FILED: NEW YORK COUNTY CLERK 05/02/2013 INDEX NO /2012 NYSCEF DOC. NO. 51 RECEIVED NYSCEF: 05/02/2013

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1 FILED: NEW YORK COUNTY CLERK 05/02/2013 INDEX NO /2012 NYSCEF DOC. NO. 51 RECEIVED NYSCEF: 05/02/2013 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK NOMURA ASSET ACCEPTANCE CORPORATION ALTERNATIVE LOAN TRUST, SERIES 2006-S3, by HSBC BANK USA, NATIONAL ASSOCIATION, in its capacity as Trustee pursuant to a Pooling and Servicing Agreement, dated as of July 1, 2006, Plaintiff, -against- NOMURA CREDIT & CAPITAL, INC., Index No /2012 Motion Seq. #001 Hon. O. Peter Sherwood IAS Part 49 Oral Argument Requested Defendant. REPLY MEMORANDUM OF LAW IN FURTHER SUPPORT OF DEFENDANT NOMURA CREDIT & CAPITAL, INC. S MOTION TO DISMISS THE COMPLAINT Joseph J. Frank Matthew L. Craner Orrick, Herrington & Sutcliffe LLP 51 West 52nd Street New York, New York Tel: (212) Fax: (212) Attorneys for Defendant Nomura Credit & Capital, Inc.

2 TABLE OF CONTENTS Page PRELIMINARY STATEMENT... 1 ARGUMENT... 1 I. PLAINTIFF S CLAIMS ARE TIME BARRED... 1 A. The Contractual Sole Remedies Provision Does Not Extend The Statute Of Limitations For The Alleged Underlying Breaches The Sole Remedies Provision Is Solely A Remedy, It Does Not Create A Continuing Obligation Of Future Performance Plaintiff May Not Defer Accrual Of Its Claims By Waiting To Pursue Its Remedies Discovery Of A Breach Is Not A Condition Precedent That Could Delay Accrual Of Plaintiff s Claims Plaintiff Does Not Contend That Accrual Was Delayed For Its Purported Claim Under The No Untrue Statements Representation B. This Action Was Not Timely Commenced... 7 II. THE PARTIES AGREEMENTS DO NOT PERMIT PLAINTIFF TO RECOVER DAMAGES FOR THE CLAIMS IT ASSERTS HERE... 8 A. Plaintiff May Not Circumvent The Contractual Sole Remedies By Seeking Damages For An Alleged Failure To Provide That Remedy... 8 B. The No Untrue Statements Representation Does Not Permit Plaintiff to Escape the Sole Remedies for Which It Contracted III. THE COMPLAINT FAILS TO STATE A CLAIM FOR SPECIFIC PERFORMANCE OF NOMURA S REPURCHASE OBLIGATIONS A. Plaintiff Did Not Allege That Any Loans Are Capable Of Being Repurchased i

3 B. The Complaint Fails To State A Claim for Breach Plaintiff Fails To Allege a Breach of MLPA 8(xiv) Plaintiff Fails To Allege a Breach of MLPA 8(xii) Plaintiff Fails To Allege a Breach of MLPA 8(xxvii) and 8(xxxi[x]) Plaintiff Fails To Allege Breaches Uncovered By Its Loan File Review CONCLUSION ii

4 TABLE OF AUTHORITIES Page(s) Cases 1303 Webster Ave. Realty Corp. v. Great Am. Surplus Lines Ins. Co., 63 N.Y.2d 227 (1984)...2, 6 Allstate Ins. Co. v. Countrywide Fin. Corp., 824 F. Supp. 2d 1164 (C.D. Cal. 2011)...14 Assured Guar. Mun. Corp. v. DB Structured Prods., Inc., 927 N.Y.S.2d 880 (Sup. Ct., N.Y. Cnty. 2011)...6 Assured Guar. Mun. Corp. v. Flagstar Bank, FSB, 11 Civ (JSR), 2013 WL (S.D.N.Y. Feb. 5, 2013)...9, 12, 15 Assured Guar. Mun. Corp. v. Flagstar Bank, FSB, No. 11 Civ. 2375, 2011 WL (S.D.N.Y. Oct. 31, 2011)...9, 12 Assured Guar. Corp. v. EMC Mortg., LLC, No /2012, 2013 WL (Sup. Ct., N.Y. Cnty. Apr. 4, 2013)...8 In re Bear Stearns Mortg. Pass-Through Certificates Litig., 851 F. Supp. 2d 746 (S.D.N.Y. 2012)...10 Bulova Watch Co. v. Celotex Corp., 46 N.Y.2d 606 (1979)...2, 3 Certain Underwriters at Lloyd s, London v. William M. Mercer, Inc., /02, 7 Misc. 3d 1008(A), 2005 WL (Sup. Ct., N.Y. Cnty. Apr. 12, 2005)...15 Citipro Realty Corp. v. Lorac Mgmt. Co. Inc., 681 N.Y.S.2d 536 (1st Dep t 1998)...11 Colello v. Colello, 780 N.Y.S.2d 450 (4th Dep t 2004)...7 Ely-Cruikshank Co. v. Bank of Montreal, 81 N.Y.2d 399 (1993)...5 Fed. Hous. Fin. Agency v. Morgan Stanley, No. 11 Civ. 6739, 2012 WL (S.D.N.Y. Nov. 19, 2012)...14 Fed. Hous. Fin. Agency v. UBS Am., Inc., 858 F. Supp. 2d 306 (S.D.N.Y. 2012)...14 iii

