Case 1:15-cv-10033-KPF-SN Document 303 Filed 08/21/17 Page 1 of 57
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`Plaintiffs,
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`v.
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`WELLS FARGO BANK, NATIONAL
`ASSOCIATION, et al.,
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`Defendants.
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`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF NEW YORK
`--------------------------------------------------------------- X
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`BLACKROCK ALLOCATION TARGET SHARES:
`SERIES S PORTFOLIO, et al.,
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`--------------------------------------------------------------- X
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`ROYAL PARK INVESTMENTS SA/NV,
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`Individually and on Behalf of all Others
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`Similarly Situated,
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`Defendant.
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`--------------------------------------------------------------- X
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`NATIONAL CREDIT UNION ADMINISTRATION
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`BOARD, as Liquidating Agent of U.S. Central
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`Federal Credit Union, Western Corporate Federal
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`Credit Union, Members United Corporate Federal
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`Credit Union, Southwest Corporate Federal Credit
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`Union, and Constitution Corporate Federal Credit
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`Union,
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`14 Civ. 9371 (KPF) (SN)
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`OPINION AND ORDER
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`14 Civ. 9764 (KPF) (SN)
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`14 Civ. 10067 (KPF) (SN)
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`v.
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`WELLS FARGO BANK, N.A,
`as Trustee,
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`v.
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`WELLS FARGO BANK, NATIONAL
`ASSOCIATION,
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`Plaintiffs,
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`Plaintiff,
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`Defendant.
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`Case 1:15-cv-10033-KPF-SN Document 303 Filed 08/21/17 Page 2 of 57
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`and
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`NCUA GUARANTEED NOTES TRUST 2010-R1,
`NCUA GUARANTEED NOTES TRUST 2010-R2,
`NCUA GUARANTEED NOTES TRUST 2010-R3,
`NCUA GUARANTEED NOTES TRUST 2011-R2,
`NCUA GUARANTEED NOTES TRUST 2011-R4,
`NCUA GUARANTEED NOTES TRUST 2011-R5,
`and NCUA GUARANTEED NOTES TRUST 2011-
`M1,
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`Nominal
`Defendants.
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`v.
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`WELLS FARGO BANK, N.A.,
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`v.
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`WELLS FARGO BANK N.A.,
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`14 Civ. 10102 (KPF) (SN)
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`15 Civ. 10033 (KPF) (SN)
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`Plaintiffs,
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`Defendant.
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`Plaintiffs,
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`Defendant.
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`--------------------------------------------------------------- X
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`PHOENIX LIGHT SF LIMITED, et al.,
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`--------------------------------------------------------------- X
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`COMMERZBANK AG,
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`X
`---------------------------------------------------------------
`KATHERINE POLK FAILLA, District Judge:
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`
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`Pending before the Court are multiple motions, several discovery-related
`
`and others responsive to the Court’s March 30, 2017 Opinion and Order (the
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`2
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`Case 1:15-cv-10033-KPF-SN Document 303 Filed 08/21/17 Page 3 of 57
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`“March 30 Opinion”). The Court here resolves three of them, listed in the order
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`in which they were filed:
`
`(i) The Rule 72 Objections to and Motion to Vacate
`Magistrate Judge Netburn’s Opinion and Order
`Concerning Sampling (the “Sampling Motion”), filed
`by Plaintiffs Blackrock Allocation Target Shares: Series S
`Portfolio
`(the
`“BlackRock Plaintiffs”), Royal Park
`Investments SA/NV, Phoenix Light SF Limited, National
`Credit Union Administration Board, as liquidating agent
`(the “NCUAB”), and Commerzbank AG (collectively with
`the other Plaintiffs, the “Coordinated Plaintiffs”);
`
`(ii) The Motion of the NCUAB, as liquidating agent for
`five corporate credit unions, and Graeme W. Bush, as
`Separate Trustee of the NGN Trusts, for Leave to File a
`Supplemental Complaint and Substitute the Separate
`Trustee as Plaintiff for NGN-Related Claims (the “Motion
`to Supplement and Substitute”); and
`
`(iii) The Blackrock Plaintiffs’ Rule 72 Objections to and
`Motion to Vacate Magistrate Judge Netburn’s Order
`Concerning Topics
`for Defendant’s Rule 30(b)(6)
`Depositions (the “30(b)(6) Motion”).
`
`For the reasons outlined in the remainder of this Opinion, the Coordinated
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`Plaintiffs’ Sampling Motion is denied and their objections overruled; the
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`NCUAB’s Motion to Supplement and Substitute is granted; and the BlackRock
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`Plaintiffs’ 30(b)(6) Motion is denied and their objections overruled.
