524 B.R. 563
Bankr. S.D.N.Y.2015Background
- RFC sold >42,300 loans to RFC via Defendants, with warranties/representations in Client Guide, Seller Contract, and specific Defendant agreements.
- RFC and Debtors filed chapter 11; the Bankruptcy Settlement and Plan centralized the Trust as successor to RFC and assignee of claims.
- The Trust brings two contract/indemnification claims against each Defendant for breaches of representations/warranties and for indemnification of RFC losses.
- Defendants move to dismiss on standing, enforceability of sole-remedy provisions, timeliness, sufficiency of pleading, and indemnification scope.
- Court decides standing issues favoring the Trust as real party in interest, addresses continuing-obligation/continuing-tobligations, and sets partial rulings on timeliness and pleading adequacy.
- Conclusion: motions denied in part and granted in part; breach claims before 5/14/2006 time-barred; other claims survive to be addressed on the merits.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing of the Trust to sue | Trust is the real party in interest; substitution allowed under Rule 17(a). | RFC had assigned to the Trust on Effective Date; RFC lacked standing to file, so dismissal warranted. | Trust substituted as real party; standing upheld; dismissal denied. |
| Standing to assert securitized-loan claims | RFC’s securitization assignments do not unambiguously extinguish Trust rights; factual issues remain. | Assignments to securitization trusts foreclose Trust rights to sue on securitized loans. | Standing to claim securitized-loan breaches survives at pleadings stage; factual issues remain. |
| Satisfaction of conditions precedent | General averment that all conditions precedent were met suffices under Rule 9(c). | Need more particularized pleading of conditions precedent. | General claim sufficient at this stage; Rule 9(c) satisfied. |
| Whether sole-remedy provision bars monetary damages | Sole remedy may allow damages where repurchase impossible; damages may be recoverable. | Sole remedy provision bars monetary damages entirely. | Premature to rule; not barred at pleading stage; issue reserved. |
| Timeliness of breach-of-contract claims | Continuing-obligation theory extends accrual; Minnesota law tolling arguments may apply. | Loans sold before 5/14/2006 untimely; choice-of-law under NY borrowing statute; pre-2006 claims time-barred. | Claims for loans sold after 5/14/2006 timely; pre-2006 claims dismissed as untimely. |
Key Cases Cited
- Advanced Magnetics, Inc. v. Bayfront Partners, Inc., 106 F.3d 11 (2d Cir.1997) (standing substitution may good-cause substitute after suit filed)
- Global Fin. Corp. v. Triare Corp., 98 N.Y.2d 525 (N.Y. 1999) (borrowing statute requires shortest applicable limitations period)
- Ace Sec., Corp. v. DB Structured Prods., Inc., 112 A.D.3d 522 (N.Y. App. Div. 2013) (continuing-disclosure obligations do not postpone accrual)
- In re Livent Sec. Litig., None (S.D.N.Y. 2002) (S.D.N.Y. 2002) (indemnification claims may proceed where fault is not yet determined)
- Gibbs-Alfano v. Burton, 281 F.3d 12 (2d Cir.2002) (public-policy limits on indemnifying intentional torts; nuanced application)