Commerzbank AG v. Deutsche Bank National Trust Company

Filing 54

MEMORANDUM OPINION AND ORDER re: 31 MOTION to Dismiss the Amended Complaint. filed by Deutsche Bank National Trust Company. The Court has considered all of the arguments raised by the parties. To the extent not specifically addressed , the arguments are either moot or without merit. For the foregoing reasons, the defendant's motion to dismiss is granted in part and denied in part. The Clerk is directed to close Dkt. 31. (As further set forth in this Order.) (Signed by Judge John G. Koeltl on 2/8/2017) (cf)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
-----------------------------------COMMERZBANK AG,
Plaintiff,
- v.-

15-cv-10031 (JGK)
MEMORANDUM OPINION
AND ORDER

DEUTSCHE BANK NATIONAL TRUST COMPANY,
Defendant.
-----------------------------------JOHN G. KOELTL, District Judge:
The plaintiff, Commerzbank AG (“Commerzbank”), allegedly
made 74 investments in 50 residential mortgage-backed securities
(“RMBS”) trusts (the “Trusts”) for which the defendant, Deutsche
Bank National Trust Company (“Deutsche Bank”), served as
trustee. Commerzbank seeks to hold the defendant liable for the
poor performance of Commerzbank’s investments in the Trusts, and
has asserted that the defendant (1) violated the Trust Indenture
Act of 1939 (the “TIA”), 15 U.S.C. § 77aaa, et seq.; (2)
breached the Pooling and Servicing Agreements (the “PSAs”) and
the indenture agreements (the “Indentures”) governing the
Trusts; (3) breached its fiduciary duty to Commerzbank; (4) was
negligent or grossly negligent; (5) violated New York’s Streit
Act, N.Y. Real Prop. Law § 124, et seq.; and (6) breached the
covenant of good faith. The defendant has moved to dismiss
portions of the Amended Complaint for failure to state a claim

pursuant to Rule 12(b)(6) of the Federal Rules of Civil
Procedure.
The motion to dismiss presents the feeling of déjà vu. In a
related case before this Court, see Phoenix Light SF Ltd. v.
Deutsche Bank Nat’l Trust Co., 14-cv-10103 (JGK) (S.D.N.Y.) (the
“Phoenix Light Action”), different plaintiffs brought
substantially similar claims against Deutsche Bank that, as
described by Commerzbank, are “rooted in the same basic alleged
facts and legal theories against the same defendant” and in fact
involve nine of the same Trusts. Dkt. 3 (The Related Case
Statement Filed by Commerzbank). The law firms representing the
parties in this action, and in that action, are the same. On
January 22, 2016, this action was stayed pending the decision on
the motion to dismiss portions of the Second Amended Complaint
in the Phoenix Light Action. See Dkt. 13. In an Opinion and
Order dated March 28, 2016 (“Deutsche Bank I”), the motion to
dismiss in the Phoenix Light Action was granted in part and
denied in part. See Phoenix Light SF Ltd. v. Deutsche Bank Nat’l
Trust Co., 172 F. Supp. 3d 700 (S.D.N.Y. 2016). Thereafter,
Commerzbank filed the Amended Complaint in this action.
For the reasons explained below, Deutsche Bank’s motion to
dismiss the Amended Complaint is granted in part and denied in
part.

2

I.
In deciding a motion to dismiss pursuant to Rule 12(b)(6),
the allegations in the complaint are accepted as true, and all
reasonable inferences must be drawn in the plaintiff’s favor.
McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184, 191 (2d Cir.
2007). The Court’s function on a motion to dismiss is “not to
weigh the evidence that might be presented at a trial but merely
to determine whether the complaint itself is legally
sufficient.” Goldman v. Belden, 754 F.2d 1059, 1067 (2d Cir.
1985). The Court should not dismiss the complaint if the
plaintiff has stated “enough facts to state a claim to relief
that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550
U.S. 544, 570 (2007). “A claim has facial plausibility when the
plaintiff pleads factual content that allows the court to draw
the reasonable inference that the defendant is liable for the
misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009).
While the Court should construe the factual allegations in
the light most favorable to the plaintiff, “the tenet that a
court must accept as true all of the allegations contained in
the complaint is inapplicable to legal conclusions.” Id. When
presented with a motion to dismiss pursuant to Rule 12(b)(6),
the Court may consider documents that are referenced in the
complaint, documents that the plaintiff relied on in bringing
3

suit and that are either in the plaintiff's possession or that
the plaintiff knew of when bringing suit, or matters of which
judicial notice may be taken. See Chambers v. Time Warner, Inc.,
282 F.3d 147, 153 (2d Cir. 2002); see also Phoenix Light, 172 F.
Supp. 3d at 704–05.
II.
The allegations in the Amended Complaint are accepted as
true for purposes of this motion to dismiss.
The allegations in the Amended Complaint are substantially
similar to those in the Second Amended Complaint in the Phoenix
Light Action, as described in Deutsche Bank I. See Phoenix
Light, 172 F. Supp. 3d at 705–07; see also Pl.’s Op. Mem. at 3
(“Commerzbank’s Amended Complaint is substantially the same as
the Second Amended Complaint in the [Phoenix Light Action].”).
Familiarity with that decision, the mechanism by which RMBS
trusts are created, and the alleged misconduct of the thirdparty sponsors, originators, depositors, underwriters, and
servicers related to the Trusts (the “Third-Party Entities”)
that underlies Commerzbank’s claims, is presumed. See id.; see
also Phoenix Light SF Ltd. v. Bank of N.Y. Mellon, No. 14-CV10104 (VEC), 2015 WL 5710645, at *1 (S.D.N.Y. Sept. 29, 2015).
Commerzbank is alleged to be an entity organized under the
laws of Germany. Am. Compl. ¶ 16. The defendant is alleged to be
a national banking organization with its principal place of
4

