BNP Paribas Mortgage Corporation v. Bank of America N.A., No. 1:2009cv09783 - Document 167 (S.D.N.Y. 2013)
Court Description: OPINION re: (156 in 1:09-cv-09783-RWS) JOINT MOTION for Leave to File Third Supplemental and Amended Complaints filed by BNP Paribas Mortgage Corporation, BNP Paribas, (143 in 1:09-cv-09784-RWS) MOTION for Leave to File Third Supplemental and Amended Complaint filed by Deutsche Bank AG. Based on these conclusions, as well as the futility of Plaintiffs' proposed allegations, Plaintiffs' request to supplement and amend is denied. (Signed by Judge Robert W. Sweet on 12/9/2013) (cd)
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r~ y DO(1j~ll~:rl lJSD( UNITED DISTRI COURT SOUTHERN DISTRICT OF NEW YORK ELLCfR(;N it AJ.l ---------------------- -----------X BNP PARI BAS MORTGAGE CORPORATION and BNP PARIBAS, OOC #: _._......;:::;:~r+T'-?""'j DATE FlLEt>: ~_~~~21 aintiffs, 09 Civ. 9783 (RWS) - against OPINION BANK OF AMERICA, N.A., Defendant. ----------- -x DEUTSCHE BANK AG, Plaintiff, 09 Civ. 9784 - against OPINION BANK OF AMERICA, N.A., Defendant. -x A P PEA RAN C E S: At Mo iffs BNP Pa BNP BOIES SCHILLER & FLEXNER LLP 333 Main Street Armonk, NY 10504 By: Robin A. Henry, Esq. Matty Shulman, Esq. Jack Wilson, Esq. s s (RWS) Attorneys for Plaintiff Deutsche Bank AG WILLIAMS & CONNOLLY LLP 725 Twelfth Street, N.W. Washington, DC 20005 By: William E. McDaniels, Esq. Stephen D. Andrews, Esq. Stephen P. Sorensen, Esq. Daniel M. Dockery, Esq. Katherine O'Connor, Esq. Attorneys for Defendant Bank of America, N.A. MUNGER, TOLLES & OLSON LLP 355 South Grand Avenue, 35th Floor Los Angeles, CA 90071-1560 By: Marc T.G. Dworsky, Esq. Kristin Linsley Myles, Esq. Gregory Weingart, Esq. Richard St. John, Esq. KING & SPALDING LLP 1185 Avenue of the Americas New York, NY 10036 By: Richard T. Marooney, Esq. 1 Sweet, D.J. Plaintiffs' BNP Paribas Mortgage Corporation ("BNPP") and Deutsche Bank AG ("DB") (together, "Plaintiffs") move for joint leave to supplement and amend their Second Amended Complaints ("BNP SAC" and "DB SAC") (collectively, the "SACs") pursuant to Federal R. Civ. P. 15(a) (2) and 15(d) For the reasons set forth below, the motion is denied. Prior Proceedings The Plaintiffs initiated these actions against BoA on November 25, 2009, and each filed Amended Complaints on March 17, 2010. 1 On April 30, 2010, BoA moved to dismiss the FACs and on March 23, 2011, this Court issued its ruling on BoA's motion in BNP Paribas Mortg. Corp. v. Bank of America, N.A., Supp. 2d 375 (S.D.N.Y. 2011) decision dismissed (1) (the "March 23 Opinion") 778 F. The Plaintiffs' contract claims for lack of standing under the Depositary Agreement, the Custodial Agreement and the March 2009 Letter; (2) Plaintiffs' indemnification 1 Hereafter, the Amended Complaint filed by DB will be referred to as the "DB AC" and the Amended Complaint filed by BNP in its contracts case will be referred to as the "BNP AC" (collectively, "Plaintiffs' FACs"). 2 and (3) all claims relating to Ocala Notes is to y 20, 2009. r The decision upheld all remaining cIa On August 30, 2010, the Plaintiffs filed new act BoA in the Southern District of Florida, asserting conversion of Ocala's assets and seeking to recover their investment losses on their unpaid Ocala notes. Deut AG v. Bank e 1 Action No. 10 America ("Deutsche II"), S.D. Fla. 3124 and BNP Paribas Mortg. Corp. v. Bank ca ("BNP II"), S.D. Fla. Civil Action No. 10-23115 (collect the act ly, "Conversion Actions"). s were trans York and re r to rred to the Southern District of New is Court. On August 30, 2011, this Court dismissed Plaintiffs' conversion claims. Corp. v. Bank On November 17, 2010, BNP Paribas Mortg. ca, N.A., Nos. 10-8630 and 10-8299, 2011 WL 3847376 (S.D.N.Y. "August 30 Opinion") . 30, 2011) i On July 6, 2011, P1a s made a formal demand by letter on BoA, as Indenture Trustee pursue claims against the sitary, Agent for breaches of the corre Collateral Agent, to an and Collateral itary, Custodial 3 Security Agreements. On August 6, 2011, BoA re Plaintiffs' demands. On June 22, 2011, BoA fil party defendant BNP Pa its Complaint s Securities Corporation ("BNPPS") and third party def Inc. ("DBS") (collectively, Deutsche Bank Securities, "Note Dealers" or the "Thi Party Defendants"), and motions to smiss were heard and marked fully submitted on January 25, 2012. Pla iffs on April 4, 2012. On June 5, 2012, this Court ing on BoA's Comp s Defendants t the Third Party Plaintiffs' Motion to America, N.A., Corp. v. Bank 2012) On December 29, 2011, led a motion to amend, which was heard and mar fully issued inst "June 6 Opinion"). in BNP Paribas Mortg. 