U.S. Bank National Ass'n v. Dexia Real Estate Capital Markets
959 F. Supp. 2d 443
S.D.N.Y.2013Background
- Trust sues Dexia for breach of representations under the MLPA and PSA governing a 2006 mortgage loan securitization.
- Repurchase Protocol requires cure or repurchase within 90 days if a breach materially and adversely affects loan value; mere breach triggers general notice obligations otherwise.
- Dispute centers on a Guaranty allegedly containing a full-recourse provision that Guarantors never approved; Minnesota litigation later held the full-recourse provision unenforceable.
- Trust notified Dexia of the breach on September 29, 2011 and demanded cure or repurchase; Dexia did not respond within 90 days.
- Trust filed suit in December 2012; Dexia moved to dismiss on statute-of-limitations grounds, arguing accrual in October 2006.
- Court held that accrual occurred when the breach materially and adversely affected value (July 2011), not at the initial breach in 2006.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Accrual and material adverse effect | Accrual occurs when breach materially affects loan value. | Accrual starts at contract breach (2006) regardless of effects. | Material adverse effect in July 2011; accrual delayed until then. |
| Timeliness of cure/repurchase demand | Demand valid upon material adverse effect; timely after July 2011. | Demand should have been made by 2012 or earlier under 90-day cure rule. | Demand timely since it followed July 2011 material adverse effect. |
Key Cases Cited
- Hahn Automotive Warehouse, Inc. v. American Zurich Insurance Co., 18 N.Y.3d 765 (2012) (distinguishes timing of rights to demand after breach)
- Hayden v. Paterson, 594 F.3d 150 (2d Cir. 2010) (pleading standards apply toRule 12(b)(6) adequacy)
- Wilson v. Merrill Lynch & Co., 671 F.3d 120 (2d Cir. 2011) (plausibility standard in Iqbal framework)
- Diesel Props S.r.l. v. Greystone Bus. Credit II LLC, 631 F.3d 42 (2d Cir. 2011) (pleading and accrual considerations under contract claims)
- Igbal v. Ashcroft, 556 U.S. 662 (Supreme Court 2009) (Twombly/Iqbal plausibility standard)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (Supreme Court 2007) (plausibility pleading standard)