As we explained in our case summary, the question in this case was whether New York’s borrowing statute required application of another state’s statute of limitations to an RMBS trustee’s loan-repurchase claims where the trustee was headquartered outside of New York. The Court (Fahey, J.) held that the borrowing statute required application of the out-of-state limitations period and that the RMBS trustee’s claims were therefore untimely.
The majority decision proceeded in three parts. First, the majority applied the “plaintiff residence rule” of claim accrual–that is, that a claim for purely economic injury accrues where the plaintiff resides and sustains the alleged economic loss. The majority thus rejected an argument that a different accrual rule should apply where the plaintiff sued solely in a representative capacity, as in the case of an RMBS trustee. Applying a different test, the majority explained, would result in unpredictability and confusion–things anathema to the goals of the borrowing statute.
Next, the majority concluded that the economic injury in this case occurred at the plaintiff’s residence in California. The plaintiff’s residence was appropriate to measure accrual because the plaintiff was the entity authorized to enforce the relevant agreements. The residence of the certificate holders, on whose behalf the trustee was suing, was not appropriate to measure accrual because, although they may have sustained an economic loss, they “may have their own, separate claims” to assert to recover that loss.
Finally, the majority held that the trustee’s claims were not timely under California’s four-year statute of limitations. Contractual provisions did not extend the limitations period, either under New York law or California law. And the discovery rule did not apply because the trustee “knew or should have known” about the conduct at issue within the limitations period.
The dissent (Wilson, J.) would have resolved the case differently on grounds not advanced by the parties. In the dissent’s view, measuring accrual from the trustee’s residence was wrong. The injury in this case–breach of representations in the underlying agreements–occurred at the time those agreements were closed. At that point, the only parties to the agreement were New York residents. To be sure, the trustee was later assigned those New York parties’ rights to pursue claims. But that assignment did not change the location of the injury that the trustee was assigned rights to pursue.
The dissent also parted ways with the majority about how to analyse the location of an economic injury that is geographically diffuse. Rather than look to the trustee’s residence, the dissent would have looked to the trust’s residence–that is, the law under which the trust was organized. The dissent reached this choice because a rule of accrual based on the location of the trust beneficiaries, who sustained the actual economic injury, was unworkable; and a rule based on the location of the trustee, who sustained no economic injury at all, was “at odds with the law and reality of the role of the trustee.” The location of the trust, then, served as the best proxy for the location of the injury, and in the dissent’s view should govern the location of claims accrual in complicated situations like this one.
Return to the case page for Deutsche Bank v. Barclays / Deutsche Bank v. HSBC.