05591.00001/5715436.3

SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK

NATIXIS REAL ESTATE CAPITAL TRUST 2007-HE2, by COMPUTERSHARE TRUST COMPANY, NATIONAL ASSOCIATION, solely in its capacity as Separate Securities Administrator,

Plaintiff,

-against- NATIXIS REAL ESTATE HOLDINGS, LLC, as successor-in-interest by merger to NATIXIS REAL ESTATE CAPITAL INC., f/k/a IXIS REAL ESTATE CAPITAL, INC.,

Defendant.

Index No.: 153945/2013 Honorable Marcy S. Friedman

Motion Seq. 001 ORAL ARGUMENT REQUESTED

PLAINTIFF’S MEMORANDUM OF LAW IN OPPOSITION

TO DEFENDANT’S MOTION TO DISMISS AND MOTION TO STRIKE

QUINN EMANUEL URQUHART & SULLIVAN, LLP Philippe Z. Selendy Erica P. Taggart Sean P. Baldwin Maya D. Cater 51 Madison Avenue, 22nd Floor New York, NY 10010 (212) 849-7000 philippeselendy@quinnemanuel.com ericataggart@quinnemanuel.com seanbaldwin@quinnemanuel.com mayacater@quinnemanuel.com Attorneys for Plaintiff

FILED: NEW YORK COUNTY CLERK 01/17/2014 INDEX NO. 153945/2013

NYSCEF DOC. NO. 28 RECEIVED NYSCEF: 01/17/2014

05591.00001/5715436.3 ii

Table of Contents

PRELIMINARY STATEMENT ..................................................................................................1

STATEMENT OF FACTS ............................................................................................................2

A. The Securitization at Issue .......................................................................................2

B. The Representations and Warranties and the Obligation to Repurchase Defective Loans .......................................................................................................3

C. Natixis’s Guaranty to Repurchase Loans if the Originators Failed to Perform ....................................................................................................................4

D. Natixis’s Refusal to Repurchase Defective Loans ...................................................4

LEGAL STANDARD ....................................................................................................................6

ARGUMENT ..................................................................................................................................6

I. THE SECURITIES ADMINISTRATOR HAS STANDING TO ENFORCE

THE PSA ON BEHALF OF THE TRUST AND THE

CERTIFICATEHOLDERS ..............................................................................................6

II. THE TRUST’S CLAIMS DID NOT ACCRUE BEFORE APRIL 30, 2007 ................8

A. The Trust’s Claims Could Not Have Accrued Before April 30, 2007, the Date the Representations and Warranties Were Made and the Trust Was Formed .....................................................................................................................9

B. The Trust’s Claims Against Natixis as the Guarantor of the Originator’s Obligations Did not Accrue Until the Originators Repudiated Their Obligations and Natixis Failed to Repurchase the Affected Loans .......................12

III. THE TRUST’S CLAIMS ARE RIPE ............................................................................13

A. Natixis Had Adequate Notice of All Defective Loans in the Trust .......................13

B. Natixis Had Notice of Rep & Warrant Breaches No Later than March 1, 2013........................................................................................................................15

C. Natixis’s Guaranty Attaches Immediately Upon the Expiration of the Originator’s 60-day Cure Period or Upon Repudiation of the Originator’s Repurchase Obligation ...........................................................................................15

D. The Trust’s Claims Are Ripe Because Natixis Knew on the Closing Date that Loans Breached the R&Ws .............................................................................16

05591.00001/5715436.3 iii

IV. THE COMPLAINT ADEQUATELY ALLEGES CLAIMS BASED ON

NATIXIS’S GUARANTY OF THE ORIGINATORS’ OBLIGATIONS...................17

V. THE TRUST IS ENTITLED TO PLEAD ALTERNATIVE FORMS OF

RELIEF TO BE MADE WHOLE ..................................................................................20

A. The Trust Is Entitled to Compensatory or Rescissory Damages ...........................20

B. CPLR 3016(b) Does Not Apply to Breach of Contract Claims .............................24

VI. THE TRUST’S CLAIMS BASED ON APPRAISAL VALUES ARE

ADEQUATELY ALLEGED ...........................................................................................25

05591.00001/5715436.3 iv

TABLE OF AUTHORITIES

Page

Cases

511 W. 232nd Owners Corp. v. Jennifer Realty Co., 98 N.Y.2d 144 (2002) ................................................................................................................5

ACE Sec. Corp. v. DB Structured Products, Inc., 965 N.Y.S.2d 844 (Sup. Ct. N.Y. Cty. 2013) ........................................................14, 20, 21, 23

ACE Securities Corp. v. DB Structured Products, Inc., Index No. 650980/2012 (1st Dep't 2013) .............................................................................8, 10

Aetna Life & Cas. Co. v. Nelson, 501 N.Y.S.2d 313 (1986) ...........................................................................................................8

AG Capital Funding Partners, L.P. v. State St. Bank & Trust Co., 11 N.Y.3d 146, 896 N.E.2d 61 (2008) .......................................................................................7

Allied Sheet Metal Works, Inc. v. Kerby Saunders, Inc., 619 N.Y.S.2d 260 (1st Dep't 1994) ..........................................................................................10

Am. Home Assur. Co. v. Scanlon, 559 N.Y.S.2d 317 (1st Dep't 1990) ............................................................................................7

Ambac Insurance Corp. u .. EMC Mortg. Corp., No. 08 Civ. 9464, 2009 WL 734073, at 2 (S.D.N.Y. Mar. 16, 2009)................................22, 23

Assured Guar. Mun. Corp. v. DLJ Mortg. Capital, Inc., 37 Misc. 3d 1212( 2012 WL 5192752 ACE 2006-SL2 ...........................................................18

Assured Guar. Mun. Corp. v. DLJ Mortg. Capital, Inc., No. 652837/11, 2012 WL 5192752 (N.Y. Sup. Ct. Oct. 11, 2012) .........................................22

Assured Guar. Mun. Corp. v. EMC Mortgage, LLC, 39 Misc. 3d 1207(A) (N.Y. Sup. Ct. 2013)..............................................................................22

Assured Guar. M’m. Corp. I). UBS Real Estate Sees., Inc., No, 12 CV 1579, 2012 WL 3525613 (S.D.N.Y. Aug. 15, 2012) ............................................23

Assured Guar. Mun. Corp. v. Flagstar Bank, FSB, 11 Civ. 2375, 2011 WL 5335566 (S.D.N.Y. Oct. 31, 2011) .......................................15, 19, 22

Banc of America Secs. LLC v. Solow Building Co. II LLC, 47 A.D.3d 239 (1st Dep't 2007) ...............................................................................................22

Clark-Fitzpatrick, Inc. v. Long Is. R.R. Co., 70 N.Y.2d 382, 521 N.Y.S.2d 653, 516 N.E.2d 190 ([year]) ..................................................24

Colello v. Colello, 9 A.D.3d 855, 857 (4th Dep't 2004) ........................................................................................11

05591.00001/5715436.3 v

Continental Cas. Co. v. Stronghold Ins. Co., Ltd., 77 F.3d 16 (2d Cir. 1996).........................................................................................................13

Cayuga Harvester, Inc. v. Allis-Chalmers Corp., 95 A.D.2d 5, 11 (4th Dep’t 1983) ............................................................................................20

DeBlasio v. Merrill Lynch & Co., 2009 U.S. Dist. LEXIS 64848 (S.D.N.Y. July 27, 2009) ........................................................23

Drake v. Hodgson, 192 A.D. 676 (N.Y. Ct. App. 1920) .........................................................................................14

FDIC v. Key Fin. Servs., Inc., No., 89-02366-DPW, 1999 WL 34866812 (D. Mass. Dec. 23, 1999) ....................................21

Fed. Hous. Fin. Agency v. UBS Americas, Inc., 858 F. Supp. 2d 306 (S.D.N.Y. 2012)......................................................................................25

Frontier Commc’ns of New York, Inc. v. Int’l Bhd. of Elec. Workers, 07 CIV.10327 GEL, 2008 WL 1991096 (S.D.N.Y. May 6, 2008) ...........................................6

Frota v. Prudential-Bache Sec., Inc., 639 F. Supp. 1186 (S.D.N.Y. 1986).........................................................................................23

Gold Connection Disc. Jewelers, Inc. v. Am. Dist. Tel. Co., 212 A.D.2d 577 (2d Dep't 1995) ..............................................................................................22

Greenfield v. Philles Records, Inc., 98 N.Y.2d 562 (2002) ................................................................................................................6

Hahn Auto. Warehouse, Inc. v. Am. Zurich Ins. Co., 967 N.E.2d 1187 (2012)...........................................................................................................12

Hildene Capital Management, LLC v. Bank of New York Mellon, 105 A.D.3d 436 (1st Dep't 2013) ...............................................................................................6

HSBC Bank USA v. Nat'l Equity Corp., 279 A.D.2d 251 (1st Dep't 2001) .............................................................................................18

Harris v. Seward Park Hous. Corp., 79 A.D.3d 425, 913 N.Y.S.2d 161 (1st Dep't 2010) .................................................................4

John J. Kassner & Co. v. City of N.Y., 389 N.E.2d 99 (N.Y. 1979) .....................................................................................................12