5 TABLE OF AUTHORITIES (cont d) Page(s) Cases Hahn Auto. Warehouse, Inc. v. Am. Zurich Ins. Co., 18 N.Y.3d 765 (2012)...3, 5 Helprin v. Harcourt, Inc., 277 F. Supp. 2d 327 (S.D.N.Y. 2003)...11 Inter-Community Mem l Hosp. of Newfane, Inc. v. Hamilton Wharton Grp., Inc., 941 N.Y.S.2d 360 (4th Dep t 2012)...3 John J. Kassner & Co. v. City of New York, 46 N.Y.2d 544 (1979)...5 Lana & Edward s Realty Corp. v. Katz/Weinstein P ship, No /08, 2010 WL (Sup. Ct., Kings Cnty. Mar. 17, 2010)...7 LaSalle Bank N.A. v. CAPCO Am. Secs. Corp., No. 02 Civ. 9916, 2005 WL (S.D.N.Y. Nov. 14, 2005)...12 LaSalle Bank Nat l Ass n v. Lehman Bros. Holdings, Inc., 237 F. Supp. 2d 618 (D. Md. 2002)...4, 9 Lehman Bros. Holdings, Inc. v. Evergreen Moneysource Mortg. Co., 793 F. Supp. 2d 1189 (W.D. Wash. 2011)...3 Lehman Bros. Holdings, Inc. v. Key Fin. Corp., 09 Civ. 623, 2011 WL (M.D. Fla. Mar. 31, 2011)...4 Lehman Bros. Holdings, Inc. v. Laureate Realty Servs., No. 04 Civ. 1432, 2007 WL (S.D. Ind. Sept. 28, 2007)...10 Lehman Bros. Holdings, Inc. v. Nat l Bank of Ark., 875 F. Supp. 2d 911 (E.D. Ark. 2012)...4 Lehman Bros. Holdings, Inc. v. PMC Bancorp, 10 Civ , 2013 WL (C.D. Cal. Mar. 8, 2013)...4 Lehman Bros. Holdings, Inc. v. Royal Pac. Funding Corp., 10 Civ , 2011 U.S. Dist. LEXIS (C.D. Cal. Oct. 20, 2011)...4 Manns v. Norstar Bldg. Corp., 771 N.Y.S.2d 438 (4th Dep t 2004)...7 Marathon Enters., Inc. v. Feinberg, 595 F. Supp. 368 (S.D.N.Y. 1984)...7 iv

6 TABLE OF AUTHORITIES (cont d) Page(s) Cases MASTR Asset Backed Sec. Trust 2006-HE3 v. WMC Mortg. Corp., 843 F. Supp. 2d 996 (D. Minn. 2012)...9, 10 MBIA Ins. Corp. v. Countrywide Home Loans, Inc., 928 N.Y.S.2d 229 (1st Dep t 2011)...14 MBIA Ins. Corp. v. Countrywide Home Loans, Inc., No /08, 2013 WL (1st Dep t, Apr. 2, 2013)...6 Plumbers Union Local No. 12 Pension Fund v. Nomura Asset Acceptance Corp., 632 F.3d 762 (1st Cir. 2011)...14 Resolution Trust Corp. v. Key Fin. Servs., Inc., 280 F.3d 12 (1st Cir. 2002)...4, 12 Rom Terminals, Ltd. v. Scallop Corp., 529 N.Y.S.2d 304 (1st Dep t 1988)...6 Ronnen v. Ajax Elec. Motor Corp., 88 N.Y.2d 582 (1996)...9 RR Chester, LLC v. Arlington Bldg. Corp., 22 A.D.3d 652 (2d Dep t 2005)...11 Stalis v. Sugar Creek Stores, Inc., 744 N.Y.S.2d 586 (4th Dep t 2002)...3 Structured Mortg. Trust v. Daiwa Fin. Corp., No. 02 Civ. 3232, 2003 WL (S.D.N.Y. Feb. 25, 2003)...3 Syncora Guar. Inc. v. EMC Mortg. Corp., No. 09 Civ. 3106, 2011 WL (S.D.N.Y. Mar. 25, 2011)...10 Toyomenka Pac. Petroleum, Inc. v. Hess Oil V.I. Corp., 771 F. Supp. 63 (S.D.N.Y. 1991)...5 Trust for the Certificate Holders of the Merrill Lynch Mortg. Pass-Through Certificates Series 1999-C1 v. Love Funding Corp., 736 F. Supp. 2d 716 (S.D.N.Y. 2010)...12 U.S. Bank, N.A. v. GreenPoint Mortg. Funding, Inc., No /09, 26 Misc. 3d 1234(A), 2010 WL (Sup. Ct., N.Y. Cnty. Mar. 3, 2010)...10 v

7 TABLE OF AUTHORITIES (cont d) Page(s) Cases Unigard Sec. Ins. Co. v. N. River Ins. Co., 79 N.Y.2d 576 (1992)...5 Wells Fargo, N.A. v. Bank of Am., N.A., No. 10 Civ (JPO), 2013 WL (S.D.N.Y. Mar. 28, 2013)...9, 12 Young v. Woodcrest Club, 729 N.Y.S.2d 855 (Sup. Ct., Nassau Cnty. 2001)...7 Statutes 26 U.S.C. 860G...2 CPLR CPLR vi

