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Deutsche Bank Response to FDIC and JPM Motions to Dismiss

Deutsche Bank Response to FDIC and JPM Motions to Dismiss

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Published by Isaac Gradman
Deutsche Bank has filed a lawsuit against JP Morgan and the FDIC in Washington, D.C. District Court over deficiencies in the mortgages underlying 159 securitizations sponsored by Washington Mutual. Both JPM, who acquired WaMu out of receivership, and the FDIC, which acted as the receiver for WaMu, point the finger at the other as bearing the responsibility for buying back WaMu's defective loans. In this response by Deutsche Bank, as trustee for these securitizations, the bank argues that both parties should remain on the hook.
Deutsche Bank has filed a lawsuit against JP Morgan and the FDIC in Washington, D.C. District Court over deficiencies in the mortgages underlying 159 securitizations sponsored by Washington Mutual. Both JPM, who acquired WaMu out of receivership, and the FDIC, which acted as the receiver for WaMu, point the finger at the other as bearing the responsibility for buying back WaMu's defective loans. In this response by Deutsche Bank, as trustee for these securitizations, the bank argues that both parties should remain on the hook.

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Published by: Isaac Gradman on Jan 21, 2011
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07/01/2013

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 i
IN THE UNITED STATES DISTRICT COURTFOR THE DISTRICT OF COLUMBIA
Case No.: 1:09-CV-1656-RMCHon. Rosemary M. CollyerDEUTSCHE BANK NATIONAL TRUST COMPANY,as Trustee of the Trusts listed in Exhibits 1-A and 1-B,Plaintiff,v.FEDERAL DEPOSIT INSURANCE CORPORATION,as receiver for Washington Mutual Bank; JPMORGANCHASE BANK, National Association; andWASHINGTON MUTUAL MORTGAGESECURITIES CORPORATION,Defendants.
PLAINTIFF DEUTSCHE BANK NATIONAL TRUST COMPANY’S MEMORANDUMOF LAW IN OPPOSITION TO:(I)
 
FDIC RECEIVER’S MOTION TO DISMISS;(II)
 
JPMORGAN CHASE BANK, N.A. AND WASHINGTON MUTUALMORTGAGE SECURITIES CORPORATION’S MOTION TO DISMISS; AND(III)
 
JPMORGAN CHASE BANK, N.A. AND WASHINGTON MUTUALMORTGAGE SECURITIES CORPORATION’S MOTION FOR PARTIALSUMMARY JUDGMENT
BOIES, SCHILLER & FLEXNER LLP333 Main StreetArmonk, NY 10504Phone: (914) 749-8200Fax: (914) 749-8300TALCOTT FRANKLIN P.C.208 North Market Street, Suite 200Dallas, Texas 75202Phone: (214) 736-8730Fax: (877) 577-1356
Case 1:09-cv-01656-RMC Document 56 Filed 01/14/11 Page 1 of 54
 
 i
TABLE OF CONTENTS
TABLE OF AUTHORITIES.........................................................................................................iiiPRELIMINARY STATEMENT....................................................................................................1BACKGROUND............................................................................................................................3A. The Trusts and the Governing Documents...................................................................3B. The Senate Subcommittee Investigation and Findings.................................................4C. The Ongoing and Continuous Breach of the Repurchase and Notice Obligationsand Of the Trustee’s Access Rights..............................................................................6I. JPMC IS IN CONTINUING BREACH OF ITS CONTRACTUAL OBLIGATIONTOPROVIDE THE TRUSTEE ACCESS TO THE LOAN FILES..................................10A. JPMC – the Only Party With Possession of the Loan Files – Has Refused toProvide the Trustee With Access to the Loan Files....................................................10 B. JPMC Cannot Demand the Trustee Plead Loan-Level Breaches When JPMCRefuses to Honor the Trustee’s Access Rights or Provide the Trustee withContractually Required Notice...................................................................................11 C. JPMC’s Refusal to Give the Trustee Access to the Loan Files Constitutes aSeparate Breach of the Governing Documents...........................................................12 II. THE AMENDED COMPLAINT MORE THAN ADEQUATELY PLEADS ABREACH OF CONTRACT CLAIM................................................................................13A. The Amended Complaint Alleges Breaches of the Representations andWarranties...................................................................................................................13B. The Trustee Has No Obligation to Provide Proof of Loan-Level Breaches...............15C. The Trustee Has Sufficiently Pled That WaMu’s Breaches of its Representationsand Warranties Had a Material and Adverse Effect on the Value of the MortgageLoans in the Trusts......................................................................................................16D. WaMu’s Repurchase Obligations Are Not Excused By the Trustee’s Inability toProvide WaMu with Notice of Loan Level Breaches.................................................18III. THE TRUSTEE’S CLAIMS ARE NOT BARRED BY THE SOLE REMEDYPROVISION OR BY THE STATUTE OF LIMITATIONS............................................19A. The Trustee’s Claim is for WaMu’s Independent Breaches of the OngoingRepurchase and Notice Obligations............................................................................19B. The Sole Remedy Provision Does Not Bar The Trustee’s Claim...............................20
Case 1:09-cv-01656-RMC Document 56 Filed 01/14/11 Page 2 of 54
 
 ii C. The Trustee’s Claims Are Not Barred by the Statute of Limitations.........................22IV. JPMC ASSUMED THE TRUST-RELATED LIABILITIES AS THEY WEREREFLECTED ON THE BOOKS AND RECORDS OF WAMU....................................25A. Under the Plain Meaning of Section 2.1, JPMC Assumed All Trust-relatedLiabilities, as They Were Reflected on WaMu’s Books and Records as of September 25, 2008....................................................................................................27B. JPMC’s Interpretation of Section 2.1 Would Render Entire Clauses andProvisions of the PAA Superfluous or Repugnant.....................................................29C. Documentary Evidence of the PAA Parties’ Negotiations Supports the Positionthat JPMC Knowingly Assumed Substantially All of WaMu’s LiabilitiesReflected on the Books and Records..........................................................................31D. JPMC’s Statements and Conduct Immediately After its Acquisition of WaMu –and Until Recently – are Inconsistent with its Current Position.................................34E. The WaMu PAA is By Design Structurally and Fundamentally Different FromOther PAAs.................................................................................................................35F. Public Policy Supports a Finding that JPMC Assumed the Trust-relatedLiabilities....................................................................................................................37V. THE TRUSTEE’S CLAIMS AGAINST THE FDIC RECEIVER BASED ON POST-RECEIVERSHIP BREACHES SHOULD NOT BE DISMISSED..................................39A. The Trustee’s Claims for Post-Receivership Breaches Are Not Barred byFIRREA’s Administrative Exhaustion Requirements................................................39B. The Trustee Has Properly Plead a Breach of Contract Claim Against the FDIC.......41C. The FDIC’s Post-Receivership Breaches Of The Governing Documents EntitleThe Trustee To Administrative Priority......................................................................43CONCLUSION.............................................................................................................................43
Case 1:09-cv-01656-RMC Document 56 Filed 01/14/11 Page 3 of 54

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