Joseph Martin, Jr. Delicatessen, Inc. v Schumacher, 52 N.Y.2d 105 (1981) ................................................................................................................9

LaSalle Bank N.A. v. Citicorp Real Estate, Inc., 2003 U.S. Dist. LEXIS 12043 (S.D.N.Y. July 16, 2003) ........................................................16

LaSalle Bank Nat'l Ass'n. ex rel Lewnnar Partners, Inc. v. Capco Am. Securitization Corp., 2005 WL 3046292 (S.D.N.Y. Nov. 14, 2005) .........................................................................19

05591.00001/5715436.3 vi

La Salle Bank Nat'l Ass'n v. CIBC, Inc., No. CV9916(RLE),2012 WL 112208 (S.D.N.Y. Jan. 12, 2012) .......................................19, 21

LaSalle Bank Nat'l Ass'n v. Lehman Bros. Holdings, Inc., 237 F. Supp. 2d 618 (D. Md. 2002) .........................................................................................21

Lana & Edward's Realty Corp. v. Katz/Weinstein P'ship, No. 27958/08, 2010 N.Y. Misc. LEXIS 548 (Sup. Ct. Mar. 17, 2010) ...................................10

Lehman Bros. Holding, Inc. v. Evergreen Moneysource Mortg. Co., 793 F. Supp. 2d 1189 (W.D. Wash. 2011) ...............................................................................13

Lehman Bros. Holdings, Inc. v. PMC Bancorp, No. LA CV10-07207 JAK (PJWx), 2013 WL 1095458 (C.D. Cal. Mar. 8, 2013) ...........................................................................21

Leon v. Martinez, 84 N.Y.2d 83 (1994) ..................................................................................................................5

Lusker v Tannen, 90 A.D.2d 118 (1st Dep't 1982) ...............................................................................................20

Manley v. AmBase Corp., 337 F.3d 237 (2d Cir.2003)......................................................................................................18

Manns. Norstar Bldg. Corp., 4 A.D.3d 799 (4th Dep't 2004) ................................................................................................11

Marathon Enters., Inc. v. Feinberg, 595 F. Supp. 368 (S.D.N.Y. 1984) ............................................................................................8

MASTR Adjustable Rate Mortgages Trust 2006-OA2, et. al., v. UBS Real Estate Securities, Inc., Case No. 12-cv-07322 (S.D.N.Y. August 15, 2013) ..........................................................19,22

MASTR Asset Backed Sec. Trust 2006-HE3 v. WMC Mortg. Corp., 2012 U.S. Dist. LEXIS 142579 (D. Minn. Oct. 1, 2012) ........................................................21

MBIA Ins. Co. v. Residential Funding Co., LLC, 906 N.Y.S.2d 781, 2009 WL 5178337 (N.Y. Sup. Ct. 2009) ..................................................22

MBIA Ins. Corp. v.Credit Suisse Sec. (USA) LLC, 32 Misc. 3d 758 (Sup. Ct. N.Y. 2011) ....................................................................................14

Mee Direct, LLC v. Automatic Data Processing, Inc., 102 A.D.3d 569 (1st Dep't 2013) .............................................................................................24

Morgan Guar. Trust Co. v. Bay View Franchise Mortg. Acceptance Co., No. 00 CIV. 8613 (SAS), 2002 WL 818082 (S.D.N.Y. Apr. 30, 2002) ..................................21

Morgan Stanley Mortg. Loan Trust 2006-14 SL, No. 652763/2012 (Sup. Ct. N.Y. Cty. Aug. 21, 2013) ...........................................................13

Morris v. 702 E. Fifth St. HDFC, 46 A.D.3d 478 N.Y.S.2d 6 (1st Dep't 2007) ..............................................................................9

05591.00001/5715436.3 vii

MSABS 2007-HE6 v. Decision One, et. al., Case No. 2013-L-005823 (Il. Cir. Ct 2013) ...............................................................................6

Noise In The Attic Prods., Inc. v. London Records, 10 A.D.3d 303, 782 N.Y.S.2d 1 (1st Dep't 2004) ......................................................................5

Nomura Asset Acceptance Corp. Alternative Loan Trust, Series 2005-S2 v. Nomura Credit & Capital, Inc., No. 651827/2012, 2013 N.Y. Misc. LEXIS 2001 (N.Y. Sup. Ct. December 24, 2013)..........11

Nomura Asset Acceptance Corp. Alternative Loan Trust, Series 2005-S4 ex rel. HSBC Bank USA, Nat. Ass'n v. Nomura Credit & Capital, Inc., No. 653541/2011, 2013 WL 2072817 (N.Y. Sup. Ct. May 10, 2013)...............................11, 13

Olsen v. U.S. Fid. & Guar. Co., 230 N.Y. 31 (1920) ..................................................................................................................20

Proc v. Home Ins. Co., 270 N.Y.S.2d 412 (1966) .........................................................................................................13

Resolution Trust Corp. v. Key Fin. Servs., Inc., 280 F.3d 12 (1st Cir. 2002) ......................................................................................................22

RTC v. Key Fin. Servs., Inc., 280 F.3d 12 (1st Cir. 2002) ......................................................................................................19

Rombach v. Chang, 355 F.3d 164 (2d Cir. 2004).....................................................................................................23

Russack v. Weinstein, 737 N.Y.S.2d 638 (2d Dep't 2002) ..........................................................................................12

SRM Beauty Corp. v. Sook Yin Loh, 2011 N.Y. Misc. LEXIS 326 (Sup. Ct. N.Y. Cnty. Feb. 14, 2011) .........................................18

Sea Tow Services Int'l, Inc. v. Pontin, 607 F. Supp. 2d 378 (E.D.N.Y. 2009) .....................................................................................14

Siemens Credit Corp. v. Marvik Colour, Inc., 859 F. Supp. 686 (S.D.N.Y. 1994) ..........................................................................................20

Soggs v. Crocco, 668 N.Y.S.2d 796 (4th Dep't 1998) .........................................................................................19

Structured Mortg. Trust 1997-2 v. Daiwa Fin. Corp., No. 02-CV-3232, 2003 WL 548868 (S.D.N.Y. Feb 25, 2003) ................................................13

Sunshine Steak, Salad & Seafood, Inc. v. W.I.M. Realty, Inc., 135 A.D.2d 891 (N.Y. Ct. App. 1987) .....................................................................................15

Syllman v. Calleo Development Corp., 290 A.D.2d 209 (2002) ............................................................................................................24

05591.00001/5715436.3 viii

In re The Bennett Funding Group, Inc., 292 B.R. 476 (N.D.N.Y. 2003) ................................................................................................12

Trust for the Certificate Holders of the Merrill Lynch Mortg. Pass-Through Certificates Series 1999-C1 v. Love Funding Corp., 2005 U.S. Dist. LEXIS 23522 (S.D.N.Y. Oct. 11, 2005), rev'd on other grounds, 591 F.3d 116 (2d Cir. 2010) ....................................................................................................................16

Trust for the Certificate Holders of the Merrill Lynch Mortg. Pass-Through Certificates Series 1999-C1 v. Love Funding Corp., 736 F. Supp. 2d 716 (S.D.N.Y. 2010)......................................................................................19

Tsereteli v. Residential Asset Securitization Trust 2006-A8, 692 F. Supp. 2d 387 (S.D.N.Y. 2010)......................................................................................24

Van Wagner Adver. Corp. v. S & M Enterprises, 67 N.Y.2d 186 (1986) ..............................................................................................................19

Voorhis v. Consol. Rail Corp., 60 N.Y.2d 878 (1983) ..............................................................................................................22

Wells Fargo Bank, N.A. v. Bank of Am., N.A., No. 10 CIV. 9584 (JPO), 2013 WL 1285289 (S.D.N.Y. Mar. 28, 2013) ................................19

Wells Fargo Bank, N.A. v. LaSalle Bank Nat. Ass'n, No. CIV-08-1125-C, 2011 WL 3739170 (W.D. Okla. Aug. 23, 2011) ...................................19

West 90th Owners Corp. v. Schlechter, 137 A.D.2d 456 (1988) ............................................................................................................15

Wolff & Munier, Inc. v. Whiting-Turner Contracting Co., 946 F.2d 1003 (2d Cir. 1991)...................................................................................................18

Zawatski v. Cheektowaga-Maryvale Union Free Sch. Dist., 261 A.D.2d 860 (4th Dep't May 7, 1999) ................................................................................13

Statutes and Rules

15 U.S.C. § 77k (2000) ..................................................................................................................23

96 N.Y. Jur. 2d Specific Performance § 82 ...................................................................................20

C.P.L.R. § 2001................................................................................................................................7

CPLR 3013.....................................................................................................................................24

CPLR 3016(b) ................................................................................................................................23

Rule 9(b) ..................................................................................................................................23, 24

05591.00001/5715436.3 1

PRELIMINARY STATEMENT

This action concerns Natixis’s failure to repurchase defective mortgage loans, contrary to

its obligation to do so under the governing documents that established the Plaintiff trust, Natixis

Real Estate Capital Trust 2007-HE2 (the “Trust”). In 2007, Defendant Natixis Real Estate

Holdings LLC (“Natixis” or “Defendant”) acquired approximately 4,204 residential mortgage

loans (the “Loans”) from various mortgage lenders (the “Originators”) and sold them to the Trust

for approximately $877 million and the Trust in turn issued residential mortgage-backed

securities (“RMBS”), termed Certificates, which were sold to investors. In connection with the

sale of Loans into the Trust, Natixis and the Originators made numerous representations and

warranties relating to the quality and characteristics of the Loans. The Originators and Natixis

agreed to repurchase any Loans that did not conform to those representations. Because the

Originators were not as financially strong as Natixis—indeed nearly all are now bankrupt or

defunct—Natixis also agreed that it would cure or repurchase defective Loans if the Originators

failed to do so (the “Guaranty”). Yet, despite now-overwhelming evidence that defective Loans

permeate the Trust—and despite the Originators’ effective repudiation of their repurchase

obligations—Natixis has refused to cure or repurchase a single Loan.

