Case 1:14-cv KPF-SN Document 182 Filed 08/08/16 Page 1 of 54

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1 Case 1:14-cv KPF-SN Document 182 Filed 08/08/16 Page 1 of 54 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK BLACKROCK ALLOCATION TARGET SHARES: SERIES S PORTFOLIO, et al., Plaintiffs, Case No. 14-cv-9371-KPF-SN JURY DEMAND -against- WELLS FARGO BANK, NATIONAL ASSOCIATION, Defendant, ROYAL PARK INVESTMENTS SA/NV, Individually and on Behalf of All Others Similarly Situated, Plaintiffs, Case No. 14-cv-9764-KPF-SN JURY DEMAND -against- WELLS FARGO BANK, N.A., as Trustee, Defendant, NATIONAL CREDIT UNION ADMINISTRATION BOARD, as Liquidating Agent of U.S. Central Federal Credit Union, Western Corporate Federal Credit Union, Members United Corporate Federal Credit Union, Southwest Corporate Federal Credit Union, and Constitution Corporate Federal Credit Union, derivatively and in its own right, Case No. 14-cv KPF-SN JURY DEMAND -against- Plaintiffs, WELLS FARGO BANK, NATIONAL ASSOCIATION, -and- Defendant,

2 Case 1:14-cv KPF-SN Document 182 Filed 08/08/16 Page 2 of 54 NCUA GUARANTEED NOTES TRUST 2010-R1, NCUA GUARANTEED NOTES TRUST 2010-R2, NCUA GUARANTEED NOTES TRUST 2010-R3, NCUA GUARANTEED NOTES TRUST 2011-R2, NCUA GUARANTEED NOTES TRUST 2011-R4, NCUA GUARANTEED NOTES TRUST 2011-R5, NCUA GUARANTEED NOTES TRUST 2011-M1, Nominal Defendants, PHOENIX LIGHT SF LIMITED, et al., -against- Plaintiffs, Case No. 14-cv KPF-SN JURY DEMAND WELLS FARGO BANK, N.A., Defendant, COMMERZBANK AG, -against- Plaintiff, Case No. 15-cv KPF-SN JURY DEMAND WELLS FARGO BANK, N.A., Defendant. PLAINTIFFS JOINT OPPOSITION TO DEFENDANT S MOTION TO DISMISS

3 Case 1:14-cv KPF-SN Document 182 Filed 08/08/16 Page 3 of 54 TABLE OF CONTENTS I. PRELIMINARY STATEMENT... 1 II. FACTUAL BACKGROUND... 3 Page A. Wells Fargo s Role As Trustee For The Trusts... 3 B. Wells Fargo s Contractual Duties Ensure The Trusts Take Title To The Mortgage Loans Enforce The Sellers Repurchase Obligations Notify Defaulting Servicers And Demand A Cure Heightened Post-Event Of Default Duties... 5 C. Wells Fargo s Breach Of Its Duties Has Caused Plaintiffs To Suffer Damages... 6 III. ARGUMENT... 9 A. Plaintiffs Complaints Adequately Allege Claims Based On Seller R&W Breaches Wells Fargo s Reliance On Commerce Bank Is Misplaced Wells Fargo s Trust-Specific Arguments Are Without Merit B. Plaintiffs Complaints Adequately Allege Wells Fargo s Breach Of Its Post-EOD Duties C. Plaintiffs Complaints Adequately State Claims For Violations Of The Trust Indenture Act D. Plaintiffs Complaints Adequately Alleges Tort Claims Plaintiffs Tort Claims Are Predicated On Independent, Extracontractual Duties The Economic Loss Doctrine Does Not Bar Plaintiffs Non-Contract Claims Plaintiffs Allege Cognizable Conflicts Of Interest E. Plaintiffs Adequately Allege Streit Act Claims F. NCUA Has Standing To Sue On Behalf Of The NGN Trusts i

4 Case 1:14-cv KPF-SN Document 182 Filed 08/08/16 Page 4 of The NGN Indenture Trustee Acquiesced In NCUA s Derivative Suit, Which Is Sufficient Under Controlling Delaware Law To Confer Derivative Standing The Delaware Statutory Trust Act Authorizes NCUA s Derivative Suit Wells Fargo Lacks Standing To Challenge BNYM s Acquiescence In Any Event, Wells Fargo s Claims Based On U.S. Bank Are Erroneous G. NCUA Has Standing To Pursue All Of Its Direct Claims H. Commerzbank s Claims Are Timely Claims Wells Fargo Concedes Are Not Time-Barred Wells Fargo Fails To Demonstrate That Any Of Commerzbank s Claims Accrued In Germany Wells Fargo Fails To Demonstrate That Any Claims Would Be Untimely Under German Law Commerzbank Retained All Its Claims IV. CONCLUSION ii

5 Case 1:14-cv KPF-SN Document 182 Filed 08/08/16 Page 5 of 54 TABLE OF AUTHORITIES Case Page ACE Sec. Corp. v. DB Structured Prod., Inc., 112 A.D.3d 522 (1st Dep t 2013)...39 Advanced Magnetics, Inc. v. Bayfront Partners, Inc., 106 F.3d 11 (2d Cir. 1997)...33 Alexander v. Sandoval, 532 U.S. 275 (2001)...20 Ambac Assurance Corp. v. EMC Mortg. LLC, 121 A.D.3d 514 (1st Dep t 2014)...15 Appel v. Kidder, Peabody & Co. Inc., 628 F. Supp. 153 (S.D.N.Y. 1986)...35 Armstrong v. Exceptional Child Ctr., Inc., 135 S. Ct (2015)...20 Arrowgrass Master Fund Ltd. v. The Bank of N.Y. Mellon, 2012 WL (N.Y. Sup. Ct. Feb. 24, 2012)...18 Ashcroft v. Iqbal, 556 U.S. 662 (2009)...1, 9, 11 Beana v. Woori Bank, 2006 WL (S.D.N.Y. Oct. 11, 2006)...36 Bank of N.Y. Mellon v. Gales, 116 A.D.3d 723 (2d Dep t 2014)...28 The Bank of N.Y. Mellon Trust Co., N.A. v. Morgan Stanley Mortg. Capital, Inc., 2013 WL (S.D.N.Y. June 19, 2013)...11, 12 The Bank of N.Y. Mellon Trust Co., N.A. v. Morgan Stanley Mortg. Capital, Inc., 821 F.3d 297 (2d Cir. 2016)...11, 12 The Bank of New York Mellon v. WMC Mortg., LLC, 2015 WL (S.D.N.Y. May 22, 2015)...25 Beck v. Mfrs. Hanover Trust Co., 632 N.Y.S.2d 520 (1st Dep t 1995)...21, 25 Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007)...1, 9 BlackRock Core Bond Portfolio v. U.S. Bank Nat l Ass n, 2016 WL (S.D.N.Y. Feb. 26, 2016)... passim iii

