Summary
denying motion to dismiss, noting that causation is an issue of fact
Summary of this case from Sterling Fed. Bank, F.S.B. v. Countrywide Fin. Corp.Opinion
No. 09 C 6904.
May 11, 2011
MEMORANDUM OPINION
Before the court is defendant Bank of New York Mellon's ("BNYM") motion to dismiss plaintiff Sterling Federal Bank, F.S.B.'s amended complaint. For the reasons explained below we deny defendant's motion.
BACKGROUND
We will assume that the reader is familiar with our opinion dismissing Sterling's original complaint, which discussed plaintiff's allegations in detail. Sterling Federal Bank, F.S.B. v. DLJ Mortgage Capital, Inc., No. 09 C 6904, 2010 WL 3324705 (N.D. Ill. Aug. 20, 2010) ("Sterling I").
DISCUSSION
A. Standard of Review
The purpose of a 12(b)(6) motion to dismiss is to test the sufficiency of the complaint, not to resolve the case on the merits. 5B Charles Alan Wright Arthur R. Miller, Federal Practice and Procedure § 1356, at 354 (3d ed. 2004). To survive such a motion, "a complaint must contain sufficient factual matter, accepted as true, to `state a claim to relief that is plausible on its face.' 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, 129 S. Ct. 1937, 1949 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 556 (2007)). When evaluating a motion to dismiss a complaint, the court must accept as true all factual allegations in the complaint. Iqbal, 129 S. Ct. at 1949. However, we need not accept as true its legal conclusions; "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. (citing Twombly, 550 U.S. at 555).B. Dismissal for Noncompliance with the No-Action Clause
In Sterling I, we dismissed Sterling's claims against all the defendants except BNYM because Sterling failed to comply with the Pooling and Servicing Agreements' ("PSAs") no-action clauses:
No Certificateholder shall have any right by virtue or by availing itself of any provisions of this Agreement to institute any suit or proceeding in equity or at law upon or under or with respect to this Agreement, unless such Holder previously shall have given to the Trust Administrator a written notice of an Event of Default and of the continuance thereof, as provided herein, and unless the Holders of Certificates evidencing not less than 25% of the Voting Rights evidenced by the Certificates shall also have made written request upon the Trust Administrator to institute such action, suit or proceeding in its own name as Trust Administrator hereunder and shall have offered to the Trust Administrator such reasonable indemnity as it may require against the costs, expenses, and liabilities to be incurred therein or thereby, and the Trust Administrator 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; it being understood and intended, and being expressly covenanted by each Certificateholder with every other Certificateholder and the Trust Administrator, that no one or more Holders of Certificates shall have any right in any manner whatever by virtue or by availing itself or themselves of ay provisions of this Agreement to affect, disturb or prejudice the rights of the Holders of any other of the Certificates, or to obtain priority or preference to any other such Holder or to enforce any right under this Agreement, except in the manner herein provided and for the common benefit of all Certificateholder.
(PSA (2002-24) § 12.07.) We concluded that § 12.07 did not apply to Sterling's claims against BNYM because it would be "absurd" to ask BNYM to sue itself. Sterling I, 2010 WL 3324705, *4 (citingCruden v. Bank of New York, 957 F.2d 961, 968 (2d Cir. 1992) andPeak Partners, LP v. Republic Bank, 191 Fed.Appx. 118, 2006 WL 2243040, *7 n. 11 (3d Cir. Aug. 7, 2006)). BNYM effectively conceded that point, but it argued that we should nevertheless enforce § 12.07's other requirements, "including the obligation to obtain the endorsement of `Holders of Certificates evidencing not less than 25% of the Voting Rights evidenced by the Certificates.'" Sterling I, 2010 WL 3324705, *4. We rejected BNYM's argument because (1) BNYM did not cite any relevant authority to support it, and (2) it was inconsistent with the holdings in Cruden and Peak Partners. Id.
In its motion to dismiss Sterling's amended complaint, BNYM rehashes its argument that we should enforce the no-action clause's other requirements, even if we excuse Sterling from formally demanding that BNYM sue itself. It is true, as BNYM points out, that neither Cruden nor Peak Partners explicitly addressed whether the no-action clauses in those cases should be enforced in the piecemeal fashion that BNYM advocates here. They simply held that the clauses did not apply to the plaintiffs' claims against the trustees, and we agree. We see no basis, then, to reform the contract to make the 25% voting-rights term (for example) a free-standing requirement applicable to suits against the trustee. (Cf. PSA § 12.07 (Prohibiting suit "unless the Holders of Certificates evidencing not less than 25% of the Voting Rights evidenced by the Certificates shall also have made written request upon the Trust Administrator to institute such action. . . .").) If the parties had wanted to impose such a restriction on suits against the trustee, they should have done so explicitly. BNYM cites cases that support severing invalid provisions from otherwise enforceable contracts. See, e.g., In re Balfour MacLaine Int'l, Ltd., 85 F.3d 68, 81 (2d Cir. 1996); see also PSA § 12.06 (requiring severance of "invalid" provisions). Those authorities are irrelevant. The no-action clause is not "invalid" as applied to BNYM. It does not apply to BNYM at all.
The Cruden court concluded that even though the no-action clause did not apply to plaintiffs' claims against the trustee, it was relevant to the question of when their claims accrued.Cruden, 957 F.2d at 961. The court did not, as BNYM seems to suggest, apply the no-action clause's event-of-default requirement to the plaintiffs' claims against the trustees.
C. Whether Sterling Has Properly Alleged Damages Caused by BNYM's Conduct
D. Sterling's "Breach of Fiduciary Duty" Claim
Sterling I2010 WL 3324705Id. Id. See, e.g. US Pack Network Corp. v. Travelers Property Casualty 840 N.Y.S.2d 3536Leigh Management Associates v. Weinstein 674 N.Y.S.2d 688689 Sterling I2010 WL 3324705See Bennett v. Schmidt 153 F.3d 516518 See, e.g. See Hess v. Reg-Ellen Machine Tool Corp. 423 F.3d 653 665
CONCLUSION
BNYM's motion to dismiss (72) is denied. Sterling's motion to file supplemental authority (91) is denied as moot. A status hearing is set for May 18, 2011 at 10:30 a.m.