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`BACKGROUND1
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`The Court presumes familiarity with the factual and procedural
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`
`
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`background of these related cases, which background has been described in
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`
`1
`Except where otherwise specified, the docket citations in this Opinion are to Case No.
`14 Civ. 10067. For clarity, the Court will not cite to duplicative entries on each of the
`five relevant dockets. (See also Dkt. #296, at 3 n.1 (Coordinated Plaintiffs adopting the
`same practice in briefing related to the Sampling Motion)).
`With regard to the Sampling Motion, the Court will refer to the parties’ briefing in the
`following manner: the Coordinated Plaintiffs’ memorandum of law in support of the
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`3
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`Case 1:15-cv-10033-KPF-SN Document 303 Filed 08/21/17 Page 4 of 57
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`detail in the March 30 Opinion (Dkt. #281) and in Judge Netburn’s March 10,
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`2017 Opinion & Order (the “Sampling Opinion” (Dkt. #263)). See BlackRock
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`Allocation Target Shares: Series S. Portfolio v. Wells Fargo Bank, Nat’l Ass’n,
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`No. 14 Civ. 9371 (KPF) (SN), 2017 WL 1194683, at *2-6 (S.D.N.Y. Mar. 30,
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`2017) (“BlackRock DJ Opinion”); BlackRock Allocation Target Shares v. Wells
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`Fargo Bank, Nat’l Ass’n, No. 14 Civ. 9371 (KPF) (SN), 2017 WL 953550, at *1-3
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`(S.D.N.Y. Mar. 10, 2017) (“BlackRock MJ Opinion”). The Court hereby
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`incorporates those factual statements by reference, and will focus its attention
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`in this section on the developments in these cases that are of particular
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`relevance to the three motions resolved in this Opinion. Because of the
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`interrelationship of certain of the motions, the Court will set forth the relevant
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`facts for all three motions before proceeding to its analysis.
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`Sampling Motion as “Pl. Sampling Br.” (Dkt #296); Defendant’s memorandum of law in
`opposition as “Def. Sampling Opp.” (Dkt. #314); and the Coordinated Plaintiffs’ reply
`memorandum as “Pl. Sampling Reply” (Dkt. #317).
`With regard to the Motion to Supplement and Substitute, the Court will refer to the
`parties’ briefing similarly: the NCUAB and Separate Trustee’s memorandum of law in
`support of the Motion to Supplement and Substitute as “Pl. Supp. & Sub. Br.” (Dkt.
`#309); Defendant’s memorandum of law in opposition as “Def Supp. & Sub. Opp.” (Dkt.
`#322); and the NCUAB and Separate Trustee’s reply memorandum as “Pl. Supp. & Sub.
`Reply” (Dkt. #324).
`The same with regard to the 30(b)(6) Motion: the BlackRock Plaintiffs’ memorandum of
`law in support of the 30(b)(6) Motion will be referred to as “Pl. 30(b)(6) Br.” (14 Civ. 9371
`Dkt. #433); Defendant’s memorandum of law in opposition as “Def. 30(b)(6) Opp.” (14
`Civ. 9371 Dkt. #485); and the BlackRock Plaintiffs’ reply memorandum as “Pl. 30(b)(6)
`Reply” (14 Civ. 9371 Dkt. #499). Defendant’s letter motion to strike the exhibits filed
`with the BlackRock Plaintiffs’ 30(b)(6) reply will be referred to as “Def. Str. Letter” (Dkt.
`#504) and its sur-reply as “Def. 30(b)(6) Sur-Reply” (Dkt. #512).
`The affidavits filed in support of the parties’ briefing will be referred to by the name of
`the affiant, and, as needed, the name of the brief with which it is associated. For
`example: “Attaway Sampling Decl.” (Dkt. #297), “Lovitt Sampling Opp. Decl.” (Dkt.
`#315), and “Attaway Sampling Reply Decl.” (Dkt. #318).
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`4
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`Case 1:15-cv-10033-KPF-SN Document 303 Filed 08/21/17 Page 5 of 57
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`A.
`
`
`
`The Sampling Motion
`
`On September 17, 2015, these related cases were referred to the
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`Honorable Sarah Netburn, United States Magistrate Judge, for the purposes of
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`managing discovery. (Dkt. #53). Judge Netburn instituted a schedule for
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`expert discovery on July 22, 2016, that directed the parties to “work diligently
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`and cooperatively in advance of the expert discovery period to develop a loan
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`re-underwriting protocol,” and to propose a joint proposed protocol to the
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`Court. (Dkt. #130).
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`
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`Perhaps unsurprisingly, the parties could not agree on such a protocol.
