FILED: NEW YORK COUNTY CLERK 07/16/ :39 PM INDEX NO /2015 NYSCEF DOC. NO. 566 RECEIVED NYSCEF: 07/16/2018

Transcription

1 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK x IN RE: PART 60 RMBS PUT-BACK LITIGATION : : : : : Index No /2015 Justice Friedman IAS Part x x AFFIRMATION OF BRIAN S. WEINSTEIN IN SUPPORT OF DEFENDANTS POSITION STATEMENT REGARDING EXPERT REPORTS Brian S. Weinstein affirms pursuant to CPLR 2106 that the following is true: 1. I am an attorney admitted to practice in the State of New York. I am a member of the firm of Davis Polk & Wardwell LLP, counsel for defendants in, inter alia, Deutsche Bank National Trust Company, solely in its capacity as Trustee of the Morgan Stanley ABS Capital I Inc. Trust 2007-NC4 v. Morgan Stanley Mortgage Capital Holdings LLC, as Successor-by- Merger to Morgan Stanley Mortgage Capital Inc., No /2014. I submit this affirmation in support of Defendants Position Statement Regarding Expert Reports. 2. Attached hereto as Exhibit A is a true and correct copy of the Memorandum of Law for Defendant Deutsche Bank National Trust Company in Phoenix Light SF Ltd. v. Deutsche Bank National Trust Co., No. 14-cv JGK (S.D.N.Y.), dated August 14, Dated: New York, New York July 16, 2018 /s/ Brian S. Weinstein Brian S. Weinstein 1 of 59

2 Exhibit A 2 of 59

3 1 of 57 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK PHOENIX LIGHT SF LIMITED, BLUE HERON FUNDING V LTD., BLUE HERON FUNDING VI LTD., BLUE HERON FUNDING VII LTD., BLUE HERON FUNDING IX LTD., C-BASS CBO XIV LTD., C-BASS CBO XVII LTD., KLEROS PREFERRED FUNDING V PLC, SILVER ELMS CDO PLC and SILVER ELMS CDO II LIMITED, Plaintiffs, No. 14-cv JGK Hon. John G. Koeltl v. DEUTSCHE BANK NATIONAL TRUST COMPANY, Defendant. MEMORANDUM OF LAW IN SUPPORT OF MOTION TO DISMISS THE SECOND AMENDED COMPLAINT BY DEFENDANT DEUTSCHE BANK NATIONAL TRUST COMPANY, AS TRUSTEE Michael S. Kraut Steven G. Brody Kevin J. Biron MORGAN, LEWIS & BOCKIUS LLP 101 Park Avenue New York, New York Tel: Fax: Attorneys for Defendant Deutsche Bank National Trust Company, as Trustee 3 of 59

4 2 of 57 TABLE OF CONTENTS Page PRELIMINARY STATEMENT... 1 STATEMENT OF FACTS AND RELEVANT BACKGROUND... 3 A. Structure of RMBS Trusts... 4 B. The RMBS Trustee s Obligations, Which Are Limited to Those Expressly Set Forth in the Agreements, Differ From Those of an Ordinary Trustee... 5 C. The RMBS Trustee s Obligations Are Specifically Defined, Narrow, and Do Not Include Responsibility for the Alleged Wrongdoing in the SAC The RMBS Trustee Has Limited Duties Relating to Mortgage Loan Files The RMBS Trustee Has No Pre-EoD Obligation to Monitor the Performance of Servicers The RMBS Trustee Does Not Make, and Is Not Responsible For, Loan-Level R&Ws About the Nature and Quality of Trust Loans The RMBS Trustee Has No Pre-EoD Obligation To Investigate Facts or Matters Absent Direction By Holders... 7 D. Plaintiffs and the Structure of Collateralized Debt Obligations... 9 SUMMARY OF PLAINTIFFS ALLEGATIONS AND CLAIMS... 9 PROCEDURAL HISTORY ARGUMENT I. PLAINTIFFS CLAIMS RELATING TO THE RMBS TRUSTEE S ALLEGED FAILURE TO TAKE ACTION AGAINST INDYMAC BANK SHOULD BE DISMISSED II. III. PLAINTIFFS INCOMPLETE MORTGAGE LOAN FILE CLAIMS ARE BARRED BY THE STATUTE OF LIMITATIONS A. Plaintiffs TIA, Breach of Contract, Streit Act and Breach of the Covenant of Good Faith and Fair Dealing Claims Are Time-Barred B. Plaintiffs Tort Claims Concerning Allegedly Incomplete Mortgage Loan Files Are Time-Barred PLAINTIFFS R&W CLAIMS CONCERNING THE MSAC 2007-NC4 TRUST FAIL IV. PLAINTIFFS BREACH OF CONTRACT CLAIMS FAIL A. Plaintiffs Lack Standing To Enforce the Agreements For 17 of the 55 Trusts Pursuant to Negating Clauses i- 4 of 59

5 3 of 57 TABLE OF CONTENTS (continued) Page 1. Under New York Law, a Negating Clause Is Controlling and Precludes Claims by Unauthorized Third-Party Beneficiaries The Negating Clauses in 17 Agreements Bar Enforcement by Beneficial Owners of the RMBS B. Plaintiffs Fail to State a Claim For Breach of the RMBS Trustee s Pre- EoD R&W Obligations Plaintiffs Have Not Alleged that the RMBS Trustee Acquired Actual Knowledge of any R&W Breaches With Respect to 39 of the 55 Trusts, the RMBS Trustee Did Not Have a Pre-EoD Duty to Enforce R&Ws C. Plaintiffs Fail to State a Claim For Breach of the RMBS Trustee s Post- EoD Obligations Plaintiffs Have Not Pled EoDs Under the Agreements a. Plaintiffs have not pled servicer/master servicer/issuer breaches b. With respect to 11 Trusts that require written notice of breach to the servicer/issuer and failure to cure before an EoD occurs, Plaintiffs have not pled the notice and cure requirements Plaintiffs Have Not Pled That the RMBS Trustee Had Actual Knowledge of or Written Notice That An EoD Occurred D. With Respect to All 55 Trusts, Plaintiffs Breach of Contract Claims Are Barred By the No-Action Clauses in the Agreements V. PLAINTIFFS TORT CLAIMS SHOULD BE DISMISSED VI. A. Plaintiffs Tort Claims Are Duplicative of Their Contract Claims B. Plaintiffs Tort Claims Are Barred By the Economic Loss Doctrine C. Plaintiffs Breach of Fiduciary Duty Claim Fails D. Plaintiffs Negligence and Gross Negligence Claim Fails The Agreements Bar This Claim Plaintiffs Fail to Plead that the RMBS Trustee Neglected to Perform a Ministerial Duty with Due Care Plaintiffs Fail to Plead the Existence of a Conflict of Interest THE CLAIM FOR BREACH OF THE IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING IS DUPLICATIVE ii- 5 of 59

