810 F.3d 861 (2nd Cir. 2015), 14-3373-cv, Deutsche Bank Nat'l Trust Co. v. Quicken Loans Inc.

Docket Nº:14-3373-cv
Citation:810 F.3d 861
Opinion Judge:Wesley, Circuit Judge :
Party Name:DEUTSCHE BANK NATIONAL TRUST COMPANY, solely as Trustee of the GSR Mortgage Loan Trust 2007-OA1, Plaintiff-Appellant, v. QUICKEN LOANS INC., Defendant-Appellee. [*]
Attorney:ZACHARY D. ROSENBAUM, Lowenstein Sandler LLP, New York, NY, for Plaintiff-Appellant. JEFFREY B. MORGANROTH, Morganroth & Morganroth, PLLC, Birmingham, MI (Howard F. Sidman, Heidi A. Wendel, Michael O. Thayer, Jones Day, New York, NY), for Defendants-Appellees.
Judge Panel:Before: STRAUB, WESLEY, AND LIVINGSTON, Circuit Judges.
Case Date:November 16, 2015
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit
 
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810 F.3d 861 (2nd Cir. 2015)

DEUTSCHE BANK NATIONAL TRUST COMPANY, solely as Trustee of the GSR Mortgage Loan Trust 2007-OA1, Plaintiff-Appellant,

v.

QUICKEN LOANS INC., Defendant-Appellee. [*]

No. 14-3373-cv

United States Court of Appeals, Second Circuit

November 16, 2015

Argued October 15, 2015.

Appeal from an August 4, 2014 opinion and order of the United States District Court for the Southern District of New York (Paul A. Crotty, Judge). After the Federal Housing Finance Agency (" FHFA" ) filed a summons with notice in state court asserting breach of contractual obligations to repurchase mortgage loans that violated representations and warranties, Defendant-Appellee Quicken Loans Inc. (" Quicken" ) removed the action to federal court. There, Plaintiff-Appellant Deutsche Bank National Trust Company (" the Trustee" ), as trustee of the subject residential mortgage-backed securities trust, took control of the litigation and filed the Complaint. Quicken moved to dismiss the suit as, inter alia, barred by the statute of limitations. The District Court concluded (1) the statute of limitations ran from the date the representations and warranties were made; (2) the extender provision of the Housing and Economic Recovery Act did not apply to the Trustee's claim; and (3) the Trustee's claim for breach of the implied covenant of good faith and fair dealing was duplicative. We agree with each conclusion. We therefore AFFIRM the District Court's dismissal of the action.

ZACHARY D. ROSENBAUM, Lowenstein Sandler LLP, New York, NY, for Plaintiff-Appellant.

JEFFREY B. MORGANROTH, Morganroth & Morganroth, PLLC, Birmingham, MI (Howard F. Sidman, Heidi A. Wendel, Michael O. Thayer, Jones Day, New York, NY), for Defendants-Appellees.

Before: STRAUB, WESLEY, AND LIVINGSTON, Circuit Judges.

OPINION

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Wesley, Circuit Judge :

After the Federal Housing Finance Agency (" FHFA" ) filed a summons with notice in state court asserting breach of contractual obligations to repurchase mortgage loans that violated representations and warranties, Defendant-Appellee Quicken Loans Inc. (" Quicken" ) removed

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the action to federal court. There, Plaintiff-Appellant Deutsche Bank National Trust Company (" the Trustee" ), as trustee of the subject residential mortgage-backed securities trust, took control of the litigation and filed the Complaint. Quicken moved to dismiss the suit as, inter alia, barred by the statute of limitations. The District Court concluded (1) the statute of limitations ran from the date the representations and warranties were made; (2) the extender provision of the Housing and Economic Recovery Act did not apply to the Trustee's claim; and (3) the Trustee's claim for breach of the implied covenant of good faith and fair dealing was duplicative. We now affirm each of the District Court's conclusions.

BACKGROUND1

Quicken originated the mortgage loans at issue and sold them to nonparty Goldman Sachs Mortgage Company (" the Sponsor" ) pursuant to a Purchase Agreement dated June 1, 2006. That Purchase Agreement included a series of representations and warranties (" R& Ws" ) about the quality of the mortgage loans and their compliance with specified underwriting and origination guidelines. Through a series of sales and assignments, the mortgage loans were deposited into a securitization trust; the Trustee received all the rights, title, and interest in the mortgage loans for the benefit of the certificateholders in the securitization. Additionally, the Trustee received, as assignee, all the Sponsor's rights against Quicken, including its rights and remedies arising out of the R& Ws. The securitization trust issued certificates representing interests in the mortgage loans to investors in a public offering, pursuant to a shelf registration statement filed with the U.S. Securities and Exchange Commission; the closing date of the securitization was May 8, 2007. One of the certificate purchasers was the Federal Home Loan Mortgage Corporation (" Freddie Mac" ).

The R& Ws contained in the Purchase Agreement contained both transaction-level R& Ws--representations as to the characteristics of the transaction as a whole--and loan-level R& Ws--representations as to the characteristics of the individual mortgage loans. The R& Ws collectively covered such subjects as Quicken's characteristics as originator as well as the features, quality, and risk profile of the loans contained in the securitization pool, including the loans' compliance with origination guidelines, the absence of delinquencies and defaults, or the absence of originator fraud. These R& Ws guaranteed these characteristics " as of" the closing and transfer dates set forth in a series of Purchase Confirmation Letters, in which Quicken sold individual batches of the mortgage loans to the Sponsor pursuant to the Purchase Agreement. Joint App'x 90, 95-112 (Purchase Agreement § § 2.01, 2.09, 3.01-.02).

The Purchase Agreement also created a contractual remedy for any material breach of the R& Ws (" the Repurchase Protocol" ). See Joint App'x 112-14 (Purchase Agreement § 3.03). Upon discovering any breach of the R& Ws that materially and adversely affected the value of the loan or the trust's interests, the discovering party was required to give prompt written notice to the other. Quicken had sixty days--with a possible fifteen-day extension--to cure the material breach, calculated

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from the earlier of discovery or receipt of notice; if the breach could not be cured within that time, Quicken had to repurchase the mortgage loan at a prescribed price.2

This section of the Purchase Agreement also contained a provision imposing limits on when the counterparty may bring an action against Quicken for material breach of the R& Ws (" the Accrual Clause" ). Because of the importance of this provision to the case's resolution, we include it here:

Any cause of action against [Quicken] relating to or arising out of the Material Breach of any representations and warranties made in Sections 3.01 and 3.02 shall accrue as to any Mortgage Loan upon (i) the earlier of discovery of such breach by [Quicken] or notice thereof by the [Trustee] to [Quicken], (ii) failure by [Quicken] to cure such Material Breach or repurchase such Mortgage Loan as specified above, and (iii) demand upon [Quicken] by the [Trustee] for compliance with this Agreement.

Joint App'x 114 (Purchase Agreement § 3.03).

On May 8, 2013, FHFA commenced an action in New York Supreme Court, New York County, " as conservator of" Freddie Mac and " on behalf of" the Trustee, by filing a summons with notice. It then served Quicken on September 4...

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