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`In a letter filed on August 11, 2016, Wells Fargo expressed its belief that
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`“[r]equiring the parties to commence the re-underwriting process at [that]
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`juncture of the litigation [was] inefficient and illogical.” (Dkt. #143, at 1). Wells
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`Fargo proposed that non-underwriting discovery continue to progress, but that
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`“underwriting efforts be held in abeyance until a later stage of the case.” (Id. at
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`2). The Coordinated Plaintiffs responded by letter filed on August 16, 2016, in
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`which they urged the Court to reject Wells Fargo’s bifurcated-discovery
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`proposal. (Dkt. #147). Each side also proposed its own re-underwriting
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`protocol. (Compare id., with Dkt. #143).
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`
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`On October 28, 2016, the parties appeared before Judge Netburn for a
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`discovery conference to discuss issues regarding the mortgage loan re-
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`underwriting sampling process. (See Dkt. #169). Judge Netburn “ordered the
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`parties to brief the issue of whether sampling, in the context of re-underwriting
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`mortgage loans, can be used to support or challenge any claim or defense in
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`5
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`

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`Case 1:15-cv-10033-KPF-SN Document 303 Filed 08/21/17 Page 6 of 57
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`these related Actions.” (Id.). Subsequently, Judge Netburn set a briefing
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`schedule by Order dated November 2, 2016, and also directed the parties to
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`address five specific questions in their papers. (Id.). Briefing concluded on
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`December 14, 2016. (Dkt. #210).
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`
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`By order dated February 24, 2017, Judge Netburn denied as
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`disproportionate to the needs of the case the Coordinated Plaintiffs’ motion for
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`leave to re-underwrite a sample of loans to prove Wells Fargo’s liability beyond
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`the specific loans included in the sample pool. (Dkt. #253). Judge Netburn
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`explained the reasoning for this decision in the Sampling Opinion issued on
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`March 10, 2017. (Dkt. #263). See BlackRock MJ Opinion, 2017 WL 953550.
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`
`
`
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`The Coordinated Plaintiffs filed the Sampling Motion on April 7, 2017.
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`(Dkt. #292-97). Defendant filed its opposition thereto on April 28, 2017 (Dkt.
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`#314-15), and the Coordinated Plaintiffs filed their reply on May 5, 2017 (Dkt.
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`#317-19).
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`B.
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`The Motion to Supplement and Substitute
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`The March 30 Opinion dismissed the NCUAB’s derivative claims. See
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`BlackRock DJ Opinion, 2017 WL 1194683, at *21-30. The Court found that
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`through the NGN Indenture Agreement, Bank of New York Mellon (“BNYM”)
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`“was granted the right to take action against Defendant with respect to the
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`certificates and the Trusts.” BlackRock DJ Opinion, 2017 WL 1194683, at *21-
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`30 (internal quotation mark omitted) (quoting Dkt. #82, at ¶ 33; Dkt. #82-2).
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`Specifically, the Granting Clause of the Indenture Agreement gave BNYM, in its
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`capacity as Indenture Trustee, “all of [the Trusts’] right, title and interest in
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`6
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`Case 1:15-cv-10033-KPF-SN Document 303 Filed 08/21/17 Page 7 of 57
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`and to ... the Underlying Securities ... , and all distributions thereon, ... [and]
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`all present and future claims, demands, causes, and choses in action in
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`respect of the foregoing, including ... the rights of the [Trusts (as the Issuers)]
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`under the Underlying Securities and Underlying Agreements.” (Dkt. #82-2, at
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`5). “This language effected a broad grant of rights to BNYM. Any right to sue
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`that the NCUAB had against Defendant with regard to the Trust Estate was
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`transferred, along with that Estate, to BNYM.” BlackRock DJ Opinion, 2017 WL
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`1194683, at *27. And BNYM declined to exercise that right and pursue the
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`claims in the instant action. (Dkt. #82, at ¶ 34).
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`
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`Crucially, however, the March 30 Opinion dismissed the NCUAB’s
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`derivative claims without prejudice. See BlackRock DJ Opinion, 2017 WL
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`1194683, at *30. The Court permitted the NCUAB to move the Court for leave
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`to amend its pleading, but required that in doing so the NCUAB (i) identify the
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`party who would replace it, (ii) explain how such a substitution would rectify
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`the standing deficiencies identified in the March 30 Opinion, and (iii) address,
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`in detail, the contemplated impact that a substitution (and, conversely, a
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`failure to substitute) would have on this case, particularly its ongoing discovery
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`schedule. Id.
