625046.

v1
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA


RESIDENTIAL FUNDING COMPANY,
LLC,

Plaintiff,

v.

PROVIDENT FUNDING ASSOCIATES,
L.P.,

Defendant.


Court File No. 13-cv-03485 (SRN/TNL)


PLAINTIFF’S MEMORANDUM OF
LAW IN OPPOSITION TO
DEFENDANTS’ MOTION TO
DISMISS THE FIRST AMENDED
COMPLAINT


INTRODUCTION

Defendant Provident Funding Associates, L.P. (“Defendant”) and others like it
participated in mortgage lending practices that nearly brought the United States economy
to its knees, miring this country in a multi-year recession from which we are just now
recovering. Defendant’s wrongful practices – which led to hundreds of lawsuits and
billions in judgments or settlements against mortgage originators that perpetrated similar
wrongdoing – are specifically alleged in the First Amended Complaint. Defendant sold
more than $2.6 billion dollars worth of loans to Plaintiff Residential Funding Company,
LLC (“RFC” or “Plaintiff”), many of which were defective. These defective loans
caused RFC to incur millions of dollars of losses, and ultimately contributed to driving
RFC into bankruptcy. In selling the loans to RFC, Defendant made numerous
representations and warranties regarding the quality and characteristics of the loans, and
agreed to sweeping indemnification provisions requiring Defendant to make RFC whole
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for Defendant’s breaches of those representations and warranties. By this action, which
is now being prosecuted on RFC’s behalf by the ResCap Liquidating Trust for the benefit
of RFC’s creditors, RFC is seeking to be made whole for Defendant’s violations of its
contractual obligations.
Defendant’s motion to dismiss is wholly without merit.
1
With no substantive
defense to RFC’s claims, Defendant instead attempts to obscure the issues with specious
arguments to distract the Court from the valid claims pled.
First, Defendant fails to identify the correct law, which applies to RFC’s claims
for breach of representations and warranties (Count One) and indemnification (Count
Two) asserted in the First Amended Complaint. This Court has repeatedly set forth the
three elements of claims for breach of a representation and warranty: a plaintiff must
plead the existence of a warranty, a breach, and a causal link between the breach and the
alleged harm. RFC has pled each of these three elements. Indemnification, in turn,
requires the existence of an express contract requiring one party to indemnify the other.
RFC has pled these elements of an indemnification claim as well. Notably, Defendant
never cites any of the controlling case law on these points for the Court. Applying the
correct law, it is clear that RFC has adequately pled the elements of both its claims.
Second, while Defendant argues that the First Amended Complaint fails to satisfy
Iqbal/Twombly, in fact, the First Amended Complaint provides detailed allegations
regarding the representations and warranties at issue and Defendant’s breaches of them.

1
The filing of RFC’s First Amended Complaint mooted Defendant’s Motion to Dismiss
RFC’s original Complaint.
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And, contrary to Defendant’s suggestion, RFC is not required to plead the alleged defect
in each and every loan at issue. Particularly in residential mortgage-backed securities
(“RMBS”) cases such as this, involving a large number of loans (here, more than 6,900),
courts do not require the plaintiff to allege in the initial pleading each and every breach in
each and every loan. Indeed, even in RMBS litigation involving fraud claims that must
be pled with particularity, courts have not required plaintiffs to plead the specific defects
in each and every one of the dozens, hundreds, or even thousands of loans involved. All
that is required is a short and plain statement of RFC’s claims consistent with the
requirements of Fed. R. Civ. P. 8. The First Amended Complaint easily satisfies that
standard. Should any doubt remain, statistical sampling is a widely accepted method of
proof in cases relating to RMBS, further demonstrating that loan-by-loan allegations in a
complaint are neither necessary nor feasible.
Third, Defendant wrongly contends that RFC has failed to allege injury sufficient
to establish constitutional standing. Once again, Defendant fails to identify the applicable
law. At the pleading stage, general factual allegations of injury resulting from the
defendant’s conduct are sufficient to establish constitutional standing. The First
Amended Complaint easily satisfies this minimal standard. It contains numerous and
detailed allegations – all of which this Court must accept as true – setting forth how RFC
has been damaged as a result of the Defendant’s conduct.
Fourth, Defendant argues that RFC’s claims are time-barred. Defendant again has
ignored the applicable law. RFC’s bankruptcy filing on May 14, 2012 extended the
statute of limitations as a matter of law. See 11 U.S.C. § 108(a). Accordingly, with
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respect to RFC’s claim for breach of representations and warranties, RFC may seek
recovery as to any loans sold at least as early as May 14, 2006 – within six years from the
bankruptcy filing. Furthermore, with respect to RFC’s indemnification claim, it is black-
letter law in Minnesota that the statute of limitations does not begin to run until the
underlying liability of the party seeking indemnification has become fixed or ascertained
through a settlement or judgment. Here, RFC is seeking indemnification for liabilities
and losses primarily arising from RMBS related liabilities. The Bankruptcy Court
approved settlements related to those liabilities when it confirmed the debtors’ Plan, and
the Plan became effective, in December 2013. Accordingly, RFC’s indemnification claim
is timely – as a matter of law – with respect to all of the subject loans.
In sum, RFC’s pleaded claims are robust and compelling as to Defendant’s
wrongdoing. Those claims are more than sufficiently pled in the First Amended
Complaint. Defendant’s motion to dismiss must be denied.
ARGUMENT
I. Summary Of Allegations In The First Amended Complaint.
Defendant originated and sold residential mortgage loans to RFC. (See First Am.
Compl. ¶¶ 1, 4, 19) (ECF No. 30). Defendant knew RFC pooled the loans purchased
from Defendant and other correspondent lenders and sold the pooled loans into special
purpose securitization trusts, which issued mortgage-backed securities to investors. (Id.
¶¶ 21-23.)
Defendant originated and underwrote the loans that it sold to RFC, and understood
that RFC generally would not be re-underwriting the loans. (Id. ¶ 20.) As part of its sale
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of loans to RFC, Defendant made numerous material representations and warranties to
RFC regarding the loans. (Id. ¶ 24(a)-(m), 25.) These representations and warranties are
set forth in the “Client Guide,” which contains the terms and conditions of the agreement
between the parties. (Id. ¶ 18; see also id. Ex. B (attaching excerpts).) The parties’
agreement provides that it is governed by Minnesota law. (Id., Ex. A at ¶ 10.)
The Client Guide provides that Defendant’s failure to comply with its
representations and warranties to RFC or any other requirements constitute an “Event of
Default.” (Id. ¶¶ 26-27.) The Client Guide also provides numerous non-exclusive,
cumulative remedies available to RFC in case of an Event of Default. (Id. ¶¶ 28-30.) For
example, RFC may demand that Defendant repurchase defective loans. (Id. ¶ 29.)
Alternatively, RFC can recover all losses, costs and expenses it has incurred as the result
of an Event of Default. (Id. ¶ 31.) RFC can also assert any remedy allowed by law or
equity. (Id. ¶ 28.) Finally, RFC is entitled to obtain indemnification pursuant to the
Client Guide, including as against all losses, liabilities, and damages arising from
Defendant’s breach of representations and warranties and other obligations. (Id. ¶ 33.)
Defendant sold more than 6,900 loans, with an original principal balance in excess
of $2.6 billion to RFC. (Id. ¶¶ 4, 19.) RFC pooled and sold these loans into more than
160 RMBS trusts. (Id. ¶ 37.) A preliminary identification of the specific Defendant
loans that were securitized, including their original principal balance, the securitization in
which each loan was included, and the date Defendant sold the loan to RFC, is provided
with the First Amended Complaint at Exhibit C. Defendant sold additional loans to RFC
that RFC sold to whole loan purchasers. (Id. ¶ 22.)
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RFC has conducted a forensic review of the loans Defendant sold to RFC. (Id.
¶ 39.) The forensic review involved the use of an automated valuation model to examine
the veracity of Defendant’s representations and warranties about the subject properties’
appraised values and owner-occupancy status. (Id.)
The forensic review demonstrated extensive and substantial breaches of
representations and warranties by Defendant. Among other findings, the forensic review
concluded that 43% of the subject loans had property values overrepresented by more
than 10%; 33% of the subject loans had reported property values overrepresented by
more than 15%; nearly 33% of the subject loans had reported loan-to-value ratios
(“LTV”) underrepresented by more than 10%; 23% of the subject loans had reported
LTV ratios underrepresented by more than 15%; 12% of the subject loans had reported
LTV ratios underrepresented by more than 25%; and nearly 13% of the loans had actual
LTV ratios greater than 100% (i.e., the loans were “under water” at origination). (Id.
¶ 42.) All of these findings constitute breaches of at least the following representations:
(A), (T), and (KK) of Section A202 of the Client Guide. (Id. ¶ 43.)
The forensic review also investigated Defendant’s representations regarding the
owner-occupancy status of the loans Defendant sold to RFC. (Id. ¶¶ 44-47.) 41% of the
sampled loans were determined to violate Defendant’s representations and warranties
regarding owner-occupancy status contained in (A), (G) and (KK) of Section A202 of the
Client Guide. (Id. ¶ 47.)
Furthermore, over time, many of the loans Defendant sold to RFC defaulted or
became seriously delinquent. (Id. ¶ 48.) These delinquency and default rates exceed
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what would normally be expected in a given population of mortgage loans. (Id. ¶ 49.)
Internal reviews conducted by RFC after the loans were acquired from Defendant also
determined that numerous loans sold to RFC by Defendant violated the Client Guide
and/or other representations or warranties made by Defendant, resulting in an Event of
Default under the Agreement. (Id. ¶ 50.) The types of defects included income and
employment misrepresentation, insufficient credit scores, owner occupancy
misrepresentation, appraisal misrepresentations or inaccuracies, undisclosed debt, and
missing or inaccurate documents (Id. ¶ 51). In the aggregate, RFC suffered more than
$187.5 million in losses due to defective loans sold to RFC by Defendant (Id. ¶ 48). Nine
specific examples of defective loans Defendant sold to RFC are contained in the First
Amended Complaint. (Id. ¶ 52.)
2


