Commerzbank AG v. Wells Fargo Bank N.A.

Filing 614

OPINION AND ORDER re: 520 CROSS MOTION for Summary Judgment and in Opposition to Defendant's Motion for Summary Judgment. filed by Commerzbank AG. For the foregoing reasons, the Court GRANTS Defendant's motion for summary j udgment as to the Phoenix Light Plaintiffs' claims in their entirety. Further, the Court GRANTS in part and DENIES in part the parties' cross-motions for summary judgment as to Commerzbank's claims. More specifically, the Court: GRANTS Defendant's motion for summary judgment as to Commerzbank's claims arising out of the Sold Certificates; GRANTS Defendant's motion for summary judgment as to Commerzbank's claims arising out of the Negating Clause Securities, exc ept with respect to the four loans upon which Judge Netburn reserved judgment; GRANTS Defendant's motion for summary judgment as to Commerzbank's claims arising out of the Separate Trustee Claims, except with respect to the eight loans upon which Judge Netburn reserved judgment; GRANTS Defendant's motion for summary judgment as to the Early EOD Trusts, with the exception of Commerzbank's claims arising out of the OOMLT 2006-2 Trust; GRANTS Defendant's motion for summary judgment as to the German SOL Trusts; GRANTS Defendant's motion for summary judgment as to the Exception Report Trusts, with the exception of claims under trusts (i) GPMF 2005-AR4; (ii) GPMF 2006-AR1; (iii) GPMF 2006-AR3; (iv) MSAC 2005-WMC5; an d (v) OWNIT 2006-2; and DENIES Defendant's motion for summary judgment as to the Liquidated Loans Trusts. The Court refers Commerzbank's case back to Judge Netburn for further proceedings addressing Commerzbank's surviving claims. The Clerk of Court is directed to enter judgment for Defendant in case number 14 Civ. 10102 and to close that case. The Clerk of Court is further directed to terminate the motion at docket entry 520 in case number 15 Civ. 10033 and to lift the stay in that case. SO ORDERED. Case Stay Lifted. (Signed by Judge Katherine Polk Failla on 7/12/2022) (kv)

Case 1:15-cv-10033-KPF-SN Document 614 Filed 07/12/22 Page 1 of 68

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
PHOENIX LIGHT SF LTD., et al.,
Plaintiffs,
-v.-

14 Civ. 10102 (KPF) (SN)

WELLS FARGO BANK, N.A.,
Defendant.
COMMERZBANK AG,
Plaintiff,
-v.WELLS FARGO BANK, N.A.,

15 Civ. 10033 (KPF) (SN)
OPINION AND ORDER

Defendant.
KATHERINE POLK FAILLA, District Judge:
Plaintiffs are investors in trusts that were created to facilitate
transactions in financial instruments known as residential mortgage-backed
securities, or “RMBS.” Defendant Wells Fargo Bank, N.A. (“Wells Fargo”) is the
trustee charged with administering the trusts for Plaintiffs’ and other investors’
benefit. Following the collapse of the real estate market more than a decade
ago, Plaintiffs filed these related cases, alleging that Defendant failed to
monitor and address underlying infirmities in the trusts and thereby caused
Plaintiffs to suffer hundreds of millions of dollars in damages.
Now before the Court are the parties’ consolidated cross-motions for
summary judgment pursuant to Federal Rule of Civil Procedure 56. The Court
referred the motions to Magistrate Judge Sarah Netburn, who issued a

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thorough and well-reasoned report and recommendation on December 6, 2021
(the “Report”), recommending that the Court grant in part and deny in part the
parties’ motions. More specifically, Judge Netburn recommends that the Court
find that (i) Plaintiffs lack standing to pursue many of their claims; (ii) certain
of Plaintiffs’ claims are contractually barred; (iii) certain of Plaintiffs’ claims are
barred by judgments reached in prior state court litigation; and (iv) still other of
Plaintiffs’ claims are time-barred. Judge Netburn declined to reach various
other disputes raised by the parties in the interest of judicial economy,
reasoning that the Court’s adoption of her recommendations on these
threshold issues would largely, if not entirely, dispose of the cases.
The Court has reviewed the Report, the parties’ objections to the Report,
and the parties’ submissions before Judge Netburn. For the reasons that
follow, the Court adopts the Report’s recommendation that Defendant’s motion
for summary judgment be granted as to all claims brought by Phoenix Light SF
Limited (“Phoenix Light”); Blue Heron Funding II Ltd.; Blue Heron Funding V
Ltd.; Blue Heron Funding IX Ltd.; Silver Elms CDO PLC; C-Bass CBO XVII Ltd.;
C-Bass CBO XIV Ltd.; Kleros Preferred Funding V PLC; and Royal Park
Investments SA/NV (together with Phoenix Light, the “Phoenix Light Plaintiffs”).
By contrast, the Court adopts in part and rejects in part the Report’s
recommendations with respect to the claims brought by Commerzbank AG
(“Commerzbank,” and together with the Phoenix Light Plaintiffs, “Plaintiffs”),
ultimately concluding that Commerzbank is foreclosed from pursuing some,

2

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but not all, of its claims. The Court refers Commerzbank’s case back to Judge
Netburn for further proceedings addressing Commerzbank’s surviving claims.
BACKGROUND 1
A.

Factual Background
The Court previously addressed the factual background of this case in its

March 30, 2017 Opinion and Order granting in part and denying in part

1

Unless otherwise noted, all record citations correspond to filings made in Phoenix Light
SF Ltd. v. Wells Fargo Bank, N.A., No. 14 Civ. 10102 (KPF) (SN). Where the Court
distinguishes between the Phoenix Light Plaintiffs’ case and Commerzbank’s case, it
cites to the docket of the former action as “PL Dkt. #[]” and the latter as “CB Dkt. #[].”
This Opinion draws its facts primarily from the parties’ Local Rule 56.1 statements
submitted in connection with their cross-motions for summary judgment. The Court
draws first from Defendant’s consolidated Local Rule 56.1 Statement, which comprises:
(i) Defendant’s initial Rule 56.1 Statement in support of its motion for summary
judgment; (ii) Plaintiffs’ responses to each statement; and (iii) Defendant’s replies to
Plaintiffs’ responses. (Dkt. #607 (“Def. 56.1”)). The Court next takes additional facts
from Plaintiffs’ responses and objections to Defendant’s supplemental Local Rule 56.1
Statement, which includes: (i) Defendant’s supplemental statement of facts and
(ii) Plaintiffs’ responses to each statement. (Dkt. #622 (“Pl. Resp. 56.1”)). The Court
further sources facts from Defendant’s responses to Plaintiffs’ Rule 56.1
counterstatement. (Dkt. #608 (“Def. Resp. 56.1”)). Lastly, the Court references the
declarations submitted by the parties in support of and in opposition to their crossmotions for summary judgment and the exhibits thereto, which are cited using the
convention “[Name] Decl.”
Citations to a party’s Rule 56.1 Statement incorporate by reference the documents cited
therein. Where facts stated in a party’s Rule 56.1 Statement are supported by
testimonial or documentary evidence, and denied with only a conclusory statement by
the other party, the Court finds such facts to be true. See Local Civil Rule 56.1(c)
(“Each numbered paragraph in the statement of material facts set forth in the
statement required to be served by the moving party will be deemed to be admitted for
purposes of the motion unless specifically controverted by a corresponding numbered
paragraph in the statement required to be served by the opposing party.”). Additionally,
to the extent that either side purports to dispute facts in the other’s Rule 56.1
Statement with inadmissible evidence or with evidence that does not support the
proposition for which it is advanced, the Court finds such facts to be true. See id. at
56.1(d) (“Each statement by the movant or opponent ... controverting any statement of
material fact[ ] must be followed by citation to evidence which would be admissible, set
forth as required by Fed. R. Civ. P. 56(c).”).
For ease of reference, the Court refers to Defendant’s memorandum of law in support of
its objections to the Report as “Def. Br.” (Dkt. #653); Plaintiffs’ memorandum of law in
support of their objections to the Report as “Pl. Br.” (Dkt. #654); Defendant’s opposition
to Plaintiffs’ objections as “Def. Opp.” (Dkt. #655); Plaintiffs’ opposition to Defendant’s
objections as “Pl. Opp.” (Dkt. #656); Defendant’s reply brief in further support of its

3

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Defendant’s motion to dismiss. (Dkt. #305). BlackRock Allocation Target
Shares: Series S. Portfolio v. Wells Fargo Bank, Nat’l Ass’n, 247 F. Supp. 3d
377, 383 (S.D.N.Y. 2017) (“BlackRock: Series S”), objections overruled, No. 14
Civ. 10067 (KPF) (SN), 2017 WL 3610511 (S.D.N.Y. Aug. 21, 2017). 2 As the
Court stated in that Opinion, “[e]xplanations of the typical formation process
and structure of RMBS trusts abound in this District[.]” Id. (citing BlackRock
Allocation Target Shares v. Wells Fargo Bank, Nat’l Ass’n, No. 14 Civ. 9371
(KPF) (SN), 2017 WL 953550, at *1-3 (S.D.N.Y. Mar. 10, 2017)). The Court
assumes familiarity with its prior Opinion, and provides here only a brief
overview of RMBS trusts, the rights and responsibilities of the parties
associated with the trusts, and the nature of Plaintiffs’ claims.
1.

RMBS Trusts Generally

RMBS are created through a process known as mortgage loan
securitization. Broadly speaking, the mortgage loan securitization process

objections as “Def. Reply” (Dkt. #659); and Plaintiffs’ reply brief in further support of
their objections as “Pl. Reply” (Dkt. #660).
Similarly, the Court refers to Defendant’s memorandum of law in support of its motion
for summary judgment as “Def. SJ Br.” (Dkt. #560); Plaintiffs’ consolidated
memorandum of law in support of their motion for summary judgment and in
opposition to Defendant’s motion for summary judgment as “Pl. SJ Br.” (Dkt. #575);
Defendant’s consolidated memorandum of law in opposition to Plaintiffs’ cross-motion
for summary judgment and reply in further support of its motion for summary
judgment as “Def. SJ Reply” (Dkt. #606); and Plaintiffs’ consolidated motion in further
support of their cross-motion for summary judgment as “Pl. SJ Reply” (Dkt. #619).
2

The Court’s March 30, 2017 Opinion resolved Defendant’s motion to dismiss five related
cases brought against it, two of which were initiated by plaintiffs other than the Phoenix
Light Plaintiffs and Commerzbank. See, e.g., BlackRock Allocation Target Shares: Series
S. Portfolio v. Wells Fargo Bank, Nat’l Ass’n, 247 F. Supp. 3d 377, 383 n.1 (S.D.N.Y.
Aug. 21, 2017) (listing the plaintiffs and providing the docket numbers associated with
their related cases). The other plaintiffs have since resolved their claims against
Defendant and those claims are not addressed further in this Opinion.

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begins with a “sponsor” or “seller” acquiring residential mortgage loans from an
“originator.” (Def. 56.1 ¶ 27). Once the seller acquires enough loans, the seller
pools the loans together and sells them to a “depositor,” who then conveys the
pooled loans to an RMBS trust. (Id. at ¶ 28). The trust operates by selling
certificates that represent an interest in the payments made by the original
borrowers on the mortgage loans to investors, or “certificateholders,” such as,
for example, Commerzbank and the Phoenix Light Plaintiffs. (Id. at ¶¶ 29-30).
The trust, acting through a trustee, ensures that borrowers make their
required payments by engaging a “servicer,” who is tasked with managing the
collection of payments in return for a monthly fee. (Id. at ¶ 32).
2.

The Governing Agreements

The rights and responsibilities of the parties associated with creating and
administering RMBS trusts — including the originators, sponsors, depositors,
trustees, and certificateholders — are set forth in the trusts’ governing
agreements. (Def. 56.1 ¶ 34). In this case, the governing agreements primarily
take the form of either pooling and service agreements (“PSAs”) or indentures
(together with PSAs, the “Governing Agreements” or “GAs”). (Id. at ¶ 33). 3
The Governing Agreements impose a wide variety of duties on the RMBS
trustees. Of particular relevance to the present motions, the GAs require the
trustee to review all loans provided to it by the depositor and certify that the

3

The Court addressed the differences between PSAs and indentures in its March 30,
2017 Opinion. See generally BlackRock: Series S, 247 F. Supp. 3d at 384-85. The
distinctions between the two forms of GAs are not relevant to the parties’ objections to
the Report, and the Court will not distinguish between the two types of agreements,
except when addressing the agreement applicable to a particular trust.

5

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loans and associated documents comply with the GA’s requirements. (See,
e.g., Stanton Decl. (Dkt. #566), Ex. 5 at § 2.02). If, in the process of reviewing
the loan paperwork, the trustee discovers either that there are missing or
deficient documents, or that an originator or seller breached a representation
or warranty (“R&W”), the GAs obligate the trustee to notify certain
contractually-defined parties of the issue and pursue certain specified
enforcement measures. (See generally Def. 56.1, App’x M).
While the precise language related to the trustee’s notice and
enforcement duties differs slightly from trust to trust, the PSA for trust ABFC
2006-OPT2 — one of the trusts implicated in these cases — is illustrative. (See
Stanton Decl., Ex. 5). This PSA states that upon learning of either a missing or
deficient loan document or a breach of a representation or warranty, the RMBS
trustee “shall promptly notify” the contractually-defined parties “and request
that” the deficiency be cured within 120 days (in the case of a defective or
missing document) or 90 days (in the case of a breach of a representation or
warranty) from the date the trustee provides notice of the issue. (Id., § 2.03(a)).
The PSA further provides that, if the responsible party does not cure the defect
or breach within the specified cure period, the trustee “shall enforce the”
party’s obligation to repurchase the loan from the trust. (Id.). 4
In addition to these notice and enforcement duties, the GAs also impose
certain “prudent person” responsibilities on the RMBS trustee in connection
4

The GAs for several other trusts provide that a non-compliant party can cure a defect or
breach either by repurchasing the loan or substituting a compliant loan for the
defective one. (See, e.g., Stanton Decl. (Dkt. #566), Ex. 8 (PSA for GPMF 2005-AR4)).

6

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with so-called events of default (“EODs”). (Def. 56.1 ¶ 632). 5 Most notably, the
GAs provide that during and following an EOD, Defendant “shall exercise such
of the rights and powers vested in it” by the GAs and “use the same degree of
care and skill in their exercise as a prudent person would exercise or use under
the circumstances in the conduct of its own affairs.” (Id.). 6
3.

The Parties

Plaintiffs are certificateholders who invested in RMBS trusts for which
Defendant served as the trustee. (Def. 56.1 ¶ 12). Commerzbank is an
international commercial bank organized under the laws of Germany. (Id. at
¶¶ 1-2). As relevant here, Commerzbank acquired interests in 28 RMBS
certificates that were issued by 19 RMBS trusts. (Id. at ¶ 3). Phoenix Light is a
special purpose investment vehicle backed in part by RMBS. (Id. at ¶ 7). The
remaining Phoenix Light Plaintiffs (i.e., all but Phoenix Light itself) are issuers
of financial instruments known as collateralized debt obligations (“CDOs”) that
are backed in part by RMBS (the “CDO Plaintiffs”). (Id. at ¶ 6). Phoenix Light
“holds more than 50% of the senior notes and, thus, is the Controlling Party” of
the CDO Plaintiffs. (Id. at ¶ 8). The Phoenix Light Plaintiffs collectively
acquired RMBS certificates issued by 11 RMBS trusts. (Id. at ¶ 9).