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`
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`“Effective April 27, 2017, BNYM appointed Mr. Graeme W. Bush as
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`Separate Trustee of the NGN Trusts in order ‘to add the Separate Trustee as a
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`substituted or additional plaintiff, as the court may require, to assert any
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`claims on behalf of the Indenture Trustee or the NGN Trusts (the Separate
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`Trustee Claims).’” (Pl. Supp. & Sub. Br. 4-5 (quoting Hall Supp. & Sub. Decl.,
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`7
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`Case 1:15-cv-10033-KPF-SN Document 303 Filed 08/21/17 Page 8 of 57
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`Ex. B (the “Separate Trustee Agreement”))). BNYM made this appointment
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`pursuant to its Indenture-Trustee authority under Section 5.13 of the
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`Indenture Agreements. Id. (quoting Hall Supp. & Sub. Decl., Ex. B, at § 1.1)).
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`BNYM “transfer[red] to the Separate Trustee, and the Separate Trustee ...
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`assume[d] any and all legal title, claims, powers, rights, authorities, and duties
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`of the Indenture Trustee, including pursuit of the Separate Trustee Claims.”
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`Id. (internal quotation mark omitted) (quoting Hall Supp. & Sub. Decl., Ex. B,
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`at § 1.1)). The Separate Trustee was empowered to “pursue such claims or
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`litigation in the name of the Separate Trustee pursuant to the appointment by
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`the Indenture Trustee, except as may otherwise be required by law or
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`applicable court order.” Id. (internal quotation mark omitted) (quoting Hall
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`Supp. & Sub. Decl., Ex. B, at § 1.13).
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`
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`The NCUAB filed the Motion to Supplement and Substitute on April 27,
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`2017. (Dkt. #308-10). Defendant filed its opposition thereto on May 19, 2017
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`(Dkt. #322-23), and the NCUAB its reply on May 26, 2017 (Dkt. #324-25).
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`C.
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`
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`The 30(b)(6) Motion2
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`On December 19, 2016, Judge Netburn issued a Deposition Protocol
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`Order Governing Fact Depositions, including the depositions of Rule 30(b)(6)
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`witnesses. (Dkt. #284). The deadlines set therein were subsequently extended
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`several times at the parties’ request. (Dkt. #337, 386, 402). On April 5, 2017,
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`Judge Netburn ordered the parties to file with the Court any resolved
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`2
`The docket citations within this section are all citations to the docket of Case No. 14
`Civ. 9731.
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`8
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`

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`Case 1:15-cv-10033-KPF-SN Document 303 Filed 08/21/17 Page 9 of 57
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`objections to the proposed scope of the Rule 30(b)(6) depositions by a date
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`certain. (Dkt. #402).
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`
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`However, on April 6, 2017, Defendant advised the Court that the parties
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`were unable to “reach agreement on the proper scope of [the Consolidated]
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`Plaintiffs’ upcoming Rule 30(b)(6) deposition of [Defendant].” (Dkt. #403). For
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`various reasons, Defendant believed Plaintiffs’ demands to be unreasonably
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`broad, “impractical[,] and outside the bounds of Rule 30(b)(6).” (Id.). The
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`Consolidated Plaintiffs opposed Defendant’s letter on April 11, 2017. (Dkt.
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`#412). In turn, the Consolidated Plaintiffs argued that Defendant sought
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`“duplicative Rule 30(b)(6) testimony on vast, open-ended topics that cover
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`virtually the entire spectrum of Plaintiffs’ businesses and the RMBS market in
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`general.” (Dkt. #404). The Consolidated Plaintiffs felt Defendant’s requests
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`were unduly burdensome and intended to harass them. (Id.).
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`
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`Judge Netburn resolved these disputes in an order issued on April 27,
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`2017 (the “30(b)(6) Order” (Dkt. #422)). Each party’s objections were sustained
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`in part and overruled in part. (Id.). With respect to BlackRock’s Objections to
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`Defendant’s 30(b)(6) Notices specifically, the 30(b)(6) Order held with regard to
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`the Notice applicable to the BlackRock Plaintiffs:
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`•
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`It is ORDERED that the BlackRock plaintiffs’ objections
`to General Topics 3, 4, 5, 8, 9, 10, 11, 12, 13, 14, 15,
`16, and 17 are OVERRULED, and the BlackRock
`plaintiffs must each produce a witness, pursuant to
`Rule 30(b)(6), to testify on these topics as set forth in
`Wells Fargo’s Notice of Deposition (Ex. 1 to Wells Fargo’s
`April 11, 2017 Letter).3
`
`3
`These topics are listed and their scope outlined in depth in Exhibit B to the Declaration
`of Benjamin Galdston filed in Support of the 30(b)(6) Motion. (Dkt. #434-2).
