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Federal Deposit Insurance Corp. v. Bayone Real Estate Investment Corp.

United States District Court, N.D. California

March 27, 2017

FEDERAL DEPOSIT INSURANCE CORPORATION, Plaintiff,
v.
BAYONE REAL ESTATE INVESTMENT CORPORATION, et al., Defendants.

          ORDER ON PARTIES' DISCOVERY DISPUTE REGARDING DEFENDANTS' RESPONSES TO REQUESTS FOR PRODUCTION AND DOCUMENT PRODUCTION RE: DKT. NO. 67

          SUSAN VAN KEULEN United States Magistrate Judge.

         The parties filed a joint statement regarding a dispute over defendants' responses to requests for production and document production. Plaintiff seeks additional responses and production of documents on two subjects: (1) a 2009 lawsuit in Santa Clara County Superior Court between defendant BayOne REIC (“BayOne”) and Lydia Fangon, a borrower on one of the loans that is the subject of this action (the “Fangon Action”), and (2) BayOne's errors and omissions (“E&O”) insurance policies and applications. ECF 67 at 1-3. Plaintiff requests an order requiring BayOne to produce additional documents regarding the Fangon Action and regarding BayOne's insurance policies and applications, as well as a declaration from Young-Ming Chou, BayOne's counsel in the Fangon Action, concerning his search for documents. Id. at 5.[1]

         Defendants oppose on the grounds that there are no responsive documents on these issues in their possession, custody, or control that have not already been produced. Id. at 3-5. Defendants offer to provide a further supplemental response to requests for production of both categories of documents, confirming that a diligent search was made and no discoverable documents were found. Id. at 5.

         For the reasons discussed below, the Court holds that defendants must conduct a further diligent search for and reasonable inquiry to locate documents regarding the Fangon Action and either produce such documents or, if no documents are located, provide further responses and a declaration from Mr. Chou confirming that following a diligent search and reasonable inquiry, including a search by Mr. Chou, defendants have not located any additional responsive documents concerning that lawsuit. The Court further holds that defendants must supplement their responses to confirm that following a diligent search and reasonable inquiry, they have not located any insurance policies that would provide coverage for the claims made in this action.

         I. FACTUAL BACKGROUND

         Plaintiff Federal Deposit Insurance Corporation, as Receiver for BankUnited, FSB, alleges that defendants breached a written Mortgage Broker Agreement that set forth terms by which BankUnited would purchase and/or fund loans and defendant BayOne would originate, sell, or assign loans. ECF 67 at 1. According to plaintiff, the loan documents for three loans submitted by BayOne to BankUnited-including a loan to borrower Lydia Fangon-contained inaccuracies, misrepresentations, and fraudulent statements. Id. Defendants have denied liability.

         Discovery closed on March 6, 2017, except for the deposition of BayOne, which was to take place by March 9, 2017. On March 16, 2017, the parties filed separate statements concerning several issues plaintiff had with defendants' document production. ECF 61, 63. The Court ordered the parties to meet and confer in accordance with this Court's standing order and, if necessary, file a joint statement regarding any remaining disputes by March 22, 2017. ECF 65. The parties filed a joint statement on two remaining issues on March 22. ECF 67.

         II. Documents Relating to Fangon Action

         On April 6, 2016, plaintiff served requests for production (“RFPs”) on BayOne. Plaintiff argues that documents concerning the Fangon Action are responsive to three of those RFPs (see Id. at 1):

         RFP 17:

All Documents relating to the Borrowers, the Subject Properties, and/or the Subject Loans, including, but not limited to, escrow instructions, ledgers, settlement statements, communications, contracts, invoices, closing packets, appraisals, cancelled checks, disclosures, title insurance documents, wire confirmations, and/or all other loan information.

         RFP 18:

All Communications, or Documents concerning Communications, between or among You, on the one hand, and the Borrowers, BankUnited and/or any other Person(s), on the other hand, Relating to the Borrowers, the Properties, and/or the Subject Loans.

         RFP ...


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