5

EOD is a catch-all term for certain contractually-defined events that vary from trust to
trust. (See Keenan Decl. (Dkt. #594), Ex. 16 (providing a table of the relevant EOD
provisions for each of the at-issue trusts)).

6

The GAs of several of the relevant RMBS trusts use the term “prudent man” (as opposed
to “prudent person”). (See Def. 56.1 ¶ 632). This difference is immaterial, and the
Court will refer only to the “prudent person” standard.

7

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4.

Plaintiffs’ Claims

Generally speaking, the Report addresses three sets of Plaintiffs’ claims.
The first set of claims alleges that Defendant failed to discharge its notice and
enforcement duties following its discovery of document defects in certain
mortgage loans provided to the RMBS trusts. (See Def. 56.1 ¶ 335). The
second set alleges that Defendant similarly failed to discharge its notice and
enforcement duties after uncovering breaches of certain representations and
warranties. (See, e.g., id. at ¶ 174). And the third set alleges that Defendant
failed to discharge its obligation to act as a “prudent person” following EODs.
(Id. at ¶ 633). All told, Plaintiffs assert that Defendant’s failure to discharge its
obligations under the GAs caused them to incur hundreds of millions of dollars
in damages. (PL Dkt. #80 at ¶ 159; CB Dkt. #1 at ¶ 15).
B.

Procedural Background
The Phoenix Light Plaintiffs and Commerzbank initiated their cases on

December 23, 2014, and December 24, 2015, respectively. (PL Dkt. #1; CB
Dkt. #1). Following the Court’s resolution of Defendant’s motion to dismiss the
related actions and the completion of discovery, the Court referred the cases to
Magistrate Judge Sarah Netburn for a report and recommendation on the
parties’ anticipated summary judgment and Daubert motions. (Dkt. #503).
Defendant filed a consolidated motion for summary judgment on March 10,
2021 (Dkt. #559), and Plaintiffs filed a consolidated cross-motion for summary
judgment on March 12, 2021 (Dkt. #569). The parties’ motions were fully
briefed upon the filing of Plaintiffs’ reply brief on March 15, 2021. (Dkt. #619).
8

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Judge Netburn issued the Report on December 6, 2021, recommending
that the Court grant in part and deny in part the parties’ cross-motions for
summary judgment. (Dkt. #644 (“Report”)). 7 As set forth in greater detail in
the Report, Judge Netburn finds that Defendant should be granted summary
judgment on several threshold issues that preclude Plaintiffs from maintaining
their claims, including: (i) a lack of standing; (ii) provisions in the GAs limiting
who can bring claims under the agreements; (iii) orders issued in certain
Minnesota state court proceedings; and (iv) the applicable statutes of
limitations. (See generally Report). “Because these recommendations may
resolve one or both actions, or may significantly narrow the scope of the
remaining claims,” Judge Netburn declined to reach the parties’ remaining
arguments. (Id. at 2). Judge Netburn further requested that if this Court

7

Judge Netburn issued two versions of the Report on that date. (Dkt. #644, 645). The
first version, which was filed under seal and viewable only to the parties and Court,
referenced and quoted certain exhibits that had previously been filed under seal. (Dkt.
#644; see also Dkt. #646). The second version, which was made publicly available,
redacted all references to and quotations from sealed materials. (Dkt. #645). In
response to Judge Netburn’s order directing the parties to meet and confer as to
whether there was an ongoing need to withhold the redacted material from the public
version of the Report, the parties filed a joint letter on December 9, 2021, stating that
they did not object to the unsealing of the redacted version of the Report. (Dkt. #648).
Judge Netburn thereafter ordered the unsealing of the full Report. (Dkt. #649).
In addition to the Report, Judge Netburn also issued an Opinion and Order on
December 6, 2021, partially denying and partially reserving judgment on the parties’
motions to exclude one another’s experts under Federal Rule of Evidence 702 and
Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993). (Dkt. #647).
Explaining her decision to resolve a limited portion of the parties’ Daubert motions,
Judge Netburn observed that only Defendant’s challenge to the admissibility of
Plaintiff’s expert Ingrid Beckles required resolution to issue the Report and that the
interest of judicial economy counseled against reaching the balance of the parties’
motions. (Id. at 2). As to Ms. Beckles, Judge Netburn found that her opinions on
uncured document defects and loan serving standards were sufficiently reliable and
admissible. Judge Netburn’s resolution of Defendant’s Daubert motion is not at issue
here.

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decided not to adopt certain of her recommendations, then the Court refer the
case back to her for resolution of any remaining issues not addressed in the
Report. (Id. at 56).
Following the filing of the Report, on December 15, 2021, this Court held
a telephonic conference at which it stayed Plaintiffs’ cases to allow the parties
additional time to brief their objections to the Report. (See Dkt. #652). The
parties submitted consolidated objections to the Report on January 14, 2022
(Dkt. #653 (Defendant), 654 (Plaintiffs)); briefs in opposition on February 22,
2022 (Dkt. #655 (Defendant), 656 (Plaintiffs)); and reply briefs on March 15,
2022 (Dkt. #659 (Defendant), 660 (Plaintiffs)). The parties also submitted
several letters informing the Court of relevant decisions issued during and after
the close of briefing. (Dkt. #658, 663, 664, 665, 666, 667). The parties’
objections are now fully briefed and ripe for the Court’s decision.
DISCUSSION
A.

Applicable Law
1.

Reports and Recommendations of a Magistrate Judge

When reviewing a magistrate judge’s report and recommendation, a
district court “may accept, reject, or modify, in whole or in part, the findings or
recommendations made by the magistrate judge.” 28 U.S.C. § 636(b)(1)(C); see
generally United States v. Romano, 794 F.3d 317, 340 (2d Cir. 2015). “To
accept those portions of the report to which no timely objection has been
made, … a district court need only satisfy itself that there is no clear error on
the face of the record.” Herrara v. 12 Water St. Gourmet Cafe, Ltd., No. 13 Civ.
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4370 (JMF), 2016 WL 1268266, at *1 (S.D.N.Y. Mar. 31, 2016). By contrast, a
district court must review de novo “those portions of the report or specified
proposed findings or recommendations to which objection is made.” 28 U.S.C.
§ 636(b)(1)(C); see also Fed. R. Civ. P. 72(b)(3). In undertaking this review, “[i]t
is sufficient that the Court ‘arrive at its own independent conclusion regarding
those portions of the report to which objections are made,’ and the Court ‘need
not conduct a de novo hearing on the matter.’” City of Almaty v. Sater, No. 19
Civ. 2645 (JGK), 2022 WL 1555542, at *2 (S.D.N.Y. May 16, 2022) (quoting In
re Hulley Enters. Ltd., 400 F. Supp. 3d 62, 69 (S.D.N.Y. 2019)).
2.

Motions for Summary Judgment

Under Federal Rule of Civil Procedure 56(a), a “court shall grant
summary judgment 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(a). 8 A fact is “material” if it “might affect the outcome of the
suit under the governing law,” and is genuinely in dispute “if the evidence is
such that a reasonable jury could return a verdict for the nonmoving party.”
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); accord Jeffreys v.
City of New York, 426 F.3d 549, 553 (2d Cir. 2005).

8

The 2010 Amendments to the Federal Rules of Civil Procedure revised the summary
judgment standard from a genuine “issue” of material fact to a genuine “dispute” of
material fact. See Fed. R. Civ. P. 56, advisory comm. notes (2010 Amendments) (noting
that the amendment to “[s]ubdivision (a) ... chang[es] only one word — genuine ‘issue’
becomes genuine ‘dispute.’ ‘Dispute’ better reflects the focus of a summaryjudgment determination.”). This Court uses the post-amendment standard, but
continues to be guided by pre-amendment Supreme Court and Second Circuit
precedent that refer to “genuine issues of material fact.”

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The moving party bears the initial burden of demonstrating “the absence
of a genuine issue of material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323
(1986). The movant may discharge its burden by showing that the nonmoving
party has “fail[ed] to make a showing sufficient to establish the existence of an
element essential to that party’s case, and on which that party will bear the
burden of proof at trial.” Id. at 322; see also Selevan v. N.Y. Thruway Auth.,
711 F.3d 253, 256 (2d Cir. 2013) (finding summary judgment appropriate
where the non-moving party failed to “come forth with evidence sufficient to
permit a reasonable juror to return a verdict in his or her favor on an essential
element of a claim” (internal quotation marks omitted)).
If the moving party meets this burden, the nonmoving party must “set
forth specific facts showing that there is a genuine issue for trial” using
affidavits or otherwise but cannot rely on the “mere allegations or denials”
contained in the pleadings. Anderson, 477 U.S. at 248; see also Wright v.
Goord, 554 F.3d 255, 266 (2d Cir. 2009). In other words, the nonmoving party
“must do more than simply show that there is some metaphysical doubt as to
the material facts,” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S.
574, 586 (1986), and cannot rely on “mere speculation or conjecture as to the
true nature of the facts to overcome a motion for summary judgment,” Knight v.
U.S. Fire Ins. Co., 804 F.2d 9, 12 (2d Cir. 1986).
“When ruling on a summary judgment motion, the district court must
construe the facts in the light most favorable to the non-moving party and
must resolve all ambiguities and draw all reasonable inferences against the
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movant.” Dallas Aerospace, Inc. v. CIS Air Corp., 352 F.3d 775, 780 (2d Cir.
2003). In considering “what may reasonably be inferred” from witness
testimony, however, the court should not accord the non-moving party the
benefit of “unreasonable inferences, or inferences at war with undisputed
facts.” Berk v. St. Vincent’s Hosp. & Med. Ctr., 380 F. Supp. 2d 334, 342
(S.D.N.Y. 2005) (citing Cty. of Suffolk v. Long Island Lighting Co., 907 F.2d
1295, 1318 (2d Cir. 1990)). “Put another way, summary judgment is
appropriate only where the record taken as a whole could not lead a rational
trier of fact to find for the non-movant.” Borley v. United States, 22 F.4th 75,
78 (2d Cir. 2021) (internal alterations omitted).
B.

Analysis
Plaintiffs and Defendant object to different findings and

recommendations made in the Report. Defendant objects only to the Report’s
interpretation of a contractual provision that bears on Commerzbank’s ability
to pursue a subset of its claims against it, and does so only to the extent that
the Court does not find that Commerzbank lacks standing to pursue its claims
for other, independent reasons identified in the Report. By contrast, Plaintiffs
object to the balance of the Report’s findings and recommendations.
Upon de novo review of the challenged portions of the Report, the Court
finds that the Phoenix Light Plaintiffs are collaterally estopped from relitigating
the issues of champerty and prudential standing that were resolved in a prior
case. The Court therefore grants summary judgment in favor of Defendant as
to all of the Phoenix Light Plaintiffs’ claims. The Court further finds that
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Commerzbank (i) lacks prudential standing to bring claims related to
certificates it sold prior to initiating its action; (ii) lacks contractual standing to
bring certain other claims; (iii) is barred from asserting additional claims by
orders issued in prior state court litigation; and (iv) is time-barred from
bringing a final set of claims. The Court thus grants summary judgment in
part to Defendant as to Commerzbank’s claims and refers the case back to
Judge Netburn for further motion practice and a report and recommendation
on all surviving claims.
1.

Standing

In the Report, Judge Netburn makes several findings and
recommendations related to Plaintiffs’ standing to pursue their actions. With
respect to the Phoenix Light Plaintiffs, the Report finds that these plaintiffs lack
prudential standing and, alternatively, that they are collaterally estopped from
relitigating a previous finding that they lack prudential standing. And with
respect to Commerzbank, the Report finds that the bank lacks standing to
pursue its claims based on certain RMBS certificates that it sold prior to
initiating the instant litigation. Unsurprisingly, Plaintiffs object to both sets of
findings and recommendations. The Court addresses the Report’s findings and
Plaintiffs’ corresponding objections in turn.
a.

Collateral Estoppel

While the Report opens by finding that the Phoenix Light Plaintiffs lack
prudential standing, the Court begins with Judge Netburn’s alternative finding
that these plaintiffs are collaterally estopped from relitigating the issues of
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champerty and prudential standing, which issues were resolved against them
in a recent case involving many of the same plaintiffs. (Report 16). As the
Court will explain, it agrees with Judge Netburn that the Phoenix Light
Plaintiffs are collaterally estopped from relitigating these issues. The Court
therefore grants Defendant summary judgment with respect to the Phoenix
Light Plaintiffs’ claims.
As Judge Netburn explains in the Report, “[c]ollateral estoppel applies
‘where [i] the identical issue was raised in a previous proceeding; [ii] the issue
was actually litigated and decided in the previous proceeding; [iii] the party had
a full and fair opportunity to litigate the issue; and [iv] the resolution of the
issue was necessary to support a valid and final judgment on the merits.’”
(Report 13 (quoting Marvel Characters, Inc. v. Simon, 310 F.3d 280, 288-89 (2d
Cir. 2002))). Based on her review of the record, Judge Netburn recommends
that the Phoenix Light Plaintiffs be collaterally estopped from relitigating the
issues of champerty and prudential standing based on Judge Vernon S.
Broderick’s decision in Phoenix Light SF Ltd. v. U.S. Bank Nat’l Ass’n, No. 14
Civ. 10116 (VSB), — F. Supp. 3d —, 2020 WL 1285783, at *1 (S.D.N.Y.
Mar. 18, 2020) (“PL/USB III”), reconsideration denied, No. 14 Civ. 10116 (VSB),
2020 WL 4699043 (S.D.N.Y. Aug. 12, 2020), which the Second Circuit later
affirmed in Phoenix Light SF DAC v. U.S. Bank Nat’l Ass’n, No. 20-1312-cv,
2021 WL 4515256 (2d Cir. Oct. 4, 2021) (summary order) (“PL/USB IV”).
(Report 13-16).