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`9
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`Case 1:15-cv-10033-KPF-SN Document 303 Filed 08/21/17 Page 10 of 57
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`It is FURTHER ORDERED that the BlackRock plaintiffs’
`objections to General Topics 1, 2, and 19 are
`SUSTAINED, and the BlackRock plaintiffs must each
`produce a witness, pursuant to Rule 30(b)(6), to testify
`on these topics as modified by the BlackRock plaintiffs’
`counter-proposal Notice of Deposition
`(Ex. B to
`BlackRock Plaintiffs’ April 6, 2017 Letter).
`
`It is FURTHER ORDERED that the BlackRock plaintiffs’
`objections to General Topics 6 and 7 are SUSTAINED,
`and the BlackRock plaintiffs need not produce a
`witness, pursuant to Rule 30(b)(6), to testify as to these
`topics.
`
`•
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` •
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`
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` •
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`
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`It is FURTHER ORDERED that the BlackRock plaintiffs’
`objections to General Topic 18 are SUSTAINED, and the
`BlackRock plaintiffs must each produce a witness,
`pursuant to Rule 30(b)(6), to testify only to the plaintiffs’
`theory of damages, but not to the amount of any losses,
`the time of occurrence, quantification or cause of such
`damages.
`
`(Dkt. #422). And with regard to the individual plaintiff groups comprising the
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`BlackRock Plaintiffs, the 30(b)(6) Order held:
`
`It is ORDERED that BlackRock must produce a witness,
`pursuant to Rule 30(b)(6), to testify on Topic (i) as set
`forth in Wells Fargo’s Notice of Deposition.
`
`It is FURTHER ORDERED that DZ Bank must produce
`a witness, pursuant to Rule 30(b)(6), to testify on Topic
`(i) as set forth in Wells Fargo’s Notice of Deposition.
`
`It is FURTHER ORDERED that Prudential’s objections
`to Topic (i) are OVERRULED, and Prudential must
`produce a witness, pursuant to Rule 30(b)(6), to testify
`on the particular topic as set forth in Wells Fargo’s
`Notice of Deposition.
`
`It is FURTHER ORDERED that TIAA’s objections to
`Topic (i) are OVERRULED, and TIAA must produce a
`witness, pursuant to Rule 30(b)(6), to testify on the
`
`•
`
`•
`
` •
`
`
`
` •
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`
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`
`10
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`

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`Case 1:15-cv-10033-KPF-SN Document 303 Filed 08/21/17 Page 11 of 57
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`particular topic as set forth in Wells Fargo’s Notice of
`Deposition.
`
`It is FURTHER ORDERED that PIMCO’s objections to
`Wells Fargo’s Topics are OVERRULED in part and
`SUSTAINED in part, and PIMCO must produce a
`witness, pursuant to Rule 30(b)(6), to testify on only the
`following topics set forth in Wells Fargo’s Notice of
`Deposition: all sub-sections of Topic (i) except for sub-
`section (a) regarding Mr. Gu’s PIMCO investments;
`Topic (ii); only subsection (a) of Topic (iii) regarding
`budgets of RMBS-related surveillance; and Topic (iv).
`
`It is FURTHER ORDERED that Sealink’s objections to
`Wells Fargo’s Topics are OVERRULED in part and
`SUSTAINED in part, and Sealink must produce a
`witness, pursuant to Rule 30(b)(6), to testify on only the
`following topics set forth in Wells Fargo’s Notice of
`Deposition: Topic (i); all sub-sections of Topic (ii) except
`for sub-section (e); Topic (iii); and Topic (iv).
`
`Wells Fargo is FURTHER ORDERED to file a redacted
`copy of its April 11, 2017 response to BlackRock’s
`objections on the public docket.
`
` •
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`
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` •
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` •
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`
`
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`(Id.).
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`
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`The BlackRock Plaintiffs filed the 30(b)(6) Motion with this Court on
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`May 11, 2017. (Dkt. #432-34). Defendant filed its opposition thereto on
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`June 15, 2017 (Dkt. #485-86), and the BlackRock Plaintiffs their reply on
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`June 27, 2017 (Dkt. #499-500). On June 29, 2017, Defendant filed a letter
`
`motion to strike the evidentiary exhibits the BlackRock Plaintiffs submitted in
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`support of their reply. (Dkt. #504). The Court deferred resolution of
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`Defendant’s letter motion pending the resolution of the 30(b)(6) Motion, but
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`permitted Defendant to file a sur-reply. (Dkt. #505). Defendant filed a sur-
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`reply on July 10, 2017. (Dkt. #512; see also Dkt. #510-11).