6 4 of 57 TABLE OF CONTENTS (continued) Page VII. THE TRUST INDENTURE ACT CLAIM FAILS VIII. THE STREIT ACT CLAIM FAILS A. The Securities Are not Mortgage Investments under the Streit Act B. The Streit Act s Legislative History Shows that It Does Not Apply to RMBS Trusts C. The Streit Act Does Not Provide a Private Cause of Action D. Even if the Streit Act Were Applicable and a Private Cause of Action Existed, Plaintiffs Claims Under the Act Would Fail as a Matter of Law CONCLUSION iii- 6 of 59

7 5 of 57 TABLE OF AUTHORITIES Page(s) CASES Aaron Ferer & Sons Ltd. v. Chase Manhattan Bank, N.A., 731 F.2d 112 (2d Cir. 1984)...14 ACE Sec. Corp. Home Equity Loan Trust, 2007-HE3 ex rel. HSBC Bank USA, N.A. v. DB Structured Prods., Inc., 5 F. Supp. 3d 543, (S.D.N.Y. 2014)...4 AG Capital Funding Partners, L.P. v. State St. Bank & Trust Co., 11 N.Y.3d 146 (2008)...33, 34 Amron v. Morgan Stanley Inv. Advisors, Inc., 464 F.3d 338 (2d Cir. 2006)...22 Argonaut P ship L.P. v. Bankers Tr. Co., No , 2001 WL (S.D.N.Y. May 30, 2001)...22, 26, 34 Arrowgrass Master Fund Ltd. v. Bank of N.Y. Mellon, No /2010, 2012 WL (Sup. Ct. N.Y. Cnty. Feb. 24, 2012)...28, 29 Bank of N.Y. v. First Millennium, Inc., 607 F.3d 905 (2d Cir. 2010)...40 Barberan v. Nationpoint, 706 F. Supp. 2d 408 (S.D.N.Y. 2010)...19 Bd. of Trustees ex rel. Gen. Ret. Sys. of Detroit v. BNY Mellon, N.A., No. 11 CIV (RJS), 2012 WL (S.D.N.Y. Sept. 10, 2012)...18 Blackrock Allocation Target Shares: Series Portfolio v. U.S. Bank N.A., No. 14-cv-9401-KBF, 2015 WL (S.D.N.Y. May 18, 2015)...8 Blackrock Balanced Capital Portfolio (FI) v. Deutsche Bank Nat l Trust Co., No. 14-cv RMB (S.D.N.Y. Nov. 24, 2014)...30 BNP Paribas Mortg. Corp. v. Bank of Am., N.A., 949 F. Supp. 2d 486 (S.D.N.Y. 2013)...33 Can. Life Assurance Co. v. Converium Ruckversicherung (Deutschland) AG, 335 F.3d 52 (2d Cir. 2003)...43 CFIP Master Fund, Ltd. v. Citibank, N.A., 738 F. Supp. 2d 450 (S.D.N.Y. 2010)...8, 36 -iv- 7 of 59

8 6 of 57 TABLE OF AUTHORITIES (continued) -v- Page(s) Collette v. St. Luke s Roosevelt Hosp., 132 F. Supp. 2d 256 (S.D.N.Y. 2001)...42 Cortlandt St. Recovery Corp. v. Hellas Telecomms., S.a.r.l., 996 N.Y.S.2d 476 (Sup. Ct. N.Y. Cnty. 2014), rearg. den., No /11, 2015 WL (Sup. Ct. N.Y. Cnty. Feb. 5, 2015)...21 CPC Int l Inc. v. McKesson Corp., 70 N.Y.2d 268 (1987)...45 Cruden v. Bank of N.Y., 957 F.2d 961 (2d Cir. 1992)...13, 14, 31 Cruz v. TD Bank, N.A., 22 N.Y.3d 61 (2013)...44 Deutsche Zentral-Genossenchaftsbank AG v. HSBC N. Am. Holdings Inc., No. 12 Civ. 4025(AT), 2013 WL (S.D.N.Y. Dec. 17, 2013)...22 Ellington Credit Fund, Ltd. v. Select Portfolio Servicing, Inc., 837 F. Supp. 2d 162 (S.D.N.Y. 2011)... passim Elliott Assocs. v. J. Henry Schroder Bank & Trust Co., 838 F.2d 66 (2d Cir. 1988)...5 Ely-Cruikshank Co. v. Bank of Montreal, 81 N.Y.2d 399 (1993)...14, 16, 17 FHFA v. HSBC N. Am. Holdings Inc., 33 F. Supp. 3d 455, (S.D.N.Y. 2014)...22 FHFA v. UBS, Ams. Inc., No. 11-cv-5201, 2013 WL (S.D.N.Y. June 28, 2013)...28 First Am. Title Ins. Co. of N.Y. v. Fiserv Fulfillment Servs., Inc., No. 06 CIV (NRB), 2008 WL (S.D.N.Y. Aug. 14, 2008)... passim FW/PBS, Inc. v. City of Dallas, 493 U.S. 215 (1990)...20 Gabriel Capital, L.P. v. Bankers Tr. Co., No. 00-cv-4244-LLS, 2000 WL (S.D.N.Y. Oct. 5, 2000)...34 GEM Advisors, Inc. v. Corporacion Sidenor, S.A., 667 F. Supp. 2d 308 (S.D.N.Y. 2009) of 59

9 7 of 57 TABLE OF AUTHORITIES (continued) Page(s) Glatt v. Fox Searchlight Pictures Inc., 293 F.R.D. 516 (S.D.N.Y. 2013)...14 Glob. Fin. Corp. v. Triarc Corp., 93 N.Y.2d 525 (1999)...13 Gravatt v. City of New York, 226 F.3d 108 (2d Cir. 2000)...29 IDT Corp. v. Morgan Stanley Dean Witter & Co., 12 N.Y.3d 132 (2009)...14 IMS Eng rs-architects, P.C. v. State, 858 N.Y.S.2d 486 (3d Dep t 2008)...19 In re Appointment of Indep. Counsel, 766 F.2d 70, 73 (2d Cir. 1985)...19 In re Bankers Trust Co., 450 F.3d 121 (2d Cir. 2006)...27 In re E.F. Hutton Sw. Props. II, Ltd., 953 F.2d 963 (5th Cir. 1992)...37 In re Eagle s Estate, 7 N.Y.S.2d 173 (Sur. Ct. N.Y. Cnty. 1938)...42 In re Metromedia Fiber Network, Inc., 416 F.3d 136 (2d Cir. 2005)...39 India.com, Inc. v. Dalal, 412 F.3d 315 (2d Cir. 2005)...20 Knights of Columbus v. The Bank of New York Mellon, No /2011 (Sup. Ct. N.Y. Cnty. July 10, 2015), NYSECF Doc. No Magten Asset Mgmt. Corp. v. Bank of N.Y., 841 N.Y.S.2d 219 (Sup. Ct. N.Y. Cnty. 2007)...26 Marblegate Asset Mgmt. v. Educ. Mgmt. Corp., No. 14-cv-8584-KPF, 2014 WL (S.D.N.Y. Dec. 30, 2014)...40 Martinez v. Capital One, N.A., 863 F. Supp. 2d 256 (S.D.N.Y. 2012) vi- 9 of 59