866 F. The .2d 257 ision dismissed BoA's its entirety and granted Compla (S.D.N.Y. aintiffs' motion to amend and file the Second Amended Complaint. a reasserting iffs filed their SACs on October 1, 2012, ir initial surviving claims and adding allegations of (1) BoA failing to "sue itself" or assign its claims; (2) negl and negligent mis 4 sentation; and (3) contingent quasi-contract claims. On January 15, 2013, BoA filed a motion to dismiss counts four through twelve of the Plaintiffs' SACs and BNP's Fourteenth Cause of Action. BoA's motion to dismiss was granted in its entirety in BNP Paribas Mortg. Corp. v. Bank of America, N.A., June 6, 2013) 2013 WL 2452169 (S.D.N.Y. (the "June 6 Opinion") . On July 8, 2013, Plaintiffs filed the instant motion for joint leave to supplement and amend their SACs. This motion was heard and marked fully submitted on October 2, 2013. Facts The transaction giving rise to this action was alleged in the initial complaint and described in the June 6 Opinion. Plaintiffs' motion to file the Third Amended Complaints ("TACs") principally relates to the terms of a May 23, 2013 assignment, under which BoA, as Indenture Trustee, assigned claims to BNPP and DB in exchange for Plaintiffs' agreement not to appoint a successor Indenture Trustee. 5 On April 8, 2013, Plaintiffs notifi BoA that, suant to Section 10.6(b) of the Base Indenture, BoA was removed as Indenture Trustee, pending appointment of a new Trustee. I (Affi t of Nathan Holcomb, July 8, 2013 1 8, 2013 Notice of Removal of Bank ("Holcomb Aff."); Ex. 0 of Ame ca as Indenture Trustee for Ocala Funding).) 2013, BoA, as Indenture Trustee, assigned "all of t Trustee's right, title, and Agreement and/or t Indenture rest in and to" any c potential claims "that the I Deposita On May 23, Trustee may have Custodial Agreement or r the t BoA for alleged breaches of any duties and obligations under Agreement and/or the Custodial Agreement" to Depos PI if (Holcomb Aff. Ex. C ~ 1 (May 23, 2013 Limit Assignment/Transfer Agreement among BoA, BNP Paribas Mort Corp. and DB) ed that these assi Agreement Noteholders only The Assignment claims be pursued by this Court and only by way of amendment of the existing pleadings. Trustee's r ement").) (the "Assignment (Id. (assigni , title and interest in "all of the Indenture to the Claims, provided, however, that the Investors acknowledge and agree that, to the extent the Investors intend to assert the Claims, such claims shall asserted solely and exclusively in the New York Actions by way of a motion seeking leave to amend and/or 6 supplement the complaints. . ") . ) Plaintiffs contend that pursuant to this agreement, they have standing to assert claims under the Depositary Agreement against BoA, and seek to file their TACs to assert these newly acquired claims. The Applicable Standard Under Rule 15(a), "leave to amend 'shall be freely given when justice so requires,' [but] it is within the sound discretion of the district court to grant or deny leave to amend." McCarthy v. Dun (2d Cir. 2007) & Bradstreet Corp., 482 F. 3d 184, 200 (quoting Fed. R. Civ. P. 15 (a)); see also Williams v. Citigroup Inc., 659 F.3d 208, 212-13 (2d Cir. 2011) (citing New York v. Green, 420 F.3d 99, 104 (2d Cir. 2005)) (the standard governing motions to amend is a "permissive" one that is informed by a "strong preference for resolving disputes on the merits."). "If the underlying facts or circumstances relied upon by a plaintiff may be a proper subject of relief, he ought to be afforded an opportunity to test his claim on the merits." Williams, 659 F.3d at 213 (quoting Foman v. Davis, 371 U.s. 178, 182, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962)). 