Lehman Brothers Holdings Inc. v. Universal American Mortgage Company, LLC

Filing 103

ORDER denying as moot 48 Motion for Partial Summary Judgment, denying as moot 51 Motion to Exclude, granting in part and denying in part 67 Motion for Summary Judgment, granting 86 Motion for Leave, denying 88 Motion to Strike, granting 99 Motion for Leave, and denying as moot 102 Motion for Order. Trial Preparation Conference and Jury Trial are vacated. This case is dismissed in its entirety. By Judge Christine M. Arguello on 04/30/2014. (athom, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge Christine M. Arguello
Civil Action No. 13-cv-00088-CMA-MEH
LEHMAN BROTHERS HOLDINGS INC.,
Plaintiff,
v.
UNIVERSAL AMERICAN MORTGAGE COMPANY,
Defendant.

ORDER GRANTING IN PART AND DENYING IN PART
DEFENDANT’S MOTION FOR SUMMARY JUDGMENT

This matter is before the Court on Defendant Universal American Mortgage’s
Motion for Summary Judgment. (Doc. # 67.) The motion is ripe for the Court’s review
and for the reasons stated below, that motion is granted in part and denied in part.
I.

BACKGROUND

Plaintiff Lehman Brothers Holdings, Inc. (“LBHI”) is a Delaware corporation with
its principal place of business in New York. On or about January 31, 2006, Defendant
sold a residential mortgage loan to Lehman Brothers Bank, FSB (“LBB”) pursuant to a
written Loan Purchase Agreement (the “Agreement”) and the Seller’s Guide, which is
incorporated by reference. On February 27, 2006, LBB sold the loan to Freddie Mac.
On June 11, 2008, Freddie Mac demanded that Plaintiff make it whole for its losses
incurred following foreclosure of the property securing the Loan. In accordance with

Freddie Mac’s demands, LBB repurchased the loan on July 25, 2008. On August 6,
2008, Aurora Loan Services, Plaintiff’s agent, issued a repurchase demand to
Defendant.
On March 11, 2011, Plaintiff first filed suit with regard to this loan in the Southern
District of Florida. On January 4, 2013, Judge King, who presided over that action,
ordered that the suit, which concerned eight distinct loans, be severed and refiled as
separate claims. Judge King also stated, “The date of the filing of any [of] these
Complaints will relate back to the filing of Plaintiff’s original Complaint (DE #1), filed
on March 11, 2011.” (Doc. # 59-2) (Lehman Bros. Holdings, Inc. v. Universal American
Mort., Case No. 1:11-cv-20859-JLK, Doc. # 95, at 2 (January 9, 2013)).
On January 15, 2013, Plaintiff filed suit in this Court. (Doc. # 1.) Defendant now
moves for summary judgment on Plaintiff’s single claim, arguing that the action is barred
by the statute of limitations.
II.

LEGAL STANDARD

Summary judgment is appropriate “if the movant shows that there is no genuine
dispute as to any material fact and the movant is entitled to judgment as a matter of
law.” Fed. R. Civ. P. 56. To overcome a motion for summary judgment, the nonmoving
party must present enough evidence to allow a reasonable jury to find in its favor.
Vitkus v. Beatrice Co., 11 F.3d 1535, 1539 (10th Cir. 1993). In analyzing the evidence
on a motion for summary judgment, this Court must view the factual record and draw
reasonable inferences in favor of the nonmoving party. Kidd v. Taos Ski Valley, Inc.,
88 F.3d 848, 851 (10th Cir. 1996).
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III.

LAW AND ANALYSIS

To determine whether this action is timely, the Court must first determine which
state’s statute of limitations applies to the instant case. The parties focus on whether
the plain language of the Agreement mandates that this Court apply New York’s sixyear limitations period. The Agreement states, in relevant part:
This Agreement and the Seller’s Guide shall be construed in accordance
with the laws of the State of New York and the obligations, rights and
remedies of the parties hereunder shall be determined in accordance
with the laws of the State of New York, except to the extent preempted
by Federal law.
(Doc. # 21-1 at 5.) The Seller’s Guide further states:
The Loan Purchase Agreement shall be construed in accordance with the
substantive law of the State of New York and the obligations, rights and
remedies of the parties hereunder shall be determined in accordance with
such law without regard for the principles of conflict of laws.
Plaintiff argues that, because the parties’ contract applies “without regard for the
principles of conflict of laws,” it excludes application of the New York Borrowing Statute.
(Doc. # 25 at 13.) The New York borrowing statute, states:
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.
New York Civil Practice Law and Rules (“CPLR”) § 202. “Stated plainly, the borrowing
statute requires that, when a nonresident sues on a cause of action accruing outside
New York, the cause of action must be timely under both New York's applicable statute
of limitation and that of the jurisdiction where the cause of action accrued.”

