The Appellate Division, First Department denied a trustee’s motion for re-argument or, in the alternative, leave to appeal to the state’s highest court a December 2013 decision concerning the statute of limitations in residential mortgage-backed securities (RMBS) put-back cases.
In December, a four-judge panel unanimously held in Ace Securities, Series 2006-SL2 v. DB Structured Products, 650980/2012, that breach of contract claims begin to accrue at the time the transaction closes, not when the defendant bank fails to repurchase a breached loan.
Trustee counsel Marc Kasowitz, partner at Kasowitz, Benson, Torres & Friedman and Paul Clement, partner at Bancroft, a Washington, D.C. appellate litigation firm, moved for re-argument, arguing that “hundreds of pending cases involving hundreds of billions of dollars in RMBS losses” would be affected by the court’s decision.
The First Department’s seven-line denial order was issued last Thursday. HSBC Bank, the trustee for certificate-holders who allegedly suffered $330 million in losses from this securitization, is expected to directly appeal to the Court of Appeals to settle the issue.
That motion is due April 21.
In its December ruling, the appellate panel reversed Manhattan Supreme Court Justice Shirley Kornreich’s May 2013 opinion finding Deutsche Bank’s failure to cure or repurchase defective mortgage loans comprising these securities constituted an independent breach that set the six-year clock running on statute of limitations.
The First Department held that the limitations period sets in when the representation and warranties of these loans were made, or at the time of transaction, rendering the breach claims here untimely.
Deutsche Bank is represented by partner David Woll of Simpson Thacher & Bartlett. He declined to comment on the latest development.