MEMORANDUM AND ORDER
SC Note Acquisitions, LLC (“plaintiff’) commenced this action against Wells Fargo Bank, N.A. (‘Wells Fargo”), Midland Loan Services, Inc. (“Midland”), and LNR Partners, LLC (“LNR”) (collectively, “defendants”) alleging various causes of action under state law, including breach of .contract, breach of the covenant of good faith and fair dealing, and negligence. The gravamen of plaintiffs complaint alleges that defendants, as Trustee, Master Servicer, and Special Servicer of a commercial mortgage-backed securities trust, adopted an interpretation of tax law that will cause the trust to lose the status that had allowed it to avoid paying certain taxes. However, plaintiff does not dispute that the Internal Revenue Service has not yet determined that the trust has lost this status, and the trust has not yet suffered any monetary harm as a result of defendants’ allegedly incorrect interpretation of the tax laws.
Defendants now move to dismiss the complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. For the reasons set forth below, defendants’ motion is granted. Specifically, plaintiff has not demonstrated that this case is justiciable under Article III because the IRS has not actually determined that the trust’s tax status has been jeopardized. Accordingly, any injury suffered by plaintiff is purely hypothetical at this juncture. In addition, plaintiffs one claim that alleges wrongdoing not related to the trust’s tax liability, a breach of contract claim solely against LNR, is also dismissed because plaintiff cannot satisfy either the contemporaneous ownership rule required to bring a derivative action, or the no-action clause contained in the Pooling and Servicing Agreement that bars lawsuits by certificateholders of the trust.
I. Background
A. Factual Background
The following facts are taken from the complaint, including documents incorporated by reference. These facts are not findings of fact by the Court. Instead, the Court assumes these facts to be true for purposes of deciding the pending motion to dismiss, and will construe them in a light most favorable to plaintiff, the non-moving party.
1. The Pooling and Services Agreement
On November 29, 2005, defendants and J.P. Morgan Chase Commercial Mortgage Securities Corporation (“J.P. Morgan”) executed a pooling and services agreement (the “PSA”). (Compl. ¶ 5.) Pursuant to the PSA, J.P. Morgan creatеd a commercial mortgage-backed securitization trust called “J.P. Morgan Chase Commercial Mortgage Securities Corp. Commercial Mortgage Pass-Through Certificates, Series 2005-CIBC 13” (the “Trust”). (Id. ¶ 6; Decl. of Colleen M. Mallon in Supp. of Defs.’ Mot. to Dismiss Pl.’s Compl. (“Mallon Deck”) Ex. A, Pooling and Servicing Agreement.)
2. REMIC Status
Plaintiff alleges that “[flundamental to the economic viability of the Trust is having the Trust qualify as a Real Estate Mortgage Investment Conduit” (“REM-IC”) as defined by the Internal Revenue Code. (Id. ¶ 11.) This classification “permits the' Trust to be treated as a pass-through entity for federal income tax purposes, rendering it exempt from paying income tax at the entity level on the otherwise taxable income generated from the Mortgage Loans, thus avoiding double taxation.” (Id.) Under the PSA, two REMICs were . created within the Trust, an Upper-Tier REMIC and a Lower-Tier REMIC. (Id. ¶ 13.) Section 10.01(f) of the PSA states that neither Midland nor LNR may “knowingly or intentionally take any action” or “cause the Trust Fund to take any action” that could “endanger the status of the Lower-Tier REMIC or the Upper-Tier REMIC as a REMIC” or “result in the imposition of a tax upon the Lower-Tier REMIC or Upper-Tier REM-IC.” (Id. ¶ 49.)
Plaintiff claims that Wells Fargo, acting through LNR, caused the Trust to transfer certain mortgage loans to special purpose entities (“SPEs”). (Id. ¶50.) The ownership interests in these SPEs became property of the Lower-Tier REMIC. (Id. ¶ 51.) Plaintiff alleges that the' Internal Revenue Code does not permit a REMIC to own these types of assets (id. ¶ 53), and therefore, the REMICs lost their REMIC status and the Trust was rendered “economically non-viable” (id. ¶ 55). Defendants claim that plaintiff erroneously interprets the Internal Revenue Code and that the SPEs have no effect on the Trust’s status as a REMIC. (Defs.’ Mem. at 1.) Plaintiff does not dispute that the Trust has not currently , had any tax imposed on it by the IRS due to the transfer of certain loans to SPEs. Moreover, plaintiff concedes that the IRS may never determine that the Trust no longer qualifies for REMIC status.