8 Nomura respectfully submits this reply memorandum in further support of its motion pursuant to CPLR Rules 3211(a)(1), (a)(5) and (a)(7) to dismiss the Complaint. 1 PRELIMINARY STATEMENT This case relates exclusively to the Mortgage Representations representations about the Mortgage Loans that Nomura made effective July 1, The Mortgage Representations are snapshots that describe the condition of the Loans at a specific point in time (either the date of the loan s origination or the closing date of the securitization, depending on the representation). In the event one of the Mortgage Representations was breached that is, if it was untrue when Nomura made it on July 1, 2006 Plaintiff and Nomura bargained for the sole remedies of cure, repurchase, or, for a limited time, substitution of the breaching loan or loans. Plaintiff now seeks to transform these narrow contractual remedies into an independent obligation that eviscerates the six-year statute of limitations for the alleged underlying breach, while at the same time seeking relief far beyond the agreed upon sole remedies. And it does both these things without adequately stating a claim that any Mortgage Representation actually was breached. None of these gambits works, and Plaintiff s Complaint should be dismissed. ARGUMENT I. PLAINTIFF S CLAIMS ARE TIME BARRED A. The Contractual Sole Remedies Provision Does Not Extend The Statute Of Limitations For The Alleged Underlying Breaches. In the event of a breach of the Mortgage Representations, Nomura and Plaintiff bargained for specific sole remedies, entitling Plaintiff only to cure, repurchase, or substitution of the defective loan. The parties expressly shortened the period within which Plaintiff could pursue substitution but did not otherwise alter the six-year statute of limitations applicable to all breach 1 Capitalized terms not defined herein have the meanings set forth in Nomura s opening brief. Opposition ( Opp n ) refers to Plaintiff s Memorandum of Law in Opposition to Defendant s Motion to Dismiss the Complaint.

9 of contract claims under New York law. 2 Plaintiff s argument that the sole remedies provision does away with the six-year limitations period for claims for breach of the Mortgage Representations, and instead creates a continuing obligation to cure or repurchase Defective loans throughout the [thirty-year] life of the Trust, is unsupported by either the plain language of the PSA and MLPA or New York law. Opp n at The Sole Remedies Provision Is Solely A Remedy, It Does Not Create A Continuing Obligation Of Future Performance. Plaintiff s assertions that Nomura guarantee[d] the condition or performance of the Loans, and undertook a continuing obligation to perform a service if that condition or performance changed, find no support in the parties agreements. Opp n at 11 (internal quotation marks omitted). Rather, the Mortgage Representations were made effective July 1, 2006 and were limited to describing certain characteristics of the Mortgage Loans at that fixed point in time. The Mortgage Representations say nothing about the Loans performance after that date, nor do they bind Nomura to address any subsequently arising conditions. The agreements here stand in sharp contrast to those at issue in Plaintiff s lead case, Bulova Watch Co. v. Celotex Corp., 46 N.Y.2d 606 (1979). In Bulova, the defendant made a general warranty that roofing materials had been applied in the [manner] specified, and made a separate, forward-looking guarantee to make any repairs... that may become necessary to maintain the roof in a water-tight condition. Id. at 609. The guarantee was not a remedy for breach of the general warranty; instead, it was a standalone obligation to maintain the roof in water-tight condition for the life of the agreement. Id. Indeed, the Bulova court dismissed the 2 Shortening the limitations period for the substitution remedy does not in any way suggest that the parties intended to do away with the applicable statute of limitations for cure or repurchase claims. See Opp n at 10. To the contrary, the parties choice not to provide an alternative limitations period for those claims confirms that CPLR 213 s six-year period applies. Unless contracting parties explicitly specify an alternative period which indisputably they did not here the general Statute of Limitations of six years for an action on a contract applies Webster Ave. Realty Corp. v. Great Am. Surplus Lines Ins. Co., 63 N.Y.2d 227, 231 (1984). In any event, the time limitation on the substitution remedy is dictated by federal statute. See 26 U.S.C. 860G(a)(4)(B)(ii). 2

10 plaintiff s claim for breach of warranty analogous to Plaintiff s claim here for breach of the Mortgage Representations as time-barred. Id. at 610. Unlike the defendant in Bulova, Nomura did not provide a separate, forward-looking guarantee that the loans would perform for the life of the deal, did not warrant that the condition of the loans as described on July 1, 2006 would continue unchanged, and did not agree to perform any service if a loan ceased performing or if its condition changed. 3 What Nomura did agree to was that specified contractual remedies and only those remedies would be available if the Mortgage Representations were untrue when made. Such a breach could occur only on the date the Representation was made and any claim for breach expired six years later. 2. Plaintiff May Not Defer Accrual Of Its Claims By Waiting To Pursue Its Remedies. A party may not unilaterally extend the statute of limitations for breach of contract by delaying its pursuit of remedies. Hahn Auto. Warehouse, Inc. v. Am. Zurich Ins. Co., 18 N.Y.3d 765, 771 (2012) (the statute of limitations ran from the date when the plaintiff acquired the right to demand payment, not from the later date when the plaintiff in fact demanded payment); see also Lehman Bros. Holdings, Inc. v. Evergreen Moneysource Mortg. Co., 793 F. Supp. 2d 1189, 1194 (W.D. Wash. 2011) (same; applying New York law); Structured Mortg. Trust v. Daiwa Fin. Corp., No. 02 Civ. 3232, 2003 WL , at *3 (S.D.N.Y. Feb. 25, 2003). Evergreen which engages in an exhaustive analysis of the relevant principles of New York contract law and Daiwa are indistinguishable from the facts here and compel the same conclusion. The central issue in those cases, like this one, is whether the defendant breached 3 Plaintiff s other authority is similarly distinguishable. See Stalis v. Sugar Creek Stores, Inc., 744 N.Y.S.2d 586, 587 (4th Dep t 2002) (defendant agreed to continue... to be responsible for code compliance to ensure that the product installed continued to comply with code for the life of the agreement); Inter-Community Mem l Hosp. of Newfane, Inc. v. Hamilton Wharton Grp., Inc., 941 N.Y.S.2d 360, (4th Dep t 2012) (holding that the statute of limitations runs from the time of breach, not from a later date on which plaintiffs took certain action). 3