10 8 of 57 TABLE OF AUTHORITIES (continued) Page(s) Martinez v. Vakko Holding A.S., No. 07 Civ. 3413(LAP), 2008 WL (S.D.N.Y. July 23, 2008)...24 Meckel v. Cont l Res. Co., 758 F.2d 811 (2d Cir. 1985)...5 MeehanCombs Glob. Credit Opportunities Funds, LP v. Caesars Entm t Corp., No. 14-cv-7091-SAS, 2015 WL (S.D.N.Y. Jan. 15, 2015)...40 Millennium Partners., L.P. v. U.S. Bank N.A. No. 12-cv-7581-HB, 2013 WL , at *4 (S.D.N.Y. Apr. 17, 2013)...26, 32 MLSMK Inv. Co. v. JP Morgan Chase & Co., 431 F. App x 17 (2d Cir. 2011), aff d, 651 F.3d 268 (2d Cir. 2011)...28 Murray v. U.S. Bank Trust N.A., 365 F.3d 1284 (11th Cir. 2004)...30 Okla. Police Pension & Ret. Sys. v. U.S. Bank N.A., 291 F.R.D. 47 (S.D.N.Y. 2013)... passim Olmsted v. Pruco Life Ins. Co. of N.J., 134 F. Supp. 2d 508 (E.D.N.Y. 2000)...44 Page Mill Asset Mgmt. v. Credit Suisse First Bos. Corp., No. 98 CIV 6907 MBM, 2000 WL (S.D.N.Y. June 30, 2000)...36 Peak Partners, LP v. Republic Bank, 191 F. App x 118 (3d Cir. 2006)...26 Perry v. NYSARC, Inc., 424 F. App x 23 (2d Cir. 2011)...19 Prudence Realization Corp. v. Atwell, 35 N.Y.S.2d 1001 (1st Dep t 1942), aff d, 290 N.Y. 597 (1943)...42 Putnam High Yield Trust v. Bank of N.Y., 776 N.Y.S.2d 796 (1st Dep t 2004)...28 Racepoint Partners, LLC v. JPMorgan Chase Bank, N.A., 14 N.Y.3d 419 (2010)...35 Raymond James & Assocs. v. Bank of N.Y. Trust Co., No. 07-cv-239, 2008 WL (M.D. Fla. Sept. 18, 2008) vii- 10 of 59

11 9 of 57 TABLE OF AUTHORITIES (continued) Page(s) Ret. Bd. of the Policemen s Annuity & Benefit Fund v. Bank of N.Y. Mellon, 775 F.3d 154 (2d Cir. 2014), reh g den., No LEAD, 2015 WL (2d Cir. Apr. 13, 2015)... passim Royal Park Investments SA/NV v. HSBC Bank USA, N.A., No. 14-cv-8175 (SAS), 2015 WL (S.D.N.Y. Jan. 23, 2015)... passim Sigall v. Zipcar, Inc., No. 13-cv-4552-JPO, 2014 WL (S.D.N.Y. Feb. 24, 2014), aff d, 582 F. App x 18 (2d Cir. 2014)...45 Springwell Navigation Corp. v. Sanluis Corp., S.A., 849 N.Y.S.2d 34 (1st Dep t 2007)...20 Sterling Fed. Bank, F.S.B. v. DLJ Mortg. Capital, Inc., No. 09 C 6904, 2010 WL (N.D. Ill. Aug. 20, 2010)...26, 36 Tran v. Bank of N.Y., No. 13 Civ. 580 (RPP), 2014 WL (S.D.N.Y. Mar. 24, 2014), aff d, 592 F. App x 24 (2d Cir. 2015)...6 U.S. Bank N.A. v. Citigroup Glob. Mkts. Realty Corp., No. 13-cv-6989-GBD, 2014 WL (S.D.N.Y. Nov. 14, 2014)...22 UBS Capital Ams. II, LLC v. Highpoint Telecomms. Inc., No. 01-CV-8133-JSM, 2002 WL (S.D.N.Y. Mar. 8, 2002)...28 Univs. Research Ass n v. Coutu, 450 U.S. 754 (1981)...45 W.B. David & Co. v. De Beers Centenary AG, 507 F. App x 67 (2d Cir. 2013)...14 Wilson v. Dantas, 746 F.3d 530 (2d Cir. 2014)...20 STATUTES & RULES Fed. R. Civ. P. 12(b)...1, 18, 19 N.Y. C.P.L.R N.Y. C.P.L.R N.Y. C.P.L.R viii- 11 of 59

12 10 of 57 TABLE OF AUTHORITIES (continued) Page(s) N.Y. Gen. Bus. Law N.Y. Gen. Bus. Law N.Y. Real Prop. Law , 44 N.Y. Real Prop. Law N.Y. Real Prop. Law , 46 N.Y. Real Prop. Law 130-k...41, 42 Trust Indenture Act of 1939 (15 U.S.C. 77aaa 77bbbb)... passim -ix- 12 of 59

13 11 of 57 Deutsche Bank National Trust Company, as trustee of 55 residential mortgage-backed securitization ( RMBS ) trusts at issue in this action (the RMBS Trustee ), submits this memorandum of law in support of its motion pursuant to Federal Rules of Civil Procedure ( FRCP ) 12(b)(1) and (6) to dismiss the Second Amended Complaint, Dkt. No. 33 ( SAC ). PRELIMINARY STATEMENT Plaintiffs allege that the RMBS Trustee breached the 55 different trust agreements (the Agreements ) that govern the 55 different RMBS trusts at issue here (the Trusts ). But they have not pled a single viable claim. Plaintiffs allege the RMBS Trustee breached the Agreements by failing to act as a policeman for the Trusts to remedy other parties purported breaches. But, the RMBS Trustee had no such obligation. To the contrary, the Agreements and the law are clear that the role the RMBS Trustee accepted was sharply circumscribed and ministerial in nature, and (most important to this action) did not include investigating matters related to the Trusts or overseeing other parties. The Agreements provide for an investor-driven process for remediating other parties breaches. Because Plaintiffs contract claim is based upon breaches of obligations that the RMBS Trustee never assumed, it fails. Plaintiffs attempts to recast that claim as a tort or statutory violation fare no better. All Plaintiffs claims should be dismissed with prejudice for multiple reasons. First, the applicable statutes of limitations bar certain of Plaintiffs claims with respect to the 5 Trusts sponsored by IndyMac Bank F.S.B. ( IndyMac Bank ) and all of Plaintiffs claims based on allegedly incomplete mortgage loan files. Second, Plaintiffs lack standing to bring a contract claim with respect to 17 of the 55 Trusts. Negating clauses in the Agreements for those Trusts bar enforcement by anyone other than specifically identified entities. Because Plaintiffs are not those entities, their contract claim as to those 17 Trusts should be dismissed of 59

