FILED: NEW YORK COUNTY CLERK 09/04/ :59 PM INDEX NO /2015 NYSCEF DOC. NO. 15 RECEIVED NYSCEF: 09/04/2015

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1 FILED: NEW YORK COUNTY CLERK 09/04/ :59 PM INDEX NO /2015 NYSCEF DOC. NO. 15 RECEIVED NYSCEF: 09/04/2015 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK x BLACKROCK BALANCED CAPITAL PORTFOLIO (FI), et al., v. Plaintiffs, U.S. BANK NATIONAL ASSOCIATION, Defendant x : : : : : : : : : Index No /2015 Hon. Saliann Scarpulla (IAS Part 39) Mot. Seq. No. 002 Oral Argument Requested DEFENDANT U.S. BANK NATIONAL ASSOCIATION S MEMORANDUM OF LAW IN SUPPORT OF ITS MOTION TO DISMISS PLAINTIFFS CLASS ACTION COMPLAINT JONES DAY David F. Adler Louis A. Chaiten (pro hac vice pending) North Point 901 Lakeside Avenue Cleveland, Ohio (216) ; (216) (fax) dfadler@jonesday.com lachaiten@jonesday.com JONES DAY Michael T. Marcucci (pro hac vice forthcoming) 100 High Street, 21st Floor Boston, Massachusetts (617) ; (617) (fax) mmarcucci@jonesday.com ROBINS KAPLAN LLP Martin R. Lueck Michael A. Collyard 800 LaSalle Avenue, Suite 2800 Minneapolis, MN (612) ; (612) (fax)

2 JONES DAY Andrew S. Kleinfeld 222 East 41st Street New York, New York (212) ; (212) (fax) Attorneys for Defendant U.S. Bank National Association

3 TABLE OF CONTENTS Page TABLE OF AUTHORITIES... iii INTRODUCTION...1 FACTUAL BACKGROUND...4 A. The RMBS Securitization Process...4 B. The Trusts at Issue, and the Trustee s Limited Duties The trustee s duties prior to a default The trustee s duties with respect to breaches of representations and warranties The trustee s duties with respect to Events of Default and servicer conduct...7 C. Plaintiffs Allegations...8 LEGAL STANDARD...8 ARGUMENT...9 I. PLAINTIFFS FAIL TO STATE A BREACH OF CONTRACT CLAIM...9 A. Plaintiffs Fail to Comply with Even the Most Basic Standards for Pleading Breach of Contract...10 B. No-Action Clauses Bar Plaintiffs Breach-of-Contract Claims...12 C. Plaintiffs Do Not Adequately Allege Violations of Any Obligation to Putback Loans in Any Trust for Breaches of Representations and Warranties For at least 106 trusts, U.S. Bank has no obligation to enforce breaches of representations and warranties For all 794 trusts, Plaintiffs fail to allege that U.S. Bank discovered or received written notice of loan-specific breaches of representations and warranties...16 D. Plaintiffs Also Fail to State a Claim for Breach of Post-Event of Default Obligations Plaintiffs do not allege an Event of Default Plaintiffs fail to adequately plead actual knowledge of Events of Default by a Responsible Officer of U.S. Bank...22 i

4 3. The PSAs contradict Plaintiffs allegations regarding post-event of Default duties, even if U.S. Bank had actual knowledge of an Event of Default...24 II. PLAINTIFFS STREIT ACT CLAIM SHOULD BE DISMISSED...25 A. The Streit Act Does Not Apply to RMBS Certificates...25 B. The Streit Act Does Not Provide a Private Right of Action...27 C. Plaintiffs Streit Act Claim Would Fail as a Matter of Law Even if the Act were Applicable and Provided a Private Right of Action...29 III. PLAINTIFFS TORT CLAIMS SHOULD ALSO BE DISMISSED...29 A. Plaintiffs Tort Claims Are Duplicative of Plaintiffs Contract Claims...30 B. The Economic Loss Doctrine Also Bars Plaintiffs Tort Claims...31 C. Plaintiffs Fail to Allege an Actual Conflict of Interest...32 CONCLUSION...34 ii

5 TABLE OF AUTHORITIES Page CASES AG Capital Funding Ptrs., L.P. v. State St. Bank & Trust Co., 11 N.Y.3d 146, 866 N.Y.S.2d 578 (2008)...33 Alexander v. Sandoval, 532 U.S. 275 (2001)...28 Argonaut P ship L.P. v. Bankers Trustee Co., No. 96 civ 1970(LLS), 2001 WL (S.D.N.Y. May 30, 2001)...21 Ark Bryant Park Corp. v. Bryant Park Restoration Corp., 285 A.D.2d 143, 730 N.Y.S.2d 48 (1st Dep t 2001)...9, 11, 12 Arrowgrass Master Fund Ltd. v. Bank of New York Mellon, No /2010, 2012 WL (Sup. Ct. N.Y. Cnty. Feb. 24, 2012), aff d in part, modified in part, 106 A.D.3d 582, 965 N.Y.S.2d 473 (1st Dep t 2013)...19, 23 Atl. Veal & Lamb, Inc. v. Silliker, Inc., 11 Misc. 3d 1072(A), 2006 WL (Sup. Ct. Kings Cnty. Mar. 29, 2006)...10 Atlantis Info. Tech., GmbH v. CA, Inc., 485 F. Supp. 2d 224 (E.D.N.Y. 2007)...30 Bank of N.Y. Mellon v. Walnut Place, LLC, No. 11-cv-05988, ECF No. 124 (S.D.N.Y. Oct. 31, 2011)...2 Beck v. Mfrs. Hanover Tr. Co., 218 A.D.2d 1, 632 N.Y.S.2d 520 (1st Dep t 1995)...16 Beka Realty LLC v. JP Morgan Chase Bank, N.A., 41 Misc. 3d 1213(A), 2013 WL (Sup. Ct. Kings Cnty. Sept. 25, 2013)...9 Bellikoff v. Eaton Vance Corp., 481 F.3d 110 (2d Cir. 2007)...28 iii

