Lehman XS Trust v. Greenpoint Mortgage Funding, Inc.
916 F.3d 116
2d Cir.2019Background
- In 2006 GreenPoint sold pools of mortgage loans to Lehman under Mortgage Loan Purchase and Warranties Agreements (MLPAs) and related Trust Agreements; U.S. Bank served as Trustee for three securitization trusts (GP2, GP3, GP4).
- The MLPAs/Trust Agreements contained R&W "as of" specific closing dates, cure/repurchase remedies (60–90 day cure windows), an accrual provision, and an indemnification clause (Section 9).
- Freddie Mac’s 2012 forensic review found pervasive breaches of the R&Ws; U.S. Bank (as Trustee) sent breach notices in March–August 2012; GreenPoint did not cure or repurchase.
- FHFA (as conservator for Freddie Mac) filed summonses with notice in state court on May–July 2012; GreenPoint removed to federal court and FHFA later dropped out; U.S. Bank filed amended complaints and a second amended consolidated complaint (SACC) in 2016.
- U.S. Bank asserted (1) breach of contract (specific performance), (2) breach of contract (damages), (3) indemnification under Section 9 of the MLPAs/Trust Agreements, and (4) breach of separate Indemnification Agreements executed around closing.
- The district court held all claims time‑barred under New York law; U.S. Bank appealed. The Second Circuit affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether breach claims accrue on the R&W effective date or upon failed demand/cure | U.S. Bank: express accrual clause and negotiated cure/demand process delay accrual until demand and failure to cure in 2012 | GreenPoint: ACE and Deutsche Bank control—accrual occurs when R&Ws become effective | Held: Accrual date is the R&W effective date; breach claims time‑barred |
| Whether an indemnification claim under MLPA §9 is an independent, timely cause of action | U.S. Bank: §9 provides an independent damages remedy distinct from repurchase, so indemnity claim is timely | GreenPoint: §9 is not unmistakably clear to cover first‑party losses; it is a repackaged breach claim | Held: §9 claim is effectively a breach claim, not true indemnity; time‑barred |
| Whether an express contractual accrual clause can postpone the statute of limitations | U.S. Bank: parties can contract for an express accrual that delays limitations | GreenPoint: New York law (ACE, Flagstar) disallows delaying accrual by private agreement | Held: Flagstar/ACE foreclose delaying limitations via express accrual clause |
| Whether breach of the separate Indemnification Agreements in the 2016 SACC relates back under Fed. R. Civ. P. 15(c) | U.S. Bank: breach of Indemnification Agreements arises from same transactions and thus relates back to 2012 filings | GreenPoint: Indemnification Agreements are separate contracts with different signatories and facts; original summonses gave no notice | Held: Claims based on separate Indemnification Agreements do not relate back and are untimely |
Key Cases Cited
- ACE Secs. Corp. v. DB Structured Prods., Inc., 25 N.Y.3d 581 (N.Y. 2015) (R&W breach accrues on effective date of representation)
- Deutsche Bank Nat'l Tr. Co. v. Quicken Loans Inc., 810 F.3d 861 (2d Cir. 2015) (applies ACE; demand/cure is procedural and does not delay accrual)
- Deutsche Bank Nat'l Tr. Co. v. Flagstar Capital Mkts. Corp., 32 N.Y.3d 139 (N.Y. 2018) (express accrual clauses cannot postpone the limitations period)
- Oscar Gruss & Son, Inc. v. Hollander, 337 F.3d 186 (2d Cir. 2003) (indemnification arises when one party pays liability to a third party)
- Peoples' Democratic Rep. of Yemen v. Goodpasture, Inc., 782 F.2d 346 (2d Cir. 1986) (pleading a claim "for indemnity" does not convert a breach claim into indemnity)