AMBAC Assurance Corporation v. Adelanto Public Utility Authority

Filing 98

OPINION & ORDER re: 95 MOTION for Entry of Judgment under Rule 54(b) as to Defendant/Counter Claimant's First Amended Counter Claim. filed by Adelanto Public Utility Authority, 93 MOTION for Entry of Judgment under Rule 54(b). filed b y AMBAC Assurance Corporation. For the foregoing reasons, the clerk of court is respectfully directed to enter final judgment, pursuant to Rule 54(b), as to Plaintiff's first, second, and fourth claims, as well as to Defendant's first, second, third, fourth, fifth, sixth, and seventh counterclaims. (Signed by Judge John F. Keenan on 3/3/2014) (djc)

USDC SDNY
DOCUMENT
ELECTRONICALLY FILED
DOC #: _________________
DATE FILED: Mar. 6, 2014

UNITED STATES DISTRICT COURT
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
SOUTHERN DISTRICT OF NEW YORK
-----------------------------------X
-----------------------------------------------------------x
AMBAC ASSURANCE CORPORATION,
:
In re FANNIE MAE 2008 SECURITIES
:
08 Civ. 7831 (PAC)
:
LITIGATION
:
09 MD 2013 (PAC)
Plaintiff,
:
:
:
09 Civ. 5087 (JFK)
:
OPINION & ORDER
-against:
OPINION & ORDER
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:
ADELANTO PUBLIC UTILITY AUTHORITY, :
:
Defendant.
:
HONORABLE PAUL A. CROTTY, United States
-----------------------------------X District Judge:
JOHN F. KEENAN, United States District Judge:

BACKGROUND1
Ambac Assurance Corporation (“Ambac”) now moves, pursuant
The early years of this decade saw a boom in home financing which was fueled, among
to Rule 54 of the Federal Rules of Civil Procedure, for entry of
other things, by low interest rates and lax credit conditions. New lending instruments, such as
final judgment on its first, second, and fourth claims.
subprime mortgages (high credit risk loans) and Alt-A mortgages (low-documentation loans)
Adelanto Public Utility Authority (“Authority”) cross-moves for
kept the boom going. Borrowers played a role too; they took on unmanageable risks on the
entry of final judgment dismissing its seven counterclaims.
assumption that the market would continue to rise and that refinancing options would always be
Neither motion is opposed. For the reasons that follow, both
available in the future. Lending discipline was lacking in the system. Mortgage originators did
motions are granted.
not hold these high-risk mortgage loans. Rather than carry the rising risk on their books, the
I. Background
originators sold their loans into the secondary mortgage market, often as securitized packages
In its November 14, 2011 opinion, this Court dismissed all
known as mortgage-backed in the Authority’s First Amended
seven claims asserted securities (“MBSs”). MBS markets grew almost exponentially.
But then breach of contract, breach of for implied
Counterclaim: the housing bubble burst. In 2006, the demandthehousing dropped abruptly
and home prices began to fall. In light of the changing housing market, estoppel,
covenant of good faith and fair dealing, promissorybanks modified their
lending practices and became unwilling to refinance home mortgages without refinancing.
negligence, negligent misrepresentation, fraud, and unjust
enrichment. See Ambac Assurance Corp. v. Adelanto Pub. Util.
1

Unless otherwise indicated, all references cited as “(¶ _)” or to the “Complaint” are to the Amended Complaint,

Auth.,June 22, 2009.Civ. 5087, 2011 WL allegations in the at *10Complaint are takenNov.
dated No. 09 For purposes of this Motion, all 5553444, Amended (S.D.N.Y. as true.
14, 2011).

Although not expressly stated in the opinion, each
1

of the seven claims was dismissed with prejudice. See Fed. R.
Civ. P. 41(b).
In its opinion dated January 11, 2013, this Court granted
summary judgment for Ambac as to liability and damages for
Ambac’s first claim and partial summary judgment as to liability
on Ambac’s second and fourth claims. See Ambac Assurance Corp.
v. Adelanto Pub. Util. Auth., No. 09 Civ. 5087, 2013 WL 139557,
at *7 (S.D.N.Y. Jan. 11, 2013).

On August 29, 2013, this Court

set damages for the second and fourth claims. See Ambac
Assurance Corp. v. Adelanto Pub. Util. Auth., No. 09 Civ. 5087,
2013 WL 4615404, at *7 (S.D.N.Y. Aug. 29, 2013).

This Court has

therefore fully resolved Ambac’s claims for reimbursement,
breach of contract, and attorney’s fees and expenses.