6 Case 1:14-cv KPF-SN Document 182 Filed 08/08/16 Page 6 of 54 Bluebird Partners, L.P. v. First Fid. Bank, N.A., 85 F.3d 970 (2d Cir. 1996)...19 BNP Paribas Mortgage Corp. v. Bank of Am., N.A., 778 F. Supp. 2d 375 (S.D.N.Y. 2011)...19 Brereton v. Bountiful City Corp., 434 F.3d 1213 (10th Cir. 2006)...33 Clark-Fitzpatrick, Inc. v. Long Island Rail Road Co., 70 N.Y.2d 383 (1987)...21 Collette v. St. Luke s Roosevelt Hosp., 132 F. Supp. 2d 256 (S.D.N.Y. 2001)...26 Commerce Bank v. The Bank of New York Mellon, 35 N.Y.S.3d 63 (1st Dep t 2016)... passim In re Colonial Trust Co., 189 Misc. 335, 67 N.Y.S.2d 534 (Sup. Ct. N.Y. Cnty. 1946)...25, 31 Cortner v. Israel, 732 F.2d 267 (2d Cir. 1984)...32 Cullen v. Margiotta, 811 F.2d 698 (2d Cir. 1987)...34 Debussy LLC v. Deutsche Bank, 2006 WL (S.D.N.Y. Mar. 29, 2006)...27 Doyle v. Allstate Ins. Co., 1 N.Y.2d 439, 154 N.Y.S.2d 10 (1956)...25 DZ Bank AG v. UBS AG, 2014 WL (Sup. Ct. N.Y. Cnty. Apr. 17, 2014)...39 Ellington Credit Fund, Ltd. v. Select Portfolio Servicing, Inc., 837 F. Supp. 2d 162 (S.D.N.Y. 2011)...23 In re Facebook, Inc., IPO Derivative Litig., 797 F.3d 148 (2d Cir. 2015)...34 FHFA v. JPMorgan Chase & Co., 2012 WL (S.D.N.Y. Dec. 3, 2012)...37 Fixed Income Shares: Series M, et al. v. Citibank N.A., 130 F. Supp. 3d 842 (S.D.N.Y. 2015)...11, 19, 20, 23 Global Fin. Corp. v. Triarc Corp., 93 N.Y.2d 525 (1999)...36 iv

7 Case 1:14-cv KPF-SN Document 182 Filed 08/08/16 Page 7 of 54 Glus v. Brooklyn E. Dist. Terminal, 359 U.S. 231 (1959)...38 Goldman v. Belden, 754 F.2d 1059 (2d Cir. 1985)...9 Groseclose v. Merchs. Nat l Bank & Trust Co. of Syrcase, 71 Misc. 2d 111 (Sup. Ct. Onondaga Cnty. 1972)...25 Harper v. Larchmont Yacht Club, 38 N.Y.S.2d 505 (Sup. Ct. N.Y. Cnty. 1942)...25 HSH Nordbank AG v. Barclays Bank PLC, 42 Misc. 3d 1231(A) (Sup. Ct. N.Y. Cnty. 2014)...39 HSH Nordbank AG v. Goldman Sachs Grp., Inc., 43 Misc. 3d 1225(A) (Sup. Ct. N.Y. Cnty. 2013)...39 HSN Nordbank AG v. RBS Holdings USA Inc., 2015 WL (S.D.N.Y. Mar. 23, 2015)...39 Hydro Inv rs, Inc. v. Trafalgar Power Inc., 227 F.3d 8 (2d Cir. 2000)...22 Kaplan v. Peat, Marwick, Mitchell & Co., 540 A.2d 726 (Del. 1988)... passim Landesbank Baden-Württemberg v. RBS Holdings USA Inc., 14 F. Supp. 3d 488 (S.D.N.Y. 2014)...36 Lang v. Paine, Webber, Jackson & Curtis, Inc., 582 F. Supp (S.D.N.Y. 1984)...36 LNC Invs., Inc. v. First Fid. Bank, Nat l Ass n, 935 F. Supp (S.D.N.Y. 1996)...20, 21 Loreley Fin. (Jersey) No. 3 v. Wells Fargo Sec., LLC, 797 F.3d 160 (2d Cir. 2015)...33 Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992)...34 Maiden v. Biehl, 582 F. Supp (S.D.N.Y. 1984)...35 McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184 (2d Cir. 2007)...9 In re Methyl Tertiary Butyl Ether (MTBE) Products Liab. Litig., 279 F.R.D. 131 (S.D.N.Y. 2011)...10 v

8 Case 1:14-cv KPF-SN Document 182 Filed 08/08/16 Page 8 of 54 Millennium Partners L.P. v. U.S. Bank Nat l Ass n, 2013 WL (S.D.N.Y. Apr. 17, 2013))...18, 22 Morgan Guar. Trust Co. of N.Y. v. Bay View Franchise Mortg. Acceptance Co., 2002 WL (S.D.N.Y. Apr. 30, 2002)...11, 12 Nat l Credit Union Admin. Bd. v. HSBC Bank USA, Nat. Ass n, 117 F. Supp. 3d 392 (S.D.N.Y. 2015)...16, 27 Nat l Credit Union Admin. v. U.S. Bank Nat l Ass n 2016 WL (S.D.N.Y. Feb. 25, 2016)... passim Nomura Home Equity Loan, Inc., Series 2006-FM2 v. Nomura Credit & Capital, Inc., 133 A.D.3d 96, 19 N.Y.S.3d 1 (1st Dep t 2015)...25 Okla. Police & Ret. Sys. v. U.S. Bank, Nat l Ass n, 291 F.R.D. 47 (S.D.N.Y. 2013)...11, 12, 18, 21 OP Sols., Inc. v. Crowell & Moring, LLP, 72 A.D.3d 622, 900 N.Y.S.2d 48 (1st Dep t 2010)...20 Page Mill Asset Mgmt. v. Credit Suisse First Boston Corp., 2000 WL (S.D.N.Y. Mar. 30, 2000)...23 Pahuta v. Massey Ferguson, Inc., 170 F.3d 125 (2d Cir. 1999)...10 Phoenix Light SF Ltd. v. ACE Sec. Corp., 39 Misc. 3d. 1218(A) (Sup. Ct. N.Y. Cnty. 2013)...39 Phoenix Light SF Ltd. v. The Bank of N.Y. Mellon, 2015 WL (S.D.N.Y. Sept. 29, 2015)...12, 17, 19 Phoenix Light SF Ltd. v. Deutsche Bank Nat l Tr. Co., 2016 WL (S.D.N.Y. Mar. 28, 2016)... passim Platek v. Town of Hamburg, 26 N.E.3d 1167 (N.Y. 2015)...14 Policemen s Annuity & Benefit Fund of the City of Chi. v. Bank of Am., N.A., 907 F. Supp. 2d 536 (S.D.N.Y. 2012)...12, 22 Policemen s Annuity & Benefit Fund of the City of Chi. v. Bank of Am., N.A., 943 F. Supp. 2d 428 (S.D.N.Y. 2013)...10, 12, 17 Prudence Realization Corp. v. Atwell, 264 A.D. 546 (1st Dep t 1942)...24 Rajamin v. Deutsche Bank Nat l Tr. Co., 757 F.3d 79 (2d Cir. 2014)...3, 28 vi

