Emc Mortg. LLC v. Pulte Mortg. LLC, Civil Action No. 19-cv-1574-WJM-NYW
| Decision Date | 20 February 2020 |
| Docket Number | Civil Action No. 19-cv-1574-WJM-NYW |
| Citation | 441 F.Supp.3d 1140 |
| Parties | EMC MORTGAGE LLC, Plaintiff, v. PULTE MORTGAGE LLC, Defendant. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Beth Deborah Newton, Sullivan & Cromwell LLP, David Jonathan Grais, Grais & Ellsworth LLP, New York, NY, Peter G. Koclanes, Sherman & Howard LLC, Denver, CO, Robert Andrew Sacks, Sullivan & Cromwell LLP, Los Angeles, CA, for Plaintiff.
Jake Matthew Greenberg, Philip Rogers Stein, Kenneth James Duvall, Bilzin Sumberg Baena, Price & Axelrod, LLP, Miami, FL, Jamie Grant Siler, Michael David diFilipo, Murr Siler & Accomazzo, P.C., Lauren Renee Lee, Akerman LLP, Denver, CO, for Defendant.
ORDER DENYING DEFENDANT'S MOTION TO DISMISS AND MOTION FOR A MORE DEFINITE STATEMENT
This matter is before the Court on Defendant Pulte Mortgage LLC's ("Pulte's") Motion to Dismiss the Complaint and Motion for More Definite Statement (the "Motion"). (ECF No. 6.) For the reasons that follow, the Motion is denied.
On May 1, 2019, Plaintiff EMC Mortgage LLC ("EMC") filed a Complaint against Pulte in Colorado state court (ECF No. 2), seeking to enforce Pulte's alleged contractual obligation to indemnify EMC for losses resulting from defective mortgage loans that Pulte originated and sold to EMC between 2004 and 2007 (id. ¶ 1). Pulte removed the action to this Court on May 31, 2019. (ECF No. 1.) EMC's allegations, which the Court accepts as true for purposes of the Motion, are as follows:
Between 2004 and 2007, Pulte sold thousands of mortgage loans to EMC under a written agreement (the "Agreement") that consists of (1) a mortgage loan purchase agreement dated November 1, 2003 (the "MLPA"), and 2) "an accompanying seller guide, as amended from time to time, that was incorporated into the terms of the MLPA" (the "Seller Guide"). (ECF No. 2 ¶ 2)
The Agreement includes over 50 representations and warranties ("R&Ws") made by Pulte regarding the quality, risk, and manner and process of origination of the loans. The Agreement "obligated Pulte to indemnify EMC for any losses that EMC might suffer as a result of actual or alleged breaches of those R&Ws." (Id. ¶ 3.) For example, Pulte represented to EMC in the Agreement "that the property securing each loan had been appraised by a qualified appraiser in compliance with specified standards and requirements." (Id. ¶ 3.)
As contemplated by the parties at the time the Agreement was executed, "EMC subsequently pooled [the loans it purchased from Pulte] with other loans and transferred them to third-party securitization trusts that issued residential mortgage backed securities" ("RMBS"). (Id. ¶ 4.) EMC sold approximately 10,800 of the loans that it purchased from Pulte into 65 securitization trusts that issued RMBS between 2005 and 2007. (Id. ¶ 4.) The approximately 10,800 loans EMC purchased from Pulte and subsequently transferred to the 65 securitization trusts, are referred to in the Complaint as the "Pulte Loans" or "Loans," a convention the Court will adopt for purposes of this Order (Id. ¶ 4.) The 65 securitization trusts into which the Pulte Loans were sold will hereinafter be referred to as the "Pulte Trusts" or "Trusts."
In connection with EMC's transfer of the Loans into the Trusts, EMC made R&Ws about the Loans to the relevant Trusts based on the R&Ws Pulte had made to EMC about the Loans. (Id. ¶ 5.) "In each case, the R&Ws that EMC made about the Pulte Loans to the Pulte Trusts were substantively identical to or more limited than the R&Ws that Pulte made to EMC about the same Pulte Loans." (Id. ¶ 5.) In other words, if a Loan breached a R&W that EMC made about that Loan to a Trust, the Loan necessarily breached a R&W that Pulte made to EMC that covered that same Loan, thereby obligating Pulte to indemnify EMC for any loss that EMC might incur as a result. (Id. ¶ 5.)
In late 2007, the residential-mortgage industry collapsed. (Id. ¶ 6.) As a result of the high volume of defaulting loans, RMBS trusts began to suffer significant losses.
(Id. ¶ 6.) "Collectively, the Pulte Trusts have experienced losses totaling approximately $15 billion, of which approximately $350 million was generated by defaulting Pulte Loans." (Id. ¶ 6.) Pulte Trusts and others with economic interests in the performance of the Trusts consequently asserted claims against EMC, alleging that the Trusts' losses resulted from breaches of EMC's R&Ws as to the Loans EMC had sold into the Trusts. (Id. ¶ 7.)
