that the plaintiff says that defendants have conceded that the sampling is appropriate to establish some of the claims.

The motion is timely because it will impact on whether the experts have to review the 386 thousand loans instead of the sampling of them. This is an ’08 case. The definition of a sample need not be resolved in time closer to trial, but then one of my questions is how would the plaintiff advise an expert as to what the sample is if you don’t have it defined? And, frankly, after reading the papers it comes to me that sampling, while it may make sense, it is too early for me to

9 determine what the sampling is. And the reason why I say that is that in the first place I think it is important that discovery is complete. That sampling — that this motion should really be withdrawn by the plaintiff at this time without prejudice to being re-filed at a later time and then at the later time the issue of what kind of a sample should be submitted to the Court with affidavits from experts that you have consulted as to what would be the mechanism of producing the sample. It is just mind boggling.

I think that it makes all the sense in the world that you can use a sample to prove the case because otherwise I can’t imagine a jury listening to 386 thousand cases. Even if you have that available, nevertheless you are not going to present that to a jury or even to a judge. I’m patient but not that patient. So therefore it is going to be a sample in the end, but I do think it has to be properly defined. I think it has to be thought throughout in a better – and I think it should be done after discovery and more  complete before you can really begin addressing that

issue.

So my suggestion about 15 is that you withdraw it without prejudice for a time closer to when the documents arrive and discovery is complete. I am not so sure that some depositions shouldn’t be had before coming back with the sampling issue or sampling application.

MR. SELENDY: I think your Honor is addressing the question of the weight or admissibility of a particular sample. And what this motion is directed to is not that question. Indeed, that’s one of the reasons why defendants’ cases are generally in opposite.  What we are trying to establish at this point through the motion in limine is that MBIA may make use of

the method of statistical sampling to present the elements of its contract and fraud causes of action.

THE COURT: Unless I know what the method is going to be I can’t really rule on that.  We can all talk about samplings but until I know specifically what you are talking about, how can I say, gee, go ahead, you are right, let’s do sampling only?

MR. OBLAK: I agree this does not involve, and we’re not seeking a determination as any particular sampling. What we are asking for in light of defendants’ to us surprising objection to the use of statistical sampling, is that the Court give us an order that the general method of statistical sampling is permissible to go forward. It’s exactly the kind of case as your Honor has said where statistical sampling is appropriate.

THE COURT: You see, I can’t say that either.  That’s the reason why I suggested this is a better motion for a later time. I can’t say that either because I don’t know what you are talking about in terms of the statistical sampling. Are you saying we will do every ten, we will do every 20?

MR. OBLAK: Those questions don’t need to come up at this time. Your Honor, for you to give us a direction that consistent with virtually every case since 1850 that has had statistical sampling is an acceptable method to prove our issues, if you gave us an order that that is acceptable, then our expert can develop an approach and present it to your Honor to then decide at that point whether it is admissible —

THE COURT: My suggestion is that your expert does that and then come back to court and ask for statistical sampling based on what the expert tell you.

MR. OBLAK: The reason why we are here today, why we need an order today, is that as your Honor has previously admonished the parties, you have said you don’t want this trial to run until the Court retires.

The truth is the parties can not realistically meet the Court’s trial schedule without the use of sampling. There are basic issues of judicial economy and management of resources at stake.

THE COURT: All of this has been discussed at length, but I am not going to grant you an order saying go forward and MBIA with the blessing of the Court on the statistical sampling aspect of it without having for the Court’s own knowledge and thinking a valid proposal. And I think that, you know, gee, statistical sampling sounds good to me but you see what you are asking the Court to do is to say that you will be allowed to establish your case through statistical sampling where it is imposed by — well somewhat imposed although there are inklings that might be — something that might be agreed to by Countrywide, but nevertheless without having the data, without having the information the Court can’t say to you, go forward young man and do it.

MR. OBLAK: We’re not asking defendants to relinquish any challenges they may have as to what our expert does with the sample, what inferences can be drawn from that. That is not what we’re seeking. What we’re seeking is an order as to the method itself.

In effect it is like a Frye motion, and the reason why I would have thought we hadn’t the need to come to Court for this is that defendants themselves also proposed that this case be presented on a sampling basis. They did that originally in the context of discovery when they didn’t want to turn over their loan files and they did it again in their opposition to our motion where they admitted that bell weather claims may be an appropriate way to go forward. Well, to do a bell weather claim you have to have a distinction of what claims are representative of the population. The use of bell weather claims presupposes the method. The reason we want an initial ruling right now is precisely because it will inform how discovery is conducted, what the experts do, what motions are possible on summary judgment and how in fact this case can be presented. We are not asking for a merit determination as to any particular sample.