3. Other Alleged Misconduct
The PSA also obligates defendants to administer the Trust in certain other ways. For example, LNR and Midland are required to:
service the Mortgage Loans in accordance with the higher of the following standаrds of care: (1) in the same manner in which, and with the same care, skill, prudence and diligence with which the Master Servicer or the Special Servicer, as' the case may be, services and administers similar mortgage loans for other third party portfolios and (2) the same care, skill, prudence and diligence with which the Master Servicer or the Special Servicer, as the case may be, services and administers similar" mortgage loans owned by the Master Servicer or the Special Servicer, as the case may be, with a view to the maximization of timely recovery of principal and interest on a net present value basis on the Mortgage Loans or the Specially Serviced Mortgage Loans, as applicable, and the best interests of the Trust and the Certificate holders ....
(Mallon Decl. Ex. A, Pooling and Servicing Agreement, at 119; see also Compl. ¶ 25.)
Plaintiff claims that LNR’s interests conflict with the best interests of the Trust. (Compl. ¶ 26.) The complaint alleges that LNR has serviced the loans “in such a manner so as to maximize its fees regardless of the best interests of the Trust or the Certificateholders.” (Id. ¶ 32.) For example, plaintiff claims that
4. Plaintiffs Interest in the Trust
Plaintiff owns a minority share in a company that holds a minority interest in Philips South Beach, LLC, owner of The Shore Club Hotel in -Miami. (Id. ¶ 20.) The Trust held two promissory notes, which were secured by a mortgage on the hotel. (Id.) The mortgage went into default. (Id. ¶22.) On apprоximately September 14, 2009, LNR assigned all of the Trust’s interest in the loan to J.P. Morgan, thereby divesting the Trust of any interest in this loan. (Id. ¶¶ 22, 38.) In November 2010, J.P. Morgan- filed a foreclosure action on this loan in Florida state court. (See Mallon Decl. Ex. C, Docket Sheet of JPMCC 2005-CIBC13 Collins Lodging, LLC v. Philips South Beach, LLC, No. 10-61128 CA 06,
According to defendants, plaintiff was formed as an LLC on October 26, 2011. (See Mallon Decl. Ex. B, Articles of Organization of SC Note Acquisitions LLC.)
B. Procedural History
Plaintiff commenсed this action in New York State Supreme Court, Suffolk County, on January 30, 2012. On March 1, 2012, defendants removed the case to this Court. On April 2, 2012, defendants filed a motion to dismiss plaintiffs complaint. Plaintiff filed its opposition on May 2, 2012, and defendants replied on May 16, 2012. The Court held oral argument on July 17, 2012. The Court has fully considered all of the submissions of the parties.
II. Standard op Review
- In reviewing a motion to dismiss pursuant to Rule 12(b)(6), the Court must accept the factual allegations set forth in the complaint as true and draw all reasonable inferences in favor of the plaintiff. See Cleveland v. Caplaw Enters.,
The Court notes that in adjudicating this motion, it is entitled to consider: “(1) facts alleged in the complaint and documents attached to it or incorporated in it by reference, (2) documents ‘integral’ to the complaint and relied upon in it, even if not attached or incorporated by reference, (3) documents or information contained in defendant’s motion papers if plaintiff has knowledge or possession of the material and relied on it in framing the complaint, (4) public disclosure documents required by law to be, and that have been, filed with the Securities and Exchange Commission, and (5) facts of which judicial notice may properly be taken under Rule 201 of the Federal Rules of Evidence.” In re Merrill Lynch & Co.,
III. Discussion
Defendants move to dismiss the complaint under numerous theories, including that plaintiff lacks standing to sue regarding a potential future revocation of the Trust’s tax status, that plaintiff lacks standing to bring a derivative action since plaintiff did not own shares in the Trust at the time of the alleged wrongdoing, and that plaintiff did not satisfy the requirements of the no-action clause of the PSA. For the reasons set forth below, the Court grants defendants’ motion to dismiss.