14 12 of 57 Third, Plaintiffs contract claim conflicts with the clear terms of the Agreements. Plaintiffs allege two types of contractual breaches: (1) breaches of the RMBS Trustee s prudent person obligations, which arise only upon the occurrence of an Event of Default as defined in the Agreements ( EoD ); and (2) breaches of the RMBS Trustee s alleged pre-eod obligations, which are limited to those duties expressly set forth in the Agreements. Plaintiffs claim for breach of the RMBS Trustee s alleged post-eod prudent person duties fails because Plaintiffs do not allege an EoD, or that the RMBS Trustee had knowledge of an EoD (as required by the Agreements to trigger post-eod duties). Plaintiffs also fail to allege facts supporting a plausible inference that the RMBS Trustee breached its alleged pre-eod obligations. For example, Plaintiffs allege that the RMBS Trustee breached its purported duty to provide notice of third parties obligations to repurchase non-conforming mortgage loans that were conveyed to the Trusts. However, Plaintiffs do not allege facts supporting a plausible inference that the RMBS Trustee had actual knowledge of breaches of representations and warranties ( R&Ws ) regarding those loans on a loan-by-loan and trust-by-trust basis; such knowledge is required under recent Second Circuit authority1 to trigger the RMBS Trustee s obligations to enforce third parties repurchase obligations. Indeed, for the one Trust where Plaintiffs are able to allege such knowledge, they concede the RMBS Trustee is already enforcing repurchase obligations for the non-conforming loans. Fourth, Plaintiffs contract claim is barred by no-action clauses in the Agreements. Before even a registered holder of the Securities could bring this lawsuit, it would have been required to: (1) provide written notice to the RMBS Trustee of an EoD; and (2) obtain a 1 See Ret. Bd. of the Policemen s Annuity & Benefit Fund v. Bank of N.Y. Mellon ( PABF ), 775 F.3d 154, 162 (2d Cir. 2014), reh g den., No LEAD, 2015 WL (2d Cir. Apr. 13, 2015) of 59

15 13 of 57 consensus of at least 25% of the Trust s Voting Rights to make a written request to the RMBS Trustee to institute such a lawsuit. Plaintiffs do not allege those prerequisites were fulfilled. Fifth, Plaintiffs breach of fiduciary duty and negligence claims fail for numerous reasons. For example, these claims should be dismissed because they are duplicative of Plaintiffs contract claim and are barred by the economic loss doctrine. Plaintiffs breach of fiduciary duty claim also fails because the RMBS Trustee did not owe Plaintiffs any fiduciary duties. Plaintiffs negligence claim cannot be maintained because the RMBS Trustee s duties are limited by contract prior to an EoD. Sixth, Plaintiffs claim for breach of the implied covenant of good faith and fair dealing fails because it is duplicative of the breach of contract claim, and because the express terms of the Agreements preclude liability based on implied covenants. Seventh, Plaintiffs claim under the Trust Indenture Act of 1939 (the TIA ) fails. Controlling Second Circuit precedent holds that the TIA does not apply to the 49 Trusts that are governed by pooling and servicing agreements ( PSAs ). As to the remaining 6 Trusts that are governed by indentures, Plaintiffs fail to allege a violation of the TIA. Finally, Plaintiffs claim for violation of New York s Streit Act fails because that statute does not apply to RMBS trusts or provide for a private cause of action. In any event, Plaintiffs have failed to allege any violation of the Streit Act. STATEMENT OF FACTS AND RELEVANT BACKGROUND This action involves two types of securitization transactions: (i) RMBS transactions that created the Trusts and led to the issuance of the Securities, and (ii) Plaintiffs collateralized debt obligation ( CDO ) transactions. Below is an overview of RMBS transactions and the RMBS Trustee s duties under the Agreements, followed by a brief description of Plaintiffs CDO transactions of 59

16 A. 14 of 57 Structure of RMBS Trusts RMBS trusts generally are created using one of two types of agreements, a PSA or an indenture. A PSA creates a New York common law trust, conveys mortgage loans to a trustee, may set forth how the loans in the pool will be serviced, and creates certificates of the trust to be sold for investing ( PSA Trusts ). An indenture contains a pledge of the right to payment for the loans by a statutory trust to a trustee, does not address mortgage loan servicing terms, and creates notes to be sold for investing in the trust ( Indenture Trusts ). Of the 55 Trusts at issue here, 49 are PSA Trusts and 6 are Indenture Trusts.2 SAC, 4 n.1. In an RMBS offering, after an originator makes the mortgage loans to borrowers, selected loans are bundled into a pool and conveyed to an entity called a sponsor, which then conveys the pool to a depositor. See ACE Sec. Corp. Home Equity Loan Trust, 2007-HE3 ex rel. HSBC Bank USA, N.A. v. DB Structured Prods., Inc., 5 F. Supp. 3d 543, (S.D.N.Y. 2014). The depositor then conveys the pool to (i) the trustee (solely in its trustee capacity) in exchange for certificates in the case of PSA Trusts or (ii) to the statutory trust in exchange for notes in the case of Indenture Trusts. The depositor (or an underwriter) then sells the certificates or notes, and the certificateholders or noteholders receive their share of principal and interest when mortgage payments are made. The rights and obligations of the parties to the RMBS securitization appear in its 2 The 6 Indenture Trusts are listed on Exhibit B to the Declaration of Steven G. Brody in Support of Defendant s Motion to Dismiss. Exhibits to the Brody Declaration are cited herein as Ex. [A-W], and Exhibits to the Declaration of Kevin J. Biron in Support of Defendant s Motion to Dismiss are cited herein as Ex. [1-77]. The RMBS Trustee uses the names given by Plaintiffs to each Trust, as listed in Exhibit A to the SAC of 59