11 mortgage representations and warranties. As those courts hold, a plaintiff may pursue the contractually-specified remedies as soon as a breach occurs i.e., as soon as the representations are made. The existence of sole remedy provisions do nothing to alter New York law on the accrual of claims for breach of contractual representations and warranties. The same is true here. In contrast, the out-of-jurisdiction authorities upon which Plaintiff exclusively relies ignore New York law. Those cases derive from the First Circuit s decision in Resolution Trust Corp. v. Key Fin. Servs., Inc., 280 F.3d 12 (1st Cir. 2002). In Resolution Trust, the First Circuit held without citation to New York law, and outside the statute of limitations context that certain remedies would be available [w]hether or not Key committed an independent breach by failing to repurchase on demand. Id. at 18 (emphasis supplied). Without analysis, and again without citation to New York authority, the Eastern District of Arkansas relied solely on Resolution Trust and its progeny in the statute of limitations ruling upon which Plaintiff s argument depends. Lehman Bros. Holdings, Inc. v. Nat l Bank of Ark., 875 F. Supp. 2d 911, (E.D. Ark. 2012) (citing Resolution Trust and LaSalle Bank Nat l Ass n v. Lehman Bros. Holdings, Inc., 237 F. Supp. 2d 618, 638 (D. Md. 2002)). 4 Plaintiff s cited cases do not discuss Hahn or other New York cases concerning accrual of a contract claim which is not surprising, given that their holdings are fundamentally inconsistent with New York law on this point. 3. Discovery Of A Breach Is Not A Condition Precedent That Could Delay Accrual Of Plaintiff s Claims. Plaintiff s argument that the use of the word discovery in the sole remedies provision alters the accrual analysis and distinguishes this case from Evergreen and Daiwa is also wrong. 4 The other cases that Plaintiff cites are equally unavailing, as they rely solely on Resolution Trust and LaSalle and do not address any statute of limitations arguments. See Lehman Bros. Holdings, Inc. v. PMC Bancorp, 10 Civ , 2013 WL , at *4 (C.D. Cal. Mar. 8, 2013); Lehman Bros. Holdings, Inc. v. Royal Pac. Funding Corp., 10 Civ , 2011 U.S. Dist. LEXIS , at *11 (C.D. Cal. Oct. 20, 2011); Lehman Bros. Holdings, Inc. v. Key Fin. Corp., 09 Civ. 623, 2011 WL , at *11 (M.D. Fla. Mar. 31, 2011). 4

12 Opp n at 12. Whether or not the word discovery appears in the sole remedies provision, Plaintiff of course would only ever demand cure or repurchase after learning of a breach. But it is black letter law that knowledge of the occurrence of the wrong on the part of the plaintiff is not necessary to start the Statute of Limitations running in a contract action. Ely-Cruikshank Co., v. Bank of Montreal, 81 N.Y.2d 399, 403 (1993) (internal quotation marks omitted). The plaintiff in Hahn, like Plaintiff here, argued that its claim did not accrue until it demanded payment. The Court of Appeals rejected this argument, holding that while the existence of an unsatisfied condition to performance theoretically could delay accrual, the issuance of a demand does not constitute a condition precedent. Hahn, 18 N.Y.3d at Hahn contrasted the facts of that case to those in John J. Kassner & Co. v. City of New York, 46 N.Y.2d 544 (1979) a case in which the right to payment was conditioned on the receipt of an audit report from a third party. Hahn, 18 N.Y.3d at ; Kassner, 46 N.Y.2d at 550. The discovery of a claim does not constitute a condition precedent here any more than the existence of a demand did in Hahn. [A] contractual duty ordinarily will not be construed as a condition precedent absent clear language showing that the parties intended to make it a condition. Unigard Sec. Ins. Co. v. N. River Ins. Co., 79 N.Y.2d 576, 581 (1992); see also, e.g., Hahn, 18 N.Y.3d at 772; Toyomenka Pac. Petroleum, Inc. v. Hess Oil V.I. Corp., 771 F. Supp. 63, 68 (S.D.N.Y. 1991) ( Stipulations for notice will not be construed as conditions precedent if reasonably open to another construction. (internal quotation marks omitted)). Here, the use of the word discovery does not create any hurdle that could justify delaying accrual of Plaintiff s claims. Instead, the parties agreements require that notice of a breach be given prompt[ly] after discovery. MLPA 9(a); PSA 2.03(c). Thus, the word discovery is used to shorten the time in which a party complaining of a breach must act, not to extend the limitations period. 5

