action ordinarily asserts repurchase claims for hundreds, if not thousands, of securitized mortgages and
seeks damages in the hundreds of millions of dollars. Nearly all of these actions arise from RMBS
contracts executed before 2008, which incurred significant losses following the financial crisis.
Because many of these repurchase actions were filed in 2012 or later, a key issue for a substantial number
of pending actions, as well as for potential future actions, is whether the repurchase claims accrued when
the RMBS contracts were executed or when the repurchase claims were made by the trustee and denied by
the issuer. If the claims accrued when the RMBS contracts were executed, then New York’s six-year
statute of limitations would bar a number of pending actions, and would preclude future repurchase
actions related to pre-2008 RMBS issuances. If the claims accrued upon each discovery of a breach of a
representation and warranty and denial of a repurchase claim, then the statute of limitations would
effectively be extended through the life of the RMBS trust, which could be decades.
Procedural History
In this action, two investors in the ACE Corp., Home Equity Loan Trust, Series 2006-SL2 residential
mortgage-backed securitization (the “Trust”) issued a notice on January 12, 2012, alleging breaches of
representations and warranties as to hundreds of mortgages securitized into the Trust. (Op. 5–6.)
Purporting to act on behalf of the Trust, the investors then filed a summons with notice in New York
Supreme Court on March 28, 2012, asserting a breach of contract claim against the sponsor of the Trust,
DB Structured Products, Inc. (“DBSP”). The claim alleged that DBSP had materially breached its
representations and warranties regarding the mortgages identified in the notice, and had failed to comply
with its contractual obligation to repurchase mortgages after receiving notice of the alleged breaches.
(Op. 6.) The summons with notice demanded specific performance of DBSP’s repurchase obligations and
damages totaling $250 million. (Op. 6.) Six months after the investors filed the action, the trustee,
HSBC, was substituted as the plaintiff and filed a complaint on behalf of the Trust. (Op. 6; see 40 Misc.
3d 562, 564 (N.Y. Sup. Ct. 2013).)
The summons with notice was filed exactly six years from the date that the underlying securitization
agreements were executed, March 28, 2006 (Op. 4), but less than sixty days after the notice of alleged
breaches had been delivered to DBSP. Under the contractual provision governing the repurchase claims,
DBSP was entitled to sixty days from the date of notice to cure any breach. If DBSP failed to cure, it was
required to repurchase the mortgages at issue within ninety days from the date of notice. (Op. 4–5.)
DBSP moved to dismiss the action as untimely. DBSP argued that the initial summons with notice filed
by the investors was void because the contractually specified cure and repurchase periods had not expired
when the action was initiated. (Op. 7.) In addition, DBSP argued that the Trust’s claims would be time-
barred. That was so, according to DBSP, because claims for breaches of representations and warranties
accrued when the contracts were signed in 2006, and because the corresponding cure and repurchase