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Sher v. Barclays Capital Inc.

United States District Court, Fourth Circuit

August 28, 2013

JOEL I. SHER, CHAPTER 11 TRUSTEE for TMST, INC., f/k/a Thornburg Mortgage, Inc., Plaintiff,


TIMOTHY J. SULLIVAN, Magistrate Judge.

Now pending before the Court is a discovery dispute between the parties concerning the production of three categories of documents related to the value or price of certain mortgage backed securities ("MBS") sought by the Plaintiff Joel I. Sher, Chapter 11 Trustee for TMST, f/k/a Thornburg Mortgage, Inc. ("TMST and "the Trustee") from the Defendant Barclays Capital, Inc. ("Barclays"). The Trustee contends that the documents it has requested from Barclays should be produced and has filed a Motion to Compel (ECF No. 92-1) after good faith efforts by both parties to resolve this dispute failed.[1]

This Memorandum Opinion addresses: (1) the Trustee's Motion to Compel Production of Documents ("the Motion") dated June 10, 2013 (ECF No. 92-1); (2) Barclays' Memorandum of Law in Opposition dated July 1, 2013 (ECF No. 92-2); and (3) the Trustee's Reply to Barclays' Opposition dated July 15, 2013 (ECF No. 92-3). Pursuant to Local Rule 104.7, the Trustee has certified that counsel have conferred regarding the discovery dispute. ECF No. 92. The Court expressly notes that the issues have again been well briefed by the parties. The Court granted Barclays' request (ECF No. 94) for a telephone conference with counsel to hear arguments on the Motion and a conference was held on August 23, 2013. ECF No. 97. The Court finds that no further hearing is necessary. See Local Rule 105.6. For the reasons set forth below, the Trustee's Motion to Compel is GRANTED IN PART and DENIED IN PART. This Memorandum Opinion disposes of ECF No. 92.


This lawsuit is based on a Master Repurchase Agreement ("MRA") between Barclays and TMST, a real estate investment trust that focused on residential mortgage-backed securities ("MBS"). ECF No. 69-1 at 5. The MRA governed "individual repurchase transactions, " allowing TMST to temporarily finance its purchase of securities through loans from Barclays. Id. The transactions were the "economic equivalent of a secured loan" (ECF No. 69-1 at 5); Barclays would hold the purchased securities as collateral until TMST effectively repurchased the securities by repaying the loans with interest on a specified date. ECF No. 69-1 at 5-7. The MRA allowed either TMST or Barclays to make margin calls "at any time" if the market value of the securities serving as collateral became less than or exceeded the designated repurchase price by more than the agreed upon "margin amount." ECF No. 69-1 at 6.

At the beginning of August 2007, seven repurchase transactions were outstanding under the MRA. Id. These transactions represented thirteen MBS, valued at approximately $2.7 billion. ECF No. 69-1 at 6. When the value of those securities began to decline below the margin amount, Barclays issued a series of margin calls and declared an event of default on August 14, 2007. Id. Barclays claims it declared the default because TMST failed to satisfy its duty to meet the margin call. Id. TMST claims Barclays did not provide "the contractually mandated time to contest or meet the call." ECF No. 7 at 9. After issuing a Notice of Default, Barclays disposed of TMST's collateral by liquidating some of the MBS assets and taking some of those assets into its own inventory. ECF Nos. 69-1 at 6 & 69-2 at 5. The Trustee alleges that Barclays failed to liquidate the securities at "reasonably satisfactory prices or otherwise in a commercially reasonable manner." ECF Nos. 7 at 11 & 69-2 at 6-7.

In November 2011 and August 2012 the Trustee served two sets of document production requests on Barclays. ECF No. 92-1 at 17-25 & 27-31. Barclays objected to several of the requests, and after good faith efforts of the parties were not successful in resolving the dispute, the Trustee filed a motion to compel with respect to three of its document production requests. ECF No. 92-1. In the Motion, the Trustee asks that the Court compel Barclays to produce certain documents in response to Document Request Nos. 12 (as modified), 27 (as modified) and 32. ECF No. 92-1.