13 If the parties had wanted to tie the accrual date for the Trustee s claims to the repurchase provision and issuance of a demand, they would have done so. 5 See Assured Guar. Mun. Corp. v. DB Structured Prods., Inc., 927 N.Y.S.2d 880, (Sup. Ct., N.Y. Cnty. 2011) (pooling and servicing agreement stated that any cause of action for representation and warranty breach shall accrue upon (i) discovery of such breach by plaintiff; (ii) failure to cure the breach or repurchase the loan; and (iii) demand upon defendant by plaintiff for compliance). 6 The parties did not use such language; thus, the standard rule that the claim accrues on the date the representations were made controls. See 1303 Webster Ave., 63 N.Y.2d at Plaintiff Does Not Contend That Accrual Was Delayed For Its Purported Claim Under The No Untrue Statements Representation. The No Untrue Statements Representation was made on July 1, 2006, the date of the MLPA. As Plaintiff is at pains to point out, the cure or repurchase remedy does not apply to the No Untrue Statements Representation. Thus, even if Plaintiff were to persuade the Court that its claims for breach of the Mortgage Representations accrue only when it demands cure or repurchase against the overwhelming weight of authority that argument does not apply to its claim for breach of the No Untrue Statements Representation, which plainly is time-barred. 5 The parties plainly knew how to create a condition precedent. See, e.g., MLPA 10 (specifying conditions to closing). See also generally Rom Terminals, Ltd. v. Scallop Corp., 529 N.Y.S.2d 304, 306 (1st Dep t 1988) ( Also inconsistent with the repair obligation being a condition precedent is the fact that paragraph 18 is not included or mentioned in the section of the contract setting forth the conditions of closing. ). 6 This is only one of many differences in the contractual language used across the thousands of loan purchase and pooling and servicing agreements used by the multitude of participants in the securitization industry. Some contracts expressly tie accrual to a breach of the cure or repurchase provision. See Affirmation of Matthew L. Craner in Further Support of Defendant Nomura Credit & Capital, Inc. s Motion to Dismiss the Complaint ( Craner Reply Aff. ) Ex. A Other contracts explicitly state that a request for repurchase may be made at any time. Id. Ex. B 5. Thus, arguments about what other banks say in their public filings about other contracts, or what changes such other banks have made to such other contracts post-financial crisis, are irrelevant in construing the language actually chosen by the parties here. Opp n at 11 nn MBIA Ins. Corp. v. Countrywide Home Loans, Inc., No /08, 2013 WL (1st Dep t, Apr. 2, 2013), has nothing to do with the statute of limitations, contrary to Plaintiff s suggestion. Opp n at 10. In any event, MBIA supports Nomura s arguments had these sophisticated parties intended for something other than the standard accrual and limitations rules to apply, they would have said so WL , at *2. 6

14 B. This Action Was Not Timely Commenced. An agreement s stated effective date is unambiguous evidence of the parties intent to be bound to each other from that date. Manns v. Norstar Bldg. Corp., 771 N.Y.S.2d 438, 439 (4th Dep t 2004); see also, e.g., Colello v. Colello, 780 N.Y.S.2d 450, 453 (4th Dep t 2004). 8 The date of the contract controls even when the representation is made as of a future closing date. Id.; see also Lana & Edward s Realty Corp. v. Katz/Weinstein P ship, No /08, 2010 WL , at *4 (Sup. Ct., Kings Cnty. Mar. 17, 2010). 9 Plaintiff s authority is not to the contrary; it merely confirms well-established law that the statutory period of limitations begins to run when the liabilities for the wrong have risen. Young v. Woodcrest Club, 729 N.Y.S.2d 855, 857 (Sup. Ct., Nassau Cnty. 2001); Marathon Enters., Inc. v. Feinberg, 595 F. Supp. 368, 372 (S.D.N.Y. 1984) (plaintiff s claim accrued on the date of the contract). Plaintiff attempts to distinguish Manns and Colello by arguing that neither addressed when a cause of action for breach of contract accrues. Opp n at 13 n.9. This argument misses the mark in each case, the earlier date provided for in the contract, not the date the contract was signed, was held to be the legally relevant date on which all terms of the contract became effective. Manns, 771 N.Y.S.2d at 439; Colello, 780 N.Y.S.2d at 453. Here, both the MLPA and the PSA state on their cover pages that they are made effective July 1, MLPA at 1; PSA at 1. Both also state very clearly that they are deemed executed on that date. MLPA at 19 8 The Notary Certifications on which Plaintiff relies thus have no legal relevance for determining the date on which the contracts were effective or the date on which the representations were effective. Opp n at Plaintiff cannot distinguish Lana & Edward s. In that case, the parties executed an agreement dated June 28, 2002 with a closing date of October 15, Lana & Edward s Realty Corp., 2010 WL , at *1-2. The agreement contained representations and warranties that shall be true and correct at closing. Id. at *2. In a lawsuit filed October 9, 2008, the plaintiff contended that the representations were not true as of the date of the closing. Id. at *3. The Court held that the plaintiff s breach of contract claim accrued on June 28, 2002, the date the representation was made, and expired six years later. Id. at *4-5. Indeed, the Court rejected the very argument Plaintiff made here namely, that the claim accrued on the closing date because the contract stated the representation would be true and correct as of the closing date because the representation was alleged to have been false when made, on the date of the contract. Id. 7

15 (the parties have caused their names to be signed by their respective officers thereunto duly authorized as of the date first above written i.e., July 1, 2006); PSA at signature pages (same). By July 1, 2006, the parties had agreed on the Mortgage Loans to be included in the transaction and had already transferred the right to receive principal and interest payments on those loans. See MLPA 2, 3(b). The fact that certain loans may have been subject to substitution prior to the Closing Date is entirely consistent with the sole remedies available under the agreements and does not change the fact that the agreements were effective July 1, 2006 and the representations were made effective July 1, Plaintiff s claims accrued on July 1, 2006, more than six years before this lawsuit was filed on July 27, II. THE PARTIES AGREEMENTS DO NOT PERMIT PLAINTIFF TO RECOVER DAMAGES FOR THE CLAIMS IT ASSERTS HERE Plaintiff s claims exclusively involve breaches of the Mortgage Representations. Indeed, the Mortgage Representations are the only representations Nomura made about the Mortgage Loans. The parties agreements explicitly limit the remedies for breaches of the Mortgage Representations to cure or repurchase. Under these circumstances, Plaintiff s request for relief beyond the sole remedies must be dismissed. See Assured Guar. Corp. v. EMC Mortg., LLC, No /2012, 2013 WL , at *5 (Sup. Ct., N.Y. Cnty. Apr. 4, 2013) ( EMC ) (all breach claims that relate to, and overlap with, loan-level representations subject to a repurchase protocol are limited to cure or repurchase as the sole available remedies). A. Plaintiff May Not Circumvent The Contractual Sole Remedies By Seeking Damages For An Alleged Failure To Provide That Remedy. Under the plain and unambiguous terms of the sole remedies provisions of the MLPA and the PSA, money damages are not available for a breach of the Mortgage Representations. Plaintiff argues incorrectly that Nomura s failure to provide the contractual remedy that stems from any breach of the Mortgage Representations constitutes a separate breach for which 8

