Free Motion for Miscellaneous Relief - District Court of Colorado - Colorado

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

Document 456

Filed 02/12/2008

Page 1 of 8

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.

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 moves this Court for an Order: (a) authorizing Cartel to conduct limited additional discovery, (b) requiring Defendants to supplement previous Fed.R.Civ.P. 26 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. The purpose of this Motion is to allow the full and fair presentation of evidence on damages at the retrial. The sole damage issue is the magnitude of the benefit realized by Ocwen Federal Bank, N.A. (the "Bank"), and its successors and assigns, as a result of the wholesale and illicit theft of Cartel's

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

Document 456

Filed 02/12/2008

Page 2 of 8

valuable trade secret by the Bank. In support of this Motion, Cartel advises the Court as follows: D.C.COLO.L.Civ.R 7.1 CERTIFICATION Pursuant to D.C.COLO.L.Civ.R 7.1, the undersigned counsel for Cartel certifies that on February 12, 2008 he has conferred by telephone with Defendants' lead trial counsel about the relief sought herein. Defendants' counsel advised the undersigned that the Defendants oppose the relief sought in this Motion.

I. 1.

The Current Procedural Posture of the Case Following the initial trial in this matter, the jury returned a verdict,

in the aggregate amount of nearly $9 million (aggregate actual and punitive damages), in favor of Cartel on account of the Bank's theft of Cartel's highly valuable trade secret. Following entry of the original judgment on the jury verdict, the trial court vacated that judgment, and thereafter entered a judgment n.o.v. An appeal followed. 2. On September 18, 2007, the United States Court of Appeals for the

Tenth Circuit issued its Order and Judgment (the "Opinion"). In the Opinion, the Tenth Circuit: (a) affirmed the entry of judgment against the Bank on the issue of liability, Opinion at p. 65, (b) affirmed the determination that an award of punitive damages against the Bank is fully justified, Order of November 21, 2007, and (c) remanded for this Court to conduct a new trial on damages against the Bank. Opinion at pp. 50-51, 65. Cartel Asset Management v. Ocwen Financial Corp., 2007 U.S.App. LEXIS 22346 (10th Cir. Sept. 18, 2007). 3. While the appeal was pending in the Tenth Circuit, the Bank: (a)

sold its Fort Lee, New Jersey branch, (b) assigned the balance of its assets and properties

2

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

Document 456

Filed 02/12/2008

Page 3 of 8

to a newly-formed acquisition vehicle, Ocwen Loan Servicing, LLC ("OLS"), and (c) began a process of voluntary dissolution. Thereafter, the Bank moved this Court under Fed.R.Civ.P. 25 to have OLS substituted for the Bank prior to the new trial on damages. Cartel responded by opposing "substitution." Instead, Cartel urged that OLS and Ocwen Financial Corp. ("OFC") be joined as parties Defendant under Fed.R.Civ.P. 18(b), 20(a) and 25. Those cross-motions remain pending before the Court.

II. 4.

The Damage Issue on Retrial

In its Opinion, the Tenth Circuit concluded that the jury did "have

sufficient evidence to reasonably infer the Bank used the [Cartel's trade secrets] to purchase BPOs and resell them for a profit." Opinion at p. 30-31; see also, id. at p. 38. The Tenth Circuit also determined that Colorado law permits plaintiffs to recover -- as a measure of damages for misappropriation of trade secrets -- the "unjust enrichment," "illgotten gains" or "benefit" derived by wrongdoers as a result of misappropriation. Id. at pp. 23, 25 and 29. 5 In addressing the proof of "unjust enrichment," "ill-gotten gains,"

or "benefit" derived by the Bank from its extensive misappropriation of Cartel's valuable trade secret, the Tenth Circuit observed that Cartel would generally be required to prove the net profit realized by the Bank in respect of the Bank's BPO product line. Id. at pp. 37-41. However, Ocwen Realty Advisors, the division of the Bank in which the Bank's valuation business (including BPO business) was housed, id. at p. 7, "asserted it did not retain records allocating the profits within its product lines." Id. at p. 37. Thus, the Tenth Circuit ruled that "[b]ecause the absence of evidence is directly attributable to [Ocwen Realty Advisors'] failure to provide the data, it was not unreasonable for

3

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

Document 456

Filed 02/12/2008

Page 4 of 8

[Cartel's expert witness] to apply the same profit ratio for all product lines to [the BPO product line]." Id. at p. 41. 6. Ultimately, the Tenth Circuit determined that a new trial on

damages is necessary because in the first trial there was not sufficient evidence for Cartel's expert witness to assume four-years as the time it would take the Bank to develop a national network of realtors providing BPOs absent the Bank's brazen theft of Cartel's network (its valuable trade secret). Id. at pp. 42-51. Of course, evidence

available to the Bank is likely highly relevant to the appropriate period to be used in the damages calculation on retrial. Cf. id. at p. 42 (testimony of former Bank employee Ann Gilbert).

