Order — Virginia ex rel. Integra REC LLC v. Countrywide Securities Corporation (Document 122)
Summary
Order in Commonwealth of Virginia ex rel. Integra REC LLC v. Countrywide Securities Corporation, et al., Civil No. 3:14cv706 (MHL), in the U.S. District Court for the Eastern District of Virginia, Richmond Division, filed 06/15/15 as Document 122, dated June 15, 2015 and signed /s/ David J. Novak, United States Magistrate Judge. The order sets a settlement process for the Commonwealth's claims based on residential mortgage-backed securities purchased by the Virginia Retirement System. The Commonwealth is to provide each defendant a letter brief, each defendant is to respond with a non-posturing offer, and the Commonwealth may reply not later than October 6, 2015. It schedules settlement conferences on November 2, 9 and 10, 2015 and records an agreed full stay of the proceedings in both this Court and the state court.
Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used
Cite this document
“Order — Virginia ex rel. Integra REC LLC v. Countrywide Securities Corporation (Document 122).”
Original at archive.org. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/court-filing-no-3-14-cv-00706-dkt-122-e-d-va-9cf3decfd8/
, SHA-256 8cb2af240712c981ecbafb5b45b2870de04878b42050a2d1402386444a223930.Full text
Case 3:14-cv-00706-MHL Document 122 Filed 06/15/15 Page 1 of 7 PageID# 4342
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF VIRGINIA
Richmond Division
COMMONWEALTH OF VIRGINIA, ex )
rei. INTEGRA REC LLC )
Plaintiff, )
)
V. ) Civil No. 3:14cv706 (MHL)
)
COUNTRYWIDE SECURITIES )
CORPORATION, eta!., )
Defendants. )
______________________________)
ORDER
The parties come before the Court by Order (ECF No. 86) for the purposes of settlement.
On June 9, 2015, the undersigned met with the Commonwealth and the defendants that have been
removed to this Court ("federal defendants") for the purpose of facilitating settlement. On June 10,
2015, the undersigned met with the defendants not participating in the removed portion of this
action ("state defendants"), but nonetheless wished to participate in settlement discussions.• As a
result of the discussions, it became apparent that both sides needed to more fully develop the
In the parallel state court action, Deutsche Bank Securities Inc. ("DBSI") appeared specially
for the limited purpose of objecting to personal jurisdiction and moving to dismiss the Complaint.
In reliance on the Commonwealth's representation that the Commonwealth would not argue that by
participating in the ongoing mediation in the instant action DBSI had waived its jurisdictional
objection, DBSI accepted the Court's invitation to participate in the mediation. The
Commonwealth has renewed and expanded its representation to encompass DBSI's continued
participation in the mediation, including without limitation providing information to the
Commonwealth and/or the Court, and seeking information from the Commonwealth in compliance
with this Order. Accordingly, the Court finds that DBSI's participation in the instant mediation
shall not be deemed to be engaging in conduct related "to adjudicating the merits of the case" within
the contemplation of Virginia Code§ 8.01-277.1, and that, accordingly, such participation will not
waive or compromise in any respect DBSI's objection to personal jurisdiction.
Case 3:14-cv-00706-MHL Document 122 Filed 06/15/15 Page 2 of 7 PageID# 4343
underlying facts pertaining to the Commonwealth's claims based on common law fraud as applied
to the non-Luther securities at issue. 2 Accordingly, with the agreement of all parties,
the Court ORDERS the following to facilitate settlement.
The Commonwealth's Initial Production
Not later than July 30,2015, the Commonwealth shall provide each defendant with a letter
brief, along with a copy to the Court, that contains the following information pertaining to the
certificates for the residential mortgage-backed securities ("RMBS") pertaining to that institution: 3
• An opening section with an overview that details the elements of each cause of action and
the legal support for the Commonwealth's position on any damages that it may seek if it
prevails on the cause of action;
• An identification of comparable settlements in other similar cases that could be used as a
model in this case, including the settlement rate;
• For each RMBS at issue for that particular institution, a detailed, factual narrative that sets
forth:
o the original offering date of the certificate;
o the original underwriter(s) of the certificate;
2
Although the Court will focus only on the Commonwealth's common fraud claims
pertaining to non-Luther securities, the Commonwealth has not waived its ability to seek recovery
for the Luther securities at issue or for redress under the Virginia Fraud Against Taxpayers Act.
Instead, the Court simply believes that the most productive approach to settlement involves
focusing solely on the merits of the common law fraud claims.