7 However, "[aJ st leave for good reason, i delay, or undue prej ct court has discretion to ng futility, bad faith, undue opposing party." McCa v. 184, 200 (2d Cir. 2007). to Dun & Bradstreet Corp., 482 F. An amendment to a pleading will not withstand a motion to di uti v. N.Y.C. ny ile if a proposed claim cou ss pursuant to Rule 12 (b) (6) . Transit Auth., 941 F.2d 119, 123 (2d Cir. 1991); see also AEP Energy Servs. Gas Holding Co. v. Bank of Am., N.A., 626 F.3d 699, 726 (2d Cir. 2010) nied on grounds of futility if t to state a legally cognizable cla issues of fact."). t ("Leave to amend may proposed amendment fails or ils to raise triable Other factors that may be considered include length of the delay, the judicial and party resources that or evident in the expended, and any tactical be i 's request for leave to amend. See v. Dun & Bradstreet, 482 F.3d 184, 200 01 Tra g Corp. of India v. Assuranceforenin 409, 418 erally McCarthy (2d Cir. 2007); State ld, 921 F.2d (2d Cir. 1990). I. Amendment Would be Futile " [A] that st to replead should be denied would be futile." Absolute Activist Master 8 event Ltd. v. ceto, 677 F.3d 60, 71 (2d Cir. 2012); see also Oneida an Nation of N.Y. v. City of Sh r. 2003) (" [A]mendment is not war things, 'futility.''') on other grounds, 8 11, 337 F.3d 139, 168 (2d in the case of, among (internal citations omitted), rev'd 544 U.S. 197 (2005); anstasio v. D'Agostino, F. Supp. 2d 343, 351 (S.D.N.Y. 2012). to a pleading would be futi if it proposed amendment not withstand a motion to dismiss pursuant to Rule 12 (b) (6)./1 Oneida Indian Nation, F.3d at 168; see also Heal 810 (2d Cir. 1990) (" [W] . v. Baker, 337 915 F.2d 805, re is no merit in the [] should be denied."); see prorposed amendments, leave to also E*Trade Fin. Corp. v. Deutsche Bank AG, 420 F. Supp. 2d 273, 282 (S.D.N.Y. 2006) the amended pleading ils to state a claim or would be subject to a successful motion to Pia amendment is considered futile if ss on some other basis."). iffs seek to supplement and amend t the Depositary Agreement. bring claims Two have rejected Plaintiffs' attempt to bring such ion the March 23 beneficiaries of enforce it, see Ma 6 Opinion ir SACs to ior opinions rst, Id that Plaintiffs were not Depositary Agreement and 23 Opinion at 408-11, and se ssed the Depositary claims from 9 standing to , the June SACs, holding that a party cannot bring an adversarial claim (i. BoA as indenture trustee of e. could not be 7. through derivat f Depositary Agreement ired to sue itself). Now, Plaintiffs seek to bring inst its June 6 same all nion at *6 ions not standing or by forcing BoA to sue self, but as assignees of BoA's Indenture Trustee claims. "It is elementary ancient law that an assignee never stands any better position than his assignor./f See Matter of International Ribbon Mills, 36 N.Y.2d 121, 126 (1975); see also New York & Presbyt. Hosp. v Country-Wi 54 (2011) (an assi e can acquire "no greater rights" t of his assignor). t this rule: juri (a) assigni ction that Ins. Co. 934 N.Y.S.2d re are two established ions to a claim can create diversity d not othe se exist, see Deajess Imaging v. Allstate Ins. Co., 344 F. Supp. 2d 907, 910-11 (S.D.N.Y. 2004), and (b) New York law has allowed assignments of cIa by corporations to individuals to 321(a), which bars corporations from Kinlay v. Henley, 868 N.Y.S.2d 62, 10 63 ss N.Y. C.P.K.R. aring pro se. See (N.Y. App. Div. 2008). § Neither exception is Assignment was used icable to the instant motion. both narrow line of cases to avoid jurisdictional and procedural bars, not to cure a failure to state a claim. As Plaintiffs ac edge, each line of cases involves an "impediment [that] is of the merits." Mot."; at 12.) (See Plaintiffs' Motion to Supplement; " contrast, no New York case or any other ar to cure the defect rti sue self. a rcuit has s s allowed assignments to cure a cIa In on the merits, or rty not being able to Here, Plaintiffs' claims were ce dismissed r 12(b) (6) motions, not as the result of a procedural bar or juri t" of ctional defect. Courts in this circuit have made clear smissal under Rule 12 (b) (6) is a action. F.3d 1182, 1187 (dismissal Nowak v. II ssal on the merits Ironworkers Local 6 Pen (2d Cir. 1996); see also r than for lack of jurisdict on Fund, R. Civ. , imp or failure to a join a party is "adjudication on The proposed Depositary Agreement fect P. 81 41 (b) venue, merits") . rives from the structure of the contractual scheme to which Plaintiffs and because BoA cannot as a matter of law sue itself. 