6 Biondi v. Beekman Hill House Apartment Corp., 257 A.D.2d 76, 692 N.Y.S.2d 304 (1st Dep t 1999)...8, 9 BlackRock Allocation Target Shares: Series S Portfolio v. U.S. Bank Nat l Ass n, No. 14-cv-9401 (KBF), 2015 WL (S.D.N.Y. May 18, 2015)...18 BlackRock Core Bond Portfolio v. U.S. Bank Nat l Ass n, No. 14-cv-9401 (KBF), ECF No. 74 (S.D.N.Y. July 2, 2015)...11 Brooks v. Key Trust Co. Nat l Ass n, 26 A.D.3d 628, 809 N.Y.S.2d 270 (3d Dep t 2006)...30 Caniglia v. Chicago Tribune-New York News Syndicate Inc., 204 A.D.2d 233, 612 N.Y.S.2d 146 (1st Dep t 1994)...10 Centro Empresarial Cempresa S.A. v. America Movil, S.A.B. de C.V., 76 A.D.3d 310, 901 N.Y.S.2d 618 (1st Dep t 2010)...30 CFIP Master Fund, Ltd. v. Citibank, N.A., 738 F. Supp. 2d 450 (S.D.N.Y. 2010)...33 Chrysler Capital Corp. v. Hilltop Egg Farms, Inc., 129 A.D.2d 927, 514 N.Y.S.2d 1002 (3d Dep t 1987)...10 Clark-Fitzpatrick, Inc. v. Long Island R. Co., 70 N.Y. 2d 382, 521 N.Y.S.2d 653 (1987)...30, 31, 32 Cruden v. Bank of N.Y., 957 F.2d 961 (2d Cir. 1992)...12, 13 Deer Consumer Prods., Inc. v. Little, 32 Misc. 3d 1243(A), 2011 WL (Sup. Ct. N.Y. Cnty. Aug. 31, 2011)...4 Dresner Co. Profit Sharing Plan v. First Fidelity Nat l Bank, N.A., New Jersey, No. 95 Civ (MBM), 1996 WL (S.D.N.Y. Dec. 4, 1996)...21 Ellington Credit Fund, Ltd. v. Select Portfolio Servicing, Inc., 837 F. Supp. 2d 162 (S.D.N.Y. 2011)...13, 14, 18, 30, 33 Elliott Assocs. v. J. Henry Schroder Bank & Trust Co., 838 F.2d 66 (2d Cir. 1988)...5, 6, 15, 33, 34 FHFA v. HSBC N. Am. Holdings, Inc., 33 F. Supp. 3d 455 (S.D.N.Y. 2014)...19, 20 iv

7 FHFA v. UBS Americas Inc., No. 11 Civ (DLC), 2013 U.S. Dist. LEXIS (S.D.N.Y. June 28, 2013)...18, 22 Gravatt v. City of New York, 226 F.3d 108 (2d Cir. 2000)...18 Harper v. Larchmont Yacht Club, 38 N.Y.S.2d 505 (Sup. Ct. N.Y. Cnty. 1942)...28 Hazzard v. Chase Nat l Bank, 287 N.Y.S. 541 (Sup. Ct. N.Y. Cnty. 1936)...32, 33 In re Atlantic City Ambassador Hotel Corp., 62 N.Y.S.2d 62 (Sup. Ct. N.Y. Cnty. 1946)...28 In re Automotive Prof ls, Inc., 370 B.R. 161 (Bankr. N.D. Ill. 2007)...20 In re E.F. Hutton Sw. Props. II, Ltd., 953 F.2d 963 (5th Cir. 1992)...34 Ind. Inv. Protective League v. Time, Inc., 50 N.Y.2d 259, 428 N.Y.S.2d 671 (1980)...13 Island Surgical Supply Co. v. Allstate Ins. Co., 32 A.D.3d 824, 820 N.Y.S.2d 854 (2d Dep t 2006)...10, 19 Kamchi v. Weissman, 125 A.D.3d 142, 1 N.Y.S.3d 169 (2d Dep t 2014)...9 Knights of Columbus v. The Bank of N.Y. Mellon, Index No /2011, NYSCEF Doc. No. 115 (Sup. Ct. N.Y. Cnty. July 24, 2015)...23 Magten Asset Mgmt. Corp. v. Bank of N.Y., 15 Misc. 3d 1132(A), 2007 WL (Sup. Ct. N.Y. Cnty. May 8, 2007)...5 Mandarin Trading Ltd. v. Wildenstein, 16 N.Y.3d 173, 919 N.Y.S.2d 465 (2011)...11 Matter of Raritan Dev. Corp. v. Silva, 91 N.Y.2d 98, 667 N.Y.S.2d 327 (1997)...25 v

8 Millennium Partners, L.P. v. U.S. Bank Nat l Ass n, No. 12-cv-7581, 2013 WL (S.D.N.Y. Apr. 17, 2013)...16, 21 MLSMK Inv. Co. v. JP Morgan Chase & Co., 431 F. App x 17 (2d Cir. 2011)...18 New York City Educ. Constr. Fund v. Verizon New York Inc., 114 A.D.3d 529, 981 N.Y.S.2d 11 (1st Dep t 2014)...10, 12 New York Univ. v. Continental Ins. Co., 87 N.Y.2d 308, 639 N.Y.S.2d 283 (1995)...31 N. Shipping Funds I, LLC v. Icon Capital Corp., 921 F. Supp. 2d 94 (S.D.N.Y. 2013)...30 Page Mill Asset Mgmt. v. Credit Suisse First Boston Corp., No. 98-cv-6907, 2000 U.S. Dist. LEXIS 9077 (S.D.N.Y. June 30, 2000)...33 Prudence Realization Corp. v. Atwell, 264 A.D. 546, 35 N.Y.S 2d 1001 (1st Dep t 1942), aff d, 290 N.Y. 597 (1943)...26 Racepoint Partners, LLC v. JPMorgan Chase Bank, N.A., 14 N.Y.3d 419, 902 N.Y.S.2d 14 (2010)...5 Ret. Bd. of the Policemen s Annuity & Benefit Fund of Chi. v. Bank of N.Y. Mellon, 775 F.3d 154 (2d Cir. 2014)...2, 4, 17, 25 Rosner v. Bank of China, No. 06-cv-13562, 2008 U.S. Dist. LEXIS (S.D.N.Y. Dec. 18, 2008), aff d, 349 F. App x 637 (2d Cir. 2009)...19, 22 Royal Park Investments SA/NV v. HSBC Bank USA, National Association, Nos. 14-cv-8175, 14-cv-9366, 14-cv-10101, -- F. Supp. 3d --, 2015 WL (S.D.N.Y. June 1, 2015)...13, 14 Sheehy v. Big Flats Community Day, Inc., 73 N.Y.2d 629, 543 N.Y.S.2d 18 (1989)...28 Sommer v. Fed. Signal Corp., 79 N.Y.2d 540, 583 N.Y.S.2d 957 (1992)...31, 32 vi