3
All of the letter briefs ordered shall be treated as follow-up settlement memoranda that are
provided to opposing counsel and the undersigned's chambers via e-mail and not electronically
filed. The Commonwealth shall provide each defendant with a brief individually directed to the
certificates at issue for that institution. The Commonwealth shall not provide copies to the other
defendants; however, any defendant may elect to share the Commonwealth's brief regarding its
institution with any co-defendant. If a defendant elects to share the Commonwealth's brief
regarding its institution with a co-defendant, the electing defendant must give notice of doing so to
both the Commonwealth and the undersigned's chambers. Likewise, each defendant must provide
its response only to the Commonwealth and the undersigned's chambers; however, a defendant may
share its brief with any co-defendant, while giving notice of doing so to both the Commonwealth
and the undersigned's chambers. Any reply submitted by the Commonwealth shall follow these
same rules.
2
Case 3:14-cv-00706-MHL Document 122 Filed 06/15/15 Page 3 of 7 PageID# 4344
o the date of purchase of the certificate by the Virginia Retirement System ("VRS");
o the entity or individual(s) (including any broker-dealer) that sold the certificate to the
VRS;
o the aggregate purchase price for the certificate paid by the VRS;
o the purchase amount stated in terms of original par value for the certificate;
o a transactional history for the certificate from its original sale until its purchase by
the VRS;
o if the VRS purchased the certificate on the secondary market and not directly from
the defendant, an explanation as to the liability of the defendant with regard to the
downstream purchase by the VRS and whether any intervening actions by
intermediate buyers/sellers impact the liability analysis, particularly as to reliance by
the VRS on any alleged misstatements by the defendant;
o for any downstream purchases by the VRS, a summary of any communications that
the VRS had with the original underwriter before the purchase of the certificate by
the VRS;
o the specific facts underlying the alleged fraudulent statement(s) pertaining to the
certificate and the evidentiary support to establish the fraud at trial;
o an identification of the individuals who purchased the certificate for the VRS and
their roles in the purchase;
o a description of any analysis or due diligence that the VRS or its outside advisors
performed before the purchase of the certificate by the VRS, including any
review/analysis of the offering documents to include the prospectus supplement;
o an identification of any downgrades or public statements regarding a diminution of
the value of the certificate before its purchase by the VRS;
o an explanation with specific facts regarding the alleged reliance upon the alleged
fraudulent statement by the VRS to include those who reviewed the offering
documents (including the prospectus supplement) and the extent of their review;
o the date of sale along with sale price and principal balance purchased of the
certificate if sold by the VRS, along with an identification of the actual seller (e.g.,
broker-dealer) who sold the certificate on behalf of the VRS;
o any disclosures made by the VRS about the value of the certificate to any purchasers
before or at the time of the sale;
o if the VRS continues to retain the certificate, the current value recorded ofthe
certificate in the VRS' s internal financial statements;
3
Case 3:14-cv-00706-MHL Document 122 Filed 06/15/15 Page 4 of 7 PageID# 4345
o the amount of principal payments received by the VRS during the period that the
certificate was held by the VRS;
o a calculation and explanation (including method of calculation, specific dates used
for the calculations and the impact of any non-fraud factors) of damages pertaining
to the certificate to include any actual losses, any lost interest and any lost profits by
the VRS;
o to the extent that the Commonwealth relies on any lost opportunity to purchase
alternative investments that were not considered at the time of the VRS's purchase of
the certificate, identify the alternative investments, their cost at the time and their
alleged rate of return;
o the date and amount of any write-down or write-up by the VRS pertaining to the
certificate as reflected in any of the VRS' s financial statements;
o the dollar amount of any income recorded pertaining to the certificate due to its
increase in value after the date of purchase; and,
o if multiple undenvriters are involved, an explanation regarding the allocation of the
damages amongst all institutions involved.
In addition to this information, each brief shall contain a certification from the Commonwealth that
the leadership of the VRS has reviewed and agrees with the Commonwealth's position, including
the damages involving actual losses and lost profits. This information shall be provided security-
by-security and in narrative form for each institution.
Defendant's Response
Not later than September 16,2015, each defendant shall provide the Commonwealth with
a letter brief, along with a copy to the Court, that contains the following information pertaining to
the certificates for the RMBS pertaining to that defendant:
• An opening section with an overview that details the elements of each cause of action and
the legal support for any non-procedural defense that the defendant intends to offer and for
the defendant's position on any damages that the Commonwealth intends to seek if it
prevails on the cause of action; 4
4
Because the Court has already addressed the statute of limitations issues raised by the
defendants, there is no need for further discussion of these issues. However, by proceeding in this
4
Case 3:14-cv-00706-MHL Document 122 Filed 06/15/15 Page 5 of 7 PageID# 4346
• An identification of comparable settlements in other similar cases that could be used as a
model in this case, including the settlement rate, along with a response to the
Commonwealth's cited examples;
• For each RMBS at issue for that particular institution, a detailed, factual narrative that sets
forth:
o a factual response to the Commonwealth's submission as to each of the above points,
including identifying any dispute as to the Commonwealth's position. If there is a
factual dispute on any point, the defendant must offer its own contrary, factual
recitation and not merely deny the Commonwealth's position;
o a detailed description of any internal or third-party due diligence associated with the
certificate before its sale;
o if the loan tapes or similar information exists for the certificate, provide the
information as it relates to any factual challenge to the Commonwealth's position to
include data regarding owner-occupancy, second liens and loan-to-value;
o an identification of any automated valuation model used during due diligence
activities and any automated valuation associated with the certificate before its sale;
and,
o the factual basis for any affirmative, non-procedural defense that will be offered at
trial.
