Case 1:08-cv-00361-GJQ Doc #377 Filed 03/08/11 Page 1 of 12 Page ID#7955

UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION

JAMES B. HURLEY and BRANDI HURLEY,

jointly and severally,

Plaintiffs,
v. Case No. 1:08-cv-00361
Honorable Gordon J. Quist
DEUTSCHE BANK TRUST COMPANY
AMERICAS, f/k/a Banker’s Trust Company, as
Trustee and custodian by: SAXON MORTGAGE
SERVICES, INC., f/k/a Meritech Mortgage
Services, Inc., and DAVID C. LOHR, and
ORLANS ASSOCIATES, PC,

Defendants.
_______________________________________/

SAXON MORTGAGE SERVICES, INC. AND

DEUTSCHE BANK TRUST COMPANY AMERICAS’
MOTION TO QUASH THE SUBPOENA SERVED ON GREGORY SMALLWOOD

Defendants, Saxon Mortgage Services, Inc. and Deutsche Bank Trust Company Americas

(“Saxon”), through counsel, respectfully request that this Court quash the unsigned subpoena

served on Gregory Smallwood on March 3, 2011 because (1) the Court has ruled inadmissible

any reference to the DOJ investigation for which Plaintiffs have suggested Mr. Smallwood’s

testimony would be probative; (2) Mr. Smallwood is not on any party’s witness list; (3) Mr.

Smallwood does not have any personal knowledge of any of the facts of this case because he did

not join Saxon Mortgage Services, Inc. until 2008, and (4) as Saxon Mortgage Services, Inc.’s

general counsel, Mr. Smallwood’s communications are subject to attorney-client privilege.

Pursuant to Local Rule 7.1, concurrence in the relief sought was requested from

Plaintiffs’ counsel, but denied. Accordingly, Saxon respectfully requests that its motion be

granted, that the subpoena served on Mr. Smallwood be quashed, and that Plaintiffs otherwise be

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precluded from calling Mr. Smallwood as a witness in this case for any purpose. This motion is

supported by the attached Brief.

Respectfully submitted,

KERR, RUSSELL AND WEBER, PLC

By: /s/Fred K. Herrmann

William A. Sankbeil (P19882)
Fred K. Herrmann (P49519)
Matthew L. Powell (P69186)
500 Woodward Avenue, Suite 2500
Detroit, MI 48226
(313) 961-0200; (313) 961-0388 (facsimile)
was@krwlaw.com; fkh@krwlaw.com;
mlp@krwlaw.com

Attorneys for Defendants Saxon Mortgage

Dated: March 8, 2011 Services, Inc. and Deutsche Bank Trust Company
Americas

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UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION

JAMES B. HURLEY and BRANDI HURLEY,

jointly and severally,

Plaintiffs,
v. Case No. 1:08-cv-00361
Honorable Gordon J. Quist
DEUTSCHE BANK TRUST COMPANY
AMERICAS, f/k/a Banker’s Trust Company, as
Trustee and custodian by: SAXON MORTGAGE
SERVICES, INC., f/k/a Meritech Mortgage
Services, Inc., and DAVID C. LOHR, and
ORLANS ASSOCIATES, PC,

Defendants.
_______________________________________/

BRIEF IN SUPPORT OF SAXON MORTGAGE SERVICES, INC. AND

DEUTSCHE BANK TRUST COMPANY AMERICAS’
MOTION TO QUASH THE SUBPOENA SERVED ON GREGORY SMALLWOOD

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TABLE OF CONTENTS

STATEMENT OF THE ISSUE PRESENTED ............................................................................. iii

CONTROLLING OR MOST APPROPRIATE AUTHORITY .................................................... iv

INTRODUCTION AND STATEMENT OF FACTS .................................................................... 1

ARGUMENT .................................................................................................................................. 1

CONCLUSION ............................................................................................................................... 5

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STATEMENT OF THE ISSUE PRESENTED

Should the Court quash the unsigned subpoena handed to Gregory Smallwood on March

3, 2011, and preclude Plaintiffs from calling Mr. Smallwood as a witness in this case for any

purpose, because (1) the Court has ruled inadmissible any reference to the DOJ investigation for

which Plaintiffs have suggested Mr. Smallwood’s testimony would be probative; (2) Mr.