23 Opinion at 410 counseled part s See March ("Deliberate choices by 'sophistica aling at arm's length' in a 'multimillion 11 lar transaction' must be given ef ct." (quoting Chimart Assocs. V. Paul, 66 N.Y.2d 570, 574-75 (19986))). In West Penn Adm ., Inc. v. Pittsburgh Nat'l Bank, 433 A.2d 896 (Pa. Super. 1981), the Pennsylvania appellate court rejected plaintiff assi 's attempt to sue a bank because assignment had come from same bank: "It is axiomatic that a party may not sue himself [and] an assignment r right, power, or confer upon the assi than that possessed by t assignor." citations omitted). any greater rights rnal d not have the right to sue itself reement, and an assignment cannot con r at the time of the assignment See June 6 Opinion at *6-7; see also Squire assignor possess v. Greene, Id. at 901 ( rest same reasoning applies here: At time of the assignment, BoA under the Depositary s not 52 N.Y.S. 1013, 1017-18 (2d Dep't 1989); n Steamship Co. v. Sonmez Denizcilik Ve Ticaret, A.S., 598 F.2d 1264, 1266 (2d r. 1979) whatever limitations York & 586, 593 (2011) if you had no ri (" as assignee of a claim ta had in the hands of the ass s with "); New an Hosp. v. Country-Wide Ins. Co., 17 N.Y.3d ("you cannot assign your right to bene ts. to those benefits in the first place."). 12 The Assignment Agreement, contrary to Plaintiffs' assertions, supports this reasoning. "without prejudice to BoA's pos CIa cannot be Agreement <JI 2.) The ement was executed ion that various defects in the (See Assignment by assignment." r provi The Assignment Agreement "BoA has not wai does not wa reserves/ any de s or rights with respect to the assert of the C , and i s that ims on procedural, substantive or including, without limitation, expressly itable grounds, . any argument that claims are improper or may not be pursed for any reason the val 5 (h) .) of the assignment." ¢ <JI 2; see also id. The Agreement thus assigned available not concede or guarantee that any such rights <JI s, but did sted. 2 Plaintiffs maintain that the assignment should be respected because BoA "voluntarily as its claims" and received "valuable consideration" for the assign~ent. (Pl. Mot. at 10-11.) Whether BoA made the assignment voluntarily and what consideration BoA received have no on whether the underlying claim under the Depositary is viable. Similarly, Plaintiffs' cited precedent of U.S. Trust Co. N.Y. v. First Nat' City Bank, 394 N.Y.S.2d 653 (1st t 1977), in which a successor trustee brought an action for mismanage~ent its sor, is irrelevant to the instant ions. Plaintiffs are not successor trustees; BoA remains the trustee. (See Assignment '1113, 5 (a).) Further, a successor does not obtain claims from the former trustee by ass As such U.S. Trust Co. is inapplicable. 13 Plaintiffs contend that they were somehow misled into believing that BoA would sue itself, citing in support a March 2009 side letter between BoA and BNP (Holcomb Aff. Ex. F) and a June 2008 opinion letter by Alston & Bird 11P, then counsel to BoA. (Id. Ex. E.) However, the March 2009 letter, which the March 23 Opinion has held to be unenforceable, says only that BoA's duties as Depositary "play an informative role in mitigating" risks faced by BNP. The June 2008 letter, in which Alston & Bird opines in boilerplate fashion that the Facility Documents create "legal, valid and binding obligations" that are "enforceable against [BoA]," does not create additional rights or obligations, but is enforceable only "in accordance with the terms" of BoA's obligations. BoA's obligations do not include suing itself under the Depositary Agreement. In any event, Plaintiffs are sophisticated financial institutions that struck a bargain that did not give them rights to assert claims under the Depositary Agreement. See June 6 Opinion at *10 (giving effect to "deliberate choices" by "sophisticated, counseled parties") . BoA, Neither letter entitles Plaintiffs, as assignees of to bring a claim that BoA could not itself bring, that Plaintiffs cannot bring in their own right, and for which Plaintiffs did not contract. 