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PL/USB is an RMBS action that involves the same basic factual
circumstances, and many of the same parties, as the Phoenix Light Plaintiffs’
present case. See PL/USB III, 2020 WL 1285783, at *1. Prior to being assigned
to Judge Broderick, the case was assigned to then-District Judge Katherine B.
Forrest. Id. at *2. In a pair of opinions resolving the defendants’ motions to
dismiss, Judge Forrest set the stage for Judge Broderick’s and the Second
Circuit’s subsequent decisions. See Phoenix Light SF Ltd. v. U.S. Bank Nat.
Ass’n, No. 14 Civ. 10116 (KBF), 2015 WL 2359358, at *1 (S.D.N.Y. May 18,
2015) (“PL/USB I”); Phoenix Light SF Ltd. v. U.S. Bank Nat’l Ass’n, No. 14 Civ.
10116 (KBF), 2016 WL 1169515, at *1 (S.D.N.Y. Mar. 22, 2016) (“PL/USB II”).
Briefly stated, Judge Forrest’s decisions in PL/USB address the
transactions through which Phoenix Light and the other plaintiffs in that case
acquired their interests in the relevant RMBS certificates. In PL/USB I, Judge
Forrest found that the plaintiffs had assigned their interests in the relevant
RMBS certificates to certain RMBS trustees and thus granted the defendants’
motion to dismiss for lack of standing. 2015 WL 2359358, at *1-2. In
consequence, “[f]rom April to July of 2015, Plaintiffs sought from” the relevant
RMBS trustees “assignments of the rights to bring these claims in light of”
Judge Forrest’s opinion in PL/USB I. PL/USB III, 2020 WL 1285783, at *3.
The plaintiffs then filed an amended complaint and the defendants again
moved to dismiss the claims, this time arguing that the assignments granting
the plaintiffs rights in the RMBS certificates were champertous and thus void

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under New York law. 9 In PL/USB II, Judge Forrest denied the defendants’
motion to dismiss, finding that the record was insufficiently developed to
resolve these arguments. See 2016 WL 1169515, at *1.
As relevant here, Judge Broderick’s decision in PL/USB III picks up
where Judge Forrest left off. Observing that “[b]oth Supreme Court and Second
Circuit precedent indicate that the lack of valid assignments from [certain
RMBS trustees] would in fact deprive [the plaintiffs] of both Article III and
prudential standing,” PL/USB III, 2020 WL 1285783, at *10, Judge Broderick
set out to determine “whether the assignments to [the] [p]laintiffs of the right to
bring [the] suit were valid,” id. at *11. Judge Broderick ultimately held that the
assignments were invalid because they were made for the sole purpose of
pursuing the litigation and, as such, were champertous under New York law.
Id. at *12-15. Based on this finding, Judge Broderick concluded that Phoenix
Light and the other plaintiffs lacked prudential standing because they were
seeking to assert the relevant RMBS trustees’ — rather than their own — legal
interests in the RMBS certificates. Id. at *16. On appeal, the Second Circuit
affirmed Judge Broderick’s finding, holding that the plaintiffs lacked prudential

9

Under New York’s champerty law, “no corporation or association, directly or indirectly,
itself or by or through its officers, agents or employees, shall solicit, buy or take an
assignment of, or be in any manner interested in buying or taking an assignment of a
bond, promissory note, bill of exchange, book debt, or other thing in action, or any
claim or demand, with the intent and for the purpose of bringing an action or
proceeding thereon[.]” N.Y. Jud. Law § 489(1). As Judge Broderick observed, this law
“restricts individuals and companies from purchasing or taking an assignment of notes
or other securities with the intent and for the purpose of bringing an action or
proceeding thereon.” PL/USB III, 2020 WL 1285783, at *11 (quoting Justinian Cap. SPC
v. WestLB AG, 28 N.Y.3d 160, 166 (2016)).

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standing because “it is clear that the assignments made were indeed
champertous” and “therefore invalid.” PL/USB IV, 2021 WL 4515256, at *1.
Turning to the present case, the Court observes that the Report does not
address the basis for the application of collateral estoppel at length, but
ultimately finds that Judge Netburn’s recommendation is both supported by
the record and consistent with several recent decisions addressing nearly
identical factual circumstances. The Court’s application of the relevant test
demonstrates that the Phoenix Light Plaintiffs are collaterally estopped from
asserting their claims against Defendant in this action. See Simon, 310 F.3d at
288-89 (stating the applicable legal framework).
First, the facts bearing on the issues of champerty and prudential
standing in this proceeding and PL/USB are identical. Indeed, the assignments
at issue in this case are either the same or materially same assignments that
Judge Broderick and the Second Circuit deemed to be champertous in PL/USB.
Compare PL/USB III, 2020 WL 1285783, at *4, and PL/USB IV, 2021 WL
4515256, at *1, with Def. 56.1 ¶¶ 905-11 (listing the assignments).
Second, the issues of champerty and prudential standing were both
litigated and decided in the PL/USB action. See PL/USB III, 2020 WL 1285783,
at *16 (concluding that “the assignments at issue [are] void under New York
champerty law” and, “[a]ccordingly,” that “Plaintiffs lack both constitutional
and prudential standing to bring this breach of contract action”); PL/USB IV,
2021 WL 4515256, at *1 (holding that the assignments were champertous and

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thus that the Phoenix Light Plaintiffs lacked prudential standing “[f]or
substantially the reasons given by Judge Broderick”).
Third, the Phoenix Light Plaintiffs had a full and fair opportunity to
litigate the issues of champerty and prudential standing in PL/USB. Six of the
nine Phoenix Light Plaintiffs in this action were also plaintiffs in PL/USB, and
all parties in that action “took full advantage of the opportunity to pursue
vigorously their claims before the district court and court of appeals.” Phoenix
Light SF Ltd. v. Deutsche Bank Nat’l Tr. Co., — F. Supp. 3d —, No. 14 Civ.
10103 (JGK), 2022 WL 384748, at *9 (S.D.N.Y. Feb. 8, 2022) (“PL/DB”) (finding
this factor to be satisfied in a case involving many of the same Phoenix Light
Plaintiffs); see also Phoenix Light SF Ltd. v. HSBC Bank USA, Nat’l Ass’n, No. 14
Civ. 10101 (LGS), 2022 WL 1266632, at *4 (S.D.N.Y. Apr. 28, 2022)
(“PL/HSBC”) (stating in a similar action that “Plaintiffs have had a full and fair
opportunity to litigate the issue of standing and champerty”).
Moreover, while three of the Phoenix Light Plaintiffs in this action (Blue
Heron II, Blue Heron V, and Blue Heron IX) were not parties to PL/USB, “the
opportunity-to-litigate factor can be satisfied where, as here, the parties in
question are controlled by a party in a related action.” PL/DB, 2022 WL
384748, at *9 (quoting Phoenix Light SF Ltd. v. Bank of N.Y. Mellon, No. 14 Civ.
10104 (VEC), 2022 WL 92213, at *4-5 (S.D.N.Y. Jan. 7, 2022) (“PL/BNY”)); see
also Buechel v. Bain, 97 N.Y.2d 295, 304 (2001) (explaining that privity
“includes … those who control an action although not formal parties to it”).
“The Second Circuit applies the doctrine of privity with flexibility when it comes
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to issue preclusion; so long as the interests of the nonparties were adequately
represented, the application of collateral estoppel is permissible.” Id. (internal
quotation marks and alterations omitted). In this case, Phoenix Light is the
majority noteholder of Blue Heron II, Blue Heron V, and Blue Heron IX and
exercises control over them (Def. 56.1 ¶ 8); the Blue Heron entities were
“parties to the same assignments held champertous by Judge Broderick and
the Court of Appeals” in PL/USB (Report 16); and the Blue Heron entities and
the plaintiffs in the PL/USB action are represented by the same counsel and
have advanced substantially the same arguments with respect to the issues of
champerty and prudential standing in both cases.
On this record, the Court agrees with Judge Netburn’s finding that Blue
Heron II, Blue Heron V, and Blue Heron IX are in privity with and were
adequately represented by the plaintiffs in PL/USB such that they may be
collaterally estopped from relitigating the court’s findings in that prior action.
(See Report 16); See also PL/DB, 2022 WL 384748, at *9 (concluding for similar
reasons that Blue Heron V and Blue Heron IX’s interests “were adequately
protected in” PL/USB and that “there is ‘sufficient privity’ between the Blue
Heron Plaintiffs and the eight other Phoenix Light Plaintiffs” to collaterally
estop the plaintiffs from relitigating findings made in PL/USB); PL/BNY, 2022
WL 92213, at *5 (finding that Blue Heron V was collaterally estopped from
relitigating champerty and prudential standing by PL/USB).
Fourth and finally, the resolution of the champerty and prudential
standing issues was necessary to (and, in fact, dispositive of) both Judge
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Broderick’s and the Second Circuit’s decisions in PL/USB. See PL/USB III,
2020 WL 1285783, at *16 (holding “that Plaintiffs lack both constitutional and
prudential standing to bring this breach of contract action”); PL/USB IV, 2021
WL 4515256, at *1 (finding, “[f]or substantially the reasons given by Judge
Broderick,” that the Phoenix Light Plaintiffs lack prudential standing); see also
PL/DB, 2022 WL 384748, at *10 (stating that “the issues decided by the court
of appeals relating to champerty and prudential standing are dispositive of the
present action”); PL/BNY, 2022 WL 92213, at *5 (observing that “[t]here is no
room to argue whether prudential standing guided the Second Circuit’s
decision in U.S. Bank IV; indeed, it was the entire decision”).
The Phoenix Light Plaintiffs’ objections to the Report’s collateral estoppel
analysis, many of which were presented to and rejected by Judge Netburn, are
unavailing. The Phoenix Light Plaintiffs first suggest that Judge Netburn made
both factual and legal errors in rejecting their argument that Defendant is not
entitled to invoke the defense of collateral estoppel because it was a party to
certain of the assignments at issue and therefore has unclean hands. (Pl. Br.
13). This assertion is based on Judge Netburn’s observation that “Wells Fargo
is not a party to the challenged transactions, and Plaintiffs have not offered
evidence that Wells Fargo acted ‘fraudulently, or … by deceit or any unfair
means has gained an advantage.’” (Report 14 (quoting CBF Indústria de Gusa
S/A v. AMCI Holdings, Inc., 850 F.3d 58, 78 (2d Cir. 2017))).
The Phoenix Light Plaintiffs contend that Judge Netburn’s statement is
erroneous for two reasons. First, they point to the fact that Defendant is, in
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fact, “the CDO trustee for two plaintiffs (Silver Elms II and Blue Heron VII)
named in the initial complaint in this action and was a party to the challenged
transactions.” (Pl. Br. 13). This observation does not undermine Judge
Netburn’s finding that collateral estoppel is appropriate here. Neither Silver
Elms II nor Blue Heron VII is being collaterally estopped in this case, because
both parties voluntarily dismissed their claims in this case. (See Dkt. #80,
490). The Phoenix Light Plaintiffs fail to explain why Defendant’s participation
in two transactions not at issue here should prevent it from invoking collateral
estoppel with respect to several distinct transactions, and the Court is unaware
of any authority that would compel such a counterintuitive result.
Second, the Phoenix Light Plaintiffs separately argue that the Report
incorrectly read “a showing of fraudulent intent” into the applicable legal
standard. (Pl. Br. 13). But the Report did no such thing. Judge Netburn
adopted the precise formulation of the legal standard that the Phoenix Light
Plaintiffs advance in their briefing and concluded that the Phoenix Light
Plaintiffs had not offered any evidence that Defendant had, by “any unfair
means … gained an advantage.” (Compare Report 14, with Pl. Br. 13 (arguing
that “the doctrine of in pari delicto applies when the party ‘gained an advantage’
through ‘any unfair means’”)). Because the Phoenix Light Plaintiffs have failed
to point to evidence of Defendant’s supposed malfeasance — either to Judge

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Netburn or to this Court — the Court adopts Judge Netburn’s finding that
there is no equitable barrier to the application of collateral estoppel. 10
Next, the Phoenix Light Plaintiffs contend that PL/USB passed on only a
“purely legal question” that is not subject to collateral estoppel. (Pl. Br. 13-14).
The Phoenix Light Plaintiffs have unsuccessfully advanced the same argument
before Judge Netburn and several other courts in this District. (Report 15-16).
See, e.g., PL/DB, 2022 WL 384748, at *10 (rejecting the Phoenix Light
Plaintiffs’ argument that “because Judge Broderick explained that the question
of champertous intent, an essential element of champerty, is a ‘factual
question’ and discussed the record evidence before him at length before finally
concluding that the assignments were void”). As Judge Caproni explained in
PL/BNY, the Phoenix Light Plaintiffs’ argument “misstates both what the
Second Circuit decided and the record before the court.” 2022 WL 92213, at
*6. Far from resolving a “purely legal question,” both Judge Broderick and the
Second Circuit made critical factual findings supporting their conclusion that
the Phoenix Light Plaintiffs’ assignments were champertous. As Judge

10

The Phoenix Light Plaintiffs also suggest that the Report failed to hold Defendant to its
burden of “demonstrat[ing] it would be fair to apply collateral estoppel under the
circumstances.” (Pl. Br. 13). In the Phoenix Light Plaintiffs’ view, it would be “grossly
unfair to allow [Defendant] to benefit from the voiding of transactions entered into in
order to address its own conflicts of interest.” (Id.). This argument misses the mark.
Neither Judge Netburn nor this Court is being called on to decide whether the end
result of this litigation is fair. Rather, the issue before the Court is whether Defendant
may fairly invoke the doctrine of collateral estoppel. As recounted above, the Phoenix
Light Plaintiffs have not identified any malfeasance that would preclude Defendant from
invoking and benefiting from collateral estoppel. Further, prior to this case, Phoenix
Light and several of the other Phoenix Light Plaintiffs had ample opportunity to brief
their standing arguments before several district courts, the Second Circuit, and, in a
recent petition for certiorari that was denied, the Supreme Court. (See Dkt. #663).

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Broderick observed in PL/USB III, whether an assignment is champertous “is
usually a factual question that cannot be decided on summary judgment,”
except where “a plaintiff fails to rebut evidence that its purpose in seeking an
assignment was to commence suit[.]” 2020 WL 1285783, at *11. After
reviewing the record before him, Judge Broderick concluded “that there is no
genuine material factual dispute as to” whether “Plaintiffs sought these
assignments for the sole purpose of pursuing this litigation, and for no other
reason.” Id. at *12. “Based on the factual findings of the District Court,” the
Second Circuit likewise held that “it is clear that the assignments made were
indeed champertous, as they were made ‘with the intent and for the primary
purpose of bringing a lawsuit.’” PL/USB IV, 2021 WL 4515256, at *1. 11
Lastly, the Phoenix Light Plaintiffs contend that there has been a
“material occurrence” since PL/USB was decided that relieves them from the
case’s preclusive effect: the Second Circuit’s decision in Fund Liquidation
Holdings LLC v. Bank of Am. Corp., 991 F.3d 370, 375 (2d Cir. 2021) (“Fund
Liquidation”). (Pl. Br. 15). In Plaintiffs’ words, Fund Liquidation “rejected prior
Circuit precedent to the extent it suggests that a ratification cannot cure a
standing defect.” (Id.). The Phoenix Light Plaintiffs contend that “[i]t is now

11

The Phoenix Light Plaintiffs’ argument is also legally unsupported. “While the Supreme
Court has recognized an ‘exception to the applicability of the principles of collateral
estoppel for unmixed questions of law,’ that exception only applies to ‘successive
actions involving unrelated subject matter.’” FCA US, LLC v. Spitzer Autoworld Akron,
LLC, 887 F.3d 278, 289 (6th Cir. 2018) (internal quotation marks omitted) (quoting
United States v. Stauffer Chem. Co., 464 U.S. 165, 171 (1984)). Here, as discussed
earlier, the subject matter in PL/USB and the Phoenix Light Plaintiffs’ case before this
Court are the same. Thus, even if the Phoenix Light Plaintiffs’ argument were factually
supported, the Court would reject it for this independent reason.

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clear” from Fund Liquidation that the Phoenix Light Plaintiffs “can rely on a
ratification [to confer standing] even assuming arguendo they could not rely on
an assignment that is functionally equivalent to a ratification.” (Id.). In other
words, the Phoenix Light Plaintiffs suggest that any standing issues identified
in Judge Broderick’s opinion in PL/USB III are moot in light of ratifications the
plaintiffs received from the certificateholders to pursue their claims.
Fund Liquidation is not the white knight that the Phoenix Light Plaintiffs
wish it to be. While an intervening material change in the law may warrant
cutting short the preclusive effect of a factual finding or judgment in some
circumstances, see Bouchard Transp. Co. v. Long Island Lighting Co., 807 F.
App’x 40, 42 (2d Cir. 2020) (summary order), there has been no intervening
change in law in this case. Fund Liquidation was decided while PL/USB was
pending before the Second Circuit, and the plaintiffs in PL/USB submitted
arguments to the Court of Appeals based on the decision in a letter filed
pursuant to Federal Rule of Appellate Procedure 28(j). See PL/USB, No. 201312, Dkt. #133 (2d Cir. Mar. 22, 2021). As this timeline demonstrates, the
Second Circuit’s decision in Fund Liquidation predates its decision in PL/USB
IV. “Because the court of appeals rendered its decision in [PL/USB] despite
being made aware of the plaintiffs’ Fund Liquidation arguments, that case does
not strip [PL/USB] of its preclusive effect.” PL/DB, 2022 WL 384748, at *11.
*

*

*

For all of these reasons, the Court agrees with Judge Netburn that the
Phoenix Light Plaintiffs are collaterally estopped from relitigating the findings
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made as to champerty and prudential standing in PL/USB. As a result, the
Court finds that the Phoenix Light Plaintiffs lack a legal interest in their claims
and thus are prudentially barred from pursuing their case. Because the
resolution of this threshold issue is dispositive of the Phoenix Light Plaintiffs’
claims, the Court declines to address their remaining objections and grants
Defendant’s motion for summary judgment as to their claims. 12
b.

