Judge Paul A. Crotty of the Southern District of New York

Trustee’s Repurchase Suit Against Quicken Loans Dismissed as Time-Barred

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 issue�at the time the loans were sold�not 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.

S.D.N.Y. Holds Monoline Insurer Can Pursue Pool-Wide Remedy Based on Sampling of Loans

On March 25, 2011, Judge Paul A. Crotty of the Southern District of New York granted partial summary judgment to Syncora Guarantee, Inc., a monoline insurer, in a suit against Bear Stearns affiliate EMC Mortgage Corp. In that decision, Judge Crotty rejected EMC’s argument that the exclusive remedy available to Syncora for breaches of representations and warranties on Home Equity Line of Credit (“HELOC”) residential mortgage loans underlying the insured securitization was the repurchase of the individually identified, non-complying loans. Instead, the court, citing the broad rights and remedies for which Syncora bargained, accepted Syncora’s position that it “could seek a pool-wide remedy based on sampling and extrapolation.” Syncora Decision.

SDNY Dismisses Securities Class Action Against Barclays

On January 5, 2011, Judge Paul A. Crotty of the Southern District of New York granted defendant Barclays’s Motion to Dismiss claims under Sections 11, 12(a)(2) and 15 of the Securities Act that alleged that Barclays failed to properly disclose and account for its RMBS-related exposure in the offering documents for Barclays ADS issued between April 2006 and April 2008. The court found that the plaintiffs did not have standing to pursue Section 12(a)(2) claims because they failed to alleged that they had bought shares directly from the defendants, that many of the claims were time-barred because they were filed more than one year after plaintiffs had sufficient information to be on inquiry notice of the alleged mis-statements, and that the remaining allegations were insufficient to state a claim. Decision.