Overview
In an opinion Friday, Judge Scheindlin dismissed as time-barred a case alleging that certain mortgage-backed securities were not as represented. The plaintiff claimed that the statute of limitations did not begin to run until the defendant refused to repurchase or cure the defects, but Judge Scheindlin, relying largely on the First Department’s recent decision in ACE Sec. Corp. v. DB Structured Products (see here, starting at pg. 26), disagreed:
The Trust [the plaintiff] attempts to distinguish ACE Securities by stating that “the contract at issue in ACE did not contain a provision expressly stating the conditions that must be satisfied before a cause of action can accrue.” That is true. However parties may not contractually adopt an accrual provision that effectively extends the statute of limitations before any claims have accrued. In another case pertaining to mortgage loans, the Western District of Washington, applying New York law, held that parties “may not extend the accrual date of the statute of limitations simply by delaying its demand for payment [because a ] cause of action for breach of contract accrues when the party making the claim possesses a legal right to demand payment.”Judge Scheindlin's decision reflects a split with a decision from Judge Hellerstein in December, which cited the trial court’s decision (since reversed) in the ACE case. Last Wednesday, Judge Hellerstein declined to reconsider his decision, notwithstanding the reversal in ACE:
I’ve read the Appellate Division’s decision in Ace II and it does not change my views that the contract was breached not at the time of closing by at the time of failure to cure. Therefore the motion to reconsider is denied.Reuters’s Alison Frankel covered Judge Hellerstein’s ruling, and has more on this issue, here.
