United States District Court, S.D. New York
MEMORANDUM OPINION AND ORDER
G. KOELTL UNITED STATES DISTRICT JUDGE.
plaintiff, Commerzbank AG (“Commerzbank”),
allegedly made 74 investments in 50 residential
mortgage-backed securities (“RMBS”) trusts (the
“Trusts”) for which the defendant, Deutsche Bank
National Trust Company (“Deutsche Bank”), served
as trustee. Commerzbank seeks to hold the defendant liable
for the poor performance of Commerzbank's investments in
the Trusts, and has asserted that the defendant (1) violated
the Trust Indenture Act of 1939 (the “TIA”), 15
U.S.C. § 77aaa, et seq.; (2) breached the Pooling and
Servicing Agreements (the “PSAs”) and the
indenture agreements (the “Indentures”) governing
the Trusts; (3) breached its fiduciary duty to Commerzbank;
(4) was negligent or grossly negligent; (5) violated New
York's Streit Act, N.Y. Real Prop. Law § 124, et
seq.; and (6) breached the covenant of good faith. The
defendant has moved to dismiss portions of the Amended
Complaint for failure to state a claim pursuant to Rule
12(b)(6) of the Federal Rules of Civil Procedure.
motion to dismiss presents the feeling of déjà
vu. In a related case before this Court, see Phoenix
Light SF Ltd. v. Deutsche Bank Nat'l Trust Co.,
14-cv-10103 (JGK) (S.D.N.Y.) (the “Phoenix Light
Action”), different plaintiffs brought substantially
similar claims against Deutsche Bank that, as described by
Commerzbank, are “rooted in the same basic alleged
facts and legal theories against the same defendant”
and in fact involve nine of the same Trusts. Dkt. 3 (The
Related Case Statement Filed by Commerzbank). The law firms
representing the parties in this action, and in that action,
are the same. On January 22, 2016, this action was stayed
pending the decision on the motion to dismiss portions of the
Second Amended Complaint in the Phoenix Light Action.
See Dkt. 13. In an Opinion and Order dated March 28,
2016 (“Deutsche Bank I”), the motion to
dismiss in the Phoenix Light Action was granted in part and
denied in part. See Phoenix Light SF Ltd. v. Deutsche
Bank Nat'l Trust Co., 172 F.Supp.3d 700 (S.D.N.Y.
2016). Thereafter, Commerzbank filed the Amended Complaint in
reasons explained below, Deutsche Bank's motion to
dismiss the Amended Complaint is granted in part and denied
deciding a motion to dismiss pursuant to Rule 12(b)(6), the
allegations in the complaint are accepted as true, and all
reasonable inferences must be drawn in the plaintiff's
favor. McCarthy v. Dun & Bradstreet Corp., 482
F.3d 184, 191 (2d Cir. 2007). The Court's function on a
motion to dismiss is “not to weigh the evidence that
might be presented at a trial but merely to determine whether
the complaint itself is legally sufficient.”
Goldman v. Belden, 754 F.2d 1059, 1067 (2d Cir.
1985). The Court should not dismiss the complaint if the
plaintiff has stated “enough facts to state a claim to
relief that is plausible on its face.” Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 570 (2007). “A
claim has facial plausibility when the plaintiff pleads
factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct
alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678
the Court should construe the factual allegations in the
light most favorable to the plaintiff, “the tenet that
a court must accept as true all of the allegations contained
in the complaint is inapplicable to legal conclusions.”
Id. When presented with a motion to dismiss pursuant
to Rule 12(b)(6), the Court may consider documents that are
referenced in the complaint, documents that the plaintiff
relied on in bringing suit and that are either in the
plaintiff's possession or that the plaintiff knew of when
bringing suit, or matters of which judicial notice may be
taken. See Chambers v. Time Warner, Inc., 282 F.3d
147, 153 (2d Cir. 2002); see also Phoenix Light, 172
F.Supp.3d at 704-05.
allegations in the Amended Complaint are accepted as true for
purposes of this motion to dismiss.
allegations in the Amended Complaint are substantially
similar to those in the Second Amended Complaint in the
Phoenix Light Action, as described in Deutsche Bank
I. See Phoenix Light, 172 F.Supp.3d at 705-07;
see also Pl.'s Op. Mem. at 3
(“Commerzbank's Amended Complaint is substantially
the same as the Second Amended Complaint in the [Phoenix
Light Action].”). Familiarity with that decision, the
mechanism by which RMBS trusts are created, and the alleged
misconduct of the third-party sponsors, originators,
depositors, underwriters, and servicers related to the Trusts
(the “Third-Party Entities”) that underlies
Commerzbank's claims, is presumed. See id.;
see also Phoenix Light SF Ltd. v. Bank of N.Y.
Mellon, No. 14-CV-10104 (VEC), 2015 WL 5710645, at *1
(S.D.N.Y. Sept. 29, 2015).
is alleged to be an entity organized under the laws of
Germany. Am. Compl. ¶ 16. The defendant is alleged to be
a national banking organization with its principal place of
business located in California. Am. Compl. ¶ 21.
Commerzbank is the holder, or former holder, of RMBS
certificates (the “Certificates”) issued by the
Trusts, for which the defendant served as trustee pursuant to
the PSAs and Indentures governing the Trusts. Am. Compl.
