FILED: NEW YORK COUNTY CLERK 02/03/2014 INDEX NO /2013 NYSCEF DOC. NO. 4 RECEIVED NYSCEF: 02/03/2014

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1 FILED: NEW YORK COUNTY CLERK 02/03/2014 INDEX NO /2013 NYSCEF DOC. NO. 4 RECEIVED NYSCEF: 02/03/2014 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK ROYAL PARK INVESTMENTS SA/NV, Plaintiff, - against - MORGAN STANLEY, MORGAN STANLEY & CO. LLC, MORGAN STANLEY MORTGAGE CAPITAL HOLDINGS LLC, MORGAN STANLEY ABS CAPITAL I, INC., and MORGAN STANLEY CAPITAL I INC., Index No /2013 ORAL ARGUMENT REQUESTED Defendants. MEMORANDUM OF LAW IN SUPPORT OF DEFENDANTS MOTION TO DISMISS THE COMPLAINT DAVIS POLK & WARDWELL LLP 450 Lexington Avenue New York, New York (212) Attorneys for Defendants Morgan Stanley, Morgan Stanley & Co. LLC, Morgan Stanley Mortgage Capital Holdings LLC, Morgan Stanley ABS Capital I, Inc., and Morgan Stanley Capital I Inc.

2 TABLE OF CONTENTS PAGE PRELIMINARY STATEMENT...1 STATEMENT OF FACTS...3 ARGUMENT...4 I. Plaintiff Does Not Allege Justifiable Reliance...4 II. Plaintiff Lacks Standing...7 III. Plaintiff s Claims are Barred By the Applicable Statutes of Limitation...8 A. Plaintiff s Negligent Misrepresentation Claim Is Barred by C.P.L.R. 214(4) s Three Year Statute of Limitations...8 B. Plaintiff s Fraud Claims As To Eighteen Certificates Are Barred by C.P.L.R. 213(8) s Six-Year Statute of Limitations and Two Year Discovery Rule...8 IV. Plaintiff Still Fails to Plead Misrepresentations by Morgan Stanley with the Particularity Required by C.P.L.R. 3016(b)...12 A. No Particularized Allegations of Misstatements No Misstatements as to Originators Loan Underwriting Guidelines No Misstatements as to LTV Ratios No Misstatements as to Owner Occupancy Status No Misstatement as to Credit Ratings No Misstatement as to Transfer of Title...16 B. The Alleged Misstatements Concern Non-Actionable Opinions...17 C. The Alleged Misrepresentations Were Attributed to Others and Are Not Actionable Against Morgan Stanley...18 V. Plaintiff Failed to Plead Scienter...19 VI. Plaintiff Does Not and Cannot Allege Loss Causation...23 VII. Plaintiff Fails to State a Claim for Aiding and Abetting or Negligent Misrepresentation...24 CONCLUSION...26 i

3 TABLE OF AUTHORITIES Cases PAGE ACA Fin. Guar. Corp. v. Goldman, Sachs & Co., 106 A.D.3d 494 (1st Dep t 2013)... 5, 6 ACA Fin. Guar.Corp. v. Goldman, Sachs & Co., No /11, 2012 N.Y. Misc. LEXIS 1940 (Sup. Ct. N.Y. Cnty. Apr. 23, 2012), rev d, 106 A.D.3d 494 (1st Dep t 2013)... 5 Allstate Ins. Co. v. Morgan Stanley, No /11, 2013 N.Y. slip op (U) (N.Y. Sup. Ct. Mar. 14, 2013) Ashland Inc. v. Morgan Stanley & Co., 700 F. Supp. 2d 453 (S.D.N.Y. 2010), aff d, 652 F.3d 333 (2d Cir. 2011) Atl. Gypsum Co., v. Lloyds Int l Corp., 753 F. Supp. 505 (S.D.N.Y. 1990) ATSI Commc ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87 (2d Cir. 2007) Bank Hapoalim B.M. v. Bank of Am. Corp., No. 12-CV-4316, 2012 WL (C.D. Cal. Dec. 21, 2012)... 16, 17, 24 Bank of N.Y. v. Silverberg, 86 A.D.3d 274 (2d Dep t 2011) Barneli & Cie S.A. v. Dutch Book Funds SPC, Ltd., No /08, 2010 N.Y. Misc. LEXIS 4270 (Sup. Ct. N.Y. Cnty. Aug. 9, 2010), rev d, 95 A.D.3d 736 (1st Dep t 2012)... 5 Braddock v. Braddock, 60 A.D.3d 84 (1st Dep t 2009) Carbon Capital Mgmt., LLC v. Am. Express Co., 88 A.D.3d 933 (2d Dep t 2011)... 9 CDR Créances S.A.S. v. First Hotels & Resorts Invs., Inc., 101 A.D.3d 485 (1st Dep t 2012) Centro Empresarial Cempresa S.A. v. América Móvil, S.A.B. de C.V., 17 N.Y.3d 269 (2011)... 4 ii

4 City of Austin Police Ret. Sys. v. Kinross Gold Corp., No. 12 Civ. 1203, 2013 WL (S.D.N.Y. Mar. 22, 2013) Colon v. Banco Popular N. Am., 59 A.D.3d 300 (1st Dep t 2009)... 8 Cortec Indus., Inc. v. Sum Holding LP, 949 F.2d 42 (2d Cir. 1991) Davis v. A.O. Smith Corp., 262 A.D.2d 752 (3d Dep t 1999)... 9 DerOhannesian v. City of Albany, 110 A.D.3d 1288 (3d Dep t 2013) Dexia SA/NV v. Morgan Stanley, 41 Misc. 3d 1214(A) (Sup. Ct. N.Y. Cnty. 2013)... 7, 8 ECA & Local 134 IBEW Joint Pension Trust v. JP Morgan Chase Co., 553 F.3d 187 (2d Cir. 2009) ESBE Holdings, Inc. v. Vanquish Acquisition Partners, LLC, 50 A.D.3d 397 (1st Dep t 2008) Estrada v. Metro. Prop. Grp. Inc., 973 N.Y.S.2d 147 (1st Dep t. 2013)... 6 Eurycleia Partners, LP v. Seward & Kissel, LLP, 46 A.D.3d 400 (1st Dep t 2007) Eurycleia Partners, LP v. Seward & Kissel, LLP, 12 N.Y.3d 553 (2009)... 12, 18, 19, 23 Fed. Hous. Fin. Agency v. UBS Americas, Inc., 858 F. Supp. 2d 306 (S.D.N.Y. 2012) Footbridge Ltd. v. Countrywide Home Loans, Inc., No. 09 Civ. 4050, 2010 WL (S.D.N.Y. Sept. 28, 2010) Fox v. Hirschfeld, 157 App. Div. 364 (1st Dep t 1913)... 7 Friedman v. Anderson, 23 A.D.3d 163 (1st Dep t 2005) Garelick v. Carmel, 141 A.D.2d 501 (2d Dep t 1988) iii