The Sold Certificates

Having found that the Phoenix Light Plaintiffs are collaterally estopped
from relitigating their lack of prudential standing, the Court now turns to the
second standing issue addressed by Judge Netburn, namely, her finding that
Commerzbank lacks Article III standing to bring a subset of its claims arising
out of certain RMBS certificates that the bank sold prior to initiating its case
(the “Sold Certificates”). (Report 22). 13
Judge Netburn recommends dismissing Commerzbank’s claims
predicated on the Sold Certificates on the basis that New York law governs
Commerzbank’s sale of the Sold Certificates, and that under New York General

12

While the Court will not address any remaining objections made solely by the Phoenix
Light Plaintiffs, the remainder of this Opinion addresses several objections raised by
both the Phoenix Light Plaintiffs and Commerzbank. To the extent the Court’s
resolution of these objections applies to the Phoenix Light Plaintiffs, the Court views
such analysis as providing an independent basis for its decision.

13

Commerzbank sold the certificates between November 3, 2011, and February 12, 2015.
(Def. 56.1 ¶¶ 57-66). The Sold Certificates include: (i) ABFC 2005-HE2 (all tranches);
(ii) ABFC 2005-OPT1 (all tranches); (iii) ABFC 2006-OPT1 (M1 and M3 tranches only);
(iv) ABSHE 2005-HE5 (all tranches); (v) CMLTI 2005-OPT4 (all tranches); (vi) GPMF
2005-AR4 (all tranches); (vii) GPMF 2006-AR1 (all tranches); (viii) GPMF 2006-AR2 (all
tranches); (ix) GPMF 2006-AR3 (all tranches); (x) MSAC 2005-WMC2 (all tranches);
(xi) MSAC 2005-WMC3 (all tranches); (xii) MSAC 2005-WMC5 (all tranches); (xiii) MSAC
2006 HE1 (all tranches); and (xiv) OOMLT 2006-2 (2A4 tranche only). (See Report 17
n.4 (citing Def. 56.1 ¶ 55)); see also Pl. Br. xv).

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Obligations Law § 13-107, “the transfer of Commerzbank’s Sold Certificates
automatically vested in the transferees all of Commerzbank’s claims related to
the Sold Certificates.” (Report 22). “Because it is undisputed that
Commerzbank did not expressly reserve its litigation rights,” Judge Netburn
concluded, “it does not have standing to bring claims related to the Sold
Certificates.” (Id.).
Commerzbank raises several objections to the Report’s findings with
respect to the Sold Certificates. The Court addresses each challenge in turn.
While the Court does not agree with Judge Netburn that Commerzbank’s sale
of the Sold Certificates raises an issue of Article III standing rather than
prudential standing, the Court ultimately agrees that Commerzbank is barred
from asserting claims arising out of the Sold Certificates.
i.

Standing and Waiver

Preliminarily, Commerzbank argues that Judge Netburn improperly
relied on an overturned Second Circuit summary order when she rejected its
arguments that waiver, judicial estoppel, and law of the case precluded
Defendant from raising the issue of Commerzbank’s standing. (Pl. Br. 15-16).
In relevant part, Judge Netburn rejected Commerzbank’s arguments with
respect to these issues based on her observations that (i) subject matter
jurisdiction cannot be waived and (ii) “a Court cannot exercise subject matter
jurisdiction over claims for which the plaintiffs lack standing.” (Report 17). As
Commerzbank observes, the Report cites Valdin Invs. Corp. v. Oxbridge Cap.
Mgmt., LLC, 651 F. App’x 5, 7 (2d Cir. 2016) (summary order), for the latter
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proposition. (Id.). But Valdin’s holding that an “assignment can result in a
loss of [Article III] standing” is no longer good law, as it was subsequently
overruled by the Second Circuit in Fund Liquidation. See Fund Liquidation, 991
F.3d at 381 n.5 (stating that “Valdin does not represent the law of our Circuit”
on this issue). Commerzbank asserts that Fund Liquidation establishes that its
pre-suit sales of the Sold Certificates do not divest it of Article III standing or
the Court of subject matter jurisdiction, and that Judge Netburn erred by
finding otherwise. (Pl. Br. 16).
The Court agrees with Commerzbank, but only to a point. Defendant
challenges Commerzbank’s standing to pursue claims based on the Sold
Certificates. (See Def. Opp. 9-10). Contrary to the Report’s finding, the Second
Circuit held in Fund Liquidation that a party’s pre-litigation assignment of a
claim does not divest the party of Article III standing or the Court of subject
matter jurisdiction. See Fund Liquidation, 991 F.3d at 380 (explaining that a
pre-litigation assignment of a claim does not implicate Article III); see also
Nastasi & Assocs., Inc. v. Bloomberg, L.P., No. 18 Civ. 12361 (JMF), 2021 WL
3541153, at *2 (S.D.N.Y. Aug. 11, 2021) (describing Fund Liquidation as
“holding that a party’s pre-filing assignment of its claim does not deprive that
party of Article III standing”). The Court therefore views Defendant’s challenge
to Commerzbank’s ability to pursue claims based on the Sold Certificates as
raising an issue of prudential, rather than Article III, standing. See Fund
Liquidation, 991 F.3d at 381-82 (noting that a lack of “legal title to, or a
proprietary interest in, the claim” may implicate the prohibition on raising
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another’s legal rights). And because a challenge to a party’s prudential
standing does not implicate the Court’s subject matter jurisdiction, it can be
waived. See June Med. Servs. L.L.C. v. Russo, 140 S. Ct. 2103, 2117 (2020)
(explaining that prudential standing “does not involve the Constitution’s ‘caseor-controversy requirement’” and thus “can be forfeited or waived”). Thus, the
Court finds it appropriate to address Commerzbank’s waiver, judicial estoppel,
and law of the case arguments as part of the Court’s inquiry into
Commerzbank’s ability to maintain its claims based on the Sold Certificates. 14
While Commerzbank’s arguments as to judicial estoppel and law of the
case are more appropriately analyzed alongside Judge Netburn’s choice-of-law
analysis, its waiver argument is best addressed at the outset of the Court’s
analysis. Commerzbank contends that Defendant waived its argument that
Commerzbank lacks standing by failing to raise it as an affirmative defense in
its answer. (Pl. Br. 5). The Court is unpersuaded by this argument. To begin,

14

Defendant cites PL/BNY for the proposition that “prudential standing is a matter of
subject-matter jurisdiction[.]” (Def. Br. 11 (quoting PL/BNY, 2022 WL 92213, at *2)).
PL/BNY, in turn, cites to Thompson v. Cnty. of Franklin, 15 F.3d 245, 248 (2d Cir.
1994), in which the Second Circuit found that its “independent obligation to examine
subject matter jurisdiction” extended “to the prudential rules of standing that, apart
from Art. III’s minimum requirements, serve to limit the role of the courts in resolving
public disputes.” The Court does not read Thompson to hold that prudential standing is
a prerequisite to a court’s exercise of subject matter jurisdiction. Indeed, such a
reading would be contrary to the Supreme Court’s observation that “unlike Article III
standing, prudential standing ‘does not implicate subject-matter jurisdiction, i.e., the
court’s statutory or constitutional power to adjudicate the case.’” Partner Reinsurance
Co. Ltd. v. RPM Mortg., Inc., No. 18 Civ. 5831 (PAE), 2020 WL 2904862, at *2 (S.D.N.Y.
June 3, 2020) (quoting Lexmark Int’l, Inc. v. Static Control Components, Inc., 572 U.S.
118, 128 n.4 (2014)). Instead, Thompson is more appropriately read to stand for the
narrower proposition that federal courts may raise the issue of a party’s prudential
standing sua sponte. See Keepers, Inc. v. City of Milford, 807 F.3d 24, 39 (2d Cir. 2015)
(“The party invoking federal jurisdiction bears the burden of establishing prudential and
constitutional standing, but courts may raise the issue sua sponte, including for the
first time on appeal.” (internal footnotes omitted)).

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while Defendant’s challenge to Commerzbank’s ability to pursue claims related
to the Sold Certificates does not draw this Court’s subject matter jurisdiction
into question, the Court retains the ability to raise and consider the issue of
Commerzbank’s prudential standing sua sponte. See Keepers, Inc. v. City of
Milford, 807 F.3d 24, 39 (2d Cir. 2015) (“The party invoking federal jurisdiction
bears the burden of establishing prudential and constitutional standing, but
courts may raise the issue sua sponte, including for the first time on appeal.”
(internal footnotes omitted)); see also MainStreet Org. of Realtors v. Calumet
City, 505 F.3d 742, 749 (7th Cir. 2007) (rejecting a reading of prior precedent
that would preclude courts from raising prudential standing sua sponte).
Thus, even if Defendant had waived the argument, Judge Netburn would not
have erred in addressing the issue. Moreover, as Defendant identifies in its
briefing, Commerzbank’s ability to pursue claims based on the Sold Certificates
has been a contested issue in this case since at least Defendant’s filing of its
motion to dismiss in 2017, and has continued through Defendant’s second
motion to dismiss, discovery, and summary judgment briefing. (See Def.
Opp. 10 (collecting cites)). On this record, the Court finds that Defendant has
preserved its challenge to Commerzbank’s standing.
ii.

Choice of Law and Prudential Standing

Commerzbank’s more substantive challenge concerns the Report’s
finding that New York law governs its sale of the Sold Certificates. The Report’s
choice of law analysis is determinative of whether Commerzbank may assert
claims under the Sold Certificates. If New York law applies, as Defendant
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urges and the Report finds, then Commerzbank’s sale of the Sold Certificates
transferred not only the certificates themselves, but also all claims related to
them. (See Report 22 (citing N.Y. Gen. Oblig. Law § 13-107)). 15 In that event,
Commerzbank would lack prudential standing to pursue claims based on the
Sold Certificates, because these claims were transferred to the assignees of the
certificates. See W.R. Huff Asset Mgmt. Co., LLC v. Deloitte & Touche LLP, 549
F.3d 100, 108 (2d Cir. 2008) (stating that a “plaintiff [must] have legal title to,
or a proprietary interest in, the claim” to have standing); Fund Liquidation, 991
F.3d at 182 (explaining that W.R. Huff is “best interpreted as limited to” the
context of prudential standing”); cf. PL/USB IV, 2021 WL 4515256, at *1
(concluding that many of the Phoenix Light Plaintiffs lacked prudential
standing to raise claims based on RMBS certificates that they had assigned to
third parties). By contrast, if another jurisdiction’s law applies (such as, for
example, English law), then Commerzbank would have retained its litigation
rights in the Sold Certificates even after selling the certificates themselves. See
PL/DB, 2022 WL 384748, at *12 (making a similar observation); see also Royal
Park Invs. SA/NV v. Wells Fargo Bank, N.A., No. 14 Civ. 9764 (KPF) (SN), 2018

15

The relevant provision of New York’s General Obligations Law provides:
Unless expressly reserved in writing, a transfer of any bond shall
vest in the transferee all claims or demands of the transferrer,
whether or not such claims or demands are known to exist, (a) for
damages or rescission against the obligor on such bond, (b) for
damages against the trustee or depositary under any indenture
under which such bond was issued or outstanding, and (c) for
damages against any guarantor of the obligation of such obligor,
trustee or depositary.
N.Y. Gen. Oblig. Law § 13-107(1).

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WL 1831850, at *6 (S.D.N.Y. Apr. 17, 2018) (observing that “in most states,
assignors must manifest an intent to transfer litigation rights, while New York
law applies a minority rule under which litigation rights automatically
accompany the sale of a certificate” (internal quotation marks omitted)).
The parties agree, with one caveat not relevant here, that Judge Netburn
appropriately used New York’s center of gravity test to determine the
substantive law that applies in this case. (Pl. Br. 17; Def. Opp. 12). 16 As
Judge Netburn explained, “[u]nder New York’s center of gravity test, courts
consider: (i) the places of contracting, negotiation, and performance; (ii) the
location of the subject matter of the contract; and (iii) the domicile or place of
business of contracting parties.” (Report 20 (quoting, inter alia, Zurich Ins. Co.
v. Shearson Lehman Hutton, Inc., 84 N.Y.2d 309, 317 (1994))). “The place of
contracting and the place of performance are given the heaviest weight in this
analysis.” (Id. (citing Brink’s Ltd. v. S. Afr. Airways, 93 F.3d 1022, 1031 (2d
Cir. 1996))).

16

Defendant maintains, as it did before Judge Netburn (see Report 18-19), that standing
is a procedural (rather than a substantive) issue, and that because “procedural matters
are governed by the forum’s law[,]” New York law applies to Commerzbank’s sale of the
Sold Certificates (Def. Opp. 15-16). Defendant’s argument is based primarily on the
First Department’s decision in Royal Park Invs. SA/NV v. Morgan Stanley, in which the
state appellate court held that “[t]he question of whether a plaintiff has standing is a
procedural matter.” 86 N.Y.S.3d 14, 16 (1st Dep’t 2018) (internal quotation marks
omitted). Judge Netburn rejected Defendant’s argument based, in part, on her
observation that “Royal Park appears to be an outlier[.]” (Report 18). As Defendants
state in their opposition brief, however, the First Department has since reaffirmed Royal
Park’s holding in a case entitled Zachariou v. Manios, 130 N.Y.S.3d 448 (1st Dep’t.
2020). (Def. Opp. 16). Nonetheless, the Court declines to resolve Defendant’s argument
with respect to this issue because it finds that New York law applies irrespective of
whether standing is considered a procedural or substantive matter.