2
For example, with regard to Loan ID #1913569, RFC’s investigation revealed
misrepresentations or errors regarding the borrower’s credit score and employment and
bankruptcy history, the borrower’s debt-to-income ratio was incorrectly calculated, and
loan file documents were missing. (See First Am. Compl. ¶ 52(a).) As to Loan ID
#1910782, the borrower’s income had been improperly “grossed up,” making the debt-to-
income ratio insufficient, and the appraisal was inflated. (Id. ¶ 52(b).) It was determined
that the loan documents and representations regarding Loan ID #10968712 were almost
entirely false and inaccurate and that the borrower in fact did not really qualify for the
loan. (Id. ¶ 52(c).) For Loan ID #1907065, the borrower fraudulently misrepresented
their income and should not have received loan approval. (Id. ¶ 52(d).) With regard to
Loan ID #1911787, the borrower’s income was not properly verified and the appraisal
was improperly done. (Id. ¶ 52(e).) For Loan ID #3320345, the borrower misrepresented
his income and his assets. (Id. ¶ 52(f).) For Loan ID #4261026, the loan-to-value ratio
exceeded guidelines and the loan file contained no verification of the borrower’s
employment. (Id. ¶ 52(g).) For Loan ID #9467525, the borrower improperly ended his
stated employment before loan funding, leading naturally to default. (Id. ¶ 52(h).) For
Loan ID #10368936, the borrower provided no verification of the existence of a company
he claimed to own, and failed to disclose the total amount of properties he owned. (Id.
¶ 52(i).) Defendant’s conduct with regard to these loans breached Defendant’s
representations and warranties in the Client Guide. (Id.)
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Beginning in 2008, RFC faced a growing number of claims and lawsuits stemming
from the defective loans that it purchased from Defendant and others. (Id. ¶¶ 48-71.)
Various bond insurers, trustees and institutional investors made repurchase demands
and/or filed lawsuits against RFC. (Id.) All of the lawsuits alleged that the loans RFC
sold into RMBS securitizations were defective in a variety of ways, including, among
other things, borrower fraud, missing or inaccurate documentation, misrepresentations
regarding owner occupancy, fraudulent or inflated appraisals, and failure to comply with
state and federal law. (Id. ¶ 68.) The lawsuits involved RMBS securitizations containing
loans sold to RFC by Defendant. (Id. ¶¶ 64, 66, 67.) Collectively, the lawsuits involved
more than one hundred RMBS securitizations with a combined principal balance of more
than $100 billion. (Id. ¶ 69.)
In May 2012, RFC and certain of its affiliates filed for Chapter 11 bankruptcy
protection in the Southern District of New York. (Id. ¶ 72.) In the bankruptcy
proceedings, hundreds of proofs of claims were filed by insurers, trustees and investors
alleging that loans in the RMBS securitizations were defective for the same reasons as
alleged in the pre-bankruptcy lawsuits. (Id. ¶ 73-75.) RFC and its affiliates settled many
of these claims and lawsuits in the bankruptcy proceedings for allowed claims totaling
billions of dollars. (Id. ¶¶ 76-77.) RFC has also paid millions of dollars in attorneys’
fees to defend against, negotiate, and ultimately settle claims relating to allegedly
defective loans. (Id. ¶ 78.) These liabilities and losses were caused in part by
Defendant’s breaches of representations and warranties to RFC. (Id.)
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RFC’s First Amended Complaint asserts two claims against Defendant. Count
One of the Complaint asserts a claim arising from Defendant’s breach of representations
and warranties in loans sold to RFC. (Id. ¶¶ 79-86.) Count Two of the Complaint asserts
a claim for indemnification for liabilities and losses RFC has incurred as a result of the
defective loans Defendant sold to RFC. (Id. ¶¶ 87-90.) These claims are now being
prosecuted for the benefit of RFC’s creditors by the ResCap Liquidating Trust, which has
succeeded to all of RFC’s rights and now controls RFC. (Id. ¶¶ 13, 77.)
II. Legal Standards Applicable To Defendant’s Motion To Dismiss.
Under Fed. R. Civ. P. 12(b)(6), this Court must construe the allegations in the
Complaint “in the light most favorable” to RFC and “the facts alleged in the complaint
must be taken as true.” Patil v. Minn. State Univ., Mankato, 2012 WL 7807608 at *9 (D.
Minn. Dec. 10, 2012). Additionally, this Court “must resolve any ambiguities concerning
the sufficiency of [RFC’s] claims in favor of [RFC], and give [RFC] the benefit of every
reasonable inference drawn from the well-pleaded facts and allegations” in the
Complaint. Id. (quotation omitted).
The First Amended Complaint must also satisfy the standards set forth by the
United States Supreme Court in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) and
Ashcroft v. Iqbal, 556 U.S. 662 (2009). Generally, under Twombly and Iqbal, “to survive
a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true,
to state a claim for relief that is plausible on its face.’” Hamilton v. Palm, 621 F.3d 816,
817 (8th Cir. 2010) (quoting Iqbal, 556 U.S. at 678). “Determining whether a claim is
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plausible is a ‘context specific task that requires the reviewing court to draw on its
judicial experience and common sense.’” Id. at 818 (quoting Iqbal, 556 U.S. at 678).
The Eighth Circuit has held, however, that “Twombly and Iqbal did not abrogate
the notice pleading standard of Rule 8(a)(2)” which only requires a “short and plain
statement of the claim showing that the pleader is entitled to relief.” Hamilton, 621 F.3d
at 817 (reversing district court’s dismissal of complaint). Rule 8(a)(2) is satisfied “‘when
the plaintiff pleads factual content that allows the court to draw the reasonable inference
that the defendant is liable for the misconduct alleged.’” Id. at 817 (quoting Iqbal, 556
U.S. at 678). Put another way, the complaint is sufficient if it contains “enough fact[s] to
raise a reasonable expectation that discovery will reveal evidence of [the claim].”
Meecorp Capital Markets LLC v. Oliver, 2010 WL 330324, at *3 (D. Minn. Jan. 21,
2010) (quoting Twombly, 550 U.S. at 556) (alterations in original). And, despite
Twombly and Iqbal, “there is no requirement that a plaintiff actually prove the merits of
its case in its complaint.” Meecorp, 2010 WL 330324 at *3. RFC’s First Amended
Complaint meets these standards, and Defendant’s motion should be denied, as discussed
below.
III. RFC Has Adequately Pled The Elements Of Its Claims And Satisfies
Iqbal/Twombly.