Smallwood is not on any party’s witness list; (3) Mr. Smallwood does not have any personal

knowledge of any of the facts of this case because he did not join Saxon Mortgage Services, Inc.

until 2008, and (4) as Saxon Mortgage Services, Inc.’s general counsel, Mr. Smallwood’s

communications are subject to attorney-client privilege?

Saxon answers, “Yes.”

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CONTROLLING OR MOST APPROPRIATE AUTHORITY

CASES

Baxter Travenol Lab. v. Le May, 708 F.2d 721 (6th Cir. 1982)

Crabb v. KFC Nat'l Management Co., No. 91-5474, 1992 U.S. App. LEXIS 38268 (6th Cir. Jan.
6, 1991)

Crenshaw v. Herbert, No. 09-0348-pr, 2011 U.S. App. LEXIS 2155 (2d Cir. N.Y. Feb. 2, 2011)

Dodson v. CBS Broad. Inc., 423 F. Supp. 2d 331 (S.D.N.Y. 2006)

L.C. v. Cent. Pa. Youth Ballet, 2010 U.S. Dist. LEXIS 66060, 28-29 (M.D. Pa. July 2, 2010)

Reynolds v. Roberts, 202 F.3d 1303 (11th Cir. 2000)

Spreadsheet Automation Corp. v. Microsoft Corp., 587 F. Supp. 2d 794 (E.D. Tex. 2007)

United States v. Associated Milk Producers, Inc., 534 F.2d 113 (8th Cir. 1976)

United States v. Roxworthy, 457 F.3d 590 (6th Cir. 2006)

RULES

FED. R. CIV. P. 45

FED. R. EVID. 401, 402, 403, and 408

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INTRODUCTION AND STATEMENT OF FACTS

On March 3, 2011, Plaintiffs’ counsel handed Gregory Smallwood an unsigned1

subpoena directing him to be present, beginning on March 3, to testify at trial. Exhibit A,

Declaration of Gregory Smallwood (“Smallwood Declaration”) ¶ 5. Mr. Smallwood is Saxon

Mortgage Services, Inc.’s (“SMSI”) general counsel. Id. ¶ 1. He resides in Texas. Id. ¶ 2. Mr.

Smallwood did not join SMSI until April 22, 2008. Id. ¶ 3. He has no personal knowledge of

any of the facts underlying the allegations in this case. Id. ¶ 4.

Mr. Smallwood does not appear, nor did he ever appear, on any party’s witness list.

When counsel for SMSI approached Plaintiffs’ counsel about Mr. Smallwood’s subpoena, Mr.

Odom stated that Mr. Smallwood would be a rebuttal witness, not subject to disclosure. On

March 8, 2011, Mr. Odom stated that Mr. Smallwood was involved in negotiations with the

Department of Justice (“DOJ”). The same day, March 8, the Court ruled, twice, that evidence of

the DOJ investigation was inadmissible and unfairly prejudicial.

ARGUMENT

The Court’s case management order makes clear that no witness whose name does not

appear on the party’s witness list will be permitted to testify for any purpose, except

impeachment. Doc. #114 at 4. Mr. Smallwood does not appear on any party’s witness list.

Moreover, because Mr. Smallwood did not join SMSI until April 2008, he has no knowledge of

the facts relevant to this case. Because he has no personal knowledge of the facts relevant to this

case, he could not properly appear for any impeachment purpose.

1
Federal Rule of Civil Procedure 45(a)(3) requires that the clerk of the court or an attorney sign
the subpoena as an officer of the court from which the subpoena is issue. Because the subpoena
was not signed, it is a nullity. The Court may quash the subpoena for this reason alone.
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In addition, because he lacks personal knowledge of the facts underlying Plaintiffs’

allegations, the only possible reason to call Mr. Smallwood as a rebuttal witness is to explore the

Department of Justice (“DOJ”) investigation. Mr. Smallwood cannot be called for this reason.