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Lehman Bros. Holdings, Inc. v. Universal Am. Mortg. Co., LLC; No. 13-cv-0091-REBKMT, 2014 WL 292858, at *2 (D.Colo. Jan. 27, 2014) (citing Global Fin. Corp. v. Triarc
Corp., 715 N.E.2d 482, 484 (N.Y. 1999)). “The cause of action is barred if either of
these two periods of limitation has expired.” Id. (citation omitted).
Courts have repeatedly held that the borrowing statute does not require the Court
to engage in a conflict-of-law analysis. Aurora Commercial Corp., No. 12-cv-3138WJM-KLM, 2014 WL 1056383, at *3 (D. Colo. March 19, 2014); see also Universal Am.
Mortg. Co., 2014 WL 292858, at *3; Ledwith v. Sears Roebuck & Co., 660 N.Y.S.2d
402, 406 (N.Y. App. Div. 1997) (“[M]odern choice-of-law decisions are simply
inapplicable to the question of statutory construction presented by CPLR 202.”) 1
To hold otherwise would be to defeat the very purpose of a borrowing statute, which
mandates that between the foreign and local statute of limitations, the statute with the
shorter period of limitation is to be applied, Ledwith, 660 N.Y.S.2d at 406, in order to
keep nonresident, forum-shopping plaintiffs from exploiting advantageous limitations
periods in other states. See Patterson v. Williams, 500 F. Appx. 792, 794 (10th Cir.
2012); see also Ibrahim J. Wani, Borrowing Statutes, Statutes of Limitations and
Modern Choice of Law, 57 UMKC L. Rev. 681, 690 (1989).
Because the borrowing statute is not precluded by the contract’s conflict-of-law
prohibition, the Court addresses Plaintiff’s second argument: that the borrowing statute
is inapplicable because it was a New York resident at the time of the accrual of the
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For this same reason, the doctrine of renvoi has no bearing on the application of New York's
borrowing statute. See Baena v. Woori Bank, 2006 WL 2935752, at *7 (S.D.N.Y. Oct. 11, 2006);
Ledwith, 231 A.D.2d 17, 660 N.Y.S.2d at 406.

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present action. “For purposes of the New York borrowing statute, a cause of action
accrues where the injury is sustained. In cases involving economic harm, that place is
normally the state of plaintiff’s residence.” Gorlin v. Bond Richman & Co., 706 F.Supp.
236, 240 (S.D.N.Y. 1989). “In the case of a corporate plaintiff, that may be the state of
incorporation or its principal place of business.” Oxbow Calcining USA v. Am. Indus.
Parters, 948 N.Y.S.2d 24, 30 (N.Y. App. Div. 2012); see also Aurora Commercial Corp.,
2014 WL 1056383, at *4; Universal Am. Mortg. Co., 2014 WL 292858, at *3.
Plaintiff claims that it is a Delaware corporation with its principal place of
business in New York. (Doc. # 1, ¶ 5.) However, two courts in this district have recently
observed that LBB was a federally chartered savings association, and not a corporation.
See Aurora Commercial Corp., 2014 WL 1056383, at *4; Universal Am. Mortg. Co.,
2014 WL 292858, at *4; see also (Doc. # 21-6, “Federal Stock Charter Lehman Brothers
Bank, FSB”). As a federally chartered savings association, LBB was “wholly a creature
of federal statutory law” and was not incorporated under the laws of any state.
Universal Am. Mortg. Co., 2014 WL 292858, at *4 (citations omitted). Thus, its principal
place of business “is the State in which the institution maintains its home office . . . .”
12 C.F.R. § 1263.18(b). See also 12 C.F.R. § 561.39 (“The term principal office means
the home office of a savings association . . . .”).
At all relevant times, Plaintiff’s home office was in Wilmington, Delaware. (Doc.
# 21-6 “Federal Stock Charter Lehman Brothers Bank, FSB,” § 2 “The home office shall
be in Wilmington, Delaware.”) Therefore, the borrowing statute applies and this action