III.

The Limited Additional Discovery Sought by Cartel is Appropriate 7. Upon remand from the Tenth Circuit, this Court has discretion to

reopen and to permit additional discovery. Been v. O.K. Industries, Inc., 495 F.3d 1217, 1236 (10th Cir. 2007); Weahkee v. Norton, 621 P.2d 1080, 1083-84 (10th Cir. 1980). The factors that should be weighed by this Court in the exercise of its discretion were alluded to in 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. We do not feel, however, that the trial court's ruling should be inflexible. Clearly, if the trial court perceives in limiting evidentiary proof in a new trial, a manifest injustice, to one side or the other, the court must retain broad latitude and may with proper notice allow additional witnesses and relevant proof. In this regard, 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. ... This does not mean the court should allow cumulative

4

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

Document 456

Filed 02/12/2008

Page 5 of 8

evidence, but it does mean that the court should allow sufficient leeway for the parties to produce new evidence, without undue prejudice to their interest. Technical rulings should never preclude new and material proofs; common sense should control. Id. at 1450 (emphasis supplied). 8. For a host of reasons, this is a compelling case for authorizing the

additional, limited discovery sought by Cartel. First, the Tenth Circuit has already underscored that at the first trial "the absence of evidence is directly attributable to [Ocwen Realty Advisors'] failure to provide the data." Opinion at p. 41. Second, with the unfortunate and untimely passing of Judge Phil Figa, the retrial on damages will occur before a new trial judge who does not have the same familiarity "with the conduct of the original trial." Cleveland, 985 F.2d at 1450. Third, as an established intentional wrongdoer, the Bank simply is not credible complaining about the modest additional discovery sought by Cartel (to determine the full extent of the monetary relief necessary to remedy its intentional wrongdoing). 9. The additional discovery proposed by Cartel would be limited to

the "damages issue" (the "unjust enrichment," "ill-gotten gains" and/or "benefit" derived by the Bank from the blatant theft of Cartel's trade secrets). It is anticipated that the discovery could be completed within 60-75 days, depending upon the availability of the witnesses, and would be limited to: A. No more than 10 interrogatories served by Cartel on each defendant; No more than 10 document requests served by Cartel on each defendant; No more than 4 (party and non-party) non-expert depositions conducted by Cartel; and

B.

C.

5

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

Document 456

Filed 02/12/2008

Page 6 of 8

D.

A deposition by Cartel of each expert that any of the Defendants will call at trial.

IV.

Supplementation of Defendants Rule 26(a)(1) Disclosures and Discovery Responses is Appropriate 10. As this case has been returned by the Tenth Circuit for retrial on

the issue of damages, prior to the retrial it is appropriate -- both under the Tenth Circuit authority cited above as well as the provisions of Fed.R.Civ.P. 26(e)(1)(B) -- for the Court to order and direct that the Defendants' Fed.R.Civ.P. 26 disclosures (including expert witness disclosures) and prior discovery responses be appropriately supplemented. Such an Order will facilitate the full and fair presentation of evidence on damages at the retrial.

V.

Reservation of Right to Introduce Additional Evidence at Trial 11. The Defendants' supplemental disclosures, and their new and

supplemented discovery responses may, of course, support the propriety of introducing additional and/or different evidence at the retrial on damages. That will now be known until Cartel receives Defendants' supplemental disclosures and discovery responses, and completes the additional discovery requested herein. 12. Accordingly, Cartel respectfully seeks leave of this Court to

deviate from the prior Final Pretrial Order governing the original trial, and to reserve the right to introduce additional and/or different evidence (lay and expert testimony and trial exhibits) on the remaining damage issue before the Court on retrial.

6

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

Document 456

Filed 02/12/2008

Page 7 of 8

13.

To the extent that Cartel determines to introduce additional and/or

different evidence (including lay and expert testimony) at the retrial on damages, it will provide timely disclosure to each of the Defendants of its intent to do so. WHEREFORE, Cartel respectfully moves this Court for an Order: (a) authorizing Cartel to conduct limited additional discovery, (b) requiring Defendants to supplement previous Fed.R.Civ.P. 26 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 12th 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

7

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

Document 456

Filed 02/12/2008

Page 8 of 8

CERTIFICATE OF SERVICE I hereby certify that on the 12th day of February, 2008, a true and correct copy of the foregoing 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

8