On August 4, Judge Paul A. Crotty of the Southern District of New York granted Quicken Loans’ motion to dismiss a lawsuit brought by Deutsche Bank National Trust Co. (as Trustee of the GSR 2007-OA1 trust), alleging that Quicken breached its obligation to repurchase defective mortgage loans. Following the First Department’s decision in ACE Securities, Judge Crotty held that the six year statute of limitations for breach of contract began to accrue when Quicken allegedly breached the representations and warranties at issueï¿½at the time the loans were soldï¿½not when the Trustee demanded repurchase. He rejected the plaintiff’s argument that the lawsuit was timely because the contract at issue included a so-called “accrual” provision, which specified that the Trustee’s cause of action for repurchase would accrue upon (1) notice of breach (2) failure to cure the breach and (3) Plaintiff’s demand for cure. The court held that the accrual provision could not alter the six-year limitations period because parties cannot agree in advance to extend the statute of limitations before any claims have accrued. Opinion and Order.
On May 27, Judge Laura Taylor Swain of the Southern District of New York granted Morgan Stanley’s motion for reconsideration and dismissed as time-barred claims brought by certain named plaintiffs (the New Plaintiffs) first added to the case more than a year after it was originally filed. The New Plaintiffs, several banks and pension funds, asserted claims under Sections 11, 12 and 15 of the Securities Act of 1933 but did so after the expiration of the three-year statute of repose applicable to such claims. In September 2011, Judge Swain originally held that the claims were nonetheless timely under the American Pipe tolling doctrine, which holds that the statute of limitations for an absent class member’s individual claim is tolled during the pendency of a putative class action. In 2013, however, the Second Circuit in In re IndyMac Mortgage-Backed Securities Litigation, 721 F.3d 95 (2d Cir. 2013), held that American Pipe tolling applies to statutes of limitations, but does not apply to statutes of repose. (As discussed in the March 17, 2014, Week in Review, the Supreme Court granted a petition for a writ of certiorari in the IndyMac case to resolve the applicability of American Pipe to statutes of repose; the case remains pending). Upon reconsideration in light of the Second Circuit’s IndyMac decision, Judge Swain held that the New Plaintiffs’ claims were barred by the applicable statute of repose. She rejected the New Plaintiffs’ attempt to rely on relation back under Rule 15 or joinder under Rule 17(a), finding those rules equally inapplicable to avoid statutes of repose as American Pipe tolling. Order.
On September 26, Fitch updated its securitization criteria for global trade receivables. Report.
Note: Free registration is required for rating agency releases and reports.
On July 12, Treasury and the IRS announced that they intend to amend final Treasury regulations implementing the U.S. Foreign Account Tax Compliance Act (FATCA) to provide for a six-month extension to the start of FATCA withholding and the end of the FATCA grandfathering period, from January 1, 2014 (under current regulations) to July 1, 2014, in order to allow for a more orderly implementation of FATCA. In addition, the timelines for implementing certain FATCA account due diligence requirements and FATCA registration requirements are to be extended, and Treasury and the IRS will provide a list of jurisdictions that will be treated as having in effect an intergovernmental agreement (IGA) with the U.S. FATCA withholding is scheduled to apply to payments of U.S. source dividends, interest and other fixed payments beginning July 1, 2014, and to payments from the disposition of property producing such payments beginning January 1, 2017. IRS Notice 2013-43.
On September 25, Judge Jed S. Rakoff of the Southern District of New York issued a written opinion denying summary judgment in Assured Guaranty Municipal Corp.’s contract dispute with Flagstar Bank FSB over its insurance policies on nearly $1 billion in mortgage-backed securities backed by home equity loans. Assured initiated this action in April 2011, alleging that Flagstar breached representations and warranties concerning the underwriting guidelines used to originate the mortgages, the credit characteristics of the loans, and the absence of negligence or fraud in the origination process. Assured alleges that many of the loans have defaulted, resulting in $82.4 million in claims paid to date. In denying Flagstar’s summary judgment motion, Judge Rakoff found that Assured need not demonstrate loss causation – that is, that the representation and warranty breach caused the loan to default and caused Assured to suffer damages – but rather that Assured could prevail if it proves that the representation and warranty breach materially increased the risk of loss to Assured. Trial in this matter is scheduled for October 9. Judge Rakoff’s ruling is similar to that of Judge Paul Crotty in Syncora Guarantee Inc. v. EMC Mortgage Corp., a decision covered in the June 25 issue of the Week in Review. Order.
Since FATCA’s enactment in March 2010, the IRS has issued several rounds of guidance and the proposed implementing rules are evolving considerably as the Treasury and the IRS continue to consider comments received from various stakeholders. However, the Proposed Regulations have been much anticipated by taxpayers that may be affected by the FATCA withholding tax regime and they provide a clearer insight into the possible contours of final regulations to be adopted, as well as some welcome relief in certain areas. Click here to read more.
On April 4, U.S. District Court Judge Collyer approved the previously announced consent judgments resolving claims by by the DOJ and 49 state AGs against Ally, Bank of America, Citi, JPMorgan and Wells Fargo relating to alleged mortgage servicing and foreclosure practices. Ally Financial Consent Judgment. Bank of America Consent Judgment. Citigroup Consent Judgment. JP Morgan Consent Judgment. Wells Fargo Consent Judgment.
On November 29, 2011, the Financial Guaranty Insurance Co. (“FGIC”) filed three lawsuits in New York state court against the mortgage divisions of Ally Financial. FGIC alleged that GMAC and the Residential Funding Company misrepresented to FGIC the quality of loans underlying RMBS valued at $3.8 billion in order to obtain insurance policies from FGIC that were purportedly necessary for the RMBS to be given a AAA credit rating. FGIC’s insurance policies guaranteed principal and interest payment on the securities at issue. FGIC asserts a number of causes of action in each case, including claims for various contractual breaches, fraudulent inducement, and tortious interference. Complaint A. Complaint B. Complaint C.
The Financial Times names Orrick among the top five law firms overall in its recently published 2011 FT Law 25: Most Innovative US Law Firms report. The FT Law 25
recognizes firms that consistently “create transformative solutions for clients” and is
based on client feedback and independent research. The top five firms include Davis Polk, Skadden, Cleary Gottlieb, Orrick and Latham & Watkins.
The FT report also names Orrick’s work on Redwood Trust’s 2011 public offerings of private-label mortgage-backed securities among the most innovative financings of 2011. The FT reports: “the firm’s understanding of the evolving regulations and regulators helped restart this industry sector.”
Additionally, Orrick is the only law firm to advise on three of the most innovative Energy Sector deals.
This achievement is a testament to the market leadership of our clients – we thank our clients for continuing to entrust us with their most innovative deals.
On November 1, pursuant to Section 316 of the Dodd-Frank Act, the OCC released an issuance revising the procedures for national banks to appeal agency decisions and actions to include federal savings associations. Issuance.