U.S. Court of Appeals for the Second Circuit
Mortgage-backed Securities – Breach of Implied Covenant of Good Faith
Statute of Limitations – Accrual
Deutsche Bank National v. Quicken Loans
Judges Straub, Wesley and Livingston
Background: After the Federal Housing Finance Agency filed a summons with notice in state court asserting breach of contractual obligations to repurchase mortgage loans that violated representations and warranties, the defendant removed the action to federal court. The plaintiff-appellant as trustee of the subject residential mortgage-backed securities trust, took control of the litigation and filed a complaint. The defendant moved to dismiss the suit as barred by the statute of limitations. The plaintiff appealed from the grant of the defendant’s motion.
Ruling: The Second Circuit affirmed. The court held that statute of limitations ran from the date the representations and warranties were made. Further, the Second Circuit held that the provision of the Housing and Economic Recovery Act that delayed accrual of the claim did not apply to the trustee’s claim and that the trustee’s claim for breach of the implied covenant of good faith and fair dealing was duplicative.
Zachary D. Rosenbaum of Lowenstein Sandler for the plaintiff-appellant; Jeffrey B. Morganroth of Morganroth & Morganroth for the defendants-appellees