9 State Farm Mut. Auto. Ins. Co. v. Ford Motor Co., 13 Misc. 3d 1231(A), 2006 WL (Civ. Ct. Queens Cnty. Oct. 20, 2006)...31 Sterling Fed. Bank, F.S.B. v. DLJ Mortgage Capital, Inc., No. 09-C-6904, 2010 WL (N.D. Ill. Aug. 20, 2010)...14 U.S. Bank, N.A. v. Citigroup Global Mkts. Realty Corp., No. 13 Civ. 6989, 2014 U.S. Dist. LEXIS (S.D.N.Y. Nov. 14, 2014)...17 U.S. Bank, N.A. v. Citigroup Global Mkts. Realty Corp., No. 13 Civ. 6989, 2015 U.S. Dist. LEXIS (S.D.N.Y. Mar. 13, 2015)...17 UMG Recordings, Inc. v. MP3.com, Inc., 92 F. Supp. 2d 349 (S.D.N.Y. 2000)...20 UPIC & Co. v. Kinder-Care Learning Centers, Inc., 793 F. Supp. 448 (S.D.N.Y. 1992)...12, 13 Valley Cadillac Corp. v. Dick, 238 A.D.2d 894, 661 N.Y.S.2d 105 (4th Dep t 1997)...10 William Kaufman Org., Ltd. v. Graham & James LLP, 269 A.D.2d 171, 703 N.Y.S.2d 439 (1st Dep t 2000)...30 STATUTES N.Y. Bus. Corp. Law N.Y. Bus. Corp. Law 626(b)...13 N.Y. Real Prop. Law k...27 N.Y. Real Prop. Law 125(1)...25 N.Y. Real Prop. Law 126(1)...29 N.Y. Real Prop. Law 126(2)(a)...26 N.Y. Real Prop. Law 126(2)(b)...26 N.Y. Real Prop. Law 126(2)(e)...26 N.Y. Real Prop. Law 130-e...28 vii

10 N.Y. Real Prop. Law 130-f...28 OTHER AUTHORITIES CPLR , 10, 11, 12 CPLR 3211(a)(1)...1, 9, 12 CPLR 3211(a)(7)...1, 9, 10, 12 CPLR 3211(c)...9 N.Y. Leg. Doc. (1936) No N.Y. Leg. Doc. (1937) No viii

11 U.S. Bank National Association ( U.S. Bank ) respectfully submits this memorandum of law in support of its motion to dismiss Plaintiffs Class Action Complaint (the Complaint or Compl. ) pursuant to CPLR 3211(a)(1) and (7). 1 INTRODUCTION Plaintiffs, sophisticated and well-informed institutional investors, took a calculated risk on residential mortgage-backed securities ( RMBS ). Plaintiffs claim they suffered large losses following the collapse of the residential real-estate market nearly a decade ago. That they would resort to litigation to try to recover their losses is unsurprising. Since 2010, RMBS plaintiffs have attempted to recover from entities that played direct and significant roles in creating, structuring, and contributing loans to RMBS transactions, such as originators and sponsors. What is surprising and implausible is this attempt to impose liability on Defendant U.S. Bank, the corporate trustee for these trusts. An RMBS trustee undertakes specific duties strictly limited by contract. The trustee, for example, undertakes no duty to monitor the appropriateness or performance of Plaintiffs investments. Plaintiffs case hinges on assertions that U.S. Bank had duties it did not have and that it violated the limited and specific ministerial duties it did assume. One of the ironies of this case is that BlackRock and other institutional investors have judicially acknowledged an RMBS trustee s limited role, and its obligation to act only upon the investors direction and indemnity: [E]ven in a post-default world, the Trustee is not required to act beyond its contractually conferred rights and powers.... The Trustee does not have, and will never have, an obligation to investigate facts to determine whether an Event of Default has occurred unless 25% of the Certificateholders instruct it to do so. Even after an Event of a [sic] Default, if the Certificateholders seek to compel the Trustee to take action, they must offer the Trustee an indemnity of the expenses it will incur to do so. 1 The Complaint and all exhibits thereto are attached as Exhibit A to the accompanying Affirmation of David F. Adler ( Adler Aff. ). All references to Exhibits A through AA refer to Exhibits A through AA of the Adler Aff. 1

12 Institutional Investors Statement, Bank of N.Y. Mellon v. Walnut Place, LLC, No. 11-cv (S.D.N.Y. Oct. 31, 2011), ECF No. 124 at 14 ( Walnut Place ) (internal citations and footnotes omitted). 2 Plaintiffs do not contend they invoked these direct and indemnify procedures here, despite their deep involvement in directing trustees in other matters. This is instead an after-the-fact effort to create a case so massive that U.S. Bank will feel compelled to pay some amount to resolve meritless claims. It is an attempt to use general assertions to bind together 794 different trusts, governed by over 100,000 pages of trust agreements, involving more than a million mortgage loans, valued at billions of dollars. But Plaintiffs fail to satisfy even the most basic pleading requirement of identifying which contractual provisions in any of the 794 governing agreements U.S. Bank has breached, what representations and warranties sellers breached, and what servicer duties were violated. Tellingly, in parallel federal litigation, these same Plaintiffs filed an amended complaint that (while inadequate in many other ways) included charts documenting the provisions they claim were violated and identifying the differences among the trusts at issue. They fail to do even that much here. Nor do Plaintiffs allege enough factual material to show that discovery would yield the kind of loan-by-loan and trust-by-trust proof of violations and U.S. Bank knowledge that Plaintiffs need to prevail. Ret. Bd. of the Policemen s Annuity & Benefit Fund of Chi. v. Bank of N.Y. Mellon, 775 F.3d 154, 162 (2d Cir. 2014) ( BNYM ). Generalized allegations regarding mortgage-industry problems fall well short. Plaintiffs nowhere allege that a Responsible Officer of U.S. Bank had actual knowledge or received written notice of loan- and trust-specific violations, a prerequisite to any contractual obligation of the trustee. Plaintiffs cannot use 2 The entire Walnut Place brief is attached as Exhibit B to the Adler Aff. 2