5 Gomez-Jimenez v. N.Y. Law Sch., 103 A.D.3d 13 (1st Dep t 2012)... 14, 15 Graham Packaging Co. v. Owens-Illinois, Inc., No /06, 2007 WL (Sup. Ct. N.Y. Cnty. Oct. 19, 2007), aff d, 67 A.D.3d 465 (1st Dep t 2009)... 5 Greentech Research LLC v. Wissman, 104 A.D.3d 540 (1st Dep t 2013) Greschler v. Greschler, 71 A.D.2d 322 (2d Dep t 1979) Gusmao v. GMT Grp., Inc., No. 06 Civ (GEL), 2008 WL (S.D.N.Y. Aug. 1, 2008) Hirsch v. du Pont, 553 F.2d 750 (2d Cir. 1977)... 6 Hotaling v. A.B. Leach & Co., 247 N.Y. 84 (1928) HSH Nordbank AG v. UBS AG, 95 A.D.3d 185 (1st Dep t 2012)... 5 In re Lehman Bros. Mortgage-Backed Sec. Litig., 650 F.3d 167 (2d Cir. 2011) Irwin v. Veterans Admin., 498 U.S. 89 (1990) Jacobs v. Lewis, 261 A.D.2d 127 (1st Dep t 1999) Jana L. v. W. 129th St. Realty Corp., 22 A.D.3d 274 (1st Dep t 2005)... 5 Janus Capital Grp., Inc. v. First Derivative Traders, 131 S. Ct (2011) Jim Longo, Inc. v. Rutigliano, 251 A.D.2d 547 (2d Dep t 1998) Kleinerman v. 245 E. 87 Tenants Corp., 74 A.D.3d 448 (1st Dep t 2010) Kronos, Inc. v. AVX Corp., 81 N.Y.2d 90 (1993)... 8 iv

6 Landesbank Baden-Wurttemberg v. Goldman Sachs & Co., 821 F.Supp. 2d 616 (S.D.N.Y. Sept. 28, 2011) Landesbank Baden-Wurttemberg v. Goldman Sachs & Co., 478 F. App x 679 (2d Cir. 2012) Laub v. Faessel, 297 A.D.2d 28 (1st Dep t 2002) Lentell v. Merrill Lynch & Co., 396 F.3d 161 (2d Cir. 2005) Lore v. N.Y. Racing Ass n, 12 Misc. 3d 1159(A), 819 N.Y.S.2d 210 (Sup. Ct. Nassau Cnty. 2006) Loreley Fin. (Jersey) No. 3 Ltd. v. Wells Fargo Sec s, LLC, No. 12 Civ RJS, 2013 WL (S.D.N.Y. Mar. 28, 2013) Mandarin Trading Ltd. v. Wildenstein, 16 N.Y.3d 173 (2011)... 7, 17, 18, 24 Mateo v. Senterfitt, 82 A.D.3d 515 (1st Dep t 2011)... 18, 25 MBIA Ins. Co. v. GMAC Mortg. LLC, 30 Misc. 3d 856 (Sup. Ct. N.Y. Cnty. 2010) MBIA Ins. Corp. v. Countrywide Home Loans, 87 A.D.3d 287 (1st Dep t 2011) McDonald v. McBain, 99 A.D.3d 436 (1st Dep t 2012)... 4 Municipal High Income Fund, Inc. v. Goldman, Sachs & Co., Index No /06, 2008 WL (Sup. Ct. N.Y. Cnty. Oct. 30, 2008)... 9 N.Y. Univ. v. Cont l Ins. Co., 87 N.Y.2d 308 (1995)... 16, 17 Nat l Ass n of Gov t Employees v. San Antonio, No. SA-89-CA-1672, 1992 WL (W.D.Tex. Feb. 24, 1992) Nat l Union Fire Ins. Co. of Pittsburgh v. Robert Christopher Assocs., 257 A.D.2d 1 (1st Dep t 1999) Nat l Union Fire Ins. Co. of Pittsburgh, Pa. v. Worley, 257 A.D.2d 228 (1st Dep t 1999) v

7 Newman v. Wells Fargo Bank, N.A., 85 A.D.3d 435 (1st Dep t 2011) Prichard v. 164 Ludlow Corp., 49 A.D.3d 408 (1st Dep t 2008)... 9 Reilly Green Mt. Platform Tennis v. Cortese, Index No /06, 2007 WL (Sup. Ct. Westchester Cnty. Nov. 14, 2007)... 8 Republic Bank & Trust Co. v. Bear, Stearns & Co., 707 F. Supp. 2d 702 (W.D.Ky. 2010), aff d, 683 F.3d 239 (6th Cir. 2012) Siebros Fin. Corp. v. Fire Ass n of Phila., 128 Misc. 223 (Sup. Ct. N.Y. Cnty. 1926) Soc y of Plastics Indus. v. Cnty. of Suffolk, 77 N.Y.2d 761 (1991)... 7 Starr Foundation v. Am. Int l Group, Inc., 76 A.D.3d 25 (1st Dept 2010) State Farm Mut. Ins. Co. v. Anikeyeva, Index No. 4399/10, 2012 WL (Sup. Ct. Nassau Cnty. Mar. 13, 2012)... 7 State of Cal. Pub. Emps. Ret. Sys. v. Shearman & Sterling, 95 N.Y.2d 427 (2000)... 7 Union Cent. Life Ins. Co. v. Credit Suisse Sec. (USA), LLC, No. 11 Civ. 2327, 2013 WL (S.D.N.Y. Mar. 29, 2013) United Guar. Mtg. Indem. Co. v. Countrywide Fin. Corp., 660 F. Supp. 2d 1163 (C.D. Cal. 2009) UST Private Equity Investors Fund, Inc. v. Salomon Smith Barney, 288 A.D.2d 87 (1st Dep t 2001)... 5 Ventur Group, LLC v. Finnerty, 68 A.D.3d 638 (1st Dep t 2009)... 5 W. & S. Life Ins. Co. v. Countrywide Fin. Corp. (In re Countrywide Fin. Corp. Mortg.- Backed Sec. Litig.), No. 2:11-cv MRP, 2012 WL (C.D. Cal. Mar. 9, 2012) Woori Bank v. Merrill Lynch, 923 F. Supp. 2d 491 (S.D.N.Y. 2013) vi