The only

remaining claim is Ambac’s third claim, which seeks specific
performance of a contract provision requiring the Authority to
set its rates at an amount that would allow the Authority to
reimburse Ambac.
II. Discussion
A. Legal Standard
A court may certify a final judgment when (1) there are
multiple claims, (2) at least one of the claims has been finally
determined, and (3) the court makes an express determination
that there is “no just reason for delay.” Fed. R. Civ. P. 54(b);
see also Info. Res., Inc. v. Dun & Bradstreet Corp., 294 F.3d
2

447, 451 (2d Cir. 2002).

In considering the third factor, a

court must be mindful of its role as a “dispatcher” and the need
to guard against “piecemeal appeals.” Curtiss-Wright Corp. v
Gen. Elec. Co., 446 U.S. 1, 8 (1980).

This role requires a

court to consider “judicial administrative interests as well as
the equities involved.” Id.

Appropriate considerations include

(1) “whether the claims under review [are] separable from the
others remaining to be adjudicated”; (2) “whether the nature of
the claims already determined [are] such that no appellate court
would have to decide the same issues more than once even if
there were subsequent appeals”; and (3) the possibility of
settlement. Id. at 8 & n.2; see also Novick v. AXA Network, LLC,
642 F.3d 304, 310 (2d Cir. 2011); New York v. Amro Realty Corp.,
936 F.2d 1420, 1426 (2d Cir. 1991).

Although the motions here

are unopposed, for a court’s Rule 54(b) order to confer
appellate jurisdiction, the order must explain the court’s
considerations as to the third factor. See Novick, 642 F.3d at
310.
B. Application
The first two factors are clearly satisfied.
are four claims and seven counterclaims.

First, there

Second, the Court’s

previous orders finally determined Ambac’s first, second, and
fourth claims along with the Authority’s seven counterclaims,
leaving only Ambac’s specific performance claim pending.
3

After careful consideration of the third factor, the Court
finds that there is no just reason for delay.

In reaching this

conclusion, the Court notes that the remaining specific
performance claim is dependent on Ambac’s entitlement to, and
the amount of, damages.

As this Court has previously noted,

specific performance of the reimbursement provision is only
appropriate if the Authority cannot pay the damages owed. See
Ambac, 2013 WL 139557, at *6.

Indeed, the main factual issue

preventing entry of summary judgment on the third claim is
whether or not the Authority can already reimburse Ambac for the
damages owed on the first, second, and fourth claims. See id.
With that in mind, several considerations lead the Court to
conclude that certification of a final judgment would serve
judicial administrative interests.

First, certification would

allow Ambac to begin enforcing the final judgment on the first,
second, and fourth claims.

Both parties agree that this will

facilitate settlement of the third claim.

Alternatively, if the

Authority wins on appeal, the amount of damages it owes would be
diminished.

Such an appellate resolution could also help the

parties reach a settlement.

If the Authority owes Ambac no

damages or the parties settle, judicial economy would be served
because the pending specific performance claim would be moot.
Finally, neither this Court nor any subsequent appellate
court would have to decide the same issue more than once.
4

The

third claim is separate from the resolved claims and
counterclaims.

It involves a discrete provision of the contract

that is not implicated in any of the other claims or
counterclaims.

Furthermore, the Authority only raises two

arguments concerning the third claim: “(1) specific performance
is not a valid claim for relief, and (2) granting Plaintiff’s
claim would directly conflict with the California constitution,
as Article XIIID . . . imposes certain notice and hearing
requirements on the Authority before it can increase rates.” Id.
Both arguments are unique to this claim.

Moreover, although the

third claim depends on the apportionment of damages, the
certifiable claims and counterclaims are not dependent on
resolution of the third claim.

There is therefore no danger

that a later decision on the third claim would moot an appellate
panel’s previous decision on the instant claims and
counterclaims. See Ginett v. Computer Task Grp., Inc., 962 F.2d
1085, 1094 (2d Cir. 1992) (noting that a district court “should
avoid the possibility that the ultimate dispositions of the
claims remaining in the district court could . . . moot [an
appellate] decision on the appealed claim”).

For these reasons,

the Court finds that judicial economy—at both the trial and
appellate level—would best be served by entering final judgment
on Ambac’s first, second, and fourth claims, as well as all of
the Authority’s counterclaims.
5

III. Conclusion

For the foregoing reasons, the cl
respect

of court is

ly directed to enter final judgment, pursuant to Rule

54(b), as to Plaintiff's first, second, and fourth claims, as
well as to Defendant's first, second, third, fourth, fifth,
sixth, and seventh counterclaims.
SO ORDERED.

Dat

New York, New York
March
2014

3 '

John F. Keenan
United States District Judge

6