13 generalized allegations regarding other industry actors to plausibly allege loan- and trust-specific knowledge of a Responsible Officer of U.S. Bank. It is no answer to argue that the supposed facts are in U.S. Bank s hands. The governing agreements here include procedures allowing investors to obtain information and direct investigations, but Plaintiffs never invoked them. These and a host of other problems compel dismissal. Breach of Contract Claims. Plaintiffs breach-of-contract claims fail as an initial matter because they do not even allege which provisions of which agreements U.S. Bank supposedly violated. The agreements no-action clauses also bar Plaintiffs claims. Plaintiffs cannot plead a breach-of-contract claim for failure to enforce the seller s representations and warranties because, for at least 106 of the trusts, U.S. Bank has no duty at all to enforce the seller s representations and warranties, and for all 794 trusts, Plaintiffs fail to plead facts showing that U.S. Bank had discovered or received written notice of loan-specific breaches. Plaintiffs allegations regarding post-event of Default contractual duties miss the mark for similar reasons, and others including that many of the governing agreements require a master servicer Event of Default to trigger U.S. Bank s obligations, and Plaintiffs make no allegations regarding master servicer violations, as opposed to servicer violations. Streit Act. The Streit Act is a Depression-era statute that does not apply to modern securitization trusts like these. Nor does it create a private right of action for damages. In any event, U.S. Bank complied with the only section of the Streit Act Plaintiffs invoke. Tort Claims. Plaintiffs tort claims fare no better. They are duplicative of the contract claims and barred by New York s economic-loss doctrine. Plaintiffs conflict-of-interest claim should be dismissed for the additional reason that Plaintiffs do not plead an actual (as opposed to hypothetical) conflict from which U.S. Bank personally benefitted. Plaintiffs Complaint third in the state and federal history of this case should be 3

14 dismissed with prejudice. FACTUAL BACKGROUND A. The RMBS Securitization Process. An RMBS securitization involves bundling individual mortgage loans together and selling interests in the resulting revenue streams to investors. See BNYM, 775 F.3d at 156; Compl In each securitization, a sponsor or seller forms a loan pool from mortgages it originated itself or purchased from other financial institutions, which it then transfers to a depositor, which segments the loans in the loan pool among different levels of risk. Id After an underwriter sells the securities to investors ( certificateholders ), a servicer, appointed by the sponsor and sometimes overseen by a master servicer, collects payments on the underlying mortgage loans and sends the funds to a trustee. The trustee passes on those payments to the certificateholders. Id The trust is governed by a Pooling and Servicing Agreement ( PSA or Trust Agreement ), pursuant to which the loans are conveyed to a trustee tasked with holding legal title to the assets in its name and for the benefit of the certificateholders. See Compl. 257, 276; see also, e.g., Ex. C, Preliminary Statement (MSMLT AR PSA). 3 U.S. Bank is the trustee for the 794 trusts at issue, each of which contains a unique pool of residential mortgage loans and is governed by its own separate agreements. B. The Trusts at Issue, and the Trustee s Limited Duties. Each of the 794 PSAs at issue defines U.S. Bank s rights and duties as trustee in that particular transaction. Of the trusts at issue, 701 are New York common law trusts, three are Delaware common law trusts, and 90 are Delaware statutory trusts. Compl The trustee s 3 The Court may rely on documents referred to in the Complaint on a motion to dismiss without converting the motion to a motion for summary judgment. See, e.g., Deer Consumer Prods., Inc. v. Little, 32 Misc. 3d 1243(A), 2011 WL , at *4 (Sup. Ct. N.Y. Cnty. Aug. 31, 2011). 4

15 duties with respect to each of these trusts are limited. Under well-settled New York law, the role of a securitization trustee differs from that of an ordinary trustee. Magten Asset Mgmt. Corp. v. Bank of N.Y., 15 Misc. 3d 1132(A), 2007 WL , at *6 (Sup. Ct. N.Y. Cnty. May 8, 2007). The RMBS trustee s duties are strictly defined and limited to the terms of the PSA or Trust Agreement. Elliott Assocs. v. J. Henry Schroder Bank & Trust Co., 838 F.2d 66, 71 (2d Cir. 1988). The New York Court of Appeals recently rejected efforts to expand[ ] indenture trustees recognized administrative duties far beyond anything found in the [governing agreements]. Racepoint Partners, LLC v. JPMorgan Chase Bank, N.A., 14 N.Y.3d 419, 425, 902 N.Y.S.2d 14, 17 (2010). 1. The trustee s duties prior to a default. Before the occurrence of a specifically defined Event of Default, the trustee performs certain ministerial tasks things like processing payments to certificateholders and providing information to them on request. The trustee undertakes no obligations other than those explicitly set forth in the agreements. Elliott, 838 F.2d at 71; see also, e.g., Ex. D 8.01 (HEAT PSA); Ex. E 8.01(i) (WMLT 2005-WMC1 PSA) (before an Event of Default, the duties and obligations of the Trustee... shall be determined by the express provisions of this Agreement ). The trustee has no contractual obligation to monitor or oversee servicers or the master servicer, either because the depositor (or master servicer) is obligated to do so or because the trustee is explicitly exempted from doing so. See, e.g., Ex. F 6.05 (CMLTI 2004-NCM2 PSA) ( The Depositor may, but is not obligated to, enforce obligations of the Master Servicer under this Agreement ); Ex. E 3.03 (trustee shall not have any responsibility or liability for any action or failure to act by the Servicer and is not obligated to supervise the performance of the Servicer hereunder or otherwise ). The PSAs further provide that the trustee undertakes no obligation to investigate 5

16 suspicious reports unless requested in writing to do so by the Holders of at least a majority in Class Principal Balance (or Percentage Interest) of each Class of Certificates. See, e.g., Ex. C 6.02(iv). The trustee is then entitled to be indemnified (by the trusts or a directing certificateholder) and is not required to expend any of its own funds in the exercise of its duties under the PSAs. See, e.g., id. 6.01(f). A trustee has no obligation to institute, conduct or defend any litigation at the request of certificateholders unless such Certificateholders shall have offered to the Trustee reasonable security or indemnity against, the costs, expenses and liabilities which may be incurred therein or thereby. See, e.g., Ex. F 8.02(a)(iii). 2. The trustee s duties with respect to breaches of representations and warranties. The trustee makes no representations and warranties with respect to the underlying loans. The seller does. The trustee may conclusively rely on the truth of statements in any certificates or opinions furnished to it, and has no duty to verify them. See, e.g., Ex. G 8.01(c)(ii) (WMALT PSA). The trustee s obligation upon discovering a breach of the seller s representations or warranties depends on the particular trust. At least 106 of the 794 trusts impose no obligation on the trustee whatsoever to enforce the right of the trusts to return mortgage loans to the sponsor/seller (so-called putback rights) even if the trustee knows of breaches of representations and warranties. Twenty-three of those 106 trusts explicitly assign any enforcement obligation to the securities administrator, depositor, servicer, or master servicer. See, e.g., Ex. H 2.03(a) (BASIC Trust Agreement) (securities administrator); Ex. I 2.03(c) (FFMER 2007-H1 PSA) (depositor); Ex. J 2.09 (WMABS 2007-HE2 PSA) (servicer); Ex. K (Chart 1). None of those 106 trusts imposes the obligation on the trustee, a prerequisite to the trustee assuming any obligation under the agreements. See Ex. K (Chart 1); Ex. L (Chart 2); 6