8 Statutes & Rules C.P.L.R C.P.L.R. 213(8)... 9, 12 C.P.L.R. 214(4)... 8 C.P.L.R C.P.L.R. 3016(b)... 2, 12 C.P.L.R. 3211(a)(3) C.P.L.R. 3211(a)(5) C.P.L.R. 3211(a)(7) vii

9 PRELIMINARY STATEMENT This case is brought by a special purpose vehicle formed to hold the troubled investment portfolio of Fortis Bank (one of the most sophisticated financial institutions in the world) in an attempt to shift to Morgan Stanley Fortis s investment losses arising from the global financial crisis. When its extensive residential mortgage backed securities ( RMBS ) investments declined in value, Fortis collapsed, was bailed out by the Dutch government and purportedly assigned all the certificates at issue to plaintiff Royal Park Investments SA/NV ( plaintiff ) a special purpose vehicle specifically created to remove troubled assets from Fortis s books. Plaintiff initially filed a single complaint asserting that at least eleven different investment banks had separately defrauded Fortis and its affiliates into buying $8.4 billion in RMBS between 2005 and When this Court dismissed the carbon-copy complaint that plaintiff s lawyers had filed on behalf of other entities in Phoenix Light S.F. Ltd. v. JPMorgan Securities LLC, ( Phoenix Light ), plaintiff withdrew its complaint in this case and filed separate actions against Morgan Stanley and the other defendants. But plaintiff s claims against Morgan Stanley remain legally deficient, and the complaint must be dismissed for multiple reasons. First, plaintiff fails to allege justifiable reliance. Under controlling New York law, a sophisticated entity like Fortis may not simply rely on information presented in offering materials but must seek to verify independently the matters claimed to be false or misleading. Yet, plaintiff does not allege that Fortis asked Morgan Stanley (or did anything else) to verify any of the alleged misrepresentations before investing $600 million in the certificates at issue, nor does the complaint allege that Fortis requested any materials from Morgan Stanley that would have allowed it to do so. The absence of these critical reliance allegations requires dismissal. 1

10 Second, plaintiff fails to allege standing. Plaintiff concedes that it did not purchase any of the thirty-seven certificates at issue and sues solely through a purported assignment of tort claims. Yet plaintiff has not alleged the relevant terms of the supposed assignment agreements, as required under controlling New York law. Third, most of plaintiff s claims are untimely. Plaintiff s negligent misrepresentation claims are barred by New York s applicable three-year statute of limitations. Plaintiff s fraud claims with respect to eighteen certificates also come too late under New York law because plaintiff waited more than six years from the purchase of those certificates to file this lawsuit in July 2012 and had already been on inquiry notice of its claims for over two years before it did so. Fourth, plaintiff fails to plead the substantive elements of its fraud claims, let alone with the detail required by C.P.L.R. 3016(b). Although this action relates to completely different offerings and certificates from the Phoenix Light case, the complaint is nearly verbatim the same. These cookie-cutter allegations do not plead any actionable misrepresentations by Morgan Stanley in the offering documents at issue, but rather challenge generic statements about the general purposes of various non-party originators loan underwriting guidelines, as well as other non-actionable statements of opinion and statements attributed to third parties that cannot support fraud claims against Morgan Stanley. In addition, plaintiff has not alleged scienter because it does not allege that Morgan Stanley knew of the alleged falsity of any of the challenged statements when they were made. Plaintiff fails to allege loss causation or damages, each of which is a required element of its claims. Finally, plaintiff s remaining claims for aiding and abetting fraud and negligent misrepresentation must be dismissed. Plaintiff alleges only that Morgan Stanley aided and abetted itself, which is not an actionable claim, and it likewise fails to allege the necessary fiduciary like relationship required for negligent misrepresentation claims. 2

11 STATEMENT OF FACTS Plaintiff is a special purpose vehicle created in order to minimize the downside risk and maximize recoveries on the... legacy portfolio of Fortis Bank, the banking arm of... a Belgian insurance, banking and investment management company. ( 4, 5.) Plaintiff sues as purported assignee of thirty-seven RMBS certificates purchased by Fortis Bank and two of its subsidiaries (together Fortis ). Fortis, which was sold to BNP Paribas in 2008 after severe financial difficulties (See 5), was a sophisticated financial institution that invested extensively in RMBS. In 2007, it was one of Europe s largest banks, with 327 billion in assets under management, a market capitalization of over 40 billion, more than 85,000 employees worldwide and its own investment-management arm. Ex. 1, at 1-2. It was also a major presence in the mortgage-backed securities market in its own right. Fortis s 2007 Annual Report stated that Fortis is active in the [asset backed securities] and MBS market as issuer, placement agent, collateral manager, arranger, trader and investor... Fortis, as arranging bank, has structured and launched both classic and synthetic [collateralized debt obligations]. Ex. 1, at In June 2008, Fortis held 41.7 billion in RMBS and other structured investments. Ex. 2. Plaintiff alleges various misstatements in the offering documents for thirty-seven certificates sold in twenty-seven different offerings, which were originally purchased by Fortis between January 12, 2005, and May 7, (See Compl. at App. A.) The certificates entitle their holder to a share of the interest and principal payments from pools of mostly subprime mortgage loans. (See, e.g., Ex. 3, at S-10.) The certificates offer enhanced protections from the risk of default, including subordination, over-collateralization and excess interest. 1 1 See, e.g., Ex. 4 at S-75-S-76; Ex. 5 at S-67-S-68, S-78-S-79; Ex. 6 at S-63, S-73. 3

12 As was its practice, 2 Morgan Stanley itself invested over $1 billion in the most junior pieces ( residuals ) of at least twenty-one of the twenty-seven offerings at issue exposing Morgan Stanley to the first risk of loss if the loans did not perform. 3 Because the residuals entitled Morgan Stanley to excess interest and principal payments generated by the loans only after more senior investors like plaintiff were paid, if the underlying loans defaulted, Morgan Stanley s investment necessarily would be eliminated before plaintiff experienced losses. 4 ARGUMENT I. Plaintiff Does Not Allege Justifiable Reliance The complaint fails to plead justifiable reliance because it does not allege that Fortis did anything to verify the allegedly misrepresented information in the offering materials before purportedly relying on that information to invest $600 million in the RMBS at issue. Under New York law, a plaintiff must verify the specific information challenged as false or misleading. See Centro Empresarial Cempresa S.A. v. América Móvil, S.A.B. de C.V., 17 N.Y.3d 269, (2011) (holding that justifiable reliance requires investigation of truth or real quality of the subject of the representation alleged to be false (internal quotation marks and citation omitted)); McDonald v. McBain, 99 A.D.3d 436, (1st Dep t 2012) (holding that plaintiff was obligated to conduct his own independent verification of defendant s alleged statements concerning the matters allegedly misrepresented). Fortis, a highly sophisticated investor, could not merely rely on what was in the offering documents; rather, it had an affirmative duty to 2 Ex. 7, Morgan Stanley, Annual Report 2007, at 52 ( The Company typically retains certain lower-rated securities of such securitizations, often referred to as residual tranche securities. ) 3 Morgan Stanley s residual interest in each offering was approximately equal to the initial overcollateralization amount i.e., the difference between the value of the loans Morgan Stanley transferred to the securitization trusts and the value of the publicly offered RMBS certificates it received in return. 4 See, e.g., Ex. 8 at S-6, S-8, S-9. See also App. A and Exs. 3, 4, 5, 8 and 9-45 cited therein. 4