¶¶ 33, 108. The Certificates have an original face
value in excess of $640 million. Am. Compl. ¶ 3.
Commerzbank has brought in this action “its own claims
while it was [the holder of the Certificates] and the claims
that were assigned to it by [the prior holders of the
Certificates].” Am. Compl. ¶¶ 16-17.
alleges that, over a period of years, the Third-Party
Entities systematically and substantially misbehaved with
respect to the Trusts. The essence of Commerzbank's
claims is that the defendant failed to comply with its
statutory, contractual, and common law duties in monitoring
and policing the Third-Party Entities, and in notifying
Commerzbank about the misconduct. See, e.g., Am.
Compl. ¶¶ 9-15, 34-35, 45, 61, 68, 73, 80, 129-32.
Amended Complaint alleges that the misconduct of the
Third-Party Entities became apparent to the defendant, and
later the public (including Commerzbank), in drips and drabs.
The Trusts were created between 2005 and 2007. Am. Compl.
¶ 2. The Amended Complaint alleges that the defendant
was aware of at least some of the misconduct as early as
2007. Am. Compl. ¶ 130. The Amended Complaint alleges
that, “Beginning in 2009 or 2010, facts began to emerge
publicly demonstrating that the Sponsors and Originators had
violated the representations and warranties provided in
connection with the  Trusts.” Am. Compl. ¶ 77.
The Amended Complaint alleges that, in July 2011, the
Association of Mortgage Investors wrote a letter to, among
others, the defendant notifying the defendant about the
Association's concerns regarding the conduct of the
Third-Party Entities. Am. Compl. ¶ 114. The Amended
Complaint also alleges that, in December 2011, another group
of investors “in hundreds of RMBS trusts issued written
instructions to [the defendant], as trustee, to open
investigations into large numbers of ineligible mortgages in
the loan pools securing those trusts and deficient servicing
of those loans.” Am. Compl. ¶ 115.
November 2011, Commerzbank sold several of its Certificates.
See Am. Compl., Ex. B. The Amended Complaint alleges
that, “When the sales were made it was apparent that
Deutsche Bank had breached its duties and would not take
steps to remedy its failures.” Am. Compl. ¶ 163.
Amended Complaint alleges that the defendant's conduct
has caused Commerzbank to suffer hundreds of millions of
dollars in losses on its investments in the Trusts. Am.
Compl. ¶ 15.
defendant has moved to dismiss as time-barred the claims with
respect to the “Palmer 3 Certificates, ”
see Biron Decl., Ex. C; the “Commerzbank
Certificates, ” see Biron Decl., Ex. D; and
the “Eurohypo Certificates, ” see Biron
Decl., Ex. E.
acquired the Palmer 3 Certificates through its merger with
Dresdner Bank AG (“Dresdner”) in May 2009. Am.
Compl. ¶¶ 16, 20. Prior to the merger, Dresdner was
a public limited company incorporated in Germany with its
principal place of business in Germany. See Biron
Decl., Ex. M (Dresdner Financial Report 2008). Dresdner
acquired the Palmer 3 Certificates around August 2008 from
Palmer Square 3 Limited (“Palmer 3”), a private
limited liability company organized under the laws of
Ireland. Am. Compl. ¶¶ 17, 20.
acquired the Commerzbank Certificates at their issuance. Am.
Compl. ¶ 17; see also Am. Compl., Ex. B.
acquired the Eurohypo Certificates on December 11, 2013 from
Eurohypo AG (“Eurohypo”), now known as
Hypothekenbank Frankfurt AG, New York Branch, which was the
New York branch of a corporate entity organized under the
laws of Germany. Am. Compl. ¶¶ 17, 19; see
also Biron Decl., Ex. L (Commerzbank Financial
Statements and Management Report 2015).
federal court sitting in diversity applies the forum
state's statute of limitations provisions as well as any
provisions that govern the tolling of the statute of
limitations. Diffley v. Allied-Signal, Inc., 921
F.2d 421, 423 (2d Cir. 1990); see also Vincent v. Money
Store, 915 F.Supp.2d 553, 562 (S.D.N.Y. 2013). In
diversity cases in New York, federal courts apply New
York's borrowing statute, N.Y. C.P.L.R. § 202.
Stuart v. Am. Cyanamid Co., 158 F.3d 622, 627 (2d
C.P.L.R. § 202 requires a non-resident plaintiff to file
a claim within the shorter of either: 1) the New York statute
of limitations; or 2) the statute of limitations in the
jurisdiction in which the claim accrued. Glob. Fin. Corp.
v. Triarc Corp., 715 N.E.2d 482, 484 (N.Y. 1999)
(“When a nonresident sues on a cause of action accruing
outside New York, CPLR 202 requires the cause of action to be
timely under the limitation periods of both New York and the
jurisdiction where the cause of action accrued. This prevents
nonresidents from shopping in New York for a favorable
Statute of Limitations.” (footnote omitted)). When
borrowing a foreign jurisdiction's statute of
limitations, the tolling provisions are also borrowed.
GML, Inc. v. Cinque & Cinque, P.C., 877 N.E.2d
649, 650 (N.Y. 2007).
the defendant bear[s] the burden of establishing the
expiration of the statute of limitations as an affirmative
defense, a pre-answer motion to dismiss on this ground may be
granted only if it is clear on the face of the complaint that
the statute of limitations has run.” Fargas ...