Alden Global Value Recovery Master Fund, L.P., etc., Plaintiff-Appellant,
KeyBank National Association, et al., Defendants-Respondents, Wells Fargo Bank, N.A., etc., Nominal Defendant.
& Stachenfeld LLP, New York (Kirk L. Brett of counsel),
Steptoe & Johnson, Chicago, IL (Michael Dockterman of the
bar of the State of Illinois, admitted pro hac vice, of
counsel), for KeyBank National Association, respondent.
& Loeb LLP, New York (Gil Feder of counsel), for Berkadia
Commercial Mortgage LLC, respondent.
Field Paddock & Stone, P.L.C., Troy, MI (James L. Allen
of the bar of the State of Michigan, the State of Ohio and
the State of Illinois, admitted pro hac vice, of counsel),
for Berkadia Commercial Mortgage LLC, respondent.
Friedman, J.P., Kahn, Gesmer, Kern, Moulton, JJ.
Supreme Court, New York County (Anil C. Singh, J.), entered
November 29, 2016, which granted defendants KeyBank National
Association and Berkadia Commercial Mortgage LLC's
motions to dismiss the complaint as against them with
prejudice, unanimously affirmed, without costs.
principal issue before us is whether, in granting
defendants' motions to dismiss in this purported
derivative action for breach of an Amended and Restated
Pooling and Servicing Agreement (PSA), Supreme Court
improperly interpreted the term "default, " as
employed in one provision of the PSA, as synonymous with the
term "Event of Default, " as defined in a preceding
provision of the PSA. We find that Supreme Court's
determination was correct, and therefore affirm.
appeal arose from the sale of a commercial mortgage loan for
allegedly less than "fair value."
2007, the Bryant Park Hotel, located at 40 W. 40th Street,
borrowed funds from the J.P. Morgan Chase Commercial Mortgage
Securities Trust Series 2007-CIBC18 (the Trust), which was
created pursuant to a pooling and servicing agreement dated
March 7, 2007. Under the terms of that agreement, defendant
Wells Fargo Bank was designated as the Trustee and Paying
Agent, defendant Berkadia was designated as the Master
Servicer and defendant KeyBank was designated as the Special
Servicer. The Bryant Park Hotel loan was pooled with other
commercial mortgage loans and securitized into the Trust.
6.03 of the PSA limits the potential claims of liability that
may be brought against the servicers of the Trust to willful
misfeasance, bad faith, negligence or negligent disregard of
their duties under the PSA. That section also provides that
the servicers will be indemnified by the Trust for all
expenses unless incurred by reason of bad faith, willful
misconduct, negligence or negligent disregard.
VII of the PSA, entitled "Default, " includes
alternative definitions of the term "Event of
Default" (Section 7.01[a]). The parties agree that the
only definition of "Event of Default" applicable to
the circumstances presented in this case is the following:
failure on the part of the Master Servicer [or] the Special
Servicer... duly to observe or perform in any material
respect any of its other covenants or obligations contained
in this Agreement which continues unremedied for a period of
30 days... after the date on which written notice of such
failure, requiring the same to be remedied, shall have been
given... to the Master Servicer [or] the Special
Servicer... as the case may be, with a copy to each
other party to this Agreement, by the Holders of
Certificates evidencing Percentage Interests aggregating not
less than 25%" (Section 7.01[a][iii] [emphasis added]).
12.03(c) of the PSA (the "no-action" clause) sets
forth the limited circumstances under which a
certificateholder may institute suit. Section 12.03(c)
provides, in pertinent part:
"No Certificateholder shall have any right by virtue of
any provision of this Agreement to institute any suit, action
or proceeding in equity or at law upon or under or with
respect to this Agreement or any Mortgage Loan, unless, with
respect to any suit, action or proceeding upon or under or
with respect to this Agreement, such Holder previously shall
have given to the Trustee and the Paying Agent a written
notice of default hereunder, and of the continuance
thereof, as herein before provided, and unless also
(except in the case of a default by the Trustee) the Holders
of Certificates of any Class evidencing not less than 25% of
the related Percentage Interests in such Class shall have
made written request upon the Trustee to institute such
action, suit or proceeding in its own name as Trustee
hereunder and shall have offered to the Trustee such
reasonable indemnity as it may require against the costs,
expenses and liabilities to be incurred therein or thereby,
and the Trustee, for 60 days after its receipt of such
notice, request and offer of indemnity, shall have neglected
or refused to institute any such action, suit or
proceeding" (emphasis added).
sets forth no definition of the term "default" as
employed in section 12.03(c).
October 2011, the borrower defaulted on the loan, and
Berkadia, which had been responsible for servicing the loan
as Master Servicer, transferred that responsibility to
KeyBank, as Special Servicer. KeyBank, as Special Servicer,
was tasked with determining the "fair value" of the
loan, and Berkadia, as Master Servicer, was responsible for
reviewing KeyBank's fair value determination.
February 27, 2012, the original pooling and servicing
agreement was ...