RFC has asserted claims for breach of representations and warranties (Count One)
and indemnification (Count Two). Remarkably, Defendant has failed to correctly
identify the elements of either claim under applicable Minnesota law. Applying the
correct law, it is clear RFC has adequately pled the elements of each of these claims.
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A. RFC Has Adequately Pled A Breach Of Representation And Warranty
Claim In Count One Of The First Amended Complaint.

Courts applying Minnesota law have treated claims for breach of representations
and warranties as separate and distinct from generic breach of contract claims. See Gen.
Mills Operations, LLC v. Five Star Custom Foods, Ltd., 703 F.3d 1104, 1112 (8th Cir.
2013).
3
Accordingly, under Minnesota law, claims for breach of representation/warranty
require only “the existence of a warranty, breach of the warranty, and a causal link
between the breach and the alleged harm.” VISIONBank v. Minnwest Bank Metro., 2011
WL 1261597 at *4 (D. Minn. March 31, 2011) (addressing breach of warranty in
contractual real estate loan dispute); see also Jesse v. HSFL Acquisition Co., LLC, 2009
WL 1086474 at *3 (D. Minn. April 22, 2009) (“To prevail on a breach of warranty claim
under Minnesota law, a party must show the existence of a warranty, a breach and a
causal link between the breach and the alleged harm”); Daigle v. Ford Motor Co., 713 F.
Supp. 2d 822, 825 (D. Minn. May 10, 2010) (same).
Here, RFC has alleged each of these three elements:
• The existence of representations and warranties, which Defendant made to
RFC. (See First Am. Compl. ¶ 5 (Defendant made “contractual
representations and warranties designed to protect RFC from the risks of
borrower fraud, appraisal fraud, failure to comply with state and federal law,
and other credit and compliance factors . . . .”); id. ¶ 24(a)-(m) (identifying and

3
In General Mills, the plaintiff asserted both a generic breach of contract and a breach of
warranty claim. The Eighth Circuit noted that the district court properly considered the
breach of contract claim as separate from the breach of warranty claim. See id. at 1112.
This confirms that generic breach of contract claims are governed by different standards
than breach of warranty claims.
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quoting relevant representations and warranties); id., Ex. B (Client Guide
excerpts))
4
;

• Breach of those representations and warranties. (Id. ¶¶ 38-47 (RFC
conducted a forensic review of the loans Defendant sold to RFC); id. ¶¶ 42, 47
(the forensic review determined that various representations and warranties
were breached at rates as high as 43% of the sampled loans); id. ¶ 48 (“Over
time, many of the loans sold to RFC by Provident defaulted or became
seriously delinquent.”); id. ¶ 49 (“These delinquency and default rates exceed
what would normally be expected in a given population of mortgage loans.”);
id. ¶ 50 (“Internal reviews conducted by RFC determined that numerous loans
sold to RFC by Provident violated the Client Guide and/or other
representations or warranties made by Provident, resulting in an Event of
Default under the Agreement.”); id. ¶ 51 (“The types of defects varied, but
included income misrepresentation, employment misrepresentation,
insufficient credit scores, owner occupancy misrepresentations, appraisal
misrepresentations or inaccuracies, undisclosed debt, and missing or inaccurate
documents, among others.”); id. (“a number of the loans defaulted very shortly
after origination . . . which is widely recognized . . . as often signaling fraud or
other problems in the origination and underwriting of the loans”); see also id. ¶
52 (providing examples of defective loans Defendant sold to RFC, all of which
breached Defendant’s representations and warranties to RFC); and

• A causal link between the breach and the alleged harm. (Id. ¶ 58 (prior to
the bankruptcy proceedings, “RFC faced a growing number of claims and
dozens of lawsuits stemming from the defective loans sold to it by Provident