A. Standing and Ripeness
1. Legal Standard
“The jurisdiction of federal courts is defined and limited by Article III of the Constitution^ and] the judicial power of federal courts is constitutionally restricted to ‘cases’ and ‘controversies.’ ” Flast v. Cohen,
Although they are separate doctrines, ripeness and standing “virtually transect one another” in this case, id., because when “measuring whether the litigant has asserted an injury that is real аnd concrete rather than speculative and hypothetical,
“It is axiomatic that ‘[tjhere are three Article III standing requirements: (1) the plaintiff must have suffered an injury-in-fact; (2) there must be a causal connection between the injury and the conduct at issue; and (3) the injury must be likely to be redressed by a favorable decision.’ ” Cooper v. U.S. Postal Serv.,
To meet Article Ill’s injury-in-fact requirement, plaintiffs alleged injury “must be ‘concrete and particularized’ as. well as ‘actual or imminent, not conjectural or hypothetical.’ ” Baur v. Veneman,
In addition, for claims to be justiciable under Article III, “courts have long recognized that the controversy, as an initial matter, must be ripe.” Kittay v. Giuliani,
Although the plaintiff must independently establish that it has standing to bring this action, and that its claim is ripe, the Court will analyze these inquires together because this case concerns whether plaintiffs injury is currently concrete, and not hypothetical, which implicates both standing and ripeness. See Brooklyn Legal Servs. Corp. v. Legal Servs. Corp., 462 F.3d 219, 225-26 (2d Cir.2006) (“Because LSC’s ripeness arguments concern only that shared requirement — i.e., LSC challenges the claim’s ripeness on essentially the same grounds as those related to the plaintiffs’ standing — it follows that our analysis , of LSC’s standing challenge applies equally and interchangeably to its ripeness challenge. We therefore do not address ripeness separately,, but consider it together with, and as part of, the standing inquiry.”), abrogated on other grounds by Bond v. United States, — U.S. -,
2. Analysis
Whether analyzed under the doctrines of standing or ripeness, plaintiff has not satisfied its burden of demonstrating that it has satisfied the case or controversy requirement of Article III. In Counts I-XIV of the complaint, plaintiff alleges that defendants’ actions have caused the Trust to lose its REMIC status. However, this injury is currently “hypothetical.” Lujan,
Although it does not appear that any other court has confronted this exact situation, courts have reached the same conclusion under similar circumstances. In Scanlan v. Kodak Retirement Income Plan,
At oral argument, plaintiff principally relied on two cases in support of its proposition that this case is ripe for adjudication. In Nathel v. Siegal,
Plaintiff also relied at oral argument on Stern & Co. v. State Loan & Finance Corp.,
Plaintiff argues that tax liability is imposed as a matter of law, and that defendants’ actions have already violated the PSA regardless of whether the IRS actually collects additional taxes. (See PL’s Opp’n at 13.) However, plaintiffs interpretation оf tax law may be incorrect. If the Court were to allow this case to proceed prior to an IRS determination and plaintiff was victorious in this lawsuit, but the IRS later determined that defendants did not endanger the REMIC status, plaintiff would receive a windfall. The Court cannot decide a case with a hypothetical injury that may never occur. If the IRS and the Tax Court ever determine that the Trust may no longer be classified as a REMIC, plaintiff would have standing under Article III. However, until that time, plaintiff has not suffered an injury.
B. Contemporaneous Ownership Rule
As acknowledged by plaintiff at oral argument, Count XV is the only claim in the complaint that is not dependent upon the Trust’s REMIC status being potentially withdrawn. (See Oral Arg., Jul. Í7, 2012 at 29-31.) Count XV is a breach of contract claim solely against LNR, and alleges that LNR breached the servicing standards set forth in the PSA by “servicing the Mortgage Loans in such a manner as to maximize its own fees regardless of the best interest of the Trust or the Certificateholders____” (Compl. ¶ 147; see also id. ¶¶ 25-33, 39-41, 145-49.) However, this claim is dismissed because plaintiff does not have standing to bring it due to the contemporaneous ownership rule.