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After considering each of the center of gravity test’s three factors, Judge
Netburn concluded that New York law applies to Commerzbank’s sale of the
Sold Certificates. (Report 20-22). “In summary,” Judge Netburn observed, “the
actual certificates are located in New York and the transactions occurred in
New York; although the London Commerzbank branch conducted the sales,
Commerzbank itself is incorporated under German law; and there is
insufficient information to conclude that the buyers were domiciled or had their
principal place of business in England.” (Id. at 22). Based on these factual
findings, and “[w]ith heavy weight accorded to the place of transaction and the
latter two considerations in equipoise,” Judge Netburn found that “New York
has the most significant relationship to the transactions at issue, and New
York law thus governs the question of whether Commerzbank sold its right to
bring claims associated with the Sold Certificates.” (Id.).
Commerzbank raises several objections to Judge Netburn’s analysis,
none of which is persuasive. First, Commerzbank argues that Judge Netburn
improperly declined to factor into her analysis the fact that the bank’s sales of
the Sold Certificates took place in its London office. (Pl. Br. 17-18). The Court
disagrees. As Judge Netburn observed, while the transactions took place in
Commerzbank’s London office, Commerzbank itself is a German bank, and
“courts in this district have rejected the concept that branches of a bank are
separate entities[.]” (Report 20 (quoting Commerzbank AG v. U.S. Bank Nat’l
Ass’n, 457 F. Supp. 3d 233, 243 (S.D.N.Y. 2020) (“CB/USB”))). See also PL/DB,
2022 WL 384748, at *13 (stating in response to the same argument that
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“courts in this district have consistently rejected arguments that a branch
should be treated as a separate entity for choice of law analysis”).
Second, Commerzbank asserts that Judge Netburn ignored the supposed
fact that the buyers of the Sold Certificates were also based in London. (Pl.
Br. 18). Again, the Court finds no error in Judge Netburn’s analysis. Plaintiffs’
evidence on this point consists of a supporting declaration that “lists no fewer
than seven buyers for the Sold Certificates.” (Report 22 (citing Boelstler Decl.
(Dkt. #587) at ¶ 10)). But this list establishes only the identity of certain
buyers and the place of “negotiations and execution”; it does not identify the
domicile or place of business of the ultimate purchasers. Thus, Judge Netburn
appropriately found that this evidence was insufficient to establish “that the
certificate buyers were located in England for purposes of the ‘center of gravity’
test.” (Id.). See also PL/DB, 2022 WL 384748, at *13 (finding plaintiffs’ failure
“to produce evidence regarding the identity and location of the ultimate
purchasers” of sold RMBS certificates to preclude them from meeting their
burden of establishing standing to bring claims related to the certificates).
Third, Commerzbank disputes Judge Netburn’s finding that the actual
sale of the Sold Certificates took place in New York via the Depository Trust
Company (“DTC”). The “DTC is a securities depository based in New York City
that is organized as a limited purpose trust company and provides safekeeping
through electronic record-keeping of securities balances. It also acts as a
clearinghouse to process and settle trades.” (Report 20 (internal citations
omitted)). Echoing Judge Pauley’s findings in CB/USB, Judge Netburn found
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that “[t]he fact that DTC actually holds the certificates and effectuates the
transactions means that the transactions actually occurred in New York and
are governed by New York law.” (Id. at 21 (quoting CB/USB, 457 F. Supp. 3d at
243)). Commerzbank contends that Judge Netburn and Judge Pauley both
conflate the “trade execution date (when parties enter into a contract) and the
later settlement date (when a depository [like DTC] completes the back-office
mechanics.” (Pl. Br. 18). According to Commerzbank, only the former of these
dates is relevant to the present choice-of-law analysis. (Id.).
To be sure, decisions addressing the significance of the DTC’s role in
securities-related cases are not perfectly consistent. Compare, e.g., PL/DB,
2022 WL 384748, at *14 (finding that evidence suggested “that New York law
governed the Sold Certificates transactions because each Sold Certificate was
registered in the [DTC] at the time of sale”), with In re: Petrobras Sec. Litig., 152
F. Supp. 3d 186, 193 (S.D.N.Y. 2016) (rejecting argument that DTC’s
involvement in settling securities purchases was sufficient to establish that
purchases were domestic for federal securities law purposes). Notably, in a
report and recommendation now pending before this Court, Magistrate Judge
Robert W. Lehrburger declined to find that the involvement of the DTC in a
transaction was itself sufficient to compel the application of New York law. (Pl.
Br. 17-19). See Pac. Life Ins. Co. v. Bank of N.Y. Mellon, No. 17 Civ. 1388 (KPF)
(RWL), 2022 WL 1446552, at *9-12 (S.D.N.Y. Feb. 22, 2022) (“PacLife”).
Despite Commerzbank’s repeated assertion that PacLife and this case are
mirrors of one another, the factual record in PacLife differs in several critical
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respects, as was recognized by Judge Lehrburger in PacLife itself. To begin,
“PacLife’s principal place of business is California, the buyers operated out of
California, and all of the pertinent components of contract formation took place
in California.” PacLife, 2022 WL 1446552, at *11. By contrast, Commerzbank
is located in Germany and there is insufficient evidence of where the Sold
Certificates’ ultimate purchasers reside. (See Report 22). Furthermore, Judge
Lehrburger deemed relevant the fact that PacLife (unlike Commerzbank) does
not “trade through any subsidiary entities that were DTC participants.”
PacLife, 2022 WL 1446552, at *11. (Cf. Report 21 (noting that “Commerzbank
trades through a wholly-owned subsidiary that is a DTC participant” (internal
quotation marks omitted)). “Due to the[se] discernable differences,” Judge
Lehrburger “decline[d] to reach the same conclusion as” CB/USB or the Report.
Id. at *12.
After careful review of the decisions discussed above and noted in
Commerzbank’s briefing, the Court agrees with Judge Netburn that the
involvement of the DTC in this case is relevant to the choice-of-law analysis.
Judge Lehrburger’s decision in PacLife does not suggest that it is improper to
consider the DTC’s involvement in a transaction as one factor in a broader
constellation of considerations. Instead, PacLife suggests that where the
remaining considerations, including the location of the ultimate buyers and
sellers, all point toward one jurisdiction, the DTC’s involvement will be

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insufficient to overcome their pull. On this reading, PacLife does not
undermine Judge Netburn’s choice-of-law analysis. 17
Given Commerzbank’s failure to identify any error in Judge Netburn’s
choice-of-law analysis, the Court adopts the Report’s finding that New York law
governed Commerzbank’s sales of the Sold Certificates. Under New York law,
Commerzbank sold both the Sold Certificates and any claims it held based on
the certificates at the time of the transactions. Therefore, Commerzbank lacks
“legal title to, or a proprietary interest in,” its claims based on the Sold
Certificates, and cannot pursue those claims in federal court. See W.R. Huff
Asset Mgmt. Co., LLC, 549 F.3d at 108. The Court thus grants Defendant’s
motion for summary judgment as to Commerzbank’s Sold Certificate claims.
2.

Contractual Bars to Plaintiffs’ Claims

The Report’s next set of findings and recommendations address
provisions in certain of the trusts’ GAs that limit who can bring a claim under

17

For similar reasons, the Court also rejects Commerzbank’s law of the case and judicial
estoppel arguments. Commerzbank objects to Judge Netburn’s analysis based on an
argument Defendant raised in opposing class certification in another RMBS case before
this Court “that settlement through DTC does not turn transactions into New York
transactions.” (Pl. Br. 16). In Commerzbank’s view, the fact that class certification was
ultimately denied in that case means that Defendant “is now estopped under judicial
estoppel and the law of the case” from arguing otherwise. (Id. (citing Royal Park Invs.
SA/NV v. Wells Fargo Bank, N.A., No. 14 Civ. 9764 (KPF) (SN), 2018 WL 1831850, at *7
(S.D.N.Y. Apr. 17, 2018))). The Court takes a different view. In the case discussed in
Commerzbank’s objections, the Court found that individualized issues of standing
would likely predominate over issues common to the proposed class, in part because
choice-of-law issues would require individualized inquiries into “the chain of ownership
necessary to determine whether a given certificateholder owns the litigation rights
associated with their certificates.” Royal Park Invs. SA/NV, 2018 WL 1831850, at *7.
Even assuming Judge Netburn was bound by the Court’s holding in that case, the
Court finds no error in Judge Netburn’s choice-of-law analysis here. Indeed, Judge
Netburn’s individualized inquiry into the chain of ownership implicated by the Sold
Certificates led her to conclude that Commerzbank had not adequately demonstrated
that the ultimate purchasers were domiciled in England. (See Report 22).

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the agreements (the “Negating Clauses”). 18 Negating clauses “limit the parties
who may pursue actions to enforce contractual rights.” (Report 26 (citing
Royal Park Invs. SA/NV v. HSBC Bank USA, Nat’l Ass’n, 109 F. Supp. 3d 587,
606 (S.D.N.Y. 2015) (“RP/HSBC”))). Seven of the trusts at issue in this case
contain GAs with Negating Clauses (the “Negating Clause Securities”). 19 The
GAs for the Negating Clause Securities contain nearly identical provisions,
which state: “‘Nothing in this Agreement or in the Certificates, expressed or
implied, shall give to any Person, other than the Certificateholders, the parties
hereto and the NIMS Insurer and their successors hereunder, any benefit or
any legal or equitable right, remedy or claim under this Agreement.’” (Id.). 20

18

The Report also addresses separate provisions of GAs for four trusts that prescribe
under what circumstances a claim can be brought (the “No-Action Clauses”).
Specifically, the Report recommends rejecting Defendant’s argument that the No-Action
Clauses bar certain of Plaintiffs’ claims. (Report 31-33). Defendant objects to this
recommendation. (See Def. Br. 3-7). As Defendant observes, however, the Court need
not resolve Defendant’s objection because the Court’s finding that Commerzbank lacks
prudential standing to bring claims related to the Sold Certificates moots the issue. (Id.
at 1-2 (stating that, if the Court were to find that Commerzbank lacks standing to bring
claims under the Sold Certificates, “there is no need to reach a decision on the issue of
the applicability of the” No-Action Clauses)).

19

The Negating Clause Securities comprise: (i) all at-issue securities in the ABFC 2005HE2 Trust; (ii) all at-issue securities in the ABFC 2005-OPT1 Trust; (iii) all at-issue
securities in the ABFC 2006-OPT1 Trust; (iv) all at-issue securities in the ABFC 2006OPT2 Trust (for Commerzbank only); (v) all at-issue securities in the ABSHE 2005-HE5
Trust; (vi) all at-issue securities in the CMLTI 2005-OPT4 Trust; (vii) all at-issue
securities in the OOMLT 2006-2 Trust; (viii) the M3 tranche of the FFML 2006-FFA
Trust; (ix) the certificate in the M1 tranche of the FFML 2006-FFA Trust that was
allegedly acquired on February 13, 2012; (x) the M1 tranche of the IMM 2005-6 Trust;
and (xi) the three certificates in the 1A1 tranche of the IMM 2005-6 Trust that were
allegedly acquired on September 9, 2005. (Report 26 n.6; see also Pl. Br. 20 n.29
(explaining that the Report references a fourth certificate in the 1A1 tranche of the IMM
2005-6 Trust, but that this certificate is not subject to Defendant’s Negating Securities
argument); Def. Opp. i (agreeing with Plaintiffs’ statement with respect to the 1A1
tranche of the IMM 2005-6 Trust)).

20

“One agreement also identifies the ‘Swap Counterparty and its successors and
assignees’ as beneficiaries.” (Report 27 (quoting Stanton Decl., Ex. 20 at § 11.11)).

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Judge Netburn recommends finding that the Negating Clauses bar most
of Plaintiffs’ claims related to the Negating Clause Securities. 21 Preliminarily,
Judge Netburn observed that Plaintiffs are not parties to the GAs, nor is any
the NIMS Insurer or Swap Counterparty, leaving only “Certificateholders” as a
possible source of enforcement rights under the GAs. (Report 27). While
Plaintiffs suggest that the term “Certificateholders” is self-defining, the GAs in
fact differentiate between the “Certificateholder” — which the GAs define as the
“[p]erson in whose name a Certificate is registered in the Certificate Register” —
and the “Certificate Owner[.]” (Id.). Judge Netburn concluded that Plaintiffs
had not offered proof that they are Certificateholders as opposed to Certificate
Owners, and thus were barred from bringing their claims by the Negating
Clauses. (Id.).
Plaintiffs raise several objections to the Report’s recommendation. First,
Plaintiffs assert that Defendant waived its defense based on the Negating
Clauses “by not including a ‘specific denial’ in its answer as required to raise a
lack of capacity defense.” (Pl. Br. 19 (quoting Fed. R. Civ. P. 9(a)(2))). Judge
Netburn considered and rejected this argument, reasoning that Defendant had
preserved the issue in a series of filings made between 2015 and 2020. (Report
27). This Court agrees. Of note, Defendant raised the issue more than seven
years ago, in a motion to dismiss in which it argued that Plaintiffs lacked

21

Judge Netburn deferred ruling on the effect of the Negating Clauses on “four loans
whose claimed enforcement dates were determined by reviewing Dr. [Karl N.] Snow’s
report,” requesting that the issue be remanded to her if the Court were to disagree with
“the rest of the [Report.]” (Report 26 n.6). The Court expresses no opinion as to these
loans.

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standing under the Negating Clauses. (Dkt. #28 at 20-22). Defendant then
raised the issue again in several additional filings, including in its present
motion for summary judgment. (See Def. SJ Br. 10 (collecting filings)). Lastly,
Defendant’s answers to the operative complaints in the present cases assert
Plaintiffs’ lack of standing as an affirmative defense. (PL Dkt. #343 at third
affirmative defense; CB Dkt. #264 at third affirmative defense).
The Court agrees with Judge Netburn that Defendant preserved its
argument based on the Negating Clauses by including it in its motion to
dismiss and, at least plausibly, in its answers. See Wells Fargo Bank, N.A. v.
Wrights Mill Holdings, LLC, 127 F. Supp. 3d 156, 169 (S.D.N.Y. 2015) (stating
that “[u]nder both federal and New York state law, challenges to standing must
be raised in a party’s answer or pre-answer motion to dismiss”); see also Fed.
Deposit Ins. Corp. v. Murex LLC, 500 F. Supp. 3d 76, 97 (S.D.N.Y. 2020)
(applying the same standard of waiver to a defense that could be characterized
as raising either an issue of “contractual standing” or “legal capacity”).
Next, Plaintiffs effectively ask the Court to reinterpret the GAs’ definition
of “Certificateholders.” With a nod to the nebulous concept of “commercial
realities,” Commerzbank contends that the term “Certificateholder” is
“commonly understood to refer to the individual investor that holds a
certificate” (Pl. Br. 20), making Commerzbank the Certificateholder within the
meaning of the Negating Clauses. “Under New York law,” however, “where a
provision in a contract expressly negates enforcement by third parties, that
provision is controlling.” Morse/Diesel, Inc. v. Trinity Indus., Inc., 859 F.2d
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242, 249 (2d Cir. 1988). Commerzbank’s argument, which does not even
attempt to address the GAs’ definition of the contractual term
“Certificateholder,” fails to identify any error in Judge Netburn’s analysis.
Lastly, Commerzbank argues that it received a ratification to pursue its
claims from the Negating Clause Securities’ nominal owner, and that its claims
therefore relate back to the date the case was filed pursuant to Federal Rule of
Civil Procedure 17(a)(3). (Pl. Br. 20-21). 22 As before, Commerzbank made this
argument before Judge Netburn, who considered and rejected it for reasons the
Court now adopts. (See Report 27-29). Specifically, Judge Netburn noted that
Rule 17 “permits ‘the real party in interest to ratify, join, or be substituted into
the action’ so long as such substitut[ion] occurs within ‘a reasonable time’ after
objection.” (Id. at 28 (quoting Fed. R. Civ. P. 17(a)(3))). Here, as just discussed,
Defendant raised the issue of Commerzbank’s contractual standing beginning
in 2015 and continuing through the present. (Id.). Yet Commerzbank did not
receive authorization to pursue this action until April and May 2020. (Id.).
“Plaintiffs’ authorizations are therefore untimely and ineffective.” (Id. at 29).
Accordingly, the Court grants Defendant’s motion for summary judgment as to
Commerzbank’s claims relating to the Negating Clause Securities.