business located in California. Am. Compl. ¶ 21. Commerzbank is
the holder, or former holder, of RMBS certificates (the
“Certificates”) issued by the Trusts, for which the defendant
served as trustee pursuant to the PSAs and Indentures governing
the Trusts. Am. Compl. ¶¶ 33, 108. The Certificates have an
original face value in excess of $640 million. Am. Compl. ¶ 3.
Commerzbank has brought in this action “its own claims while it
was [the holder of the Certificates] and the claims that were
assigned to it by [the prior holders of the Certificates].” Am.
Compl. ¶¶ 16-17.
Commerzbank alleges that, over a period of years, the
Third-Party Entities systematically and substantially misbehaved
with respect to the Trusts. The essence of Commerzbank’s claims
is that the defendant failed to comply with its statutory,
contractual, and common law duties in monitoring and policing
the Third-Party Entities, and in notifying Commerzbank about the
misconduct. See, e.g., Am. Compl. ¶¶ 9-15, 34-35, 45, 61, 68,
73, 80, 129-32.
The Amended Complaint alleges that the misconduct of the
Third-Party Entities became apparent to the defendant, and later
the public (including Commerzbank), in drips and drabs. The
Trusts were created between 2005 and 2007. Am. Compl. ¶ 2. The
Amended Complaint alleges that the defendant was aware of at
least some of the misconduct as early as 2007. Am. Compl. ¶ 130.
5

The Amended Complaint alleges that, “Beginning in 2009 or 2010,
facts began to emerge publicly demonstrating that the Sponsors
and Originators had violated the representations and warranties
provided in connection with the [] Trusts.” Am. Compl. ¶ 77. The
Amended Complaint alleges that, in July 2011, the Association of
Mortgage Investors wrote a letter to, among others, the
defendant notifying the defendant about the Association’s
concerns regarding the conduct of the Third-Party Entities. Am.
Compl. ¶ 114. The Amended Complaint also alleges that, in
December 2011, another group of investors “in hundreds of RMBS
trusts issued written instructions to [the defendant], as
trustee, to open investigations into large numbers of ineligible
mortgages in the loan pools securing those trusts and deficient
servicing of those loans.” Am. Compl. ¶ 115.
In November 2011, Commerzbank sold several of its
Certificates. See Am. Compl., Ex. B. The Amended Complaint
alleges that, “When the sales were made it was apparent that
Deutsche Bank had breached its duties and would not take steps
to remedy its failures.” Am. Compl. ¶ 163.
The Amended Complaint alleges that the defendant’s conduct
has caused Commerzbank to suffer hundreds of millions of dollars
in losses on its investments in the Trusts. Am. Compl. ¶ 15.

6

III.
A.
The defendant has moved to dismiss as time-barred the
claims with respect to the “Palmer 3 Certificates,” see Biron
Decl., Ex. C; the “Commerzbank Certificates,” see Biron Decl.,
Ex. D; and the “Eurohypo Certificates,” see Biron Decl., Ex. E.
Commerzbank acquired the Palmer 3 Certificates through its
merger with Dresdner Bank AG (“Dresdner”) in May 2009. Am.
Compl. ¶¶ 16, 20. Prior to the merger, Dresdner was a public
limited company incorporated in Germany with its principal place
of business in Germany. See Biron Decl., Ex. M (Dresdner
Financial Report 2008). Dresdner acquired the Palmer 3
Certificates around August 2008 from Palmer Square 3 Limited
(“Palmer 3”), a private limited liability company organized
under the laws of Ireland. Am. Compl. ¶¶ 17, 20.
Commerzbank acquired the Commerzbank Certificates at their
issuance. Am. Compl. ¶ 17; see also Am. Compl., Ex. B.
Commerzbank acquired the Eurohypo Certificates on December
11, 2013 from Eurohypo AG (“Eurohypo”), now known as
Hypothekenbank Frankfurt AG, New York Branch, which was the New
York branch of a corporate entity organized under the laws of
Germany. Am. Compl. ¶¶ 17, 19; see also Biron Decl., Ex. L
(Commerzbank Financial Statements and Management Report 2015).

7

A federal court sitting in diversity applies the forum
state’s statute of limitations provisions as well as any
provisions that govern the tolling of the statute of
limitations. Diffley v. Allied–Signal, Inc., 921 F.2d 421, 423
(2d Cir. 1990); see also Vincent v. Money Store, 915 F. Supp. 2d
553, 562 (S.D.N.Y. 2013). In diversity cases in New York,
federal courts apply New York’s borrowing statute, N.Y. C.P.L.R.
§ 202. Stuart v. Am. Cyanamid Co., 158 F.3d 622, 627 (2d Cir.
1998).
N.Y. C.P.L.R. § 202 requires a non-resident plaintiff to
file a claim within the shorter of either: 1) the New York
statute of limitations; or 2) the statute of limitations in the
jurisdiction in which the claim accrued. Glob. Fin. Corp. v.
Triarc Corp., 715 N.E.2d 482, 484 (N.Y. 1999) (“When a
nonresident sues on a cause of action accruing outside New York,
CPLR 202 requires the cause of action to be timely under the
limitation periods of both New York and the jurisdiction where
the cause of action accrued. This prevents nonresidents from
shopping in New York for a favorable Statute of Limitations.”
(footnote omitted)). When borrowing a foreign jurisdiction’s
statute of limitations, the tolling provisions are also
borrowed. GML, Inc. v. Cinque & Cinque, P.C., 877 N.E.2d 649,
650 (N.Y. 2007).