17 see also, e.g., Ex. E 8.01(i); Elliott, 838 F.2d at 71 ( [T]he duties of an indenture trustee are strictly defined and limited to the terms of the [governing agreements]. ). Under the trust agreements that do impose certain putback obligations on the trustee, the trustee need not make any demand for repurchase of mortgage loans without discovery or receipt of written notice of the breach. See, e.g., Ex. M 2.03(a) (CMLTI 2004-UST1 PSA). 3. The trustee s duties with respect to Events of Default and servicer conduct. Events of Default arise under PSAs when a servicer and/or master servicer (depending on the particular PSA) materially breaches its obligations, receives written notice, and fails to cure within a specified time. See, e.g., Ex. M Under at least 150 of the PSAs at issue, only a master servicer Event of Default can trigger post-event of Default trustee obligations. See, e.g., Ex. N 8.01 (BAFC 2004-D PSA); Ex. O (Chart 3). As explained below, Plaintiffs do not allege master servicer Events of Default. Under other PSAs, a servicer Event of Default can trigger post-event of Default trustee obligations. The trustee s post-event of Default obligations, if any, arise only when a U.S. Bank Responsible Officer has actual knowledge or written notice of the Event of Default (depending on the PSA), at which point the trustee must comply with a prudent-person standard, provide notice to certificateholders (depending on the PSA), and, potentially, terminate the servicer. See, e.g., Ex. P 8.02(a)(viii) (MLMI 2006-AHL1 PSA) ( Trustee shall not be deemed to have knowledge of an Event of Default until a Responsible Officer of the Trustee shall have received written notice thereof ); Ex. Q 9.01(d)(iv) (BSABS 2004-FR1 PSA) ( The Trustee shall not... be deemed to have notice or knowledge of any default or Event of Default unless a Responsible Officer of the Trustee shall have actual knowledge thereof. ). Absent actual knowledge or written notice, the Trustee may conclusively assume there is no such default or Event of Default. Id. An obligation to terminate the servicer 7

18 arises only when a specified percentage (typically between 25% and 51%) of certificateholders direct the trustee to do so (or under certain very limited circumstances not relevant here). See, e.g., Ex. Q 8.01 (25%); Ex. R 7.01 (MASTR ABS Trust 2005-NC2 PSA) (51%). C. Plaintiffs Allegations. Plaintiffs claim that U.S. Bank breached its limited duties by failing to provide written notice of breaches of mortgage loan representations and warranties, and by failing to take followup action, including by demanding repurchase. Compl. 16; 536; ; 608. Plaintiffs also allege that U.S. Bank failed to monitor and provide notice of any breach of duties owed by mortgage loan servicers as specified in the PSAs. Id ; 538; 543; 583; 608. Servicers, in turn, are alleged to have failed to provide notice of breaches of mortgage loan representations and warranties, failed to service mortgage loans prudently, failed to pursue foreclosure actions promptly, and failed to follow proper procedures for mortgage loan modifications. See e.g., id Plaintiffs assert that U.S. Bank knew of the occurrence of numerous unspecified Events of Default, but did not enforce the trusts repurchase rights, provide notice to the defaulting party, act with the proper standard of care following an Event of Default, or provide notice to the certificateholders. Id ; Plaintiffs also assert that U.S. Bank had a conflict of interest because it was financially beholden to the sellers/sponsors of RMBS securitizations and in other circumstances acted as an originator. Id ; LEGAL STANDARD Under New York law, a complaint must be sufficiently particular to give the court and parties notice of the transactions, occurrences, or series of transactions or occurrences, intended to be proved and the material elements of each cause of action or defense. CPLR Allegations consisting of bare legal conclusions, as well as factual claims either inherently incredible or flatly contradicted by documentary evidence, are not presumed to be true and 8

19 accorded every favorable inference. Biondi v. Beekman Hill House Apartment Corp., 257 A.D.2d 76, 81, 692 N.Y.S.2d 304, 308 (1st Dep t 1999) (internal quotation marks omitted). The factual allegations in a complaint instead must be sufficient to raise the claimed right to relief above the level of mere speculation and to state a claim for relief that is, at least, plausible on its face. Beka Realty LLC v. JP Morgan Chase Bank, N.A., 41 Misc. 3d 1213(A), 2013 WL , at *6 (Sup. Ct. Kings Cnty. Sept. 25, 2013). On a motion to dismiss pursuant to CPLR 3211(a)(1) and (7), the court may consider evidentiary material submitted by a defendant in support of [its] motion. Kamchi v. Weissman, 125 A.D.3d 142, 150, 1 N.Y.S.3d 169, 176 (2d Dep t 2014) (internal quotation marks omitted); see also CPLR 3211(c). If Plaintiffs claims turn on a contract, the actual provisions of the contract control. See Ark Bryant Park Corp. v. Bryant Park Restoration Corp., 285 A.D.2d 143, 150, 730 N.Y.S.2d 48, 54 (1st Dep t 2001) ( In those circumstances where the legal conclusions and factual allegations are flatly contradicted by documentary evidence, they are not presumed to be true or accorded every favorable inference..., and the criterion becomes whether the proponent of the pleading has a cause of action, not whether he has stated one. ) (internal quotation marks omitted). ARGUMENT I. PLAINTIFFS FAIL TO STATE A BREACH OF CONTRACT CLAIM. Plaintiffs fail to state a claim for breach of contract for several independent reasons. They fail to satisfy the most basic standards for pleading breach of contract, including identifying the terms of the agreements upon which liability is predicated. The contracts noaction clauses bar the claims. Plaintiffs do not adequately allege violation of any obligation to putback loans in any trust for any breaches of representations and warranties with respect to any loans. And Plaintiffs also fail to state a claim based on post-event of Default contractual duties. 9