4
Defendant complains that RFC has not specifically alleged that the loans at issue are
subject to the Seller Contracts attached to the Complaint, and that RFC has not attached
the Client Guide in its entirety. Defendant’s contentions lack any merit whatsoever.
RFC has specifically alleged that the defective loans were among those sold pursuant to
the Contracts attached as Exhibit A to the Complaint, and that those Contracts
incorporated the Client Guide. (See First Am. Compl. ¶¶ 17-19, Exs. A, B). Moreover,
RFC additionally alleged that the “complete versions of the Client Guide are known to
the parties and too voluminous to attach in their entirety; the omitted portions of the
Client Guides do not affect the obligations set forth in this Amended Complaint.” (Id.
¶ 18). Rule 8 only requires a “short and plain statement” of RFC’s claims—it does not
require RFC to attach thousands of pages of documents to its Complaint or prove its
entire case at the pleadings stage. Consistent with Rule 8, RFC has identified the Seller
Contracts and the key provisions of the Client Guide at issue in its First Amended
Complaint and has attached the relevant excerpts of the Client Guide. Rule 8 does not
require anything further.

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and others.”); ¶¶ 59-71 (discussing specific examples of lawsuits involving
RMBS containing loans sold to RFC by Defendant ); id. ¶ 73 (“In connection
with the bankruptcy proceeding, hundreds of proofs of claim were filed by
investors in RMBS, monoline insurers, whole loan purchasers, indenture
trustees . . . These proofs of claim . . . sought damages in the tens of billions of
dollars, all stemming from allegedly defective mortgage loans, including those
sold to RFC by Provident.”); id. ¶ 75 (“These proofs of claim, lawsuits, and
demands all alleged, among other things, that the securitized or purchased
loans were defective, improperly underwritten . . . .”); id. ¶¶ 76-77 (After
protracted litigation and a lengthy mediation process, the Bankruptcy Court
approved a global settlement “including the $10 billion-plus settlement of
RMBS-related liabilities”); id. ¶ 78 (“Pursuant to its express contractual
obligations, Provident is obligated to compensate RFC for the portion of the
global settlement associated with its breaches of representations and warranties
. . . .”)).

Construing these allegations in favor of RFC, taking them as true, and drawing all
reasonable inferences in favor of RFC, as this Court must, RFC has alleged each of the
required elements of a breach of representation and warranty claim.
5

B. RFC Has Adequately Pled An Indemnification Claim In Count Two Of
The Complaint.

Defendant does not present any argument regarding RFC’s indemnification claim
other than generally contending that it fails for the same reasons as RFC’s claim for
breach of representations and warranties. Defendant, however, has once again failed to

5
The Minnesota Supreme Court has accepted for review a certified question of law from
the Seventh Circuit regarding whether reliance is a required element of a representation
and warranty claim. See Lyon Financial Services, Inc. v. Illinois Paper & Copier Co.,
Case No. A13-1944 (Minn. Oct. 29, 2013) (accepting certified questions pursuant to
Minn. Stat. § 480.065); Lyon Financial Services, Inc. v. Illinois Paper & Copier Co., 732
F.3d 755 (7th Cir. 2013). RFC notes that, in Section A200 of the Client Guide itself,
Defendant expressly acknowledged that RFC “purchases Loans in reliance upon the
accuracy and truth of [Defendant’s] warranties and representations[.]”
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identify the law applicable to RFC’s indemnification claim, which is separate and distinct
from RFC’s claim for breach of representations and warranties.
“Indemnity arises out of a contractual relationship, either expressed or implied by
law, which ‘requires one party to reimburse the other entirely.’” Hernick v. Verhasselt
Construction, Inc., 2003 WL 1814876 at *4 (Minn. Ct. App. April 8, 2003) (quotation
omitted). A claim for indemnification exists “[w]here there is an express contract
between the parties containing an explicit undertaking to reimburse for liability of the
character involved.” Id. at *5.
Here, RFC has alleged the existence of an express contract, which requires
Defendant to indemnify RFC for RFC’s damages. Specifically, RFC alleges that
Defendant entered into a Seller Contract, which incorporates the terms of the Client
Guide. (See First Am. Compl. ¶¶ 17, 18.) A copy of the Seller Contract and relevant
excerpts from the Client Guide are attached as Exhibits A and B to the First Amended
Complaint. (See id., Exs. A, B.)
The Client Guide, in turn, contains broad indemnification provisions obligating
Defendant to indemnify RFC for RFC’s damages. Section A212, for example, provides:
[Defendant] shall indemnify GMAC-RFC from all losses,
damages, penalties, fines, forfeitures, court costs and
reasonable attorneys’ fees, judgments, and any other costs,
fees and expenses … includ[ing], without limitation,
liabilities arising from (i) any act or failure to act, (ii) any
breach of warranty, obligation or representation contained in
the Client Guide, (iii) any claim, demand, defense or assertion
against or involving GMAC-RFC based on or resulting from
such breach, (iv) any breach of any representation, warranty
or obligation made by GMAC-RFC in reliance upon any
warranty, obligation or representation made by [Defendant]
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contained by the Client Contract and (v) any untrue statement
of a material fact, omission to state a material fact, or false or
misleading information provided by the [Defendant] in
information required under Regulation AB or any successor
regulation.
In addition, [Defendant] shall indemnify GMAC-RFC against
any and all losses, damages, penalties, fines, forfeitures,
judgments, and any other costs, fees and expenses (including
court costs and reasonable attorneys’ fees) incurred by
GMAC-RFC in connection with any litigation or
governmental proceeding that alleges any violation of local,
State or federal law by [Defendant], or any of its agents, or
any originator or broker in connection with the origination or
servicing of a Loan.
(Id., Ex. B § A212.) Similarly, in Section A202, Defendant agreed:
to indemnify and hold GMAC-RFC harmless from and
against any loss, damage, penalty, fine, forfeiture, court cost,
reasonable attorneys’ fees, judgment, cost, fee, expense or
liability incurred by GMAC-RFC as a result of any material
misstatement in or omission from any information provided
by [Defendant] to GMAC-RFC; or from any claim, demand,
defense or assertion against or involving GMAC-RFC based
on or grounded upon, or resulting from such misstatement or
omission or a breach of any representation, warranty or
obligation made by GMAC-RFC in reliance upon such
misstatement or omission.
(See Id. §§ A202, A212.) These indemnification provisions are one of the non-exclusive,
cumulative remedies available to RFC under the Client Guide. Notably, Defendant does
not expressly discuss these indemnification provisions in any detail in its motion.
In sum, RFC has alleged the existence of a contract requiring Defendant to
indemnify RFC for its damages. This is sufficient to state a claim for indemnity under
Minnesota law and the notice pleading standards of Rule 8. Accordingly, Defendant’s
motion should be denied with respect to Count Two of the Complaint as well.
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IV. RFC Has Pled Facts Sufficient To Establish Standing.
Defendant contends that RFC lacks constitutional standing to bring this lawsuit
because, purportedly RFC has failed to plead facts sufficient to demonstrate injury as a
result of Defendant’s conduct. Defendant, however, has ignored both the applicable law
(again) and the actual allegations in the First Amended Complaint.
While constitutional standing requires injury-in-fact, that standard is easily met at
the pleading stage. Specifically, “general factual allegations of injury resulting from the
defendant’s conduct” are sufficient and “on a motion to dismiss we presume that general
allegations embrace those specific facts that are necessary to support the claims.”
Frankle v. Best Buy Stores, L.P., 609 F. Supp. 2d 841, 844-45 (D. Minn. 2009).
Here, the First Amended Complaint easily satisfies this standard. The First
Amended Complaint contains detailed factual allegations of the injuries and damages
suffered by RFC, and the causal connection between those injuries and damages, and
Defendant’s conduct:
• Defendant originated and sold residential mortgage loans to RFC. (See First Am.
Compl. ¶¶ 4, 19.)

