Free Reply to Response to Motion - District Court of Colorado - Colorado

Case 1:01-cv-01644-REB-CBS

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO

Civil Action No. 01-cv-1644-REB-CBS CARTEL ASSET MANAGEMENT, a Colorado corporation, Plaintiff, vs. OCWEN FINANCIAL CORPORATION, a Florida corporation; and OCWEN FEDERAL BANK FSB, a subsidiary of OCWEN FINANCIAL CORPORATION, Defendants. _____ REPLY IN SUPPORT OF "PLAINTIFF'S MOTION TO: (i) CONDUCT LIMITED ADDITIONAL DISCOVERY, (ii) REQUIRE DEFENDANTS TO SUPPLEMENT DISCLOSURES AND DISCOVERY RESPONSES, AND (iii) RESERVE THE RIGHT TO INTRODUCE DIFFERENT AND/OR ADDITIONAL EVIDENCE AT RETRIAL" _____

Plaintiff, Cartel Asset Management ("Cartel"), through its undersigned counsel, G.W. MERRICK & ASSOCIATES, LLC, respectfully submits this Reply in support of "Plaintiff's Motion to: (i) Conduct Limited Additional Discovery, (ii) Require Defendants to Supplement Disclosures and Discovery Responses, and (iii) Reserve the Right to Introduce Different and/or Additional Evidence at Retrial" (the "Motion for Limited Discovery").

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I.

INTRODUCTION AND BACKGROUND

On March 3, 2008, Ocwen Federal Bank (the "Bank") filed its Response in Opposition (the "Bank's Opposition") to Cartel's Motion for Limited Discovery. The Bank's Opposition selectively emphasizes portions of the: (i) pre-trial period antecedent to the initial trial, Bank's Opposition at pp. 2-3, (ii) two week trial which resulted in a nearly $9 million jury verdict and judgment against the Bank (later set aside by the trial court), id. at pp. 3-4, and (iii) appeal to the Tenth Circuit that resulted in a reversal and remand for retrial on damages. Id. at p. 4. Of course, the Bank ignores that the jury, this Court and the Tenth Circuit all concurred that at trial Cartel: (a) proved that the Bank was guilty of stealing its highly valuable trade secret, and (b) proved, beyond a reasonable doubt, the Bank's deceitful conduct justified an award of punitive damages. The Bank further omits that in directing a "redo" on the issue of damages, the Tenth Circuit: (a) emphasized that "the absence of evidence is directly attributable to [the Bank's] failure to provide [relevant data in discovery]," Cartel Asset Management v. Ocwen Financial Corp., 249 Fed. Appx. 63, 79 (10th Cir. 2007), and (ii) disagreed with all but one of Judge Phil Figa's reservations about Cartel's damages proof. Id. at 69-79. Against this backdrop, the Bank urges that the modest additional discovery sought in the Motion for Limited Discovery must be denied because "[t]he Motion is, in effect, a request to modify the Final Pretrial Order." Bank's Opposition at p. 5. The Bank declares that "the evidence at the second trial may not extend beyond the

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testimony and documents identified in the Final Pretrial Order [entered before the original trial]." Id. at p. 2. 1

II.

SUPPLEMENTAL DISCLOSURES AND DISCOVERY RESPONSES ARE APPROPRIATE A review of the Bank's Opposition confirms that the Bank offers no

resistance to entry of an Order requiring supplemental disclosures and discovery responses -- all as required by Fed.R.Civ.P. 26(e)(1)(B). Of course, such supplemental disclosures and discovery responses may produce new evidence germane to the damage case. Logically, the Bank's concession that supplementation of disclosures/discovery responses is appropriate rebuts its avowal that "the evidence at the second trial may not extend beyond the testimony and documents identified in the Final Pretrial Order [entered before the original trial]."

III.

THE LIMITED ADDITIONAL DISCOVERY SOUGHT BY CARTEL IS APPROPRIATE In opposing the limited additional discovery sought by Cartel, the Bank

argues that Cartel is seeking to modify the Final Pretrial Order, and that Cartel has not demonstrated "manifest injustice," within the meaning of Fed.R.Civ.P. 16(e), for doing so. Bank's Opposition at pp. 5-8. The Bank's argument fails for a host of reasons. A. Nothing in Rule 16 Bars Entry of a Revised Pretrial Order A review of Fed.R.Civ.P. 16 confirms that nothing in that

Tailored to the Retrial.

rule prohibits the Court, on remand, from entering an amended Final Pretrial Order tailored to address the damages issue framed by the Tenth Circuit's ruling. The Tenth
The Bank further exclaims that "[t]he Final Pretrial Order [entered before the original trial] reflects the only evidence Cartel should be permitted to present at the second trial." Id. at p. 5. (Emphasis in original).
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Circuit underscored that the Bank's liability, and Cartel's right to punitive damages, are established and removed these as issues on retrial. Tenth Circuit's November 21, 2007 Order Denying Ocwen Federal Bank's Petition for Rehearing. Accordingly, the Final Pretrial Order that governed the initial trial is no longer apt. Moreover, as