The Court ruled twice on March 8, 2011 that the DOJ investigation was not relevant and would

be unfairly prejudicial. And, as the Court has previously ruled, “this case is about what

happened between Plaintiffs and Defendants and any damages Plaintiffs may have suffered.”

Doc. #324 at 6, February 23, 2011 Opinion and Order. Moreover, the Court specifically

prohibited Plaintiffs, including their attorneys, from “suggest[ing] that damages should be

imposed against [Saxon] based upon events having no connection to the facts of this case.” Doc.

#324 at 6, February 23, 2011 Opinion and Order. Accordingly, the Court’s rulings prohibit

Plaintiffs from basing their claim to damages on allegations of other alleged SCRA violations

subject to DOJ inquiry, and precluded Plaintiffs from using Mr. Smallwood to explore the

existence or substance of the DOJ investigation.

Even if the Court’s previous rulings did not already prohibit references or evidence of the

DOJ investigation, it would nevertheless be inadmissible under Federal Rules of Evidence 401,

402, 403, and 408. See, e.g., Crenshaw v. Herbert, No. 09-0348-pr, 2011 U.S. App. LEXIS

2155 (2d Cir. N.Y. Feb. 2, 2011) (“even if evidence of a prior substantiated excessive force

investigation existed, on the facts of the particular case before us such evidence would be

inadmissible to show that Bartkowiak acted violently in this instance.”); Doc. #241, December

17, 2010 Opinion at 12 (“The existence of another case involving similar facts, without more, is

insufficient to support an award of punitive damages”).

Likewise, the fact that Saxon may be negotiating a settlement of the investigation is also

inadmissible. See, e.g., Reynolds v. Roberts, 202 F.3d 1303, 1318 (11th Cir. 2000)

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(representations min the course of negotiating the terms of a DOJ consent decree were

inadmissible under Federal Rule of Evidence 408); United States v. Associated Milk Producers,

Inc., 534 F.2d 113, 117 (8th Cir. 1976) (a consent decree “is the equivalent of a nolo contendere

plea and is inadmissible in other suits” involving the same alleged violations); L.C. v. Cent. Pa.

Youth Ballet, 2010 U.S. Dist. LEXIS 66060, 28-29 (M.D. Pa. July 2, 2010) (“consent decrees are

not adjudications of guilt. Therefore, the consent decree entered into by Karl Moll cannot

materially substantiate the claims Plaintiffs have asserted against him in the action at bar,

meaning that it is entirely irrelevant to those claims.”); Spreadsheet Automation Corp. v.

Microsoft Corp., 587 F. Supp. 2d 794, 801 (E.D. Tex. 2007) (“evidence of consent decrees,

settlements, and licenses made under the threat of litigation would not be proper evidence of

Plaintiff’s damages to present to the jury.”); Dodson v. CBS Broad. Inc., 423 F. Supp. 2d 331,

334 (S.D.N.Y. 2006) (The “limited probative value of” an EEOC suit and settlement “is

substantially outweighed by the burden that the admission of this evidence would place on

[defendant] to explain the circumstances at issue in [the EEOC’s lawsuit and its settlement], by

the waste of time that would accompany such explanations, and by the danger that admission of

this evidence will create unfair prejudice against [defendant].” (citations omitted)).

Further, even if the DOJ investigation were relevant to the facts of this case, which they

are not, any reference to the investigation, the negotiation of a consent decree, or the allegations

that are the basis for that investigation, would also be unfairly prejudicial to Saxon. Under Rule

403, even relevant evidence may be excluded if its probative value is substantially outweighed

by the danger of unfair prejudice, confusion of the issues, or misleading the jury. FED. R. EVID.

