ASSURED GUARANTY MUNICIPAL CORP., f/k/a Financial Security Assurance, Inc., Plaintiff, v. UBS REAL ESTATE SECURITIES INC., Defendant No. 12 Civ. 1579(HB)(J0F) United States District Court, S.D. New York November 21, 2012 Francis IV, James C., United States Magistrate Judge MEMORANDUM AND ORDER *1 This case arises out of agreements under which Assured Guaranty Municipal Corp. (“Assured”) wrote financial guaranty policies on three residential mortgage-backed securities (“RMBS”) sponsored by UBS Real Estate Securities Inc. (“UBS”). Assured alleges that UBS breached contractual representations and warranties as to the credit quality of the mortgage loans underlying the agreements and that it breached its obligations under several commitment letters by providing rating agencies with false information in order to obtain inflated ratings for the insured certificates. Both parties now move to compel certain discovery from the other. Background The factual background of this case is set forth in detail in the decision of the Honorable Harold Baer, U.S.D.J., addressing UBS's motion to dismiss the complaint, Assured Guaranty Municipal Corp. v. UBS Real Estate Securities, Inc., No. 12 Civ. 1579, 2012 WL 3525613 (S.D.N.Y. Aug. 15, 2012), and I will repeat it here only as necessary to address the pending discovery motions. RMBS pool residential mortgage loans into a trust that issues certificates. Id. at *1. Shares of the certificates are then sold to investors who receive a portion of the principal and interest payments generated by the loans. Id. Assured provides insurance to make up the difference when cash flows from the loans are inadequate to pay investors the amounts they are due. Id. In this case, Assured agreed in 2006 and 2007 to provide financial guaranty insurance for three certificates sponsored by UBS. Id. Each certificate is governed by a Pooling and Servicing Agreement (“PSA”) entered into by parties including UBS, the depositor, and the trustee, among others. Id. Although Assured is not a party to the PSAs, it is named as a third-party beneficiary and “has the same general rights as the parties to the PSAs.” Id. at *4. The PSAs include representations and warranties by UBS with respect to the quality of the underlying loans including, for example, borrower income and borrower debt. Id. at *2 & n.2. Also relevant are commitment letters executed by UBS and Assured prior to the issuance of the financial guaranty policies. These letters provide, among other things, that as a condition for issuance of each policy, Standard and Poor's Rating Services and Moody's Investor Service, Inc. have rated the certificates AAA and Aaa, respectively. Id. at *4. (Commitment Letters, attached as Exhs. B, C, and D to Declaration of Scott D. Musoff dated Sept. 13, 2012). Assured filed this action in February 2012 in New York State Supreme Court, and UBS subsequently removed it to this Court. Assured asserted claims for breach of the representations and warranties set forth in the PSAs, breach of UBS's obligation to repurchase underperforming mortgages, breach of the commitment letters through the provision of false information to the rating agencies, declaratory judgment for failure to cure the alleged breaches, and declaratory judgment seeking reimbursement. UBS moved to dismiss the complaint, and Judge Baer granted the motion to the extent of dismissing the claims for declaratory relief as duplicative of other causes of action and dismissing the claim regarding breach of repurchase obligations for lack of standing. Id. at *7. He denied the motion with respect to the breach of the representations and warranties and breach of the commitment letters. Id. He also rejected UBS's request that he strike Assured's demand for recissory damages, finding that “[i]t would be premature to strike a remedy at the pleading stage.” Id. *2 Each party now seeks to compel certain discovery from the other, and I will take up each issue in turn. Discussion A. Discovery Sought by Assured UBS has declined to produce documents that were generated more than a month after each of the RMBS transactions sponsored by UBS closed, contending that such information is irrelevant because damages for breach of contract are determined as of the time of the breach. (UBS Real Estate Securities Inc.'s Memorandum of Law in Support of Its Motion to Compel (“Def.Memo.”) at 12–13; UBS Real Estate Securities Inc.'s Memorandum of Law in Further Support of Its Motion to Compel and in Opposition to Assured's Motion to Compel (“Def.Reply.”) at 6–9). It also argues that providing the requested information would be unduly burdensome. (Def. Memo. at 14). Generally, “[p]arties may obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or defense[.]” Fed.R.Civ.P. 26(b)(1). “Although not unlimited, relevance, for purposes of discovery, is an extremely broad concept.” Condit v. Dunne, 225 F.R.D. 100, 105 (S.D.N.Y.2004); see also Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340, 351 (1978). “Relevant information need not be admissible at the trial if the discovery appears reasonably calculated to lead to the discovery of admissible evidence.” Fed.R.Civ.P. 26(b)(1). The burden of demonstrating relevance is on the party seeking discovery. See, e.g., Mandell v. Maxon Co., No. 06 Civ. 460, 2007 WL 3022552, at *1 (S.D.N.Y. Oct. 16, 2007). Here, there is no basis for UBS's imposition of a hard date limit on its production. Documents that post-date the transactions may nevertheless relate back to the state of affairs as it existed at the crucial time. For example, UBS's retrospective assessment of the subject mortgages, triggered by Assured's demands that UBS repurchase the loans, may well analyze the representations that UBS made at the time of closing. Similarly, UBS's own repurchase demands could indicate that it complained about the same representations that it passed along to Assured. Finally, UBS's monitoring of the transactions after closing may have included an assessment of representations previously made to Assured and to the rating agencies.[1] UBS's objections on grounds of burden fare no better. “[T]he court must limit the frequency or extent of discovery” where “the burden or expense of the proposed discovery outweighs its likely benefit, considering the needs of the case, the amount in controversy, the parties' resources, the importance of the issues at stake in the action, and the importance of the discovery in resolving the issues.” Fed.R.Civ.P. 26(b)(2)(C)(iii). However, “[g]eneral and conclusory objections as to ... burden are insufficient to exclude discovery of requested information.” Melendez v. Greiner, No. 01 Civ. 7888, 2003 WL 22434101, at *1 (S.D.N.Y. Oct. 23, 2003). UBS's claim of burden is based exclusively on the representation that “even using a far more truncated time period resulted in a harvest of over 600,000 documents for only six of Assured's proposed eight search strings.” (Def. Memo. at 14). This argument fails for several reasons. First, it is to be expected that the vast majority of relevant documents will have been generated near the time that the transactions closed, which is the universe that UBS has already searched. Second, UBS has apparently not sampled documents from the post-transaction period in order to provide a realistic estimate of what might be unearthed. And, finally, the total number of documents “harvested” is not a particularly compelling statistic by itself, because it says nothing about the possible significance of the documents and may in fact reflect an inefficient search protocol. *3 Accordingly, Assured's motion to compel is granted to the extent UBS is required to produce responsive documents including those that post-date the transactions by more than one month. B. Discovery Sought by UBS Assured objects to UBS's demand for three categories of documents not directly related to the transactions at issue: Assured's knowledge of the underwriting practices of the originators, its knowledge of the processes and information used by rating agencies to assign ratings, and its knowledge of overall market conditions of RMBS. (Plaintiff's Memorandum of Law in Support of Its Motion to Compel and in Opposition to Defendant's Motion to Compel (“Pl.Memo.”) at 10–13; Plaintiff's Further Memorandum of Law in Support of Its Motion to Compel and in Opposition to Defendant's Motion to Compel (“Pl.Reply”) at 5–7; Def. Memo. at 9–10). According to UBS, the requested discovery is relevant in at least two respects. First, because Assured asserts a claim for equitable relief—specifically, rescissory damages—UBS is entitled to assert equitable defenses, and information about the reasons for Assured's delay in filing this case are relevant, for example, to the defense of laches. (Def. Memo. at 8–11; Def. Reply at 2–4). Second, UBS argues that the discovery is relevant to whether there was a breach of contract. (Def. Memo. at 11–12). For instance, if the “shadow ratings” issued by the rating agencies were promulgated consistent with practices that Assured was familiar with, then its claim of the ratings having been obtained through deception must fail. (Def. Memo. at 11–12). Assured responds that because it is seeking rescissory damages akin to monetary relief, and not rescission as such, equitable defenses are not available to UBS and discovery related to such defenses should be denied. (Pl. Reply at 5). This distinction is untenable. Rescissory damages are an alternative form of equitable relief when rescission is impracticable, MBIA Insurance Corp. v. Countrywide Home Loans, Inc., 34 Misc.3d 895, 907, 936 N.Y.S.2d 513, 523 (N.Y.Sup.Ct.2012), and, as such, they are subject to equitable defenses, including laches. Rescissory damages are obviously more beneficial to a plaintiff than out-of-pocket damages to the extent that rescissory damages