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 A New York state appeals court found that the case was barred by the
state's six-year statute of limitations, ruling that the clock began
to run when the contract was executed in 2006.
The decision reversed a May 13 ruling by a lower court, which had
found that the statute of limitations did not begin until the bank
refused investor demands that it repurchase the defective loans.
Marc Kasowitz, who represented ACE Securities Corp, the bondholder
who brought the case, said in an email that he looked forward to "a
successful appeal" of Thursday's ruling.
David Woll, who represented the Deutsche unit, DB Structured
Products Inc, declined to comment.
The decision is a victory for some banks facing claims by
bondholders over residential mortgage-backed securities issued in
the run-up to the 2008 financial crisis.
The ruling "will have an impact on numerous existing cases as well
as limiting new cases because most of the securitizations at issue
occurred more than six years ago," Scott Musoff, a lawyer who is
involved in similar cases, said in an interview.
Musoff is not involved in the DB Structured Products case, but
represents other financial institutions facing similar claims.
In Thursday's decision, a unanimous four-judge appeals panel ruled
that the lower court "erred in finding that plaintiff's claims did
not accrue until defendant either failed to timely cure or
repurchase a defective mortgage loan."
To the contrary, "the claims accrued on the closing date" of the
mortgage loan purchase agreement, according to the decision, which
was unsigned.
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The court also found the action was not timely for other reasons.
For one thing, the bondholders didn't give the bank the 60 and
90-day periods to cure or repurchase the underlying mortgages before
filing their summons in March 2012, as the agreement required.
For another, the court ruled the investors whose bonds were held in
a trust lacked standing to commence the action on behalf of the
trust.
The bondholders later substituted the trustee as plaintiff, but that
did not make the September 2012 complaint timely, the court said.
The case is ACE Securities Corp v DB Structured Products Inc., New
York state Supreme Court, Appellate Division, No. 11384 and M-5893,
M-6111 and M-6133.
(Reporting by Karen Freifeld)
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