Federal Rule of Civil Procedure 37(a) provides that, where notice has been given, "a party may move for an order compelling disclosure or discovery." Fed.R.Civ.P. 37(a)(1). The motion to compel "must include a certification that the movant has in good faith conferred or attempted to confer with the person or party failing to make disclosure or discovery in an effort to obtain it without court action, " Fed.R.Civ.P. 37(a)(1); see also Loc. R. 104.7, and must be made "in the court where the action is pending, " Fed.R.Civ.P. 37(a)(2). Document production requests are properly the subject of a motion to compel discovery under Rule 37. See Fed.R.Civ.P. 37(a)(3)(B).

Central to resolving any discovery dispute is determining whether the information sought is within the permissible scope of discovery, as stated in Fed.R.Civ.P. 26(b)(1). See, e.g., Fed.R.Civ.P. 34(a) (stating that document production requests must be "within the scope of Rule 26(b)"). Under Rule 26(b)(1), "[p]arties may obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or defense." Fed.R.Civ.P. 26(b)(1); see also Fed.R.Evid. 401; Fed.R.Civ.P. 26(b)(3) (explaining that work product or trial preparation material ordinarily is not discoverable). If good cause is shown, the Court "may order discovery of any matter relevant to the subject matter involved in the action." Fed.R.Civ.P. 26(b)(1). "Relevant information need not be admissible at the trial if the discovery appears reasonably calculated to lead to the discovery of admissible evidence." Id.

Federal Rule of Civil Procedure 26(b)(2)(C) "cautions that all permissible discovery must be measured against the yardstick of proportionality." Victor Stanley, Inc. v. Creative Pipe, Inc., 269 F.R.D. 497, 523 (D. Md. 2010). Under that rule, the court, acting sua sponte or at a party's request, "must limit the frequency or extent of discovery" if: (i) "the discovery sought is unreasonably cumulative or duplicative, or can be obtained from some other source that is more convenient, less burdensome, or less expensive"; (ii) "the party seeking discovery has had ample opportunity to obtain the information by discovery in the action"; or (iii) "the burden or expense of the proposed discovery outweighs its likely benefit, considering the needs of the case, the amount in controversy, the parties' resources, the importance of the issues at stake in the action, and the importance of the discovery in resolving the issues." Fed.R.Civ.P. 26(b)(2)(C)(i)-(iii).

Federal Rule of Civil Procedure 34 governs document production requests. Pursuant to Rule 34, a party may request that the opposing party "produce and permit the requesting party... to inspect, copy, test, or sample" relevant documents, electronically stored information, and tangible things that are within the party's "possession, custody, or control." Fed.R.Civ.P. 34(a)(1). The party served with a document production request may object to the request if a legitimate basis for doing so exists. See Fed.R.Civ.P. 34(b)(2)(B)-(C). Thus, a party may object that a document production request exceeds the scope of discovery permitted by Fed.R.Civ.P. 26(b)(1); that it should be denied for the grounds stated in Fed.R.Civ.P. 26(b)(2)(C); that it impermissibly requests privileged or work product material, see Fed.R.Civ.P. 26(b)(3); or that documents should not be produced without implementation of a protective order, see Fed.R.Civ.P. 26(c). All objections to document production requests must be stated with particularity and specificity; objections may not be "boilerplate." See Hall, 231 F.R.D. at 470 (holding that "implicit within Rule 34 is the requirement that objections to document production requests must be stated with particularity in a timely answer, and that a failure to do so may constitute a waiver of grounds not properly raised, including privilege or work product immunity, unless the court excuses this failure for good cause shown"); Thompson, 199 F.R.D. at 173; Marens, 196 F.R.D. at 38-39.

A. Document Request No. 12 (as modified)

In Document Request No. 12 (as modified in ECF No. 92-1), the Trustee ...

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