Trustee Repurchase Action

Court Grants in Part and Denies in Part DB Structured Products’ Motion to Dismiss Trustee Repurchase Action

On August 28, Justice Marcy S. Friedman of the Supreme Court of the State of New York granted in part and denied in part DB Structured Products, Inc.’s motion to dismiss repurchase claims brought by HSBC, as Trustee for the Ace Securities Corp. Home Equity Loan Trust, Series 2007-ASAP2.  Relying on her prior decision in Nomura Asset Acceptance Corp. Alternative Loan Trust v. Nomura Credit & Capital, Inc., Justice Friedman held that the relief available to plaintiff is limited by the sole remedy provision of the parties’ contracts and therefore dismissed plaintiff’s claim for rescission.  She also dismissed as duplicative plaintiff’s claim for breach of implied covenant of good faith and fair dealing and rejected plaintiff’s claim for indemnification of attorney’s fees.  However, Justice Friedman declined to dismiss the complaint because of the plaintiff’s failure to serve a timely repurchase demand prior to filing suit, holding the plaintiff sufficiently alleged that DBSP had independently discovered breaches within the six-year limitations period to survive a motion to dismiss. Order.

Court Grants in Part and Denies in Part Nomura’s Motion to Dismiss Trustee Repurchase Action

On July 18,  Justice Marcy Friedman of the New York County Supreme Court, Commercial Division, granted in part and denied in part Nomura Credit & Capital Inc.’s motion to dismiss claims brought by HSBC, as Trustee for the NAAC 2006-AF2 RMBS Trust, seeking damages, specific performance and indemnification for alleged breach of contract.  Relying on her order from a prior case involving Nomura, Justice Friedman held that the causes of action for damages and specific performance were adequately pled to the extent they were based on Nomura’s alleged breaches of representations and warranties regarding mortgage loans.  Justice Friedman held that the relief available to the plaintiff was limited, by operation of the sole remedy provision of the parties’ contract, to specific performance of the repurchase protocol or damages consistent with the protocol’s terms.  She thus dismissed plaintiff’s cause of action seeking rescissory damages.  Justice Friedman also rejected the plaintiff’s argument that alleged willful misconduct rendered the sole remedy provision unenforceable, holding both that plaintiff failed to adequately allege intentional wrongdoing by Nomura and that the sole remedy provision was not the type of exculpatory clause that could be rendered unenforceable by willful misconduct.  Finally, Justice Friedman rejected plaintiff’s request for attorneys’ fees, holding that the indemnification provision in the parties’ contract did not clearly provide for fee shifting in lawsuits between the parties.  Order.