permit the plaintiff to shift the risk of a declining market onto the defendant. Due to a concern that rescissory damages will penalize defendants for market risks that have nothing to do with the fraud, most courts have adopted the restrictions on rescission developed by equity courts, particularly the requirement that a plaintiff file suit for rescission promptly after notice of the fraud. Tower C. Snow, Jr., et al., “Defending Securities Class Actions,” Securities Litigation Planning and Strategies for the New Millennium (American Law Institute–American Bar Association, 2000); see also Jordan v. Duff and Phelps, Inc., 815 F.2d 429, 440–42 (7th Cir.1987); City National Bank v. American Commonwealth Financial Corp., 801 F.2d 714, 719 (4th Cir.1986); cf. Syncora Guaran tee Inc. v. EMC Mortgage Corp., No. 09 Civ. 3106, 2012 WL 2326068, at *10 (S.D.N.Y. June 12, 2012) (treating recissionary damages as “relief equivalent to rescission”). Similarly, in one recent case, the court rejected a claim by Assured for recissionary damages on equitable grounds because Assured had continued to accept premiums for its financial guarantee insurance after it had knowledge of the alleged breach. Assured Guaranty Municipal Corp. v. DLJ Mortgage Capital, Inc., 37 Misc.3d 1212(A), 2012 WL 5192752, at *5–6 (N.Y.Sup.Ct. Oct. 11, 2012) (slip op.).[2] *4 Two of the three categories of discovery sought by UBS are therefore relevant to its potential equitable defenses: information about Assured's knowledge of the originator's underwriting policies and its knowledge of the practices of the rating agencies. Assured's general knowledge of the RMBS market, however, is too tenuously related to any plausible defense to be a proper subject of discovery. C. Search Terms Finally, the parties dispute the adequacy of the search terms that Assured proposes to apply to electronic documents. (Pl. Memo. at 13–15; Def. Memo. at 15). A court should be hesitant to resolve issues that demand technical expertise. Whether search terms or “keywords” will yield the information sought is a complicated question involving the interplay, at least, of the sciences of computer technology, statistics and linguistics. See George L. Paul & Jason R. Baron, “Information Inflation: Can the Legal System Adapt?”, 13 Rich. J.L. & Tech. 10 (2007).... Given this complexity, for lawyers and judges to dare opine that a certain search term or terms would be more likely to produce information than the terms that were used is truly to go where angels fear to tread. United States v. O'Keefe, 537 F.Supp.2d 14, 24 (D.D.C.2008). Here, the parties have not provided me with the kinds of expert affidavits that would be necessary for me to offer an opinion as to the most efficient search protocol. They are left with three options. They can cooperate (along with their technical consultants) and attempt to agree on an appropriate set of search criteria. They can refile a motion to. compel, supported by expert testimony. Or, they can request the appointment of a neutral consultant who will design a search strategy. See Trusz v. UBS Realty Investors LLC, No. 3:09 CV 268, 2010 WL 3583064, at *5 (D.Conn. Sept. 7, 2010) (suggesting that special electronic discovery master would be appointed if parties failed to agree on search protocol), vacated in part on other grounds on reconsideration, 2011 WL 124504 (D.Conn. Jan. 13, 2011). I will leave it to the parties to consider the best course. Conclusion For the reasons set forth above, Assured's motion to compel (Docket no. 35) is granted to the extent that UBS shall produce relevant documents generated up to the date of the filing of the complaint in this action. UBS's motion (Docket no. 32) is granted to the extent that Assured shall produce documents relating to UBS's equitable defenses, including documents relating to Assured's knowledge of the originators' underwriting policies and the rating agencies' rating practices. These determinations are designed to provide guidance and not to bless the sweeping document requests that the parties have promulgated. To the extent they cannot agree on more targeted discovery, the parties are invited to seek my assistance. In all other respects, the motions are denied. SO ORDERED. Footnotes [1] UBS suggests that even if the requested information were relevant, it is likely subject to work product protection. (Def. Reply at 8 n.6). I will address issues of privilege and work product if and when they are properly raised. [2] Indeed, in the instant case, Judge Baer has treated the relief requested by Assured as equitable in nature. See Assured Guaranty Municipal Corp., 2012 WL 3525613, at *7 (quoting Syncora Guaran tee Inc., 2012 WL 2326068, at *10 for the proposition that “[w]hether [plaintiff] may seek equitable remedies requires the Court to make factual determinations for which there is no support in the record at this stage.” (alterations in original)).