Natixis’s motion to dismiss does not dispute that the Loans held by the Trust are

defective. Nor does Natixis argue that the Trust has failed to plead cognizable breach of contract

claims. Instead, Natixis puts forth multiple procedural challenges to the Trust’s right to relief,

primarily related to standing, statute of limitations, and ripeness. As set forth below, these

arguments have no merit: the Trust’s claims were filed by a party with contractual authority to

do so, are timely filed under any applicable standard of law, and are ripe for litigation. None of

Natixis’s arguments can be accepted at the pleading stage (or, for that matter, on the merits), and

the action should proceed.

05591.00001/5715436.3 2

STATEMENT OF FACTS

A. The Securitization at Issue

The Trust is an RMBS trust, arranged and sponsored by Natixis.1 Complaint (“Compl.”)

¶ 1. The Trust was created on April 30, 2007 (the “Closing Date”), Id. ¶ 17, when the Trust’s

Pooling and Servicing Agreement (the “PSA”) was executed by Morgan Stanley ABS Capital I,

Inc., as Depositor, Wells Fargo Bank, N.A., as Master Servicer and Securities Administrator,

Saxon Mortgage Services, Inc., as Servicer, Natixis as Unaffiliated Seller, and Deutsche Bank

National Trust Company, as Trustee. Id. ¶ 11; Ex.2 B (PSA).

As a sponsor, Natixis would purchase pools of mortgage loans from the Originators

pursuant to individual master mortgage loan purchase agreements and related assignment and

conveyance agreements (the “Master MLPAs”). The Master MLPAs are “umbrella” agreements

that allowed Natixis to continually buy pools of mortgage loans from the Originators for multiple

RMBS pursuant to a single “master” purchase agreement. These MLPAs are not specific to a

particular securitization or a pool of loans. 3 In addition to the Master MLPAs, for each

securitization, the Originators and Natixis executed assignment and recognition and unaffiliated

seller agreements on the closing date.

1 The Trust was formed pursuant to 76 separate agreements, opinions of counsel, and

related documents. A full list of the Trust’s closing documents is set forth in Exhibit A to the Affirmation of Erica P. Taggart in Support of Plaintiff’s Opposition to Defendant’s Motion to Dismiss and Motion to Strike, dated November 22, 2013 (“Taggart Affirmation.”).

2 Unless otherwise indicated, “Ex.” refers to the exhibits attached to the Taggart Affirmation.

3 See e.g. Ex. E§ 1, definition of “Closing Date” is the “date or dates on which [Natixis] from time to time shall purchase and [the Originator] from time to time shall sell the Mortgage Loans listed on the related Mortgage Loan Schedule with respect to the related Mortgage Loan Package.”).

05591.00001/5715436.3 3

Likewise, to sell the Loans to the Trust, Natixis, the Originators, and the Depositor

executed separate Assignment and Recognition Agreements (the “A&R Agreements”) and an

Unaffiliated Seller’s Agreement (the “Seller’s Agreement” ) between Natixis and the Depositor,

each dated as of April 30, 2007, for this Trust. Compl. ¶ 17; Ex. C-D (A&R Agreements); Ex. F,

(Seller’s Agreement). Unlike the Master MLPAs, the A&R Agreements and the Seller’s

Agreement pertain specifically to the Loans in the Trust. Id. Natixis sold the Loans to the

Depositor, who then transferred all right, title and interest in the Loans and the A&R Agreements

to the Trust pursuant to the PSA. Compl. ¶ 17. The Trust, in turn, issued $877 million in

Certificates that were sold to investors. Id.

The sale of the Loans occurred in two phases. Id. n. 4. The first phase occurred on April

30, 2007, when Natixis sold approximately 3,440 Loans to the Depositor pursuant to ten separate

A&R Agreements and the Seller’s Agreement, each dated April 30, 2007. Id. The second phase

occurred approximately a month later, when Natixis sold another 760 Loans to the Depositor

pursuant to seven additional A&R Agreements as well as a Subsequent Transfer Agreement,

each dated May 31, 2007 (the “Subsequent Sale Agreement,” and collectively with the A&R

Agreements and the Seller’s Agreement, the “Sale Agreements”) Id. Exs. D (A&R Agreements);

Ex. G (Subsequent Transfer Agreement).

B. The Representations and Warranties and the Obligation to Repurchase Defective Loans

The A&R Agreements incorporate over 70 representations and warranties regarding the

Loans, which are made as of the Trust’s Closing Date, April 30, 2007, as well as on May 31,

2007 (the “Originator Reps”). Compl. ¶ 20; Exs. C-D, A&R Agreements, § 4 (stating that the

Originator Reps were “true and correct as of [April 30, 2007, or May 31, 2007, as applicable] as

if such representations and warranties were made on the date [thereof] unless otherwise

05591.00001/5715436.3 4

specifically stated in such representations and warranties.”) Separately, Natixis made its own

distinct representations in the Seller’s Agreement and the Subsequent Transfer Agreement (the

“Seller Reps,” and together with the Originator Reps, the “R&Ws”). Compl. ¶ 22; Exs. F-G.

In the Master MLPAs, each Originator agreed that if an Originator Rep were breached,

the Originator would cure the breach within 60 days of either discovery or receipt of notice (the

“Originator Cure Period”) or repurchase the defective Loans (the “Originator Repurchase

Obligation”). Compl. ¶ 26; Ex. B, PSA § 2.03(d). Similarly, Natixis agreed that if a Seller Rep

was breached, Natixis would cure the breach within 90 days of either discovery or receipt of

notice (the “Seller Cure Period”) or repurchase the Loans (the “Seller Repurchase Obligation”).

Compl. ¶ 27; Ex. B, PSA § 2.03(d). Natixis also agreed to repurchase any loans where it

discovered (or deemed to have discovered) the breaches as of the Closing Date. Ex. B, PSA

§ 2.03(d).

C. Natixis’s Guaranty to Repurchase Loans if the Originators Failed to Perform

Because the Originators were not as financially strong as Natixis, Natixis committed in

Section 2.03 of the PSA to repurchase defective Loans if the Originators failed to do so:

In the event there is a breach of a representation or warranty by an Originator with respect to a Mortgage Loan originated or acquired by such Originator that materially and adversely affects the value of such Mortgage Loan or the interest of the Trustee and the Certificateholders therein, and, upon discovery or receipt of

notice, such Originator fails to cure, substitute or repurchase such Mortgage

Loan within the period specified in either the applicable Assignment and Recognition Agreement, if any, or the applicable Mortgage Loan Purchase Agreement, the Unaffiliated Seller shall cure, substitute or repurchase such

Mortgage Loan subject to the conditions set forth in this Section 2.03.

Id. (emphasis added).

D. Natixis’s Refusal to Repurchase Defective Loans

On February 27, 2013, Natixis and the Originators were sent a letter notifying them that

(i) more than 1,900 Loans (45 percent of the Trust) breached one or more R&Ws; and (ii) the

05591.00001/5715436.3 5

high percentage of breaches indicated that the Trust was plagued with defective Loans (the

“Breach Notice”). Compl. ¶ 44; Br. at Ex. 3. Natixis received the Breach Notice on March 1,

2013. Br. at Ex. 3. However, all communications to the Originators (including the Breach

Notice) have been returned as undeliverable or were not answered within the Originators’ 60-day

Cure Period. Compl. at ¶ 6 n. 3. None of the Originators repurchased any Loans within the

requisite 60-day cure period. Id. ¶ 6. To the extent the Originators’ Cure Period even applied, it

expired on April 30, 2013, at the latest, thus triggering Natixis’s Guaranty. Id. ¶ 45. Natixis,

however, failed to repurchase a single Loan. Id. The Trust thus filed this action via Summons

with Notice on April 30, 2013, within six years of the Trust’s Closing Date (when the initial set

of loans was transferred to the Trust) and 60 days after the Breach Notice was sent to Natixis and

the Originators. Id. ¶ 13. Natixis has not only failed to repurchase any Loans, but it stated in its

ABS-15G filing dated August 12, 2013, that it rejected repurchase demands with respect to each

of the Trust’s 4,204 Loans. Id. ¶ 47; Ex. J.

On June 5, 2013, the Securities Administrator duly appointed Computershare Trust

Company, National Association (“Computershare”) as Separate Securities Administrator to the

Trust. Compl. ¶ 13. The appointment (obtained with the Depositor’s consent) authorized

Computershare, as Separate Securities Administrator, to take actions on behalf of the Trust for

purposes of enforcing repurchase obligations, including, but not limited to, commencing and

prosecuting litigation.4 Id. On October 4, 2013, the Trust filed its Complaint.

