IKB International SA In Liquidation et al v. Bank Of - Docket Alarm

IKB International SA In Liquidation et al v. Bank Of - Docket Alarm

Case 1:12-cv-04036-LAK-HBP Document 27 Filed 02/28/14 Page 1 of 64 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK -----------------------...

270KB Sizes 0 Downloads 0 Views

Recommend Documents

Zografos et al v. Qwest Communications Corporation et - Docket Alarm
Jul 11, 2013 - MGM-Pathe Commc'ns Co.,. 129 F .3d 1026, 1027 (9th Cir. 1997) (holding that district court abused its dis

AMERICAN GENERAL LIFE INSURANCE CO et al v - Docket Alarm
PLAINTIFFS AMERICAN GENERAL LIFE INSURANCE COMPANY. AND AIG ANNUITY LIFE INSURANCE CONIPANY'S OPPOSITION TO THE. RAIN PA

EAGLE VIEW TECHNOLOGIES, INC. et al v - Docket Alarm
Aug 2, 2016 - This patent case arises from sales by Defendants Xactware Solutions, Inc. and Verisk. Analytics, Inc. (col

HULLEY ENTERPRISES LTD. et al v. RUSSIAN - Docket Alarm
Aug 17, 2016 - Michael Goldhaber's Column in The American Lawyer ... In 1995-1996, Mikhail Khodorkovsky and his friends

The Bank Of New York Mellon, et al. v. Cape Jasmine - Docket Alarm
Jun 27, 2016 - of New York, Trustee,. Plaintiff v. Cape Jasmine CT Trust et al.,. Defendants ..... Flipside, Hoffman Est

Bank Of Credit And Commerce International SA (In Liquidation - SeyLII
Bank Of Credit And Commerce International SA (In. Liquidation v Berlouis. (2001) SLR 284. Bernard GEORGES for the Plaint

McDonagh et al v. Harrah's Las Vegas, Inc. et al, 2:13 - Docket Alarm
Jun 17, 2014 - ORDER. Presently before the court is a motion to dismiss filed by defendants Harrah's Las Vegas, Inc. and

Gehl et al v. Bloomin' Brands et al, 4:13-cv-05961, No - Docket Alarm
Nov 20, 2015 - The parties to the above-captioned action, through their attorneys of record, hereby respectfully request

TIBOTEC INC. et al v. LUPIN LIMITED et al, 2:10-cv - Docket Alarm
Mar 12, 2014 - LUPIN LIMITED, et al.,. Defendants. : : : : OPINION. : : Civ. No. 2:10-05954 (WHW). : : : : : : : Walls,

Homelife, LLC v. Maverick International, Inc., et al, 5 - Docket Alarm
Dumble Overdrive Reverb Amplifier Head, Model OD-100W, Serial No. 0059; a vintage. Jackson Browne Dumble Amplifier Cabin

Case 1:12-cv-04036-LAK-HBP Document 27 Filed 02/28/14 Page 1 of 64

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK -----------------------------------X IKB INTERNATIONAL S.A. IN LIQUIDATION and IKB DEUTSCHE INDUSTRIEBANK AG,

: :

Plaintiffs, -againstBANK OF AMERICA CORPORATION; BANK OF AMERICA, N.A.; MERRILL LYNCH, PIERCE, FENNER & SMITH, INC., f/k/a "Banc of America Securities LLC;" MERRILL LYNCH & CO., INC.; MERRILL LYNCH MORTGAGE INVESTORS, INC.; MERRILL LYNCH MORTGAGE CAPITAL, INC. and ASSET BACKED FUNDING CORPORATION,

:

12 Civ. 4036 (LAK)(HBP)

:

REPORT AND RECOMMENDATION

: : : : : :

Defendants. : -----------------------------------X

PITMAN, United States Magistrate Judge:

TO THE HONORABLE LEWIS A. KAPLAN, United States District Judge,

I.

Introduction

In principal part, this is a common law fraud action brought by the assignee of a purchaser of $ 56,188,000 worth of residential mortgage-backed securities ("RMBS") in seven different trusts.

Stated briefly, plaintiffs allege that defendants

f Find authenticated court documents without watermarks at docketalarm.com.

Case 1:12-cv-04036-LAK-HBP Document 27 Filed 02/28/14 Page 2 of 64

engaged in a pervasive scheme to defraud investors by overstating the quality of the mortgages that were deposited in the trust; it was the income from these mortgages that was to be distributed to the purchasers of the trust certificates and was to provide a return for the investors.

According to plaintiffs, defendants'

overstatement of the quality of the mortgages enabled the defendants to sell the securities for far more than they were actually worth.

Plaintiffs also assert alternative claims for negligent

misrepresentation, fraudulent concealment and aiding and abetting. By notice of motion dated November 30, 2012 (Docket Item 14), all defendants move pursuant to Fed.R.Civ.P. 12(b)(6) to dismiss the complaint on the grounds that it is time-barred and fails to state a claim on which relief can be granted. Alternatively, defendants move to dismiss the complaint on the ground that it fails to allege fraud with particularity as required by Fed.R.Civ.P. 9(b). For the reasons stated below, I respectfully recommend that defendants' motion be granted.

2

f Find authenticated court documents without watermarks at docketalarm.com.

Case 1:12-cv-04036-LAK-HBP Document 27 Filed 02/28/14 Page 3 of 64

II.

