Monterey Bay Military Hous. v. Ambac Assurance Corp
| Docket Number | Civil Action 19 Civ. 9193 (PGG) (SLC) |
| Decision Date | 25 August 2023 |
| Parties | MONTEREY BAY MILITARY HOUSING, LLC, MONTEREY BAY LAND, LLC, MEADE COMMUNITIES LLC, FORT BLISS/WHITE SANDS MISSILE RANGE HOUSING LP, RILEY COMMUNITIES LLC, FORT LEAVENWORTH FRONTIER HERITAGE COMMUNITIES, I, LLC, FORT LEAVENWORTH FRONTIER HERITAGE COMMUNITIES, II, LLC, CARLISLE/PICATINNY FAMILY HOUSING LP, BRAGG COMMUNITIES LLC, FORT DETRICK/WALTER REED ARMY MEDICAL CENTER LLC, PICERNE-FORT POLK FUNDING, LLC, RUCKER COMMUNITIES, LLC, STEWART HUNTER HOUSING LLC, SILL HOUSING, LLC, AETC HOUSING LP, AMC WEST HOUSING LP, LACKLAND FAMILY HOUSING, LLC, and VANDENBERG HOUSING LP, Plaintiffs, v. AMBAC ASSURANCE CORPORATION, JEFFERIES MORTGAGE FINANCE, INC., JEFFERIES & COMPANY INC., JEFFERIES L.L.C., JEFFERIES GROUP LLC, DANNY RAY, and CHETAN MARFATIA, Defendants. |
| Court | U.S. District Court — Southern District of New York |
In the latest chapter in the lengthy history of discovery in this action, Defendant Ambac Assurance Corporation (“Ambac”) sought to compel the United States Department of the Army (“Army”), and Defendant Jefferies[1] sought to compel the United States Department of the Air Force (“Air Force”), to produce witnesses for Federal Rule of Civil Procedure 30(b)(6) depositions. (ECF Nos. 709; 712-13 (the “Motions to Compel”)). Following an in-person conference on August 1, 2023, the Court granted in part and denied in part the Motions to Compel. (ECF No. 733 (the “Aug. 1 Order”)). The Army and the Air Force have objected to the Aug. 1 Order which they now ask the Court to stay pending a ruling by the Honorable Paul G. Gardephe on their objections. (ECF No. 737 (the “Stay Motion”)). Ambac and Jefferies oppose the Stay Motion. (ECF No. 738). For the reasons set forth below, the Stay Motion is DENIED.
II.BACKGROUND
The factual background of this action is set out in detail in prior decisions issued by Judge Gardephe and the undersigned. See Monterey Bay Mil. Hous., LLC v. Ambac Assurance Corp., No. 19 Civ. 9193 (PGG) (SLC), 2023 WL 3779338 (“Monterey Bay IV”); Monterey Bay Mil. Hous., LLC v. Ambac Assurance Corp., No. 19 Civ. 9193 (PGG) (SLC), 2023 WL 315072 (S.D.N.Y. Jan. 19, 2023) (“Monterey Bay III”); Monterey Bay Mil. Hous., LLC v. Ambac Assurance Corp., No. 19 Civ. 9193 (PGG) (SLC), 2021 WL 4173929 (S.D.N.Y. Sept. 14, 2021) (“Monterey Bay II”); Monterey Bay Mil. Hous., LLC v. Ambac Assurance Corp., 531 F.Supp.3d 673 (S.D.N.Y. 2021) (“Monterey Bay I”).[2]The Court incorporates those factual summaries, and all defined terms to the extent not defined differently herein.
As is relevant to the Stay Motion, the Military Housing Privatization Initiative of 1996 (“MHPI”) authorized the United States Department of Defense, including the Army and the Air Force, “to enter into agreements with private developers to modernize housing for military families on bases around the country.” (ECF No. 210-3 ¶ 1). Plaintiffs[3]are the MHPI project entities dedicated to individual military bases (the “Projects”). (Id.) The Army and the Air Force partnered with private developers, which managed the Projects. (Id. ¶¶ 2-3). For each Army MHPI Project, the Army contributed housing and equity in exchange for a “significant equity participation,” and possessed “consent rights to major decisions regarding the Projects, including the terms of the initial financing at issue and whether to pursue litigation such as” this action. (Id. ¶ 2). Similarly, for each Air Force MHPI Project, the Air Force contributed housing and provided a loan to the project in exchange for the rights to cash flows from the project, to consent to significant aspects of the project, and to consult on whether to pursue litigation including this action. (Id ¶ 3). The Army and the Air Force are not, however, parties to this action. (See generally id.).
The Court deemed fact discovery in this action closed as of April 28, 2023, with a few discrete issues, including discovery from the Army and Air Force, remaining open. Monterey Bay IV, 2023 WL 3779338, at *4. (ECF Nos. 635; 646; 674; 696). Expert discovery is ongoing and will be completed by October 27, 2023. (ECF No. 696).