`
`
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`11
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`Case 1:15-cv-10033-KPF-SN Document 303 Filed 08/21/17 Page 12 of 57
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`DISCUSSION
`
`
`
`A.
`
`The Rule 72 Objections Are Overruled and the Motions to Vacate
`Are Denied
`
`
`
`The Court begins its consideration with the Sampling Motion and the
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`30(b)(6) Motion, both brought pursuant to Federal Rule of Civil Procedure 72.
`
`The Court will first discuss the standards applicable to each motion under that
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`Rule and Federal Rule of Civil Procedure 26. It will then consider each motion
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`in turn, beginning with a discussion of additional law implicated by each before
`
`proceeding to an explanation of why each motion fails.
`
`1.
`
`Applicable Law
`
`a.
`
`Federal Rule of Civil Procedure 72
`
`
`
`District Courts are empowered to “designate a magistrate judge to hear
`
`and decide a pretrial matter that is ‘not dispositive of a party’s claim or
`
`defense.’” Arista Records, LLC v. Doe 3, 604 F.3d 110, 116 (2d Cir. 2010)
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`(quoting Fed. R. Civ. P. 72(a)) (citing 28 U.S.C. § 636(b)(1)(A)). If a party timely
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`objects to the magistrate judge’s decision on the non-dispositive matter, “[t]he
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`district judge in the case must consider [the] timely objections and modify or
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`set aside any part of the order that is clearly erroneous or is contrary to law.”
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`Fed. R. Civ. P. 72(a). District courts may also refer dispositive matters to a
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`magistrate judge, but “only for recommendation, not for decision.” Arista
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`Records, 604 F.3d at 116 (citing 28 U.S.C. § 636(b)(1)(B); Fed. R. Civ. P. 72(b)).
`
`“As to a dispositive matter, any part of the magistrate judge’s recommendation
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`that has been properly objected to must be reviewed by the district judge de
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`novo.” Id. (citing Fed. R. Civ. P. 72(b)).
`
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`Case 1:15-cv-10033-KPF-SN Document 303 Filed 08/21/17 Page 13 of 57
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`
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`“Pretrial discovery motions are considered nondispositive and are
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`reviewed for clear error.” City of N.Y. v. FedEx Ground Package Sys., Inc., No.
`
`13 Civ. 9173 (ER), 2017 WL 633445, at *3 (S.D.N.Y. Feb. 14, 2017); accord,
`
`e.g., Arista Records, 604 F.3d at 116 (“Matters concerning discovery generally
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`are considered nondispositive of the litigation.” (quoting Thomas E. Hoar, Inc. v.
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`Sara Lee Corp., 900 F.2d 522, 525 (2d Cir. 1990)). “An order is clearly
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`erroneous if the reviewing court is ‘left with the definite and firm conviction
`
`that a mistake has been committed.’” Lifeguard Licensing Corp. v. Ann Arbor T-
`
`Shirt Co., LLC, No. 15 Civ. 8459 (LGS), 2017 WL 3142072, at *1 (S.D.N.Y.
`
`July 24, 2017) (quoting Frydman v. Verschleiser, No. 14 Civ. 5903 (JGK), 2017
`
`WL 1155919, at *2 (S.D.N.Y. Mar. 27, 2017)); accord, e.g., Easley v. Cromartie,
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`532 U.S. 234, 242 (2001). And “[a]n order is contrary to law when it fails to
`
`apply or misapplies relevant statutes, case law[,] or rules of procedure.” Id.
`
`(internal quotation marks omitted) (quoting Frydman, 2017 WL 1155919, at
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`*2). “This is a highly deferential standard, and ‘[t]he party seeking to overturn
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`a magistrate judge’s decision thus carries a heavy burden.’” FedEx Ground
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`Package Sys., 2017 WL 633445, at *3 (alteration in original) (quoting U2 Home
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`Entm’t, Inc. v. Hong Wei Int’l Trading Inc., No. 04 Civ. 6189 (JFK), 2007 WL
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`2327068, at *1 (S.D.N.Y. Aug. 13, 2007)); see also Infinity Headwear & Apparel,
`
`LLC v. Jay Franco & Sons, Inc., No. 15 Civ. 1259 (JPO), 2017 WL 3309724, at
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`*7 (S.D.N.Y. Aug. 2, 2017) (“[M]agistrate judges are given ‘broad discretion in
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`resolving nondispositive disputes and reversal is appropriate only if their
`
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`Case 1:15-cv-10033-KPF-SN Document 303 Filed 08/21/17 Page 14 of 57
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`discretion is abused.’” (quoting Advanced Analytics, Inc. v. Citigroup Glob.
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`Mkts., Inc., 301 F.R.D. 47, 50 (S.D.N.Y. 2014))).
