United States District Court, S.D. New York
PHOENIX LIGHT SF LIMITED, in its own right and on the right of Blue Heron Funding V Ltd., Blue Heron Funding VI Ltd., Blue Heron Funding VII Ltd., Blue Heron Funding IX Ltd., Kleros Preferred Funding V PLC, Silver Elms CDO PLC, Silver Elms CDO II Limited, C-BASS CBO XVII Ltd., and C-BASS CBO XIV Ltd., and each of BLUE HERON FUNDING V LTD., BLUE HERON FUNDING VI LTD., BLUE HERON FUNDING VII LTD., BLUE HERON FUNDING IX LTD., KLEROS PREFERRED FUNDING V PLC, SILVER ELMS CDO PLC, and SILVER ELMS CDO II LIMITED, in their own right, Plaintiffs,
THE BANK OF NEW YORK MELLON, as Trustee, Defendant.
OPINION & ORDER
VALERIE CAPRONI, UNITED STATES DISTRICT JUDGE.
case represents another chapter in the saga of seemingly
endless residential mortgage-back securities
(“RMBS”) actions that have flooded this District.
Although many RMBS cases appear to settle shortly after the
motion-to-dismiss stage, this case has lived on, with
Plaintiffs pressing claims against Defendant Bank of New York
Mellon (“BNYM”) relative to twenty-one RMBS
trusts (“Trusts”), down from twenty-seven trusts
at issue in the initial complaint.
stage, only the following claims remain: (1) violations of
the Trustee Indenture Act (“TIA”), relative to
three indenture Trusts (Count I); (2) breach of contract,
relative to all Trusts (Count II); and (3) negligence, gross
negligence, and negligent misrepresentation, relative to all
Trusts (Counts IV and V); and breach of the covenant of good
faith and fair dealing, relative to all Trusts. BNYM moves for
summary judgment on all claims as to twenty
Trusts.Dkt. 128. Plaintiffs cross-move for partial
summary judgment as to seventeen Trusts. Dkts. 159,
For the following reasons, BNYM's motion is GRANTED in
part and DENIED in part, and Plaintiffs' cross-motion is
DENIED in its entirety.
Court assumes familiarity with RMBS in general, the RMBS
securitization process, and the roles of the various entities
(such as the sponsor, seller, servicer, and trustee) in the
RMBS trusts. For those unfamiliar (or who would like a
refresher), the Court directs readers to its earlier opinion
in this case for background on those subjects. See,
e.g., Phoenix Light I, 2015 WL 5710645.
twenty Trusts that are the subject of BNYM's motion,
three are indentures: CWHEL 2005-H, ECR 2005-1, and NHEL
2006-1 (collectively, “Indenture Trusts”).
Pooling and Service Agreements (“PSAs”) govern
the other seventeen trusts (collectively, “PSA
Trusts”), of which eleven were serviced by Countrywide
(collectively, “Countrywide PSA
Trusts”). The balance of the PSA Trusts is comprised
of: CBASS 2005-CB4, CBASS 2005-CB8, CBASS 2006-CB3
(collectively, the “CBASS Trusts”); OWNIT 2006-1;
HELT 2005-FRE1; and FNLC 2005-2. BNYM is Indenture Trustee
for the Indenture Trusts and Trustee for the PSA Trusts.
See Fread Decl., ¶¶ 3-23, Exs.
governing agreements (“GAs”) for the Trusts
impose different obligations on the Trustee depending on
whether the Trust experienced an “Event of
Default.” The GA describes, in considerable detail,
what constitutes an “Event of Default.” See,
e.g., Fread Decl., Ex. A (“CWALT 2006-OA10
PSA”) § 7.01(ii). Prior to an Event of Default,
the Trustee has only the contractual duties specified in the
GA, which include providing notice to all parties to the GA
upon certain breaches of a representation or warranty.
See Phoenix Light I, 2015 WL 5710645, at *2. After
an Event of Default, however, the Trustee's obligations
“come more closely to resemble those of an ordinary
fiduciary . . . .” Royal Park Invs. SA/NV v. HSBC
Bank USA, Nat'l Ass'n (“Royal
Park I”), 109 F.Supp.3d 587, 597 (S.D.N.Y. 2015).
