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

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

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Filed 02/25/2008

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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 "MOTION TO JOIN OCWEN FINANCIAL CORP. AS A PARTY DEFENDANT UNDER FED.R.CIV.P. 18(b) and 20(a)"

Plaintiff, Cartel Asset Management ("Cartel"), through its undersigned counsel, G.W. MERRICK & ASSOCIATES, LLC, respectfully submits this Reply in support of its "Motion to Join Ocwen Financial Corp. as a Party Defendant Under Fed.R.Civ.P. 18(b) and 20(a)," filed on February 7, 2008. Ocwen Federal Bank, FSB (the "Bank"), a wholly owned subsidiary of Ocwen Financial Corp ("OFC") which claims to have been dissolved with the consent of the U.S. Office of Thrift Supervision ("OTS"), protests the proposed joinder of OFC. The Bank's grounds for objecting are alleged "prejudice" to this dissolved bank resulting from supposed "delay" associated with joining a new entity, OFC. It further asserts that the case law does not support joinder. These assertions are all devoid of merit.

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A.

OFC is Not a "New Party". The Bank's first contends that

joinder of OFC would involve the assertion of claims against a "new party." Of course, that is not correct. OFC has been a party to this case from the inception of the litigation, and its motion to be removed prior to the re-trial has not been granted. B. There are no "New Claims" as OFC has Guaranteed Next, the Bank alleges that the

"Payment" (as Distinguished from "Collection").

joinder of OFC will involve the assertion of "new claims" not already at issue. The Bank professes that OFC would "presumably need to file a Third Amended Complaint to assert formally its new claim against OFC, OFC would have the right to file an Answer, discovery could proceed on the new claim, and the Pretrial Order would need to be amended to reflect the guarantee claim." Bank's Response at p. 4 (Emphasis supplied). The allegation and "presumption" are both incorrect. Neither a new Complaint, nor an Answer from OFC, is required. OFC has guaranteed "payment" (not "collection") of the Bank's obligation to Cartel, and OFC is obligated timely to pay damages to Cartel as and when due from the Bank. (In order to induce the OTS to approve the Bank's Dissolution Plan, OFC executed "an agreement to guaranty the obligations of the Bank ... on terms acceptable to the OTS"). OFC SEC Form 10-K, dated March 30, 2006, at p.3 (attached to "Defendant Ocwen Federal Bank FSB's Motion for Substitution of Party and for Amendment of Caption"). Review of the Guaranty instrument -- a copy of which is attached hereto as Exhibit A after being printed from OFC's SEC Form 10-Q dated August 9, 2005 -- demonstrates that it is a guarantee

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of payment; it is not a guarantee of collection as the Bank suggests disingenuously to this Court. 1 C. the Litigation. The Bank's Motives are to Delay, Elevate Costs and Multiply The motives underlying the Bank's opposition to the joinder of OFC

are obvious. It seeks to defer the day of reckoning for OFC, substantially increase Cartel's litigation costs and multiply the litigation battles. Tellingly, the Bank urges that Cartel should not be permitted to pursue a claim against OFC "unless and until Cartel obtains a judgment against the Bank (or [OLS]), and Cartel is unable to collect such judgment." Bank's Response at p. 6 (Emphasis supplied). Even more direct: "Cartel may pursue a claim against OFC in the unlikely event that Cartel obtains a judgment against the Bank (or [OLS]), Cartel is unable to enforce such judgment, and OFC declines to pay on its guarantee." Id. at p. 2. As noted above, these efforts by the Bank to mislead the Court into believing that OFC has executed a guaranty of "collection" rather than a guaranty of "payment" are deceptive. The Bank is fully aware that the OFC guarantee is one of payment, and not one of collection. Notwithstanding, the Bank deliberately misinforms the Court that Cartel will not have a claim against OFC unless Cartel is "unable to collect such judgment [against the Bank]." D. The Cases Cited by Cartel are Precisely on Point. Finally, the

Bank clearly errs in its declaration that the authority cited by Cartel is inapposite. For example, in Decatur Coca-Cola Bottling Co. v. Variety Vending Corp., 277 F.Supp. 393
Section 1 of the Guaranty instrument provides that OFC "hereby absolutely, unconditionally and irrevocably guarantees the punctual payment when due of all of the Assumed Liabilities ..." (Emphasis supplied). Section 2 of the Guaranty instrument provides that OFC guarantees that the Guaranteed Obligations will be paid strictly as, when and to the extent payable by [the Bank] or OLS." (Emphasis supplied).
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(N.D. Ga. 1967), the Court ruled that under Fed.R.Civ.P. 18(b) and 20(a) guarantor of "payment" may be joined in suit without the necessity of the plaintiff first obtaining a judgment against the principal obligor. See also Bailey v. Zlotnick, 133 F.2d 35, 37 (D.C.Cir. 1942)(principal and agent can be joined in the same action under Fed.R.Civ.P. 20(a) even though the principal's liability is predicated solely upon the agency); Sypherd v. Haeckl's Express, Inc., 31 F.R.D. 255 (S.D. Ohio 1962)(master and servant may be joined under Fed.R.Civ.P. 20(a) even though master's liability is based solely on the doctrine of respondeat superior); Citizens Bank of Ashville v. Cameron & Co., 40 F.Supp. 1002, 1004 (S.D.Ohio 1941), aff'd 134 F.2d 888 (6th Cir. 1943)(under Fed.R.Civ.P. 20(a) a surety may be joined as a defendant although it has no liability until judgment is obtained against the principal obligor). As is emphasized in these and other cases, joinder of OFC as a Defendant under Fed.R.Civ.P. 18(b) and 20(a) will have the salutary effects of: (a) providing an efficient and cost-effective mechanism for enforcing OFC's payment guaranty ­ which was used to induce the approval of the OTS for the Bank's Plan of Dissolution, and (b) avoiding a multiplicity of suits in respect of that guaranty. Cf. Wainwright v. Kraftco Corp., 58 F.R.D. 9, 13-14 (N.D.Ga. 1973)(party who "could have the burden of liability" joined under Fed.R.Civ.P. 25(c) so "that a multiplicity of lawsuits may be avoided"); Moody v. Albemarle Paper Co., 50 F.R.D. 494, 499 (E.D.N.C. 1970) (using Fed.R.Civ.P. 25(c) to join a party who "could have the burden of liability" because "[t]he court sees as one of its duties, the avoidance of a multiplicity of suits"). WHEREFORE, Cartel respectfully moves this Court to grant its Motion to Join as a party Defendant upon retrial of this case.

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Respectfully submitted this 25th day of February, 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

CERTIFICATE OF SERVICE I hereby certify that on the 25th day of February, 2008, a true and correct copy of the foregoing REPLY IN SUPPORT OF "MOTION TO JOIN OCWEN FINANCIAL CORP AS A DEFENDANT UNDER FED.R.CIV.P. 18(b) and 20" 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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