THE COURT: Let me ask you a question because I don’t know if I have heard this yet.  Have you sat down and done a talk through with Countrywide on this issue? I am not so sure that you wouldn’t get two sides possibly together on it because there is no doubt that 386 thousand loans later it is going to be hard to digest. Furthermore, the truth is that we are really not talking about — because some of them are good, some are this, some are that. Even if we pare it down to a realistic number of cases it is going to be away beyond the ability to maneuver.

So my suggestion is that you first start with seeing whether or not you can’t get a bell weather agreement between the two sides as to how to handle it.

Now, if you can not, then maybe you can’t. If you can not, then I am still interested in having this motion framed in the context of experts telling me what is the usual way of getting a sample and how the sample would be done. To say to you, go forward with a sample without having any information is just not going to happen. I am not comfortable with doing that.

MR. OBLAK: We will follow your suggestion and is withdraw the motion and come back to you.  What I would like to suggest is that we have a relatively early schedule in which we can do that. We have tried in the past to discuss this issue with

Countrywide. The truth is our claims are not limited as defendants say to just the 50 thousand loans for which there have been re-purchase requests or put back demands, nor are they limited to the 50 thousand loans which are now defaulted or delinquent, and that number is sure to rise. Our case concerns the whole population. We believe that Countrywide does not want us to present the picture to this Court of their misconduct across all of these securitizations because they know that is not going to be frankly a pretty picture. And we think that is the picture that should come to this Court in a single trial so you have the best available evidence across their misconduct in order to reach your ruling. So I would ask

11 if we could that we have some expedited schedule to –

THE COURT: Yes. Mr. Holand, is this something that you would be willing to do?

MR. HOLLAND: In light of the fact — a couple of clarifications. One, we’re not saying –

THE COURT: I think what he is going to do is ask for it to be delayed or put it over like a month or two while we can see whether or not we can work it out.

MR. OBLAK: That is correct.

My question to you, Mr. Holland, and this is a very important question, I still am not happy with what has been presented. I still am not comfortable with making a decision on just a concept you might say.  My question is: Would Countrywide be willing to seriously sit down and discuss maybe three kinds of categories and whether or not you can come to an agreement on at least two of them? The third one I can see to be a real problem. I see that to be you might say the general population of cases where MBIA is attempting to establish, I don’t know if they will or won’t, but they are attempting to establish that there was a general modus operandi by Countrywide in which there was a systematic defrauding of MBIA in this particular case. That’s what they want to establish. So I can see when it gets to that issue that that is fraught with problems. But there are other areas, I mean the put back areas, that’s one, and then there is also the issue of the defaults. That’s another kind of case. Those issues you might be able to come to an agreement in terms of the mechanism of a statistical sampling of these that you can agree on and go forward with those.

As to the last one, assuming that there cannot be an agreement, then I would turn and say that I want to have — it is not the expert you are going to use at trial or a statistician that can inform the Court and obviously to be answered. That would be in addition to the papers to be properly answered. If you have a different mechanism that can be used that would be a realistic way of sampling that general population —

MR. HOLLAND: The answer to your question, Judge, is, yes, absolutely we would be willing to sit down with them. We’re not saying at this point that sampling is inappropriate to use. We may want to use some samplings ourselves. As you understand from the papers it is just too early to tell and no court has blessed the concept of sampling until it has seen the actual sampling report which is exactly what you want.

So we will sit down with them, and there may be areas where we can agree. I think you are right on the last issue, there may be some difficulties but we can explore it.

That said, I know you have other cases including a very interesting case which was argued this morning and we spent a lot of time on fairly detailed discovery issues and I am wondering if it might make sense to think about at this point appointing some kind of special master for discovery so that you don’t have to be burdened with this level of minutiae.

THE COURT: I would be very happy and I have done it in another huge case where my courtroom was about as packed as this but with individual lawyers representing individual insurance companies, etc. I have appointed a special referee but you have to understand that I can not ask, I am not allowed to ask court personal to do it any longer. They are too overburdened.

So I can not do that.

So if you are willing and both sides are willing to tell me that you are interested in having a special referee appointed, I would suggest maybe doing this independently, coming up with three names each, and I can think about those three names or think about somebody else. But with the understanding that that person would be paid a regular fee to referee in this matter.