• Defendant made numerous material representations and warranties to RFC
regarding the loans. (Id. ¶¶ 5, 24(a)-(m).)

• The terms and conditions of the parties’ agreement, including the representations
and warranties, are contained in the “Client Guide.” (Id. ¶ 18; id., Ex. B (attaching
excerpts.))

• The Client Guide provides that Defendant’s failure to comply with its
representations and warranties to RFC or any other requirements constitute an
“Event of Default.” (Id. ¶¶ 26-27.)

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• The Client Guide also provides numerous non-exclusive, cumulative remedies
available to RFC in case of an Event of Default. (Id. ¶¶ 28-30.)

• RFC may demand Defendant to repurchase defective loans but is not required to
do so. If repurchase is not feasible, RFC can still recover all losses, costs and
expenses it has incurred as the result of an Event of Default. RFC can also assert
any remedy allowed by law or equity. (Id.)

• Defendant also agreed to broad indemnification provisions in the Client Guide,
pursuant to which Defendant is required to indemnify RFC for all losses, damages,
etc. arising from Defendant’s breach of representations and warranties and other
obligations. (Id. ¶ 33.)

• Defendant sold more than 6,900 loans worth in excess of $2.6 billion to RFC,
which RFC pooled and sold into some 160 RMBS trusts. (Id. ¶¶ 4, 19, 37.)

• Over time, many of the loans Defendant sold to RFC defaulted or became
seriously delinquent. (Id. ¶ 48.) These delinquency and default rates exceed what
would normally be expected in a given population of mortgage loans. (Id. ¶ 49.)

• Numerous loans Defendant sold to RFC sustained losses totaling over $187.5
million, exposing RFC to claims from investors, monoline insurers, and others.
(Id. ¶ 48.)

• RFC conducted a forensic review of the loans Defendant sold to RFC. The
forensic review determined that the loans were in breach of Defendant’s
representations and warranties at rates of up to 43% of the sampled loans. (Id.
¶ 39-47.)

• Internal reviews of loan files conducted by RFC after the loans were acquired
from Defendant also determined that numerous loans sold to RFC by Defendant
violated the Client Guide and/or other representations or warranties made by
Defendant, resulting in an Event of Default under the Agreement. (Id. ¶ 50.)

• The types of defects included income and employment misrepresentation,
insufficient credit scores, owner occupancy misrepresentation, appraisal
misrepresentations or inaccuracies, undisclosed debt, and missing or inaccurate
documents. (Id. ¶ 51)

• Examples of defective loans Defendant sold to RFC are contained in the First
Amended Complaint. (Id. ¶ 52.)

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• RFC incurred billions of dollars in liabilities and losses stemming from defective
loans, including those sold to RFC by Defendant. (Id. ¶ 56.)

• Beginning in 2008, RFC faced a growing number of claims and lawsuits stemming
from the defective loans that it purchased from Defendant and others. (Id. ¶¶ 58-
71.) Various bond insurers, trustees and institutional investors made repurchase
demands and/or filed lawsuits against RFC. (Id.) All of the lawsuits alleged that
the loans RFC sold into RMBS securitizations were defective in a variety of ways,
including, among other things, borrower fraud, missing or inaccurate
documentation, fraudulent or inflated appraisals, and failure to comply with state
and federal law. (Id. ¶ 68.) The lawsuits involved RMBS securitizations
containing loans sold to RFC by Defendant. (Id. ¶¶ 64, 66, 67.)

• RFC filed for bankruptcy protection in May 2012. (Id. ¶ 72.) In the bankruptcy
proceedings, hundreds of proofs of claims were filed by insurers, trustees and
investors alleging that loans in the RMBS securitizations were defective –
including loans Defendant sold to RFC – for the same reasons as alleged in the
pre-bankruptcy lawsuits. (Id. ¶¶ 73-75.)

• RFC settled many of these claims and lawsuits in the bankruptcy proceedings for
allowed claims totaling billions of dollars, including claims arising out of loans
sold by Defendant to RFC. (Id. ¶¶ 76-77.)

• RFC has also paid millions of dollars in attorneys’ fees to defend against,
negotiate, and ultimately settle claims relating to allegedly defective loans,
including those sold to RFC by Defendant. (Id. ¶ 78.)

• These losses and exposures stem in part from Defendant’s breaches of
representations and warranties to RFC with respect to the loans Defendant sold
to RFC. (Id. ¶ 76-78.)

• RFC has suffered loss, harm, and financial exposure directly attributable to
Defendant’s material breaches, including liability and losses stemming from
defective loans, as well as attorneys’ fees, litigation-related expenses, and other
costs associated with both defending dozens of lawsuits and proofs of claim filed
against RFC stemming in part from materially defective loans sold to RFC by
Defendant. (Id. ¶ 85)

• RFC is entitled to indemnification from Defendant for damages related to loans
sold to RFC by Defendant. (Id. ¶¶ 88-90.)

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Construing these allegations in favor of RFC, accepting them as true, and drawing
all reasonable inferences in favor of RFC, as this Court must, RFC has clearly alleged
facts sufficient to establish constitutional standing: Defendant made numerous material
representations and warranties to RFC concerning the loans Defendant sold to RFC;
Defendant contractually agreed to various remedies for any breach of its representations
and warranties, including broad indemnification provisions; Defendant’s loans in fact
contained numerous breaches of the representations and warranties traceable to those
loans; and RFC has been damaged as a result of Defendant’s breaches. These allegations
are more than sufficient to demonstrate standing at the pleading stage. Frankle, 609 F.
Supp. 2d at 844-845 (“general factual allegations of injury resulting from the defendant’s
conduct” are sufficient).
V. RFC Is Not Required To Plead The Alleged Defect In Each And Every One
Of The Large Number Of Loans At Issue In This Lawsuit.