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must have accrued within three years, according to Delaware’s statute of limitations.
See 10 Del. Code § 8106.
Plaintiff claims that the claim accrued when LBHI paid Freddie Mac for the loan
on July 25, 2008. Under the New York Borrowing Statute, the statute of limitations
began to run when this cause of action accrued, i.e., at the time of the alleged breach.
Aurora Commercial Corp., 2014 WL 1056383, at *4; see also Ely-Cruikshank Co. v.
Bank of Montreal, 615 N.E.2d 985, 986 (N.Y. 1993). Here, Plaintiff’s cause of action
accrued when Plaintiff possessed a “legal right to demand payment.” Hahn Auto.
Warehouse, Inc. v. Am. Zurich Ins. Co., 967 N.E.2d 1187, 1190 (2012) (“A consistent
line of Appellate Division precedent holds that, where the claim is for payment of a sum
of money allegedly owed pursuant to a contract, the cause of action accrues when the
[party making the claim] possesses a legal right to demand payment.”) (internal citation
omitted). Thus, Plaintiff had a “legal right to demand payment” when it purchased the
subject loan on or about January 31, 2006. See Aurora Commercial Corp., 2014 WL
1056383, at *4; Universal Am. Mortg. Co., 2014 WL 292858, at *4. Plaintiff did not file
its original complaint until March 11, 2011. Therefore, Plaintiff’s claims are barred by
Delaware’s three-year statute of limitations.
The Court also rejects Plaintiff’s argument that, even if Delaware law applies, the
statute of limitations was tolled. Delaware courts have “repeatedly held that a cause of
action ‘accrues’ under Section 8106 at the time of the wrongful act, even if the plaintiff
is ignorant of the cause of action.” Wal-Mart Stores, Inc. v. AIG Life Ins. Co., 860 A.2d
312, 319 (Del. 2004). Yet, Plaintiff asks this Court to apply Delaware’s time discovery
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rule, known as “the Doctrine of Unknowable Injury,” pursuant to which, the statute of
limitations is tolled:
[W]here the injury is inherently unknowable and the claimant is
blamelessly ignorant of the wrongful act and the injury complained of.
In such a case, the statute will begin to run only upon the discovery of
facts constituting the basis of the cause of action or the existence of facts
sufficient to put a person of ordinary intelligence and prudence on inquiry
which, if pursued, would lead to the discovery of such facts.
Id. Thus, Plaintiff must demonstrate that there were “no observable or objective factors
to put [it] on notice of an injury.” Eni Holdings, LLC v. KBR Groupe Holdings, LLC, CV
8075-VCG, 2013 WL 6186326 (Del. Ch. Nov. 27, 2013).
Plaintiff merely asserts it was “indeed ignorant of the defective nature of the
loan.” (Doc. # 68 at 22.) However, this is not sufficient to demonstrate that its claim
was “inherently unknowable,” and instead, Plaintiff essentially asks this Court to toll
the limitations period because it was “ignorant of the cause of action.” See Wal-Mart
Stores, Inc., 860 A.2d at 319; see also Mulrooney v. Corp. Serv. Co., CIV.A. 12-163SLR, 2013 WL 1246769 (D. Del. Mar. 27, 2013) (“Delaware Supreme Court would apply
the time of discovery rule in this context and toll the applicable statute of limitations until
Plaintiff was or should have been aware of his legal injury, as opposed to his actual
injury”). It is Plaintiff’s burden to establish that tolling is applicable. Eni Holdings, LLC,
2013 WL 6186326, at *11. Because Plaintiff has not met its burden, the three-year
statute of limitations is not tolled.
Plaintiff argues that even if a three-year statute of limitations applies, the suit is
timely because Defendant’s failure to repurchase the loan within thirty days of Plaintiff’s
agent’s demand on August 6, 2008, is an independent breach. Another court in this
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district rejected a similar argument, Aurora Commercial Corp., 2014 WL 1056383, *4-5,
and this Court is also not persuaded. Moreover, ACE Sec. Corp. v. DB Structured
Products, Inc., the primary case upon which Plaintiff relies, was recently reversed.
In rendering its decision, the reviewing court stated, “The motion court erred in finding
that plaintiff's claims did not accrue until defendant either failed to timely cure or
repurchase a defective mortgage loan. To the contrary, the claims accrued on the
closing date of the [Master Loan Purchase Agreement], March 28, 2006, when any
breach of the representations and warranties contained therein occurred.” ACE Sec.
Corp. v. DB Structured Products, Inc., 977 N.Y.S.2d 229, 231 (2013) (internal citations
omitted). Therefore, this suit is time barred.
IV.

CONCLUSION

Accordingly, it is hereby ORDERED that:
1. Defendant Universal American Mortgage’s Motion for Summary Judgment
(Doc. # 67) is GRANTED IN PART AND DENIED IN PART as follows:
a. The motion is GRANTED to the extent it contends that Plaintiff’s
claims are barred by the statute of limitations;
b. The motion is DENIED AS MOOT in all other respects; and
c. Plaintiff’s single claim is DISMISSED WITH PREJUDICE.
2. Plaintiff’s Motion for Partial Summary Judgment (Doc. # 48) is DENIED AS
MOOT.
3. Plaintiff’s Motion to Exclude Defendant’s Expert and Strike Defendant’s
Expert Report (Doc. # 51) is DENIED AS MOOT.
4. Defendant’s Motion for Leave to File Supplemental Authority (Doc. # 86)
is GRANTED.

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5. Defendant’s Motion to Strike (Doc. # 85) Reply to Response to Motion, for
Leave to File Notice of Ruling in Related Case Combined with Notice of
Ruling in Related Case (Doc. # 88) is DENIED.
6. Defendant’s Motion for Leave to Leave to File Supplemental Authorities
(Doc. # 99) is GRANTED.
7. Plaintiff’s Motion for Order to for Determination as to Defendant's Waiver of
Its Right to a Jury Trial (Doc. # 102) is DENIED AS MOOT.
8. All pretrial deadlines, the Final Trial Preparation Conference, and trial are
VACATED.
9. Defendant shall have its costs pursuant to Fed. R. Civ. P. 54(d)(1) and
D.C.COLO.LCivR 54.1.
10. This case is DISMISSED in its entirety.
DATED: April 30, 2014
BY THE COURT:

_____________________________
CHRISTINE M. ARGUELLO
United States District Judge

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