Free Motion for Miscellaneous Relief - 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, and OCWEN LOAN SERVICING, LLC, Defendants.

REVISED AND RENEWED MOTION TO CONDUCT ADDITIONAL DISCOVERY

Pursuant to the ruling by Magistrate Judge Craig Shaffer on March 24, 2008, as well the Courtroom Minutes/Minute Order entered on March 27, 2008, Cartel Asset Management ("Cartel"), through its undersigned counsel, G.W. MERRICK & ASSOCIATES, LLC, respectfully submits this Revised and Renewed Motion to Conduct Additional Discovery. Cartel seeks entry of an Order authorizing Cartel to: (i) serve the written discovery attached hereto as Exhibit A, (ii) directing that such discovery is deemed served, and (iii) conduct a Fed.R.Civ.P. 30(b)(6) deposition of each of the Defendants [which can be consolidated into a single deposition if the designee(s) is/are the same for each of the Defendants]. As grounds for this Revised and Renewed Motion to Conduct Additional Discovery, Cartel advises the Court as follows:

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

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. 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." Id. at pp. 30-31; 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," "ill-gotten gains" or "benefit" derived by wrongdoers as a result of misappropriation. Id. at pp. 23, 25 and 29.

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4.

In addressing the proof of "unjust enrichment," "ill-gotten gains,"

or "benefit" derived by the Bank from its extensive theft 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 [Cartel's expert witness] to apply the same profit ratio for all product lines to [the BPO product line]." Id. at p. 41. 5. 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.

II. 6.

The Appellate Opinion Concerning Reopening Discovery Unlike many cases where the Tenth Circuit sends a case back for

retrial, the appellate court specifically addressed in this case the propriety of reopening discovery on a limited basis prior to retrial: 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

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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). Id. at pp. 38-39. 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 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).

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III.

The Limited Additional Discovery Sought by Cartel is Appropriate

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 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, 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 (without ability to be exhaustive): · The continuing relocation offshore of the Bank's BPO business to a lower cost -- and more highly profitable -- environment now directed from India;

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·

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; 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 illgotten benefit conferred upon the Bank. 10. The additional discovery proposed by Cartel is specifically limited

to the "damages issue" (identifying and measuring the "unjust enrichment," "ill-gotten gains" and/or "benefit" derived by the Bank from the wholesale theft of Cartel's trade secret). It is also limited to securing information in the possession, custody and/or control of the Defendants (all of whom are under common ownership and control of Ocwen Financial Corp.) that was not available at the time of the initial trial in this case. 11. Refusal to permit the limited discovery sought herein would work

a manifest injustice against Cartel and would war with common sense. WHEREFORE, Cartel respectfully moves this Court for entry of an Order authorizing Cartel to: (i) serve the written discovery attached hereto as Exhibit A, (ii) directing that such discovery is deemed served upon each of the Defendants, and (iii)

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conduct a Fed.R.Civ.P. 30(b)(6) deposition of each of the Defendants [which can be consolidated into a single deposition if the designee(s) is/are the same for each of the Defendants]. Respectfully submitted this 28th 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

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CERTIFICATE OF SERVICE I hereby certify that on the 28th day of March, 2008, a true and correct copy of the foregoing REVISED AND RENEWED MOTION TO CONDUCT ADDITIONAL DISCOVERY 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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