17 15 of 57 governing agreements. The signatories to a PSA commonly include: (1) a depositor; (2) an RMBS trustee; and (3) a mortgage loan servicer. See, e.g., Ex. 52 Cover.3 The signatories to an RMBS indenture typically include: (1) an issuer or issuing entity; (2) an administrator or securities administrator; and (3) an RMBS trustee. See, e.g., Ex. 1a Cover. B. The RMBS Trustee s Obligations, Which Are Limited to Those Expressly Set Forth in the Agreements, Differ From Those of an Ordinary Trustee Prior to an EoD as defined in the governing agreement and actual knowledge or, in some cases, receipt of written notice of the EoD by the RMBS trustee, the obligations of an RMBS trustee are strictly limited to those explicitly found in that agreement. See Elliott Assocs. v. J. Henry Schroder Bank & Trust Co., 838 F.2d 66, 70 (2d Cir. 1988); Meckel v. Cont l Res. Co., 758 F.2d 811, 816 (2d Cir. 1985). The Agreements provide that, absent an EoD, the RMBS Trustee s obligations are limited solely to those explicitly found in the Agreements, and no implied covenants or obligations shall be read into [the Agreements] against the Trustee. See, e.g., Ex (i); Ex. 1a 6.01(b)(i); Ex. L. The Agreements also provide that the right of the Trustee to perform any discretionary act enumerated in [the Agreements] shall not be construed as a duty. See, e.g., Ex (a)(viii); Ex. 1a 6.02(b).4 C. The RMBS Trustee s Obligations Are Specifically Defined, Narrow, and Do Not Include Responsibility for the Alleged Wrongdoing in the SAC The Agreements limit the RMBS Trustee s obligations and liability with respect to the mortgage loan files, R&Ws and the servicers servicing of the mortgage loans in the Trusts. 3 Some Agreements appoint a master servicer to monitor the performance of other servicers. Except as specifically stated herein, the term servicers includes both servicers and master servicers. 4 See also Ex (a)(iii) of 59

18 16 of The RMBS Trustee Has Limited Duties Relating to Mortgage Loan Files When each RMBS transaction closed, the depositor was obligated to deliver mortgage loan files relating to the loans in the Trust to the RMBS Trustee or a custodian. See, e.g., Ex ; Ex. 1b 2.1(b). Within a specified time-period after closing, the RMBS Trustee or a custodian was required to issue certifications with a final exception report listing mortgage loan files with defective or missing documents. See, e.g., Ex ; Ex. 1b 2.2. Under certain circumstances, the depositor, sponsors or originators were required to substitute, cure or repurchase loans with incomplete mortgage loan files. See, e.g., Ex ; Ex. 1b The RMBS Trustee Has No Pre-EoD Obligation to Monitor the Performance of Servicers Servicers not the RMBS Trustee maintain the day-to-day relationships with individual borrowers. Servicers collect payments on the loans, and, upon borrower default, are responsible for enforcing the terms of the loan, which may include foreclosure. Tran v. Bank of N.Y., No. 13 Civ. 580 (RPP), 2014 WL , at *1 n.5 (S.D.N.Y. Mar. 24, 2014), aff d, 592 F. App x 24 (2d Cir. 2015). Master servicers have a duty to supervise, monitor, and oversee the Trusts servicers to ensure that the mortgage loans are being properly serviced and administered. The master servicer is required to enforce the obligations of the servicer. See, e.g., Ex. 1b 3A.3(b). Whether or not a master servicer is appointed, the Agreements assign virtually all duties with respect to servicing or administration of the mortgage loans in the Trusts to parties other than the RMBS Trustee and unequivocally provide that the RMBS Trustee is not responsible for those parties acts or omissions. See, e.g., Ex. 1b 3A.1 (the Trustee has no responsibility for any action of the Master Servicer or the Servicer and shall be indemnified by the Master Servicer or the Servicer, as applicable, for any cost, liability, or expense incurred ); Ex (a)(vi) ( the [RMBS] Trustee shall not be accountable, shall have no liability and makes of 59

19 17 of 57 no representation as to any acts or omissions hereunder of the Servicer.... ). Rather, the RMBS Trustee is entitled to conclusively rely on any certifications or other information provided by the Servicers under the terms of the applicable Servicing Agreement. See, e.g., Ex (i); Ex. 1a 6.01(b)(ii). 3. The RMBS Trustee Does Not Make, and Is Not Responsible For, Loan-Level R&Ws About the Nature and Quality of Trust Loans Sponsors and/or originators (in such capacity, a Warrantor ) make certain R&Ws concerning the nature and quality of the loans to be conveyed to the Trusts. The Agreements provide that the RMBS Trustee is entitled to rely upon such R&Ws and, as with the servicing certifications, has no obligation to investigate their veracity. 8.02(a)(v); Ex. 1a 6.02(a). See, e.g., Ex , In fact, the RMBS Trustee expressly disclaims any R&Ws regarding the loans. Ex ; Ex. 1a The RMBS Trustee Has No Pre-EoD Obligation To Investigate Facts or Matters Absent Direction By Holders Plaintiffs claims are principally based upon what the RMBS Trustee allegedly would have discovered if it had investigated matters concerning the specific loans and Trusts at issue in light of publicly available information about issues in the RMBS markets generally, and the alleged conduct of originators, sponsors, and servicers generally.5 However, prior to an EoD, the RMBS Trustee has no duty to initiate an investigation until certificateholders for PSA Trusts (or noteholders for Indenture Trusts) with the required percentage of voting rights direct such an 5 See, e.g., SAC 117 ( [The RMBS Trustee] was aware of these reports, investigations, and lawsuits.... It also had access to non-public information regarding the Covered Trusts that would have confirmed the representation and warranty violations if [the RMBS Trustee] had conducted even a limited investigation. ); id. Ex. F of 59

20 18 of 57 investigation and agree to indemnify the RMBS Trustee. See, e.g., Ex , 8.02(a)(v); Ex. 1a 6.01(g), 6.02(a); see also Blackrock Allocation Target Shares: Series Portfolio v. U.S. Bank N.A., No. 14-cv-9401-KBF, 2015 WL , at *2 (S.D.N.Y. May 18, 2015). Absent such direction and indemnity, the RMBS Trustee has no obligation to investigate any facts or matters represented in any document, certificate, or other paper, which includes the news articles and reports relied upon by Plaintiffs, the Warrantors R&Ws, and the servicers certifications of compliance with applicable servicing criteria. See, e.g., Ex (a)(v); Ex. 1a 6.01(b)(ii); see also Blackrock, 2015 WL , at *2. The reason for this no obligation to investigate provision is simple: an investigation can cost millions of dollars, and the only funds available to finance such an investigation are trust assets in which the RMBS Trustee has no beneficial interest. See, e.g., Ex (a)(iii); Ex. 1a 6.02(a). Thus, an investigation would consume monies otherwise available for distribution to investors. 6 In order to protect investors from the ill-advised whim of a trustee or a wasteful investigation directed by a holder with a small stake, this provision delineates when a trustee must investigate. This bright-line test also protects the RMBS Trustee (including from lawsuits like this). The tradeoff for these bargained-for limited obligations and broad exculpations is modest compensation. The nominal fees paid to the RMBS Trustee relative to the billion-plus dollars of principal for each Trust mere pocket change in comparison to all other economic aspects of [the] transaction 7 confirm its limited role. Plaintiffs do not allege that holders with sufficient voting rights either (i) directed the 6 The RMBS Trustee is not required to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties. E.g., Ex CFIP Master Fund, Ltd. v. Citibank, N.A., 738 F. Supp. 2d 450, 474 (S.D.N.Y. 2010) of 59

