Justice Shirley Kornreich of the Supreme Court of the State of New York

New York State Court Allows Third-Party Suit By Deutsche Bank Against Originator

On July 25, 2011, Justice Shirley Kornreich of the Supreme Court of the State of New York denied Greenpoint Mortgage Funding’s motion to dismiss Deutsche Bank’s complaint against it for indemnification of any damages awarded against it or other costs arising in a suit by Assured Guaranty Municipal Corp. Assured originally sued a subsidiary of Deutsche Bank for alleged breach of the insurance and indemnity policy covering $352 million in mortgage-backed securities. Assured’s complaint claimed that the mortgages contained in the RMBS were riskier than Deutsche Bank represented and that borrower fraud was rampant. Deutsche Bank, in turn, sued Greenpoint, claiming the originator was at fault for misrepresenting the quality of the mortgages. Greenpoint claimed that its agreement with Deutsche Bank prohibited the suit because it was only obligated to cover losses “resulting from” a breach of its representations and that certain conditions precedent to suit had not been met. Justice Kornreich held that the agreement was sufficient to cover Deutsche Bank’s losses, and (Deutsche Bank had provided Greenpoint sufficient notice of the alleged breach before filing suit. Decision.

Orrick Obtains Dismissal of MBIA’s Fraud Claim Against Credit Suisse

Justice Shirley Kornreich of the Supreme Court of the State of New York dismissed MBIA Insurance Corporation’s claim that it was fraudulently induced to insure a Credit Suisse RMBS issuance. The Court dismissed the fraudulent inducement claim because MBIA, a sophisticated party, had access to and failed to investigate all relevant information, had failed to obtain certain contractual warranties, because certain of the alleged misrepresentations were not material or amounted to non-actionable opinions of value or future expectations, and because the fraud claim was largely duplicative of MBIA’s contract claim. The Court also dismissed several other aspects of MBIA’s claims, including the prayers for punitive and consequential damages. MBIA may proceed, however, with certain other claims, including its claims for breach of contract and indemnification. Orrick represents Credit Suisse in this matter. Decision.

Orrick Obtains Dismissal of Ambac’s Fraud Claim Against Credit Suisse

Ambac Assurance Corp. v. DLJ Mortgage Capital, Inc./ Credit Suisse, No. 600070/2010 (Sup. Ct. N.Y. Apr. 7, 2011) (Kornreich, J.)

Justice Shirley Kornreich of the Supreme Court of the State of New York dismissed Ambac Assurance Corp.’s claim that it was fraudulently induced to insure a Credit Suisse RMBS issuance. Among other things, the Court found that an allegedly fraudulent representation that the loans at issue conformed to underwriting guidelines was not actionable because Ambac had access to all relevant information and failed to investigate, and because Ambac failed to obtain a contractual representation or warranty. Other aspects of the fraud claim were dismissed as duplicative of Ambac’s contract claim, which alleges that certain loans did not meet applicable representations and warranties. Orrick represents Credit Suisse in this matter. Decision.