4 As used herein, “Securities Administrator” refers to (i) Wells Fargo Bank, N.A. solely

in its capacity as Securities Administrator to the Trust, or (ii) Computershare, solely in its capacity as Separate Securities Administrator to the Trust.

05591.00001/5715436.3 6

LEGAL STANDARD

On a motion to dismiss, the court must “accept the facts as alleged in the complaint as

true, accord plaintiffs the benefit of every possible favorable inference, and determine only

whether the facts as alleged fit within any cognizable legal theory.” Leon v. Martinez, 84 N.Y.2d

83, 87-88 (1994); see also 511 W. 232nd Owners Corp. v. Jennifer Realty Co., 98 N.Y.2d 144,

152 (2002). To plead a breach of contract claim, a plaintiff must allege: (1) the existence of a

valid contract; (2) non-performance by defendant; (3) performance by plaintiff; and (4) damage

to plaintiff as a result of defendant’s non-performance. See, e.g., Noise In The Attic Prods., Inc.

v. London Records, 782 N.Y.S.2d 1, 3 (1st Dep’t 2004). Where contracts are susceptible to

conflicting interpretations, dismissal is not appropriate. See 511 W. 232nd Owners Corp., 98

N.Y.2d at 152.

ARGUMENT

I. THE SECURITIES ADMINISTRATOR HAS STANDING TO ENFORCE THE

PSA ON BEHALF OF THE TRUST AND THE CERTIFICATEHOLDERS

The Securities Administrator has standing to pursue repurchase claims on behalf of the

Trust and cannot be found to lack standing at this stage. Section 10.02(viii) of the PSA

unambiguously provides that the Securities Administrator may undertake “any such action that it

may deem necessary or desirable in respect of this Agreement and the rights and duties of the

parties hereto and the interests of the Trustee, the Securities Administrator and the

Certificateholders hereunder.” Ex. B, PSA § 10.02(viii) (emphasis added). New York law

likewise makes clear that as a signatory to the PSA, the Securities Administrator has the right to

enforce its counterparty’s contractual obligations, including Natixis’s obligations. See Hildene

Capital Mgmt., LLC v. Bank of New York Mellon, 105 A.D.3d 436 (1st Dep’t 2013) (signatory

had standing to bring breach of contract claim); Frontier Commc’ns, Inc. v. Int’l Bhd. of Elec.

05591.00001/5715436.3 7

Workers, No. 07 Civ. 10327 (GEL), 2008 WL 1991096, at *3 (S.D.N.Y. May 6, 2008) (“It is

‘axiomatic’ that a party to an agreement has standing to sue a counterparty who breaches that

agreement”).

Natixis argues that the Securities Administrator lacks standing absent a direction from the

Depositor because Section 2.03(g) of the PSA provides that “[i]n the event such required

repurchase or replacement does not occur, the Securities Administrator shall take such actions as

directed upon written direction from the Depositor.” Br. at 8. But Section 2.03(g) merely

requires the Securities Administrator to act when directed by the Depositor; it in no way limits

the Securities Administrator’s right to act on behalf of the Trust.

In fact, Natixis’s exact argument was recently rejected in Deutsche Bank National Trust

Company, as Trustee for Morgan Stanley ABS Capital I Inc. Trust 2007-HE6 v. Decision One,

No. 2013-L-005823 (Il. Cir. Ct Nov. 19, 2013). Like the PSA, the contract in that case stated

that “[t]he Trustee shall pursue all legal remedies available to the Trustee . . . as directed in

writing by the Depositor.” Id. at 3 (emphasis added). Like Natixis, the defendant there argued

that the trustee could not sue unless directed by the depositor. Id. The court disagreed. It held

that:

[T]he plain reading of [the PSA] identifies an obligation of the Trustee to pursue all legal remedies when directed to do so by the Depositor. But this duty does not

circumscribe the Trustee’s legal authority to only those matters specified by the

Depositor—the fact that it is required to pursue legal remedies when directed does not prevent the Trustee from undertaking legal remedies on its own accord. Given

that the obligation described in section 2.03(f) does not inherently require this

limitation, there is no basis to draw such a sweeping inference from the text.

Id. at 3-4 (emphasis added). The court further noted that had the parties intended on such a

limitation, “the clause would be manifestly clear to that effect.” Id. at 4. So too here.

Oddly, Natixis next argues that “[t]he PSA does not permit” the Trustee to delegate the

enforcement responsibility to the Securities Administrator, despite clear language to the contrary.

05591.00001/5715436.3 8

Br. at 11; Ex. A, §§ 2.03(g); 10.02(viii). It argues that under New York trust law, a trustee may

delegate only “purely ministerial powers, and not its discretionary powers.” Br. at 10. The law

Natixis cites applies to common law trustees, not to indenture trustees, whose rights and

obligations are defined solely by the contract that created the trust (i.e., the PSA), and more

generally, by the Trust Indenture Act. AG Capital Funding Partners, L.P. v. State St. Bank &

Trust Co., 11 N.Y.3d 146, 156-57 (2008) (holding that duties of an indenture trustee are defined

by the contract that created it). Although the Trustee clearly has standing to enforce the Trust’s

rights, nowhere does the PSA limit such enforcement duties solely to the Trustee. To the

contrary, the PSA expressly delegates the enforcement responsibility to the Securities

Administrator. Indeed, Securities Administrators and other parties designated as enforcement

agents routinely bring repurchase claims on behalf of RMBS Trusts.5

II. THE TRUST’S CLAIMS DID NOT ACCRUE BEFORE APRIL 30, 2007

Natixis next argues that the Trust’s claims are untimely because New York’s six-year

statute of limitations purportedly began to run prior to April 30, 2007, and expired more than six

years before filing. According to Natixis, the statute began to run on April 1, 2007, the so-called

“as of” date of the PSA. Br. at 13-15. But the “as of” date is no more than an accounting-related

marker that pre-dates the actual R&Ws, made on April 30, 2007, as well as the creation of Trust

itself. The Trust manifestly could not bring breach of contract claims before the R&Ws were

made (much less breached) and before the Trust existed.

5 See e.g. SACO I Trust 2006-5, et al v. EMC Mortg. LLC No. 651820/2012 (N.Y. Sup.

Ct. 2012) (Securities Administrator), Bear Stearns Mortg. Funding Trust 2006 AR1 v. EMC

Mortg. LLC, No. 7658-CS (Del. Ch. 2012) (Separate Trustee), Homeward Residential, Inc.,

solely in its capacity as Master Servicer for the Option One Mortg. Loan Trust 2006-2, for the

benefit of the Trustee and the holders of Option One Mortg. Loan Trust 2006-2 Certificates, 12-cv-05067-AT (S.D.N.Y. 2012) (Master Servicer).

05591.00001/5715436.3 9

A. The Trust’s Claims Could Not Have Accrued Before April 30, 2007, the Date the Representations and Warranties Were Made and the Trust Was Formed

The Sale Agreements (i.e., the operative agreements containing the R&Ws) are dated “as

of” April 30, 2007 or May 31, 2007, as applicable, and the R&Ws were expressly made on that

date: Exs. C-F (stating “the representations and warranties set forth in Section 9.02 . . . of the

Purchase Agreement are true and correct as of the date hereof as if such representations and

warranties were made on the date hereof unless otherwise specifically stated in such

representations and warranties.”) (emphasis added). Natixis’s suggestion that the Trust had

breach of contract claims prior to April 30, 2007, based on R&Ws that had not even been made,

much less breached, has no merit and contradicts the plain language of the PSA and the Sale

Agreements.6 Marathon Enters., Inc. v. Feinberg, 595 F. Supp. 368, 372 (S.D.N.Y. 1984)

(breach of contract claim cannot accrue prior to “when the claim first could have been sued

upon”).

The April 1, 2007 “as of” date is irrelevant to determining the accrual date here because

the PSA was not even executed until April 30, 2007. A contract claim cannot spring into being

before the relevant contract exists. Allied Sheet Metal Works, Inc. v. Kerby Saunders, Inc., 619

N.Y.S.2d 260, 263 (1st Dep’t 1994) (“The party seeking to enforce a contract bears the burden to

establish that a binding agreement was made . . . .”). Indeed, the Sale Agreements that assigned

the Loans to the Depositor (and which contain the R&Ws) are dated “as of” April 30, 2007, at

6 As noted above, at least 760 Loans were not sold to the Trust until May 31, 2007.

Com. at ¶ 17 n. 4. The Originators executed subsequent A&R Agreements and expressly made the Originator Reps as of that date. Exs. R-Z. Likewise, Natixis made the Seller Reps in the Subsequent Transfer Agreement, also dated May 31, 2007. Id. Ex. Q. Natixis cannot seriously contend that a claim accrued before April 30, 2007, when the Loans had yet to be sold and the agreements did not yet exist.