This information shall be provided security-by-security and in narrative form for each institution.
Along with their response to the Commonwealth's brief, each defendant must provide the
Commonwealth with a serious, non-posturing offer to resolve the pending lawsuits.
The Commonwealth's Reply
Not later than October 6, 2015, the Commonwealth may submit any reply to any defense
submission as it believes appropriate. Any reply must also be in narrative form.
The Court's Next Meeting with the Commonwealth
The Court will conduct a follow-up settlement conference meeting with only the
Commonwealth on Monday, November 2, 2015, at 9:30a.m. At that time, the Court will conduct a
fashion, the defendants have not waived the ability to assert defenses based on the statute of
limitations.
5
Case 3:14-cv-00706-MHL Document 122 Filed 06/15/15 Page 6 of 7 PageID# 4347
security-by-security review with the Commonwealth and provide the Court's evaluation of the
Commonwealth's case, along with the Court's proposed settlement figures. The Court expects that
this meeting will take the entire day. Thereafter, the Commonwealth's representatives shall meet
with the Attorney General of Virginia, the leadership ofthe VRS and the appropriate officials
within the Office of the Governor of Virginia and review the submissions in this case by all parties
and the Court's evaluation of the case. The Commonwealth must then provide each defendant
lVith a serious, non-posturing counter-offer to resolve the pending lawsuits not later than 4:00
p.m. on Thursday, November 5, 2015. A copy of each offer shall also be emailed to the
undersigned's chambers at that time.
Follow-up Settlement Conference
On Monday, November 9, 2015, at 9:30a.m., the Court will meet with the Commonwealth
and the federal defendants for a follow-up settlement conference. The Court will begin with
individual meetings with the federal defendants and ask for a response to the Commonwealth's
counter-offer. The Court expects that each defendant will have reviewed the Commonwealth's
counter-offer with the appropriate business officers before the Monday settlement conference.
Thereafter, the Court will meet with the Commonwealth and then continue forward with an
exchange of positions.
On Tuesday, November 10, 2015, at 9:30a.m., the Court will meet with the Commonwealth
and the state defendants, and then follow the same process as described for the previous day. The
Court holds the same expectations for the representatives of the state defendants regarding the
review of the Commonwealth's counter-offer before the follow-up settlement conference.
6
Case 3:14-cv-00706-MHL Document 122 Filed 06/15/15 Page 7 of 7 PageID# 4348
For both days, the Court will continue to require that the parties each have a representative
physically present with full authority to settle this action under the guidelines previously provided. 5
Stay of Proceedings
To allow the settlement process to move forward in a meaningful manner, all parties have
agreed to a full stay of the proceedings in both this Court and the state court. In staying these cases,
however, the Court reminds the parties in the strongest possible terms of the importance of a serious
and detailed exchange of information. To that end, the Court will not impose a page limit on any
submission.
Moreover, to underscore the importance of a serious effort by all parties, Judge Lauck has
instructed the undersigned to report to her after the filing of each submission as to whether the
parties have engaged in a serious effort. Should any submission lack the specificity, thoroughness
and consideration required to facilitate meaningful settlement discussions, the undersigned will be
prepared to report such to Judge Lauck, and recommend that the stay of the federal case be
immediately lifted.
The Clerk is directed to send a copy of this Order to all counsel of record for all parties and
to the Honorable M. Hannah Lauck, United States District Court Judge.
It is so ORDERED.
Is/
David J. Novak
United States Magistrate Judge
Richmond, Virginia
Date: June 15, 2015
5
The term "full authority" means the ability of a representative physically present for the
Commonwealth to resolve the case up to $250,000 and the ability of a representative available
telephonically to resolve the case over that amount. The term "full authority" means the ability of a
representative physically present for any defendant to resolve the case up to $1,000,000.
7
File and source
- File
- 122.pdf
- Size
- 360,501 bytes
- SHA-256
- 8cb2af240712c981ecbafb5b45b2870de04878b42050a2d1402386444a223930
- Our copy
- 122.pdf
- Original
- archive.org