A. Defendant Fails To Cite Any Authority Imposing Such A Requirement
Upon RFC.

Defendant also suggests that RFC should have pled in the First Amended
Complaint loan specific allegations regarding the breach of each loan that Defendant sold
to RFC. Yet, Defendant sold more than 6,900 loans worth billions of dollars to RFC
during the course of the parties’ relationship. (First Am. Comp. ¶¶ 4, 17, 80.) As
alleged, these loans had a value of more than $2.6 billion and were sold into some 160
RMBS trusts. (Id. ¶¶ 4, 37.) In other RMBS litigation where, as here, a large number of
loans are involved, courts have routinely refused to require plaintiffs to set forth in the
complaint each and every breach for every one of the dozens, hundreds or even thousands
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of loans involved. And for good reason. Rule 8(a)(2) only requires a “short and plain
statement of the claim[.]” That standard is satisfied here.
Indeed, this principle was recently confirmed in another RMBS case involving
defective loans. See Ace Secs. Corp. v. DB Structured Prods., Inc., 2014 WL 1116758
(S.D.N.Y. March 20, 2014). In Ace Securities, the defendant argued that the complaint
should be dismissed because the plaintiff had not alleged specific defects regarding each
loan at issue. The court rejected this contention noting, as the defendant itself conceded,
“several courts ‘have found that, as a matter of pleading sufficiency, a complaint for
repurchase need not contain specific allegations regarding each loan at issue.’” Id. at *13
(citing cases).
Numerous other courts have reached the same conclusion both under the liberal
notice pleading standards applicable to contract claims, and even under the heightened
pleading standards for fraud claims (which are not applicable here). See Oklahoma
Police Pension & Retirement Sys. v. U.S. Bank Nat’l Ass’n, 291 F.R.D. 47, 66-67
(S.D.N.Y. May 31, 2013) (allegations “render plausible the plaintiff’s claims that the
issuer breached its obligations” despite failure “to allege the specific facts necessary to
show that any of the mortgages . . . were in fact defective”); Hapoalim B.M. v. Bank of
Am. Corp., 2012 WL 6814194 (C.D. Cal. Dec. 21, 2012) (“There is no need to allege that
the specific loans backing a plaintiff’s securities contained underwriting defects”); see
also Assured Guar. Mun. Corp. v. Flagstar Bank FSB, 920 F. Supp. 2d 475, 512
(S.D.N.Y. 2013) (“To the extent that [loan seller] argues that it must be notified as to
each loan as to which a material breach is claimed with sufficient specificity to allow
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[loan seller] to identify the loan and investigate the alleged breach, this requirement
inappropriately places the burden of notification on [loan purchaser].”); ACE Sec. Corp. v
DB Structured Products, Inc., Index. No. 650327/2013, 2013 WL 6153206 (N.Y. Sup.
Ct. Nov. 21, 2013) (Denying motion to dismiss: “[P]laintiff is not precluded from
maintaining put-back claims for loans not specified in its demand letters. It is
commercially unreasonable to require plaintiff to effectively re-underwrite the balance of
the trust.”); Home Equity Mortgage Trust Series 2006-1 v. DLJ Mortgage Capital, Inc., et
al., No. 156016/2012 (N.Y. Sup. Ct. Nov. 19, 2013) (“[T]he court agrees that plaintiffs’
use of statistical sampling to prove liability and damages [in this repurchase case] would
streamline the trial, promote judicial economy, and conserve the resources of the parties
and the court.”); CIFG Assur. N. Am., Inc. v. Goldman, Sachs & Co., Index No.
652286/2011, 2012 WL 1562718 (N.Y. Sup. Ct. May 1, 2012) (under the “liberal notice
pleading standards” for contract claims, the “complaint need not make specific
representations as to each of the individual loans”) aff’d, 2013 WL 1876243, at *2 (1st
Dep’t May 7, 2013) (“Notice of breach was sufficiently alleged.”); MBIA Ins. Corp. v.
Morgan Stanley, No. 29951/2010, 2011 WL 2118336, at *4 (N.Y. Sup. Ct. May 26,
2011) (denying motion to dismiss fraud/contract claims: “The Complaint details the
results of MBIA's forensic review which found a level of material discrepancies from the
requirements of the Seller's Guide so significant that one can infer Morgan Stanley's pre-
contractual representations to have been false. Plaintiff is not limited, as Defendant
argues, to a loan by loan remedy as provided in the contract, but rather can seek a pool
wide remedy based on its sampling and extrapolation.”).
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The cases cited by Defendant, in contrast, have no application to RMBS cases
such as this one. Defendant, for example, cites Motley in support of its contention that
the First Amended Complaint is impermissibly vague. Yet, in Motley – which only
involved five loans – the court noted the plaintiffs had “not attached the allegedly
violated contracts to the Complaint, nor have they pleaded the terms of those contracts[.]”
See Motley v. Homecomings Financial, LLC, 557 F. Supp. 2d 1005, 1013 (D. Minn.
2008). Here, RFC has attached relevant excerpts of the parties’ voluminous contract, and
has pled the relevant terms. (See First Am. Compl. ¶¶ 18, 24(a)-(m); see also id., Ex. B.)
Accordingly, Motley has no bearing on this case.
6


6
The other cases cited by Defendant likewise have no bearing on this matter. For
example, in LaSalle, the court dismissed two of three claims where there was no
allegation whatsoever regarding how the subject warranties were breached. Nothing in
the court’s opinion, however, suggests that plaintiff was required to allege specific
defects in each of the subject loans. See Wells Fargo Bank, N.A. v. LaSalle Bank, N.A.,
2011 WL 4837493 (N.D. Ill. Oct. 11, 2011). In Schlief, plaintiff’s claim for breach of a
confidentiality agreement by a former employee was dismissed because plaintiff failed to
plead that the former employee was in fact in possession of, or had access to, any
confidential information belonging to plaintiff in the first place. See Schlief v. Nu-
Source, Inc., 2011 WL 1560672 *4 (D. Minn. 2011). As such, the complaint in Schlief
was dismissed because there were no facts alleged in the complaint which, if true, could
state a claim for relief. Id. The cases cited by Defendant simply have no legal or factual
relevance to this matter. Lastly, in Torchlight Loan Servs., LLC v. Column Fin., Inc.,
2012 WL 3065929 (D. Minn. July 25, 2012), the Court dismissed breach of
representation and warranty claims only as to those claims where the Complaint failed to
allege facts showing that the complained-of defects actually existed at the time the loan
was closed (and thus at the time the representation and/or warranty at issue was made).
Id. at *6-7. Here, in stark contrast, RFC has alleged that Defendant breached its
representations and warranties through defects that expressly existed in the loans when
they were sold to RFC. Torchlight is thus completely inapposite to this case.


