## Facts

- The Federal Housing Finance Agency (FHFA) sued HSBC North America Holdings Inc. and related entities in the Southern District of New York in connection with residential mortgage-backed securities purchased by Fannie Mae and Freddie Mac.
- The parties previously litigated similar matters in a federal case in California, which also involved large-scale production of electronically stored information (ESI).
- In both cases, FHFA used technology-assisted review (TAR), including predictive coding, to identify responsive ESI for production.
- During e-discovery in the New York action, FHFA inadvertently failed to include one custodian in the predictive-coding workflow, even though that custodian’s ESI had been reviewed in the earlier California case.
- After the New York e-discovery process had ended, the defendant banks moved to introduce ESI from the California litigation, arguing it would show FHFA violated the New York court’s e-discovery order and that additional discovery relief was warranted.
- The court denied that motion, and the banks moved for reconsideration of the denial.

## Issues

1. Whether the banks met the standard for reconsideration of the court’s prior discovery ruling.
2. Whether the banks could rely, after the close of e-discovery, on ESI produced in the earlier California action to establish a violation of the New York e-discovery order.
3. Whether FHFA’s inadvertent omission of a custodian from the New York TAR process justified reopening discovery or other remedial relief.

## Decision

- The court denied the banks’ motion for reconsideration.
- The court declined to revise its earlier ruling that had refused to allow late use of California-case ESI to challenge FHFA’s New York TAR production.
- The court found the omission of a custodian from the New York predictive-coding process—treated as an inadvertent mistake in a large ESI effort—did not justify the relief the banks sought.

## Legal Principles

- Reconsideration of a nonfinal ruling is an exceptional remedy and generally requires an intervening change in controlling law, newly available evidence, or a need to correct clear error or prevent manifest injustice; it is not a vehicle to reargue positions previously rejected.
- Trial courts have broad discretion to manage discovery and to enforce scheduling and e-discovery orders, including whether to reopen discovery after it has closed.
- In evaluating requests for additional discovery or sanctions-like relief, courts consider the nature of the error, the presence or absence of bad faith, the showing of concrete prejudice, and the likely burden, delay, and efficiency costs of reopening discovery.
- TAR (including predictive coding) can be a reasonable method for identifying responsive ESI when used in good faith within an approved protocol; mistakes in execution do not automatically equal noncompliance warranting reopening discovery.

## Conclusion

The court denied reconsideration because the banks did not show a change in law, new evidence, or clear error in the prior ruling, and the record did not support reopening e-discovery or granting remedial relief based on FHFA’s inadvertent failure to include a single custodian in its New York predictive-coding process.


Federal Housing Finance Agency v. HSBC North America Holdings, 2014 WL 584300 (2014)