In particular, if BNYM has knowledge of an Event of Default,
it assumes the duty to act as a prudent person. Phoenix
Light I, 2015 WL 5710645, at *2; see also Royal Park
Investments SA/NV v. Bank of N.Y. Mellon
(“Royal Park II”), No. 1:14-CV-6502-GHW,
2016 WL 899320, at *2 (S.D.N.Y. Mar. 2, 2016).
allege that BNYM breached its pre-Event of Default and
post-Event of Default obligations under the GAs. Relative to
BNYM's pre-Event of Default duties, Plaintiffs allege
that BNYM failed promptly to give notice of breaches of
representations or warranties and that BNYM failed to enforce
repurchase obligations triggered by those breaches, among
other things. TAC ¶ 385. Relative to BNYM's
post-Event of Default duties, Plaintiffs allege that BNYM
breached its duty to act prudently upon numerous Events of
Default in the Trusts. TAC ¶ 385.
BNYM's Pre-Event of Default Contractual
provide that “upon discovery” of a breach of a
representation or warranty in a mortgage loan that materially
and adversely affects the interests of certificateholders,
BNYM must give notice to “the other parties” to
the contract. See Mot. 56.1 ¶ 40 (collecting
contractual provisions); see also Hanchet Decl., Ex.
O (same). Thus, for a notice obligation to arise, BNYM must
“discover” a breach of a representation or
warranty with respect to a loan in the trust, and that breach
must “materially and adversely affect” the
certificateholder interests in the loan in breach. Upon that
occurrence, BNYM must promptly notify the other parties to
the GA (i.e., the Sellers, Master Servicer, and Depositor).
also allege that BNYM had a duty to enforce repurchase
obligations triggered by a breach of representation or
warranty. For example, relative to the CWALT Trusts, if a
breach is uncured, the Seller must either remove and
substitute the mortgage loan that is in breach from the
Trust, or repurchase that loan from the Trustee within 90
days of the Seller's discovery or written notice of a
breach. See, e.g., CWALT 2006-OA10 PSA §
2.03(c); Mot. 56.1 ¶ 47 (citing contractual provisions).
Trustee's Post-Event of Default Contractual
has more expansive obligations upon the occurrence of a
contractually-defined “Event of Default.” If an
Event of Default occurs and is not cured, the Trustee is
required to “exercise such of the rights and powers
vested in it by this Agreement, and use the same degree of
care and skill in their exercise, as a prudent person would
exercise or use under the circumstances in the conduct of
such person's own affairs.” See, e.g.,
CWALT 2006-OA10 PSA § 8.01.
the GAs do not specifically provide that the Trustee must
have knowledge of an Event of Default before it is subject to
a prudent person duty, the parties do not dispute, and the
Court previously held, that the Trustee's prudent-person
duty arises after the Trustee has knowledge of an Event of
Default. See Phoenix Light I, 2015 WL 5710645, at *2
(“If BNYM knows that there has been an Event of
Default, then it ‘assumes the same duties as a common
law trustee, ' including . . . exercising ‘the same
degree of care and skill in their exercise . . . as a prudent
person would exercise under the circumstances . . .
.'”). The GAs define the circumstances in which the
Trustee has “knowledge” of an Event of Default:
some require the Trustee to receive written notice of an
Event of Default; others provide that the Trustee has
“knowledge” if the Trustee receives written
notice or has actual knowledge of an Event of Default.
See Hanchet Decl., Exs. E-G (collecting
“knowledge” provisions under the GAs).
It is Undisputed that an Event of Default
Occurred in Five Trusts.
parties agree that an Event of Default occurred in five of
the Trusts: the three CBASS Trusts, OWNIT 2006-1, and NHEL
2006-1 (collectively, the “Default Trusts”). Mot.