20 A. Plaintiffs Fail to Comply with Even the Most Basic Standards for Pleading Breach of Contract. Plaintiffs cannot state a claim for breach of 794 contracts without, at a minimum, alleging which provisions of the contracts U.S. Bank supposedly violated. A complaint for breach of contract must set forth the terms of the agreement upon which liability is predicated, either by express reference or by attaching a copy of the contract. Valley Cadillac Corp. v. Dick, 238 A.D.2d 894, 894, 661 N.Y.S.2d 105, 106 (4th Dep t 1997) (quoting Chrysler Capital Corp. v. Hilltop Egg Farms, Inc., 129 A.D.2d 927, 928, 514 N.Y.S.2d 1002, 1003 (3d Dep t 1987)); accord Atl. Veal & Lamb, Inc. v. Silliker, Inc., 11 Misc. 3d 1072(A), 2006 WL , at *10 (Sup. Ct. Kings Cnty. Mar. 29, 2006). New York courts routinely dismiss breach-of-contract actions for failure to identify the relevant contractual provisions and particular breaches. See, e.g., New York City Educ. Constr. Fund v. Verizon New York Inc., 114 A.D.3d 529, 531, 981 N.Y.S.2d 11, 13 (1st Dep t 2014) ( In its present state, the amended complaint does not specify which provisions of the ZLDA defendant breached; hence, the ninth cause of action (for breach of the ZLDA) was correctly dismissed ). 4 Plaintiffs do not even attempt to meet this standard. They fail to identify any particular contractual provision in any of the PSAs that U.S. Bank has breached, what representations and warranties were breached, or what servicer duties were violated. In short, they have not specified the transactions or occurrences that form the basis of their lawsuit, as required by 4 See also, e.g., Island Surgical Supply Co. v. Allstate Ins. Co., 32 A.D.3d 824, 824, 820 N.Y.S.2d 854, 855 (2d Dep t 2006) ( The complaint was properly dismissed pursuant to CPLR 3211(a)(7) and 3013 because the allegations were vague, conclusory, and indefinite as to the alleged breach of numerous contracts by the defendant insurance carriers. ); Caniglia v. Chicago Tribune-New York News Syndicate Inc., 204 A.D.2d 233, 234, 612 N.Y.S.2d 146, 147 (1st Dep t 1994) ( The IAS court properly dismissed, without leave to replead, the plaintiffs first cause of action, purporting to set forth a cause of action for breach of contract, as too indefinite, and therefore, unenforceable, for plaintiffs failure to allege, in nonconclusory language, as required, the essential terms of the parties purported personal services contract, including those specific provisions of the contract upon which liability is predicated. ). 10

21 CPLR It is no answer for Plaintiffs to point to their repeated allegation that the terms of the 794 agreements are substantially similar (Compl. 267, 276, 277, 575), because, as explained in the facts above, a review of even a selection of the agreements at issue belies that assertion. See, e.g., supra B.2 and B.3. And the actual terms of the agreements, not Plaintiffs broad-brush mischaracterizations of them, control. Ark Bryant Park Corp., 285 A.D.2d at 150, 730 N.Y.S.2d at 54. It is Plaintiffs obligation, not U.S. Bank s, to undertake the massive review necessary to identify which provisions of the 794 voluminous contracts Plaintiffs allege were violated and what those provisions require. See Mandarin Trading Ltd. v. Wildenstein, 16 N.Y.3d 173, , 919 N.Y.S.2d 465, 471 (2011) (A party alleging a breach of contract must demonstrate the existence of a... contract reflecting the terms and conditions of their... purported agreement. ). Tellingly, in parallel federal litigation, these same Plaintiffs filed an amended complaint that (while inadequate in many other ways) included charts documenting the provisions they claim were violated and identifying the differences among the trusts at issue. Ex. S (Exhibit 5 to Am. Compl., BlackRock Core Bond Portfolio v. U.S. Bank Nat l Ass n, No. 14-cv-9401-KBF (S.D.N.Y. July 2, 2015), ECF No. 74). That the federal case involves 27 trusts, and this one involves 794, does not excuse Plaintiffs failure to meet the most basic requirements for pleading breach of contract. To the contrary, it only reinforces the importance of requiring Plaintiffs to comply, and the unfairness of allowing Plaintiffs to attempt to shift onto U.S. Bank the burden of combing through hundreds of agreements and guessing which provisions Plaintiffs claim were violated. 5 5 It is, of course, impossible for this Memorandum to address Plaintiffs allegations as they apply to each of the 794 transactions, where Plaintiffs make no allegations specific to those agreements. We do, however, cite a selection of those agreements to help illustrate the additional ways in which Plaintiffs have failed to plead breach of contract. 11

22 Plaintiffs Complaint, accordingly, fails to meet the pleading standards in CPLR 3013 and should be dismissed pursuant to CPLR 3211(a)(1) and (7) on this basis alone. See New York City Educ. Constr. Fund, 114 A.D.3d at 531, 981 N.Y.S.2d at 13; Ark Bryant Park Corp., 285 A.D.2d at 150, 730 N.Y.S.2d at 54. B. No-Action Clauses Bar Plaintiffs Breach-of-Contract Claims. The Court should dismiss Plaintiffs breach-of-contract claims for the additional reason that Plaintiffs have failed to comply with the PSAs no-action clauses. Most of a selection of the PSAs reviewed provide that [n]o Certificateholder shall have any right by virtue or by availing itself of any provisions of this Agreement to institute any suit, action or proceeding in equity or at law upon or under or with respect to this Agreement, unless the certificateholder, among other things, (1) provides notice of an Event of Default to the trustee; (2) marshals the support of the Holders of Certificates evidencing not less than 25% of the Voting Rights evidenced by the Certificates ; and (3) makes a written request to the trustee to institute such a lawsuit and indemnifies the trustee for bringing the suit. See e.g., Ex. P These requirements ensure the major purpose of deter[ing] individual [certificate]holders from bringing independent law suits for unworthy or unjustifiable reasons, causing expense to the [Trust] and diminishing its assets. UPIC & Co. v. Kinder-Care Learning Centers, Inc., 793 F. Supp. 448, 454 (S.D.N.Y. 1992). Simply put, if the suit is worthwhile, 25% of the [certificate]holders would be willing to join in sponsoring it. Id. Plaintiffs allege Cruden v. Bank of N.Y., 957 F.2d 961 (2d Cir. 1992), excuses them from complying with the no-action clauses. Compl Cruden held that a plaintiff is excused from complying with the last of the three requirements making a demand on a trustee when the demand would be for the trustee to sue itself. But Cruden does not address the other two requirements written notice of an Event of Default and agreement among at least 25% of 12