13 independently verify the information presented and to plead what due diligence it performed. See ACA Fin. Guar. Corp. v. Goldman, Sachs & Co., 106 A.D.3d 494, 494 (1st Dep t 2013); HSH Nordbank AG v. UBS AG, 95 A.D.3d 185, 195 (1st Dep t 2012); Ventur Group, LLC v. Finnerty, 68 A.D.3d 638, 639 (1st Dep t 2009); UST Private Equity Investors Fund, Inc. v. Salomon Smith Barney, 288 A.D.2d 87, 88 (1st Dep t 2001). The complaint s allegations do not satisfy this standard. While plaintiff pleads several vague paragraphs concerning Fortis s purported diligence process ( ), these allegations merely state that supposedly experienced Fortis employees reviewed various offering materials, modeled expected performance under various economic assumptions and provided a package of materials to an investment committee for further review. The First Department routinely rejects such allegations as insufficient to plead justifiable reliance, and repeatedly has reversed IAS court decisions that sustained complaints based on similar allegations concerning generalized investigations unrelated to the purported misrepresentations. 5 Critically, the complaint here does not allege that prior to making its investments, Fortis made any inquiry concerning the accuracy of the loan-to-value ( LTV ) ratios, owner-occupancy rates, credit ratings or descriptions of title transfer disclosed in the prospectus supplements, or that it took any specific steps to confirm that the loans in each offering complied with stated underwriting guidelines. And, while plaintiff alleges that Fortis continued to meet with both 5 See,e.g., ACA Fin. Guar.Corp. v. Goldman, Sachs & Co., No /11, 2012 N.Y. Misc. LEXIS 1940, at ***11-12 (Sup. Ct. N.Y. County Apr. 23, 2012) (sustaining complaint where plaintiff alleged a number of steps it took to analyze the transaction), rev d, 106 A.D.3d 494, 496 (1st Dep t 2013); Barneli & Cie S.A. v. Dutch Book Funds SPC, Ltd., No /08, 2010 N.Y. Misc. LEXIS 4270, at ***27 (Sup. Ct. N.Y. County Aug. 9, 2010) (sustaining complaint where plaintiff allege[d] that, despite the exercise of reasonable diligence, it did not discover the truth (emphasis supplied)), rev d, 95 A.D.3d 736, (1st Dep t 2012); ; Graham Packaging Co. v. Owens-Illinois, Inc., No /06, 2007 WL (Sup. Ct. N.Y. Cnty. Oct. 25, 2007) (sustaining complaint where plaintiff alleged that it had performed diligence by arriving at its own valuation), aff d, 67 A.D.3d 465, 465 (1st Dep t 2009); see also Jana L. v. W. 129th St. Realty Corp., 22 A.D.3d 274, 278 (1st Dep t 2005) (holding that fraud plaintiff was required to plead at the very least that it made even a simple inquiry of defendant concerning the purportedly misrepresented matter). 5

14 defendants and originators after purchasing the securities at issue and received subsequent assurances regarding the loans conformity with guidelines ( 643 (emphasis added)), Fortis s alleged post-purchase conduct cannot support an allegation that it justifiably relied on any misrepresentations before deciding whether to purchase in the first place. See Estrada v. Metro. Prop. Grp. Inc., 973 N.Y.S.2d 147, 148 (1st Dep t. 2013) (dismissing a fraud claim for failure to show reliance where plaintiff allegedly relied on an appraisal that was prepared four months after the contract was entered into). 6 Plaintiff attempts to excuse Fortis s failure to verify the alleged misrepresentations by claiming that Fortis was not allowed access to Morgan Stanley s due diligence. ( 651.) But, this allegation is insufficient because plaintiff does not allege that it ever asked to see any loan files, underwriting guidelines, diligence reports, appraisals or other documents to allow it to evaluate the representations in the offering documents now alleged to be false. See ACA Fin. Corp., 106 A.D.3d at 494 (no allegation of justifiable reliance where plaintiff fails to plead that it exercised due diligence by inquiring about the nonpublic information alleged to have been misrepresented). Fortis s decision not to inquire as to a single claimed misrepresentation shows that what would have been discovered was either immaterial... or that [Fortis] failed to exercise due diligence. Hirsch v. du Pont, 553 F.2d 750, 763 (2d Cir. 1977); see also ACA Fin. Corp., 106 A.D.3d at 496 (plaintiff could have, upon further inquiry, uncovered [alleged misrepresentations], but apparently chose not to ). 6 Furthermore, for twenty-four of the thirty-seven certificates, Fortis s purchases pre-dated issuance of the prospectus supplements (see Compl. at App. A), which were the only documents cited in the complaint for the alleged misstatements. (See, e.g., 45.) 6

15 II. Plaintiff Lacks Standing Plaintiff fails to plead sufficient facts to establish its standing to sue an aspect of justiciability which, when challenged, must be considered at the outset of any litigation. Soc y of Plastics Indus. v. Cnty. of Suffolk, 77 N.Y.2d 761, 769 (1991). Plaintiff concedes that it did not actually purchase any of the thirty-seven RMBS certificates at issue, but instead purports to bring its claims as an assignee of the original buyers. (Compl. at App. A). Under New York law, absent language demonstrating an intent to do so, tort claims do not automatically pass to an assignee. Dexia SA/NV v. Morgan Stanley, 41 Misc. 3d 1214(A) at *3 (Sup. Ct. N.Y. Cnty. 2013) (citing Fox v. Hirschfeld, 157 App. Div. 364 (1 st Dep t 1913)). Rather, a plaintiff must show that the assignment explicitly references those claims in some way. See State of Cal. Pub. Emps. Ret. Sys. v. Shearman & Sterling, 95 N.Y.2d 427, (2000) (no standing where the contract refers only to rights and interest under the loan document ). A plaintiff asserting standing based upon a contract must either append the contract as an exhibit to the complaint or plead the salient terms giving rise to standing. See Mandarin Trading Ltd. v. Wildenstein, 16 N.Y.3d 173, (2011) (dismissing claims where [t]he complaint only offers conclusory allegations without pleading the pertinent terms of the purported agreement concerning plaintiff s status as an alleged third-party beneficiary.) Although plaintiff makes the conclusory allegation that all rights, title, interest and causes of action in and related to the certificates were assigned to plaintiff ( 1 n.1.), it fails to provide the alleged assignment documents or quote any of the relevant contractual language in the complaint. 7 This type of pleading on this issue is insufficient. See State Farm Mut. Ins. Co. v. Anikeyeva, Index No. 4399/10, 2012 WL , at *3 (Sup. Ct. Nassau Cnty. Mar. 13, 7 See App. B (listing certificates that must be dismissed due to lack of standing and untimeliness). 7