9 Case 1:14-cv KPF-SN Document 182 Filed 08/08/16 Page 9 of 54 Ret. Bd. of the Policemen s Annuity & Benefit Fund of The City of Chi. v. The Bank of N.Y. Mellon, No. 11 Civ. 5459, 2014 WL (S.D.N.Y. July 30, 2014)...21 Ret. Bd. of the Policemen s Annuity & Benefit Fund of the City of Chi. v. The Bank of New York Mellon, 775 F.3d 154 (2d Cir. 2014)...10, 20, 22 Revson v. Cinque & Cinque, P.C., 221 F.3d 59 (2d Cir. 2000)...15 Royal Park Invs. SA/NV v. The Bank of N.Y. Mellon, 2016 WL (S.D.N.Y. Mar. 2, 2016)...10, 11, 17, 19 Royal Park Invs. SA/NV v. Deutsche Bank Nat l Tr. Co., 2016 WL (S.D.N.Y. Feb. 3, 2016)... passim Royal Park Invs. SA/NV v. HSBC Bank USA, Nat l Ass'n, 109 F. Supp. 3d 587 (S.D.N.Y. 2015)... passim Semi-Tech Litig., LLC v. Bankers Trust Co., 272 F. Supp. 2d 319 (S.D.N.Y. 2003)...39 S. Utah Wilderness Alliance v. Palma, 707 F.3d 1143 (10th Cir. 2013)...34 Stoneridge Inv. Partners, LLC v. Scientific-Atlanta, Inc., 552 U.S. 148 (2008)...20 Syncora Guarantee Inc. v. EMC Mortg. Corp., 2011 WL (S.D.N.Y. Mar. 25, 2011)...37 United States v. Vazquez, 145 F.3d 74 (2d Cir. 1998)...26 VNB Realty, Inc. v. U.S. Bank, N.A., 2014 WL (D.N.J. Apr. 23, 2014)...14 Warth v. Seldin, 422 U.S. 490 (1975)...26 Wash. Nat l Ins. Co. v. Morgan Stanley & Co., Inc., 1999 WL (S.D.N.Y. July 2, 1999)...19 Wells Fargo Bank, N.A. v. Erobobo, 127 A.D.3d 1176 (2d Dep t 2015)...29 Wells Fargo Bank, N.A. v. Ullah, 2015 WL (S.D.N.Y. June 15, 2015)...29 vii

10 Case 1:14-cv KPF-SN Document 182 Filed 08/08/16 Page 10 of 54 Woori Bank v. Citigroup Glob. Mkts., Inc., 609 F. App x 696 (2d Cir. 2015)...36 Zeffiro v. First Pa. Bank, N.A., 623 F.2d 290 (3d Cir. 1980)...19, 20 Zumpano v. Quinn, 6 N.Y.3d 666 (2006)...38 STATUTES, RULES & REGULATIONS 12 U.S.C. 1752a(a), 1754, 1781, 1782(c), U.S.C. 501(b)...32 Federal Rules of Civil Procedure Rule 12(b)(6)...9 Rule Rule 15(d)...33, 34 Rule Rule 17(a)...33 Rule Rule 25(c)...33 Rule Delaware Statutory Trust Act 3801(a) (g) (h) (a) (f) (a)...28, 29, 32 N.Y. Real Prop. Law , 25 Trust Indenture Act of SECONDARY AUTHORITIES Burkhard Bastuck & Burkard Gopfert, Admission and Presentation of Evidence in Germany, 16 Loy. L.A. Int l & Comp. L. Rev. 609, (1994)...37 Jesse Dukeminier & Robert H. Sitkoff, Wills, Trusts, and Estates, at (9th ed. 2013)...31 viii

11 Case 1:14-cv KPF-SN Document 182 Filed 08/08/16 Page 11 of 54 I. PRELIMINARY STATEMENT These five coordinated actions arise from Wells Fargo s failure to discharge its basic duties as Trustee for 53 residential mortgage-backed securities ( RMBS ) trusts (the Trusts ). Fundamentally, Wells Fargo must enforce the Trusts rights upon its discovery of defective loans or incomplete mortgage loan files, and must correct known servicing violations. Wells Fargo discovered widespread documentation errors and pervasive seller representation and warranties ( R&Ws ) breaches, and knew of systemic servicing violations afflicting the Trusts. Yet in direct conflict with Certificateholders interests, Wells Fargo did nothing to protect Certificateholders because doing so would have exposed Wells Fargo to massive liability for its own RMBS selling and servicing misconduct. This action seeks to recover the enormous losses caused by Wells Fargo s failures as Trustees to protect trust assets. Judges within this District have repeatedly rejected the same pleading challenges Wells Fargo asserts here, and have sustained investors complaints. These decisions confirm that allegations nearly identical to those of Plaintiffs state viable claims. Nevertheless, Wells Fargo urges this Court to go against this chorus of well-reasoned decisions in light of a recent First Department decision regarding a very different complaint, Commerce Bank v. The Bank of New York Mellon, 35 N.Y.S.3d 63 (1st Dep t 2016). Nothing in that case breaks new ground or otherwise undermines the numerous federal court decisions rejecting the RMBS trustees contractbased arguments. In effect, Wells Fargo claims Commerce Bank creates a heightened pleading standard for contract claims against RMBS trustees, including allegations of the trustee s discovery or knowledge of breaches. Not so. In federal court, contract claims are governed by Rule 8, as interpreted by Twombly and Iqbal. Nothing in Commerce Bank suggests a special or more demanding pleading standard for claims against a trustee. Moreover, Commerce Bank did not dismiss the appellants claims for failure to plead the trustee s specific knowledge of particular deficiencies of a particular loan. To the contrary, Commerce Bank made clear that consistent with the federal court decisions a plaintiff need not plead the existence of breaches and the trustee s awareness thereof on a loan-by-loan and trust-by-trust basis. That decision moreover 1