23 certificateholders and none of the reasons for excusing demand on a trustee apply to those requirements. The obvious purpose of those requirements is to prevent weak and unpopular litigation from reducing trust assets. That is precisely what this type of litigation can do, via the PSAs. UPIC & Co., 793 F. Supp. at 454; see also, e.g., Ex. C 6.11 (providing for indemnification of the trustee). The rationale for two of the three requirements under the noaction clause thus applies with equal force here, even though this case involves litigation against a trustee. Derivative litigation offers an apt analogy. In addition to a pre-suit demand on the board of directors, N.Y. Bus. Corp. Law 626 also requires a plaintiff to plead that he can adequately represent shareholders interest by virtue of being a shareholder at the time of bringing the action and at the time of the transaction of which he complains. Id. 626(b). No one would suggest, just because the demand requirement might be excused where a corporate director is asked to sue herself, that a plaintiff need not satisfy the statute s ownership requirements. See Ind. Inv. Protective League v. Time, Inc., 50 N.Y.2d 259, 263, 428 N.Y.S.2d 671, 673 (1980). So, too, in this context, a plaintiff must represent 25% of the noteholders interests and identify the default at issue before risking trust assets and trustee indemnification on weak claims, even where demand is excused. We recognize that there is contrary authority from federal courts in the Southern District of New York. See Ellington Credit Fund, Ltd. v. Select Portfolio Servicing, Inc., 837 F. Supp. 2d 162 (S.D.N.Y. 2011); Royal Park Investments SA/NV v. HSBC Bank USA, National Association, Nos. 14-cv-8175, 14-cv-9366, 14-cv-10101, -- F. Supp. 3d --, 2015 WL (S.D.N.Y. June 1, 2015). In neither case, however, did the court come to grips with the arguments made here. Those cases merely repeated Cruden s holding, which excused pre-suit demand, see Cruden,

24 F.2d at 968, but said nothing about enforceability of the notice and 25% support provisions. See Ellington, 837 F. Supp. 2d at 186; Royal Park, 2015 WL , at *10 & n.104. Even with respect to the demand requirement itself, there is no basis for excusing it under the PSAs that identify Wells Fargo, in its capacity as Trust Administrator, Securities Administrator, or Master Servicer, as a pre-suit demand party. See, e.g., Ex. T (ARMT PSA); Ex. N Plaintiffs concede that they have not complied with the pre-suit notice and indemnification requirements of those PSAs. Plaintiffs nevertheless contend that it would be... absurd for Plaintiffs to demand that Wells Fargo bring the instant suit against U.S. Bank because Wells Fargo also suffers from disabling conflicts. Compl But courts have rejected that very argument. See Sterling Fed. Bank, F.S.B. v. DLJ Mortgage Capital, Inc., No. 09-C-6904, 2010 WL , at *5 (N.D. Ill. Aug. 20, 2010) (rejecting argument that failure to comply with no-action prerequisites was excused because Trust Administrator has a conflict of interest and noting that the demand requirement still applies when asking [the demand party] to sue a third party, even when the investor alleges wrongdoing by the [demand party] ). In any event, as explained in III.C infra, Plaintiffs have failed to plead such a conflict. In sum, Plaintiffs contract claims should be dismissed for failure to comply with at least two of the three no-action clause pre-suit requirements (and, in some cases, all three requirements). C. Plaintiffs Do Not Adequately Allege Violations of Any Obligation to Putback Loans in Any Trust for Breaches of Representations and Warranties. Plaintiffs allege that U.S. Bank failed to enforce other parties breaches of their representations and warranties with respect to individual loans. These allegations, however, fail to state a claim. 14

25 1. For at least 106 trusts, U.S. Bank has no obligation to enforce breaches of representations and warranties. For at least 106 trusts (based on review of a selection of the trust agreements at issue), U.S. Bank has no duty to enforce a seller s, sponsor s, or originator s obligation to repurchase or replace mortgage loans that breach representations and warranties. For 23 of the 106 trusts, the agreements expressly assign that obligation to a party other than the trustee. Ex. K (Chart 1). For 83 other trusts, Ex. L (Chart 2), the governing agreements do not say which party has the putback obligation, but are perfectly clear that U.S. Bank undertakes only the duties specifically assigned to it. See, e.g., Ex. E 8.01(i) ( [P]rior to the occurrence of an Event of Default of which a Responsible Officer of the Trustee shall have actual knowledge..., the duties and obligations of the Trustee... shall be determined solely by the express provisions of this Agreement. ). Without language specifically assigning the duty to U.S. Bank, U.S. Bank undertakes no putback obligation under these 106 trusts. See Elliott, 838 F.2d at 71 ( [T]he duties of an indenture trustee are strictly defined and limited to the terms of the [governing agreements]. ). Plaintiffs attempt to conjure an obligation to enforce representations and warranties, even where there is none, by claiming that U.S. Bank had a post-event of Default duty to enforce seller repurchase obligations under the prudent person standard. Compl But that argument falls short for two reasons. First, as explained more fully below ( I.D.1 and I.D.2), Plaintiffs fail to adequately allege Events of Default or U.S. Bank s actual knowledge of them in the first instance. Indeed, in the particular case of breaches of servicer representations and warranties, an Event of Default occurs only if the breach is not cured within 30 days after the date on which written notice of such incorrect representation or warranty shall have been given to the Master Servicer by the Trustee or the Securities Administrator, or to the Master Servicer 15

26 and the Trustee by the Majority Certificateholders. See, e.g., Ex. U 9.01 (a)(vii) (HBMT PSA). While Plaintiffs posit various notice theories, they fail to allege an Event of Default as specifically defined including written notice of a breach that went uncured for 30 days. See, e.g., Millennium Partners, L.P. v. U.S. Bank Nat l Ass n, No. 12-cv-7581, 2013 WL , at *4 (S.D.N.Y. Apr. 17, 2013) ( Plaintiffs... do not plead that the requisite written notice was given to trigger an Event of Default because they do not allege that they owned 50% of the Aggregate Voting Interests necessary to satisfy the notice requirement[.] ). Second, even assuming arguendo that an Event of Default had occurred, the scope of U.S. Bank s post-event of Default obligation [] is still circumscribed by the [governing agreements]. Beck v. Mfrs. Hanover Tr. Co., 218 A.D.2d 1, 13, 632 N.Y.S.2d 520, 528 (1st Dep t 1995). When there are post-default prudent-person obligations, [t]he trustee must... act... only in the exercise of those rights and powers granted in the [governing agreements]. Id. Plaintiffs fail to cite any provision of the governing agreements in support of their argument that U.S. Bank was required to exercise, post-event of Default, a duty it was never assigned. See, e.g., Compl For all 794 trusts, Plaintiffs fail to allege that U.S. Bank discovered or received written notice of loan-specific breaches of representations and warranties. For all 794 trusts at issue, Plaintiffs have failed to adequately plead that U.S. Bank had discovered or received written notice of loan-specific breaches of representations and warranties. The contracts under which Plaintiffs purport to sue require trustee action (where required at all) only upon (i) discovery or (depending on the trust) receipt of written notice that (ii) a breach of a specific representation and warranty has occurred with regard to (iii) a specific mortgage loan. See, e.g., Ex. V 2.03(a) (C-BASS 2004-CB3 PSA) (predicating response to representation and warranty breaches [u]pon discovery or receipt of written notice of... the breach by the Seller 16