1. Legal Standard
“In the context of shareholder lawsuits, an action must be asserted derivatively if the alleged injury was suffered by the corporation and thus by stockholders only through diminution in the value of their shares .... ” Dallas Cowboys Football Club, Ltd. v. Nat’l Football League Trust, 95 CIV. 9426,
Under both the Federal, Rules of Civil Procedure and New York law, a plaintiff does not have standing to bring a derivative suit unless she owned shares in the corporation at the time of the alleged wrongdoing. See Fed.R.Civ.P. 23.1(b)(1) (stating that a complaint must “allege that the plaintiff was a shareholder or member at the time of the transaction complained of’); N.Y. Bus. Corp. Law § 626(b) (stating that a plaintiff must be “a holder at the time of bringing the action and that he was such-a holder at the time of the transaction of which he complains”); see also In re Bank of N.Y. Derivative Litig.,
The continuing wrong doctrine is generally considered an “equitable exception to the contemporaneous ownership rule.” In re Bank of N.Y.,
2. Analysis
As a threshold matter, plaintiff argues that this lawsuit is not a derivative action because plaintiff is not “seeking to enforce a right of the Trust,” but is “suing in its own right as a third-party beneficiary of the PSA.” (Pl.’s Opp’n at 10.) This argument is unpersuasive. The case law is clear that an injury that is “equally applicable to all shareholders must be brought as a derivative action,” Dallas Cowboys,
Because this is a derivative action, plaintiff must satisfy the contemporaneous ownership rule as provided under, both federal and New York law. Plaintiff was formed on October 26, 2011, and bought shares in the Trust sometime after that date. However, according to the complaint, the primary conduct for which this lawsuit was brought occurred over two years before plaintiffs formation. (Cоmpl. ¶38.) Although the Court is analyzing whether Claim XV, which does not involve the Trust’s potential loss of REMIC status, may proceed, the Second Circuit has explicitly held that the shareholder “must have owned stock in the corporation throughout the course of the activities that constitute the primary basis of the complaint.” In re Bank of N.Y.,
Even assuming that the Court need only analyze whether a shareholder owned stock throughout the course of activities that constitute the primary alleged wrongdoing in a specific count of a complaint, plaintiffs claim still fails because it purchased shares in the Trust after it knew of the LNR’s alleged self-dealing. Plaintiff admitted at oral argument thаt this case is a purchased grievance. Therefore, even if some of the alleged wrongdoing as defined in Count XV continued after plaintiff purchased shares in the Trust, and that wrongdoing additionally satisfied the Second Circuit’s narrow definition of transaction for determining whether there has been a continuing wrong, plaintiff does not have standing under Rule 23.1 or Section 626(b) because it purchased shares in the Trust with the knowledge of LNR’s alleged wrongdoing. See Bateson,
New York General Obligations Law § 13-107 is not to the contrary. Section 13-107 states that “a transfer of any bond shall vest in the transferee all claims or demands of the transferrer, whether or not such claims or demands are known to exist.” This provision was enacted so that existing claims for damages against a trustee would automatically transfer, even in the absence of an express agreement between the transferor and the transferee. See Bluebird Partners, L.P. v. First Fidel
C. No-Action Clause
Even assuming arguendo that plaintiff can demonstrate that it did not know of LNR’s alleged misconduct when it became a Certificateholder, Count- XV is also' dismissed because plaintiff has not satisfied the no-action clause of the PSA.