22

While Plaintiffs’ other arguments apply equally to both the Phoenix Light Plaintiffs and
Commerzbank, this argument is relevant only to Commerzbank because the Phoenix
Light Plaintiffs have not received authorizations to date. Specifically, Commerzbank
asserts that it obtained authorizations from “an entity called Cede & Co., which is the
nominee of DTC.” (Pl. Br. 19 n.27; see also id. at 20-21).

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3.

The Trust Instruction Proceedings

The Report’s third set of findings and recommendations relate to the
preclusive effect vel non of orders rendered in Minnesota state court.
(Report 33-41). These orders arise from trust instruction proceedings (“TIPs”)
that Defendant initiated before Plaintiffs filed the present cases. (See Def. 56.1
¶¶ 166-194).
“Trust instruction proceedings are a well-established procedure by which
trustees (and other affected parties) can seek judicial guidance from the court
about how to resolve immediate and difficult issues of interpretation of
governing documents.” Wrights Mill Holdings, LLC, 127 F. Supp. 3d at 176
(quoting In re Trusteeship Created by Am. Home Mortg. Inv. Tr. 2005-2, No. 14
Civ. 2494 (AKH), 2014 WL 3858506, at *12 (S.D.N.Y. July 24, 2014)); see also
RESTATEMENT (THIRD) OF TRUSTS § 71 (2007) (explaining that “[t]o avoid undue
risk of liability when reasonable doubt exists in these matters, a trustee may
seek protection by applying for instructions from an appropriate court”).
Under Minnesota’s statutes governing TIPs, “[a]n interested person may
petition the [state] district court and invoke its jurisdiction[.]” Minn. Stat.
§ 501C.0201. Once the state court’s jurisdiction is invoked, the interested
person may ask the court to, among other things, “construe, interpret, or
reform the terms of a trust” or “confirm the appointment of a trustee[.]” Id.,
§ 501C.0202. Any TIP order issued in such a proceeding “is binding in rem
upon the trust estate and upon the interests of all beneficiaries, vested or
contingent, even though unascertained or not in being.” Id., § 501C.0204.
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Between 2012 and 2014, Defendant initiated a series of TIPs in
Minnesota, seeking guidance with respect to its repurchase enforcement
obligations under several trusts’ GAs as well as the appointment of separate
trustees for those trusts. (Def. 56.1 ¶¶ 174-222). The Minnesota courts ruled,
in substance, that Defendant would be relieved of its obligation to enforce
sponsors’ and depositors’ obligations to repurchase certain deficient loans
under the GAs following the appointment of a separate trustee. (See id. at
¶¶ 181-182, 223-252). After Defendant provided notice of the courts’ orders to
the trusts’ certificateholders, separate trustees were appointed. (Id.).
The Report finds that the Minnesota TIPs orders bar Plaintiffs’
repurchase-related claims arising out of 13 separate trusts (the “Separate
Trustee Claims”). (Report 34, 41). 23 Judge Netburn based this finding on the
fact that the Separate Trustee Claims seek to relitigate the same issue that was
resolved by the TIPs orders: whether Defendant owed a duty under the relevant
trusts’ GAs to enforce other parties’ loan repurchase obligations following the
appointment of a separate trustee. (Id. at 38-49). Citing the federal courts’
obligation to afford preclusive effect to state court judgments, Judge Netburn
concluded that Plaintiffs were bound by the Minnesota courts’ finding that

23

The 13 trusts implicated by the Separate Trustee Claims are: (i) ABFC 2006-OPT2;
(ii) ABSHE 2005-HE5; (iii) CMLTI 2005-OPT4; (iv) FFML 2006-FFA; (v) GPMF 2005-AR4;
(vi) GPMF 2006-AR1; (vii) GPMF 2006-AR2; (viii) GPMF 2006-AR3; (ix) MSAC 2005WMC2; (x) MSAC 2006-HE1: (xi) OOMLT 2006-2; (xii) OOMLT 2007-3; and (xiii) OWNIT
2006-2. (See Def. Opp. i; see also Andreoli Decl. (Dkt. #564), Ex. C, D; Report 33). As
she did with respect to the Negating Clause Securities (see supra n.21), Judge Netburn
reserved decision on “eight loans whose claimed enforcement dates were determined by
reviewing Dr. Snow’s report and the twenty loans with R&W breaches in the OOMLT
2007-3 and GPMF 2005-AR4 trusts.” (Report 34). The Court likewise declines to
address these loans in the first instance.

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Defendant owed no repurchase-related enforcement duties following the
appointment of separate trustees. (Id.).
In a reprise of their arguments before Judge Netburn, Plaintiffs assert
that the TIPs orders are not preclusive for both constitutional and more prosaic
reasons. None of these arguments persuades the Court.
a.

Scope

Plaintiffs first argue that the Separate Trustee Claims are outside the
scope of the TIPs orders. (Pl. Br. 21-22). In so arguing, Plaintiffs challenge the
Report’s finding that “those loans whose ‘enforcement dates’ postdate the
separate trustee appointment” were barred by the TIPs orders. (Report 41).
Judge Netburn’s reliance on the so-called “enforcement dates” is premised on
the view that Plaintiffs cannot recover for alleged breaches of duties that
occurred after the Minnesota courts had relieved Defendant of those duties.
(See id. (explaining that the “TIP[s] orders relieved Wells Fargo of its repurchase
obligations as to these loans”)). Plaintiffs contend that this view
misunderstands the significance of an enforcement date. (Pl. Br. 22).
According to Plaintiffs, the enforcement date is “the estimate of the date the
obligated party actually repurchased the loan or otherwise compensated the
trust that was used for damages modeling, not the date [Defendant] should
have commenced enforcement.” (Id.). Plaintiffs assert that, contrary to the
Report’s finding, Defendant should have undertaken enforcement efforts prior
to the enforcement dates. (Pl. Reply 10-11). On this understanding, Defendant
could have breached its duties prior to the enforcement dates.
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Plaintiffs’ argument is belied by their own evidence. In their brief before
this Court, Plaintiffs point to a report prepared by their expert, Dr. Karl N.
Snow, that defines the so-called “enforcement date.” (Pl. Br. 22 (citing Def.
56.1 ¶¶ 749-751); see also Stanton Decl. (Dkt. #566), Ex. 175 (“Snow Report”)).
But Dr. Snow’s report only serves to strengthen Judge Netburn’s conclusion.
As Dr. Snow explains in his report, the enforcement date is “the date on which
Wells Fargo should have started to enforce the obligation to repurchase
Defective Loans[.]” (Snow Report 11). Dr. Snow contrasts the enforcement
date with the “purchase date,” which he defines as “the date that each of the
Responsible Parties would have repurchased the relevant Defective Loans …
had Wells Fargo fulfilled its obligations.” (Id.). In reply, Plaintiffs seek to
conflate the two dates discussed in Dr. Snow’s report, asserting that the
enforcement date is “not the date of [Defendant’s] breach,” but rather an
“‘estimate’ of when the seller would have been compelled to repurchase if”
Defendant had discharged its obligations under the GAs. (Pl. Reply 11). In
doing so, Plaintiffs fail to identify any evidence that would support their
reformulation of their own expert’s report. On this record, Judge Netburn did
not err in finding that the TIPs orders preclude all claims premised on
enforcement dates postdating the appointment of the separate trustees. 24

24

The Court notes that Plaintiffs’ argument with respect to the enforcement dates is also
at odds with an argument made elsewhere in their briefing. As will be discussed in the
following section, Plaintiffs vigorously contest the Report’s finding that certain of their
repurchase-related claims are untimely under the relevant statutes of limitations. (See
Pl. Br. 26). Plaintiffs’ argument on this score relies on their contention that “the fact
that the seller is obligated to repurchase [a defective loan] does not mean that the
trustee breached its duties to take action to enforce the obligation.” (Id. at 28). Yet, in
an about-face meant to avoid the preclusive effect of the TIPs orders, Plaintiffs contend

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b.

Jurisdiction

Next, Plaintiffs argue that the TIPs orders are void because the
Minnesota state courts lacked in rem jurisdiction over the property that was
the subject of the proceedings. (Pl. Br. 22-24). In Plaintiffs’ view, Maryland,
not Minnesota, was the appropriate state in which to bring the TIPs. (Id.).
Plaintiffs base this view on their assertion that Defendant “administered the
intangible property at issue — i.e., the repurchase claims and appointment of a
separate trustee — from Maryland, not Minnesota.” (Id. at 23). “The only
connection to Minnesota identified in the [Report,]” according to Plaintiffs, “is a
corporate trust office located in Minnesota[,]” and “there is no suggestion in the
record of the Minnesota actions that this office had any connection to the
repurchase claims or the appointment of a separate trustee.” (Id.).
The standards governing Plaintiffs’ jurisdictional challenge are supplied
by Minnesota law. “Under the Full Faith and Credit Act, 28 U.S.C. § 1738,
federal courts give preclusive effect to state-court judgments ‘whenever the
courts of the State from which the judgments emerged would do so’ and
‘insofar as doing so is consistent with constitutionally protected due process[.]”
(Report 34 (quoting Allen v. McCurry, 449 U.S. 90, 96 (1980), and Johnston v.
Arbitrium (Cayman Islands) Handels AG, 198 F.3d 342, 347 (2d Cir. 1999))).

that Defendant breached its enforcement-related duties on the date it “discovered a
seller’s failure to cure breaches.” (Pl. Reply 10). Plaintiffs cannot have it both ways. As
it will explain later in this Opinion, the Court finds that Plaintiffs’ better argument is
that Defendant was permitted a reasonable time after discovering missing or defective
loan documents or breaches of warranties and representations to either bring the loan
into compliance or seek repurchase of the loan.

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“Federal courts may not employ their own rules in determining the effect of
state judgments, but must accept the rules chosen by the State from which the
judgment is taken.” Matsushita Elec. Indus. Co. v. Epstein, 516 U.S. 367, 373
(1996) (internal quotation marks, alterations, and citation omitted).
As Judge Netburn explains in the Report, Minnesota law permits
collateral attacks under limited circumstances. Specifically, “judgments may
be challenged for lack of jurisdiction where ‘the lack of jurisdiction affirmatively
appears on the face of the record[.]’” (Report 24 (quoting Hanson v. Woolston,
701 N.W.2d 257, 265 (Minn. Ct. App. 2005))). “For collateral-attack purposes
the record includes, among other things, the pleadings and the judgment.”
Hanson, 701 N.W.2d at 265-66. But “a ‘mere absence’ from the record of facts
‘essential’ to jurisdiction ‘does not render an order’ subject to collateral attack.”
(Report 34 (quoting In re Hudson’s Guardianship, 226 Minn. 532, 536 (1948))).
The Report relies on Matter of HarborView Mortg. Loan Tr. 2005-10,
No. A18-0043, 2018 WL 4201211 (Minn. Ct. App. 2018), to articulate the
applicable jurisdictional principles for in rem proceedings under Minnesota law.
(Report 35). The parties do not dispute that this case provides an accurate
statement of that law. In HarborView, the Minnesota Court of Appeals
explained that it had “identified seven factors to be considered when
determining whether a [state court] has jurisdiction over a multi-state trust[.]”
Id. at *4. These factors include:
[i] the location of the trust property (the situs of the
trust assets), [ii] the domicile of the trust beneficiaries,
[iii] the domicile of the trustees, [iv] the location of the
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trust administrator, [v] the extent to which the litigation
has been resolved, [vi] the applicable law, and [vii] an
analysis of forum non conveniens principles.
Id.
Here, the Court finds that Judge Netburn appropriately concluded that
“the TIP[s] orders are not subject to collateral attack for lack of jurisdiction.”
(Report 34). Plaintiffs have not identified a “jurisdictional defect” that “appears
on the face of the record” in the TIPs. See Hanson, 701 N.W.2d at 262-63. In
fact, Plaintiffs do not address the record in the TIPs whatsoever. (Cf. Pl. Reply
11 (asserting that Defendant’s “own cited authority shows that Minnesota
courts consider the full trial record when assessing a collateral attack”)).
Instead, Plaintiffs seek to expand the record by pointing to facts that, in their
view, demonstrate that Maryland, not Minnesota, possessed jurisdiction over
the repurchase claims. (See id. at 11-12). Even if the Court were to consider
this evidence, it cannot find that the TIPs orders are void for lack of
jurisdiction. Several facts elicited in this case, including that (i) Defendant had
a corporate trust office in Minnesota; (ii) the domiciles of the beneficiaries were
unknown at the time of the TIPs orders; (iii) Defendant administered aspects of
the trusts in Minnesota; and (iv) the TIPs have been completed, suggest that
the Minnesota courts properly exercised jurisdiction over the TIPs. (Report 34;
Def. Opp. 21). More broadly, given Plaintiffs’ failure to grapple with the records
made in the TIPs, the Court cannot find that the Minnesota courts would not
afford preclusive effect to the judgments reached in those proceedings.

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c.

Due Process

Lastly, Plaintiffs raise a pair of due process challenges to the TIPs orders.
Echoing their argument before Judge Netburn, Plaintiffs first contend that the
TIPs orders do not preclude their claims here because Defendant has failed to
show that “Plaintiffs had minimum contacts with Minnesota[.]” (Pl. Br. 24).
Separately, Plaintiffs further suggest that due process dictates that the TIPs
orders, which were premised on the Minnesota courts’ in rem jurisdiction,
cannot be issue preclusive in this in personam litigation. (Id. at 24-25).
Plaintiffs’ first argument can be swiftly rejected. Contrary to Plaintiffs’
suggestion, the Minnesota courts were not required to possess in personam
jurisdiction over Plaintiffs to resolve issues concerning property in which they
possessed an interest. “If an in rem action is brought involving an out-of-state
party’s rights with respect to property in the forum state, … the forum court
ordinarily has the power to decide the case insofar as it affects those rights,
irrespective of whether there are sufficient contacts to confer on the court in
personam jurisdiction over the party.” Johnston, 198 F.3d at 348-49; see also
Bloom v. Emden, No. 19 Civ. 10155 (RA), 2022 WL 799096, at *6 (S.D.N.Y.
Mar. 16, 2022) (citing Johnston for the proposition that “a court’s judgment
affecting the property will be binding on all persons who have an interest in the
property”). Thus, the Minnesota courts’ exercise of in rem jurisdiction over the
trusts’ repurchase claims did not violate Plaintiffs’ due process rights.
Plaintiffs’ second argument is also unavailing. To be sure, a party who
does not appear in an in rem action is bound only by the court’s resolution of
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“his or her interest in the property in question,” and will not be bound by
“decisions on other issues” implicated in subsequent in personam litigation.
Johnston, 198 F.3d at 349. But Plaintiffs have failed to explain how the
Report’s findings transgress these constitutional limits. The Report found only
that Plaintiffs were bound to the TIPs orders’ resolution of “Wells Fargo’s duty
to enforce repurchase obligations” (Report 37), which is the exact “intangible
property at issue” that Plaintiffs identify in their briefing before this Court.
(See Pl. Br. 23 (describing the “intangible property at issue” as “the repurchase
claims and appointment of a separate trustee”)). Accordingly, Judge Netburn
found — and this Court agrees — that giving full faith and credit to the TIPs
orders is consistent with constitutionally protected due process.
*

*

*

The Court is bound by the Full Faith and Credit Act to “give state-court
judgments the same preclusive effect as they would receive in courts of the
same state.” Burkybile v. Bd. of Educ. of Hastings-On-Hudson Union Free Sch.
Dist., 411 F.3d 306, 310 (2d Cir. 2005) (citing 28 U.S.C. § 1738). In this case,
Minnesota state courts held that Defendant would have no repurchase-related
duties following the appointment of separate trustees. Because Plaintiff has
not identified a reason why the Minnesota courts would not accept these
judgments or why this Court should not do the same, the Court adopts Judge
Netburn’s finding that the TIPs orders preclude claims based on loans whose

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enforcement dates’ postdate the appointment of the separate trustees. 25 The
Court grants Defendant’s motion for summary judgment as to these claims. 26
4.