21 19 of 57 RMBS Trustee to investigate any facts or matters about which Plaintiffs now complain, or (ii) agreed to provide the required indemnity to take any of the actions Plaintiffs now claim the RMBS Trustee should have taken. As such, the RMBS Trustee had no duty to investigate. D. Plaintiffs and the Structure of Collateralized Debt Obligations Each Plaintiff allegedly is a special purpose entity ( SPE ) formed to issue securities in securitization transactions commonly referred to as CDOs. See SAC In a CDO transaction, an SPE referred to as the issuer issues notes pursuant to an indenture or similar agreement and acquires a portfolio of assets (such as interests in RMBS certificates), which the issuer grants to the indenture trustee when the CDO notes are issued. See, e.g., Ex. 65 at 1-3. After the closing, the indenture trustee receives proceeds from the asset portfolio and distributes those proceeds in accordance with the CDO indenture. See id. 10.5, As is typical in a CDO transaction, each Plaintiff: (i) entered into an indenture or security agreement with an indenture trustee (each, a CDO Trustee ), (ii) issued notes, and (iii) used the proceeds of the notes to acquire a portfolio of assets, which allegedly included certain of the Securities. See SAC 16-25; Exs Pursuant to the relevant CDO indenture or security agreement, each Plaintiff assigned to the relevant CDO Trustee all of [Plaintiff s] right, title and interest in property owned or later acquired by Plaintiff, including any Securities and related claims or contract rights owned or acquired by Plaintiff. See Ex. W. As of the closing date for each CDO transaction, the CDO Trustee holds the property assigned to it in trust for the benefit of all secured parties under the operative indenture or security agreement, including holders of the notes issued by Plaintiff. See id. SUMMARY OF PLAINTIFFS ALLEGATIONS AND CLAIMS At its core, this is a breach of contract case. Yet, Plaintiffs do not allege any specific facts regarding alleged breaches of the Agreements by the RMBS Trustee of 59

22 20 of 57 Plaintiffs allegations largely consist of lengthy recitations about problems in the mortgage loan market, the financial crisis in general, and alleged misconduct of parties other than the RMBS Trustee. Plaintiffs attach over 100 pages of exhibits recounting news articles, government reports, investigations, and lawsuits regarding loan originators failure to adhere to underwriting guidelines, sponsors defective underwriting and securitization practices, and servicers failure to properly service mortgage loans in RMBS trusts other than the Trusts at issue here. See SAC Exs. F, G, H. But, Plaintiffs do not tie these allegations to the Trusts, the mortgage loans in those Trusts, or the Agreements. Plaintiffs have tried this pleading approach before to no avail. As Justice Ramos observed in Phoenix Light SF Ltd. v. Merrill Lynch & Co.: [T]he claims as pled rely on reports and publications that have no connection to the actions of these defendants or to the loans underlying the specific certificates at issue here. Plaintiffs complaint relies mostly on generalized due diligence and originator reports that are not tied to any specific securitization, industry publications that do not even reference these defendants, and allegations regarding analysis offered by different investors in different securitizations. No /2013, 2014 WL , at *2 (Sup. Ct. N.Y. Cnty. Oct. 8, 2014). The Court dismissed the complaint because it is so vague that [the] Court is unable to distinguish mere speculation from allegations based upon knowledge. Id. The SAC suffers from the same fatal flaws. 8 Notably, in prior litigation, Plaintiffs themselves relied on authority from a court in this District holding: [I]t is difficult to see how a plaintiff could have plausibly pled that the epidemic of indiscretions in the MBS industry had infected his or her Certificates. A Complaint couched in nothing more than the sweepingly general allegations contained in Defendants exhibits would almost certainly stop[] short of the line between possibility and plausibility of entitlement to relief. 8 Although the Merrill Lynch case involved fraud claims, the flaws identified by the court are equally problematic under a notice pleading standard of 59

23 21 of 57 Ex. 74 (Plaintiffs Memorandum of Law in Opposition to Defendants Motion to Dismiss, Phx. Light SF Ltd. v. Ace Sec. Corp., 8-9 No /2012 (Sup. Ct. N.Y. Cnty. Sept. 11, 2012), NYSCEF Doc. No. 72 (citing In re Morgan Stanley Mortg. Pass-Through Certificates Litig., No. 09 Civ. 2137(LTS)(MHD), 2012 U.S. Dist. LEXIS (S.D.N.Y. July 16, 2012))). Plaintiffs limited references to the Trusts at issue here are insufficient to support their claims. First, Plaintiffs merely point generally to defaults, delinquencies, foreclosures, rating downgrades and losses in the Trusts that occurred during the financial crisis and housing market collapse. See SAC 97, 109. However, that the Trusts may have performed poorly in this period does not support Plaintiffs claim that the RMBS Trustee had knowledge of breaches or misconduct on a loan-by-loan and trust-by-trust basis. PABF, 775 F.3d at 162. This point should not be controversial, as Plaintiffs have argued it in other litigation: [a] decline in a security s rating says nothing as to what caused the decline, especially during a market-wide downturn and downgrades alone do not convey facts sufficient to plead [even a negligence] claim because a downgrade can occur for any number of reasons. Ex. 74 at 9. Second, Plaintiffs reference a repurchase action that the RMBS Trustee commenced relating to one of the Trusts after investors provided the RMBS Trustee with notice of loan-specific R&W breaches in that Trust. SAC 102; Ex. 71. Thus, in the only instance that Plaintiffs reference a situation where the RMBS Trustee had knowledge of loan-specific breaches in a Trust, the RMBS Trustee took action to remedy those breaches. Id. Nevertheless, Plaintiffs allege the RMBS Trustee breached the Agreements by failing to: take steps to cause sponsors or originators to repurchase loans with allegedly missing mortgage documentation; conduct investigations into whether the R&Ws were breached with regard to the loans in the Trusts specifically, based upon an alleged awareness of problems in the mortgage loan market generally; of 59