12 Case 1:14-cv KPF-SN Document 182 Filed 08/08/16 Page 12 of 54 cited as persuasive authorities cases from this District holding plaintiffs can survive a motion to dismiss by alleging massive breaches of representations and warranties and by referring to the mortgage industry s practices of ignoring underwriting guidelines and engaging in predatory lending, just as Plaintiffs do here. Phoenix Light SF Ltd. v. Deutsche Bank Nat l Trust Co., 2016 WL , at *9 (S.D.N.Y. Mar. 28, 2016) ( Phoenix Light/Deutsche Bank ). Commerce Bank merely dismissed the appellants claim predicated on the trustee s failure to provide notice of seller R&W breaches due to a perceived flaw in the charging allegations that is not present in Plaintiffs claims here. Wells Fargo also argues Commerce Bank requires dismissal of Plaintiffs post-event of Default claims because Plaintiffs have not sufficiently alleged Wells Fargo s knowledge or written notice of Events of Default. But, again, Wells Fargo misstates and misapplies the holding in Commerce Bank. And in any event, Plaintiffs allege Wells Fargo s responsible officers actual knowledge and receipt of written notice of servicing defaults, including through servicing data reflecting defaults on a loan-specific basis. Moreover, Wells Fargo cannot prevent the occurrence of an Event of Default by unreasonably refusing to provide cure notices to the Servicers under the prevention doctrine. Wells Fargo seeks to dismiss Plaintiffs claim for violations of the Trust Indenture Act of 1939 ( TIA ) contending the TIA lacks a private right of action. Courts have consistently rejected this argument, and Wells Fargo provides no reason to depart from this precedent. Wells Fargo contends Plaintiffs tort claims fail because it owes no extracontractual duties, the tort claims are barred by the economic loss doctrine, and that Plaintiffs do not state cognizable conflicts of interest. But Wells Fargo s own authorities undermine these arguments. Furthermore, Wells Fargo s argument that the Streit Act does not apply to RMBS is contradicted by the very case on which Wells Fargo relies. See Royal Park Invs. SA/NV v. HSBC Bank USA, Nat l Ass'n, 109 F. Supp. 3d 587, (S.D.N.Y. 2015) ( Royal Park/HSBC ) (holding that the trusts here directly hold mortgages on real property, and therefore the Streit Act applies. ). Wells Fargo s additional argument that the Streit Act imposes no duties on trustees 2

13 Case 1:14-cv KPF-SN Document 182 Filed 08/08/16 Page 13 of 54 beyond pasting certain provisions into the governing agreements is plainly inconsistent with the Act when read as whole. Wells Fargo s standing arguments as to the National Credit Union Administrative Board ( NCUA ) should be rejected. First, The Bank of New York Mellon ( BNYM ) acquiesced to NCUA pursuing its derivative claims, provided in a sworn declaration and an from BNYM s Head of Litigation. See Kaplan v. Peat, Marwick, Mitchell & Co., 540 A.2d 726 (Del. 1988). Second, the Delaware Statutory Trust Act authorizes NCUA s derivative suit. Third, Wells Fargo lacks standing to challenge BNYM s acquiescence. See Rajamin v. Deutsche Bank Nat l Trust Co., 757 F.3d 79, 88 (2d Cir. 2014). Finally, Wells Fargo s argument that Commerzbank s claims are time barred due to the application of the German statute of limitations is without merit because, even if the German statute of limitations applies, Wells Fargo misapplies German law and fails to demonstrate that any of Commerzbank s claims would be untimely under German law. Further, even under Wells Fargo s incorrect application of German law, most of Commerzbank s claims are still timely. II. FACTUAL BACKGROUND A. Wells Fargo s Role As Trustee For The Trusts Wells Fargo serves as trustee for the 53 Trusts. BR AC 3; RP AC 1; NCUA SAC 1, Ex. A; PL SAC 1; CB Compl The Trust estate assets consist of residential mortgage loans. BR AC 4; RP AC 3 n.2; NCUA SAC 1; PL SAC 2; CB Compl. 2. Investment bank entities called Sponsors and Depositors acquired the loans generated by originators and pooled and conveyed them into the Trusts (collectively, Sellers ). BR AC 5; RP AC 7; NCUA SAC 51-52; PL SAC 50-51; CB Compl The Master Servicers and their subservicers (collectively, Servicers ) service the loans. BR AC 59, 129; RP AC 7; NCUA SAC 58; PL SAC 52; CB Compl. 28. The principal and interest payments ( P&I ) are passed through to 1 All references herein to BR AC, RP AC, NCUA SAC, PL SAC, and CB Compl. are to the operative complaints in the BlackRock, Royal Park, NCUA, Phoenix Light, and Commerzbank matters, respectively (collectively, the Complaints ). 3

14 Case 1:14-cv KPF-SN Document 182 Filed 08/08/16 Page 14 of 54 Plaintiffs and other Holders of the Trusts RMBS. BR AC 6, 47; RP AC 3; NCUA SAC 53; PL SAC 54; CB Compl. 30. The Sellers provide contractual R&Ws to the Trusts attesting to the completeness of the mortgage loan files and the credit quality and characteristics of the loans. BR AC 6, 12; RP AC 5, 7-8; NCUA SAC 73; PL SAC 68; CB Compl. 44. The Sellers also contract to cure, substitute, or repurchase mortgages that materially breach these R&Ws. BR AC 6; RP AC 5, 7-8; NCUA SAC 74; PL SAC 68; CB Compl. 44. Likewise, the Servicers covenant to service the loans in accordance with customary and usual servicing standards. BR AC 129; RP AC 11; NCUA SAC 85-86; PL SAC 81; CB Compl. 56. As trustee, Wells Fargo is supposedly an independent entity with the critical role of protecting the Trusts assets. BR AC 7; RP AC 4, 6; NCUA SAC 3; PL SAC 6; CB Compl. 6. Plaintiffs and other investors have no access to the underlying loan files and other documents necessary to confirm the quality of the underlying loans and must, therefore, rely upon Wells Fargo to protect their interests. BR AC 7; RP AC 4; NCUA SAC 3; PL SAC 5; CB Compl. 5. B. Wells Fargo s Contractual Duties The Trusts at issue in this action are New York common law trusts that issue certificates or Delaware statutory trusts that issue notes. Each Trust is governed by governing agreements (the GAs ) setting forth trustee obligations and imposing four fundamental duties on Wells Fargo. 1. Ensure The Trusts Take Title To The Mortgage Loans Wells Fargo must ensure that the Trusts take title to the mortgage loans and must certify receipt of complete mortgage loan files from the Depositor. BR AC 62, 98, Ex. 5; NCUA 65-67, Ex. J; PL SAC 58-67; CB Compl These certifications require Well Fargo to verify that the underlying loans were properly conveyed to the Trust and that the Trust has perfected enforceable title to the loans. BR AC 60, 98, 159; NCUA 68; PL SAC 59; CB Compl. 35. If Wells Fargo discovers a material defect (e.g., a missing document), Wells Fargo must promptly identify the loan in its certifications, and require the Seller to cure or repurchase the loan. BR AC 6, 54, 98; NCUA SAC 70-71, 74-75; PL SAC 65-66, 68; CB Compl , 44. 4

