Opinion
Index No. 652492/2013 Motion Sequence No. 003
07-07-2014
CREDIT SUISSE LOAN FUNDING LLC and CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH Plaintiffs, v. HIGHLAND CRUSADER OFFSHORE PARTNERS, L.P., HIGHLAND CDO OPPORTUNITY MASTER FUND, L.P., HIGHLAND CREDIT STRATEGIES MASTER FUND, L.P., and HIGHLAND CREDIT OPPORTUNITIES CDO, L.P., Defendants.
DECISION AND ORDER
MELVIN L. SCHWEITZER, J.:
Defendants move to compel the production of documents pursuant to CPLR 3101, 3120, and 3124, and to require plaintiffs to answer interrogatories pursuant to Commercial Division Rule 11-a. Defendants' motion to compel discovery is denied and the motion to direct plaintiffs to answer interrogatories under Rule 11-a is moot.
Background
Between May 2008 and July 2008, plaintiffs and defendants entered into a series of trades whereby plaintiffs agreed to sell, and defendants agreed to purchase, certain portions of commercial loans that were funded to Goldfield Preserve Development LLC (Goldfield) and Westgate Investments, LLC (Westgate). The trades were documented in five separate Confirmations, all subject to industry standard terms and conditions (Terms and Conditions) published by the Loan Syndications and Trading Association (LSTA). Even though the parties did not agree on a settlement date, the Terms and Conditions incorporated into the Confirmations obligated the parties to settle as soon as practicable. Plaintiffs allege breach of contract with respect to three Westgate trades and two Goldfield trades.
In addition to seeking discovery regarding waiver/estoppel and mitigation of damages, defendants seek documents concerning the underlying loans in the hope they can prove plaintiffs breached the underlying credit agreements.
DiscussionCPLR 3101 entitles a party to disclosure of matter that is "material and necessary" to prosecuting or defending an action. See CPLR 3101. The trial court has discretion to determine what is "material and necessary" to the litigation. See Andon v 302-304 Mott St. Assocs., 94 NY2d 740, 746 (2000). In making this determination, the "test is one of usefulness and reason." Id. The court has the discretion to deny discovery where the party seeking discovery fails to demonstrate that the discovery is relevant. Williams Real Estate Co. v Viking Penguin, 216 AD2d 27 (1st Dept 1995). Defendants have failed to show that the documents they seek are relevant to the claims brought against them.
I. Documents Relating to the Underlying Loans, the Appraisals, and Other Related Documents
Defendants' motion to compel discovery of documents concerning the underlying loans, the appraisals, and other related documents is denied on the grounds that the Westgate and Goldfield Credit Agreements are not the relevant contracts to the trades at issue. Rather, the trades are governed by the Confirmations, under which the defendants agreed to settle the trades. Although the Confirmations list the names of the credit agreements, the Confirmations do not incorporate the terms of the credit agreements, and nothing in the Confirmations states that defendants' obligations to settle the trades are contingent on plaintiffs' performance under the credit agreements. Therefore, even if documents concerning the underlying credit agreements could be used by defendants to prove plaintiffs breached their contractual duties under the credit agreements, this would not absolve defendants of their obligations to settle the trades at issue.
II. Documents Related to Defendants' Affirmative Defenses of Waiver and Estoppel
Defendants' motion to compel discovery of documents relevant to waiver and estoppel is denied on the grounds that the specific documents requested by defendants are not actually related to waiver and estoppel. Requests seeking (i) communications between plaintiffs and Highland, the Lenders, and any prospective lender concerning the loans, including communications concerning appraisals (request 21), and (ii) documents showing the current value of the underlying loans (request 29) are not relevant to whether plaintiffs waived or are estopped from enforcing their rights under the trade Confirmations. Plaintiffs do not have responsive documents to requests 41 and 42 seeking indemnification, settlement, or release agreements concerning the loans, as they never entered into any such agreements.
III. Documents Related to LIBOR and Mitigation of Damages
Defendants' motion to compel discovery of documents concerning the alleged manipulation of LIBOR rates is denied because these documents are irrelevant to plaintiffs damages. Plaintiffs are not seeking prejudgment interest based on a LIBOR calculation. The rate does not apply because under the terms of the trade confirmations, a LIBOR-based interest rate would apply only if the trades were settled on a Delayed Settlement Date, as such term is used in the Terms and Conditions. Here, the defendants did not settle the trades.
Although plaintiffs must produce documents related to mitigation of damages, including information regarding principal and interest they have received, request 31 seeks documents concerning amounts other than principal and interest the plaintiffs or lenders received on the loan. Request 31 is denied to the extent it seeks documents beyond those that show amounts to be repaid on the loan. Plaintiffs do not have responsive documents to request 28, which seeks documents related to sales of collateral, as there were no collateral sales used to repay the loan. As stated above, plaintiffs do not have responsive documents to requests 41-42.
IV. Search Terms and Time Frame of Discovery
Plaintiffs need not expand the number of search terms they use to identify discovery documents because the five terms currently used (Westgate, Goldfield, 549084, 605389, and 536815) fully encompass the trades at issue. Requiring plaintiffs to employ more search terms would expand the scope of discovery to encompass more than the settlement of the trades and cause unnecessary delay and cost to plaintiffs.
Defendants' argument that the time period for discovery should extend until July 15, 2013, when the Complaint in this action was filed, is also rejected by this court. There is no reason to think that any relevant communications between plaintiffs and defendants concerning the trades occurred after the July 1, 2009 discovery cutoff date proposed by plaintiffs. Although defendants assert that confirmation and assignment agreements were being circulated after July 1, 2009, defendants confuse multiple separate trades going on between plaintiffs and defendants, including several trades not at issue in this case.
V. Interrogatory Responses Based on Commercial Division Rule 11-a
Defendant's motion to direct plaintiffs to answer the interrogatories is moot because plaintiffs responded to the interrogatories on June 13, 2014.
Conclusion
Accordingly, it is hereby
ORDERED that defendants' motion to compel discovery is denied and the motion to direct plaintiffs to answer interrogatories under Rule 11-a is moot.
ENTER:
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J.S.C.