8

“[B]ecause the defendant[] bear[s] the burden of
establishing the expiration of the statute of limitations as an
affirmative defense, a pre-answer motion to dismiss on this
ground may be granted only if it is clear on the face of the
complaint that the statute of limitations has run.” Fargas v.
Cincinnati Mach., LLC, 986 F. Supp. 2d 420, 427 (S.D.N.Y. 2013)
(citations omitted).
Commerzbank initiated this suit on December 23, 2015.
(i)
With respect to the Palmer 3 Certificates, the defendant
argues that any claims that accrued prior to December 23, 2009,
the longest New York statute of limitations applicable to any of
Commerzbank’s claims, are time-barred under New York law.1 The
defendant presses the application of the relevant New York
statute of limitations for any claims related to the Palmer 3
Certificates that accrued prior to the transfer of the Palmer 3
Certificates from Palmer 3 to Dresdner in August 2008.
The parties’ papers on this point are like two ships
passing in the night. Commerzbank does not dispute the
defendant’s basic New York untimeliness argument, but instead
suggests that the relevant statute of limitations for many of
1

As in Deutsche Bank I, the parties do not dispute the
applicable limitations periods for the various claims, and the
longest relevant limitations period under New York law is six
years. See Phoenix Light, 172 F. Supp. 3d at 708 n.2 (discussing
the relevant New York statute of limitations for each claim).
9

its claims would be tolled under American Pipe & Const. Co. v.
Utah, 414 U.S. 538 (1974). See Pl.’s Op. Mem. at 5 & n.1. In
reply, the defendant is equally nonresponsive to Commerzbank’s
position, asserting that “Commerzbank does not dispute that to
the extent its claims accrued before December 23, 2009 (i.e., 6
years before this action), they are time-barred under New York
law.” Def.’s Reply Mem. at 1 n.2.
On December 23, 2014, one year prior to the initiation of
this action, the plaintiffs in the Phoenix Light Action brought
the same causes of action at issue in this case, which were thus
subject to the same statutes of limitations under New York law.
See Phoenix Light, 172 F. Supp. 3d at 709. In Deutsche Bank I,
this Court ruled that “[a]ny claims arising from facts prior to
December 23, 2008, the longest statute of limitations applicable
to any of the claims, would be time barred.” Id.
The plaintiffs in the Phoenix Light Action did not raise
the issue of American Pipe tolling. See Phoenix Light Action,
14-cv-10103, Dkt. 40. Under American Pipe, “the commencement of
a class action suspends the applicable statute of limitations as
to all asserted members of the class who would have been parties
had the suit been permitted to continue as a class action.” Am.
Pipe, 414 U.S. at 554; see also In re New Oriental Educ. & Tech.
Grp. Sec. Litig., 293 F.R.D. 483, 487 (S.D.N.Y. 2013). “[T]he
Court of Appeals for the Second Circuit has recognized that
10

American Pipe tolling is part of New York common law.” Choquette
v. City of New York, 839 F. Supp. 2d 692, 697 n.3 (S.D.N.Y.
2012) (citing Cullen v. Margiotta, 811 F.2d 698, 719–21 (2d Cir.
1987) (“New York courts have . . . long embraced the principles
of American Pipe.”), overruled on other grounds by Agency
Holding Corp. v. Malley–Duff & Assocs., Inc., 483 U.S. 143
(1987)).
Commerzbank has raised a potentially meritorious argument
that could overcome at least portions of the defendant’s New
York statute of limitations defense with respect to the Palmer 3
Certificates. The defendant, represented by counsel, has failed
to respond to the American Pipe tolling argument other than to
assert erroneously that Commerzbank conceded the New York time
bar to its claims. Because the defendant failed to respond to a
potentially meritorious argument by Commerzbank, the defendant’s
motion to dismiss as untimely under New York law the claims with
respect to the Palmer 3 Certificates is denied without prejudice
to renewal in a later motion or answer. See Stop & Shop
Supermarket Co. LLC v. Goldsmith, No. 10-cv-3052 (VB), 2013 WL
3179501, at *9 (S.D.N.Y. June 24, 2013).
(ii)
The defendant argues that all of the claims related to the
Commerzbank Certificates, the Eurohypo Certificates, and the

11

Palmer 3 Certificates (that accrued after their transfer to
Dresdner) are time-barred under German law.
For the purposes of N.Y. C.P.L.R. § 202, a cause of action
“accrued” at the time when, and the place where, the plaintiff
is injured. Glob. Fin. Corp., 715 N.E.2d at 484; see also
Portfolio Recovery Assocs., LLC v. King, 927 N.E.2d 1059, 1061
(N.Y. 2010) (noting that, where a cause of action has been
assigned, the question of where and when the cause of action
accrued focuses on the original assignor). Absent unusual
circumstances, when the injury of a nonresident plaintiff is
purely economic, the cause of action accrues where the plaintiff
resides and sustains the economic impact of the loss, see Glob.
Fin., 715 N.E.2d at 485, rather than where the defendant
committed the wrongful acts, see Gordon & Co. v. Ross, 63 F.
Supp. 2d 405, 408 (S.D.N.Y. 1999) (citation omitted); see also
Vincent, 915 F. Supp. 2d at 568. “If the injured party is a
corporation, then the place of residence for the purposes of
[the borrowing statute] is traditionally the state of
incorporation or the corporation’s principal place of business.”
HSN Nordbank AG v. RBS Holdings USA Inc., No. 13 CIV. 3303
(PGG), 2015 WL 1307189, at *5 (S.D.N.Y. Mar. 23, 2015) (quoting
Baena v. Woori Bank, No. 05 Civ. 7018(PKC), 2006 WL 2935752, at
*6 (S.D.N.Y. Oct. 11, 2006)). “[T]he thrust of the inquiry is
who became poorer, and where did they become poorer as a result
12