05591.00001/5715436.3 10

the earliest.7 The Depositor, in turn, assigned the Loans to the Trust that same day. Id. (“The

Depositor, concurrently with the execution and delivery hereof, hereby sells, transfers, assigns,

sets over and otherwise conveys . . . without recourse, all the right, title and interest of the

Depositor in and to the Trust Fund and the Trustee.”) (emphasis added). Thus, no enforceable

agreement existed on April 1, 2007, because no Trust had been created, no Loans had been

transferred to the Trust, and no R&Ws had been made.8

The First Department’s decision in ACE Securities Corp. v. DB Structured Products, Inc.

contradicts Natixis’s argument. Index No. 650980/2012 (1st Dep’t 2013) (“ACE”). As here, the

PSA at issue in ACE was dated “as of” March 1, 2006. However, the loan purchase agreement

containing the representations and warranties was dated March 28, 2006 (the same day the

representations were made). The court held that the trust’s claims accrued on the closing date of

the purchase agreement, i.e. March 28, 2006, “when any breach of the representations and

warranties contained therein occurred.” There was no suggestion that the representations and

warranties could have given rise to a breach of contract claim before they were made.9

7 Exs. C-D, A&R Agreements § 1 (“[Natixis] hereby conveys, sells, grants, transfers and

assigns to [the Depositor] (x) all of the right, title and interest of the Assignor, as purchaser, in, to and under (a) those certain Mortgage Loans listed as being originated by the Company [the Originator] on the schedule . . . attached hereto as Exhibit A.”).

8 The “as of” date is merely employed as an accounting convention—it is the “Initial Cut-off Date” used to determine the principal balance of the Loans delivered to the Trust on the Closing Date. See Ex. B, PSA, § 1.01 (Definitions of “Cut-Off Date,” “Cut-Off Date Principal Balance,” “Initial Cut-Off Date,” and “Trust Fund”).

9 See also Home Equity Asset Trust 2007-1 v. DLJ Mortg. Capital, Inc., No. 650369/2013 (N.Y. Sup. Ct. Jan. 15, 2014) (“HEAT 2007-1”) (“The loans at issue in this litigation were not in breach of the representations until those representations took effect on the Closing Date.”); Home Equity Asset Trust 2006-5 v. DLJ Mortg. Capital, Inc., No. 652344/2012 (N.Y. Sup. Ct. Jan. 4, 2014) (“HEAT 2006-5”) (claims were timely filed six years after the trusts’ closing dates).

05591.00001/5715436.3 11

Natixis relies on Lana & Edward’s Realty Corp. v. Katz/Weinstein Partnership, 907

N.Y.S.2d 101 (N.Y. Sup. Ct. Mar. 17, 2010), Br. at 14, which held that a claim for breach of a

representation in a real property contract accrued on the pre-closing execution date. As Justice

Bransten recently explained in U.S. Bank National Ass’n, solely in its capacity as Trustee of the

Home Equity Asset Trust 2007-1 v. DLJ Mortgage Capital, Inc., Lana has no relevance to this

action because the Trust “could not have sought a remedy on the ‘as of’ date—and indeed no

representations could have been made to the Trustee on that date—since the Trust did not yet

exist.” No. 650369/2013 at 6 (N.Y. Sup. Ct. Jan. 14, 2014) (“HEAT 2007-1”). Unlike the

R&Ws, the provision in Lana—that the representations and warranties “shall be true and correct

at closing”—was merely a condition to closing, not a representation and warranty. See id. at *1.

The actual representation at issue pertained to the existing tenant’s lease status, which the court

held was “false when made,” and “since the alleged breach of contract occurred at the time of the

execution,” the statute of limitations began to run at that time. Id. (citing West 90th Owners

Corp. v. Schlechter, 525 N.Y.S.2d 33, 35 (1st Dep’t 1988)) (emphasis added). Even under Lana,

the earliest the R&Ws could have been breached (and the earliest the statute of limitations could

have begun to run) was April 30, 2007.10 Because the Trust commenced its action within six

years of the Closing Date, the action is timely.

10 Natixis also cites to Manns v. Norstar Bldg. Corp., 771 N.Y.S.2d 438, 439 (4th Dep’t

2004), Colello v. Colello, 780 N.Y.S.2d 450, 452 (4th Dep’t 2004), and Nomura Asset

Acceptance Corp. Alternative Loan Trust, Series 2005-S4 v. Nomura Credit & Capital, Inc., No. 653541/2011, 2013 N.Y. Misc. LEXIS 2001, at *28 (Sup. Ct. N.Y. County May 10, 2013) (“Nomura 2005-S4”); Br. at 14, none of which are on point. Norstar pertained to the enforceability of an indemnification provision in an employment agreement; it had nothing to do with representations and warranties or the statute of limitations. Colello addressed whether a prenuptial agreement was void and did not discuss statute of limitations. And although the defendants in Nomura argued that the plaintiff’s claim accrued prior to the contract’s closing, the court did not reach the issue; rather, it merely held that the complaint did not relate back to the

05591.00001/5715436.3 12

B. The Trust’s Claims Against Natixis as the Guarantor of the Originator’s Obligations Did not Accrue Until the Originators Repudiated Their Obligations and Natixis Failed to Repurchase the Affected Loans

Under the express terms of the Guaranty in Section 2.03(d) of the PSA, Natixis’s

repurchase obligations arise when the primary obligors—i.e. the Originators—fail to repurchase

a defective Loan within the Originator’s Cure Period (60 days):

In the event there is a breach of a representation or warranty by an Originator with respect to a Mortgage Loan originated or acquired by such Originator that materially and adversely affects the value of such Mortgage Loan or the interest of the Trustee and the Certificateholders therein, and, upon discovery or receipt of

notice, such Originator fails to cure, substitute or repurchase such Mortgage

Loan within the period specified in either the applicable Assignment and Recognition Agreement, if any, or the applicable Mortgage Loan Purchase Agreement, the Unaffiliated Seller shall cure, substitute or repurchase such

Mortgage Loan subject to the conditions set forth in this Section 2.03.

See Ex. A, § 2.03(d) (emphasis added). In other words, Natixis as the Guarantor had no

obligation related to the Originator Reps until the Originators failed to repurchase (or, as here,

the Originators became defunct and thus repudiated their obligations). 11 The statute of

limitations cannot begin to run until those conditions are satisfied. Aetna Life & Cas. Co. v.

Nelson, 501 N.Y.S.2d 313, 316 (1986) (statute of limitations begins to run only when “all of the

facts necessary to the cause of action have occurred so that the party would be entitled to obtain

relief in court”); Continental Cas. Co. v. Stronghold Ins. Co., Ltd., 77 F.3d 16, 19 (2d Cir. 1996)

(citing Proc v. Home Ins. Co., 270 N.Y.S.2d 412, 413-15 (1966) (holding that a cause of action

did not accrue until conditions specified in the contract were satisfied). Accordingly, no cause of

action accrued under the Guaranty until the Originators repudiated their obligations.

date that certificateholders filed a derivative action on behalf of the trust—an issue that is not currently before this Court.

11 See Drake v. Hodgson, 183 N.Y.S. 486, 491 (N.Y. Ct. App. 1920) (“The filing of the petition in bankruptcy on the part of the defendant was, within the well-settled law, a repudiation and an anticipatory breach.”).

05591.00001/5715436.3 13

III. THE TRUST’S CLAIMS ARE RIPE

The Complaint adequately alleges that (i) in 2013, an investigation of the Loans revealed

that breaches of the R&Ws permeated the Trust (Compl. ¶ 29); and (ii) that the Originators and

Natixis received the Breach Notice on March 1, 2013, (and several supplemental notices), which

notified them that the Loans in the Trust were plagued with defects and demanded repurchase of

all defective Loans. Compl. ¶ 44. The Complaint also alleges that Natixis knew the Loans were

defective because its pre-securitization due diligence led it to discover trust-wide breaches.

Compl. ¶¶ 41-43. Despite these well-pled allegations, Natixis argues that the Trust’s claims are

not ripe because (i) the Trust is not entitled to relief with respect to any Loans not specifically

identified in the Breach Notice; (ii) the Seller’s 90-day Cure Period had not yet expired when the

Trust filed this action; and (iii) the Trust failed to give Natixis “prompt” notice of the alleged

breaches. Br. at 17. These arguments are without merit.

A. Natixis Had Adequate Notice of All Defective Loans in the Trust

Natixis argues that the Trust’s claims are unripe as to any Loans for which Natixis “did

not receive [Loan-specific] notice.” Br. at 18. However, the Trust has asserted claims on all

defective Loans in the Trust after identifying pervasive breaches in a sample of over 1,900

Loans—more than 45 percent of the Trust. Compl. ¶ 5. Specifically, the February 27, 2013

Breach Notice referred to “breaches throughout the mortgage pool of the Trust,” stated that the

breaches uncovered to date “indicate that the Mortgage Loans are plagued with breaches of

representations and warranties,” and demanded cure or repurchase “of all breaching loans in the

Trust, not just those specifically identified in this letter.” Compl. ¶ 44; Br. Ex. 3. New York

courts consistently hold that a plaintiff can sue on all defective loans in a trust based on

pervasive breaches found in the review of a sample of loans. See Morgan Stanley Mortg. Loan

Trust 2006-14 SL, No. 652763/2012 (Sup. Ct. N.Y. Aug. 21, 2013) (stating that a complaint

05591.00001/5715436.3 14

containing allegations of pervasive breaches where the plaintiffs demanded repurchase of all

defective loans sufficiently states a cause of action for breach of contract); ACE Secs. Corp. v.