16 2012) (dismissing counterclaim where claimant did not submit language of the assignment instrument to the court); see also Dexia, 41 Misc. 3d 1214(A) at *5 (dismissing RMBS complaint against Morgan Stanley where language of relevant assignment did not assign fraud claims to assignee-plaintiffs ). III. Plaintiff s Claims are Barred By the Applicable Statutes of Limitation A. Plaintiff s Negligent Misrepresentation Claim Is Barred by C.P.L.R. 214(4) s Three Year Statute of Limitations Plaintiff s negligent misrepresentation claims are untimely because plaintiff commenced this action more than three years after its purchase of the RMBS at issue. Plaintiff expressly disclaims any claims of fraud or intentional or reckless misconduct for the purposes of its negligent misrepresentation claim ( 700), thus C.P.L.R. 214(4) s three-year statute of limitations applies. See Colon v. Banco Popular N. Am., 59 A.D.3d 300, 301 (1st Dep t 2009). A negligent misrepresentation claim accrues on the date of injury here, when the certificates were purchased, between 2005 and 2007 rather than on the date of the wrongful act of the defendant [or] the date of discovery of the injury by the plaintiff. Reilly Green Mt. Platform Tennis v. Cortese, Index No /06, 2007 WL , at *12 (Sup. Ct. Westchester Cnty. Nov. 14, 2007) aff d, 59 A.D.3d 695 (2d Dep t. 2009) (citing Kronos, Inc. v. AVX Corp., 81 N.Y.2d 90, 94 (1993)). Given that this action was not commenced until July 27, 2012, and Fortis s final certificate purchase was made on May 7, 2007, the negligent misrepresentation claim is time-barred in its entirety. B. Plaintiff s Fraud Claims As To Eighteen Certificates Are Barred by C.P.L.R. 213(8) s Six-Year Statute of Limitations and Two Year Discovery Rule Plaintiff s claims premised on common law fraud, fraudulent inducement and aiding and abetting fraud also are time-barred because they were not commenced within six years from the date the cause of action accrued or two years from the time the plaintiff... discovered the fraud, 8

17 or could with reasonable diligence have discovered it, whichever is later. C.P.L.R. 213(8). When the cause of action arises in the context of a fraud claim relating to the sale of securities, accrual occurs at the time such securities are purchased. See Carbon Capital Mgmt., LLC v. Am. Express Co., 88 A.D.3d 933, 939 (2d Dep t 2011); Prichard v. 164 Ludlow Corp., 49 A.D.3d 408,408 (1st Dep t 2008) (claim accrued upon entering into contract to purchase shares, when plaintiffs completed the act that the alleged fraudulent statements had induced ). Of the thirtyseven certificates purchased, eighteen were purchased before July 27, 2006, and therefore are barred by the six-year statute of limitations. These claims also are barred by the two-year discovery rule. As this court has explained, the two-year statute of limitations begins to run when there are sufficient facts to suggest to a person of ordinary intelligence the probability that he/she may have been defrauded. Municipal High Income Fund, Inc. v. Goldman, Sachs & Co., Index No /06, 2008 WL , at *3 (Sup. Ct. N.Y. Cnty. Oct. 30, 2008); see also Davis v. A.O. Smith Corp., 262 A.D.2d 752, 755 (3d Dep t 1999) (fraud claims time-barred where plaintiff possessed sufficient operative facts more than two years prior to the commencement of this action which indicated that further inquiry should be pursued to determine whether he had been defrauded. ). Thus, a plaintiff need only be aware of enough operative facts so that, with reasonable diligence, it could have discovered the fraud. Municipal High Income Fund, Inc., at *3. The allegations in the complaint itself demonstrate that Fortis could have discovered its alleged claims prior to July 27, 2010 more than two years before it filed this action. Plaintiff bases its claims on over twenty reports, events or filings that were made publicly available between March 2007 and July 2010 that describe, among other things, how various originators purportedly made loans in violation of their underwriting guidelines and then sold them to 9

18 Morgan Stanley and other investment banks. (See 435, 438, 439, 440, 445, 449, 450, 461, 476, 480, 481, 506, 507, 510, 513, 578, 610, 614, 615, 616, 617, 621, 626 and 668.) The complaint further alleges that the credit ratings for all thirty-seven certificates at issue in this case have been downgraded to below investment grade (i.e. junk ), purportedly proving that the credit ratings stated in the Offering Documents were false and providing strong evidence that defendants lied about the credit ratings. ( 563.) Yet, each of these downgrades occurred prior to July 27, 2010, 8 which, at a minimum, should have prompted plaintiff to investigate whether it was defrauded. See Fed. Hous. Fin. Agency v. UBS Americas, Inc., 858 F. Supp. 2d 306, (S.D.N.Y. 2012) aff d, 712 F.3d 136 (2d Cir. 2013) (certificate downgrades should have caused plaintiffs to discover that the loans backing the RMBS they purchased were not as advertised). More generally, these allegations create a contradiction for plaintiff: if the information they contain supposedly states a claim for fraud against Morgan Stanley in 2012, how could it have been insufficient to place plaintiff on notice of its claims before July 2010? Such reports, events and filings would have, at the very least, provided a reasonable individual with sufficient operative facts to discover a potential fraud in residential mortgage origination and securitization. Furthermore, these reports, events and filings which, in many instances, are specific to Morgan Stanley and/or the certificates or originators at issue contradict plaintiff s allegations that it could not have learned, and did not learn, that defendants were defrauding it until after the January 2011 Financial Crisis Inquiry Commission report ( FCIC Report ), which hardly mentions Morgan Stanley and contains no discussion whatsoever of the certificates in this case. ( 654); see Woori Bank v. Merrill Lynch, 923 F. Supp. 2d 491, (S.D.N.Y. 2013) aff d, No CV, 2013 WL (2d Cir. 2013) (rejecting a similar argument and 8 See App. C 10