On December 22, 2022, Ambac served on the Army a Rule 30(b)(6) deposition subpoena and Touhy request. (ECF No. 712-1 (the “Army Touhy Request”)). Over the next several months, Ambac and the Army met and conferred seven times and Ambac narrowed the Army Touhy Request three times. (ECF Nos. 712 at 1; 712-2; 712-3; 712-4). The Army continued to object to the Army Touhy Request-even as modified-as irrelevant, overbroad, and/or unduly burdensome. (ECF Nos. 712-6; 712-7 at 16; 712-11; 712-12).
In the meantime, Defendants deposed three individual Army witnesses: Mark Connor, Rhonda Hayes, and Ian Clark. (ECF Nos. 684-1; 712 at 2; 712-7 at 20). See Monterey Bay IV, 2023 WL 3779338, at *3.[5]Ambac invited the Army to adopt certain testimony of those witnesses as the Army's Rule 30(b)(6) testimony. (ECF Nos. 709-3 at 6; 712 at 2; 734 at 48). The Army, however, declined to do so, and took the position that it would only “consider” responding to written questions and would not offer a Rule 30(b)(6) witness to testify at an in-person deposition. (ECF No. 712-13 at 2, 4). On July 11, 2023, Ambac filed the Motion to Compel the Army to produce a Rule 30(b)(6) witness. (ECF No. 712).
On March 7, 2023, Jefferies served a Touhy request on the Air Force seeking testimony concerning, inter alia, Defendants' “alleged wrongful acts,” GMAC's and Mr. Ray's role with respect to Air Force MHPI Projects, and the preservation of documents. (ECF No. 675-2 (the “Air Force Touhy Request”); see ECF No. 709 at 1 n.3). At the Air Force's request, Jefferies narrowed the topics in the Air Force Touhy Request, but the Air Force still denied it as unduly burdensome, and the parties continued to meet and confer four more times regarding the topics. (ECF Nos. 709 at 1 n.1; 709-2; 709-4). Jefferies subsequently agreed to narrow the topics as to which it sought the Air Force's Rule 30(b)(6) testimony to four: (i) the factors the Air Force considered when selecting lenders and approving financing for the Air Force MHPI Projects, (ii) whether the Air Force contends that Defendants made misrepresentations to it, (iii) the Air Force's consent to Plaintiffs' filing this action, and (iv) the Air Force's preservation and production of relevant documents. (ECF No. 709 at 1-2; see ECF No. 734 at 33-34, 36). Although Jefferies invited the Air Force to designate individual Air Force witnesses' testimony for Rule 30(b)(6) purposes, the Air Force declined to review the designations absent Jefferies's prior agreement to waive the right to a Rule 30(b)(6) deposition. (ECF Nos. 709-3 at 6, 8; 712-13 at 2). Ultimately, like the Army, the Air Force only offered to respond to written questions and would not offer a Rule 30(b)(6) witness to testify at an in-person deposition. (ECF No. 709-3 at 4, 8). On July 11, 2023, Jefferies filed the Motion to Compel the Air Force to produce a Rule 30(b)(6) witness. (ECF No. 709).
After hearing nearly an hour of in-person argument from the parties on the Motions to Compel, the Court granted them in part and denied them in part in an oral ruling memorialized in the Aug. 1 Order. (ECF Nos. 733; 734). The Court first explained that, while the ruling would be the same whether the APA's[6] arbitrary and capricious standard or the Rule 45 substantial burden standard applied, the Court was applying the APA arbitrary and capricious standard because, although “narrow,” that standard was “more deferential” to the position of the Army and the Air Force. (ECF No. 734 at 64).
The Court then turned to the question whether the decision of the Army and the Air Force “to deny the [D]efendants' request to produce a live witness for a Rule 30(b)(6) deposition was based on a consideration of the relevant factors and whether there has been a clear error of judgment.” (ECF No. 734 at 64 (quoting City of New York v. Shalala, 34 F.3d 1161, 1167 (2d Cir. 1994)). The Court explained that, “despite the deference that [the APA] standard gives to the government . . . the government's decision not to produce a live [Rule] 30(b)(6) witness from the Army and the Air Force is not supported by the record here and, therefore, is arbitrary and capricious.” (Id.) The Court found that the Defendants' “very, very strong interest . . . in obtaining . . . the very important evidence from the Army and Air Force in this case” outweighed the burden that the Army and Air Force would incur in producing Rule 30(b)(6) witnesses. (Id. at 64-65). Unlike typical non-parties “who are multiple steps removed and don't have a financial interest in the outcome of the case,” the Court observed that the Army and Air Force “feature prominently in the complaint” and “have a financial interest with respect to the projects that are the plaintiffs in this case.” (Id. at 65). Because the Defendants' interest in obtaining the Rule 30(b)(6) testimony outweighed the interest of the Army and Air Force in avoiding the burden of preparing the witnesses, the Court held that their “denial of the request to produce the witnesses was arbitrary and capricious.” (Id.)
The Court cautioned that its ruling was “very narrow in order to take into account the burden on the Air Force and the Army in producing a [Rule] 30(b)(6) witness.” (Id. at 65-66). To minimize that burden, the Court: (1) limited the length of the depositions; (2) further narrowed...
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