24 22 of 57 notify the Warrantors and the parties to the Agreements of alleged breaches of R&Ws and enforce related remedies against the Warrantors; notify the parties to the Agreements of alleged breaches of contractual obligations by the master servicers and servicers and enforce related remedies against those parties; and act as a prudent person following alleged EoDs. See, e.g., SAC 117, 181. Plaintiffs also attempt to repackage their contract claim into tort and statutory claims. Id , As demonstrated below, all of Plaintiffs claims should be dismissed. PROCEDURAL HISTORY This action was commenced on December 23, 2014, when 5 Plaintiffs filed the original complaint asserting claims relating to 21 Trusts. See Dkt. No. 1. On April 10, 2015, Plaintiffs filed their first amended complaint ( FAC ), wherein, inter alia, 3 additional CDO issuers were named as Plaintiffs and claims relating to 34 new Trusts were added. See Dkt. No. 20. On May 27, 2015, the RMBS Trustee filed its motion to dismiss the FAC wherein the RMBS Trustee demonstrated that, among other deficiencies, Plaintiffs lacked standing because they assigned all their rights in the Securities and any related causes of action to the CDO Trustees. See Dkt. No. 29. Rather than responding to the RMBS Trustee s motion to dismiss, Plaintiffs elected to further amend their pleading, as permitted by the Court s scheduling order. See Dkt. No. 21. Plaintiffs filed the SAC on July 15, See Dkt. No. 33. In the SAC, Plaintiffs drop certain claims asserted in the FAC,9 and allege that they secured assignments of claims asserted in this 9 Among other amendments, Plaintiffs have dropped their claim for negligent misrepresentation, and removed allegations that the RMBS Trustee (i) failed to identify loans with missing mortgage documents; and (iii) submitted false or inaccurate remittance reports or annual certifications of 59

25 23 of 57 action from the CDO Trustees.10 As set forth below, Plaintiffs still fail to allege viable claims against the RMBS Trustee. ARGUMENT I. PLAINTIFFS CLAIMS RELATING TO THE RMBS TRUSTEE S ALLEGED FAILURE TO TAKE ACTION AGAINST INDYMAC BANK SHOULD BE DISMISSED With respect to the 5 Trusts listed on Ex. D for which IndyMac Bank was the sponsor, originator and servicer (the IndyMac Trusts ), all of Plaintiffs claims concerning the RMBS Trustee s alleged failure to pursue remedies against IndyMac Bank are time-barred. The New York statutes of limitations applicable to Plaintiffs claims11 are as follows: Claim Violation of the TIA 10 Statute of Limitations Period 6 years after the alleged violation12 The alleged assignments were executed between April and June 2015, several months after the commencement of this action. Although the RMBS Trustee requested that Plaintiffs produce [a]ny agreements necessary to establish each [Plaintiffs ] alleged acquisition of the... claims asserted [in this action], Plaintiffs did not attach the alleged assignments to the SAC or otherwise produce them. See Ex. 77 (DBNTC s First Set of Document Requests, served on May 4, 2015). The RMBS Trustee reserves its right to raise additional arguments once it has had an opportunity to review those assignments. 11 As Plaintiffs are not New York residents, N.Y. C.P.L.R. 202 requires that the causes of action be timely under the limitation periods of both New York and the jurisdiction where the cause of action accrued. Glob. Fin. Corp. v. Triarc Corp., 93 N.Y.2d 525, 528 (1999). 12 Where a statute does not contain a statute of limitations, a federal court sitting in New York will apply the statute of limitations that would apply to an analogous claim under New York law. See Cruden v. Bank of N.Y., 957 F.2d 961, 967 (2d Cir. 1992). The maximum statute of limitations for a TIA claim is 6 years. See id of 59

26 24 of 57 Claim Statute of Limitations Period Breach of contract / breach of 6 years after the alleged breach13 the implied covenant of good faith and fair dealing Breach of fiduciary duty 3 years after plaintiff first suffered an alleged injury if plaintiff seeks monetary damages (as here)14 Negligence/gross negligence 3 years after plaintiff first suffered an alleged injury15 Violation of the Streit Act 6 years after the alleged breach16 Thus, the following claims are barred: (i) any claim asserted in the original complaint that accrued before December 23, 2008 (i.e., 6 years before Plaintiffs filed that complaint), and (ii) any claim asserted by the new Plaintiffs, or related to the new Trusts, added in the FAC that accrued before April 10, 2009 (i.e., 6 years before Plaintiffs filed that complaint).17 As Plaintiffs acknowledge: (i) on July 11, 2008, IndyMac Bank was placed into receivership by the Federal Deposit Insurance Corporation (the FDIC ); (ii) on October 14, 2008, the RMBS Trustee filed a proof of claim with the FDIC relating to the IndyMac Trusts; and (iii) on May 29, 2009, the RMBS Trustee filed a lawsuit against IndyMac Bank alleging that IndyMac breached the relevant Agreements. SAC Ex. F 179, 189. In other words, Plaintiffs claim that the RMBS Trustee failed to pursue claims against IndyMac and in the same complaint concede that more than six years ago, the RMBS Trustee commenced legal proceedings asserting 13 N.Y. C.P.L.R. 213(2); Ely-Cruikshank Co. v. Bank of Montreal, 81 N.Y.2d 399, (1993). 14 IDT Corp. v. Morgan Stanley Dean Witter & Co., 12 N.Y.3d 132, 139 (2009). 15 N.Y. C.P.L.R. 214(4); Aaron Ferer & Sons Ltd. v. Chase Manhattan Bank, N.A., 731 F.2d 112, 122 (2d Cir. 1984). 16 As with the TIA, the maximum statute of limitations for a Streit Act claim is 6 years. See Cruden, 957 F.2d at See Glatt v. Fox Searchlight Pictures Inc., 293 F.R.D. 516, (S.D.N.Y. 2013) (new plaintiff); W.B. David & Co. v. De Beers Centenary AG, 507 F. App x 67, 70 (2d Cir. 2013) (new claims) of 59

27 25 of 57 those claims. Id. In an effort to avoid that fatal flaw, Plaintiffs create a different one. They allege that: If [the RMBS Trustee] had performed its duties as trustee of IndyMac RMBS in 2005 to 2007 and prior, [the RMBS Trustee] would have put back to IndyMac loans underlying the IndyMac Trusts that were missing documentation and that violated representations and warranties. If [the RMBS Trustee] had acted it would have greatly mitigated Plaintiffs losses. Moreover, if [the RMBS Trustee] had provided the appropriate notices in connection with earlier securitizations, Plaintiffs would not have continued to invest in IndyMac RMBS. SAC Ex. F 189 (emphasis added). Plaintiffs fallback theory that the RMBS Trustee breached its duties and caused injury to Plaintiffs eight to ten years ago is plainly time-barred. II. PLAINTIFFS INCOMPLETE MORTGAGE LOAN FILE CLAIMS ARE BARRED BY THE STATUTE OF LIMITATIONS A. Plaintiffs TIA, Breach of Contract, Streit Act and Breach of the Covenant of Good Faith and Fair Dealing Claims Are Time-Barred Plaintiffs TIA, breach of contract, Streit Act and breach of the covenant of good faith and fair dealing claims alleging the RMBS Trustee failed to take steps to cause the sponsors and originators to repurchase loans lacking adequate documentation are time-barred, because the alleged breaches occurred more than six years before Plaintiffs commenced this action. According to the SAC, claims concerning incomplete mortgage files all arise in connection with a final exception report (which lists any mortgage loans with missing or incomplete documentation) delivered by the RMBS Trustee, or a custodian, after each Trust s closing date: On the closing date of each Trust, the depositor delivered to the RMBS Trustee the mortgage loan files for the loans assigned to the Trust. SAC 59. After a designated period, [the RMBS Trustee], or a Custodian on its behalf, was required to issue [the final exception report] that identified mortgage files that were missing documentation required under the PSA. Id. 63. Events of Default occurred shortly after the final exception reports were delivered to the Covered Trusts under multiple provisions of the PSAs. The Events of Default triggered [the RMBS Trustee] s duty to act prudently to protect the interests of the Certificateholders in all respects, which duty continues to this date. Id of 59

