533 B.R. 379
Bankr. S.D.N.Y.2015Background
- Ocwen purchased ResCap’s mortgage loan servicing platform and servicing rights under an APA, STA, TSA, and an RM SOW; the agreements are governed by New York law and were integrated into ResCap’s confirmed chapter 11 plan (Trust successor).
- Many hard-copy servicing files were stored at third-party vendors (primarily Iron Mountain and Kenwood); some files acquired by Ocwen were commingled with files retained by ResCap/AFI.
- RM SOW §V.1 provided: “Within 18 months after the Effective Date, Ocwen shall, at ResCap’s cost, direct the appropriate third‑party vendor to segregate, remove, repackage and relocate those records belonging to Ocwen from all other records at such record retention site.”
- Iron Mountain prepared an SOW in Aug. 2013 estimating ~$7.1M to segregate certain trailing documents; ResCap subsequently ordered Iron Mountain to stop work, and invoiced/store charge disputes followed.
- Ocwen sued the Trust (and filed an administrative claim) seeking declaratory relief and damages (~$11M) for (a) ResCap/Trust’s obligation to pay segregation/delivery costs under RM SOW §V.1 and (b) relief that Ocwen need not reimburse the Trust for storage costs incurred after ResCap stopped segregation.
- Cross-motions for summary judgment were filed; the court considered whether RM SOW §V.1 or STA §3.04 controls who bears segregation/delivery and whether any condition precedent bars Ocwen’s claim, and left damages for further proceedings.
Issues
| Issue | Plaintiff's Argument (Ocwen) | Defendant's Argument (Trust) | Held |
|---|---|---|---|
| Which contract governs who pays segregation/delivery costs? | RM SOW §V.1 is specific and controls; it requires ResCap/Trust to bear segregation/delivery costs. | STA §3.04 governs transfer; it effects transfer by vendor records or assumption of vendor contract and does not obligate ResCap to physically segregate or pay segregation costs. | RM SOW §V.1 governs the dispute; its specific segregation/delivery allocation controls without rendering STA §3.04 meaningless. |
| Was there a condition precedent (Ocwen must give a direction within 18 months)? | Ocwen’s August 2013 direction to Iron Mountain satisfied the 18‑month window; ResCap’s stop‑work frustrated performance. | Section V.1 requires Ocwen to direct a vendor within 18 months and Ocwen failed to satisfy that condition (or its August request was insufficient). | Court did not decide definitively whether §V.1 is a condition precedent; but Ocwen satisfied/directed Iron Mountain within 18 months and ResCap’s stop‑work prevents Trust from relying on any unmet condition for the Iron Mountain trailing documents. For other files, materiality and repudiation issues create fact disputes. |
| Is Ocwen obligated to reimburse ResCap/Trust for ongoing vendor storage charges after Sept. 2013? | Ocwen contends it is not liable for storage charges for Ocwen’s records after ResCap refused segregation. | Trust contends Ocwen still must reimburse under the contracts and the administrative claim is insufficient. | Ocwen is not entitled to blanket summary judgment. ResCap/Trust must bear storage costs for files they retained; Ocwen must bear storage for files it acquired for at least some period. Whether Ocwen caused avoidable charges is a fact issue. |
| Are damages and accounting ripe for summary judgment? | Ocwen seeks damages (~$11M) and an accounting. | Trust opposes, arguing material facts are disputed and proof is lacking. | Damages are not established on the summary record; further discovery/accounting may be required. Summary judgment on damages denied. |
Key Cases Cited
- Commander Oil Corp. v. Advance Food Serv. Equip., 991 F.2d 49 (2d Cir. 1993) (separate contemporaneous writings may be construed as one agreement when they relate to same subject and were executed together)
- PaineWebber Inc. v. Bybyk, 81 F.3d 1193 (2d Cir. 1996) (a paper referred to in a written instrument may be incorporated by reference)
- MHR Capital Partners LP v. Presstek, Inc., 12 N.Y.3d 640 (N.Y. 2009) (identifies language that clearly creates a condition precedent)
- Kooleraire Serv. & Installation Corp. v. Bd. of Educ. of the City of N.Y., 28 N.Y.2d 101 (N.Y. 1971) (party cannot rely on another’s failure to satisfy a condition precedent when that party frustrated its satisfaction)
- New Windsor Volunteer Ambulance Corps, Inc. v. Meyers, 442 F.3d 101 (2d Cir. 2006) (material breach may excuse further performance)
- Jacob & Youngs v. Kent, 230 N.Y. 239 (N.Y. 1921) (discusses the materiality/ triviality distinction in breach of contract analysis)