of the conduct complained of.” Id. (citation and internal
quotation marks omitted).
It is undisputed that the alleged injuries in this case are
purely economic in nature; that Commerzbank was incorporated in
Germany with its principal place of business in Germany at the
time its claims accrued; and that Eurohypo and Dresdner, the
banking entities whose claims Commerzbank has acquired, were
likewise incorporated in Germany with their respective principal
places of business in Germany at the time their claims accrued.
The challenged claims plainly accrued in Germany and, pursuant
to the New York borrowing statute, are subject to any relevant
German statute of limitations as well as any relevant New York
statute of limitations.2 See, e.g., IKB Deutsche Industriebank AG
v. McGraw Hill Fin., Inc., No. 14-CV-3443 (JSR), 2015 WL
1516631, at *3 (S.D.N.Y. Mar. 26, 2015), aff’d, 634 F. App’x 19
(2d Cir. 2015) (summary order).
Nevertheless, Commerzbank argues that its claims must be
timely under New York and English law, but not German law,
because Commerzbank’s “acquisitions and other activities related
to the Certificates were conducted at and through” Commerzbank’s
London Branch. Am. Compl. ¶ 16. Commerzbank makes no effort to
explain the effect of English law on the timeliness of its
2

The defendant does not argue that the claims are untimely under
New York law except with respect to the Palmer 3 Certificates
prior to their transfer to Dresdner, as addressed above.
13

claims. Commerzbank also does not address what law should apply
in the event that the claims accrued prior to their assignment
to Commerzbank from Dresdner and Eurohypo, respectively, but,
presumably, Commerzbank would advocate the application of a
statute of limitations other than that of Germany. See Am.
Compl. ¶ 17 (suggesting that Eurohypo’s RMBS purchase decisions
were made from its New York branch); Am. Compl. ¶ 20 (suggesting
that Dresdner’s RMBS purchase decisions were made from its
London branch).
Commerzbank argues that the German statute of limitations
should not be applied because a departure from the general New
York rule for corporate claim accrual is warranted based on the
“financial base” exception identified in Lang v. Paine, Webber,
Jackson & Curtis, Inc., 582 F. Supp. 1421, 1426 (S.D.N.Y. 1984).
Under the Lang financial base exception, “Where a plaintiff
‘maintain[s] [a] separate financial base’ and where the impact
of the financial loss [is] felt at that location, it may
constitute an alternative place of injury.” Baena, 2006 WL
2935752, at *6 (citation omitted). In Lang, 582 F. Supp. at
1426, the court found that, although the individual-plaintiff in
that case was a resident of Canada at the time his claims for
securities fraud and breach of fiduciary duty accrued, his
claims should be deemed to have accrued in Massachusetts, where

14

he maintained the bank account --- his “financial base” --- that
was allegedly victimized by the defendant’s acts.
Commerzbank has cited no case in which a court found that a
branch constituted a financial base separate from the bank for
purposes of the Lang financial base exception. To the contrary,
courts have repeatedly rejected the application of the financial
base exception in RMBS cases similar to this one because “it is
well established that a ‘branch or agency of a bank is not a
separate entity.’” HSN Nordbank, 2015 WL 1307189, at *5 (quoting
In re Liquidation of N.Y. Agency & Other Assets of Bank of
Credit & Commerce Int’l, S.A., 683 N.E.2d 756, 762 (N.Y. 1997));
see also, e.g., Deutsche Zentral-Genossenchaftsbank AG v. HSBC
N. Am. Holdings, Inc., No. 12 CIV. 4025 (AT), 2013 WL 6667601,
at *6 (S.D.N.Y. Dec. 17, 2013); Deutsche ZentralGenossenschaftsbank AG, N.Y. Branch v. Citigroup, Inc., 998
N.Y.S.2d 306, 2014 WL 4435991, at *1 (N.Y. Sup. 2014) (“[I]t is
well established under New York law that ‘a branch/agency is
nothing more than a stall in the money market bazaar of
international banking in New York.’” (citation omitted));
Stichting Pensioenfonds ABP v. Credit Suisse Grp. AG, 966
N.Y.S.2d 349, 2012 WL 6929336, at *2-3 (N.Y. Sup. 2012);
Deutsche Zentral-Genossenschaftsbank AG v. Bank of Am. Corp. (In
re Countrywide Fin. Corp. Mort.-Backed Sec. Litig.), Nos. 2:11ML-02265-MRP, 13-CV-01118, 2014 WL 4162382, at *3 (C.D. Cal.
15