16 Plaintiff may pursue damages. Opp n at 15. But the failure to provide a contractual remedy does not subject a party to liability beyond that remedy. See, e.g., Assured Guar. Mun. Corp. v. Flagstar Bank, FSB, No. 11 Civ. 2375, 2011 WL , at *4-5 (S.D.N.Y. Oct. 31, 2011) ( Flagstar I ) (rejecting the argument that remedy limitations dissolve if defendant fails to repurchase defective loans); MASTR Asset Backed Sec. Trust 2006-HE3 v. WMC Mortg. Corp., 843 F. Supp. 2d 996, 1001 (D. Minn. 2012). 10 B. The No Untrue Statements Representation Does Not Permit Plaintiff to Escape the Sole Remedies for Which It Contracted. Plaintiff next argues that it can obtain full contract damages for breaches of the Mortgage Representations because those breaches also are breaches of the No Untrue Statements Representation. Opp n at Under this strained reading, however, every breach of a Mortgage Representation would also breach the No Untrue Statements Representation, and Plaintiff would never be limited to the sole remedies for which it contracted for breaches of the Mortgage Representations. New York law forbids this result. See, e.g., Ronnen v. Ajax Elec. Motor Corp., 88 N.Y.2d 582, 589 (1996); see generally Opening Mem. at and n.8. Plaintiff s arguments to the contrary are not persuasive. First, Plaintiff argues that the repurchase remedy in these contracts was not designed as a remedy for pervasive breaches and misrepresentations that Plaintiff purports to allege, and that the No Untrue Statements Representation provides relief for anything more than the occasional Defective Loan. Opp n at This is unsupported by the text of the parties agreements, and Plaintiff cannot point to any contractual language even suggesting that multiple breaches of Mortgage Representations 10 Plaintiff s cases are not to the contrary. In Wells Fargo, N.A. v. Bank of Am., N.A., No. 10 Civ (JPO), 2013 WL at *9 (S.D.N.Y. Mar. 28, 2013), the court awarded damages after the defendant itself argued that money damages would be an adequate remedy. In Assured Guar. Mun. Corp. v. Flagstar Bank, FSB, 11 Civ (JSR), 2013 WL , at *37 (S.D.N.Y. Feb. 5, 2013) ( Flagstar II ), the court awarded damages under a Transfer Deficiency provision not present in the contracts at issue here. And in LaSalle, 237 F. Supp. 2d at 638, the court misapplied New York law without citation to any New York authority. 9

17 are in any way treated differently in the aggregate than they are individually. 11 Nor can Plaintiff point to any language suggesting that the sole remedies provision ceases to apply after some unspecified number of alleged breaches of the Mortgage Representations. If the parties had intended to provide Plaintiff with a different remedy to address a certain number of alleged breaches about the mortgage loans, they easily could have done so. They did not. Second, Plaintiff claims that the No Untrue Statements Representation applies because the same alleged misstatements about the Mortgage Loans were repeated in other documents. Opp n at But such a result would render the sole remedies provision meaningless because every Mortgage Representation is repeated in documents connected to the transaction. The accuracy of information about the Mortgage Loans is covered exclusively by Section 8 of the MLPA, where Nomura made thirty-nine loan-level representations. Any dispute over the accuracy of that information is governed by the parties agreed upon sole remedies. The No Untrue Statements Representation a broad statement of general applicability not tied in any way to the Mortgage Loans does not expand the remedies available for breaches of the Mortgage Representations beyond those specified in the contracts. See MASTR, 843 F. Supp. 2d at 1001 (applying New York law to dismiss RMBS trustee s claim for damages because cure or repurchase are sole remedies available for breaches related to mortgage loans). Third, it mischaracterizes a general provision stating that remedies under the MLPA are 11 Plaintiff s cited cases all involve claims that were not subject to sole remedy provisions. One involved a claim for breach of a representation that was expressly excluded from the sole remedy provision (and, unlike here, not simply duplicative of the representations subject to the sole remedy provision). See Lehman Bros. Holdings, Inc. v. Laureate Realty Servs., No. 04 Civ. 1432, 2007 WL , at *13 (S.D. Ind. Sept. 28, 2007). Another involved a contract that expressly provided for the pool-wide repurchase remedy the plaintiff pursued. See U.S. Bank, N.A. v. GreenPoint Mortg. Funding, Inc., No /09, 26 Misc. 3d 1234(A), 2010 WL , at *6 (Sup. Ct., N.Y. Cnty. Mar. 3, 2010). The third involved a claim brought by an insurer that was not subject to the sole remedies provisions of the relevant agreements. See Syncora Guar. Inc. v. EMC Mortg. Corp., No. 09 Civ. 3106, 2011 WL , at *5 (S.D.N.Y. Mar. 25, 2011). And the final case did not involve contract claims at all, but instead claims under the federal securities laws for alleged misrepresentations in securities offering documents. See In re Bear Stearns Mortg. Pass-Through Certificates Litig., 851 F. Supp. 2d 746, 775 (S.D.N.Y. 2012). 10