19 explaining that the FCIC Report did not... unearth any age-old clandestine activities but rather in many instances merely rehash[ed] information published years earlier in articles or other publically available materials ). Standing alone, plaintiff s utter failure to allege what, if any, inquiry it performed prior to July 27, 2010 and what, if anything, it learned about its potential claims is grounds for dismissal. Indeed, if plaintiff had conducted even a cursory inquiry, it would have discovered that prior to July 27, 2010, Morgan Stanley already had been sued at least eight times in connection with alleged misstatements or omissions in offering documents for RMBS (including three of the same offerings at issue in this case) and other mortgage-related products. 9 In five of these actions, moreover, the plaintiffs were represented by Robins Geller the same attorneys who represent plaintiff here and in four of those cases, 10 these same attorneys certified that they had a good-faith basis to allege fraud against Morgan Stanley more than two years prior to filing plaintiff s complaint in this case. [P]laintiffs... are bound by their lawyers knowledge, acts and failure to act, Nat l Ass n of Gov t Employees v. San Antonio, No. SA-89-CA-1672, 1992 WL at *5 (W.D.Tex. Feb. 24, 1992) aff d, 40 F.3d 698 (5th Cir. 1994) (citing Irwin v. Veterans Admin., 498 U.S. 89, 111 (1990)). Thus, plaintiff s delay in filing this action for more than two years after its own attorneys had asserted very similar claims against Morgan Stanley 9 Abu Dhabi Commercial Bank v. Morgan Stanley & Co. Inc., et al., [08 Civ. No (SAS)] ( ADCB ); In re Morgan Stanley Mortgage Pass-Through Certificates Litig., [No. 09-CV-2137 (LTS) (MHD)]; King County, Washington, et al. v. IKB Deutsche Industriebank AG, et al., [No. 1:09-cv SAS] ( Rhinebridge ); Fed. Home Loan Bank of Seattle v. Morgan Stanley & Co., et al., [No SEA]; Employees Retirement Sys. of The Government of the Virgin Islands v. Morgan Stanley & Co., et al., [09-cv (BSJ)] ( Libertas ); Cambridge Place Invest. Mgmt Inc. v. Morgan Stanley & Co., et al., [No BLS1 (CPIM I)]; China Dev. Industrial Bank v. Morgan Stanley & Co., et al., [No /2010] ( CDIB ); Charles Schwab Corp. v. BNP Paribas Securities Corp., et al., [No. CGC ]. In fact, the plaintiffs in CPIM brought allegations on three of the very same securities here (MSAC 2006-HE3, MSHEL , and SAST ) only, they did so on July 9, 2010 two years earlier than plaintiffs here. Plaintiff, in fact, references several of these cases in its complaint in this action. ( 521, 592 & n.16.) 10 The cases are ADCB, Rhinebridge, Libertas and CDIB. 11

20 on behalf of other plaintiffs establishes that plaintiff s claims in this action are barred by C.P.L.R. 213(8). 11 IV. Plaintiff Still Fails to Plead Misrepresentations by Morgan Stanley with the Particularity Required by C.P.L.R. 3016(b) Plaintiff has failed to plead fraud with particularity as required under New York law. C.P.L.R. 3016(b) requires plaintiffs to state in detail defendant s alleged material misrepresentation of a fact. Eurycleia Partners, LP v. Seward & Kissell, LLP, 12 N.Y.3d 553, 559 (2009). 12 Consistent with its directive in Phoenix Light, which involved a nearly identical complaint filed by the same lawyers (but on behalf of different plaintiffs who purchased different RMBS), this Court directed plaintiff in this action to reorganize its complaint to allege [the] specific language that [they] say is misleading for each certificate, as well as who made the statements, when and the basis for inferring knowledge of falsity. 13 Plaintiff s second amended complaint in this case which is still essentially a cookie-cutter duplicate of the reorganized Phoenix Light complaint continues to lack the requisite particularity and must be dismissed, this time with prejudice. See Greschler v. Greschler, 71 A.D.2d 322, 325 (2d Dep t 1979) (dismissing fraud claim for failure to comply with C.P.L.R. 3016(b) and stating that a 11 Plaintiff s claims are also untimely with respect to the remaining four certificates purchased by Scaldis, which is incorporated under the laws of the Bailiwick of Jersey in the British Channel Islands. Under New York s borrowing statute, C.P.L.R. 202, plaintiff s claims must be timely under New York s statute of limitations and Jersey s three-year statute of limitations, which begins to run once it is objectively and subjectively reasonable for a would-be plaintiff to be []aware of his cause of action. Loreley Fin. (Jersey) No. 3 Ltd. v. Wells Fargo Sec s, LLC, No. 12 Civ RJS, 2013 WL , at *8 (S.D.N.Y. Mar. 28, 2013). See Ex. 46, (copy of expert affidavit provided in Loreley Financing v. Morgan Stanley, No /2012). For the same reasons stated in the text, it was objectively and subjectively reasonable for plaintiff to have been aware of the claims more than three years before it commenced this action. 12 Fraud and fraudulent inducement claims are analytically identical. See Nat l Union Fire Ins. Co. of Pittsburgh, Pa. v. Worley, 257 A.D.2d 228, 233 (1st Dep t 1999). An aiding and abetting claim must be dismissed if the underlying fraud claim fails. Kleinerman v. 245 E. 87 Tenants Corp., 74 A.D.3d 448, 449 (1st Dep t 2010). 13 See Ex. 47 at 19:3-6, 81:19-82:8; Ex. 48 at 1. 12

21 complaint is not acceptable if it is drawn as though it had been copied verbatim from a standard form book ). A. No Particularized Allegations of Misstatements 1. No Misstatements as to Originators Loan Underwriting Guidelines For each securitization at issue, plaintiff alleges that the primary misrepresentation in the offering documents is a generic statement about the purposes of loan originators underwriting guidelines. 14 This is the same statement that this Court described as fluff in Phoenix Light. 15 Plaintiff, however, has not heeded this Court s directive in Phoenix Light to focus on any more specific language. Even in the designated particularity section of its complaint, plaintiff continues to rely, again and again, upon some form of this same nonactionable generic statement as the basis for its claims. 16 But, this type of generalized language about the purposes of loan underwriting guidelines is not actionable, which is precisely why other courts have likewise rejected it as a basis for a misrepresentation claim. See United Guar. Mtg. Indem. Co. v. Countrywide Fin. Corp., 660 F. Supp. 2d 1163, 1188 (C.D. Cal. 2009) (dismissing fraud claims based on representations that lender s guidelines were developed to screen the creditworthiness of buyers and the likelihood that mortgage loans would be repaid because such allegations do nothing more than describe what underwriting guidelines are ). Plaintiff fails to plead any more specific misrepresentations. Plaintiff s allegations that originators used lax underwriting guidelines (e.g., ), made stated income loans (e.g., 14 See e.g., 76 ( [u]nderwriting standards are applied by or on behalf of a lender to evaluate the borrower s credit standing and repayment ability, and the value and adequacy of the related mortgaged property, home improvements or manufactured home, as applicable, as collateral. ) 15 See Ex. 47 at 68:7-8, 69:2. 16 See 47, 60-1, 74-6, 89-90, , , , , , , , , 221, 234, 247, , 277, 290, , , , , , 379, 392, 405 and