14 Because re is no applicable exception, and because Plaintif iously been dismissed on the merits, BoA's assignment of confer upon Pia s rights as Indenture Trustee cannot tif ability to bring claims which BoA Any supplement or amendment itself could not have relating to these claims wou II. re t be futile. Amending After Undue Delay Would Cause Undue Prejudice "[L]eave to amend s such as undue delay or undue " y [ judice to SRS Commc'ns Inc. v. 345 (2d Cir. 2004) given when factors opposing party are ck Co., Inc., (internal cit at ted); see also Burch, 551 F.3d at 126 ("[M]otions to amend shou generally be denied instances of futility, undue delay, bad motive, repeated failure to cure def non-moving ). (international citations y resources that have been expended, and or evidenced in the plaintiff's request " also be considered. 15 ith or dilatory iencies by amendments ously allowed, or undue prejudice to rty.") 360 F.3d 329, Id. \\ [T] he j cial and tactical leave to rcuit has affirmed dismissal of a The Second "without leave to replead compla ample prior opport Roebuck & y to allege a Co., Inc., 87 F.3d 65, 72 )i Mooney v. decis a party has been given tolo, ("Plaintiffs here were aim." ( De Jesus v. Sears, Cir. 1996) (c 435 F.2d 838, 839 (2d Cir. 1970) ce given an opportunity to ead. , it was within the sound discretion of the Dist There ead on the Court to deny leave to attempt.")i State Trading Corp. of India v. Assuranceforen 409, 418 (2d Cir. 1990) ct Skuld, 921 F.2d (" [AJ busy district court need not allow itself to be imposed upon by the presentation of theories seriatim. If) (internal citations omitted) . third att to bring t same claim. s is Plaintif (See Pl. Mo. At 7 ("Plaintiffs have previously pleaded claims a sing from BoA's breaches of the Depositary Agreement in their original Complaints and again in t FACs and SACs.").) Plaintiffs cou have sought removal of BoA as Indenture Trustee, or negot for BoA to assign its rights as Indenture Trustee, at any point. See Cresswell v. Sullivan & Cromwell, 1990) 922 F.2d 60, 72 (2d Cir. ("The burden is on the party who wishes to amend to provide a satis ctory explanation for the del .If). Instead, Plaintiff seek to supplement and amend their SACs over three and a half years s commencing initial action, and request to 16 of Southhold, See Zahra v. four years. file a fifth compla 48 F.3d 674, 686 (2d Cir. 1995) of leave to amend a er two a half years); AG Sec. Litig., No. 07 Civ. 6728 (affirming denial In re GPC Bio (DC), 2009 WL 5125130, at *5 ( S . D. N . Y. De c . 29, 2009 ) two years, citing nino Town leave to amend after more than te 1 h of delay" and "expenditure of time and resources"); Bymoen v. Heine, Geduld, Inc., No. 88 Civ. 1796 (KMW), 1991 WL 95387, at *1 (S.D.N.Y. May 28, 1991) ("[W]here a considerable r of time has passed between the filing of the complaint and the mot is upon the movant to show some val to amend, the burden reason r the movant's and delay."). In addition, the "longer an unexplained r less will be required of the nonmoving lay, of a showing of prejudice." Block v. First F.2d 344, 350 (2d Cir. 1993) (citation omit ce stems from the fact that this case over motions to rty in terms Assocs., 988 ). Here, ongoing s fing for years and has already twice ss. See Grand River Enters. Nations, L No. 02 Civ. 5068 (JFK), 2004 WL 1594869, at *4 July 15, 2004) (the "prejudice would stem from . v. (S.D.N.Y. ct t this action is two years old and was the subject of motions to 17 di more t ss "Agent Orange" . Liab. (E.D.N.Y. 2004) judicial s n six months to brief and submit"); Litig., In re 220 F.R.D. 22, 25-26 (denying leave to amend based on "burden on the "even if the amendment would cause no hardship at all to t rty"). also inter Amendment at this stage would ongoing expert discovery and trial preparat Conclusion Based on t se conclusions, as well as the futility of Plaintiffs' proposed alle ions, Pla iffs' request to supplement and amend is It is so orde New York, NY December jP , 2013 ROBERT W. SWEET U.S.D.J. 18
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