18 distinct from, and cumulative with other available remedies. Plaintiff asserts instead that the provision affirmatively allows Plaintiff to pursue any remedy available at law or equity. Opp n at 16 (quoting MLPA 13). This provision does not create contract rights that do not otherwise exist. Plaintiff has no right under the agreements to pursue remedies for breach of the Mortgage Representations beyond the sole remedies specified in the agreements. Fourth, Plaintiff argues that Nomura s construction would excise the No Untrue Statements Representation from the PSA. Opp n at 17. This is mere smoke and mirrors. The parties agreements include countless statements that have nothing to do with the Mortgage Loans. It is those statements to which the No Untrue Statements Representation applies. Fifth, and finally, Plaintiff argues that rescission is available without addressing any of the authority cited in Nomura s opening brief holding that Plaintiff may not obtain rescissory relief. 12 Breaches of Mortgage Representations, if they existed, do not defeat the entire purpose of the parties agreements. To the contrary, such breaches were expected, as evidenced by the parties inclusion of a sole remedy provision to address any such breaches that arose. III. THE COMPLAINT FAILS TO STATE A CLAIM FOR SPECIFIC PERFORMANCE OF NOMURA S REPURCHASE OBLIGATIONS A. Plaintiff Did Not Allege That Any Loans Are Capable Of Being Repurchased. To obtain specific performance, Plaintiff must allege that all aspects of the repurchase process are capable of being performed. Citipro Realty Corp. v. Lorac Mgmt. Co. Inc., 681 N.Y.S.2d 536, 537 (1st Dep t 1998). Plaintiff failed to do so. Specifically, Plaintiff has not alleged that any of the allegedly breaching Mortgage Loans are capable of being delivered to 12 Instead, it cites two cases addressing unique circumstances not applicable here. See RR Chester, LLC v. Arlington Bldg. Corp., 22 A.D.3d 652, 654 (2d Dep t 2005) (failure to make a down payment for a real estate purchase generally... warrant[s] rescission of the purchase agreement); Helprin v. Harcourt, Inc., 277 F. Supp. 2d 327, 339 (S.D.N.Y. 2003) (failure to publish undermine[s] the entire purpose of a publishing agreement). 11

19 Nomura upon repurchase, or that any of the allegedly breaching Mortgage Loans have a Purchase Price greater than $0, as required by the parties agreements. Plaintiff s authority does not compel any alternate conclusion. In Flagstar, unlike here, the contracts included a provision explicitly providing for repurchase of liquidated loans. The Flagstar contracts uniquely provided that if any repurchase would cause a Transfer Deficiency in the loan pools, the insurer plaintiff could recover certain defined damages for that deficiency. Flagstar I, 2011 WL , at *2. The damage award at trial flowed directly from this feature of the contracts, which is not present here. See Flagstar II, 2013 WL , at *37. In Wells Fargo, the parties and the court acknowledged that repurchase of liquidated loans is impossible WL , at *10. However, the defendant in that case conceded that damages were an appropriate remedy, so the only issue before the court was the appropriate measure of those damages. Id. at *9. 13 Neither case holds that repurchase of liquidated loans the relief Plaintiff here seeks through its request for specific performance is possible under contracts like these. Further, Nomura s payment of a Reimbursement Amount in connection with other transactions does not aid Plaintiff. The documents Plaintiff submitted confirm that it is impossible for Nomura to repurchase liquidated loans. Fay Aff. Ex. F-H. Moreover, agreements reached regarding different trusts governed by different documents with different terms, including insurance and indemnity agreements, under very different circumstances are wholly 13 Plaintiff s other authority is similarly unavailing. Resolution Trust cites to no New York authority whatsoever on this point. 280 F. 3d at 18. Furthermore, the court in Resolution Trust emphasized that the loans at issue had only gone off-line subsequent to the repurchase request, raising a complicated question of how to deal with such loans. Id. Nomura does not contest the availability of repurchase for loans that were liquidated subsequent to the demand for repurchase. In Love Funding, the defendant never argued that repurchase was impossible for liquidated loans instead, it argued for mitigation of damages. Trust for the Certificate Holders of the Merrill Lynch Mortg. Pass-Through Certificates Series 1999-C1 v. Love Funding Corp., 736 F. Supp. 2d 716, (S.D.N.Y. 2010). In Capco, the defendant argued that its attempt to cure the breach, which involved a defective UCC filing on personal property, through a cash payment prior to litigation was sufficient to comply with its contractual obligations. LaSalle Bank N.A. v. CAPCO Am. Secs. Corp., No. 02 Civ. 9916, 2005 WL at *5 (S.D.N.Y. Nov. 14, 2005). 12

20 irrelevant to the sufficiency of Plaintiff s allegations. Nor can Nomura s actions with respect to unrelated trusts change the plain meaning of these agreements. Actions taken to resolve disputes in connection with one securitization do not obligate Nomura to undertake obligations beyond the contracts governing this securitization. B. The Complaint Fails To State A Claim for Breach. Plaintiff does not dispute, and thus concedes, that it failed to allege a breach of the High Cost Loan representation. Plaintiff s remaining breach allegations are similarly defective. 1. Plaintiff Fails To Allege a Breach of MLPA 8(xiv). Plaintiff knew from the inception of the deal that the collateral pool contained interestonly balloon loans. See Pro Supp. at 28. Its attempt to manufacture the transparent presence of such loans into a breach is contrary to the terms of the MLPA 8(xiv), which makes clear that for balloon loans, the final monthly payment... is sufficient to amortize the remaining principal balance. MLPA 8(xiv). This satisfies the MLPA s requirements with respect to interest-only loans, which is that the monthly payments following the interest-only period fully amortize the principal balance over the loan s remaining term. Id. Nowhere does the MLPA require those payments to be equal amounts. Plaintiff s reliance on the PSA s separate definition of Balloon Loan does not change the fact that interest-only Balloon Loans satisfy the terms of MLPA 8(xiv) and were disclosed as part of the transaction from the very start of the deal. 2. Plaintiff Fails To Allege a Breach of MLPA 8(xii). The Certificate Distribution Summary, prepared by an unaffiliated third-party for the use of investors and the parties to the transaction, establishes on its face that Plaintiff s allegations of breach of MLPA 8(xii) are meritless. See Craner Aff. Ex. O. The document is the definitive report on the state of the trust and the relevant report for the time period including the Closing Date, and it reveals that there were no delinquencies in the Trust as of the Closing Date. Plaintiff 13

