On November 16, the Second Circuit Court of Appeals affirmed the District Court’s dismissal of a lawsuit brought by Deutsche Bank National Trust Co. (acting as Trustee for RMBS Trust GSR 2007-OA1) against Quicken Loans, alleging that Quicken breached its obligation to repurchase mortgage loans that violated representations and warranties (“R&Ws”). The court held that because Quicken’s R&Ws only purported to guarantee characteristics of the loans at the time of sale, New York’s six year statute of limitations for breach of contract ran from that date, and had lapsed by the filing date of the action.
Following the New York Court of Appeals’ decision in ACE, the court rejected the Trustee’s argument that the accrual date for its claim was delayed by the repurchase procedures set forth in the transaction documents. The court also rejected the Trustee’s argument that it should be entitled to take advantage of a statutory extension to the applicable limitations period because the FHFA originally filed the lawsuit. It held that FHFA did not “bring” the claims at issue because it only filed the initial summons and notice in the case before abandoning prosecution of the action after realizing it was not the proper plaintiff. Finally, the court upheld the dismissal of the Trustee’s breach of the implied covenant of good faith and fair dealing as duplicative of the breach of contract claim. Order.