NEW YORK (Reuters) - A unit of Deutsche Bank AG (DBKGn.DE) won dismissal Thursday of a $330 million mortgage securities lawsuit, in a victory for banks who claim the statute of limitations has expired on many such cases.
A New York state appeals court found that the case was barred by the state’s six-year statute of limitations, ruling that the clock began to run when the contract was executed in 2006.
The decision reversed a May 13 ruling by a lower court, which had found that the statute of limitations did not begin until the bank refused investor demands that it repurchase the defective loans.
Marc Kasowitz, who represented ACE Securities Corp, the bondholder who brought the case, said in an email that he looked forward to “a successful appeal” of Thursday’s ruling.
David Woll, who represented the Deutsche unit, DB Structured Products Inc, declined to comment.
The decision is a victory for some banks facing claims by bondholders over residential mortgage-backed securities issued in the run-up to the 2008 financial crisis.
The ruling “will have an impact on numerous existing cases as well as limiting new cases because most of the securitizations at issue occurred more than six years ago,” Scott Musoff, a lawyer who is involved in similar cases, said in an interview.
Musoff is not involved in the DB Structured Products case, but represents other financial institutions facing similar claims.
In Thursday’s decision, a unanimous four-judge appeals panel ruled that the lower court “erred in finding that plaintiff’s claims did not accrue until defendant either failed to timely cure or repurchase a defective mortgage loan.”
To the contrary, “the claims accrued on the closing date” of the mortgage loan purchase agreement, according to the decision, which was unsigned.
The court also found the action was not timely for other reasons. For one thing, the bondholders didn’t give the bank the 60 and 90-day periods to cure or repurchase the underlying mortgages before filing their summons in March 2012, as the agreement required.
For another, the court ruled the investors whose bonds were held in a trust lacked standing to commence the action on behalf of the trust.
The bondholders later substituted the trustee as plaintiff, but that did not make the September 2012 complaint timely, the court said.
The case is ACE Securities Corp v DB Structured Products Inc., New York state Supreme Court, Appellate Division, No. 11384 and M-5893, M-6111 and M-6133. (Reporting by Karen Freifeld)