Facts

A.

RMBS Securitizations

The complaint alleges that RMBS are created and sold to the investing public through the following process. RMBS securitizations refer to the process by which thousands of residential mortgages are pooled together in a trust which then issues investment certificates backed by the loans. In return for their investments, holders of the certificates receive the income stream generated by the loans (Compl. ¶ 40). The first step in the process involves a party known as an "originator."

The originator makes the loan to the mortgagor

and receives the mortgagor's note and mortgage.

Ths originator,

in turn sells the notes and accompanying mortgages to the investment bank arranging the securitization, also known as a "sponsor" or "seller." tor."

The sponsor, in turn, sells the loans to a "deposi-

The sponsor and the depositor are both deemed "issuers" of

the RMBS certificates (Compl. ¶ 41). Not all originators are banks, and some non-bank originators require a source of funds in order to make the loans to the mortgagors.

Originators that need funds to make loans can

sometimes secure credit from "warehouse lending facilities." According to plaintiffs, an entity providing warehouse lending 3

f Find authenticated court documents without watermarks at docketalarm.com.

Case 1:12-cv-04036-LAK-HBP Document 27 Filed 02/28/14 Page 4 of 64

facilities ordinarily performs extensive due diligence research with respect to originating lenders that are seeking such credit in order to ensure that the originating lender is sufficiently credit worthy (Compl. ¶ 42). When a sponsor or seller acquires loans from an originator, it also receives the individual loan files that

contain

the mortgagors' loan applications and supporting documentation (Compl. ¶ 43). According to plaintiffs, before a RMBS securitization closes, the sponsor will conduct a due diligence review of the loan files to ensure that they meet the issuer's quality criteria.

This review may be conducted by a third-party retained by

the issuer, by the issuer itself or by both.

Among other things,

this due diligence review examines the originators' appraisals of the property, the resulting loan to value ("LTV") ratios, whether the properties will be occupied by the borrower, the borrowers' debt-to-income ratios and other factors the issuer deems relevant (Compl. ¶ 44).

The offering documents make representations

concerning the quality of the loans on the basis of this due diligence review (Compl. ¶ 46).

These representations routinely

include such matters as the LTV and the combined LTV ("CLTV") of the loans, the percentage of properties that are owner occupied, whether certain underwriting guidelines have been followed and a 4

f Find authenticated court documents without watermarks at docketalarm.com.

Case 1:12-cv-04036-LAK-HBP Document 27 Filed 02/28/14 Page 5 of 64

statement that the loans and the mortgages will be assigned to the issuing trust at the closing (Compl. ¶ 46).

Loans that do

not meet the issuer's underwriting criteria may, nevertheless, be included in the securitization (or "waived in") if the issuer concludes there are adequate compensating factors (Compl. ¶ 45). Prior to the actual issuance of trust certificates, the notes and mortgages are ordinarily transferred to the issuing trust (Compl. ¶ 47).

B.

Defendants' Alleged Wrongdoing

Plaintiff IKB International S.A. ("IKB SA") is a commercial bank, currently in liquidation, with its main office in Luxembourg (Compl. ¶ 27).

IKB Deutsche Industriebank AG ("IKB

AG") is a commercial bank incorporated in Germany with its main office in Germany (Compl. ¶ 28).

There is no allegation that IKB

AG itself purchased any certificates.

Rather it sues in its

capacity as the assignee of IKB SA, having purchased the certificates from IKB SA on November 20, 2008 (Compl. ¶ 38). Between August 2005 and November 2006, IKB SA made the following purchases of RMBS from the indicated sellers: Deal Name and Tranche SURF 05-AB2 A1C

Trade Date

Issue Date

08/24/05

09/15/05

CounterParty

Amount Invested

Merrill Lynch & Co.

$8,060,000

5

f Find authenticated court documents without watermarks at docketalarm.com.

Explore Litigation Insights Docket Alarm provides insights to develop a more informed litigation strategy and the peace of mind of knowing you’re on top of things.

Real-Time Litigation Alerts Keep your litigation team up-to-date with real-time

API

alerts and advanced team management tools built for

Docket Alarm offers a powerful API

the enterprise, all while greatly reducing PACER spend.

(application programming inter-

Our comprehensive service means we can handle Federal, State, and Administrative courts across the country.

Advanced Docket Research With over 230 million records, Docket Alarm’s cloud-native docket research platform finds what other services can’t.

face) to developers that want to integrate case filings into their apps. LAW FIRMS Build custom dashboards for your attorneys and clients with live data direct from the court.

Coverage includes Federal, State, plus PTAB, TTAB, ITC

Automate many repetitive legal

and NLRB decisions, all in one place.

tasks like conflict checks, document

Identify arguments that have been successful in the past with full text, pinpoint searching. Link to case law cited within any court document via Fastcase.

Analytics At Your Fingertips Learn what happened the last time a particular judge, opposing counsel or company faced cases similar to yours. Advanced out-of-the-box PTAB and TTAB analytics are

management, and marketing. FINANCIAL INSTITUTIONS Litigation and bankruptcy checks for companies and debtors. E-DISCOVERY AND LEGAL VENDORS Sync your system to PACER to automate legal marketing.

always at your fingertips.

WHAT WILL YOU BUILD? | [email protected] | 1-866-77-FASTCASE

®