DB Structured Prods., Inc., 965 N.Y.S.2d 844, 850 (Sup. Ct. N.Y. 2013) (reversed on other

grounds) (“Trustee’s failure to set forth which of the specific loans are affected by false

Representations is not fatal to the Complaint because CPLR 3016(b)’s particularity requirements

do not apply to a breach of contract claim”) (internal citations omitted); MBIA Ins. Corp. v.

Credit Suisse Sec. (USA) LLC, 32 Misc. 3d 758, 778 (N.Y. Sup. Ct. 2011) (“Although MBIA

may ultimately be required to itemize the breaches constituting its contract claims, the pleadings

give sufficient notice of the claim at this juncture.”).12

Indeed, Natixis has expressly acknowledged in its SEC filings that it had notice of trust-

wide breaches. In its quarterly Form ABS-15G report (the “Form 15G”) for the Trust,13 Natixis

explicitly stated that 4,204 loans—i.e. all of the Trust’s Loans—“Were Subject of Demand” as of

June 30, 2013. Compl. at ¶ 47; Ex. I. Natixis cannot turn around and argue, solely for litigation

convenience and in direct contradiction of its statements to the SEC, that it did not receive a

Trust-wide notice.

Moreover, Natixis’s refusal to repurchase any identified Loans excused the Trust from

further notice obligations as a matter of law. See, e.g., Sunshine Steak, Salad & Seafood, Inc. v.

W.I.M. Realty, Inc., 522 N.Y.S.2d 292, 293 (3d Dep’t 1987) (“[W]here it becomes clear that one

party will not live up to a contract, the aggrieved party is relieved from the performance of futile

acts or conditions precedent”); In re Best Payphones, Inc., 432 B.R. 46, 54 (S.D.N.Y. 2010)

12 See also Ex. BB (excerpts from The Bank Of New York Mellon v. WMC Mortgage,

LLC, et al., Case No. 12-cv-7096 Transcript of Proceedings, September 12, 2013 (noting that notice of trust-wide breaches “was sufficient notice that there were problems in the trust”).

13 Pursuant to SEC Rule 15Ga-1(c) (2) (17 CFR 240.15Ga-1(c) (2)), RMBS issuers are required to disclose repurchase activity for each trust on a quarterly basis.

05591.00001/5715436.3 15

aff'd, 450 F. App'x 8 (2d Cir. 2011) (stating that under New York law, “once a party

anticipatorily repudiates, the other party is excused from complying with any conditions

precedent contained in the contract, including the obligation to give notice of breach and an

opportunity to cure.”).

B. Natixis Had Notice of Rep & Warrant Breaches No Later than March 1, 2013

The Complaint alleges (and Natixis concedes) that it received the Breach Notice on

March 1, 2013, on or around the same time as the Trust (and the Originators, to the extent notice

to them was possible), and received the same notice from the Trustee and the Securities

Administrator on March 1, 2013, and March 22, 2013, respectively. Br. at 13, 17, Exs 3-5

(copies of the Breach Notice stamped as received on March 1, 2013, and March 22, 2013).

There is nothing in the Complaint to suggest the Trust sat on information, and Natixis introduces

no facts to the contrary. Thus, Natixis’s argument that it need not comply with the Guaranty

because it was not “promptly” notified of breaches of the R&Ws is without merit.14

C. Natixis’s Guaranty Attaches Immediately Upon the Expiration of the Originator’s 60-day Cure Period or Upon Repudiation of the Originator’s Repurchase Obligation

Natixis argues that the Trust’s claims are not ripe because the Trust brought suit prior to

the expiration of the Seller’s Cure Period. Br. at 17. However, under Section 2.03 of the PSA,

the Seller’s 90-day Cure Period is available only for breaches of Natixis’s Seller Reps. See Ex.

B, § 2.03(d) (“Within 90 days of the earlier of either discovery by or notice to the Unaffiliated

14 Further, the contractual provision requiring “prompt” notice is not a condition

precedent to suit, particularly where, as here, Natixis received the Breach Notice and/or discovered breaches when performing due diligence on the Loans. See Trust for the Certificate

Holders of the Merrill Lynch Mortg. Pass-Through Certificates Series 1999-C1 v. Love Funding

Corp., 2005 WL 2582177, at *7 (S.D.N.Y. Oct. 11, 2005) (finding that a provision to provide “prompt” notice was “not a condition precedent with respect to [Defendant’s] obligation to cure the breach or repurchase”; the obligation could have also arisen upon its own discovery of a breach), rev’d on other grounds, 591 F.3d 116 (2d Cir. 2010).

05591.00001/5715436.3 16

Seller of any breach . . . set forth in Section 3.01(f), 3.01(h), 3.01(n), 3.01(o), 3.01(p) or 3.03 of

the Unaffiliated Seller's Agreement.”) In contrast, Natixis’s repurchase obligations under the

Guaranty attach immediately upon the expiration of the Originator’s Cure Period—which is 60

days, not 90 days—or upon repudiation of the Originator’s obligations. Ex. B, PSA, § 2.03(d)

(“In the event . . . such Originator fails to cure . . . the Unaffiliated Seller shall cure, substitute or

repurchase”). Compl. ¶¶ 25-26. Because the vast majority of the Originators are defunct, they

are deemed to have repudiated their repurchase obligations under New York law, thus rendering

the Originator Cure Period futile. See Wolff & Munier, Inc. v. Whiting-Turner Contracting Co.,

946 F.2d 1003, 1009 (2d Cir. 1991) (affirming district court’s holding that “compliance with the

cure provision would be futile, and should thus be excused”); Sea Tow Servs Int’l, Inc. v. Pontin,

607 F. Supp. 2d 378, 389 (E.D.N.Y. 2009) (“[A]dherence to the cure provision of a contract is

“\not required where it would be a futile act.”). Thus, there is no longer any basis for Natixis to

rely on a “cure” or waiting period, let alone longer than the 60 days between notice and the filing

of this action. Consequently, Natixis is liable under the Guaranty.

D. The Trust’s Claims Are Ripe Because Natixis Knew on the Closing Date that Loans Breached the R&Ws

In addition to its obligations as the Guarantor, Natixis has primary responsibility to

repurchase Loans that breach the R&Ws upon its own discovery.15 The Complaint adequately

alleges that Natixis identified defects when it reunderwrote the Loans prior to selling them to the

15 See e.g. Ex. B at 2.03(d) (“Within 90 days of the earlier of either discovery by or

notice to the Unaffiliated Seller of any breach of a representation or warranty set forth in . . . the Unaffiliated Seller's Agreement . . . the Unaffiliated Seller shall use its best efforts to cure such breach in all material respects and, if such breach cannot be remedied, the Unaffiliated Seller shall . . . repurchase such Mortgage Loan at the Repurchase Price.”); see also id. (“[I]n the event it is discovered by the Unaffiliated Seller . . . that the substance of a representation or warranty was inaccurate . . . the Unaffiliated Seller shall use its best efforts to cure such breach or substitute or repurchase such Mortgage Loan in accordance with this Section 2.03(d).”).

05591.00001/5715436.3 17

Trust. Id. ¶¶ 41-43. Nothing more is required at the pleading stage. See Assured Guar. Mun.

Corp. v. Flagstar Bank, FSB, 2011 WL 5335566, at *7 (S.D.N.Y. Oct. 31, 2011) (allegation that

defendant was “constructively ‘aware’” of breaches or had “inquiry notice” of breaches is

sufficient to overcome a motion to dismiss).

IV. THE COMPLAINT ADEQUATELY ALLEGES CLAIMS BASED ON NATIXIS’S

GUARANTY OF THE ORIGINATORS’ OBLIGATIONS

In addition to challenging the adequacy of notice, Natixis manufactures an elaborate

interpretation of the PSA to argue that the Guaranty is not really a guaranty at all. But the

Guaranty is straightforward. It provides that “[i]n the event there is a breach of a representation

or warranty by an Originator . . . and, upon discovery or receipt of notice, such Originator fails

to cure, substitute or repurchase such Mortgage Loan within the period specified . . . the

Unaffiliated Seller shall cure, substitute or repurchase such Mortgage Loan subject to the

conditions set forth in this Section 2.03.” Ex. B, PSA § 2.03(d) (emphasis added). Natixis

argues that the phrase “subject to the conditions set forth in Section 2.03” limits the Guaranty to

only those Loans that suffer from both a breach of an Originator Rep and a breach of a

corresponding Seller Rep. Br. at 20-21. There are many reasons why this creative construction

of the PSA fails.

First, Natixis’s theory runs contrary to the plain and unambiguous language of the

Guaranty itself. As discussed above, the Guaranty simply says that “in the event” there is “a

breach of a representation or warranty by an Originator” and the Originator fails to repurchase,

Natixis shall do so. Nowhere does the Guaranty mention that it is triggered only where a breach

of the Originator Reps corresponds to a breach of the Seller Reps, as Natixis argues. The

Guaranty is clear and unambiguous on its face, and should be interpreted according to its plain

05591.00001/5715436.3 18

meaning. See Coppola v. Stroker, 653 N.Y.S.2d 134, 135 (2d Dep’t 1997) (“[P]rinciples of

contract construction require that plain language should be given effect . . . .”).