56.1 ¶¶ 18, 37. The GAs for these Trusts provide
specific direction to the Trustee upon an Event of Default:
[T]he Trustee shall, at the direction of the Holders of each
Class of Regular Certificates evidencing Percentage Interests
aggregating not less than 51%, by notice then given in
writing to the Servicer and the Trustee, terminate all of the
rights and obligations of the Servicer as servicer under this
Mot. 56.1 ¶¶ 25-26 (citing § 7.01(b) in the
CBASS PSAs and the OWNIT 2006-1 PSA). Similarly, Section 5.02
of the NHEL 2006-1 Indenture provides, “If an Event of
Default occurs and is continuing, . . . the Indenture Trustee
may, and at the direction of Holders of Notes representing
more than 50% of the Class Note Balance of the Outstanding
Notes, shall, declare all the Notes to be immediately due and
payable by a notice in writing to the Issuing Entity . . .
.” Fread Decl., Ex. T (“NHEL 2006-1
Indenture”) § 5.02.
response to the Events of Default in the CBASS Trusts and
OWNIT 2006-1, BNYM issued notices to the certificateholders
pursuant to Section 7.01(b) (the “Notices”). Mot.
56.1 ¶¶ 27-30. In those Notices, BNYM stated that
there had been an Event of Default and that, pursuant to
Section 7.01(b) of the PSA, if the Trustee received
“appropriate written direction” from
certificateholders totaling at least 51% of the certificate
interests, the Trustee “shall terminate all of the
rights and obligations” of the Servicer. Lundberg Decl.
¶¶ 18-21, Exs. C-F (CBASS and OWNIT Notices).
in response to the NHEL 2006-1 Event of Default, BNYM sent a
Notice to NHEL 2006-1 certificateholders notifying them that
there had been an Event of Default and that, pursuant to the
Indenture, “the Indenture Trustee may, and at the
direction of Holders of Notes representing more than 50% of
the Class Note balance of the Outstanding Notes, shall,
declare all the Notes to be immediately due and payable . . .
. Noteholders should contact the Indenture Trustee . . .
should they wish to direct the Indenture Trustee to
accelerate the Notes . . . .” Mot. 56.1 ¶ 21;
see also Lundberg Decl., ¶¶ 9-12, Ex. A
(NHEL Notice). Plaintiffs do not dispute that BNYM sent a
Notice relative to the NHEL 2006-1 Event of Default.
undisputed that BNYM did not receive any certificateholder
direction in response to the Notices in the Default Trusts.
Mot. 56.1 ¶¶ 22, 35. Plaintiffs assert that BNYM
did not take any action beyond issuing the above Notices and
waiting for direction, and BNYM cites no evidence that
controverts that assertion. See Opp. 3-5. Rather,
BNYM argues that it was not required to act because BNYM
“was not reasonably assured of receiving an indemnity
and was not under an obligation to act.” Reply 8.
Remaining Fifteen Trusts
remaining Trusts are comprised of: eleven Countrywide PSA
Trusts; the ECR, CWHEL, and NHEL Indenture Trusts
(collectively, the “Indenture Trusts”); and HELT
2007-FRE1. Relative to these fifteen Trusts, the parties
dispute the existence vel non of an Event of Default
and BNYM's knowledge of an Event of Default, if there was
one. As discussed supra, the parties do not dispute
that the Trustee's prudent person duty arises only upon
both the occurrence of an Event of Default
and the Trustee's knowledge of that Event of
contend that these fifteen Trusts had Events of Default
stemming from servicing defaults that were not cured within
the contractually-specified cure period. Plaintiffs assert
that Events of Default occurred when, inter alia:
the servicer failed to deliver complete mortgage files; loans
“languish[ed] for exceptionally long periods in
foreclosure”; and cumulative losses exceeded thresholds
specified in the PSA. Opp. 7-13. BNYM contends that to the
extent that any of these events were servicer breaches, none
ripened into an Event of Default. Reply 3-4, 7-8.
of an Event of Default is defined differently in different
Trusts. The PSAs for the 11 Countrywide PSA Trusts provide,
“the Trustee shall not be deemed to have knowledge of
an Event of Default until a Responsible Officer of the
Trustee shall have received written notice thereof.”