`
`b.
`
`Federal Rule of Civil Procedure 26
`
`
`
`Federal Rule of Civil Procedure 26 permits parties to
`
`obtain discovery regarding any nonprivileged matter
`that is relevant to any party’s claim or defense and
`proportional to the needs of the case, considering the
`importance of the issues at stake in the action, the
`amount in controversy, the parties’ relative access to
`relevant
`information, the parties’ resources, the
`importance of the discovery in resolving the issues, and
`whether the burden or expense of the proposed
`discovery outweighs its likely benefit.
`
`
`Fed. R. Civ. P. 26(b)(1). “This [recently amended] rule is intended to ‘encourage
`
`judges to be more aggressive in identifying and discouraging discovery overuse’
`
`by emphasizing the need to analyze proportionality before ordering production
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`of relevant information.” In re Namenda Direct Purchaser Antitrust Litig., No. 15
`
`Civ. 7488 (CM) (JCF), 2017 WL 2693713, at *3 (S.D.N.Y. June 21, 2017)
`
`(quoting Fed. R. Civ. P. 26(b)(1) Advisory Committee’s Note to 2015
`
`Amendment)). Information “need not be admissible in evidence to be
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`discoverable.” Fed. R. Civ. P. 26(b)(1).
`
`2.
`
`The Sampling Motion Is Denied and the Objections Raised
`Therein Overruled
`
`a.
`
`The Court Reviews the Sampling Opinion for Clear Error
`
`
`
`The Consolidated Plaintiffs argue that the Sampling Opinion should be
`
`reviewed de novo, because it was rooted in conclusions of law and exceeded the
`
`scope of the Court’s reference to Judge Netburn. (Pl. Sampling Br. 5-6). The
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`Court does not agree. The Sampling Opinion was decided pursuant to Rule 26,
`
`
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`Case 1:15-cv-10033-KPF-SN Document 303 Filed 08/21/17 Page 15 of 57
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`“the Federal Rule of Civil Procedure governing discovery,” and thus is a classic,
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`non-dispositive decision regarding discovery that is subject to clear error
`
`review. Capitol Records, LLC v. Escape Media Grp., Inc., No. 12 Civ. 6646 (AJN),
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`2015 WL 1402049, at *3 (S.D.N.Y. Mar. 25, 2015).
`
`
`
`The Second Circuit rejected an argument similar to the Consolidated
`
`Plaintiffs’ in Arista Records. In that case, a defendant argued that a motion to
`
`quash the plaintiffs’ subpoena was a dispositive motion because its
`
`adjudication necessarily required the magistrate judge to decide the dispositive
`
`question of whether the complaint properly stated a claim. Arista Records, 604
`
`F.3d at 116. The Circuit affirmed the district court’s rejection of this
`
`argument. Id. It found the motion was not dispositive because (i) the
`
`magistrate judge need not have decided the complaint’s sufficiency in order to
`
`resolve it, (ii) quashing the subpoena would not have terminated any claims or
`
`the action, (iii) the defendant’s other arguments undermined his contention
`
`that the motion was dispositive, and (iv) the district court had indicated that it
`
`would have affirmed the magistrate judge even if it had considered the matter
`
`de novo. Id. at 116-17.
`
`
`
`This Court rejects the Consolidated Plaintiffs’ arguments regarding the
`
`nature of the Sampling Opinion for similar reasons. Judge Netburn did not
`
`decide Plaintiffs’ standard of proof at trial or summary judgment in resolving
`
`the sampling issue. She in fact did just the opposite, disclaiming any law-of-
`
`the-case effect. BlackRock MJ Opinion, 2017 WL 953550, at *4. A dispositive
`
`determination was not inevitably implicated by her proportionality analysis
`
`
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`Case 1:15-cv-10033-KPF-SN Document 303 Filed 08/21/17 Page 16 of 57
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`under Rule 26. Nor did the Sampling Opinion terminate any claims or the
`
`action. Indeed, the Consolidated Plaintiffs themselves have admitted that they
`
`have other evidence relevant to Defendant’s “discovery” and “actual
`
`knowledge.” (See, e.g., Pl. Sampling Br. 20-22). Thus, for the reasons it will
`
`explain more fully in the following section of this Opinion, the Court would
`
`deny the Sampling Motion even if it employed de novo review and conducted
`
`Judge Netburn’s Rule 26 analysis anew.
`
`b.
`
`The Sampling Opinion Is Not Clearly Erroneous or
`Contrary to Law
`
`The Consolidated Plaintiffs offer a host of arguments in support of the
`
`Sampling Motion. They contend that the Sampling Opinion was mistaken in
`
`its conclusions regarding the utilization of sampling in RMBS litigation. (Pl.