Second, Defendants’ artificial interpretation of the Guaranty is predicated on the

conflation of Natixis’s primary and secondary liability. Natixis has primary repurchase liability

for breaches of the Seller Reps and for breaches which it is deemed to have discovered as of

closing. Natixis also has secondary liability under the Guaranty that arises after the primary

obligor under the Master MLPAs—the Originator—fails to repurchase the defective Loan. The

two obligations are independent of each other.

Third, Natixis’s argument effectively reads the Guaranty out of existence because the

Seller Reps and the Originator Reps are different types of representations that do not overlap.

The Seller Reps state that the Depositor has “free and clear” ownership of the loans; that the

Loans do not violate predatory lending laws; and that “each Assignment and Recognition

Agreement is duly authorized, executed and enforceable against the respective Originator who

executed such agreement.” Br. at 20 n. 16, citing Seller’s Agreement, §3.01(f), (n); 3.03(b).

With the exception of the predatory lending representations, not one Seller Rep involves facts

that could give rise to a breach of an Originator Rep. Conversely, the Guaranty expressly carves

out breaches of an Originator’s payment default (“EPD”) representation, which requires the

Originator to buy back the Loans that default shortly after the Trust closed. Ex. B, PSA, §

2.03(d). Natixis’s reading of the Guaranty renders the carve-out superfluous because the Seller

Reps do not include an EPD representation; if the Guaranty is triggered only when the Originator

Reps and Seller Reps overlap, an EPD breach could never trigger the Guaranty in the first place.

See U.S. Bank Nat. Ass'n v. Lightstone Holdings LLC, 960 N.Y.S.2d 18, 19 (1st Dep’t 2013)

(“[C]ourts are obliged to interpret a contract so as to give meaning to all of its terms”).

05591.00001/5715436.3 19

For these very reasons, Justice Schweitzer recently rejected a similar argument in Merrill

Lynch Mortgage Investors Trust 2006-RM4 et al., v. Merrill Lynch Mortgage Lending Inc., No.

654403/2012 (N.Y. Sup. Ct. Sept. 10, 2013) (“MLMI”). The guaranty provision in that case

provided “that to the extent the [Originator] fails to fulfill its contractual obligations under the

[Originator] Agreement then the [Trust] shall have the right to enforce such obligations of [the

Originator] against the Sponsor [Merrill].” Id. at 12-13. The defendant Merrill argued that the

guaranty provision “addresses only circumstances where Merrill has breached one of its [Seller]

representations and warranties.” Id. at 15. The court disagreed and held that Merrill’s argument,

“while creative,” would “require the court to rewrite the contract to support its thesis,” adding

that “[t]he force of the Trust’s arguments subordinates Merrill’s unreasonable positions, however

cleverly put they may be.” Id. at 16-17.

Here too, Defendant’s creative argument must be rejected. Indeed, the Section 2.03

“conditions” Natixis refers to simply outline the process pursuant to which the repurchase is

effected, and not to the Seller Reps. For example, for substituted loans, Natixis must deliver to

the Custodian “the Mortgage Note . . . and [certain] other documents and agreements,” in the

event of repurchase, “the Repurchase Price therefor shall be deposited in the Collection Account

pursuant to” certain guidelines; and upon deposit of the repurchase price, “the Trustee shall

assign to the Unaffiliated Seller its rights under the related [MLPA].” Ex. B, PSA § 2.03.

Notably, Natixis’s repurchase obligation with respect to its Seller Reps is likewise “subject to the

conditions set forth in this Section 2.03.” Ex. B, PSA, § 2.03(d). Natixis’ interpretative

gymnastics notwithstanding, it cannot escape the plain language of the Guaranty that, if the

Originator fails to fulfill its obligations under the A&R Agreement, Natixis must step in to do so.

05591.00001/5715436.3 20

For the foregoing reasons, the Trust’s cause of action for breach of contract on all

defective Loans should be allowed to proceed.

V. THE TRUST IS ENTITLED TO PLEAD ALTERNATIVE FORMS OF RELIEF

TO BE MADE WHOLE

A. The Trust Is Entitled to Compensatory or Rescissory Damages

The complaint adequately alleges entitlement to various forms of relief to make the Trust

whole, including (i) specific performance of Natixis’ repurchase obligations, and/or damages to

the extent that specific performance is unavailable or impracticable; (ii) rescission of the PSA, or

rescissory damages in lieu of rescission; (iii) an award of such other and further relief as may be

just and proper. Compl. p. 27. Natixis argues incorrectly that none of this relief is available, that

the “sole remedy” provision in the PSA limits the Trust’s remedy to specific performance of

Natixis’s repurchase obligations (an avenue Natixis has staunchly rebuffed) and that all of the

Trust’s requests for damages should be stricken, in part because presumably, “many of the loans

at issue had been foreclosed upon or otherwise liquidated,” such that the repurchase of such

loans is “unavailable.”. Br. at 21-22, 24. However, courts have consistently held that (1) a sole

remedy clause is no bar to monetary relief, and (2) the repurchase remedy remains available even

where the loan has been liquidated.

The “sole remedy” clause does circumscribe the type of damages available; rather, it

simply caps the amount at repurchase price (before any other relief the court finds appropriate).

See HEAT 2007-2, at 8 (stating that if specific performance is not available, “the remedy is an

award of damages equal to the repurchase amount, consistent with the sole remedy provision.”);

Assured Guar. Mun. Corp. v. DLJ Mortg. Capital, Inc., 2012 WL 5192752 (permitting a claim

for “damages, in an amount to be determined at trial” to go forward) (Sup. Ct. N.Y. Cty., Oct. 11,

2012), ACE Sec. Corp. v. DB Structured Products, Inc., 965 N.Y.S.2d 844, 851 (Sup. Ct. N.Y.

05591.00001/5715436.3 21

Cty. 2013) (reversed on other grounds) (permitting both legal damages and sampling to prove

pool-wide breaches, so long as “the parties . . . come up with a sampling mechanism that

meaningfully reflects the PSA’s damages calculation”); MASTR Adjustable Rate Mortgs. Trust

2006-OA2, et. al., v. UBS Real Estate Secs., Inc., No. 12 Civ. 07322 (S.D.N.Y. August 15, 2013)

(“MARM”) (rather than limit the form of relief to specific performance, the sole remedy

provision “limit[s] potential damages to an amount that is commensurate with the sole remedy

clause”); Assured Guar. Mun. Corp. v. Flagstar Bank, FSB, No. 11 Civ. 2375, 2011 WL

5335566 (S.D.N.Y. Oct. 31, 2011) (holding that that a plaintiff was entitled to damages where

loans breached representations and warranties notwithstanding a “sole remedy” clause).16

Similarly, with the exception of one Minnesota court, courts in New York and elsewhere

have consistently held that both specific performance and damages are available regardless of

whether the loan has been liquidated. ACE, 965 N.Y.S.2d at 850 (finding defendants’ argument

that liquidated loans are not subject to repurchase “unconvincing” because “it would

perversely . . . incentivize[] [the defendant] to fill the Trust with junk mortgages that would

expeditiously default so that they could be Released, Charged Off, or Liquidated before a

repurchase claim is made”); RTC v. Key Fin. Servs., Inc., 280 F.3d 12, 18 n. 13 (1st Cir. 2002)

16 See also Trust for the Certificate Holders of the Merrill Lynch Mortg. Pass-Through

Certificates Series 1999-C1 v. Love Funding Corp., 736 F. Supp. 2d 716, 719-20, 725-26 (S.D.N.Y. 2010) (awarding damages in an amount equal to the Repurchase Price despite a sole remedy provision); LaSalle Bank Nat’l Ass’n. ex rel Lewnnar Partners, Inc. v. Capco Am.

Securitization Corp., 2005 WL 3046292, *5 (S.D.N.Y. Nov. 14, 2005) (repurchase provision “provides for liquidated damages in the event that a breach cannot be cured”); La Salle Bank

Nat’l Ass’n v. CIBC, Inc., No. 08 Civ. 9916, 2012 WL 112208, *2 (S.D.N.Y. Jan. 12, 2012) (PSA’s definition of a loan’s repurchase price is an “adequate method for calculating damages”); Wells Fargo Bank, N.A. v. Bank of Am., N.A., No. 10 Civ. 9584, 2013 WL 1285289, *9 (S.D.N.Y. Mar. 28, 2013) (“[The] PSA establishes a contractual damages amount in the form of the Purchase Price.”); Wells Fargo Bank, N.A. v. LaSalle Bank Nat. Ass’n, No. 08 Civ.1125-C, 2011 WL 3739170, *2-*3 (W.D. Okla. Aug. 23, 2011) (applying New York law) (holding that, rather than requiring specific performance of a repurchase obligation, a PSA’s “purchase price is the correct method of determining Plaintiff’s damages”).

05591.00001/5715436.3 22

(affirming damages despite a sole remedy provision for loans that had been charged off and

released from the trust).