15 Case 1:14-cv KPF-SN Document 182 Filed 08/08/16 Page 15 of Enforce The Sellers Repurchase Obligations Wells Fargo must give notice to the Seller and other parties upon discovery of any breach of the R&Ws which materially and adversely affects the interests of the Holders or the Trust. BR AC 63; RP AC 8; NCUA SAC 75; PL SAC 68; CB Compl. 44. Wells Fargo had a duty to enforce the obligations of the Seller to cure or repurchase the breaching loan. BR AC 63, 164; RP AC 7-10; NCUA 75, 377; PL SAC 68; CB Compl Notify Defaulting Servicers And Demand A Cure Wells Fargo must promptly notify a responsible Servicer upon learning of the Servicer s failure to perform in any material respect any covenant or agreement, and demand that such servicing failure be timely remedied. BR AC 1, 63-64; RP AC 10; NCUA SAC 75, 90; PL SAC 80; CB Compl Heightened Post-Event Of Default Duties The GAs impose heightened obligations on Wells Fargo following a servicing Event of Default. 2 BR AC 207; RP AC 17; NCUA SAC 414; PL SAC 73; CB Compl. 49. Under the Pooling and Servicing Agreement ( PSA ) Trusts, Events of Default occur when a Master Servicer or Servicer fails to perform in material respects its duties under the PSAs, including failing to: (i) ensure that the mortgage loans are serviced in accordance with the normal and usual standards of practice of prudent mortgage servicers (BR AC 25; RP AC 57; NCUA SAC 85-87, Ex. J; PL SAC 79; CB Compl. 55); (ii) ensuring that the mortgage loans are serviced legally (BR AC 25; RP AC 57; NCUA SAC 85; PL SAC 79; CB Compl. 54); and (iii) promptly notify Wells Fargo and other parties to the GAs upon discovery Sellers R&W breaches. BR AC 25-26; RP AC 59; NCUA SAC , 337; PL SAC 68; CB Compl. 44. Once Wells Fargo becomes aware of an Event of Default, it is required to notify and require cure of the Event of Default and to give notice of uncured Events of Default to the certificateholders. BR AC 26; 2 Certain Trusts, like ABFC 2006-OPT1, reference Servicer Events of Termination ( SEOTs ) in the GAs. RP AC 56 n.5. Other Trusts reference Events of Default. For the non-indenture Trusts, these terms describe the same failures by the Master Servicers or servicers to properly service the loans as required under the GAs and the term Event of Default is used interchangeably herein to include SEOTs. 5

16 Case 1:14-cv KPF-SN Document 182 Filed 08/08/16 Page 16 of 54 RP AC 60; NCUA SAC 90-91, 290; PL SAC 69; CB Compl. 45. Wells Fargo must also exercise the same degree of care and skill as a prudent person would in the conduct of his or her own affairs. BR AC 27; RP AC 61; NCUA SAC 92; PL SAC 75; CB Compl. 50. Wells Fargo has the same post-event of Default duties for the Indenture Trusts, under which the GAs for the Indenture Trusts, an Event of Default is triggered by the conduct of the Issuer (i.e., the Trust itself), as opposed to Servicer. BR AC 64-67; NCUA SAC 28 n.12; PL SAC Nevertheless, courts have found this distinction to have little significance. This is because the Indentures require the Issuer to enforce any rights with respect to the Trust Fund and preserve and defend title to the Trust Fund and the rights of the Indenture Trustee against the claims of all persons and parties. BR AC 68; NCUA SAC 64-69, 74, 92; PL SAC 131. Moreover, each Indenture Trust entered into separate agreements with the Sellers and Servicers of the Trust under which those parties make certain R&Ws and agree to cure or repurchase defective loans. BR AC 59; PL SAC Ex. C. As such, known and unremedied Seller and Servicer defaults constitute... a violation of the issuer s duties under the Indenture. Royal Park/HSBC Bank, 109 F. Supp. 3d at 604. C. Wells Fargo s Breach Of Its Duties Has Caused Plaintiffs To Suffer Damages After becoming trustee for the 53 Trusts, and before expiration of any statutes of limitations for Wells Fargo to bring enforcement actions against Sellers, Wells Fargo discovered that the Trusts contained numerous loan files and loans that materially breached the Sellers R&Ws. BR AC ; RP AC ; NCUA ; PL SAC , Ex. F; CB Compl , Ex. F. Preliminarily, Wells Fargo received Document Exception Reports prepared by the custodians identifying massive numbers of loan files that contained missing or incomplete documentation that were not cured within the specified time period. BR AC 98-99; NCUA SAC 352; PL SAC 63, ; CB Compl. 39, For at least two of the Indenture Trusts, Events of Default also can be and were in fact caused by Triggering Events, where historical delinquencies and collateral losses within the Trusts loan pools exceeded specified benchmarks. BR AC

17 Case 1:14-cv KPF-SN Document 182 Filed 08/08/16 Page 17 of 54 Wells Fargo and its responsible officers also tracked and reported the Trusts performance in remittance reports, including unprecedented levels of delinquencies, early payment defaults, loss severity, credit downgrades and mortgage insurance rescissions. BR AC 110; NCUA SAC 336; PL SAC 53, 104; CB Compl. 29, 78. Significantly, in internal documents Wells Fargo admitted that these metrics are clear indications of Seller breaches of R&Ws. BR AC 112. Moreover, for some of the Trusts, the historical delinquencies and collateral losses within the Trusts loan pools were so severe that it has caused Triggering Events under the Trusts GAs, causing Wells Fargo to change the distribution of Trust proceeds, evaluate the performance of the Trusts Servicers, make increased disclosures to the credit rating agencies, and in some instances declare Events of Default. BR AC 111. Additionally, the Trusts were filled with loans originated by some of the most notorious financial crisis era lenders, including Impac Funding, American Home Mortgage Corporation, Morgan Stanley, Financial Freedom, Fieldstone Mortgage Corporation, and Irwin. BR AC 80, 86, Ex. 9; NCUA SAC 47, ; PL SAC Ex. F; CB Compl. Ex. F. Additionally, the Trusts were sponsored by banks whose securitization abuses were well documented, including RBS Greenwich, Morgan Stanley, American Home, Credit Suisse, and Bear Stearns. BR AC 94-95, Ex. 9; NCUA SAC 48, ; PL SAC 84-87; CB Compl Highly publicized news reports, lawsuits, and government investigation reports concerning these same Sellers supports the plausible inference of Wells Fargo s discovery of breaches of R&Ws. In fact, several of the Trusts have been the subject of RMBS investor lawsuits alleging pervasive underwriting and securitization abuses. BR AC , Ex ; RP AC ; NCUA SAC ; PL SAC ; CB Compl Wells Fargo s internal records further confirm that the Trustee repeatedly received notice from investors and monoline insurers regarding the systemic violations of R&Ws by the Sellers. BR AC 100, 113; PL SAC ; CB Compl Holders, for example, issued written instructions to Wells Fargo to open investigations into the large number of ineligible mortgages in the loan pools securing trusts and the deficient servicing of those loans. BR AC ; PL SAC 98, , 136; CB Comp. 72, 84-86, 106. Wells Fargo also regularly 7