21 has not and cannot offer any reason why this Court should ignore such conclusive evidence. 3. Plaintiff Fails To Allege a Breach of MLPA 8(xxvii) and 8(xxxi[x]). Plaintiff claims that a plethora of publicly-available evidence demonstrates that the appraisal representation has been breached. Opp n at 22. Plaintiff has not connected that publicly-available evidence in any way to Nomura or the loans at issue here, however. See Compl Courts reject allegations like these that other [appraisers] engaged in such practices, some of which probably distorted loans, and therefore this may have happened in this case because, if permitted, they would lead to the most unrestrained of fishing expeditions. Plumbers Union Local No. 12 Pension Fund v. Nomura Asset Acceptance Corp., 632 F.3d 762, 774 (1st Cir. 2011). This Court should likewise reject these allegations here. 14 Plaintiff s allegations also fail because appraisals (and the LTV and CLTV ratios derived from those appraisals) are opinions that are not actionable unless they were knowingly false when made. See Fed. Hous. Fin. Agency v. Morgan Stanley, No. 11 Civ. 6739, 2012 WL , at *2 (S.D.N.Y. Nov. 19, 2012) (dismissing claims based on LTV ratios because the plaintiff failed to allege subjective falsity). Plaintiff has not cited any case in which appraisal-related allegations survived a motion to dismiss without allegations of subjective falsity. 15 Its failure to allege that either Nomura or the original appraisers disbelieved the opinions of value at the time they were made dooms the appraisal- and LTV-related breach allegations. Plaintiff s defective AVM allegations also provide no support. Plaintiff does not dispute 14 The Allstate decisions do not support Plaintiff s wholesale reliance on generic, industry-wide evidence. To the contrary, in the Allstate cases, the plaintiff specifically alleged that the defendants knew that the appraisals backing the specific loans at issue were flawed and that the defendants purposefully delayed second appraisals to allow the loans to be securitized based on the original flawed information. Fay Aff. Ex. J at 25; accord Fay Aff. Exs. K & L. Plaintiff here makes no such specific allegations. 15 See MBIA Ins. Corp. v. Countrywide Home Loans, Inc., 928 N.Y.S.2d 229, (1st Dep t 2011) (plaintiff alleged that LTV representations were false and misleading and made with knowledge of their falsity ); Fed. Hous. Fin. Agency v. UBS Am., Inc., 858 F. Supp. 2d 306, (S.D.N.Y. 2012) (plaintiff satisfied the subjective falsity requirement ); Allstate Ins. Co. v. Countrywide Fin. Corp., 824 F. Supp. 2d 1164, 1185 (C.D. Cal. 2011) ( Saying that the home is worth X is an opinion; saying that I believe that the home is worth X is a fact. ). 14

22 that its AVM, run many years after the fact, merely provides a different opinion of value from the original appraisals. Instead, it suggests that merely alleging this difference is sufficient to allege that the original appraisals somehow were wrong. Opp n at Even vendors of AVM services concede that AVMs do not support such conclusions: there is no way to discern from AVMs the cause of any difference between an AVM s point estimate and the opinion of value contained in an appraisal. Craner Reply Aff. Ex. C. Indeed, Plaintiff s AVM valuations do not even suggest any error in the original appraisals. Plaintiff alleges only that its AVM reported differences of at least 10% with respect to 162 properties, yet AVMs are deemed successful if they arrive at a value that is within 10-15% of the original valuation. See id. Ex. D Plaintiff Fails To Allege Breaches Uncovered By Its Loan File Review. Plaintiff attempts to buttress its claims using Breach Notices sent by Plaintiff to Nomura. Opp n at 25. The details of these notices were not set forth in or attached to the Complaint and thus cannot be used to salvage Plaintiff s claims. See Certain Underwriters at Lloyd s, London v. William M. Mercer, Inc., /02, 7 Misc. 3d 1008(A), 2005 WL , at *7 (Sup. Ct., N.Y. Cnty. Apr. 12, 2005) ( [A] contract or writing referred to in a pleading but not set forth in full or attached to the pleading is no part of the pleading and may not be considered in passing upon the sufficiency thereof. (internal quotation marks omitted)). Attaching them now to the Fay Affirmation does not cure the pleading defect. CONCLUSION For the reasons stated above, Nomura respectfully requests that the Court dismiss this action and award to Nomura such further relief as it deems just and proper. 16 Plaintiff s reliance on Flagstar II to support the Complaint s exclusive reliance on AVM allegations is misplaced. Opp n at 24. The court in Flagstar II accepted proof of breach at trial only after a reunderwriting process that included an AVM as only one component. See Flagstar II, 2013 WL , at *4, *5-6, *13. The Court did not find that any breach was established based exclusively on the results of the AVM, nor did it hold that alleged discrepancies uncovered by AVMs, by themselves, would state a claim. 15

23 Dated: New York, New York May 2, 2013 Respectfully submitted, ORRICK, HERRINGTON & SUTCLIFFE LLP By: /s/ Matthew L. Craner Joseph J. Frank Matthew L. Craner 51 West 52nd Street New York, New York Tel: Fax: Attorneys for Defendant Nomura Credit & Capital, Inc. 16