Mastr Adjustable Rate Mortgages Trust 2006-OA2 et al v. UBS Real Estate Securities Inc.
OPINION AND ORDER #102799: For reasons stated above, Proposed Intervenors' motion is DENIED. The Clerk of Court is instructed to close the motion and remove it from my docket. (Signed by Judge Harold Baer on 1/11/2013) (js) Modified on 1/16/2013 (tro).
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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MASTR ADJUSTABLE RATE MORTGAGES
TRUST 2006-OA3, MASTR ADJUSTABLE RATE
MORTGAGES TRUST 2007-1, AND MASTR
ADJUSTABLE RATE MORTGAGES TRUST 2007-3,
12 Civ. 7322 (HB)
OPINION & ORDER
-againstUBS REAL ESTATE SECURITIES, INC.,
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Hon. HAROLD BAER, JR., District Judge:
Before the Court is a motion to intervene brought by Alexander Bikal, David Visher,
Sandra Visher, and ESM Fund, I L.P. (the “Proposed Intervenors”) pursuant to Fed. R. Civ. P.
24. Plaintiffs MASTR Adjustable Rate Mortgages Trust 2006-OA2, MASTR Adjustable Rate
Mortgages Trust 2007-1, and MASTR Adjustable Rate Mortgages Trust 2007-3 (collectively, the
“Trusts”), acting through U.S. Bank National Association (“U.S. Bank”) in its capacity as the
Trustee, as well as U.S. Bank in its individual capacity, oppose. Defendant UBS Real Estate
Securities Inc. (“Defendant”), on the other hand, does not take a position. For the reasons stated
below, Proposed Intervenors’ motion is DENIED.
On September 28, 2012, Plaintiffs, through U.S. Bank acting in its capacity as the
Trustee, commenced an action against Defendant alleging breach of its contractual obligation to
repurchase defective mortgage loans under the Pooling and Servicing Agreements (“PSAs”)
governing the three Trusts. For each Trust, Defendant transferred a pool of residential mortgage
loans to Depositor Mortgage Asset Securitization Transactions Inc. (“Depositor”), who then
desposited the pool to the corresponding Trust so that each Trust could issue certificates for sale
to investors. Compl. ¶ 23. Wells Fargo Bank, N.A., as the Master Servicer, Trust Administrator,
and Custodian, administers and distributes interest and/or principal proceeds to the certificate
holders in accordance with the terms of the PSAs. Plaintiffs allege that in each PSA, Defendant
made representations and warranties regarding the mortgage loans, and that under each PSA,
Defendant has the obligation to repurchase defective mortgage loans. Id. at 27-30.
The Trusts have multiple classes of certificates with different levels of risk, and under a
waterfall payout structure, less senior certificates realize losses earlier than more senior ones.
Proposed Intervenors hold certain senior certificates of the 2006-OA Trust called Super Senior
Certificates, and they moved to intervene in this case on October 15, 2012, with a proposed
complaint that asserts the same repurchase obligation claim as well as five additional claims: two
other claims against Defendant for breach of mortgage representations and warranties and for
declaratory judgment that Defendant cure its breach, and three claims against U.S. Bank for
breach of fiduciary duty, violation of the Trust Indenture Act of 1939, 15 U.S.C. § 77aaa et seq.,
and violation of good faith and fair dealing. Spanier Decl. Ex. A.
Specifically, Proposed Intervenors argue that their motion should be granted because
their interests are not adequately protected in this litigation because the Plaintiffs’ counsel, Quinn
Emanuel Urquhart & Sullivan, LLP, also represents Assured Guaranty Municipal Corp.
(“Assured”) in two other cases in this district, including a related case before this Court. Assured
Guar. Mun. Corp. v. UBS Real Estate Sec., Inc., No. 12 Civ. 1579 (HB), 2012 WL 3525613
(S.D.N.Y. Aug. 15, 2012); Wells Fargo Bank, N.A. v. ESM Fund I, LP, 785 F. Supp. 2d 188
(S.D.N.Y. 2011). Assured insured certain classes of the certificates in the three Trusts (“Insured
Certificates”) that are just below more senior certificates, such as Proposed Intervenors’ 2006OA2 Super Senior Certificates and therefore experience losses earlier than the latter certificates.
In Wells Fargo, the Trust Administrator filed an interpleader action to determine the respective
rights of Proposed Intervenors and Assured with respect to distributions made under the Trust
2006–OA2, and the parties advocated for opposing interpretations of the PSA, with Assured
arguing that it had a separate right to reimbursement and Proposed Intervenors arguing that such
right was subject to the overall payout structure of the Trust. 785 F. Supp. 2d at 194-195. In the
related case before me, Assured brought various claims against Defendant UBS Real Estate,
including the breach of repurchase obligation at issue in this case, and the present action was
filed by the Trustee after Assured’s repurchase obligation claim was dismissed in that case on the
ground that Trustee, but not the certificate insurer, could enforce the repurchase obligation under
the PSAs.1 Assured, 2012 WL 3525613, at *4. Currently, the parties to this action are subject to
the same pretrial schedule as that of the related case. Proposed Intervenors also inform the Court
that the Trustee previously refused to take any action when they made a request for the Trustee
to do so on July 23, 2012. See Spanier Decl. Ex. C.
