BNP Paribas Mortgage Corp. v. Bank of America, N.A.
778 F. Supp. 2d 375
S.D.N.Y.2011Background
- Ocala Facility involved BNP, BNPP, and DB as noteholders secured by BoA in multiple capacities (Indenture Trustee, Collateral Agent, Depositary, Custodian) under the Base Indenture, Security Agreement, Depositary Agreements, and Custodial Agreement.
- Ocala originated and financed TBW mortgage loans via Ocala Notes; proceeds and collateral included cash and mortgages secured by the notes.
- TBW's collapse in 2009 led to insolvency concerns; Ocala allegedly could not repay the Ocala Notes, with BoA allegedly certifying Borrowing Base Certificates despite insolvency.
- Plaintiffs allege BoA breached by (i) certifying Borrowing Base Certificates, (ii) transferring funds from Collateral Accounts for improper purposes, and (iii) mismanaging collateral and funds under the Facility Documents.
- March 2009 Letter allegedly expanded BNPP indemnification rights and created asserted standing for BNP under the Depositary Agreement, though OCALA was not a signatory to that letter.
- BoA moved to dismiss Amended Complaints under Rule 12(b)(6); the court evaluates claims under Base Indenture, Security, Depositary, Custodial Agreements, and related letter.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether BoA's actual knowledge before written notice defeats notice-based immunity under 10.4. | BNP/DB contend 10.4 imposes duty to notify on actual knowledge; written notice limit does not apply to Potential Events of Default. | BoA argues 10.1(a) written-notice condition precludes liability; actual knowledge does not override notice requirement. | Plaintiffs state a plausible 10.4 claim; factual dispute on actual knowledge remains. |
| Whether BoA's duty to declare default arises under 9.1 and supersedes 10.1 exculpations. | BoA failed to shut down Ocala after insolvency per 9.1(i)-(iii) despite knowledge. | 9.1 is subordinate to 10.1 written-notice protections; no liability without notice. | Plaintiffs state a claim under 9.1; not barred by 10.1. |
| Whether BoA owed fiduciary duties to noteholders post-default and breached them. | After default, fiduciary duties arise; BoA breached by not notifying and winding down. | Trustee fiduciary duties are limited by indenture terms; no extra duties before default. | Plaintiffs adequately pleaded fiduciary duty breach; claim survives. |
| Standing to sue under Depositary and Custodial Agreements and March 2009 Letter; indemnification claims. | Plaintiffs seek third-party beneficiary or substitute-standing through Indenture Trustee or Affiliates. | Depositary/Custodial Agreements exclude unaffiliated parties; March 2009 Letter lacks proper amendment and third-party beneficiary scope. | Plaintiffs lack standing under Depositary/Custodial; BNP lacks standing under March 2009 Letter; indemnification claims rejected. |
| Whether BNP/BNP P; BNPP is a proper party; whether prior-version claims are barred by integration/merger clauses. | BNPP seeks standing as Swap Counterparty; prior-version claims may survive if not released. | BNPP lacks standing; prior-version claims barred by integration language. | BNPP not a proper party; prior-version claims dismissed. |
Key Cases Cited
- Beck v. Mfrs. Hanover Trust Co., 218 A.D.2d 1 (N.Y. App. Div. 1995) (fiduciary duties after default can extend beyond contract terms)
- Bridgestone/Firestone v. Hooper, 98 F.3d 13 (2d Cir. 1996) (indemnity must be unmistakably clear to cover first-party claims)
- Hooper Assocs., Ltd. v. AGS Computers, Inc., 549 N.Y.S.2d 903 (N.Y. App. Div. 1989) (indemnities and third-party beneficiary limits)
- Sequa Corp. v. Gelmin, 851 F. Supp. 106 (S.D.N.Y. 1994) (indemnity not extended to first-party claims absent clear language)
- Pfizer, Inc. v. Stryker Corp., 348 F. Supp. 2d 131 (S.D.N.Y. 2004) (notice provisions and contracts interpretation)
- Promuto v. Waste Mgmt., Inc., 44 F. Supp. 2d 628 (S.D.N.Y. 1999) (third-party notice and indemnity scope guidance)