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ResCap Liquidating Trust v. PHH Mortgage Corp.

United States District Court, S.D. New York

October 10, 2014

RESCAP LIQUIDATING TRUST, Plaintiff,
v.
PHH MORTGAGE CORP., Defendant

Decided October 9, 2014

Page 260

For ResCap Liquidating Trust, Plaintiff: Alex J.B. Rossmiller, Isaac Nesser, LEAD ATTORNEYS, Quinn Emanuel, New York, NY; John Patrick Sullivan, Peter E. Calamari, LEAD ATTORNEYS, Quinn Emanuel Urquhart & Sullivan LLP, New York, NY.

For PHH Mortgage Corp., Defendant: Daniel Francis Markham, LEAD ATTORNEY, Coughlin & Gerhart, LLP, Binghamton, NY; Daniel Seth Weinberger, LEAD ATTORNEY, Gibbons P.C. (NY), New York, NY; David M. Souders, LEAD ATTORNEY, PRO HAC VICE, Weiner Brodsky Sidman Kider PC, Washington, DC; Tessa Katherine Somers, LEAD ATTORNEY, PRO HAC VICE, Weiner & Cox, PLC, Southfield, MI.

Page 261

OPINION AND ORDER

John G. Koeltl, United States District Judge.

Plaintiff ResCap Liquidating Trust (" ResCap" ), the successor to Residential Funding Corp., LLC (" RFC" ), filed this suit against PHH Mortgage Corp. (" PHH Mortgage" ) as an adversary proceeding in the Bankruptcy Court for the Southern District of New York. The Amended Complaint alleges state law claims for breach of contract and indemnification. PHH Mortgage moves to withdraw the bankruptcy reference and to transfer this case to the United States District Court for the District of Minnesota. The Court has jurisdiction pursuant to 28 U.S.C. § 1334.[1]

Page 262

For the reasons explained below, the defendant's motion is granted.

I.

ResCap's First Amended Complaint alleges that PHH Mortgage sold over 3,500 mortgage loans to RFC with a combined original balance greater than $945 million. (Am. Compl. ¶ ¶ 4, 17). In the RFC-PHH Mortgage agreements, PHH mortgage made representations and warranties concerning the quality of the loans that it sold to RFC. (See Markham Decl. Attach. 1, Ex. A, at 23, 26, 30, 32 (Mortgage Loan Flow Purchase, Sale & Servicing Agreement).) These agreements also include a mandatory forum-selection clause:

Each of the parties irrevocably submits to the jurisdiction of any state or federal court located in Hennepin County, Minnesota, over any action, suit or proceeding to enforce or defend any right under this Contract or otherwise arising from any loan sale or servicing relationship existing in connection with this Contract, and each of the parties irrevocably agrees that all claims in respect of any such action or proceeding may be heard or determined in such state or federal court. Each of the parties irrevocably waives the defense of an inconvenient forum to the maintenance of any such action or proceeding and any other substantive or procedural rights or remedies it may have with respect to the maintenance of any such action or proceeding in any such forum. . . . Each of the parties further agrees not to institute any legal actions or proceedings against the other party . . . arising out of or relating to this Contract in any court other than as hereinabove specified in this paragraph 9.

(See Markham Decl. Attach. 1, Ex. A, at 3 (Client Contract).)

After purchasing the loans from PHH Mortgage, RFC pooled them into residential-mortgage backed securitization trusts (" RMBS trusts" ) or resold them to whole loan pools. (Am. Compl. ¶ ¶ 21-22.) When it resold and pooled the PHH Mortgage loans, RFC made a number of representations concerning their quality, for which it allegedly relied on PHH Mortgage's representations. (Am. Compl. ¶ 38.)

Faced with numerous lawsuits because the loans in the RMBS trusts and loan pools defaulted, on May 14, 2012, RFC and fifty affiliated entities voluntarily filed petitions for relief under Chapter 11 of the United States Bankruptcy Code. (Am. Compl. ¶ ¶ 58, 72.) The RFC petitions were administered jointly before Judge Glenn of the United States Bankruptcy Court for the Southern District of New York. PHH Mortgage filed a proof of claim, requesting $167,759 for expenses incurred from servicing twenty-nine loans on behalf of RFC. (Proof of Claim No. 7173.)

Judge Glenn ultimately approved a global settlement relating to RFC's RMBS trusts liabilities, and on December 11, 2013, Judge Glenn confirmed the Debtor's Second Amended Joint Chapter 11 Plan (the " Plan" ). In re Residential Capital, LLC, No. 12br12020, Dkt. No. 6066, (Bankr. S.D.N.Y. Dec. 11, 2013). The Plan preserved RFC's claims against the loan originators and assigned them to ResCap. In re Residential Capital, LLC, No. 12br12020, Dkt. No. 6065, slip op. at ¶ ¶ 24, 48 (Bankr. S.D.N.Y. Dec. 11, 2013).

Page 263

On December 13, 2013, ResCap filed a complaint against PHH Mortgage in the United States District Court for the District of Minnesota. (Markham Decl. Attach. 1, Ex. A.) The complaint was one of at least sixty filed in that District by ResCap against entities that had sold loans to RFC. See Residential Funding Co. v. Cherry Creek Mortg. Co., No. 13cv3449, 2014 WL 1686516, at *1 (D. Minn. Apr. 29, 2014). On February 28, 2014, ResCap voluntarily dismissed the complaint against PHH Mortgage in Minnesota, and on May 13, 2014, filed a complaint against PHH Mortgage in the Bankruptcy Court for the Southern District of New York. The two complaints assert identical causes of action. (Compare Markham Decl. Attach. 1, Ex. A, with Original Compl.) At least seventy related actions remain pending in the Minnesota courts. (September 11, 2014, Tr. at 27.)

On July 11, 2014, the defendant moved to withdraw the bankruptcy reference in this case pursuant to 28 U.S.C. § 157(d) and to transfer venue to the United States District Court for the District of Minnesota pursuant to 28 U.S.C. § 1404(a). ResCap filed its First Amended Complaint on July 24, 2014. This Court stayed the adjudication of the defendant's motion pending Judge Glenn's decision in Residential Funding Co. v. UBS ...


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