Craft EM CLO 2006-1 Ltd. v Deutsche Bank AG

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Craft EM CLO 2006-1 Ltd. v Deutsche Bank AG 2018 NY Slip Op 32682(U) October 15, 2018 Supreme Court, New York County Docket Number: 656152/16 Judge: Charles E. Ramos Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various New York State and local government sources, including the New York State Unified Court System's eCourts Service. This opinion is uncorrected and not selected for official publication. [*FILED: 1] NEW YORK COUNTY CLERK 10/18/2018 09:38 AM NYSCEF DOC. NO. 88 INDEX NO. 656152/2016 RECEIVED NYSCEF: 10/18/2018 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK: COMMERCIAL DIVISION --------------------------------------------x CEAFT EM CLO 2006-lr LTD, PLnntiff, Index No. 656l!j2/l6 DEUTSCHE BANE AG, Defendant. --------------------------------------------x Hon. C. E. Ramos, J.S.C.: In motion sequence 001, the defendant Deutsche Bank AG ("Deutsche Bank") moves pursuant to CPLR 3211 and (7), ("Craft") (a) ( l) , to dismiss the plaintiff Craft EM CLO 2006-1 Ltd.'s complaj_nt (the "Complaint") . Factual Background1 For a full recitation of the facts, prior decision, dated Aug-ust 14, 2017 CLO 2006~·}; I,td. v Deutsche Bank AG, please see this Court's (the "Decision") (Craft EM 56 Misc: 3d 1216 (fa.), [Sup Ctr NY County 2017, Ramos, J.]). In the Decision, this Court found that "Craft's claims that Deutsche Bank failed to apply updated Moody's mapping tables and to meet specified criteria in the Reference Obligation are timebarred under the applicable statute of limitations ... " because 1 D .,e f. ..1ne·d terms contained herein have the identical definition as contained in the Decision, unless otherwise defined herein, 2 of 6 [*FILED: 2] NEW YORK COUNTY CLERK 10/18/2018 09:38 AM INDEX NO. 656152/2016 NYSCEF DOC. NO. 88 RECEIVED NYSCEF: 10/18/2018 HSBC had no viable claims to assign as of the date of execution of the 2016 Assignment Agreements and on this basis, the Court aisrnissed that portion of Craft's claims and directed limited discovery pertaining ta the issuance date of the alleged improper Accountant Certifications following a credit event. Discussion With respect to the timeliness of Craft's claims alleging .1.rnproper Accountant Certifications folJ.cwin9 a c.cedit event, Deutsche Bank has established that eleven of the Accountant Certifications (including Egana and Peace Mark, the 2017 Decision) as addressed in were issued more than six years prior to the initiation of this action, November 2016. Consequently, Craft's claims relating to those eleven Accountant Certifications are time-barred as well (Tambe Supp. Aff., Ex. A, #1-11; Exs. B-L) because a claim for breach of contract "accrues at the time cf b.re<=lch" 410, 412 (Chelsea Piers L.P< v Hudson Ri<,rer Park T.r.., 106 AD3d f.20131). Otherwise, this Court concludes that Craft lacks standinq to pursue its claims because the 2016 Ass.-J.9nment Aqreernents are void. pursuant to the anti-assignment provision in the Swap Agreements. Section 5(1) of the Schedu.le to the ISDA Master Agreement clearly provides that: [Deutsche Bank] hereby acknowledges that [Craft] has granted a first priority security interest in its riqhts under this Agreement, has directed that payrnents owed to it be made to the Trustee 3 of 6 [*FILED: 3] NEW YORK COUNTY CLERK 10/18/2018 09:38 AM NYSCEF DOC. NO. 88 INDEX NO. 656152/2016 RECEIVED NYSCEF: 10/18/2018 pursuant to this Agreement and the Issue Swap Confirmation hereunder and has assigned this Agreement to the Trustee pursuant to the Indenture, and consents thereto, and [Deutsche Bank] hereby consents to further transfer of such rights pursuant to the Indenture. [Craft] shall not pledge, encumber or assign any interest (whether outright or by way of security) in this Agreement without the prior written consent of [Deutsche Bank], and any attempted assignment in violation of this provision shall be null and void.· (Tambe Aff., Exs. 8, 9, § 5 [lJ). Craft contends that the assignments are nonetheless valid because anti-assignment clause.s do not apply to the assignment of claims after loss has occurred. Craft also argues that the antiassignment provision is merely a personal covenant that does not render the assignments themselves invalid. This Court disagrees. The plain language of the antiassignment provision in the Schedule to ISDA Master Agreements expressly states that "any attempted assignment in violation of this provision shall be null and void" (id.). Pursuant to the ISDA Master Agreement, "any inconsistency between the provi_ s-1_on~:; of the Schedule and the other provisions of this Master Agreement" shall be resolved in favor of the Schedule (id.) In addition, the cases cited by Craft in support of its contentions are not applicable here, either because they arise in the context of insurance policies or involve anti-assignment provisions that do not contain express language indicating that the assignment would be void. . ~ .J 4 of 6 [*FILED: 4] NEW YORK COUNTY CLERK 10/18/2018 09:38 AM NYSCEF DOC. NO. 88 INDEX NO. 656152/2016 RECEIVED NYSCEF: 10/18/2018 Beginning in January 2007, HSBC held the right to bring any and all breach of contract claims arising under the Swap AgreemenU:;, includinq these purportedly asserted here. Craft argues that Deutsche Bank consented to HSBC's a~rnignments, hmvever, th•::? plain la.nguage of the Schedules to ISDA, Master Agreements demonstrate that Deutsche Bank provided only limited written consent "to any further transfer of such rights pursuant to the Indenture ... " (id.). Absent from the Indentures is any provision that would permit the type of assigmnents cont.ernplated by the ? CH 6 F.~rni::,pment l\greements and C:caf t. otherwise fails to establish that Deutsche Bank consented to the assignments. As a result, the assignments are not transfers ~pursuant to the Indenture," and are thus transfers without consent that are void pursuant to the Schedule to the ISDA Master Agreement ' .. \ \ .i.C1' ,l "Where the agreement in question contains express language that any a~_:;s as~~:J.9rnnent v'wuld be void, lanquaqe tc the effect that an ignee would acquire no rights as the result of an a~rnignrnent r or :J.nd:J.cates that the nonassigning party has no obligation to recognize the assignee, (.Marion Blumenthal Tr. the subsequent assignment is void" ex re."/, B.Zumenthal v llrf.)or Commercial 2015]). Consequently, because the 2016 Assigrnnent Agreements are 4 5 of 6 [*FILED: 5] NEW YORK COUNTY CLERK 10/18/2018 09:38 AM NYSCEF DOC. NO. 88 INDEX NO. 656152/2016 RECEIVED NYSCEF: 10/18/2018 invalid, the Craft's claims must be dismissed for lack of standinq (Natl, Fin, Co, v Uh, 279 AD2d 374, 375 f.lst Dept 2001]), Accordingly, it is ORDERED that defendant Deutsche Bank AG's motion to dismiss the complaint is granted; and it is further ORDERED that the Clerk shall enter judgment accordingly. Dated: October 15, 2018 6 of 6

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