Under New York’s borrowing statute, codified in CPLR 202, when a nonresident sues in New York, his or her claim must be timely both in New York and the state where the cause of action accrued. CPLR 202 was expressly intended not only to deter forum shopping by out-of-state plaintiffs, but also to add “clarity” and “predictability” to the law in respect of the limitations periods applicable to non-resident plaintiffs proceeding in New York courts. Ins. Co. of N. Am. v. ABB Power Generation, 91 N.Y.2d 180, 187 (1997). A recent First Department decision, however, has potentially injected some uncertainty into limitations periods applicable to claims involving asset-backed securities where the trustee resides outside New York. In Deutsche Bank Nat’l Trust Company v. Barclays Bank PLC, 156 A.D.3d 401 (1st Dep’t 2017) (the decision), the First Department dismissed claims brought by a corporate trustee on behalf of two mortgage-backed securitization trusts on the grounds that the borrowing statute required application of California’s four-year limitations period, not New York’s more generous six-year period. Investors and trustees should be aware of the potential ramifications of the decision.
Background and Lower Court’s Decision
The two actions adjudicated by the decision are emblematic of the bevy of residential mortgage-backed securities (RMBS) actions, generally referred to as “putback” or “repurchase” cases, filed in New York and across the country over the past decade. The trusts at issue were created in 2007 to securitize residential mortgage loans. The certificates issued by the trusts were sold to investors, who are repaid from principal and interest payments made by the borrowers of the underlying loans. Plaintiff Deutsche Bank National Trust Company serves as trustee for both trusts. Defendants, the sponsors of the securitizations, made certain contractual representations and warranties concerning the credit quality and characteristics of the mortgage loans deposited in the trusts.
