36 Misc. 3d 328
N.Y. Sup. Ct.2012Background
- Syncora sues Countrywide entities for put-back, fraud, and warranty claims tied to five securitizations insured by Syncora.
- Five securitizations include four HELOCs and one CES; trusts hold loans and issue notes to investors.
- Contracts govern securitizations: Purchase Agreements, Sales and Servicing Agreements (SSA), and pooling/servicing agreements (PSA).
- Syncora issued financial guaranty policies; indemnity and insurance agreements are central to claims.
- Syncora alleges Countrywide made misrepresentations in transaction documents, prospectuses, and supplements relied upon by Syncora.
- Court denies/limits summary judgment on various put-back and fraud-related theories, with focus on causation and remedies.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Put-back claims scope without default proof | Syncora: 2.04(b) allows put-back if misrepresentation affects interest | Countrywide: need aggregate/loan-group breach and default linkage | Not granted; factual ambiguity remains; not unambiguously enforceable on summary judgment |
| Fraud/breach causation and rescissory damages | Rescissory damages allowed; causation not required for claims payments | Causation required for damages; rescission limited by law | Rescissory damages may be awarded; causation not strictly required for fraud/breach claims |
| Time of causation for insurance claims | Misrepresentations at policy procurement foreclose need for post-loss causal link | Loss causation tied to later events and market downturn | Causation deemed applicable at policy issuance; no strict post-issuance causal link required |
| Rescission vs rescissory damages viability | Rescission impracticable; damages in lieu of rescission appropriate | Rescission damages not traditionally available in NY law | Rescissory damages allowed as equitable relief where rescission impracticable |
| Materiality and reliance standard in insurance context | Misrepresentations induced policy issuance; materiality not require direct link to loss | Materiality requires causal nexus to losses or policy terms | Material misrepresentation established; reliance sufficient to prove fraud/breach under Insurance Law concepts |
Key Cases Cited
- MBIA Ins. Corp. v. Countrywide Home Loans, Inc., 87 AD3d 287 (1st Dept 2011) (loss causation sufficient to avoid dismissal; foreseeability of losses from misrepresentations)
- Kiss Constr. NY, Inc. v Rutgers Cas. Ins. Co., 61 AD3d 412 (1st Dept 2009) (material misrepresentation standard; reliance on misrepresentation to induce contract)
- Geer v. Union Mut. Life Ins. Co., 273 N.Y.261 (1937) (materiality; reliance essential for insurance representations)
- Interested Underwriters at Lloyd's v. H.D.I. III Associates, 213 A.D.2d 246 (1st Dept 1995) (materiality; inducement in insurance applications sufficient without direct loss causation)
- State of New York v Peerless Ins. Co., 108 A.D.2d 385 (1st Dept 1985) (contract interpretation; when unambiguous on summary judgment)