Nomura Home Equity Loan, Inc. v. Nomura Credit & Capital, Inc., 39

Background

Nomura sponsored and sold pools of residential mortgage loans into RMBS trusts via Mortgage Loan Purchase Agreements (MLPAs) and Pooling and Servicing Agreements (PSAs); HSBC was trustee and assignee of depositor rights.
MLPAs contain a Section 7 “No Untrue Statement” provision covering documents prepared and furnished in the transaction (taken in the aggregate). Section 8 contains enumerated, loan-specific Mortgage Representations and Warranties.
Section 9 (MLPA) and PSA §2.03 provide a repurchase-or-cure protocol for breaches of Section 8 and include a “Sole Remedy” clause stating that cure/repurchase are the purchasers’ sole remedies respecting breaches of Section 8.
After the housing-market collapse, forensic review allegedly revealed pervasive loan defects and misstatements in loan files, schedules, and prospectus supplements; HSBC sued asserting (a) claims to enforce the contractually specified cure/repurchase remedy and (b) separate general contract-damages claims for breaches of the No Untrue Statement provision.
The motion courts dismissed HSBC’s Section 7 damages claims; the Appellate Division reinstated them. The New York Court of Appeals was asked whether Section 8’s sole‑remedy repurchase protocol bars general contract damages for the Section 7 No Untrue Statement claims when those claims are grounded in loan‑level defects.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Section 8/PSA sole‑remedy (repurchase/cure) precludes Section 7 general contract damages when Section 7 claims are grounded in loan‑specific defects	HSBC: Section 7 is a transaction‑wide warranty covering aggregated documents and is distinct from Section 8; Section 7 damages are available for systemic/aggregate misstatements regardless of Section 8 remedies	Nomura: Where Section 7 claims are based on the same loan‑level defects that fall within Section 8, parties agreed Section 8’s repurchase/cure is the sole remedy and thus general damages are barred	Court: Where Section 7 claims are in substance based on breaches of the Section 8 Mortgage Representations, the Sole Remedy Provision controls and general contract damages are barred
Whether "taken in the aggregate" language in Section 7 creates a pool‑level carve‑out from the Section 8 sole‑remedy clause	HSBC: "Taken in the aggregate" shows Section 7 covers pool/transaction-level misstatements and systemic breaches not limited by Section 8	Nomura: The aggregate language does not override the specific sole‑remedy for Section 8 breaches; Section 7 does not nullify parties’ allocation of risk for loan‑level representations	Court: The aggregate phrasing does not displace the specific Section 8/Section 9 sole‑remedy; the contracts must be read as a whole and specific provisions control
Whether Section 13 (remedies cumulative) nullifies the sole‑remedy clause	HSBC: Section 13 makes remedies cumulative and thus allows general damages in addition to repurchase/cure	Nomura: Section 13 does not override a more specific sole‑remedy provision tailored to Section 8 breaches	Court: Specific sole‑remedy clause governs; the catchall cumulativity clause cannot nullify a narrower, specific contractual allocation of remedies
Pleading sufficiency at motion‑to‑dismiss: whether HSBC plausibly alleged Section 7 breaches that are distinct from Section 8 breaches	HSBC: Complaints allege misstatements in documents (loan files, schedules, prospectus supplements) that can violate Section 7 independently of Section 8	Nomura: Pleadings show Section 7 claims are grounded in Section 8 loan defects and thus are subject to sole‑remedy limitation	Court: Accepting pleadings, the alleged Section 7 violations shown on the face of the complaints were grounded in Section 8 breaches and therefore barred from seeking general damages; claims grounded outside enumerated Section 8 warranties would not be so barred (but were not pleaded here as surviving theories)

Key Cases Cited

W.W.W. Assoc. v. Giancontieri, 77 N.Y.2d 157 (1990) (write agreements should be enforced according to their terms)
Reiss v. Financial Performance Corp., 97 N.Y.2d 195 (2001) (contracts read as an integrated whole)
Metropolitan Life Ins. Co. v. Noble Lowndes Int'l, Inc., 84 N.Y.2d 430 (1994) (parties may allocate contractual risk; courts enforce liability‑limiting provisions)
J. D'Addario & Co., Inc. v. Embassy Indus., Inc., 20 N.Y.3d 113 (2012) (‘‘sole remedy’’ language establishes that no other remedy was contemplated for that portion of a transaction)
ACE Sec. Corp. v. DB Structured Prods., Inc., 25 N.Y.3d 581 (2015) (courts must not rewrite contracts or imply omitted terms)
Leon v. Martinez, 84 N.Y.2d 83 (1994) (motion‑to‑dismiss standard; complaints should be construed liberally)