Between February 2014 and December 2017, EMC paid over $1 billion to settle claims asserted by and on behalf of dozens of Pulte Trusts. (Id. ¶ 9.) EMC subsequently demanded that Pulte indemnify it for the portion of the losses that EMC suffered in connection with that settlement, and several other settlements that were attributable to Pulte Loans. (Id. ¶ 9.) Pulte to date has refused to comply with EMC's demand for indemnification. (Id. ¶ 9.)
On June 7, 2019, Pulte filed the instant Motion. (ECF No. 6.) Pulte seeks dismissal under Federal Rule of Civil Procedure 12(b)(6), or in the alternative, a more definite statement pursuant to Rule 12(e). (Id. at 1.)
Pulte first argues that dismissal under Rule 12(b)(6) is appropriate because EMC's claims are barred by the applicable statute of limitations. (Id. at 6.) This contention rests on Pulte's assertion that EMC's cause of action is a breach-of-contract claim disguised as an indemnification claim. Pulte further contends that "the Complaint provides no factual averments or details with respect to...which [Pulte Loans] were allegedly in breach, which [provisions of the Agreement] were allegedly breached by each [Pulte Loan], and how each breach caused Plaintiff a loss," and seeks dismissal under Rule 12(b)(6) for this reason as well. (Id. at 3.) Alternatively, with respect to this latter contention, Pulte seeks under Rule 12(e) "a more definite statement of [EMC's] claims identifying the specific [Pulte Loans]" at issue.
On June 28, 2019, EMC filed a Memorandum of Law in Opposition to Pulte's Motion. (ECF No. 18.) On July 12, 2019, Pulte filed a Reply. (ECF No. 24.)
Under Federal Rule of Civil Procedure 12(b)(6), a party may move to dismiss a claim in a complaint for "failure to state a claim upon which relief can be granted." The 12(b)(6) standard requires the Court to "assume the truth of the plaintiff's well-pleaded factual allegations and view them in the light most favorable to the plaintiff." Ridge at Red Hawk, LLC v. Schneider , 493 F.3d 1174, 1177 (10th Cir. 2007). In ruling on such a motion, the dispositive inquiry is "whether the complaint contains ‘enough facts to state a claim to relief that is plausible on its face.’ " Id. (quoting Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ).
Granting a motion to dismiss "is a harsh remedy which must be cautiously studied, not only to effectuate the spirit of the liberal rules of pleading but also to protect the interests of justice." Dias v. City & Cnty. of Denver , 567 F.3d 1169, 1178 (10th Cir. 2009) (internal quotation marks omitted). "Thus, ‘a well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of those facts is improbable, and that a recovery is very remote and unlikely.’ " Id. (quoting Twombly , 550 U.S. at 556, 127 S.Ct. 1955 ).
Additionally, the Court may consider a document outside the pleadings, even in a Rule 12(b)(6) analysis, if the document is (1) "mentioned in the complaint," (2) "central to [the] claims [at issue]," and (3) not challenged as inauthentic. Toone v. Wells Fargo Bank, N.A. , 716 F.3d 516, 521 (10th Cir. 2013).1
Pulte argues that the applicable statutes of limitations have expired on EMC's claims. (ECF No. 6 at 1.) Statute of limitations questions may be resolved in a motion to dismiss "when the dates given in the complaint make clear that the right sued upon has been extinguished." Aldrich v. McCulloch Props., Inc. , 627 F.2d 1036, 1041 n.4 (10th Cir. 1980).
The parties agree that, under the Agreement, New York law applies to this dispute. (ECF No. 51 at 3; ECF No. 52 at 6). The parties also agree that, in particular, the New York "borrowing statute" must be given effect. (ECF No. 51 at 3; ECF No. 52 at 6). The borrowing statute provides:
An action based upon a cause of action accruing without the state cannot be commenced after the expiration of the time limited by the laws of either the state or the place without the state where the cause of action accrued, except that where the cause of action accrued in favor of a resident of the state the time limited by the laws of the state shall apply.
N.Y. Civ. Prac. Law and Rules ("CPLR") § 202.
The New York Court of Appeals has stated as follows with respect to the borrowing statute: "When a nonresident sues on a cause of action accruing outside New York, [the borrowing statute] requires the cause of action to be timely under the limitations periods of both New York and the jurisdiction where the cause of action accrued." Global Fin. Corp. v. Triarc Corp. , 93 N.Y.2d 525, 693 N.Y.S.2d 479, 480, 715 N.E.2d 482 (1999).
To determine whether EMC's claims are time-barred, the Court first must determine when EMC's claims accrued. When the claims accrued depends on whether, as EMC argues, the claims sound in contractual indemnification, or instead, as Pulte argues, the claims...
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