403. Thus, even if the DOJ investigation could be deemed relevant, the danger of unfair

prejudice, confusion of the issues, and misleading the jury is extreme. It is difficult to imagine

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evidence that would be more unfairly prejudicial than putting Saxon on trial for unproven

allegations by non-parties not before the Court. Plaintiffs have no justification for introducing

such evidence or making such references in this case – other than for the purpose of gaining an

unfairly prejudicial advantage and misleading the jury. Accordingly, at a minimum, such

evidence or references should be excluded as unfairly prejudicial under FRE 403.

In addition to being irrelevant and unfairly prejudicial, the introduction of evidence of, or

reference to, the DOJ investigation would result in a monumental waste of time. As discussed,

the DOJ investigation is merely a preliminary investigation based on unproven allegations, for

which no liability or wrongdoing has been found. Moreover, Plaintiffs would have to prove the

factual predicate of each, unrelated allegation, leading to a waste of the Court’s and the jury’s

time on unrelated and irrelevant matters.

Even if Mr. Smallwood had any knowledge of the facts underlying the claims in this

case, any communication Mr. Smallwood had with SMSI employees, or outside counsel, would

be protected by the attorney-client privilege because he is SMSI’s general counsel. See United

States v. Roxworthy, 457 F.3d 590 (6th Cir. 2006); Crabb v. KFC Nat'l Management Co., No.

91-5474, 1992 U.S. App. LEXIS 38268 (6th Cir. Jan. 6, 1991) (and cases cited therein); Baxter

Travenol Lab. v. Le May, 708 F.2d 721 (6th Cir. 1982). Pursuant to FED. R. CIV. P.

45(c)(3)(A)(iii), the issuing court “must quash” a subpoena that “requires disclosure of

privileged or other protected matter . . . .” The unsigned subpoena requiring SMSI’s general

counsel to testify would require just such disclosures.

Finally, FED. R. CIV. P. 45(c)(3)(A)(i) also requires the issuing court to quash a subpoena

that fails to allow a reasonable time to comply. As stated above, Mr. Smallwood was handed an

unsigned subpoena on March 3, which required his attendance on March 3. The utter lack of

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time to comply with the subpoena falls far short of the “presumptive” fourteen days Plaintiffs,

just one and half weeks ago, argued was the required notice period before a witness could be

compelled to testify. Doc. #320 at 7. Accordingly, the Court should quash the unsigned

subpoena Plaintiffs’ counsel handed Mr. Smallwood on March 3, 2011.

CONCLUSION

For the reasons stated, Saxon respectfully requests that the Court quash the unsigned

subpoena handed to Gregory Smallwood by Plaintiffs’ counsel on March 3, 2011, and preclude

Plaintiffs from calling Mr. Smallwood as a witness in this case for any purpose.

Respectfully submitted,

KERR, RUSSELL AND WEBER, PLC

By: /s/Fred K. Herrmann

William A. Sankbeil (P19882)
Fred K. Herrmann (P49519)
Matthew L. Powell (P69186)
500 Woodward Avenue, Suite 2500
Detroit, MI 48226
(313) 961-0200; (313) 961-0388 (facsimile)
was@krwlaw.com; fkh@krwlaw.com;
mlp@krwlaw.com

Attorneys for Defendants Saxon Mortgage

Services, Inc. and Deutsche Bank Trust Company
Dated: March 8, 2011 Americas

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CERTIFICATE OF SERVICE

I hereby certify that on December March 8, 2011, I electronically filed the foregoing

paper with the Clerk of the Court using the ECF system, which will send notification of such

filing to Counsel of Record via the CM/ECF system.

Respectfully submitted,
KERR, RUSSELL AND WEBER, PLC

By: /s/ Fred K. Herrmann

Fred K. Herrmann (P49519)
500 Woodward Avenue, Suite 2500
Detroit, Michigan 48226
(313) 961-0200
(313) 961-0388 (Facsimile)
Dated: March 8, 2011 fkh@krwlaw.com

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EXHIBIT A
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