| MBIA Ins. Corp. v Credit Suisse Sec. (USA) LLC |
| 2013 NY Slip Op 01011 [103 AD3d 486] |
| February 14, 2013 |
| Appellate Division, First Department |
| MBIA Insurance Corporation, Appellant, v CreditSuisse Securities (USA) LLC et al., Respondents. |
—[*1] Orrick, Herrington & Sutcliffe LLP, New York (John Ansbro of counsel), forrespondents.
Orders, Supreme Court, New York County (Shirley Werner Kornreich, J.), enteredMay 29 and August 16, 2012, which, to the extent appealed from, denied plaintiff'smotion insofar as it sought a commission permitting it to serve subpoenas to obtainnonparty, financial disclosure and testimony from the employers of 400 nonparty,out-of-state borrowers of residential mortgage loans, and sought to serve subpoenas onout-of-state borrowers who participated in reduced documentation loan programs,unanimously affirmed, without costs.
This is an action for fraud and breach of contractual representations and warrantiesby plaintiff, a financial guaranty insurance provider, against defendants, the sponsor,underwriter and servicer of a transaction in which thousands of residential mortgageloans were consolidated into a pool and transferred to a trust formed to issuemortgage-backed securities. None of the parties served as the originator of the underlyingmortgage loan transactions or had any direct relationship with any borrower.
Supreme Court correctly denied plaintiff's motion for an open-ended commission totake the deposition and obtain document disclosure, including, among other things,personal investment and bank account statements and personal income tax returns, fromnonparty residential mortgage borrowers in every state except New York, three UnitedStates territories and the District of Columbia, since plaintiff failed to make a "strongshowing of necessity and demonstrate that the information . . . isunavailable from other sources" (Williams v New York City Hous. Auth., 22 AD3d 315,316 [1st Dept 2005], quoting Gordon v Grossman, 183 AD2d 669, 670 [1st Dept1992]). Since the parties offer conflicting interpretations of the warranties andrepresentations found in the parties' insurance agreement, the relevance of the requestedmaterial is, at best, still yet to be established. Furthermore, in seeking extensive amountsof duplicative, personal and confidential financial information from over five years ago,the discovery request constitutes an undue burden and expense on the respondingnonparties (see U.S. Bank, N.A.v GreenPoint Mtge. Funding, Inc., 94 AD3d 58, 64 [1st Dept 2012]). Plaintiff'scontention that this discovery is material and necessary to its fraud and breach of contractclaims because it could potentially yield evidence that a borrower fraudulently ornegligently misrepresented the financial information provided on his or her mortgageloan application is not supported by [*2]particularizedfactual allegations specific to any of the borrowers selected for this disclosure.
For the same reasons, the court properly denied plaintiff's motion to the extent that itsought an open-ended commission to serve subpoenas on the employer of each borrower.
While plaintiff argues that every other court has permitted nonparty discovery of thisnature, we find those cases to be distinguishable based on differences in the parties'governing agreements or the defendants' direct relationship with the borrowers asoriginator of the mortgage loans, and in any event, since all of the orders cited byplaintiff are from a trial level state or federal court, they do not constitute bindingauthority and need not be followed.
Denial is proper for the additional reason that plaintiff has failed to demonstrate thata commission is "necessary or convenient" (CPLR 3108), by neglecting to include"allegations that the proposed out-of-State deponent would not cooperate with a notice ofdeposition or would not voluntarily come within this State or that the judicial imprimaturaccompanying a commission will be necessary or helpful" (Reyes v Riverside ParkCommunity [Stage I], Inc., 59 AD3d 219, 219 [1st Dept 2009] [internalquotation marks omitted]).
We have considered plaintiff's remaining contentions and find them unavailing.Concur—Mazzarelli, J.P., Friedman, Manzanet-Daniels, Román and Clark,JJ.