United States District Court, S.D. New York
WELLS FARGO BANK, N.A., as Trustee for the registered holders of J.P. Morgan Chase Commercial Mortgage Corp., Commercial Mortgage Pass-Through Certificates, Series 2002-CIBC4, acting by and through its Special Servicer, LNR Partners, LLC, Plaintiff,
JPMORGAN CHASE BANK, N.A., Defendant.
Gregory A. Cross, Esq., Colleen M. Mallon, Esq., Edmund M. O'Toole, Esq., VENABLE LLP, Baltimore, Maryland, New York, New York, Attorneys for Plaintiff.
John G. Hutchinson, Esq., Benjamin R. Nagin, Esq., Colin J. Garry, Esq., SIDLEY AUSTIN LLP, New York, New York, Attorneys for Defendant.
MIRIAM GOLDMAN CEDARBAUM, District Judge.
In this diversity suit, Wells Fargo Bank, N.A., as trustee for the registered holders of J.P. Morgan Chase Commercial Mortgage Pass-Through Certificates, Series 2002-CIBC4, acting by and through its special servicer LNR Partners, LLC, sues JPMorgan Chase Bank, N.A. Wells Fargo alleges a breach of contract related to representations and warranties made by JPMorgan in a mortgage loan purchase agreement. JPMorgan moves to dismiss the complaint as time barred. For the reasons that follow, the motion to dismiss is granted.
The complaint alleges the following facts. Since 1979, Highland Mall Limited Partnership leased a parcel of land in Austin, Texas for the purpose of operating a shopping mall. The property covered by this "Ground Lease" included only a portion of the Highland Mall. Crucially, it excluded the mall's three "anchor stores" - the prominent retailers expected to draw customers to the mall for the benefit of the smaller shops.
On June 28, 2001, as part of a refinancing, JPMorgan originated and extended a $71 million commercial loan to the Partnership. The loan was secured in part by the Partnership's interest in the Ground Lease through a leasehold deed of trust and security agreement. Concurrent with the refinancing, the Ground Lease was amended to add Section 5.06(a), which Wells Fargo calls the "First Class Mall Restriction." Compl. at 2. This provision required the Partnership "to operate the Leased Property at all times in accordance with prevailing standards for first class regional shopping malls located in the United States of America.'"
Wholly separate from the First Class Mall Restriction was a second agreement governing the mall's anchor stores. That operating agreement required retail use of the anchor stores through August of 2001 but thereafter imposed no restrictions on the properties' use. It also provided for a parking area for the Highland Mall extending through 2068 if the anchor stores remained operational, and through 2021 otherwise.
In February of 2002 JPMorgan generated for the Partnership's loan an underwriting summary that "emphasized" the mall's anchor stores and "acknowledged" that the anchor stores provided support for other tenants. The underwriting summary mentioned neither 1) that the First Class Mall Restriction in the Ground Lease was not tied to the retail operating covenant governing the anchor stores, nor 2) that the anchor stores' retail covenants were set to expire during the term of the commercial loan.
On April 29, 2002, JPMorgan sold its interest in the loan as part of a mortgage loan purchase agreement (the "MLPA") to JPMorgan Chase Commercial Mortgage Securities Corp. ("JPMCC"). JPMCC, in turn, deposited the commercial loan into the JPMCC Commercial Pass-Through Series 2002-CIBC4 Trust (the "Trust"), and, in relevant part, assigned its rights under the MLPA to plaintiff Wells Fargo.
Beginning in 2006, their operating agreement having expired, the three anchor stores shut down and were taken over by a nonretail tenant. Faced with the closure of the anchor stores and the resulting loss of customer traffic, the inline mall tenants began closing their own stores.
In June of 2009, the Partnership's loan was transferred to special servicing due to imminent default. In July of 2009, the Partnership's lessor gave notice of defaults under the Ground Lease, including the Partnership's failure to operate the property as a "first-class regional shopping mall" as required by Section 5.06(a) of the Ground Lease. A second notice followed in August of 2009, informing the Partnership that the Ground Lease would be terminated. In September of 2009, the Partnership defaulted on the commercial loan.
On December 23, 2010, Wells Fargo demanded that JPMorgan repurchase the loan because JPMorgan's "representations and warranties regarding the Ground Lease and its origination practices were untrue." Compl. at 10. The MLPA provided that such demand was "the sole remedy available to the Purchaser" in the event of breach. Compl. ex. 2. JPMorgan denied that it had breached any representation and warranty and refused to repurchase the commercial loan. On August 7, 2012, the Trust sold its interest in the Ground Lease at a loss of roughly $73 million. Wells Fargo then brought this lawsuit, alleging that JPMorgan breached its ...