See, e.g., CWALT 2006-OA10 PSA § 8.02(viii);
see also Mot. 56.1 ¶ 10 (collecting contractual
provisions); Hanchet Decl., Ex. F (same). For the other four
Trusts (the three Indenture Trusts and HELT 2007-FRE1), the
GAs provide that the Trustee shall not be deemed to have
knowledge of an Event of Default “unless a Responsible
Officer has actual knowledge thereof or unless written notice
of such Event of Default is received by a Responsible Officer
. . . .” See, e.g., Fread Decl., Ex. P
(“ECR 2005-1 Indenture”) § 5.01; see
also Mot. 56.1 ¶ 11 (collecting contractual
provisions); Hanchet Decl., Ex. G (same).
FOR SUMMARY JUDGMENT
moves for summary judgment on all counts as to all but one of
the Trusts, arguing that BNYM did not breach any
pre-Event of Default or post-Event of Default duties, that
Plaintiffs' negligence-based claims are barred as a
matter of law, and that BNYM did not violate the TIA.
Plaintiffs cross-move for partial summary judgment, arguing
that BNYM breached its post-Event of Default duties relative
to the Countrywide PSA Trusts, the Default Trusts, and FNLC
2005-2. For the following reasons, Defendant's motions
are GRANTED in part and DENIED in part, and Plaintiffs'
motion is DENIED.
judgment is appropriate when “the movant shows that
there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.”
Fed.R.Civ.P. 56(a); see also Celotex Corp. v.
Catrett, 477 U.S. 317, 322 (1986). “A genuine
dispute exists when the evidence is such that, if the party
against whom summary judgment is sought is given the benefit
of all permissible inferences and all credibility
assessments, a rational factfinder could resolve all material
factual issues in favor of that party.” SEC v.
Sourlis, 851 F.3d 139, 144 (2d Cir. 2016) (citing
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986)). For contract-based claims, summary judgment is
appropriate “where the language of the contract is
unambiguous, and reasonable persons could not differ as to
its meaning.” Fulton Cogeneration Assocs. v.
Niagara Mohawk Power Corp., 84 F.3d 91, 98 (2d Cir.
1996) (internal marks and citations omitted).
non-moving party “must do more than simply show that
there is some metaphysical doubt as to the material
facts” and “may not rely on conclusory
allegations or unsubstantiated speculation.”
Jeffreys v. City of N.Y., 426 F.3d 549, 554 (2d Cir.
2005) (citations and internal quotation marks omitted).
Rather, the nonmoving party must come forward with
“specific facts showing that there is a genuine issue
for trial.” Weinstock v. Columbia Univ., 224
F.3d 33, 41 (2d Cir. 2000) (quoting Anderson, 477
U.S. at 256). Where “the burden of proof at trial would
fall on the nonmoving party, it ordinarily is sufficient for
the movant to point to a lack of evidence to go to the trier
of fact on an essential element of the non-movant's
claim.” In re Lehman Bros. Sec. &
ERISA Litig., 131 F.Supp.3d 241, 249 (S.D.N.Y. 2015).
“Summary judgment is appropriate when there can be but
one reasonable conclusion as to the verdict, i.e.,
it is quite clear what the truth is, and no rational
factfinder could find in favor of the nonmovant.”
Sourlis, 851 F.3d at 144 (citations and internal
quotation marks omitted).
MOTION FOR SUMMARY JUDGMENT
moves for summary judgment as to all of Plaintiffs'
claims. For the following reasons, BNYM's motion relative
to the breach of contract and breach of implied covenant of
good faith and fair dealing claim is granted in part and
denied in part, BNYM's motion relative to the
negligence-based claims is granted, and BNYM's motion
relative to the TIA claims is granted in part and denied in
BNYM's Pre-Event of Default Duties
allege that BNYM breached its pre-Event of Default
contractual duty to investigate and provide notice of
breaches of representations or warranties and to enforce
Countrywide's repurchase obligations. TAC ¶ 385. In
its opening brief, BNYM includes a section titled, “The
Claims Relating to Underwriting-Related Breaches Fail,
” but makes arguments relative only to BNYM's
alleged duties to investigate and to provide notice of a
breach of representations or warranties. Mem.