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In sum, RFC has made numerous factual allegations supporting its claims,
including the allegations that an investigation of Defendant’s loans sold to RFC revealed
breaches of the applicable representations and warranties. (See First Am. Compl. ¶¶ 38-
54.) RFC is not asserting fraud claims and is not required to plead its claims with
particularity. Rather, only the liberal notice pleading standards of Rule 8 apply. Thus,
drawing all reasonable inferences in favor of RFC, as this Court must, these allegations
are more than sufficient to establish a plausible claim against Defendant.
B. Defendant Ignores The Controlling Decision In The Terrace Case
Demonstrating That RFC Has Asserted Plausible Claims Against
Defendant.

Notably, Defendant also ignores controlling legal precedent from this Court and
the Eighth Circuit holding that – under RFC’s Client Guide – RFC has the sole discretion
to determine whether an Event of Default has occurred, and the lender cannot challenge
that determination. See Residential Funding Company, LLC v. Terrace Mortgage
Company, 850 F. Supp. 2d 961 (D. Minn. 2012) aff’d 725 F.3d 910 (8th Cir. 2013). As a
result, it is not necessary for RFC to prove the existence of specific breaches by
Defendant.
Specifically, in Terrace, RFC sued one of its correspondent lenders for refusal to
repurchase 13 loans. This Court held that, under the Client Guide, RFC has “the
exclusive authority to determine if a default occurred” and that the Client Guide confirms
RFC has “the sole discretion to make such determinations.” 850 F. Supp. 2d at 966
(emphasis in original). Accordingly, this Court held that the defendant had no legal basis
to challenge RFC’s determination:
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Nevertheless, Terrace asks this Court to review and evaluate
whether there was, in fact, an Event of Default under the
terms of the parties’ agreement. Terrace, however, may not
contractually agree to give that authority solely to Residential
and then seek to have this Court independently review the
validity of Residential’s determinations. The Court's exercise
of such authority to review Residential’s determinations
would deprive Residential of part of the benefit of the bargain
it obtained from Terrace and for which Terrace was well
compensated.

Id. at 970. On appeal, the Eighth Circuit affirmed, holding that “the Client Guide gives
[RFC] ‘sole discretion’ to determine whether an Event of Default has occurred” with
respect to each loan. Terrace, 725 F.3d at 916. The Eighth Circuit also noted it was
irrelevant that RFC had “behaved during litigation as if it needed to prove to the court the
violations of the warranties in the Client Guide.” Id. Although RFC pled violations of
the warranties in its complaint and conducted discovery, the Eighth Circuit noted that the
contract language – not the parties’ litigation conduct – controlled. Id.
Applied here, this controlling legal precedent demonstrates the sufficiency of
RFC’s allegations. Under the parties’ agreement, RFC has the sole discretion to
determine whether Events of Default have occurred with respect to the loans Defendant
sold to RFC. In that regard, RFC has specifically alleged that, under the Client Guide,
breaches of representations and warranties constitute Events of Default and that
Defendant has in fact breached the representations and warranties it made to RFC. (See
First Am. Compl. ¶¶ 38-54.) These allegations are more than sufficient to state a
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plausible claim, particularly considering Defendant has no legal basis to challenge RFC’s
determination regarding Events of Default. Defendant’s motion should be denied.
7

C. RFC Is Not Required To Plead Expert Testimony In Its Complaint.
Defendant’s contention that the First Amended Complaint must allege the defects
in each and every loan fails for one additional reason. In RMBS litigation, breaches of
the subject representations and warranties are typically proven with expert witnesses,
who re-underwrite a sample of the loans involved. Indeed, courts in RMBS litigation
have approved the use of expert testimony to prove defect rates in loan pools through
statistical sampling, particularly where a large number of loans is involved. See
generally Assured Guar. Mun. Corp. v. Flagstar Bank, FSB, 920 F. Supp. 2d 475, 512
(S.D.N.Y. 2013) (“Sampling is a widely accepted method of proof . . . in cases relating to
RMBS . . . .”); Federal Hous. Fin. Agency v. JPMorgan Chase & Co., 2012 WL 6000885
(S.D.N.Y Dec. 3, 2012) (approving use of expert testimony to demonstrate loan defects
through statistical sampling). In other words, statistical sampling is often used instead of
re-underwriting each and every loan in the subject loan pool.
The foregoing is particularly true as to RFC’s claim for indemnity. Under
Minnesota law, “[l]iability need not be in the form of a verdict—a [reasonable and
prudent] settlement can trigger the duty to indemnify.” Jackson Nat'l Life Ins. Co. v.

7
In Terrace, RFC chose to pursue the non-exclusive remedy of repurchase against the
defendant. This Court noted that the Client Guide permits RFC “at its option” to
“‘exercise [any of the] remedies set forth in the Guides’ if ‘an Event of . . . Default shall
occur.’” 850 F. Supp. 2d at 966 (alterations in original). In fact, repurchase is only one
of several non-exclusive and cumulative remedies that RFC may choose to pursue under
the Client Guide. (See First Am. Compl. ¶¶ 28-30.)
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Workman Sec. Corp., 803 F. Supp. 2d 1006, 1012 (D. Minn. 2011) (citing Miller v.
Shugart, 316 N.W.2d 729, 735 (Minn. 1982) (en banc)). Accordingly, where a party
seeks indemnity as to a settlement, “The ultimate issue to be decided is the
reasonableness of [the] settlement….” Petco v. Ins. Co. of N. Am., 2011 WL 2490298,
*7-8 (D. Minn. Jun. 10, 2011), quoting Alton M. Johnson Co. v. M.A.I. Co., 463 N.W.2d
277, 279 (Minn. 1990). “Reasonableness, therefore, is not determined by conducting the
very trial obviated by the settlement,” but rather is assessed in light of factors such as
“settlements or jury verdicts in similar cases” (id.), “expert deposition testimony on the
reasonableness of the settlement” (id.), “expert opinion testimony on the possible total
jury damage award” (id.), and “opinions of attorneys retained as experts” (id.). There is
no support, under this assessment, for Branch Banking’s argument that loan-level proof
will be required at trial in this action—let alone for the suggestion that it is required on
the pleadings.
In sum, it is not necessary on either a contract or indemnity claim, for RFC to
allege each and every breach with respect to each and every loan in the Complaint when a
large number of loans is involved. That level of detail is reserved for discovery and, in
particular, expert testimony. See Meecorp, 2010 WL 330324, at *3 (plaintiff is not
required to prove its claims in the complaint; Twombly only requires “enough fact[s] to
raise a reasonable expectation that discovery will reveal evidence of [the claim]”).
VI. RFC’s Claims Are Not Barred By The Statute Of Limitations.
Defendant also contends that RFC’s claims are time-barred because all of the
subject loans were sold prior to August 28, 2007 (over six years before the filing of the
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Complaint). (See Mem. in Supp. of Defendant’s Motion to Dismiss Pl.’s First Am.
Compl. 17-20 (ECF No. 38)). Defendant, however, has yet again ignored the applicable
law. With respect to RFC’s breach of representations and warranties claim, the statute of
limitations was extended by virtue of RFC’s bankruptcy filing, and as a result, the claim
is timely at least as to all loans sold to RFC on or after May 14, 2006. With respect to
RFC’s indemnification claim, the statute of limitations did not begin to run until at the
earliest December 2013, when the Plan – which included the various settlements of
RMBS-related liabilities – was confirmed and became effective. Accordingly, RFC’s
indemnification claim is timely as to all of the subject loans.
First, with respect to RFC’s breach of representations and warranties claim, 11
U.S.C. § 108(a) extended the underlying six year statute of limitations for up to two years
after the date of the May 14, 2012 bankruptcy filing. See 11 U.S.C. § 108(a) (authorizing
trustee to commence action before the end of the applicable statute of limitations or “two
years after the order for relief,” whichever is later); see also 11 U.S.C. § 1107(a)
(providing debtor in possession with most rights of a trustee, including rights under
§ 108(a)); First Am. Compl. ¶ 72 (noting that RFC filed for bankruptcy on May 14,
2012).
Here, on the date of the bankruptcy filing, the statute of limitations had not yet run
as to loans sold to RFC on or after May 14, 2006 – within six years of the bankruptcy
filing. Section 108(a), in turn, extended the time for RFC to file this action until “two
years after the order for relief.” RFC filed its original Complaint on December 13, 2013
– within two years of its May 14, 2012 bankruptcy petition. As a result, RFC’s breach of
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representations and warranties claim – at a minimum as to loans sold to RFC on or after
May 14, 2006 – remains timely.
8