18 Case 1:14-cv KPF-SN Document 182 Filed 08/08/16 Page 18 of 54 received mortgage insurance coverage denials and policy rescissions as a result of improper underwriting of the loans. BR AC 113. Furthermore, Wells Fargo discovered widespread breaches of R&Ws through its RMBS-related activity in other capacities. In addition to acting as a trustee, Wells Fargo performed collateral risk management services in which it conducted RMBS portfolio analytics and surveillance services including loan reviews and repurchase administration for its institutional clients. BR AC 118. Wells Fargo also is among the largest mortgage loan servicers to the RMBS industry, servicing a portfolio of nearly 9 million loans, many of which were originated and sponsored by the same Sellers to the Trusts. BR AC 119; PL SAC 103, 105. The Complaints allege that Wells Fargo s responsible officers had actual knowledge of and received written notice of the Servicers material failure to observe or perform their obligations under the GAs with respect to specific loans in the Trusts. BR AC ; PL SAC 128, ; CB Compl. 103, In particular, Wells Fargo received servicing data from the Servicers that it used to prepare its monthly remittance reports that identified and tracked when certain defaulted loans within the Trusts entered within a distressed state, when the loans were processed and eliminated from the Trusts loan pools, and the recurring annual and monthly servicing costs incurred by the Trusts for these defaulted loans. BR AC The servicing data and remittance reports reflected that the Servicers timing in processing and foreclosing on defaulted loans within the Trusts went far beyond acceptable servicing and foreclosure practices based on applicable state timelines and itemized the costs that have been and continue to be incurred by the Trusts that could have been avoided had the Servicers processed and foreclosed on the loan in a timely fashion. BR AC Wells Fargo also uniquely possessed information concerning the Servicers systemically abusive servicing practices, such as: (i) Wells Fargo s involvement in government investigations, prosecutions, and settlements targeting both Wells Fargo and many of the Servicers to the Trusts for the same alleged improper servicing practices; and (ii) Wells Fargo s responsible officers receipt of written notice from Holders, monoline insurers and other stakeholders to other RMBS trusts regarding the same servicing violations by the same servicers to the Trusts here. BR AC 8

19 Case 1:14-cv KPF-SN Document 182 Filed 08/08/16 Page 19 of ; RP AC ; NCUA SAC , ; PL SAC , Ex. H; CB Compl Ex. H. Wells Fargo has taken virtually no action to enforce Seller obligations to repurchase defective loans and Servicer obligations to cure servicing defaults and reimburse the Trusts for damages. BR AC ; RP AC 129; NCUA ; PL SAC , ; CB Compl Wells Fargo s inaction has negatively impacted the performance of the Trusts, resulting in billions of dollars in recognized losses. III. ARGUMENT In deciding a motion to dismiss pursuant to Rule 12(b)(6), a complaint s allegations are accepted as true, and all reasonable inferences must be drawn in the plaintiff s favor. McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184, 191 (2d Cir. 2007). The Court s function on a motion to dismiss is not to weigh the evidence that might be presented at a trial but merely to determine whether the complaint itself is legally sufficient. Goldman v. Belden, 754 F.2d 1059, 1067 (2d Cir. 1985). The Court should not dismiss the complaint if the plaintiff has stated enough facts to state a claim to relief that is plausible on its face. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Specifically, [o]n a motion to dismiss, plaintiffs are entitled to all inferences drawn in their favor, and this includes that the same originators who accumulated pools of loans with pervasive evidence of breaches followed their routine practices with regard to the RMBS in the pools here. The same is true with regard to actions by servicers and other participants: plaintiffs may rely on an inference that they acted here as they have been shown to act elsewhere. BlackRock Core Bond Portfolio v. U.S. Bank Nat l Ass n, 2016 WL , at *15 (S.D.N.Y. Feb. 26, 2016) ( BlackRock/U.S. Bank ). A. Plaintiffs Complaints Adequately Allege Claims Based On Seller R&W Breaches 1. Wells Fargo s Reliance On Commerce Bank Is Misplaced 9

20 Case 1:14-cv KPF-SN Document 182 Filed 08/08/16 Page 20 of 54 In light of Commerce Bank, Wells Fargo asks the Court to revisit the well-established principle that a plaintiff need not plead the specific discovery or knowledge of a RMBS trustee with respect to the particular deficiencies of a particular loan. Mem Commerce Bank, however, provides no support for Wells Fargo s request. First, while state appellate decisions are ordinarily binding on federal courts applying state law, 5 Commerce Bank did not articulate any new rule with respect to pleading breach of contract claims under New York law, or clarify the meaning of any common RMBS indenture trust provision in dispute. Commerce Bank is an unremarkable seven-page order that applied virtually the same well established New York pleading principles that federal courts employed in upholding and dismissing certain contract claims alleged in a far less detailed complaint than those of Plaintiffs. See In re Methyl Tertiary Butyl Ether (MTBE) Products Liab. Litig., 279 F.R.D. 131, 134 (S.D.N.Y. 2011) (federal court not bound to follow state appellate court decision where no rule of law established). Second, nothing in Commerce Bank suggests the First Department disapproved of any prior federal court RMBS trustee decisions or approved/authorized/applied a different and more demanding pleading standard for claims against trustees. Quite the opposite, the First Department specifically made clear contrary to Wells Fargo s misreading of that case that Plaintiffs need not plead breaches on a loan-by-loan and trust-by trust basis, citing cases from this District as persuasive authority. Commerce Bank, 2016 WL , at *1 (citing Phoenix Light/Deutsche Bank, 2016 WL , at *8-9 (denying motion to dismiss based on similar allegations against RMBS trustee); Royal Park Invs. SA/NV v. The Bank of New York Mellon, 2016 WL , at *4-5 (S.D.N.Y. Mar. 2, 2016) ( Royal Park/BNYM ) (same)). These and other courts have repeatedly rejected RMBS trustees contention that plaintiffs must make allegations on a loan- or trust-specific basis because, [a]t the pleading stage, plaintiffs cannot be required to identify 4 Citations to Mem. refer to Wells Fargo s memorandum of law in support of Defendant s motion to dismiss, dated July 8, 2016 (ECF No. 171). 5 See Pahuta v. Massey Ferguson, Inc., 170 F.3d 125, 134 (2d Cir. 1999). 10

21 Case 1:14-cv KPF-SN Document 182 Filed 08/08/16 Page 21 of 54 breaches of representations and warranties with respect to the individual loans in the specific trusts [as] such information is, at this stage, is uniquely in the possession of defendants. Policemen s Annuity & Benefit Fund of the City of Chi. v. Bank of Am., NA, 943 F. Supp. 2d 428, 442 (S.D.N.Y. 2013) ( Policemen s/bofa ), abrogated on other grounds by Ret. Bd. Of the Policemen s Annuity & Benefit Fund of the City of Chi. v. The Bank of New York Mellon, 775 F.3d 154 (2d Cir. 2014). Instead, Plaintiffs only have to plead factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. Fixed Income Shares: Series M, et al. v. Citibank N.A., 130 F. Supp. 3d 842, 854 (S.D.N.Y. 2015) ( Fixed Income/Citibank ) (quoting Iqbal, 556 U.S. at 678). 6 Third, Wells Fargo s repeated suggestions that Plaintiffs must plead Wells Fargo s actual knowledge or written notice of Seller breaches of R&Ws is unsupported. Under the GAs, Wells Fargo s duties with respect to the Sellers are triggered by its discovery of breaches. BR AC 21, 63; PL SAC 68; CB Compl. 44. None of the authorities Wells Fargo relies upon interpret the term discovery, much less hold that it requires actual knowledge or written notice. Moreover, the Second Circuit recently articulated a far more realistic standard for when a Trustee charged to protect trust assets discovers breaches of representations and warranties, thereby triggering duties under RMBS GAs like those at issue in this case. See The Bank of N.Y. Mellon Trust Co., N.A. v. Morgan Stanley Mortg. Capital, Inc., 821 F.3d 297 (2d Cir. 2016) ( BNYM ). There, the Second Circuit held that the district court correctly observed [that] the law charges a party with discovery of [a] breach [of a representation and warranty]... after it has had a reasonable opportunity to investigate and confirm its suspicions [of the breach]. Id. at 310 (citing The Bank of N.Y. Mellon Trust Co., N.A. v. Morgan Stanley Mortg. Capital, Inc., 2013 WL , at *19, *21 (S.D.N.Y. June 19, 2013)). 6 See also Phoenix Light/Deutsche Bank, 2016 WL , at *8-9; Royal Park/BNYM, 2016 WL , at *4-5; BlackRock/US Bank, 2016 WL , at *15; Royal Park Invs. SA/NV v. Deutsche Bank Nat l Tr. Co., 2016 WL , at *6 (S.D.N.Y. Feb. 3, 2016) ( Royal Park/Deutsche Bank ); Royal Park/HSBC, 109 F. Supp. 3d at 602; Okla. Police & Ret. Sys. v. U.S. Bank, Nat l Ass n, 291 F.R.D. 47, 70 (S.D.N.Y. 2013) ( Okla. Police I ), abrogated on other grounds by Ret. Bd. of Policemen s Annuity, 775 F.3d