Magistrate Judge Shaffer observed at the last hearing, a revised Final Pretrial Order is necessary if for no other reason than the assignment of the retrial to Judge Robert Blackburn, who prescribes a different Final Pretrial Order than that used by Judge Figa. B. The Tenth Circuit Mandates a Balanced Approach. The Bank's

assertion that "the evidence at the second trial may not extend beyond the testimony and documents identified in the Final Pretrial Order [entered before the original trial]" also ignores the express instructions of the Tenth Circuit in remanding this case: Our remand does not, however, disturb the discretion of the district court to determine the extent it would be appropriate to re-open the record ... See Cleveland v. Piper Aircraft Corp., 985 F.2d 1438, 1450 (10th Cir. 1993) ("The trial court is much more familiar with the conduct of the original trial, the needs for judicial management and the requirements of basic fairness to the parties in a new trial. ... [I]f a party makes a timely motion to produce new and material evidence which was not otherwise readily accessible or known, the court should, within the exercise of discretion, consider whether denial of the new evidence would create a manifest injustice. ... [C]ommon sense should control."). 249 Fed.App. at 82 (emphasis supplied). By way of context, the Tenth Circuit fully embraced Cartel's "unjust enrichment" or "ill-gotten gains" approach to recoverable damages. Id. at 75. The panel also ruled that Cartel has proven that the Bank derived ill-gotten gain from its theft of Cartel's valuable trade secret, and that Cartel's reliance (in its damages model) upon multi-product profit realized by the Bank is not unreasonable. Id. at 82. Accordingly, the

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Tenth Circuit concluded that a remand was necessary. Id. It is here that the panel declared: "[o]ur remand does not, however, disturb the discretion of the district court to determine the extent it would be appropriate to re-open the record ..." The Cartel Asset Management panel immediately cited Cleveland, 985 F.2d at 1450, for the proposition that: "if a party makes a timely motion to produce new and material evidence which was not otherwise readily accessible or known, the court should, within the exercise of discretion, consider whether denial of the new evidence would create a manifest injustice. ... [C]ommon sense should control."). 249 Fed.App. at 82. C. The Limited Additional Discovery is Warranted. The Bank's

protest decrying the limited additional discovery sought by Cartel is not well-grounded. First, having established the Bank's dishonesty -- beyond a reasonable doubt -- there is a credible concern that the Bank's discovery responses have been shy of comprehensive and forthright. Second, the additional discovery proposed by Cartel will be limited to the issue of the benefit realized by the Bank from the theft of Cartel's valuable trade secret. Third, it is now known that significant events occurred following the first trial that suggest that long term (and previously unmeasured) benefits were realized by the Bank from theft of Cartel's trade secret. None of these could have been known prior to the first trial, and include: · The continuing relocation offshore of the Bank's BPO business to a lower cost -- and more highly profitable -- environment now directed from India; On November 24, 2004, the Bank filed an application to terminate its status as a federal savings bank, and thereafter sold a material portion of its assets to Marathon National Bank of New York;

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·

Following its sale to Marathon, the Bank assigned assets and liabilities to a newly-formed affiliated entity, Ocwen Loan Servicing, LLC; and William C. Erbey, the CEO and Chairman of the Ocwen Financial Corp. ("OFC"), the Bank's parent company and another defendant in this case, tendered a "going private offer" to acquire OFC.

·

These, and perhaps other developments, signal that from a timing perspective the Bank realized both immediate and long term benefits from stealing Cartel's trade secret (which enabled the Bank to extend its customer offerings with a previously missing and valuable BPO product line). In seeking to capture unjust enrichment, it is necessary to examine both immediate and more distant events and transactions that fully reflect the ill-gotten benefit conferred upon the Bank. D. The Discovery Proposed is Limited and Carefully Tailored.

The Bank's protest notwithstanding, the discovery proposed is limited and carefully tailored. It is anticipated that the same set of interrogatories and document requests will be served upon each of the Defendants (to avoid guessing who ended up with the information on the dismantling of the Bank). 2 And Cartel will cooperate fully in the scheduling of depositions to insure that they are all completed within a very modest period of time. WHEREFORE, Cartel respectfully moves this Court for an Order: (a) authorizing Cartel to conduct the limited additional discovery described in the Motion for Limited Discovery, (b) requiring Defendants to supplement previous Fed.R.Civ.P. 26

Cartel would be willing to submit promptly its written discovery to the Magistrate Judge for decision and pre-approval to avoid protracted delays associated with any objections to written discovery.

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disclosures and discovery responses, and (c) reserving Cartel's right to introduce different and/or additional evidence (lay and expert testimony and trial exhibits) at the retrial. Respectfully submitted this 10th day of March, 2008.

/s/ Glenn W. Merrick Glenn W. Merrick Brian S. Emeson G.W. MERRICK & ASSOCIATES, LLC 5445 DTC Parkway, Suite 912 Greenwood Village, Colorado 80111 Telephone: (303) 831-9400 Facsimile: (303) 771-5803 ATTORNEYS FOR PLAINTIFF, CARTEL ASSET MANAGMENT

CERTIFICATE OF SERVICE I hereby certify that on the 10th day of March, 2008, a true and correct copy of the foregoing REPLY IN SUPPORT OF "PLAINTIFF'S MOTION TO: (i) CONDUCT LIMITED ADDITIONAL DISCOVERY, (ii) REQUIRE DEFENDANTS TO SUPPLEMENT DISCLOSURES AND DISCOVERY RESPONSES, AND (iii) RESERVE THE RIGHT TO INTRODUCE DIFFERENT AND/OR ADDITIONAL EVIDENCE AT RETRIAL" was electronically filed with the clerk of court using the CM/ECF System: Lino S. Lipinsky de Orlov, Esq. Sandra Wick Mulvany, Esq. McKENNA LONG & ALDERIDGE LLP 1875 Lawrence Street, Suite 200 Denver, Colorado 80202

/s/ Dyanna M. Spicher

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