Proposed Intervenors argue that they should be permitted to intervene either as of right or
with the Court’s permission. To intervene as of right under Rule 24(a)(2), an applicant must (1)
file timely, (2) demonstrate an interest relating to the property or transaction which is the subject
of the action, (3) show an impairment of that interest arising from an unfavorable disposition,
and (4) show that there is an interest that is not adequately protected by the existing parties. Fed.
R. Civ. P. 24(a)(2); Brennan v. New York City Bd. of Educ., 260 F.3d 123, 128-129 (2d. Cir.
2001). When a potential intervenor shares the “same ultimate objective” as an existing party in
the case, however, adequate representation is presumed unless the intervenor shows “evidence of
collusion, adversity of interest, nonfeasance, or incompetence.” Butler, Fitzgerald & Potter v.
Sequa Corp., 250 F.3d 171, 179-180 (2d Cir. 2001) (internal quotation marks and citations
omitted). Under Rule 24(b), a court may also “[o]n a timely motion . . . permit anyone to
intervene who . . . has a claim or defense that shares with the main action a common question of
law or fact,” but the Court “must consider whether the intervention will unduly delay or
prejudice the adjudication of the original parties’ rights.” Fed. R. Civ. P. 24(b)(1), (3). In
exercising its broad discretion under Rule 24(b), a court considers the same factors that it
considers for intervention as of right. In re Bank of N.Y. Derivative Litig., 320 F.3d 291, 300 n.5
(2d Cir. 2003).
Here, I find that intervention as of right is inappropriate because Proposed Intervenors
have no shown that their claims against the Trustee will be impaired, while Proposed
Intervenors’ claims against Defendant are adequately represented by Plaintiffs. It is true that the
motion is timely, and Proposed Intervenors, as beneficiaries of one of the Trusts at issue, have an
interest, as least with respect to its claims against Defendant, which could be impaired by this
case. However, by bringing new claims against the Trustee, Proposed Intervenors attempt to
In the related case, Assured also brought the two other claims that Proposed Intervenors now seek to bring against
Defendant: breach of mortgage representations and warranties and declaratory judgment that Defendant cure its
breach. There, I dismissed Assured’s claim with respect to the declaratory judgment on the same ground that the
Trustee is the sole entity that can enforce this provision. Assured, 2012 WL 3525613, at *6.
radically change the existing case, as well as the related one, from a contract case against
Defendant under the PSAs to a case against the Trustee for breach of fiduciary duty, violation of
the Trust Indenture Act, and violation of good faith and fair dealing. Proposed Intervenors have
informed the Court that they do so “[i]n the interest of preserving judicial resources,”
Intervenors’ Supp. 2, n.4., but that is simply not the standard under Rule 24(a)(2). The Proposed
Intervenors fail to explain how their interest in vindicating their rights against the Trustee will be
impaired by this litigation, as any damages based on their claims would be recovered from the
Trustee, not from the Trusts and/or the Defendant. “An interest that is remote from the subject
matter of the proceeding, or that is contingent upon the occurrence of a sequence of events
before it becomes colorable, will not satisfy the rule.” Washington Elec. Co-op., Inc. v.
Massachusetts Mun. Wholesale Elec. Co., 922 F.2d 92, 97 (2d Cir. 1990). Importantly, “the rule
is not intended to allow for the creation of whole new suits by intervenors” or “[to] be used as a
means to inject collateral issues to an existing action.” Id. at 97.
With respect to the three claims that Proposed Intervenors bring against Defendant under
the PSAs, they are identical to Plaintiffs’ claims, and Proposed Intervenors share the same
“ultimate objective” against Defendant in this litigation: to obtain maximum recovery for all
certificate holders by demonstrating that Defendant breached its representations and repurchase
obligations under the PSAs. “Where there is an identity of interest, as here, the movant to
intervene must rebut the presumption of adequate representation by the party already in the
action.” Butler, 250 F.3d at 179-80. The existence of two parallel cases where Assured is also
represented by Plaintiffs’ Counsel, however, does not rise to the level of “collusion, adversity of
interest, nonfeasance, or incompetence.” Id. at 180. Unlike in Wells Fargo Bank, where
Proposed Intervenors are parties, the respective rights of Assured and Proposed Intervenors are
not at issue in this case. Rather, the Complaint asks for damages on behalf of both certificate
holders and Assured, who have subrogation rights. Compl. 21.
I also deny permissive intervention due to concerns about undue delay and prejudice to
the existing parties, which will be caused by Proposed Intervenors’ new claims against the
Trustee. Although there may be some common questions of law and fact, allowing Proposed
Intervenors to transform the nature of the case would complicate and delay the present litigation,
which shares the same pretrial schedule as the related case, brought in February 2012 and
currently has May 2013 as the trial month.
For reasons stated above, Proposed Intervenors' motion is DENIED. The Clerk of Court
is instructed to close the motion and remove it from my docket.
New York, New York
Hon. Harold Baer, Jr.
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