So if that’s something you are interested in doing, which I think would be tremendously helpful for you and save a great deal of money and time because instead of doing massive motions you can call up the referee, maybe you can come to conclusion a great deal quicker without having to do these motions and thereafter have to wait on a court decision. That’s why I want to do it from the bench. But that’s not always the best way of doing things.

So my suggestion is, yes, I would be able to appoint but it can only be with both sides agreeing on a person that would be paid for the work involved, and I would suggest giving me some ideas or, if you don’t want to have an idea, I’ll think and maybe I can come up with somebody.

MR. OBLAK: We will consider that. I will say in candor that we are concerned that will be used as another vehicle for delay. Without any disrespect to my opposing counsel, that has been the track record of Countrywide in this case.

THE COURT: It could be a mechanism of getting it done faster.

MR. OBLAK: This is also a 20 billion dollar case where

THE COURT: That’s why I tried to give you as much time as I can because I understand the significance of this case and this is not the only case that I have.

MR. OBLAK: I understand that. I will say briefly there are cases contrary to defendants’ argument, cases in which statistical samplings are used for contract as well as fraud. The method should straight forward. And we will come back to you.

THE COURT: My problem is more that if it is something that the Court is going to order, I can not do it in a vacuum of just, gee, it is a good idea. And both sides have to have input into the mechanism itself.

MR. OBLAK: May we set a schedule for that so that there is some orderly resolution of this issue?

THE COURT: Why don’t we do this.  Today is the 16th. My suggestion is to sit down and talk about this, not necessarily coming to a definite conclusion. Can you do that within the next two weeks?

MR. OBLAK: Yes, we can.

MR. HOLLAND: Yes.

THE COURT: How about on the 30th of June you would have met and conferred and you can then produce a writing to the Court by letter saying that you have met and conferred and you have hopefully agreed on X, Y and Z. That would be great but that you are not agreed on D, whatever. Then I would suggest that then you would take — so you will take the next two weeks to try to get somebody, or maybe you need three, I can’t tell you on this. Let’s say three weeks to produce in addition to your papers on this issue a statistician of utmost renown that can explain to this Court what would be the sampling method.

MR. OBLAK: Yes.

THE COURT: Then you have two weeks to do the same, to answer, to oppose that. If your statistician says, no, we have to throw everything in the air, all the documents that have now been sorted out, we have to throw everything in the air and we will take as they fall the sample. But all I am suggesting is that you think you can do it in two weeks?

MR. HOLLAND: I was going to ask for three because it is the summer and, you know, some of these professors take some interesting vacations.

THE COURT: Yes, they do. So we’re talking about the 21st for the plaintiff.

MR. OBLAK: Right.

THE COURT: Assuming you write me a letter on the 30th saying that we have agreed on X, Y and Z, I am hoping, but we have not agreed on whatever, take three 10 weeks to get a statistician, somebody with expertise in the area. That would be the 21st.

And then we are talking about August 18th for a response, the 25th for a reply. The Court is here this summer. The Court is not here in October. The first two weeks in October the Court is not here.

So then you can then schedule with Miss Woodly a date, but right now let me tell you right now is a good time to schedule.

MR. OBLAK: Could we set a September date for a hearing on this?

THE COURT: Alright. The one thing I have to figure out, and it is very important because September is the time for Jewish holidays and I don’t know if it affects anybody here, but if it doesn’t, even though there are a number of people that it would affect. So my suggestion is that we come back on the 15th of September. Is that good for everybody?

MR. HOLLAND: I believe so, your Honor.

MR. OBLAK: That works for us as well.

THE COURT: Good. Now should we devote a day to this?

MR. OBLAK: Perhaps if we start in the morning.

THE COURT: Yes. Right now we’re doing motion sequence 15. That’s the statistical thing. Motion sequence number 17 is submitted. Motion sequence number 16 is decided pursuant to what I stated, and I want to settle orders so in case I didn’t get anything right you can settle the order.

So with that that takes care of the three motions today.

MR. OBLAK: Thank you very much.

THE COURT: And we’re now up to motion sequence 18 number 18. And you can think about this. If do you have 19more motions, which I kind of expect you will, make sure that it is all returnable until we meet again on the 15th. So get it in on time so everybody has time to argue and write and get upset about it, whatever.

MS. SHETH: Your Honor, with regard to motion sequence number 16 and the loan origination files, did your Honor set a deadline for that production? We want to get started and make sure we comply with the rest of the schedule.

THE COURT: Think about the 30th of June as one — isn’t that one of the deadlines in any case? Make it the end of July.

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