June 18, 2014); see also Baena, 2006 WL 2935752, at *7; cf.
Bayerische Landesbank, N.Y. Branch v. Aladdin Capital Mgmt. LLC,
692 F.3d 42, 51 (2d Cir. 2012) (“[A bank branch] is not
separately incorporated, has no legal identity separate from
[the bank], and therefore has no standing to assert a claim
against [the defendant] independent of [the bank’s] claim.”).
As Judge Torres explained in Deutsche ZentralGenossenchaftsbank, 2013 WL 6667601, “economic injury is said to
occur in a location other than where the plaintiff resides only
in ‘extremely rare case[s] where the party has offered unusual
circumstances.’” Id. at *5 (quoting Robb Evans & Assocs. LLC v.
Sun America Life Ins., No. 10 Civ. 5999, 2012 WL 488257, at *4
(S.D.N.Y. Feb. 14, 2012)). “[E]xtending the Lang exception to
non-resident corporations conducting business in New York
without a showing of unusual circumstances ‘would allow the
exception to swallow the rule and render New York's borrowing
statute toothless.’” Id. at *6 (quoting Stichting Pensioenfonds,
2012 WL 6929336, at *3).
There is nothing in the Amended Complaint to suggest that
Commerzbank can meet this showing, or that this case is any
different from the multitude of cases that have rejected the
application of the financial base exception in essentially
identical circumstances. See Deutsche ZentralGenossenchaftsbank, 2013 WL 6667601, at *6 (“[T]he information
16

cited in support of [the plaintiffs’] argument [for the Lang
exception] is either irrelevant to the inquiry or
indistinguishable from the conduct of hundreds of other
financial services companies that operate in New York, but are
located abroad.”). The allegations in the Amended Complaint
indicate that this is a standard economic injury case, and
certainly not unusual. Indeed, Commerzbank is more circumspect
in the Amended Complaint than in its papers with respect to the
locus of its economic losses, alleging only that, “The sales of
the Sold Certificates were made by London Branch and the
economic losses from those sales were experienced in Commerzbank
in England and/or in Germany where Commerzbank is located.” Am.
Compl. ¶ 163 (emphasis added). It is apparent from the Amended
Complaint that Commerzbank cannot establish the presence of
unusual circumstances in this case, such as a showing that it
was operating so far outside of normal corporate banking
existence at the time its claims accrued that they could not be
said to have accrued in Germany. Cf. Daimler AG v. Bauman, 134
S. Ct. 746, 755-56 (2014) (noting that a corporation might be
appropriately subject to general jurisdiction in a place other
than its principal place of business or state of incorporation
where the corporation experienced a dislocation of business due
to a war). Even if all of the material decisions with respect to
the purchase of the Certificates were made at the London branch
17

of Commerzbank, Commerzbank ultimately felt its economic losses
at its principal place of business and state of incorporation:
Germany. See Deutsche Zentral-Genossenchaftsbank, 2013 WL
6667601, at *6 (noting that the Lang exception does not apply
“even when the due diligence review was conducted in New York
and the certificate purchases were carried out in New York,
involving New York accounts, and the certificates were later
managed in New York” (citing In re Countrywide, 834 F. Supp. 2d
at 958; Stichting Pensioenfonds, 2012 WL 6929336, at *2)).
Commerzbank urges that discovery is required to resolve the
issue, but courts have not required discovery to reject the
applicability of the financial base exception where the
allegations in the complaint made it clear that the exception
could not apply. See, e.g., Baena, 2006 WL 2935752, at *7.
Landesbank Baden-Wurttemberg v. RBS Holdings USA Inc., 14 F.
Supp. 3d 488 (S.D.N.Y. 2014), does not aid Commerzbank.
Landesbank, 14 F. Supp. 3d at 501-02, involved claims brought by
several related plaintiffs --- two special purposes vehicles, a
trustee, and a bank --- that had different principal places of
business and incorporation. The defendants argued that the
claims of the special purpose vehicles and the trustee accrued
at the principal place of business and incorporation of the
bank-plaintiff because the bank controlled these other non-bank
entities. Id. After noting its skepticism that the Lang
18

exception could apply in that case, the court permitted the
record to be developed. Id. at 502. Landesbank thus involved a
complex corporate structure shared by several related plaintiffs
that had (at least formally) separate corporate existences, and
a question as to which entity ultimately felt the economic
losses, the non-bank entities individually, or the bank that had
ultimate control over the non-bank entities. By contrast, here,
there is no question that Commerzbank ultimately felt its
economic losses in Germany because Commerzbank’s branches have
no separate existence from Commerzbank. The accrual analysis is
the same for the claims of Dresdner and Eurohypo (both of which
are banks) that accrued prior to their assignment to
Commerzbank. All of the claims at issue must be timely under
German law.3
The parties have submitted dueling expert reports --- from
Doctor Heinz-Peter Mansel on behalf of Commerzbank, and Doctor
Mathias Rohe on behalf of the defendant, respectively --regarding the application of German law to this case. Pursuant
to Rule 44.1 of the Federal Rules of Civil Procedure, questions
of foreign law are treated as questions of law, and the Court
3

Notwithstanding the foregoing, in light of the disposition of
this opinion, Commerzbank may renew its argument after
discovery. Absent the showing of unusual circumstances required
to establish a separate financial base, the challenged claims
must be timely under German law. It is difficult to see what
discovery Commerzbank needs to establish where it experienced
the economic loss about which it is complaining.
19