`
`Sampling Br. 10-14). The Consolidated Plaintiffs argue that the Sampling
`
`Opinion erred in concluding that sampling would not identify breaches that
`
`materially and adversely affected loan value. (Id. at 14). And because
`
`“discovery,” as used in the relevant Trust documents allegedly requires only
`
`“constructive knowledge,” rather than “actual knowledge,” the Consolidated
`
`Plaintiffs believe the Sampling Opinion misconstrued the law and misapplied
`
`contract-interpretation principles to the parties’ contracts. (Id. at 15-20).
`
`Finally, the Consolidated Plaintiffs dispute the Sampling Opinion’s conclusion
`
`that sampling would not aid the Plaintiffs in proving their claims that
`
`Defendant failed to fulfill its contractually heightened duties subsequent to
`
`events of default. (Id. at 22-25).
`
`
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`Case 1:15-cv-10033-KPF-SN Document 303 Filed 08/21/17 Page 17 of 57
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`These arguments do not succeed. In reviewing the Sampling Opinion,
`
`the Court is left with neither the definite and firm conviction that a mistake has
`
`been made nor a belief that Judge Netburn failed to apply or misapplied the
`
`applicable law.
`
`i.
`
`It Was Not Clear Error to Conclude That
`“Discovery” Requires More Than Constructive
`Knowledge
`
`
`As this Court found in its March 30 Opinion, it remains the law in RMBS
`
`cases of this kind that “[t]o prevail ultimately on the breach of contract claim, a
`
`plaintiff does have to demonstrate breach on a loan-by-loan and trust-by-trust
`
`basis.” BlackRock DJ Opinion, 2017 WL 1194683, at *7 (alteration in original)
`
`(internal quotation marks omitted) (quoting Phoenix Light SF Ltd. v. Deutsche
`
`Bank Nat’l Tr. Co., 172 F. Supp. 3d 700, 713 (S.D.N.Y. 2016)); see also, e.g.,
`
`Ret. Bd. of the Policemen’s Annuity & Ben. Fund of the City of Chi. v. Bank of
`
`N.Y. Mellon, 775 F.3d 154, 162 (2d Cir. 2014) (“[The trustee’s] alleged
`
`misconduct must be proved loan-by-loan and trust-by-trust. For example,
`
`[determining] ... [w]hether [the trustee] was obligated to repurchase a given
`
`loan requires examining which loans, in which trusts, were in breach of the
`
`representations and warranties. And [determining] whether a loan’s
`
`documentation was deficient requires looking at individual loans and
`
`documents.”); Royal Park Invs. SA/NV v. HSBC Bank USA, Nat’l Ass’n, 109 F.
`
`Supp. 3d 587, 601 (S.D.N.Y. 2015) (“Certainly, at trial or summary judgment,
`
`plaintiffs must prove their claims ‘loan-by-loan and trust-by-trust.’” (quoting
`
`Ret. Bd. of the Policemen’s Annuity & Ben. Fund, 775 F.3d at 162)). Thus,
`
`
`
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`Case 1:15-cv-10033-KPF-SN Document 303 Filed 08/21/17 Page 18 of 57
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`Judge Netburn was correct in holding as much. See BlackRock MJ Opinion,
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`2017 WL 953550, at *4.
`
`The Consolidated Plaintiffs have alleged that Defendant breached the
`
`relevant Trust Agreements by failing to discharge certain contractual duties.
`
`As Judge Netburn found, these allegations “are rooted specifically in Sections
`
`2.03 and 8.01 of the PSAs”:
`
`Section 2.03 provides in relevant part: “Upon discovery
`or receipt of written notice of any materially defective
`document in, or that a document is missing from, a
`Mortgage File or of the breach by the Originators or the
`Seller of any representation or warranty under the
`related Originator Mortgage Loan Purchase Agreement
`or the Mortgage Loan Purchase Agreement, as
`applicable, in respect of any Mortgage Loan which
`materially adversely affects the value of such Mortgage
`Loan, Prepayment Charge or the interest therein of the
`Certificateholders, the Trustee shall promptly notify the
`applicable Originator or the Seller, as the case may be,
`the Servicer and the NIMS Insurer ... and request that,
`in the case of a defective or missing document, the
`Seller cure such defect or deliver such missing
`document within 120 days from the date the Seller was
`notified of such missing document or defect or, in the
`case of a breach of a representation or warranty,
`request the related Originator or the Seller, as
`applicable, cure such breach within 90 days from the
`date the applicable Originator or the Seller, as the case
`may be, was notified of such breach. Notwithstanding
`the foregoing, any br