27 of any representation, warranty or covenant... in respect of any Mortgage Loan ). A trustee can only putback a specific loan; it may not obtain a recovery based on generic default rates or allegations of trust-wide violations. See U.S. Bank, N.A. v. Citigroup Global Mkts. Realty Corp., No. 13 Civ. 6989, 2015 U.S. Dist. LEXIS 33786, at *8 (S.D.N.Y. Mar. 13, 2015) (holding that plaintiff-trustee s allegations of pervasive breaches are insufficient as a matter of law where the Agreements contain a loan-specific cure or repurchase remedy ); U.S. Bank, N.A. v. Citigroup Global Mkts. Realty Corp., No. 13 Civ. 6989, 2014 U.S. Dist. LEXIS , at *21-22 (S.D.N.Y. Nov. 14, 2014) (finding that plaintiff failed to plead a cause of action for breach of contract based upon a lack of allegations with respect to specific loans). As the Second Circuit held in BNYM, a trustee s alleged misconduct must be proved loan-by-loan and trust-by-trust. 775 F.3d at 162. Plaintiffs make no loan- or trust-specific allegations of actual knowledge or written notice. They instead invoke (i) a supposed duty of U.S. Bank to monitor, oversee, and investigate sellers and servicers (Compl. 258, 277, 278, 285, 293, 303, 608(c)), and (ii) various public information about problems in the residential mortgage industry that should have given rise to suspicions that representations and warranties had been breached. Neither approach suffices to state a claim. Plaintiffs cannot establish the requisite knowledge by alleging a U.S. Bank duty to monitor, oversee, and investigate sellers and servicers because that is irreconcilable with the plain text of the PSAs. The PSAs state that, unless otherwise expressly set forth, the trustee shall [not] have any responsibility or liability for any action or failure to act by Servicer. Ex. E It is for this reason that courts applying New York law have concluded that PSAs do not require the Trustee to undertake any generalized monitoring or safeguarding duties beyond 17

28 those explicitly provided in the PSA. Ellington, 837 F. Supp. 2d at 189. The same goes for a duty to investigate. Absent investor direction and indemnification, U.S. Bank had no obligation to investigate suspicions that might have led to knowledge of breaches. See, e.g., Ex. F 8.02(a)(v) ( the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond or other paper or document, unless requested in writing to do so by the Holders of Certificates entitled to at least 25% of the Voting Rights ). In fact, U.S. Bank was contractually authorized to await indemnification by the investors requesting action; there is no allegation that happened here. See, e.g., id. 8.02(a)(iii). 6 Nor can Plaintiffs state a claim by alleging U.S. Bank s knowledge of general mortgage industry issues. Because U.S. Bank has no duty to investigate, discovery of a breach (to say nothing of written notice ) requires actual knowledge. And, as the Second Circuit has explained (applying New York law), should-have-known constructive knowledge is insufficient to meet the actual knowledge requirement, Gravatt v. City of New York, 226 F.3d 108, 127 n.17 (2d Cir. 2000), and certainly cannot satisfy a written notice requirement. [T]here is no authority for the proposition that evidence of generalized knowledge necessarily qualifies as circumstantial evidence of particularized, actual knowledge. FHFA v. UBS Americas Inc., No. 11 Civ (DLC), 2013 U.S. Dist. LEXIS 92081, at *52 (S.D.N.Y. June 28, 2013); see also MLSMK Inv. Co. v. JP Morgan Chase & Co., 431 F. App x 17, 20 (2d Cir. 2011) (allegation of actual knowledge [that] is purely conclusory[]... is insufficient to support 6 See also BlackRock Allocation Target Shares: Series S Portfolio v. U.S. Bank Nat l Ass n, No. 14-cv (KBF), 2015 WL , at *2 (S.D.N.Y. May 18, 2015) (explaining that the trustee has no contractual obligation to monitor or oversee servicers or the master servicer ; [t]he trustee is also not required to make any investigation unless requested to do so in writing by certificateholders with at least 25% of the voting rights ; and [t]he trustee is not required to demand repurchase of mortgage loans except [u]pon discovery or receipt of written notice of a defect. ). 18

29 a cause of action ); FHFA v. HSBC N. Am. Holdings, Inc., 33 F. Supp. 3d 455, 480 (S.D.N.Y. 2014) ( knowledge about a general population here, the set of all loans generated by a particular Originator cannot be conflated with knowledge concerning a specific subset of that population, like loans from that Originator selected and securitized ); Island Surgical Supply Co., 32 A.D.3d at 824, 820 N.Y.S.2d at At most, the Complaint s factual material suggests U.S. Bank should have been suspicious of breaches of representations and warranties. It is well established in this context that mere suspicion does not raise an inference of actual knowledge. See Arrowgrass Master Fund Ltd. v. Bank of New York Mellon, No /2010, 2012 WL , at *9-10 (Sup. Ct. N.Y. Cnty. Feb. 24, 2012), aff d in part, modified in part, 106 A.D.3d 582, 965 N.Y.S.2d 473 (1st Dep t 2013) (rejecting argument that plaintiff s allegations... concerning... knowledge of facts from news reports were sufficient, and chastising plaintiff for blatantly attempting to excise [the] actual knowledge requirement and replace it with notice as that term is defined in contexts outside of a trust [agreement] ) (internal quotation marks omitted); Rosner v. Bank of China, No. 06-cv-13562, 2008 U.S. Dist. LEXIS , at *16-19 (S.D.N.Y. Dec. 18, 2008) (citing cases), aff d, 349 F. App x 637 (2d Cir. 2009); FHFA v. HSBC N. Am. Holdings, Inc., 33 F. Supp. 3d at 481 ( Mere awareness of the ever-present risk that an issuer is mistaken, and that certain representations might be inaccurate, will not support a finding of actual knowledge of falsity. Even suspicion of falsity, before it ripens into actual knowledge, will not suffice. ). 8 7 The same deficiencies defeat Plaintiffs reliance on unsubstantiated allegations in other actions that a litigation-driven forensic review of loan files for Trusts not at issue in this case found that a stunning 79% of the reviewed mortgage loans [from Wells Fargo] were not underwritten in accordance with the underwriting guidelines. Compl. 377 (emphasis in original). Even if U.S. Bank had known of those allegations, they could not have given U.S. Bank actual knowledge of breaches of representations and warranties regarding the specific trusts at issue in the present action. 8 Plaintiffs also advance a number of theories based on U.S. Bank s involvement in RMBS activities unrelated to the Trusts at issue, which Plaintiffs contend provide a plethora of other evidence demonstrating U.S. 19