“may consider any relevant material or source, including
testimony, whether or not submitted by a party or admissible
under the Federal Rules of Evidence.” Fed. R. Civ. P. 44.1; see
also Seetransport Wiking Trader Schiffahrtsgesellschaft MBH &
Co., Kommanditgesellschaft v. Navimpex Centrala Navala, 29 F.3d
79, 81 (2d Cir. 1994); Carbotrade S.p.A. v. Bureau Veritas, No.
92 Civ. 1459, 1998 WL 397847, at *2 (S.D.N.Y. July 16, 1998).
“Accordingly, foreign law should be argued and briefed like
domestic law. As with domestic law, judges may rely on both
their own research and the evidence submitted by the parties to
determine foreign law.” Sealord Marine Co. v. Am. Bureau of
Shipping, 220 F. Supp. 2d 260, 271 (S.D.N.Y. 2002) (citation
omitted); see also IKB Deutsche Industriebank, 2015 WL 1516631,
at *3 n.1 (noting that courts “may reject the opinion of an
expert on foreign law or give it whatever probative value the
court believes it deserves” (citation omitted)).
Due to the proliferation of RMBS litigation in America
involving claims that accrued in Germany, American courts have
recently had the opportunity to interpret the German statute of
limitations applicable to this case. As the Court of Appeals
explained in IKB Deutsche Industriebank AG v. McGraw Hill Fin.,
Inc., 634 F. App’x 19 (2d Cir. 2015) (summary order):
The parties agree that the relevant provision of
German law is Section 195 of the German Civil Code,
which has a three-year limitations period. That period
20

begins to run at the end of the calendar year in which
1) the claim arose and 2) the plaintiff either has
knowledge of the circumstances giving rise to the
claim and the identity of the defendant, or would have
had
such
knowledge
but
for
gross
negligence.
Bürgerliches Gesetzbuch [BGB] [Civil Code], § 199. . .
. [U]nder German law, a plaintiff has knowledge of the
circumstances giving rise to the claim when she
obtains knowledge of the facts necessary to commence
an action in Germany with an “expectation of success”
or “some prospect of success,” though not without risk
and even if the prospects of success are uncertain. .
. . To satisfy this standard, a plaintiff need not
know all the relevant details or have conclusive proof
available; knowledge of the factual circumstances
underlying the claim is sufficient.
Id. at 22. “[T]he standard requires that the plaintiff
possess sufficient information to ‘be able to formulate a
consistent and coherent statement of the claim.’” Id. at 22 n.2;
see also In re Countrywide, 2014 WL 3529686, at *5 (cited
approvingly by IKB Deutsche Industriebank, 634 F. App’x at 22).
Although the Rohe and Mansel expert reports arrive at opposite
conclusions with respect to the timeliness of Commerzbank’s
claims, the reports are largely consonant with the articulation
of German law by the Court of Appeals.
The defendant argues that Commerzbank’s claims accrued, at
the latest, by 2011, and, thus, if by end-of-year 2011,
Commerzbank had knowledge of the circumstances giving rise to
its claims and the identity of the defendant, then its claims
must be time-barred (the defendant does not argue that
Commerzbank was grossly negligent in acquiring knowledge about

21

its claims). Under German law, Commerzbank must have had
sufficient knowledge of each element of each of its claims with
respect to each Trust for Section 195 to bar all of the claims
that accrued in Germany. See, e.g., HSN Nordbank, 2015 WL
1307189, at *6; Phoenix Light SF Ltd. v. Ace Sec. Corp., 975
N.Y.S.2d 369 (N.Y. Sup. 2013) (“[T]he statute of limitations
does not begin to run until plaintiff is on notice of every
element of the claim, which, in the case of fraud, includes
scienter.”); see also Mansel Expert Report ¶ 35; Rohe Reply
Expert Report ¶ 11.
“Limitations-based arguments in RMBS fraud actions have not
generally been accepted at the motion to dismiss phase.” HSN
Nordbank, 2015 WL 1307189, at *6 (citation omitted) (collecting
cases). “Prospective plaintiffs in such actions often ‘have a
difficult task in obtaining sufficient notice of the facts
underlying their claims.’” Id. (citation omitted).
Based on the allegations, see Fargas, 986 F. Supp. 2d at
427, it cannot be concluded that Commerzbank had sufficient
knowledge of each element of each of its claims with respect to
each, or any, Trust by end-of-year 2011 such that it could have
commenced this action with an expectation, or some prospect, of
success. The Amended Complaint includes myriad allegations about
the pre-2012 conduct of the Third-Party Entities, and the
defendant’s knowledge of that conduct, see, e.g., Am. Compl. ¶¶
22

61, 77, 129; however, those allegations cannot be equated with
Commerzbank’s knowledge of that conduct. Indeed, Commerzbank’s
theory is that the defendant concealed the objectionable conduct
from Commerzbank.
Similarly, the pre-2012 emergence of public information
about the conduct of the Third-Party Entities, along with
certain red flags about their conduct, see, e.g., Am. Compl. ¶¶
114-15, does not mean that Commerzbank necessarily had enough
information to connect the dots that it could bring any of its
claims with an expectation, or some prospect, of success against
the defendant. The defendant’s suggestion that Commerzbank had
the requisite knowledge of its claims based on pre-2012
litigation involving non-trustees fails for the same reason. See
HSN Nordbank, 2015 WL 1307189, at *6 (finding “[e]ven assuming,
arguendo, that German law requires a prospective plaintiff to
monitor foreign news accounts and litigation, it does not follow
that Plaintiffs were or should have been on notice of their
fraud claims” against underwriters years earlier); Landesbank,
14 F. Supp. 3d at 503.
The defendant imputes knowledge to Commerzbank based on the
allegation that, when Commerzbank sold a handful of its
Certificates in November 2011, “it was apparent that [the
defendant] had breached its duties and would not take steps to
remedy its failures.” Am. Compl. ¶ 163. But the allegation does
23

not make clear what Commerzbank knew at the time about the
factual circumstances underlying its claims, including whether
Commerzbank had sufficient information to formulate a consistent
and coherent statement of any of its claims.
The defendant’s motion to dismiss as untimely under German
law the claims with respect to the Eurohypo Certificates, the
Commerzbank Certificates, and the Palmer 3 Certificates is
denied without prejudice to renewal in a later motion or answer.4
B.
Forty-six of the Trusts are governed by PSAs. As
Commerzbank concedes, its claims for violations of the TIA with
respect to these forty-six Trusts are foreclosed by the decision
of the Court of Appeals for the Second Circuit in Ret. Bd. of
the Policemen’s Annuity & Ben. Fund of the City of Chicago v.
Bank of N.Y. Mellon, 775 F.3d 154, 163 (2d Cir. 2014). See also
Phoenix Light, 172 F. Supp. 3d at 706 n.1, 721. Those TIA claims
are dismissed with prejudice.
C.
With respect to the forty-six Trusts governed by PSAs,
Commerzbank has brought claims seeking money damages for
violations of Sections 126 and 130-e of the Streit Act.

