In a decision announced on May 13, 2013, Orrick obtained for Nomura Credit & Capital, Inc. the complete dismissal with prejudice of a $259 million residential mortgage-backed securities (“RMBS”) putback lawsuit in New York Supreme Court. The Nomura case is one of the first among dozens of RMBS putback cases now pending in NY Supreme. This week’s decision is significant in part because it is the first such RMBS lawsuit dismissed with prejudice by a New York court on statute of limitations grounds.
The case, originally brought by the Zambezi Funds, affiliates of hedge fund Fir Tree Partners, alleged that Nomura had breached certain contractual representations and warranties about the characteristics of mortgage loans and sought to rescind a $259 million RMBS securitization as a result.
Orrick argued that all of plaintiff’s claims are time barred under New York’s six-year statute of limitations because: (1) the Zambezi Funds had brought the RMBS Trustee into the litigation too late; and (2) the applicable statute of limitations ran from the date of the original 2005 RMBS transaction rather than from the date of any subsequent repurchase demand by the Zambezi Funds. Orrick argued that any other ruling essentially would eliminate the statute of limitations in all RMBS putback cases.
Justice O. Peter Sherwood of the Commercial Division of New York Supreme Court granted Nomura’s motion to dismiss on both grounds and dismissed the entire action with prejudice.
The Association of Mortgage Investors (“AMI”) had intervened in the litigation to file an amicus brief on plaintiff’s behalf, arguing that Nomura’s interpretation of the statute of limitations would severely limit RMBS putback claims in New York and deprive potential plaintiffs of billions of dollars in damages.
The Orrick team was led by New York securities litigation and regulatory enforcement partner Joseph J. Frank, who argued the case against Marc E. Kasowitz of Kasowitz Benson. Other Orrick lawyers who worked on the case include Steven J. Fink, Matthew L. Craner, Paul F. Rugani and Alison K. Roffi.