Statutes of Limitations

The Report’s final set of findings and recommendations that will be
addressed in this Opinion concern the timeliness of Commerzbank’s claims. As
Judge Netburn observes in the Report, where, as here, a “nonresident [such as
Commerzbank] sues on a cause of action accruing outside New York, [N.Y.
C.P.L.R. §] 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.” (Report 41 (quoting Glob. Fin. Corp. v. Triarc Corp., 93 N.Y.2d 525,
528 (1999) (internal quotation marks omitted))). Consistent with New York law,
the Report divides its analysis between New York’s and Germany’s statutes of
limitations. (See id. at 41-55). The Court addresses Commerzbank’s
challenges to the Report’s statutes of limitations analysis below. 27

25

As noted above, the Court expresses no opinion as to the loans upon which Judge
Netburn reserved decision. See supra n.23.

26

In addition to the challenges discussed above, Plaintiffs argue in passing that the
Report effectively negates certain provisions in the relevant PSAs governing the
appointment of a separate trustee. (Pl. Br. 25). In Plaintiffs’ view, “the fatal flaw in the
[Report’s] reasoning is assuming that the PSAs can be amended to allow appointment of
a separate trustee in a manner not permitted by the PSAs.” (Id.). In point of fact,
however, the flaw is in Plaintiffs’ argument, in that it fails to address Judge Netburn’s
review and analysis of the PSAs. (See Report 38-39). Given Plaintiffs’ failure to mount
a more robust challenge, the Court reviews this portion of the Report for clear error and
finds none.

27

The Report briefly touches upon the application of so-called “American Pipe tolling” to
Plaintiffs’ claims. See Am. Pipe & Constr. Co. v. Utah, 414 U.S. 538 (1974). (Report 4748). “Under the American Pipe doctrine, ‘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,’ even where the suit ultimately is not permitted to continue as a
class action.” Pac. Life Ins. Co. v. Bank of N.Y. Mellon, No. 17 Civ. 1388 (KPF), 2018 WL
1382105, at *8 (S.D.N.Y. Mar. 16, 2018) (quoting In re Initial Pub. Offering Secs. Litig.,
617 F. Supp. 2d 195, 198 (S.D.N.Y. 2007)). Applying the American Pipe standard,

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a.

Equitable Estoppel

At the outset, the Court considers Commerzbank’s threshold objection to
Judge Netburn’s finding that equitable estoppel was inapplicable to its claims
under New York law. 28 Judge Netburn articulated the applicable legal
standard as “a defendant is estopped from pleading a statute of limitations
defense if the plaintiff was induced by fraud, misrepresentations or deception
to refrain from filing a timely action.” (Report 55 (quoting Ross v. Louise Wise
Servs., Inc., 8 N.Y.3d 478, 491 (2007) (internal quotation marks omitted))).
Judge Netburn then found that Plaintiffs had failed to meet this standard
because they had not pointed “to sufficient instances of fraud,
misrepresentation, or deception that would satisfy the New York standard —
only failures to notify, which are not enough.” (Id.).
Commerzbank argues in its objections that the Report applied the wrong
legal standard. Under New York law, Commerzbank explains, “‘concealment
without actual misrepresentation’ is sufficient to trigger equitable estoppel
when the defendant is a fiduciary[.]” (Pl. Br. 31 (quoting Zumpano v. Quinn, 6
N.Y.3d 666, 675 (2006))). Thus, on Commerzbank’s view, the Report’s finding

Judge Netburn found that a putative class action filed in New York state court “tolls
some of Plaintiffs’ claims, by 29 days for Phoenix Light and 395 days for
Commerzbank[,]” but that its “application is limited” in three ways. (Report 47). See
BlackRock Allocation Target Shares v. Wells Fargo Bank, Nat’l Ass’n, No. 14 Civ. 9371
(S.D.N.Y. 2014) (“BlackRock II”). The Court need not address Plaintiffs’ objections to
Judge Netburn’s analysis on this issue, because any claims that may be tolled by
BlackRock II are barred by the balance of the Court’s findings in this Opinion. (See Def.
Opp. 39-40 (identifying the claims possibly subject to American Pipe tolling and the
independent reasons precluding Plaintiffs from pursuing those claims)).
28

Commerzbank does not object to Judge Netburn’s finding that German law does not
recognize equitable tolling. (See Report 55). After reviewing it for clear error and
finding none, the Court adopts the finding.

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that the bank failed to identify any instances of fraud, misrepresentation, or
deception does not necessarily preclude the application of equitable estoppel.
The Court nonetheless finds that equitable estoppel is inappropriate
here because Commerzbank has “failed to demonstrate how [any alleged]
breach prevented them from bringing a timely action.” Zumpano, 6 N.Y.3d at
675-76. To be sure, Commerzbank has only been able to establish a complete
record through the aid of discovery. (See Pl. SJ Br. 33-34 (making this point in
greater detail)). But Commerzbank has not convincingly explained why the
information it had available to it was insufficient to put the bank on notice of
Defendant’s alleged breaches and their need to bring an action prior to the
expiration of the statute of limitations. Accordingly, the Court declines to estop
Defendant from challenging the timeliness of Commerzbank’s claims.
b.

New York Statute of Limitations

“Under New York law, breach of contract claims are subject to a six-year
statute of limitations and accrue when the contract is breached.” (Report 41
(citing, inter alia, N.Y. C.P.L.R. § 213(2))). The Report finds that three sets of
Commerzbank’s claims accrued more than six years prior to the initiation of
this litigation and recommends that the Court enter summary judgment for
Defendant as to these claims. As discussed below, the Court adopts the
Report’s findings in part with respect to these sets of claims.

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i.

Exception Report Trusts

Commerzbank alleges that Defendant breached certain of its enforcement
obligations provided for in the GAs of eight trusts (the “Exception Report
Trusts”). 29 (See Def. 56.1 ¶ 335 (summarizing Plaintiffs’ allegations)).
As discussed earlier in this Opinion, the GAs for the RMBS trusts in this
case imposed two duties on Defendant that are of significance here. First, the
GAs provided that “[u]pon discovery or receipt of written notice of any
materially defective document in, or that a document is missing from,”
Defendant’s files, Defendant “shall promptly notify” Plaintiffs and several other
interested parties of the defect or missing document and “request that … the
Seller cure such defect or deliver such missing document within [30-120] days
from” when Defendant alerted it to the issue. (See generally Def. 56.1 App’x M
(collating the relevant portions of the PSAs for the Exception Report Trusts)).
Second, the GAs further provided that if the seller does not cure the defect or
supply the missing document, Defendant “shall enforce” the obligation and
“cause the Originator or the Seller, as applicable, to repurchase” the mortgage
at the purchase price “following the expiration” of the cure period. (Id.). 30

29

The Exception Report Trusts are: (i) ABFC 2006-OPT2; (ii) CMLTI 2005-OPT4; (iii) GPMF
2005-AR4; (iv) GPMF 2006-AR1; (v) GPMF 2006-AR3; (vi) MSAC 2005-WMC5;
(vii) OOMLT 2007-3; and (viii) OWNIT 2006-2. (See Report 42 n.9).

30

The Report finds that two of the Exception Report Trusts (MSAC 2005-WMC5 and
OWNIT 2006-2) do not impose a mandatory repurchase duty on Defendant. (See
Report 42 n.11). In contrast with the language quoted above, the PSAs for these trusts
provide that the “Trustee shall request … that the Sponsor purchase such Mortgage
Loan from the Trust Fund[.]” (Id.). Plaintiffs dispute this finding, arguing that the
“PSAs for both Trusts, however, require [Defendant] to ‘exercise the rights referred to
above,’ including the right to compel the responsible party to cure, repurchase or
substitute any Mortgage Loan.” (Pl. Br. 30). The Court is unpersuaded by this

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The Report recommends that the Court dismiss Commerzbank’s claims
arising out of Defendant’s alleged breach of the GAs as untimely under New
York’s six-year statute of limitations. (Report 41-45). In arriving at this
recommendation, Judge Netburn first found that, under the relevant GAs,
Defendant’s duty to notify interested parties of document defects or missing
documents was triggered when Defendant prepared a final exception report —
“which lists missing or defective documents identified by Wells Fargo during its
post-closing review of the trust’s mortgage files” (id. at 42) — for the trusts (id.
at 44). Judge Netburn then found that Defendant’s related duty to enforce the
GAs repurchase provision kicked in upon the expiration of the time to cure the
issue (whether it be a deficient document or a missing one) provided for in the
PSAs. (Id.). Observing that Defendant prepared the final exception reports for
the Exception Report trusts no later than March 2008, Judge Netburn held
that Defendant’s enforcement duties were “triggered no later than October
2008.” (Id. at 45). Because “[m]ore than six years passed before Plaintiffs
commenced their actions in December 2014 and December 2015,” Judge
Netburn concluded that Plaintiffs’ claims were untimely. (Id.).
Commerzbank raises a forceful challenge to the Report’s finding. As
Commerzbank observes, “the fact that the seller is obligated to repurchase”
noncompliant loans under the PSAs “does not mean that the trustee breached
its duties to take action to enforce the obligation.” (Pl. Br. 28). Put differently,

argument, which fails to overcome the plain text of the PSAs, and therefore adopts
Judge Netburn’s finding.

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the Report’s finding that Defendant had a duty to enforce the repurchase
provisions upon the expiration of the sellers’ time to cure does not establish the
date by which Defendant was obligated to discharge that enforcement duty or,
relatedly, the date on which Defendant ultimately breached the duty. Indeed,
as Commerzbank discusses in its objections, the PSAs provide that Defendant
“shall enforce” the seller’s obligation to repurchase the loan, but (with three
exceptions) do not identify a deadline for Defendant to discharge that
obligation. (Id.). 31 While the Report does not address this distinction, the
Court finds it pertinent to its statute of limitations analysis.
Where, as here, “a contract does not specify a date or time for
performance, New York law implies a reasonable time period.” PL/DB, 2022
WL 384748, at *26 (quoting Guilbert v. Gardner, 480 F.3d 140, 149 (2d Cir.
2007) (internal quotation marks omitted)). “The question of what is a
reasonable period of time for performance of a particular contract is a question
of fact for a jury, unless the facts are undisputed, in which case the question
becomes one appropriate for summary judgment.” BLD Prods., LLC v. Remote
Prods., Inc., 509 F. App’x 81, 81 (2d Cir. 2013) (summary order); see also
Tedeschi v. Northland Builders, LLC, 904 N.Y.S.2d 786, 788 (3d Dep’t 2010)

31

The exceptions are (i) ABFC 2006-OPT2; (ii) OOMLT 2007-3; and (iii) CMLTI 2005-OPT4
(Def. 56.1 ¶¶ 342, 344). The PSAs for ABFC 2006-OPT2 and OOMLT 2007-3 provide
that “if the responsible party does not deliver the missing document or cure the
material defect within 120 days, the Trustee ‘shall enforce’ the responsible party’s
obligation to repurchase the loan before the 15th day of the following month.” (Id. at
¶ 342). Similarly, the PSA for CMLTI 2005-OPT4 provides that “the Trustee ‘shall
enforce’ the responsible party’s repurchase obligation within 90 days after the
responsible party was notified.” (Id. at ¶ 344). As to these trusts, Commerzbank was
aware of Defendant’s alleged breaches upon the expiration of the period provided for in
the PSAs.

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(observing that what constitutes a reasonable time “turns on the particular
circumstances of the case and, thus, is ordinarily a question for the jury”).
Here, the Court finds that there is a genuine dispute as to what
constituted a reasonable time for Defendant’s performance under the GAs for
the five Exception Report Trusts that did not provide a deadline for Defendant’s
performance of its enforcement duties. Commerzbank has identified several
pieces of evidence that, in its view, demonstrates that Defendant’s breach of its
enforcement duties occurred in 2010. (See Pl. Br. 29 & n.38 (collecting cites)).
This evidence includes: (i) expert testimony indicating that it was common
practice to allow sellers additional time beyond the specified cure period to
address the defective or missing documents and (ii) data indicating that, by
2010, it was “clear that there was no longer a reasonable likelihood that stillexisting document defects would be cured.” (Id.). Defendant disputes the
significance of Commerzbank’s evidence, challenging the basis for
Commerzbank’s experts’ opinions and the appropriate interpretation of its
data. (Def. Opp. 28). On this latter point, Defendant argues that
Commerzbank’s evidence “shows that more than 90% of the Exception Report
Trusts’ cures occurred by the end of 2007; the cures slowed long before 2010.”
(Id. (italics omitted)). From this, Defendant reasons that, even assuming
Defendant was under a duty to enforce the GAs’ repurchase provisions within a
reasonable time, a reasonable time came and went more than six years before
Commerzbank filed suit. (Id.).

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Given the parties’ disagreement as to what constituted a reasonable time
for Defendant to discharge its enforcement duties, the Court cannot conclude
as a matter of law that a reasonable time for performance had expired under
the five relevant Exception Report Trusts’ GAs more than six years before
Commerzbank filed this action. See PL/DB, 2022 WL 384748, at *26 (denying
summary judgment where the defendant failed to “point to any evidence in the
record that supports its argument that waiting a year or more to enforce
repurchase obligations is unreasonable as a matter of law in view of the
relevant facts and circumstances”). Accordingly, the Court denies Defendant’s
motion for summary judgment as to the claims arising under (i) GPMF 2005AR4; (ii) GPMF 2006-AR1; (iii) GPMF 2006-AR3; (iv) MSAC 2005-WMC5; and
(v) OWNIT 2006-2. By contrast, the Court grants the motion as to claims
under (i) ABFC 2006-OPT2; (ii) OOMLT 2007-3; and (iii) CMLTI 2005-OPT4.
ii.

Liquidated Loans Trusts

Commerzbank also brings claims based on Defendant’s alleged failure to
act upon learning that loan servicers for 17 trusts had liquidated 3,377 loans
with document defects that should have been tendered to the sellers for
repurchase (the “Liquidated Loans Trusts”). (Report 45-46). Specifically,
Commerzbank alleges that Defendant was aware of the servicers’ breaches by
December 1, 2009. (Def. 56.1 ¶ 396; see also Stanton Decl., Ex. 151 at
App’x C). The Report recommends dismissing Commerzbank’s Liquidated
Loans Trusts claims on a similar basis as the Exception Report Trust claims,
reasoning that Defendant’s notice and repurchase duties were triggered at the
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time of the servicers’ alleged breaches (i.e., by at least December 1, 2009) and
that Commerzbank did not initiate its claims based on Defendant’s breaches
until more than six years after that date. (Report 45-46).
The Court’s analysis with respect to the Exception Report Trusts applies
with the same force here. Commerzbank alleges that Defendant knew by
December 1, 2009, that loan servicers had improperly liquidated several
thousand loans. (Def. 56.1 ¶ 396). Defendant suggests that “[a]ny
enforcement duty [it] may have had with respect to those loans would have
been triggered” at that time. (Def. Opp. 29). But Defendant does not identify
any provision of the GAs that required it to act immediately or else be deemed
in breach of the agreements. Nor does Defendant demonstrate that its alleged
breaches occurred prior to the passage of a “reasonable time,” and the Court
cannot rule as a matter of law as to what constituted a reasonable time on this
record. Accordingly, the Court denies Defendant’s motion as to these claims.
iii.