4

The parties contest other issues of German law, which are
unnecessary to resolve at this point because their resolution
would not change the disposition of this motion.
24

(i)
Section 126 of the Streit Act provides that a trustee shall
not accept a trust under an indenture or mortgage unless it
contains certain enumerated provisions. N.Y. Real Prop. Law §
126. In Deutsche Bank I, this Court concluded that Section 126
“requires only that a trust indenture contain certain
provisions, such as the provision requiring a trustee to
exercise rights and powers prudently in the case of an event of
default,” but that Section 126 “does not address compliance with
the provision that is required to be included in the indenture
agreement.” Phoenix Light, 172 F. Supp. 3d at 723. The
plaintiffs’ claims in that case were dismissed because the
plaintiffs had not alleged that the trust indentures failed to
include the provisions mandated by Section 126; rather, the
plaintiffs’ claims were predicated on the failure to comply with
those terms, which could not state a cause of action under
Section 126. Id. Commerzbank’s claims for violations of Section
126 here suffer from the same flaws, and are thus dismissed with
prejudice.
(ii)
Section 130-e of the Streit Act --- a little-cited
provision in the case law --- provides that, “A trustee,
committee or any member thereof and a depository may be removed
by the court for cause shown upon the application of any person
25

aggrieved by the act or omission to act of such trustee,
committee, member or depository after such notice and
opportunity to be heard in his or its defense as the court shall
direct.” Commerzbank does not seek the equitable relief
contemplated by Section 130-e, namely the removal of the
defendant as the trustee of the Trusts. Instead, Commerzbank
would bypass the available equitable relief provided by Section
130-e to seek money damages because Commerzbank has been
“aggrieved by the act or omission to act” of the defendant.
Commerzbank relies on the general principle that, under New York
law, “Where a plaintiff succeeds in proving his entitlement to
equitable relief, and the granting of such relief ‘appears to be
impossible or impracticable, equity may award damages in lieu of
the desired equitable remedy.’” Lusker v. Tannen, 456 N.Y.S.2d
354, 358 (App. Div. 1982) (quoting Doyle v. Allstate Ins. Co.,
136 N.E.2d 484, 486 (N.Y. 1956)).
Commerzbank would stretch the limited rule that courts in
equity may fashion suitable relief, including by awarding
damages, to a plaintiff that has succeeded in proving its
entitlement to equitable relief, but without attempting to prove
its own entitlement to such relief. The argument puts the cart
before the horse. In effect, Commerzbank is trying to read a
broad statutory private right of action for money damages into
Section 130-e. But “[w]here the Legislature has not been
26

completely silent but has instead made express provision for
civil remedy, albeit a narrower remedy than the plaintiff might
wish, the courts should ordinarily not attempt to fashion a
different remedy, with broader coverage” than the one provided
by the Legislature. Cruz v. TD Bank, N.A., 855 F. Supp. 2d 157,
172–73 (S.D.N.Y. 2012) (quoting Sheehy v. Big Flats Cmty. Day,
Inc., 541 N.E.2d 18, 22 (N.Y. 1989)), aff’d, 742 F.3d 520 (2d
Cir. 2013). The exclusive remedy afforded to an aggrieved party
under Section 130-e is the removal of the trustee. Commerzbank
has not pleaded that it is entitled to such relief.
Moreover, Commerzbank has failed to establish that removal
would be “impossible or impractical.” The defendant is currently
alleged to be the trustee of the Trusts, meaning that removal
plainly remains within the ambit of the Court’s equitable power.
Commerzbank argues that such removal would be of “little
utility” because the defendant has already allegedly failed many
of its duties as a trustee. Pl.’s Op. Mem. at 22. However, that
does not mean that removal would be impossible or impractical,
or even undesirable for Commerzbank. Indeed, Commerzbank has
made clear that it is alleging that the defendant continues to
shirk its duties as trustee “to date.” Am. Compl. ¶ 117; see
also Am. Compl. ¶¶ 89, 97, 107, 126. Rather, Commerzbank is
simply claiming that it is dissatisfied with the statutory
remedy and can use the purported ineffectiveness of that remedy
27

as a pretext for obtaining damages. But that would ignore the
plain limit of the statute.
Accordingly, Commerzbank’s claim under Section 130-e of the
Streit Act is dismissed with prejudice.5
D.
The defendant has moved to dismiss for want of standing6 the
breach of contract claims with respect to the ten Trusts
governed by PSAs that contain “negating clauses.”7 See Biron
Reply Decl., Ex. B. As an example, a typical negating clause in
the PSAs provides that, “Nothing in this Agreement or in the
Certificates, expressed or implied, shall give to any Person,
other than the Certificateholders, the Hedge Counterparties and
the parties hereto and their successors hereunder, any benefit
or any legal or equitable right, remedy or claim under this
Agreement.” See, e.g., Biron Decl., Ex. 43 § 12.10; see also
Biron Reply Decl., Ex. B. Commerzbank concedes that it does not
hold the Certificates, and that the Depository Trust Company
(the “DTC”), also known as Cede & Co., is the actual holder of
the Certificates.
5