22 Case 1:14-cv KPF-SN Document 182 Filed 08/08/16 Page 22 of 54 The district court s decision, which the Second Circuit made clear correctly stated the discovery standard (id.), had held that, [a]s several courts [including this one] have observed in cases involving securitized mortgage loans, [a] party discovers a breach when it knows or should know that the breach has occurred WL , at *19 (quoting Morgan Guar. Trust Co. of N.Y. v. Bay View Franchise Mortg. Acceptance Co., 2002 WL , at *5 (S.D.N.Y. Apr. 30, 2002) (Stein, J.)) (emphasis in original). The district court s reasoning affirmed on this issue by the Second Circuit in BNYM included the observation that, under that discovery standard, once a party becomes aware of the relevant facts, a duty arises... to pick up the scent and nose to the source. While the [party] must have an opportunity to investigate and confirm any suspicions before it is required to [act], [it] must still act promptly and diligently once it has notice of the facts suggesting a breach WL , at *19 (citations and internal quotation marks omitted); see Morgan Guar., 2002 WL , at *5. Accordingly, the Second Circuit in BNYM effectively affirmed several district courts previous interpretation of RMBS trust agreement language pertaining to discovery by trustees of breaches of loan R&Ws made by sellers of mortgage loans to those RMBS trusts. E.g., Policemen s Annuity & Benefit Fund of the City of Chi. v. Bank of Am., NA, 907 F. Supp. 2d 536, 553 (S.D.N.Y. 2012) (Forrest, J.). Fourth, contrary to Wells Fargo s contentions, Commerce Bank did not make any broad pronouncement that publically available information suggestive of the trustee s discovery of seller R&W breaches is insufficient at the pleading stage. In fact, as one of the persuasive authorities cited in Commerce Bank explained, other courts have noted that plaintiffs can survive a motion to dismiss by alleging massive breaches of representations and warranties and by referring to the mortgage industry s practices of ignoring underwriting guidelines and engaging in predatory lending just as Plaintiffs do here because it would be implausible to assume that somehow all of the mortgage loans underlying the MBS miraculously avoided being originated with practices generally utilized [by the seller] and its contracted affiliates at that time. Phoenix Light/Deutsche Bank, 2016 WL , at *9; accord Policemen s/bofa, 943 F. Supp. 2d at 442; Phoenix Light SF Ltd. v. The Bank of N.Y. Mellon, 2015 WL , at*4 (S.D.N.Y. Sept. 29, 2015) ( Phoenix Light/BNYM ); Fixed Income/Citibank, 130 F. Supp. 3d at 854; Royal 12

23 Case 1:14-cv KPF-SN Document 182 Filed 08/08/16 Page 23 of 54 Park/HSBC, 109 F. Supp. 3d 602; Okla. Police I, 291 F.R.D. at 70; Royal Park/Deutsche Bank, 2016 WL , at *6. Thus, nothing in Commerce Bank affects the holding of these wellreasoned opinions, which are based on the same inferential reasoning as those cited by the First Department as persuasive authority. Fifth, Commerce Bank did not dismiss the appellants claim predicated on the trustee s failure to provide notice of seller R&W breaches for lack of specificity; rather, this claim was dismissed due to a technical pleading defect that is not present in Plaintiffs Complaints. Specifically, the appellants in Commerce Bank alleged the sellers breach of R&Ws made pursuant section 2.03 of the PSA, which were R&Ws pertaining to the proper underwriting of the loans (i.e., loan-to-value ( LTV ), lien status, compliance with underwriting guidelines, etc.). The appellants, however, neglected to plead the trustee s discovery of breaches of these underwriting R&Ws. Instead, the appellants complaints focused on the trustee s discovery of mortgage loan documentation errors; a separate claim the First Department sustained. Importantly, Plaintiffs Complaints here do not suffer from the same infirmity. In particular, the Complaints allege the specific Seller R&Ws breached R&Ws regarding the mortgage loan files, originators compliance with underwriting standards and practices, owner occupancy statistics, appraisal procedures, LTV and combined loan-to-value ( CLTV ) ratios, and Wells Fargo s discovery of breaches of these Seller R&Ws. Nothing more is required. Sixth, Wells Fargo erroneously claims that Plaintiffs allegations of Wells Fargo s discovery of Seller R&W breaches are exclusively predicated on public information. Mem. 11. In truth, Plaintiffs also allege facts confirming Wells Fargo s discovery of Seller R&W breaches based on internal documents Plaintiffs have obtained during the course of discovery. In particular, Plaintiffs allege Wells Fargo received internal exception reports identifying incomplete or improperly documented loan files that were not corrected or addressed. BR AC 98-99; PL SAC 63, ; CB Compl. 39, Plaintiffs also allege Wells Fargo regularly received mortgage insurance coverage denials and mortgage insurance policy rescissions as a result of the improper underwriting of loans within the Trusts. BR AC Plaintiffs further allege that internal documents show that Wells Fargo tracked the Trusts abject performance and contain 13