20-21. In response to Plaintiffs' argument
that BNYM failed to investigate breaches of representation or
warranties and that BNYM failed to enforce
Countrywide's repurchase obligations, BNYM argues that it
had no duty to do so absent certificateholder direction and
adequate indemnity. Reply 10.
crux of BNYM's argument for summary judgment is that
Plaintiffs have no evidence that BNYM discovered any specific
underwriting breach, much less one that materially and
adversely affected the interests of certificateholders in a
mortgage loan. Because the Court concludes, for the reasons
discussed infra, that BNYM did not
“discover” a breach of any representation or
warranty for sixteen Trusts, BNYM's motion is GRANTED as
to those sixteen Trusts, but DENIED as to four Trusts: CWALT
2006-OA3, CWALT 2006-OA10, CWL 2005-BC1, and CWL 2006-9.
BNYM's “Discovery” of Breaches of
Representations or Warranties
provide that any duty by the Trustee to provide notice of a
breach of a representation or warranty is triggered by the
Trustee's “discovery” of that breach:
Upon discovery by any of the parties hereto of a breach of a
representation or warranty with respect to a Mortgage Loan
made . . . that materially and adversely affects the
interests of the Certificateholders in that Mortgage Loan,
the party discovering such breach shall give prompt notice
thereof to the other parties and the NIM Insurer.
See, e.g., CWALT 2006-OA10 PSA §
2.03(c). Under the plain language of this
provision, BNYM's obligation to provide “prompt
notice” to “the other parties” arises only
if it “discover[s]” a breach of a representation
or warranty with respect to a loan and that breach
“materially and adversely affects” the
certificateholder interests in that loan. Id.
parties failed to brief the standard that governs BNYM's
“discovery” of a breach of a representation or
warranty: Does “discovery” require only
“inquiry notice, ” which triggers BNYM's duty
to investigate? Or does “discovery” require that
BNYM had actual knowledge of breaches? There is
authority going both ways,  but this Court need not
resolve which of the “discovery” standards
governs. For sixteen of the Trusts, under either standard,
Plaintiffs failed to adduce any evidence that BNYM discovered
a breach of a representation or warranty. For the other four
Trusts, there is a question of fact whether BNYM discovered
loan- and Trust- specific breaches.
to the twelve Countrywide Trusts, Plaintiffs offer two types
of evidence as proof that BNYM knew of breaches of
representations or warranties. For eight of those Trusts
(CWALT 2006-OA6, CWALT 2006-OA11, CWL 2005-6, CWL 2005-IM3,
CWL 2006-1, CWL 2006-14, CWL 2006-4, and CWHEL 2005-H),
Plaintiffs rely on evidence of “pervasive
breaches” at Countrywide. For the remaining four Trusts
(CWALT 2006-OA3, CWALT 2006-OA10, CWL 2005-BC1, and CWL
2006-9), Plaintiffs cite evidence that BNYM received a letter
in connection with each of those Trusts putting it on notice
of breaches of representations or warranties relative to
specific loans in the Trusts. For the following reasons, the
Court GRANTS in part and DENIES in part BNYM's motion
relative to Plaintiffs' claim of breaches of
representations or warranties.
Eight Countrywide Trusts: CWALT 2006-OA6, CWALT
2006-OA11, CWL 2005-6, CWL 2005-IM3, CWL 2006-1, CWL 2006-14,
CWL 2006-4, and CWHEL 2005-H
to eight Countrywide Trusts, Plaintiffs rely on evidence of
“pervasive breaches” at Countrywide to prove that
BNYM discovered breaches of representations and warranties
related to loans within those Trusts. For example, Plaintiffs
cite evidence that BNYM knew of “systemic
representation and warranty breaches across an enormous
portfolio of Countrywide loans, ” “systemic
fraud” at Countrywide, and that a BNYM employee noted
that there was a “growing” number of repurchase
requests. Opp. 23-24. Plaintiffs, however, adduce no evidence
of BNYM's knowledge of any specific breach of any
representation or warranty relative to any particular loan in
any of these eight Countrywide Trusts.
