In RMBS Put-Pack Action, Court Leaves Open Possibility of Post-Suit Notice of Breaches

On December 30, 2023, Justice Cohen of the New York County Commercial Division issued a decision in U.S. Bank N.A. v. DLJ Mtge. Capital, Inc., 2023 NY Slip Op. 34560(U), holding open the possible viability of post-suit notice of representation and warranty breaches, explaining, in a footnote:

Defendants also seek dismissal of the Trustee’s notice-based claims on the alternative ground that the Trustee’s claims are barred by the six-year statute of limitations because it failed to provide notice to Ameriquest within the limitations period. In support of that argument, Defendants rely principally on principally on the Court of Appeals’ 2022 decision in Heat 2007-1, which held that failure to provide notice prior to initiating litigation was fatal to the Trustee’s claims in the circumstances presented in that case. That argument is, however, foreclosed by the Court of Appeals’ decision in the 2012 iteration of this case. In ABSHE 2006, the court specifically rejected Defendants’ argument that an action based on alleged violations of RMBS representations and warranties is untimely if the trustee does not provide notice and an opportunity to cure as required by the PSA, within the CPLR six-year statute of limitations. The court held instead that the trustee’s failure to comply with the notice and cure or repurchase condition precedent within the applicable statute of limitations does not foreclose refiling of its action for alleged breach of RMBS representations and warranties pursuant to CPLR 205 (a). The court’s invocation of CPLR 205(a) necessarily included a finding that the 2012 Action was timely commenced because the Trustee’s lawsuit was filed within the statutory 6-year period, regardless of when notice and opportunity to cure breaches was provided to Defendants. The Court of Appeals in Heat 2007-01 did not question that conclusion (on the facts presented), though it did make clear (as noted above) that nothing in our decision in the 2012 Action approves of post-suit notice. In sum, because the Court of Appeals has already found in ABSHE 2006 that the 2012 Action was timely commenced for statute of limitations purposes, the same is necessarily true of the 2015 Action by virtue of the Trustee’s compliance with CPLR 205(a). If Defendants are to obtain a ruling further narrowing the reach of ABSHE 2006 with respect to the statute of limitations on the facts of this case, it will have to come from a Court higher than this one.

(Internal quotations and citations omitted).

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