24 Case 1:14-cv KPF-SN Document 182 Filed 08/08/16 Page 24 of 54 admissions that certain adverse metrics were indicative of Seller R&W breaches. Plaintiffs submit that such loan-, trust- and seller-specific allegations of Wells Fargo s discovery go far beyond any RMBS trustee complaint analyzed to date. Seventh, Wells Fargo incorrectly suggests that Commerce Bank held that indenture trustees have no duty to nose to the source after discovering Seller R&W breaches. Preliminarily, the First Department s discussion concerning this issue was limited to servicer Events of Default, which are subject to a different actual knowledge, not discovery, standard. See 35 N.Y.S.3d 63 ( nose to the source of the systematic improper servicing and administration conduct (emphasis added; alteration omitted)); see also Platek v. Town of Hamburg, 26 N.E.3d 1167, 1173 (N.Y. 2015) ( The use of different terms in the same agreement... implies that they are to be afforded different meanings. ). More fundamentally, the First Department rejected the appellant s unsupported assertion that, irrespective of the trustee s knowledge of problems in the loan pool, an indenture trustee has an extracontractual pre-event of Default duty to investigate (i.e., nose to the source ) problems within the underlying loan pools. The First Department did not diminish, much less address any of the extensive authorities from the Second Circuit and this District holding that after discovering some number of breaching loans within Trusts loan pool, the trustee has the duty to nose to the source. Instead, it relied on a federal case where another investor similarly attempted to pursue an extra-contractual tort claim for failing to nose to the source not breach of the express contractual duties set out in a PSA concerning discovery of R&W breaches. See VNB Realty, Inc. v. U.S. Bank, N.A., 2014 WL , at *6 n.3 (D.N.J. Apr. 23, 2014) (rejecting proposition that prior to an event of default, U.S. Bank had an additional extra-contractual duty to investigate (i.e. to nose to the source ) problems with the Trust assets ). Finally, Wells Fargo s discussion concerning the substance and significance of New York Supreme Court Justice Ramos bench ruling on a RMBS trustee s motion to dismiss in Fixed Income Shares: Series M, et al. v. Citibank, N.A., Index No /2015 (N.Y. Sup. Ct. June 22, 2016), is similarly without merit. While Wells Fargo cherry-picks statements made by Justice Ramos at oral argument concerning the perceived limited value of public settlements involving the Sellers, Wells Fargo fails to disclose that Justice Ramos ultimately stated that, subject to minor 14

25 Case 1:14-cv KPF-SN Document 182 Filed 08/08/16 Page 25 of 54 modifications of two paragraphs, plaintiffs complaint stated viable contract claims against Citibank and that the parties should proceed with merits discovery. See June 22, 2016 Hr g Tr. at Wells Fargo s Trust-Specific Arguments Are Without Merit Wells Fargo claims fourteen Trusts purportedly do not impose obligations to enforce Sellers repurchase obligations, and two Trusts only impose such obligations upon satisfaction of conditions, including written notice of a breach. 7 Mem. 16. However, under the GAs, which must be read as a whole, for all of the Trusts, Wells Fargo undisputedly (i) has the duty to promptly provide notice to all parties to the GAs and the responsible Seller upon its discovery of a material R&Ws breach, which triggers the Sellers repurchase obligations (BR AC ; NCUA SAC 73-75; PL SAC 68; CB Compl. 44); (ii) has the authority to enforce the Seller s repurchase obligations or direct another party to do so (BR AC 63; NCUA SAC 73-75; PL SAC 68; CB Compl. 44); and (iii) cannot be relieved for its own negligent action, its own negligent failure to act or its own bad faith or willful misfeasance (BR AC 63-67; NCUA SAC 397; PL SAC 85; CB Compl. 59). Plaintiffs allege that after discovering Seller R&Ws breaches in all of the Trusts, Wells Fargo failed to provide the requisite notice or otherwise take action against the responsible Sellers. This inaction constitutes a breach of Wells Fargo s enforcement obligations, regardless of whether the GAs explicitly designate the trustee as the party ultimately responsible for pursuing the responsible Seller for failure to timely cure the breach upon notice. Moreover, although investors (unlike the Trustee) were not parties to or involved in negotiating the GAs, the purpose of a trustee is to protect the assets of the trust and the GAs must be read in light of that purpose and in the context of the entire integrated agreement. Revson v. Cinque & Cinque, P.C., For the remaining thirty-seven trusts, Wells Fargo does not dispute that it has the obligation to enforce repurchase obligations for R&W breaches. Indeed, the New York Appellate Division has held that the duties set forth in the GAs with substantially similar provisions confer[] upon the trustee full responsibility for enforcing the repurchase protocol. Ambac Assurance Corp. v. EMC Mortg. LLC, 121 A.D.3d 514, 519 (1st Dep t 2014) (emphasis added); see also Royal Park/Deutsche Bank, 2016 WL , at *4-6 (rejecting trustee s arguments that the PSA grants it the right to enforce breaches of R&Ws... [but] that has no obligation to do so and finding that the PSA create an obligation to enforce breaches of R&Ws on the trustee where it receives notice or has knowledge) (emphases in original). 15

26 Case 1:14-cv KPF-SN Document 182 Filed 08/08/16 Page 26 of 54 F.3d 59, 66 (2d Cir. 2000). It is up to the trier of fact to determine, based on the interrelated provisions of the GAs in full, whether under any given PSA Wells Fargo had a duty to enforce. Wells Fargo claims with respect to seven Trusts that Plaintiffs do not allege facts establishing that Wells Fargo knew of R&W breaches prior to the expiration of applicable statutes of limitation for Wells Fargo to seek loan repurchases against Sellers. Mem But as with the allegations generally, no federal pleading principle requires Plaintiffs to allege the precise time of Wells Fargo s discovery of R&W breaches or knowledge of Servicer events of default. These are matters of specific facts that can only be fleshed out in discovery. And in any event, Plaintiffs do allege that by January 1, 2009, Wells Fargo discovered that all of the Trusts loan pools contained high percentages of mortgage loans that materially breached the Sellers R&Ws. BR AC 97; NCUA SAC 104; PL SAC 97; CB Compl. 71. Furthermore, Wells Fargo s statute of limitations defense cannot be resolved at this stage because it involves factual questions as to when the claims accrued and as against whom, whether the violations were continuing, and whether tolling applies. See Phoenix Light/Deutsche Bank, 2016 WL , at * Finally, Wells Fargo argues that Plaintiffs claims for the AHM-2004 Trust are barred because the originator American Home Mortgage ( AHM ) declared bankruptcy in Mem But this argument also involves questions of fact that cannot be resolved at the pleading stage, such as what enforcement efforts Wells Fargo made or failed to make before AHM declared bankruptcy, whether it should have submitted a bankruptcy claim, and what other responsible parties or claims remain available, including for ongoing Servicer violations. See Nat l Credit Union Admin. Bd. v. HSBC Bank USA, Nat. Ass n, 117 F. Supp. 3d 392, (S.D.N.Y. 2015). 8 For example, with regard to GPMF 2005-AR4, Plaintiff Commerzbank specifically alleges Wells Fargo knew as of 2008 that Greenpoint was notorious as one of the worst originators of breaching loans with rampant violations of underwriting standards. CB Compl. Ex. F Publicly filed court documents which this Court may take judicial notice of on a motion to dismiss reveal that claims for R&W breaches in GPMF 2005-AR4 were subject to a tolling agreement, demonstrating that Wells Fargo plainly discovered the existence of breaches before the expiration of statute of limitations. See In the Matter of U.S. Bank Nat l Ass n, et al., Index No /2014 (N.Y. Sup. Ct.) (Friedman, J.). Further, when Wells Fargo discovered the breaches and whether it acted prudently upon discovery are all fact issues for a jury to decide. 16