Retirement Board of the Policemen's Annuity and
Benefit Fund of the City of Chicago v. Bank of N.Y.
Mellon (hereafter, “Retirement
Board”), 775 F.3d 154 (2d Cir. 2014), in the
context of deciding whether a putative class representative
had class standing relative to RMBS trusts in which the
plaintiff had not invested, the Second Circuit concluded that
the plaintiffs' claims alleging violations of the TIA,
breach of contract, breach of covenant of good faith, and
breach of fiduciary duty arising out of RMBS trusts
“must be proved loan-by-loan and trust-by-trust.”
775 F.3d at 162. In rejecting the plaintiffs' argument
that generalized proof regarding widespread breaches by the
loan originator could be used to establish Trustee liability,
the Second Circuit explained:
[W]hether Countrywide breached its obligations under the
governing agreements (thus triggering BNYM's duty to act)
requires examining its conduct with respect to each trust.
Whether it was obligated to repurchase a given loan requires
examining which loans, in which trusts, were in breach of the
representations and warranties. And whether a loan's
documentation was deficient requires looking at individual
loans and documents.
Id. Although Retirement Board arose in the
context of determining class standing, the Second Circuit
nevertheless made clear that to prevail on the merits of
their RMBS claims, the plaintiffs cannot rely on generalized
proof; rather, the plaintiffs must prove their claims that
the Trustee breached its contractual obligations
“loan-by-loan and trust-by-trust.” Id.
allegations of the Trustee's generalized knowledge of
breaches may be sufficient at the pleadings stage, see,
e.g., Royal Park I, 109 F.Supp.3d at 601, by
summary judgment or trial the plaintiffs must present
evidence that proves a specific breach of a representation or
warranty as to any loan or trust for which plaintiffs allege
there was a breach. See Royal Park III, 2017 WL
945099, at *4 (“Courts in this District have dismissed
theories of generalized wrongdoing after the pleading
stage.”). For example, in U.S. Bank, Nat'l
Ass'n v. UBS Real Estate Sec. Inc., the district
court concluded that breaches needed to be proven “on
an individualized loan-by-loan basis” because the court
could not “determine whether the Trusts have proved
that UBS received notice or otherwise discovered that a loan
was in breach unless the loan is identified.” 205
F.Supp.3d 386, 424-25, 476 (S.D.N.Y. 2016).
Court joins other courts in this District in holding that
Plaintiffs' lack of loan- or Trust-specific proof
relative to BNYM's knowledge of any breach is fatal to
their claims. See, e.g., Royal Park III,
2017 WL 945099, at *4 (rejecting on summary judgment
plaintiffs' “pervasive breach” theory
(collecting cases)); see also MASTR Adjustable Rate
Mortg. Trust 2006-OA2 v. UBS Real Estate Secs. Inc.
(“MASTR I”), No. 12-CV-7322 (PKC), 2015
WL 764665, at *10-12 (S.D.N.Y. Jan. 9. 2015) (plaintiff could
not rely on a theory of pervasive breaches or generalized
knowledge at summary judgment on claims alleging breach of
representation or warranty).
argue that they need not adduce evidence of loan-specific
breaches because Countrywide provided a representation and
warranty that the “Mortgage Loans, individually and
in the aggregate, conform in all material respects to
the descriptions thereof in the Prospectus Supplement.”
Opp. 22. This theory assumes too much. The PSAs make clear
that any pre-Event of Default duty that BNYM had arose only
when it discovered “a breach of a representation or
warranty with respect to a Mortgage Loan.”
