Deutsche Bank National Trust Co. ex rel. GSR Mortgage Loan Trust 2007-OA1 v. Quicken Loans Inc., 2015 U.S. App. LEXIS 19874

Background

Quicken originated mortgage loans and sold them to Goldman Sachs (the Sponsor) under a June 1, 2006 Purchase Agreement containing loan- and transaction-level representations and warranties (R&W) that were stated to be true “as of” specified closing/transfer dates.
The Purchase Agreement included a Repurchase Protocol (cure/repurchase as remedy) and an Accrual Clause tying accrual to (1) discovery/notice, (2) failure to cure/repurchase, and (3) demand for compliance.
Loans were securitized; the Trustee (Deutsche Bank) succeeded to the Sponsor’s rights and later represented certificateholders; Freddie Mac was a certificateholder and FHFA later became its conservator.
FHFA filed a summons with notice in state court in May 2013 on behalf of the Trustee, then did not participate; the Trustee filed a federal complaint in October 2013 asserting diversity jurisdiction and alleging R&W breaches discovered in audits and subsequent notice/demand letters in 2013.
Quicken moved to dismiss as time‑barred; the district court held the six‑year limitations period began when the R&Ws were made, HERA’s tolling/extension did not apply, and the implied‑covenant claim was duplicative.
The Second Circuit affirmed: R&Ws were promises about facts as of the execution date (not future performance); the Accrual Clause was procedural (did not delay accrual); HERA’s extender provision did not apply because FHFA did not effectively “bring” and prosecute the suit; the implied‑covenant claim was duplicative.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
When did the cause of action accrue for R&W breaches?	Accrual delayed until Trustee made demand / Repurchase Protocol used as condition precedent.	Accrual ran from the date R&Ws were made because they guaranteed facts as of that date.	Accrual occurs when R&Ws became effective; statute ran from that date.
Do the R&Ws guarantee future performance or only present facts?	R&Ws “survive the sale,” so they promise ongoing performance.	R&Ws are statements about loan characteristics as of closing/transfer dates — static, not ongoing promises.	R&Ws cover present facts as of specified date, not future performance.
Does the Accrual Clause make demand a substantive condition precedent?	Yes — accrual language and repurchase protocol require demand before suit.	No — demand is procedural; the remedy is for a preexisting breach and does not postpone accrual.	Demand is procedural; it does not delay accrual.
Does HERA’s extender provision (12 U.S.C. §4617(b)(12)) toll/extend limitations because FHFA filed the summons?	FHFA’s state‑court summons “brought” the action, so HERA extends accrual to FHFA’s appointment date.	FHFA merely filed a summons then abandoned prosecution; it did not “bring” and prosecute the suit for HERA’s purpose.	HERA’s extender does not apply here—FHFA did not meaningfully “bring” or prosecute the action.
Was the implied covenant claim properly dismissed as duplicative?	Implied‑covenant pleads Quicken knowingly sold defective loans and concealed defects — separate tort-like duty.	The implied‑covenant allegations arise from the same facts and seek identical remedies as the contract claim.	Claim is duplicative and was properly dismissed.

Key Cases Cited

ACE Secs. Corp. v. DB Structured Prods., Inc., 25 N.Y.3d 581 (N.Y. 2015) (R&W that state facts “as of” a date accrue at that date; repurchase remedy is derivative)
ABB Indus. Sys., Inc. v. Prime Tech., Inc., 120 F.3d 351 (2d Cir. 1997) (statements of present fact are breached, if at all, on execution date)
Cont’l Cas. Co. v. Stronghold Ins. Co., 77 F.3d 16 (2d Cir. 1996) (distinguishing substantive vs. procedural demand in accrual analysis)
Greenfield v. Philles Records, Inc., 98 N.Y.2d 562 (N.Y. 2002) (contracts enforced according to plain meaning)
Bulova Watch Co. v. Celotex Corp., 46 N.Y.2d 606 (N.Y. 1979) (distinguishing promises of continuing service from one‑time representations)
Hahn Auto. Warehouse, Inc. v. American Zurich Ins. Co., 18 N.Y.3d 765 (N.Y. 2012) (payment/final payment cases distinguish performance from remedy)
John J. Kassner & Co. v. City of New York, 46 N.Y.2d 544 (N.Y. 1979) (right to final payment cases illustrate accrual when contractual performance is due)