Second, with respect to RFC’s indemnification claim, it is black-letter law in
Minnesota that the statute of limitations does not begin to run until the underlying
liability of the party seeking indemnification has become fixed or ascertained through a
settlement or judgment. Hernick, 2003 WL 1814876 at *5 (“The statute of limitations in
an indemnification case ordinarily is six years after final judgment or settlement”);
Mason v. Spiegel, Inc., 610 F. Supp. 401, 404 n.3 (D. Minn. 1985) (“[U]nder Minnesota
law, the statute of limitations does not begin to run on a right to claim . . . indemnity until
liability by the party claiming such right actually occurs.”); see also Metro. Prop. &
Casualty Ins. Co. v. Metro. Transit Comm’n, 538 N.W.2d 692, 695 (Minn. 1995) (statute
of limitations does not begin to run until “the liability of the party seeking indemnity has
become finally fixed and ascertained, or until after the claimant has settled or has paid the
judgment or more than a commensurate share of it) (quotation omitted).

8
RFC does not concede that loans sold prior to May 14, 2006 are time-barred. RFC’s
claim for breach of representations and warranties as to such loans may still be timely
depending on the facts and circumstances of each loan. The resolution of such factual
issues is not appropriate at the pleading stage. See Moore v. Medtronic, Inc., CIV. 99-
2066 (ADM/AJB), 2001 WL 1636248 (D. Minn. Jan. 31, 2001) (“Where a contract
provides for continuing performance over a period of time, each breach may begin the
running of the statute anew such that accrual occurs continuously.”); Airco Alloys Div. v.
Niagara Mohawk Power Corp., 76 A.D.2d 68, 80 (4th Dep’t 1980) (same); City of
Pipestone v. Wolverine Ins., 1985 WL 1845 (D. Minn. 1985) (“Where a warranty relates
to a future event that will determine whether or not it is breached, the statute does not
begin to run until the happening of such future event.”). And, as discussed above, RFC’s
indemnification claim remains timely as to all of the subject loans, regardless of the date
the loans were sold.
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Applying the foregoing rule, courts routinely deem claims for contractual
indemnification timely even where the statute of limitations for breach of contract has
lapsed. See Discovery Group v. Chapel Dev., 574 F.3d 986, 990 (8th Cir. 2009) (statute
of limitation bars contract claim for breach of representations and warranties, but does
not bar claim for indemnity for liability/losses to third parties resulting from breaches of
those representations and warranties) (applying Missouri law); Smith Int’l v. Egle Group,
490 F.3d 380, 388-89 (5th Cir. 2007) (same); Italia Marittima, S.P.A. v. Seaside Transp.
Services, LLC, 2010 WL 3504834 (N.D. Cal. Sept. 7, 2010) (same); TIB-The Independent
Bankersbank v. Canyon Community Bank, 2014 WL 1373507 (N.D. Tex. April 8, 2014)
(same as to contract for purchase of mortgage loans).
Here, RFC is seeking indemnification for liabilities and losses which were
primarily fixed and ascertained during the bankruptcy proceedings, which began in May
2012. (See First Am. Compl. ¶¶ 58-71.) RFC filed this lawsuit on December 13, 2013 –
less than two years later. There can be no argument that indemnification for these
liabilities and losses is somehow time-barred. It is not. In short, Defendant has ignored
the law applicable to RFC’s claim for breach of representations and warranties and for
indemnification. RFC’s claims are not time-barred as a matter of law.
CONCLUSION
For the foregoing reasons, RFC respectfully requests the Court to deny
Defendant’s motion to dismiss (ECF No. 36) the First Amended Complaint (ECF No.
30).
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Dated: May 15, 2014

FELHABER LARSON

By: s/Jessica J. Nelson
Donald G. Heeman, #286023
David L. Hashmall, #138162
Jessica J. Nelson, #347358
220 South Sixth Street, Suite 2200
Minneapolis, MN 55402-4504
Telephone: (612) 339-6321
Facsimile: (612) 338-0535
dheeman@felhaber.com
dhashmall@felhaber.com
jnelson@felhaber.com


QUINN EMANUEL URQUHART & SULLIVAN, LLP
Peter E. Calamari (admitted pro hac vice)
51 Madison Avenue, 22
nd
Floor
New York, New York 10010
Telephone: (212) 849-7000
Facsimile: (212) 849-7100
PeterCalamari@quinnemanuel.com

CARPENTER LIPPS & LELAND LLP
Jeffrey A. Lipps (admitted pro hac vice)
280 Plaza, Suite 1300
280 North High Street
Columbus, Ohio 43215
Telephone: (614) 365-4100
Facsimile: (614) 365-9145
lipps@CarpenterLipps.com

ATTORNEYS FOR PLAINTIFF
RESIDENTIAL FUNDING COMPANY, LLC

CASE 0:13-cv-03485-SRN-TNL Document 42 Filed 05/15/14 Page 30 of 30

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