Mot. 56.1 ¶ 43 (emphasis added). Along similar lines,
the remedy provisions for a breach of a representation or
warranty required the Seller to cure the breach, and if it
could not or did not cure, to “remove such Mortgage
Loan . . . from the Trust Fund and substitute in its
place a Substitute Mortgage Loan” or “repurchase
the affected Mortgage Loan or Mortgage Loans from the
Trustee.” Mot. 56.1 ¶ 47 (emphasis added).
Moreover, this remedy was the “sole remedy”
available for this breach. See, e.g., CWALT
2006-OA10 PSA § 2.03(c). Taken together, these breach
and remedy provisions make clear that breaches must be
discovered (and remedied) relative to the particular mortgage
loans in breach; as such, knowledge of “pervasive
breaches” does not suffice. See MASTR I, 2015
WL 764665, at *11 (“the PSAs expressly provide that
cure or repurchase are the ‘sole remedies, ' and,
thus, they foreclose the ‘pervasive breach'
summary judgment, Plaintiffs must prove that they have
evidence to support their claims “loan-by-loan and
trust-by-trust.” Ret. Bd., 775 F.3d at 162.
Because Plaintiffs have not done so relative to CWALT
2006-OA6, CWALT 2006-OA11, CWL 2005-6, CWL 2005-IM3, CWL
2006-1, CWL 2006-14, CWL 2006-4, and CWHEL 2005-H, BNYM's
motion related to pre-Event of Default duties is GRANTED
relative to these eight Trusts.
Remaining Four Countrywide Trusts: CWALT 2006-OA3, CWALT
2006-OA10, CWL 2005-BC1, and CWL 2006-9
remaining four Trusts, Plaintiffs' proof, though scant,
fares better. Plaintiffs cite evidence that BNYM received a
letter relative to CWALT 2006-OA3, Fitzgerald Decl., Ex. 18
(“Baupost OA3 Letter”), and a letter relative to
CWALT 2006-OA10, Fitzgerald Decl., Ex. 19 (“Baupost
OA10 Letter”), from the Baupost Group, LLC
(“Baupost”), a certificateholder in both of those
trusts, stating that hundreds of loans in each of those
Trusts did not comply with Countrywide's representations
and warranties and that those breaches “materially and
adversely affect[ed] the value of the interests of
Certificateholders in those mortgage loans.” Baupost
OA3 Letter at 1; Baupost OA10 Letter at 1. The Baupost
Letters each attached appendices identifying each loan that
was purportedly in breach of Countrywide's
representations or warranties concerning loan-to-value
ratios, appraisal values, and occupancy status. Baupost OA3
Letter, Apps. A-B; Baupost OA10 Letter, Apps. A-B.
subsequently assigned its interest in CWALT 2006-OA10 to
Walnut Place. Walnut Place sent a follow-up letter to BNYM
(“Walnut Place Letter”) noting that the Sellers
had failed to repurchase the loans in breach and requesting
BNYM to file suit against the Sellers to enforce the
Sellers' repurchase obligations. Fitzgerald Decl., Ex. 64
at 1-2. Walnut Place offered to indemnify BNYM for any
expenses incurred in doing so. Fitzgerald Decl., Ex. 64 at 2.
forwarded the Baupost OA3 Letter to: Countrywide Home Loans,
Inc., Park Granada LLC, Park Monaco, Inc., and Park Sienna,
LLC (the Sellers to the Trust); CWALT, Inc. (the Depositor to
the Trust), and BAC Home Loans Servicing, LP (the Servicer to
the Trust). See Fitzgerald Decl., Ex. 66
(“Countrywide Letter”). Those entities responded
that BNYM had not followed the proper procedure to notify
Countrywide of any breach, because “Section 2.03 [of
the PSA] . . . provides that a party may provide notice of a
breach only upon its ‘discovery' of a breach-not
upon an allegation of breach by a non-party
certificateholder.” Countrywide Letter at 2. BNYM
asserts that it forwarded the Baupost OA10 Letter to
Countrywide, see Reply 9 (citing Fitzgerald Decl.,
Ex. 64), but the evidence that BNYM cites shows only an email
chain among BNYM employees and attorneys at Mayer Brown, with
the subject line ...