It is unnecessary to reach the defendant’s alternative
arguments for dismissal of the Streit Act claims. See Phoenix
Light, 172 F. Supp. 3d at 723 n.10.
6
The defendant has moved to dismiss these claims pursuant to
Rule 12(b)(1) of the Federal Rules of Civil Procedure.
7
The defendant initially moved to dismiss the breach of contract
claim with respect to Trust “IMM 2007-A” on the same basis, but
has conceded that the operative PSA underlying that Trust does
not in fact contain a negating clause.
28

Just as in this case, the plaintiffs in the Phoenix Light
Action conceded that the DTC was the actual holder of the
certificates at issue there. See Phoenix Light, 172 F. Supp. 3d
at 711-12. In Deutsche Bank I, this Court found that, while the
plaintiffs were beneficial owners of the certificates held by
the DTC, they were not the registered holders, and thus that the
PSAs with negating clauses deprived the plaintiffs of standing
to pursue their breach of contract claims. See id. However, the
plaintiffs were permitted to attempt to cure their lack of
standing by obtaining authorization from the DTC to pursue those
claims. See id. at 712.
Commerzbank stands in the same position as the plaintiffs
in the Phoenix Light Action. Because of the negating clauses,
Commerzbank, as a beneficial but not registered owner of the
Certificates, lacks standing to bring its breach of contract
claims for the ten Trusts at issue; however, Commerzbank may
cure its lack of standing by obtaining authorization from the
DTC, as Commerzbank represents it is currently seeking to do.
Commerzbank attempts to distinguish Deutsche Bank I by
arguing that the DTC is acting as its agent and that Commerzbank
thus has standing to sue on the Certificates as a principal. The
argument is meritless because the plain language of the negating
clause clearly “bar[s] enforcement [of the PSAs] by unnamed
third-party beneficiaries,” such as Commerzbank. Royal Park
29

Invs. SA/NV v. HSBC Bank USA, Nat’l Ass’n, 109 F. Supp. 3d 587,
607 (S.D.N.Y. 2015); see also India.Com, Inc. v. Dalal, 412 F.3d
315, 321 (2d Cir. 2005) (“Under New York law, the effectiveness
of a negating clause to preclude third-party beneficiary status
is well-established: ‘[w]here a provision exists in an agreement
expressly negating an intent to permit enforcement by third
parties, . . . that provision is decisive.’” (citations
omitted)). As with the arguments against enforcement of the
negating clauses advanced by the plaintiffs in Deutsche Bank I,
Commerzbank’s “interpretation of the [PSAs] . . . ignores the
plain language of the PSA provisions that treats registered
holders differently from beneficial owners and would render
superfluous the provision of the PSA that provides a mechanism
for beneficial owners to enforce the agreements.” Phoenix Light,
172 F. Supp. 3d at 711.
Commerzbank’s breach of contract claims with respect to the
ten Trusts governed by PSAs with negating clauses are dismissed
without prejudice, subject to Commerzbank curing its lack of
standing.
E.
The defendant has moved to dismiss the claims for breach of
the implied covenant of good faith. As explained in Deutsche
Bank I:

30

“New York law . . . does not recognize a separate
cause of action for breach of the implied covenant of
good faith and fair dealing when a breach of contract
claim, based upon the same facts, is also pled.”
Harris v. Provident Life & Accident Ins. Co., 310 F.3d
73, 81 (2d Cir. 2002). A plaintiff can maintain a
claim for breach of the implied covenant of good faith
and fair dealing simultaneously with a breach of
contract claim “only if the damages sought by the
plaintiff for breach of the implied covenant are not
intrinsically tied to the damages allegedly resulting
from breach of contract.” Page Mill Asset Mgmt. v.
Credit Suisse First Bos. Corp., No. 98–cv–6907 (MBM),
2000 WL 335557, at *8 (S.D.N.Y. Mar. 30, 2000)
(citation and internal quotation marks omitted).
Phoenix Light, 172 F. Supp. 3d at 721. The plaintiffs’
claims for breach of the implied covenant of good faith were
dismissed in Deutsche Bank I because they arose from the same
set of facts as their claims for breach of contract. Id.
Commerzbank has presented no persuasive reasons to explain
why Deutsche Bank I is distinguishable from this case.
Commerzbank frames its claims for breach of the implied covenant
as based upon the defendant’s prevention or hindrance of the
occurrence of certain contractual conditions precedent that
could have allowed Commerzbank to mitigate its losses, but those
claims are duplicative of Commerzbank’s breach of contract
claims. See id. at 715 & n.5; see also Int’l Techs. Mktg., Inc.
v. Verint Sys., Ltd., 157 F. Supp. 3d 352, 367, 369 (S.D.N.Y.
2016). Commerzbank’s allegations for breach of the implied
covenant depend entirely on the defendant’s alleged breaches of
its obligations as set forth in the PSAs and the Indentures. The
31

claims for breach of the implied covenant of good faith are
dismissed with prejudice.
CONCLUSION
The Court has considered all of the arguments raised by the
parties. To the extent not specifically addressed, the arguments
are either moot or without merit. For the foregoing reasons, the
defendant’s motion to dismiss is granted in part and denied in
part. The Clerk is directed to close Dkt. 31.
SO ORDERED.
Dated:

New York, New York
February 8, 2017

_____________/s/______________
John G. Koeltl
United States District Judge

32