22 432-33), and granted frequent exceptions (e.g., 495) do not support a fraud claim because these matters were disclosed (see App. D) 17, and accurately disclosed information is not fraudulent. Gomez-Jimenez v. N.Y. Law Sch., 103 A.D.3d 13, 18 (1st Dep t 2012). 2. No Misstatements as to LTV Ratios Plaintiff also fails to plead any false statements regarding LTV ratios. Plaintiff claims that it performed after-the-fact historical analyses using automated valuation models ( AVMs ) that generated different property valuations from those used to calculate the LTV ratios reflected in the offering documents. (See, e.g., 120, 180, 210.) But, the only representation made about LTV ratios was that they were a ratio computed by dividing the amount of the loan by the appraised value of the property at origination. 18 Plaintiff does not allege that reported LTV ratios did not in fact reflect that ratio or were computed according to some other, undisclosed methodology. Thus, plaintiff does not allege a misrepresentation regarding LTV ratios. See, e.g., Gomez-Jimenez, 103 A.D.3d at 18 (no misrepresentation where data disclosed by [the] defendant was not actually false (even if it was incomplete) ); Republic Bank & Trust Co. v. Bear, Stearns & Co., 707 F. Supp. 2d 702, (W.D. Ky. 2010) (dismissing claims based on purportedly misstated LTV ratios where offering documents stated that property values may fluctuate), aff d, 683 F.3d 239 (6th Cir. 2012). 3. No Misstatements as to Owner Occupancy Status Plaintiff s contention that owner-occupancy rates were lower than reported fails to allege any misrepresentation at all. ( ) Plaintiff never quotes the language in the offering materials concerning owner occupancy; instead, it impermissibly mischaracterizes it. Nowhere 17 See App. D. 18 See Id. 14

23 in the offering materials does it say that the owner occupied properties refer to loans that were issued to borrowers that actually lived in the properties. (See, e.g., 50, 64, 79, 93, 107.) Rather, the offering materials typically stated that owner-occupancy was based on a representation by the borrower at the loan s origination or a finding that the address of the underlying property is the borrower s mailing address or that [o]wner-occupied properties include second homes and vacation homes. (See App. D; see also, e.g., Ex. 8 at 30; Ex. 43 at 32; Ex. 44 at S-47). Plaintiff does not attempt to allege that owner occupancy rates as defined in the prospectus supplements were not accurately reported, and plaintiff s attempts to redefine owner occupancy cannot form the basis of a fraud claim against Morgan Stanley. See Gomez- Jimenez, 103 A.D.3d at 17 (where defendants disclosed that salary data were based on small samples of self-reporting graduates, they simply publish[ed] truthful information ); see also Footbridge Ltd. v. Countrywide Home Loans, Inc., No. 09 Civ. 4050, 2010 WL , at *9 (S.D.N.Y. Sept. 28, 2010) (no fraud claim based on owner occupancy rates absent allegation that the reported percentages are inaccurate representations of the data received from borrowers ). 4. No Misstatement as to Credit Ratings Plaintiff s allegations concerning credit ratings similarly do not plead any misrepresentation. Plaintiff does not, for example, allege that the prospectus supplements misreported the credit ratings that actually were assigned to the certificates at issue. Instead, plaintiff alleges that those ratings did not accurately reflect the risks of the certificates, and the certificates should have been rated lower. (See, e.g., ) But, the offering documents do not warrant the accuracy of the initial credit ratings. Rather, they make clear that the ratings were based on assumptions by the rating agencies that could turn out to be inaccurate, in which case, the rating agencies could lower them at any time, and [n]o one will be required to supplement any credit enhancement or to take any other action to maintain any rating of the 15

24 certificates. (See, e.g., Ex. 37 at S-17.) Further, while plaintiff contends that the ratings were inaccurate in part because defendants allegedly supplied certain false information to the rating agencies, plaintiff s allegations are either entirely derivative of their insufficiently plead allegations of false LTV ratios and owner occupancy rates, or else concern matters not alleged to have been misrepresented (like FICO scores). (See 184.) 5. No Misstatement as to Transfer of Title Plaintiff s allegations regarding title transfer of the mortgage loans (see, e.g., 126) do not support an inference that anything was misrepresented. The offering materials stated that [p]ursuant to the pooling and servicing agreement, the depositor will sell, without recourse, to the trust, all right, title and interest in and to each mortgage loan. (See, e.g., 55, 69, 84, 98.) Plaintiff does not allege that the offering documents misrepresented the requirements of the pooling and servicing agreements. Plaintiff merely alleges that defendants did not comply with those agreements terms. ( 569.) Allegations that a defendant accurately disclosed the terms of an agreement but failed to comply with the terms or even had an intention not to perform an obligation are insufficient to allege fraud. DerOhannesian v. City of Albany, 110 A.D.3d 1288, 1292 (3d Dep t 2013); accord N.Y. Univ. v. Cont l Ins. Co., 87 N.Y.2d 308, 318 (1995). At most, plaintiff is left with an unpleaded claim for breach of contract against the trustees, whose responsibility it was to ensure that the necessary documents were received (see App. D) not a claim for fraud against Morgan Stanley. See Bank Hapoalim B.M. v. Bank of Am. Corp., No. 12-CV-4316, 2012 WL , at *8 (C.D. Cal. Dec. 21, 2012) (finding that the remedy for 16