28 26 of 57 If there was a defect with any mortgage file, then [the RMBS Trustee] was obligated to demand that the Sponsor cure the defect leading to the exception (typically within 90 days) or repurchase or substitute the defective loans. Id. 65, Ex. C VI. The Agreements provide that it was the [RMBS] Trustee s duty to seek cure, repurchase or substitution remedies and, as a result, the [RMBS] Trustee knew that affected loans were not cured, repurchased or substituted because it did not seek such remedies. Id Rather than take action to ensure the responsible parties cured such defects or substituted or repurchased the affected loans, [the RMBS Trustee] stood by while the Sponsors, Servicers and Master Servicers of the Covered Trusts engaged in so called robo-signing on a widespread basis when the missing documents were needed to foreclose on properties underlying the Covered Trusts. Id. 123; see also id. 14, 173, 181, 199. Thus, according to Plaintiffs, the RMBS Trustee breached its duties to enforce remedies for loans with missing documents when the final exception report for each Trust was issued. As Plaintiffs recognize, each Agreement required the RMBS Trustee or a custodian to issue a final exception report within a specified time period after the closing date for the Trust. The Trusts closed between March 29, 2005 and July 12, 2007, and the last final exception report had to be delivered by April 24, 2008 (see Ex. V) approximately 8 months before December 23, 2008 (i.e., six years before Plaintiffs filed their initial complaint) and approximately one year before April 10, 2009 (i.e., six years before Plaintiffs filed the FAC). Accordingly, based on the allegations in the SAC, Plaintiffs TIA, breach of contract, Streit Act and breach of the covenant of good faith and fair dealing claims concerning allegedly incomplete mortgage loan files are time-barred. See, e.g., Ely-Cruikshank Co., 81 N.Y.2d at Plaintiffs try to save these claims by alleging that in addition to breaching its duties by failing to pursue incomplete loan file remedies when the final exception reports were issued, the RMBS Trustee committed separate breaches by failing to pursue those same remedies each time a loan identified in the final exception reports defaulted and foreclosure occurred which is when Plaintiffs claim they suffered a loss. See SAC 130 ( Deutsche Bank had a continuing of 59

29 27 of 57 obligation to seek repurchase of loans missing required documentation through its tenure as Trustee, including as loans on the final exception report defaulted. ); id. 163 ( The extended foreclosure timelines that resulted from document delivery failures and the robo-signing scandal resulted in increased servicing fees, increased property tax and utility expenditures which were borne by the Covered Trusts, a decline in value of the underlying properties and ultimately less sale proceeds of the Covered Trusts and Certificateholders ). Put differently, Plaintiffs claim that although the RMBS Trustee allegedly breached its duties when the final exception reports were issued, another breach occurred when Plaintiffs realized losses from the initial breach. This attempt to avoid the statute of limitations fails. New York law is well-settled that in assessing whether a claim is time-barred, a breach of contract cause of action accrues at the time of the breach, even if no damage occurs until later. Ely-Cruikshank Co., 81 N.Y.2d at Moreover, the failure to cure a breach does not constitute a continuing violation. See, e.g., First Am. Title Ins. Co. of N.Y. v. Fiserv Fulfillment Servs., Inc., No. 06 CIV (NRB), 2008 WL , at *2 (S.D.N.Y. Aug. 14, 2008) (holding breach of contract claim was time-barred, because defendant s failure to record the mortgages was a breach of contract and the mere fact that defendant could have recorded the mortgages at a later date and thereby prevented injury overlooks the distinction between a breach and the ability to cure a breach ). Accordingly, Plaintiffs attempt to turn one alleged breach into two cannot resuscitate their untimely incomplete document claims. See id. B. Plaintiffs Tort Claims Concerning Allegedly Incomplete Mortgage Loan Files Are Time-Barred With regard to Plaintiffs claims for breach of fiduciary duty and negligence, the statute of limitations is 3 years from the date an alleged injury was first suffered. See Section I, supra. Here, Plaintiffs claim that they have been injured by the RMBS Trustee s alleged failure to cause of 59

30 28 of 57 the responsible parties to remedy incomplete loan documentation because that alleged failure placed a cloud over title and has limited the [] Trusts ability to efficiently foreclose on properties underlying the [] Trusts that has impacted the market value of the Certificates. SAC 164. According to the allegations in the SAC citing to numerous news articles, lawsuits, and government investigations, the alleged RMBS documentation issues and foreclosure difficulties were widely known in the market and causing harm to investors by 2010 at the latest, which is more than 3 years before December 23, 2014 when Plaintiffs commenced this action. See SAC Ex. G. Therefore, Plaintiffs fiduciary duty and negligence claims are untimely and should be dismissed. See, e.g., Bd. of Trustees ex rel. Gen. Ret. Sys. of Detroit v. BNY Mellon, N.A., No. 11 CIV (RJS), 2012 WL , at *8 (S.D.N.Y. Sept. 10, 2012). III. PLAINTIFFS R&W CLAIMS CONCERNING THE MSAC 2007-NC4 TRUST FAIL With respect to one of the Trusts, MSAC 2007-NC4, Plaintiffs claims that the RMBS Trustee did not provide notice of alleged R&W breaches, or enforce repurchase obligations, fail. As Plaintiffs acknowledge, the RMBS Trustee did provide notice of alleged R&W breaches in that Trust and is currently enforcing repurchase claims against the relevant Warrantors. See SAC 102; Ex. 71 (Complaint at 11, Deutsche Bank Nat l Trust Co. v. Morgan Stanley Mortg. Capital Holdings LLC, No /2014 (Sup. Ct. N.Y. Cnty. Jan. 23, 2015), NYSCEF Doc. No. 7). 18 Although Plaintiffs allege that those repurchase claims are subject to significant 18 When presented with a motion to dismiss pursuant to Rule 12(b)(6), the Court may consider documents that are referenced in the [c]omplaint, documents that the plaintiff relied on in bringing suit and that are either in the plaintiff s possession or that the plaintiff knew of when bringing suit, or matters of which judicial notice may be taken. Okla. Police Pension & Ret. Sys. v. U.S. Bank N.A., 291 F.R.D. 47, 52 (S.D.N.Y. 2013) (Koeltl, J.), abrogated by PABF, 775 F.3d of 59