1. Legal Standard
No-action clauses are “standard provision[s]” thаt are present in many trust agreements. Akanthos Capital Mgmt., LLC v. CompuCredit Holdings Corp.,
Courts routinely enforce these no-action clauses to bar shareholders from bringing lawsuits. See, e.g., Akanthos,
2. Analysis
The PSA in this case provides that “no Certificateholder shall have any right by virtue of any provision of this Agreement-to institute any suit” unless it: (1) gives “the Trustee and the Paying Agent a written notice of default hereunder”; (2) represents 25% of a class of Certificateholders; (3) “made written request upon the-Trustee to institute such action .... in .its own name as Trustee”; and (4) “оffered to the Trustee such reasonable indemnity as . it may require against the costs, expenses and liabilities to be incurred therein .... ” (Mallon Decl. Ex. A, Pooling and Servicing Agreement, at 289.) ■ The Certificateholder is only required to give the “notice of default,” and does not need to satisfy the other provisions, “in the case of a default by the Trustee.” (Id.) The Certificateholder is not required to give the “notice of default” if a “Responsible Officer of the Trustee
Plaintiff does not contend that it provided a “notice of default” to the Trustee. Instead, plaintiff claims that Wells Fargo “unquestionably had actual knowledge of the creation of the SPEs and the assignment of Mortgage Loans.” (Pl.’s Opp’n at 7.) However, plaintiffs complaint does not allege thаt Wells Fargo had actual knowledge of the misconduct alleged in Count XV. For this reason alone, plaintiffs claim should be dismissed as no-action clauses must be “strictly construed.” Cruden,
However, even if the Trustee had actual knowledge, plaintiff would still be required to satisfy the other provisions of the no-action clause. Plaintiff claims that it was not required to do so for two reasons. First, plaintiff contends that it was not required to make a written request upon the Trustee regarding LNR’s misconduct because the Trustee was conflicted, and thus, it would result in the same “absurdity]” that the Second Circuit warned against in Cruden. (PL’s Opp’n at 6.) Second, plaintiff argues that it was not required to satisfy the other requirements of the no-action clause because there was a “default by the Trustee” which excused its performance of the requirements. (Id. at 7.) For the reasons set forth below, both of plaintiffs arguments are unpersuasive.
In Cruden, the Second Circuit stated that a shareholder is not required to ask the trustee to sue itself. 957 F.2d at-968. Plaintiff states that the same absurdity is present here because any “action taken by Wells Fargo against LNR would necessarily require that Wells Fargo confirm its own liability.” (PL’s Opp’n at 6.) That is simply not the case. The misconduct that plaintiff alleges LNR committed in Count XV does not implicate Wells Fargo in any wrongdoing. Furthermore, courts have explicitly held that it is not akin to asking the trustee to bring an action against itself when the request is to sue a servicer or another manager of the trust, even if it may implicate some misconduct by thе trustee. See Peak Partners,
Plaintiff also argues that failure to comply with the no-action clause be excused because the PSA does not require a certificateholder to comply with the 25%, written request, and indemnity provisions “in the case of a default by the Trustee.” Plaintiff argues that “such a default has occurred and has been properly pleaded here.” (PL’s Opp’n at 7.) To support this argument, however, plaintiff only cites sections of the complaint that do not relate to Count XV. Even construing plaintiffs complaint broadly, the Court cannot determine how a default by the Trustee could have occurred through LNR’s alleged wrongdoing. If this argument were permitted, then no-action clauses would never be enforced to bar lawsuits against servicers because plaintiffs’ allegations of the negli
D. Leave to Replead
Although plaintiff has not requested leave to re-plead the complaint, the Court has considered whether plaintiff should be given an opportunity to re-plead its claims. Under Rule 15(a) of the Federal Rules of Civil Procedure, the “court should freely give leave [to amend] when justice so requires.” Fed.R.Civ.P. 15(a)(2). However, even under this liberal standard, this Court finds that any attempt to amend the pleading in this ease would be futile. See Cuoco v. Moritsugu,
IV. Conclusion
For the foregoing reasons, defendants’ motion to dismiss the complaint is granted in its entirety. The Clerk of the Court shall enter judgment accordingly and close the case.
SO ORDERED.
Notes
. Because the complaint makes "a clear, definite and substantial reference” to the PSA, the Court may consider the PSA on a motion to dismiss because it has been incorporated by reference. DeLuca v. AccessIT Grp., Inc.,
. "A court may take judicial notice of a document filed in another court not for the truth of the matters asserted in the other litigation, but rather to establish the fact of such litigation and related filings.” Global Network Commc’ns, Inc. v. City of N.Y.,
. See, e.g., Am. Cas. Co. of Reading, PA v. Lee Brands, Inc., No. 05-Civ-6701,
. Plaintiff argues that Rule 23.1 does not apply to actions removed to federal court based on federal jurisdiction. (See Pl.’s Opp'n at 9 (citing Jablow v. Agnew,