Early EOD Trusts

Commerzbank’s final set of claims relevant to the Report’s analysis of
New York’s statute of limitations concerns Defendant’s alleged failure to
discharge its duties under the GAs for five trusts following EODs (the “Early
EOD Trusts”). 32 The Report found that these claims accrued when Defendant
notified Commerzbank and other certificateholders of the EODs. (Report 46).

32

The Early EOD Trusts are: (i) ABFC 2005-HE2; (ii) ABFC 2005-OPT1; (iii) ABFC 2006OPT1; (iv) ABFC 2006-OPT2; and (v) OOMLT 2006-2. (See Report 42 n.10).

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Because Defendant had sent all such notices by August 2008, the Report
recommended dismissing Commerzbank’s claims as untimely. (Id.).
Commerzbank argues that Judge Netburn’s recommendation is flawed
because it overlooks the fact that Defendant’s duties under the Early EOD
Trusts’ GAs were continuous. (Pl. Br. 26-27). In Commerzbank’s view, the
“PSAs’ requirement that [Defendant] must take action when an EOD ‘has
occurred and remains uncured’ creates a continuing duty that is breached
every day that [Defendant] fails to exercise its rights in the same manner that a
prudent person would.” (Id. at 27). This position, if adopted, would render
Commerzbank’s claims timely, because “[r]egardless of whether [Defendant]
should have acted prior to 2010, it indisputably did not act in 2010 or
thereafter” despite the fact that it “would have been prudent to do so.” (Id.).
The Court rejects Commerzbank’s argument for substantially the same
reasons articulated in PL/DB. See 2022 WL 384748, at *25. As Judge Koeltl
explained in that decision, “New York contract law distinguishes between ‘a
single wrong that has continuing effects and a series of independent, distinct
wrongs,’ and allows an exception to the typical accrual rules only in the latter
case.” Id. (quoting Maloul v. New Columbia Res., Inc., No. 15 Civ. 8710 (KPF),
2017 WL 2992202, at *5 (S.D.N.Y. July 13, 2017)). Here, as in PL/DB,
Defendant committed its alleged breach upon learning of the EODs and, with
one exception addressed below, informing investors that it would not take
action to address them. (See Def. 56.1 ¶¶ 403, 405, 407, 409). The harm
Commerzbank alleges that it suffered as a result is traceable to that single
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breach. “To hold otherwise would eviscerate the statute of limitations in these
circumstances by allowing the clock to perpetually restart even though any
alleged injury is traceable to a decision, that [Defendant] announced to
investors, to do nothing.” PL/DB, 2022 WL 384748, at *25.
Commerzbank’s claims arising out of the OOMLT 2006-2 Trust provide
the exception to the Court’s foregoing analysis. In contrast with the four
notices discussed above, Defendant’s notice with respect to this trust did not
inform investors that Defendant would not act in response to the EOD absent
certificateholder direction. (See Def. 56.1 ¶ 410; see also Def. Opp. 30 (stating
that Defendant “specifically informed investors in four of [the five] notices that
it would take no action unless it was directed to do so” (internal quotation
marks omitted)). Thus, the record does not establish that certificateholders
(such as Commerzbank) in the OOMLT 2006-2 Trust knew or should have
known that Defendant was, in effect, “disclaiming [its] duty to act as a prudent
person” at the time the notices were distributed. PL/DB, 2022 WL 384748, at
*24 (finding under analogous circumstances that certificateholders were put on
notice of their claims against the RMBS trustee upon receiving notices stating
that there had been an EOD and that the trustee would not act absent
direction from the certificateholders). As Defendant has not identified any
other evidence bearing on this issue, the Court cannot conclude on the record
before it that Commerzbank’s claims arose outside the limitations period.
Accordingly, the Court adopts the Report’s finding that Commerzbank’s
claims arising out of four of the five Early EOD Trusts (ABFC 2005-HE2; ABFC
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2005-OPT1; ABFC 2006-OPT1; ABFC 2006-OPT2) are untimely and grants
Defendant’s motion for summary judgment as to these claims. By contrast, the
Court declines to adopt the Report’s finding that Commerzbank’s claims arising
out of the OOMLT 2006-2 Trust are untimely and denies Defendant’s motion
for summary judgment as to Commerzbank’s claims arising out of this trust. 33
c.

German Statute of Limitations

The Report finds that several of Commerzbank’s claims are also untimely
under German law and recommends dismissing them on that basis.
(Report 48-54). Judge Netburn begins this section of the Report by observing
that under Rule 44.1 of the Federal Rules of Civil Procedure, “questions of
foreign law are treated as questions of law, and the Court ‘may consider any
relevant material or source, including testimony, whether or not submitted by a
party or admissible under the Federal Rules of Evidence.” (Id. at 49 (quoting
Fed. R. Civ. P. 44.1)). Judge Netburn then found that for timeliness purposes,
“[i]n the context of RMBS litigation, ‘the relevant provision of German law is
Section 195 of the German Civil Code, which has a three-year limitations
period.’” (Id. (quoting IKB Deutsche Industriebank AG v. McGraw Hill Fin., Inc.,
634 F. App’x 19, 22 (2d Cir. 2015) (summary order))). “That period begins to

33

Plaintiffs suggest that the Report is “unclear because it does not indicate whether its
recommendation concerning the” Early EOD Trusts “is limited to claims relating to the
EODs” identified in the notices Defendant sent to certificateholders, or whether the
Report also embraces “other EODs not referenced in that notice.” (Pl. Br. 27). In
response, Defendant argues that “Plaintiffs’ decision to plead that ‘all’ document defects
and alleged R&W breaches should have been discovered and enforced after the very first
EOD means that all claims arising from them accrued when the first EODs were
declared in the Early EOD Trusts.” (Def. Opp. 31). The logic articulated above leads
the Court to conclude that Plaintiffs’ claims based on the EODs either predating
Defendant’s notices to certificateholders or described in those notices are untimely.

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run at the end of the calendar year in which [i] the claim arose and [ii] 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.” (Id.).
Judge Netburn applied these legal precepts to Commerzbank’s claims
arising out of 11 trusts and certificates in two other trusts (the “German SOL
Trusts”). (Report 51). 34 Beginning with the first element of the German statute
of limitations, Judge Netburn found that, on Commerzbank’s own allegations,
its claims against Defendant arose no later than 2011. (Id.). Turning to the
second element, Judge Netburn found that “[t]here is plenty of evidence that,
by 2011, Commerzbank was not only monitoring news articles and
investigations relevant to potential R&W breaches and document defects but
was also considering RMBS-related litigation.” (Id. at 53). As more fully set
forth in the Report, this evidence included (i) Commerzbank’s receipt of
Defendant’s notices informing certificateholders of EODs; (ii) its receipt of an
investment advisor’s report suggesting “partnering up with other investors to
pursue recovery for violations of contractual representation and warranties”
and to “direct the trustee to examine the deal documents for fraud or other
misrepresentations in the loan origination process”; (iii) the filing of three
similar RMBS lawsuits against trustees; and (iv) Commerzbank’s maintenance

34

The German SOL Trusts include: (i) ABFC 2005-HE2; (ii) ABFC 2005-OPT1; (iii) ABFC
2006-OPT1 (M3 tranche only); (iv) ABSHE 2005-HE5; (v) CMLTI 2005-OPT4; (vi) GPMF
2005-AR4; (vii) GPMF 2006-AR1; (viii) GMPF 2006-AR2; (ix) GPMF 2006-AR3; (x) MSAC
2005-WMC3; (xi) MSAC 2005-WMC5; (xii) MSAC 2006-HE1; and (xiii) OOMLT 2006-2
(A4 tranche only). (See Report 48 n.15).

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of a spreadsheet tracking active RMBS-related litigation. “Taken together,”
Judge Netburn concluded, “Commerzbank knew or was grossly negligent in not
knowing of the circumstances underlying its claims against Wells Fargo.” (Id.).
Commerzbank asserts that Judge Netburn’s recommendation should be
rejected for four reasons. First, Commerzbank argues that the Report
disregarded German law mandating the application of a separate limitations
period for each breach in favor of a “unity of damages” theory of liability. (Pl.
Br. 33-34). Courts in this District have repeatedly rejected this argument. See
PL/DB, 2022 WL 384748, at *23 (stating that “[i]t is clear that German law
applies the [principle] of ‘unit of damages,’ pursuant to which ongoing breaches
do not restart or toll the Plaintiffs’ statute of limitations period”); Commerzbank
AG v. U.S. Bank Nat’l Ass’n, No. 16 Civ. 4569 (WHP), 2021 WL 603045, at *5
(S.D.N.Y. Feb. 16, 2021) (similarly rejecting Commerzbank’s argument).
Because Commerzbank merely rehashes the arguments that were correctly
rejected in those prior cases, the Court does not address the issue further here.
Second, Commerzbank contends that Judge Netburn erred by using a
three-year, rather than a ten-year, limitations period. (Pl. Br. 35). In broad
strokes, Commerzbank argues that (i) the three-year limitations period Judge
Netburn adopted is applicable only where Defendant shows that Commerzbank
had sufficient knowledge of Defendant’s alleged wrongdoing to bring an action
in Germany with an expectation of success and (ii) Defendant has not shown,
on a trust-by-trust, claim-by-claim basis that Commerzbank had sufficient

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knowledge by 2011 of Defendant’s alleged breaches to have an expectation that
a suit against Defendant would succeed. (Id. at 35-38).
Once again, Commerzbank’s argument has been presented to and
rejected by several courts in this District. As Judge Koeltl explained in PL/DB,
Commerzbank’s argument “confuses the Plaintiffs’ burden at summary
judgment or trial with the level of knowledge sufficient to commence the
German statute of limitations period and is unsupported by federal court
precedent applying Germany’s statute of limitations.” PL/DB, 2022 WL
384748, at *22; see also CB/USB, 457 F. Supp. 3d at 247 (rejecting identical
argument from Commerzbank); IKB, 634 F. App’x at 22 (“[A] plaintiff need not
know all the relevant details or have conclusive proof available” to trigger the
German statute of limitations; rather, “knowledge of the factual circumstances
underlying the claim is sufficient.”). The Court joins the chorus of decisions
rejecting Commerzbank’s argument on this point.
Third, Commerzbank contends that the Report’s “gross negligence
findings are contrary to German law.” (Pl. Br. 38). According to
Commerzbank, the evidence shows that it was “proactive and diligent, actively
investigating potential claims before 2012,” but that, despite such diligence,
“Commerzbank did not uncover any claims against [Defendant] before 2012[.]”
(Id. at 39). Notably, Commerzbank fails to engage with the evidence upon
which Judge Netburn based her findings, which the Court has already
described above. This evidence includes the fact that Commerzbank had
received several notices, including from Defendant itself, alerting it to issues
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with loans held by the RMBS trusts and Defendant’s decision not to pursue
any recourse by 2011. The Court agrees with the Report’s finding that given
that “[s]ophisticated plaintiffs [like Commerzbank] have a heightened duty to
investigate possible claims[,]” the record evidence should have put
Commerzbank on notice that it was under a duty to investigate whether it held
any claims against Defendant. (See Report 52 (quoting Deutsche ZentralGenossenchaftsbank AG v. HSBC N. Am. Holdings, Inc., No. 12 Civ. 4025 (AT),
2013 WL 6667601, at *10 (S.D.N.Y. Dec. 17, 2013) (internal quotation marks
omitted))). See also PL/DB, 2022 WL 384748, at *22 (observing that “German
law contemplates that plaintiffs, particularly those as sophisticated as [Phoenix
Light and several of the other Phoenix Light Plaintiffs], exercise reasonable care
in investigating potential claims”).
Fourth and finally, Commerzbank faults Judge Netburn for supposedly
resolving disputed issues of fact at the summary judgment stage. (Pl. Br. 3940). On this score, Commerzbank asserts that Judge Netburn impermissibly
found, over its objection, that Commerzbank knew of three lawsuits against
other RMBS trustees before 2012. (Id. at 39). Commerzbank’s argument
misstates the record. Judge Netburn found that the three lawsuits had been
filed; that Commerzbank maintained a spreadsheet that tracked active RMBS
litigation; and that Commerzbank’s spreadsheet stated that Commerzbank
“was investigating taking legal action against ‘US RMBS Originators and
Trustees[.]’” (Report 54). While these findings suggest that Commerzbank may

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have been aware of the lawsuits, Judge Netburn did not find that
Commerzbank had actual notice of these specific lawsuits prior to 2012.
Commerzbank next asserts that Judge Netburn’s recommendation
improperly relies on a 2007 news article referencing a lawsuit against another
RMBS trustee that had “nothing to do with Commerzbank’s claims here.” (Pl.
Br. 40). Setting aside that Commerzbank’s point does not suggest that Judge
Netburn resolved a dispute of fact, the Court observes that this argument is
emblematic of the larger shortcoming in Commerzbank’s objections to this
section of the Report. Rather than address the evidence Judge Netburn relied
on to support her findings, Commerzbank points time and time again to
subsidiary issues in the record that cannot overcome the evidence indicating
that Commerzbank knew or should have known that its claims against
Commerzbank had accrued by 2011. The Court is unpersuaded by these
evidentiary sleights of hand. Accordingly, the Court adopts Judge Netburn’s
finding that Commerzbank’s claims related to the eleven trusts and certificates
in two others are barred by Germany’s applicable statute of limitations and
grants Defendant’s motion for summary judgment as to these claims.
CONCLUSION
For the foregoing reasons, the Court GRANTS Defendant’s motion for
summary judgment as to the Phoenix Light Plaintiffs’ claims in their entirety.
Further, the Court GRANTS in part and DENIES in part the parties’ crossmotions for summary judgment as to Commerzbank’s claims. More
specifically, the Court:
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•

GRANTS Defendant’s motion for summary judgment as to
Commerzbank’s claims arising out of the Sold Certificates;

•

GRANTS Defendant’s motion for summary judgment as to
Commerzbank’s claims arising out of the Negating Clause
Securities, except with respect to the four loans upon which Judge
Netburn reserved judgment;

•

GRANTS Defendant’s motion for summary judgment as to
Commerzbank’s claims arising out of the Separate Trustee Claims,
except with respect to the eight loans upon which Judge Netburn
reserved judgment;

•

GRANTS Defendant’s motion for summary judgment as to the
Early EOD Trusts, with the exception of Commerzbank’s claims
arising out of the OOMLT 2006-2 Trust;

•

GRANTS Defendant’s motion for summary judgment as to the
German SOL Trusts;

•

GRANTS Defendant’s motion for summary judgment as to the
Exception Report Trusts, with the exception of claims under trusts
(i) GPMF 2005-AR4; (ii) GPMF 2006-AR1; (iii) GPMF 2006-AR3;
(iv) MSAC 2005-WMC5; and (v) OWNIT 2006-2; and

•

DENIES Defendant’s motion for summary judgment as to the
Liquidated Loans Trusts.

The Court refers Commerzbank’s case back to Judge Netburn for further
proceedings addressing Commerzbank’s surviving claims.
The Clerk of Court is directed to enter judgment for Defendant in case
number 14 Civ. 10102 and to close that case. The Clerk of Court is further
directed to terminate the motion at docket entry 520 in case number 15 Civ.
10033 and to lift the stay in that case.
SO ORDERED.
Dated:

July 12, 2022
New York, New York

__________________________________
KATHERINE POLK FAILLA
United States District Judge

68