25 alleged violations of the PSA is to sue the trusts for breach of contract and breach of fiduciary duties ); accord Jim Longo, Inc. v. Rutigliano, 251 A.D.2d 547, 548 (2d Dep t 1998). 19 B. The Alleged Misstatements Concern Non-Actionable Opinions Plaintiff fails to allege any actionable misstatement in the offering documents as to appraisals, LTV ratios or credit ratings for an additional reason: they are statements of subjective judgment and belief that are not actionable under New York law. See Mandarin Trading Ltd., 16 N.Y.3d at 179 (representation of value constituted nonactionable opinion that provided no basis for a fraud claim ). Statements of present fact can support a fraud claim. See, e.g., N.Y. Univ., 87 N.Y.2d at 318; Braddock v. Braddock, 60 A.D.3d 84, 89 (1st Dep t 2009). Opinions and predictions generally cannot. See, e.g., Jacobs v. Lewis, 261 A.D.2d 127, (1st Dep t 1999). Property appraisals and the LTV ratios mathematically derived from them are nonactionable opinions as a matter of New York law. See, e.g., Newman v. Wells Fargo Bank, N.A., 85 A.D.3d 435, 435 (1st Dep t 2011) ( Appraisals are not actionable because they are matters of opinion. ). So, too, are credit ratings, which represent a rating agency s judgment regarding the likelihood of the receipt by a certificateholder of distributions on the mortgage loans to which they are entitled by the Final Scheduled Distribution Date. (Ex. 37 at S-130.) Thus, [t]he rating... speaks merely to the Agency s opinion of the creditworthiness of a particular security. In re Lehman Bros. Mortgage-Backed Sec. Litig., 650 F.3d 167, 183 (2d 19 Plaintiff s allegations also disregard the plain language of the pooling and servicing agreements ( PSAs ), which plainly transferred all right, title and interest in the loans to the Trustee, on behalf of the trust, just as represented in the offering documents. See, App. D; see also Bank of N.Y. v. Silverberg, 86 A.D.3d 274, (2d Dep t 2011); Bank Hapoalim B.M., 2012 WL , at *8 (holding that the PSA itself properly transferred the loans to the trust ). Moreover, Plaintiff concedes that based on its investigation, the loans were transferred to the trusts in many instances. ( 580.) While Plaintiff asserts that these transfers were not timely, that is irrelevant under New York law, which allows the holder of a mortgage and note to foreclose on a property if assignment is made at any point before the initiation of foreclosure proceedings. Silverberg, 86 A.D.3d at

26 Cir. 2011). Such projections about future events are not actionable. See ESBE Holdings, Inc. v. Vanquish Acquisition Partners, LLC, 50 A.D.3d 397, 398 (1st Dep t 2008). C. The Alleged Misrepresentations Were Attributed to Others and Are Not Actionable Against Morgan Stanley To the extent that representations in the offering documents regarding underwriting guidelines, owner occupancy rates or credit ratings were false (and as set forth above, they were not), they still would not be actionable as to Morgan Stanley, which did not make those statements. [T]o plead a valid cause of action sounding in fraud, the complaint must set forth all of the elements of fraud including the making of material representations by the defendant to the plaintiff. Mandarin Trading, Ltd., 16 N.Y.3d at (quoting Garelick v. Carmel, 141 A.D.2d 501, 502 (2d Dep t 1988)). The offering documents, however, did not attribute statements of owner occupancy rates, credit ratings or underwriting guidelines to Morgan Stanley. Rather, as set forth above, owner occupancy rates were expressly attributed to borrower representations, while credit ratings exclusively are assigned by credit ratings agencies. (Supra at IV.A.3, IV.A.4). Likewise, the offering documents specifically attributed the description of the underwriting guidelines to the loan originators. 20 To plead a fraud claim, it is not enough to allege that the defendant incorporated another s purportedly false statement into an offering document. See Mateo v. Senterfitt, 82 A.D.3d 515, 517 (1st Dep t 2011); Eurycleia Partners, LP v. Seward & Kissel, LLP, 46 A.D.3d 400, 401 (1st Dep t 2007) aff d, 12 N.Y.3d 553 (2009) See, e.g., Ex. 37, at S-28 ( The information set forth in the following paragraphs has been provided by NC Capital Corporation. ), S-33 (The information set forth in the following paragraphs has been provided by WMC. ), S-44 ( The information set forth in the following paragraphs has been provided by Decision One Mortgage Company, LLC and relates solely to the mortgage loans acquired from Decision One. ); (App. D.) 21 For the same reason, as a matter of law, Plaintiff does not and cannot allege any misstatements by Morgan Stanley concerning the ACCR Plaintiff alleges that all of the purported misstatements concerning this offering was made in the associated prospectus supplements. ( ) Plaintiff alleges only that Morgan Stanley acted as an underwriter and played a role in structuring it and selling the certificates, not that it made the statements in the prospectus supplements. ( 273.) And under federal law, which governs these documents and (.continued) 18

27 V. Plaintiff Failed to Plead Scienter Plaintiff s scienter allegations do not give rise to a reasonable inference that Morgan Stanley knew about the falsity of the [specific] contested statements in the offering memoranda. See Eurycleia Partners, LP, 12 N.Y.3d at 559. In its complaint, plaintiff relies principally upon a report prepared by Clayton, a third-party due diligence vendor that Morgan Stanley and others sometimes engaged to assist in evaluating loans for purchase, to show that defendants knew that originators had not complied with underwriting guidelines. ( , 551, 556, , ). But, these allegations fail to show Morgan Stanley s knowledge that any challenged statements in the prospectus supplements were false. The Clayton report on its face is not linked to any specific loan or offering, and therefore is not sufficiently particular to plead knowledge of any false statements under 3016(b). See, e.g., Union Cent. Life Ins. Co. v. Credit Suisse Sec. (USA), LLC, No. 11 Civ. 2327, 2013 WL , at *7 (S.D.N.Y. Mar. 29, 2013) (rejecting Clayton allegations as not specific to any of the loans underlying the securitizations at issue ). Indeed, at least two of the certificates in this case were issued before January 1, 2006, and thus predate the period covered by the Clayton report. 22 The Clayton allegations thus do[] not bear on these two offerings. Landesbank Baden-Wurttemberg v. Goldman Sachs & Co., 478 F. App x 679, 682 (2d Cir. 2012). Moreover, plaintiff s allegations regarding Morgan Stanley s alleged purchase of loans that Clayton flagged as defective reflect, at most, a difference of opinion between Clayton and Morgan Stanley regarding the existence and sufficiency of subjective compensating factors. ( (continued.) dictates their content, the prospectus supplements are the statements of the issuers, not of the underwriters like Morgan Stanley. See Janus Capital Grp., Inc. v. First Derivative Traders, 131 S. Ct. 2296, 2303 (2011). Thus, Plaintiff s claims as to this certificate must be dismissed. See Eurycleia Partners, LP, 46 A.D.3d at The offerings are MSAC 2005-HE2 and MSHEL (App. D.) 19