Moreover, Natixis cannot plausibly argue both that repurchase of the loan is the Trust’s

only remedy and that it is unavailable for a large share of the Trust’s loans because they have

been liquidated. This would deprive the Trust of any remedy—something that courts have

refused to do. MARM, 2013 WL 4399210, *3 (declining “to foreclose the possibility of

awarding damages in lieu of specific performance” because when “specific performance . . . is

not possible, the parties are left to whatever legal or equitable remedies they may have”) (internal

quotations omitted); Assured Guar. Mun. Corp., 2013 WL 1308979, at *5 (finding the “‘cure or

repurchase’ obligation to be the exclusive remedy available to [the plaintiff] for [the defendant]’s

breach of a representation or warranty” and subsequently awarding damages); Lusker v Tannen,

90 456 N.Y.S.2d 354 (1st Dep’t 1982) (“Where . . . [equitable] relief ‘appears to be impossible

or impracticable, equity may award damages in lieu of the desired equitable remedy’”).

Even if specific performance were the Trust’s sole remedy and liquidated Loans could

not be repurchased (which is plainly not the case), there would still be no basis for Natixis to

avoid liability as to such Loans on the pleadings. As noted above, Natixis’s repurchase obligation

arises upon its “discovery” of the breach, and whether Loans were liquidated prior to Natixis’s

discovery is a question of fact that cannot be resolved on a motion to dismiss. Thus, Natixis’s

argument, even if accepted, would not support dismissal of the Trust’s claims. ACE Sec. Corp.

965 N.Y.S.2d at 850 (reversed on other grounds) (holding that defendant’s argument that the

PSA's damages calculation prohibits recovery raised “questions of fact [that] clearly preclude

dismissal on this ground”).

05591.00001/5715436.3 23

More generally, a factual record is necessary to determine what relief will be required to

make the Trusts whole. See MBIA Ins. Co. v. Residential Funding Co., LLC, 2009 WL 5178337,

at *4 (N.Y. Sup. Ct. 2009) (“[Defendant’s] request to strike [Plaintiff’s] request for punitive and

consequential damages is denied as premature.”); Assured Guar. Mun. Corp. I v. UBS Real

Estate Sees., Inc., 2012 WL 3525613, at *7 (S.D.N.Y. Aug. 15, 2012) (“It would be premature to

strike a remedy at the pleadings stage.”); Ambac Insurance Corp. v. EMC Mortg. Corp., 2009

WL 734073, at 2 (S.D.N.Y. Mar. 16, 2009) (denying defendant’s request to strike rescissory

damages sought by a financial guaranty insurer on the basis that it was premature).

Finally, Natixis relies on an outlier decision from a Minnesota federal court, MASTR

Asset Backed Sec. Trust 2006-HE3 v. WMC Mortg. Corp., 843 F. Supp. 2d 996 (D. Minn. Oct. 1,

2012), which is not binding on this Court, is contrary to New York law, and has been rejected by

New York courts. See, e.g., MARM, 2013 WL 4399210, at *3 (“I share that view [that damages

are available] and reject the contrary position adopted by a district court in another circuit.”).17

In any event, the Minnesota decision was on a motion for summary judgment, not a motion to

dismiss, and is thus inapposite. Further, the same Minnesota court subsequently ruled in the

same case (not cited by Natixis) that the trust was entitled to pursue damages under certain

circumstances, such as here, where the Complaint alleges that Natixis had notice of breaches and

failed to notify the Trust and repurchase defective Loans.18 Compl. ¶ 43. Accordingly, if the

evidence supports the complaint’s allegations that Natixis knew of the breaches, yet still failed to

17 See also ACE, 965 N.Y.S.2d at 851; Lehman Bros. Holdings, Inc. v. PMC Bancorp,

No. 10 Civ. 07207, 2013 WL 1095458, *4 (C.D. Cal. Mar. 8, 2013) (applying New York law); LaSalle Bank Nat’l Ass’n v. Lehman Bros. Holdings, Inc., 237 F. Supp. 2d 618, 638 (D. Md. 2002) (applying New York law); La Salle Bank v. CIBC, 2012 WL 112208, *1 (S.D.N.Y. Jan. 12, 2012); Morgan Guar. Trust Co. v. Bay View Franchise Mortg. Acceptance Co., No. 00 CIV. 8613 (SAS), 2002 WL 818082, *2, *4-*5 (S.D.N.Y. Apr. 30, 2002)

18 See MASTR Asset Backed Sec. Trust 2006-HE3 v. WMC Mortgage Corp., No. 11 Civ. 2542 (D. Minn. Sept. 30, 2013).

05591.00001/5715436.3 24

notify or repurchase, it cannot use the sole remedy provision to escape liability. See Gold

Connection Disc. Jewelers, Inc. v. Am. Dist. Tel. Co., 622 N.Y.S.2d 740, 741 (2d Dep’t 1995)

(stating that limiting clauses will not preclude recovery where the losses are the result of gross

negligence).

B. CPLR 3016(b) Does Not Apply to Breach of Contract Claims

Natixis’s assertion that the Trust’s Complaint is subject to the heightened pleading

requirements of CPLR 3016(b) is also incorrect. Br. at 18. The rule’s “particularity

requirements do not apply to a breach of contract claim.” ACE Sec. Corp. v. DB Structured

Products, Inc., 965 N.Y.S.2d at 850.

Each of the cases cited by Natixis is inapposite. Rombach v. Chang, 355 F.3d 164 (2d

Cir. 2004) involved securities law claims, not contract claims. Likewise, the district court in

Frota v. Prudential-Bache Securities, Inc., 639 F. Supp. 1186 (S.D.N.Y. 1986)dismissed the

plaintiff’s common law fraud claims on the ground that the complaint “merely incorporate[d] the

allegations of the securities fraud and RICO counts.” Id. at 1193. Frota v. Prudential-Bache

Sec., Inc., 639 F. Supp. 1186, 1193 (S.D.N.Y. 1986). Finally, DeBlasio v. Merrill Lynch & Co.,

2009 WL 2242605 (S.D.N.Y. July 27, 2009), applied Rule 9(b) to a claim for breach of the

implied covenant of good faith and fair dealing (not to a claim for breach of an express contract

provision) that was based on allegations of a fraudulent scheme that supported claims for

securities fraud and common-law fraud. Id. at *36-37. No case holds that heightened pleading

standards apply merely to allegations that the defendant knowingly breached a contract. See

Syllman v. Calleo Development Corp., 736 N.Y.S.2d 318 (2002) (quoting Clark–Fitzpatrick, Inc.

v. Long Is. R.R. Co., 70 N.Y.2d 382, 390 (1987) (“[E]mploying language familiar to tort law,

does not, without more, transform a simple breach of contract into a tort claim.”). As such, the

05591.00001/5715436.3 25

breach of contract claims in the Complaint are governed by the less stringent pleading

requirements of CPLR 3013.

VI. THE TRUST’S CLAIMS BASED ON APPRAISAL VALUES ARE

ADEQUATELY ALLEGED

Finally, Natixis moves to dismiss the Trust’s claims to the extent its claims are based on

false loan-to-value (“LTV”) and combined loan-to value (“CLTV”) ratios, because it claims that

inaccurate appraisals are “subjective opinions” and therefore “not actionable misrepresentations

of Originators.” Br. at 23. Natixis confuses the standards for contract claims with fraud and

Securities Act claims, where the distinction between an opinion and statement of fact is relevant

to the elements of those causes of action.19 The Trust’s claims are contract claims. See Home

Equity Mortgage Trust Series 2006-1, et al. v. DLJ Mortgage Capital, Inc., et al., No.

156016/2012 (N.Y. Sup. Ct. Jan. 10. 2014) (finding that “DLJ made R&Ws which are allegedly

wrong” and the “R&Ws were not qualified by the concept of ‘opinion’ relevant in federal

securities law claims.”). The Originator Rep that “no Mortgage Loan has an LTV greater than

100%” cannot be made to disappear based on an assertion that LTV is a “subjective opinion.”

The Trust is entitled to show that the representations made to it were breached, and Natixis is

allowed to argue otherwise, but Natixis cannot make an Originator Rep vanish by arguing it is an

“opinion,” certainly not on a motion to dismiss. Regardless, courts have approved breach claims

based on misrepresented LTVs and CLTVs. See, e.g., MBIA IV, 2013 WL 1845588, at *31

(granting summary judgment with respect to certain CLTV breaches and only leaving the

question of materiality for trial).

19 For example, Natixis cites Tsereteli v. Residential Asset Securitization Trust 2006-A8,

692 F. Supp. 2d 387 (S.D.N.Y. 2010), in which the court held that “a subjective opinion is actionable under the Securities Act only if the amended complaint alleges that the speaker did not truly have the opinion at the time it was made public.” Id. at 392 (emphasis added). Natixis cites no authority that this standard applies to breach-of-contract claims.

05591.00001/5715436.3 26

CONCLUSION

For the reasons set forth above, the Trust respectfully requests that Natixis’s Motion to

Dismiss and Motion to Strike be denied in their entirety.

05591.00001/5715436.3 27

Dated: New York, New York January 17, 2014

QUINN EMANUEL URQUHART & SULLIVAN, LLP

By: /s/ Erica Taggart_________________

Philippe Z. Selendy Erica P. Taggart Sean P. Baldwin Maya D. Cater philippeselendy@quinnemanuel.com ericataggart@quinnemanuel.com seanbaldwin@quinnemanuel.com mayacater@quinnemanuel.com 51 Madison Avenue, 22nd Floor New York, NY 10010 (212) 849-7000

Attorneys for Plaintiff