James R. Asperger - Typepad · James R. Asperger [email protected] QUINN EMANUEL...

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James R. [email protected] EMANUEL URQUHART & SULLIVAN, LLP865 South Figueroa Street, 10th FloorLos Angeles, CA 90017Tel: 213-443-3000Fax: 213-443-3100

Michael B. [email protected] [email protected] EMANUEL URQUHART & SULLIVAN, LLP51 Madison Avenue, 22nd FloorNew York, NY 10010Tel: 212-849-7000Fax: 212-849-7100

Attorneys for Plaintiffs

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

In re COUNTRYWIDE FINANCIAL CORP. MORTGAGE-BACKED SECURITIES LITIGATION

AMERICAN INTERNATIONAL GROUP, INC., et al.,

Plaintiffs,

v.

BANK OF AMERICA CORPORATION, et al.,

Defendants.

Case No. 11-ML-02265-MRP (MANx)

Case No. 11-CV-10549-MRP (MANx)

MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO COUNTRYWIDE’S MOTION TO DISMISS

Date: May 14, 2012Time: 11:00 a.m.Courtroom: 12Judge: Hon. Mariana R. Pfaelzer

Case 2:11-cv-10549-MRP-MAN Document 125 Filed 04/23/12 of 51 Page ID #:6467

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TABLE OF CONTENTS

Page

PRELIMINARY STATEMENT................................................................................. 1

PROCEDURAL BACKGROUND ............................................................................. 4

ARGUMENT............................................................................................................... 4

I. Plaintiffs’ Common Law Claims Are Timely Under New York’s Six-Year Statutes of Limitation ............................................................................... 4

A. The New York Plaintiffs Are New York Residents Subject to New York’s Statutes of Limitation.........................................................5

B. All Plaintiffs’ Claims Accrued in New York and Are Subject to New York’s Statutes of Limitation.......................................................13

II. PLAINTIFFS’ COMMON LAW CLAIMS ARE TIMELY EVEN IF THE COURT APPLIES OTHER STATES’ LIMITATIONS PERIODS...... 17

A. Fraud Claims Subject to Texas’s Four-Year Statutes of Limitation Are Timely ..........................................................................18

B. Claims Subject to Arizona’s, California’s, or Tennessee’s Three-Year Statutes of Limitations Are Timely..............................................25

C. Claims Subject to Delaware’s Three-Year Statutes of LimitationsAre Timely ............................................................................................31

D. Claims Subject to Illinois’s Three-Year Statutes of Limitations Are Timely ............................................................................................35

III. PLAINTIFFS’ 1933 ACT CLAIMS ARE TIMELY...................................... 35

IV. PLAINTIFFS’ CLAIMS AGAINST BANK OF AMERICA AND MERRILL LYNCH ARE NOT BEFORE THIS COURT ............................. 39

CONCLUSION ......................................................................................................... 39


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TABLE OF AUTHORITIES

Page

Cases

Ackerman v. Price Waterhouse,252 A.D.2d 179 (1st Dep’t 1998)....................................................................... 13

Adrico Realty Corp. v. City of New York,250 N.Y. 29 (1928)............................................................................................. 11

Agristor Leasing v. Saylor,803 F.2d 1401 (6th Cir. 1986)............................................................................ 25

Allegaert v. Warren,480 F. Supp. 817 (S.D.N.Y. 1979)............................................................... 10, 12

Allen v. Handszer,148 Misc. 2d 334 (N.Y. Sup. Ct. N.Y. Cty. 1990)....................................... 14, 16

Allstate Ins. Co. v. Countrywide Fin. Corp .....................................13, 21, 27, 28, 35

Am. Home Assur. Co. v. Nausch, Hogan & Murray, Inc.,71 A.D.3d 550 (1st Dep’t 2010)........................................................................... 9

Am. Lumbermens Mut. Casualty Co. of Illinois. v. Cochrane,129 N.Y.S.2d 489 (N.Y. Sup. Ct. N.Y. Cty. 1954), aff’d without opinion, 284 A.D. 884 (1st Dep’t 1954), aff’d without opinion, 309 N.Y. 1017 (1956) .................................................................................................................................. 11, 12

Am. Pipe & Constr. Co. v. Utah,414 U.S. 538 (1974) ............................................................................. 36, 37, 38

Anderson v. Cocheau,176 S.W.3d 685 (Tex. App. 2005) ..................................................................... 19

Antone v. General Motors Corp., Buick Motor Div.,64 N.Y.2d 20 ...............................................................................................passim

Bank Brussels Lambert v. Credit Lyonnais (Suisse),2001 WL 492363 (S.D.N.Y. May 9, 2001).......................................................... 7

Boerger v. Heiman,,965 A.2d 671 (Del. 2009)................................................................................... 34

Boilermakers Nat’l Annuity Trust Fund v. WaMu Mortg. Pass-Through Certificates, Series AR1,748 F. Supp. 2d 1246 (W.D. Wash. 2010) ......................................................... 37

BP Am. Prod. Co. v. Marshall,342 S.W.3d 59 (Tex. 2011) ................................................................................ 21

Brinckerhoff v. JAC Holding Corp.,263 A.D.2d 352 (1st Dep’t 1999)................................................................... 6, 16


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City State Bank v. Dean Witter Reynolds, Inc.,948 S.W.2d 729 (Tenn. Ct. App. 1996) ............................................................. 17

Clarkson v. Goldstein,2007 WL 914635 (Del. Super. Ct. Apr. 17, 2007)............................................. 33

Coleman v. PricewaterhouseCoopers,854 A.2d 838 (Del. 2004)............................................................................. 31, 33

Computer Assoc. Int’l Inc. v. Altai, Inc.,918 S.W.2d 453 (Tex. 1996) ........................................................................ 20, 21

Cooper v. Lee,75 Tex. 114 (1889) ............................................................................................. 19

Crown, Cork & Seal Co. v. Parker,462 U.S. 345, 351 (1983) ................................................................................... 36

In re Countrywide Fin. Corp. Sec.,588 F. Supp. 2d 1132 (C.D. Cal. 2008).............................................................. 38

DDJ Mgmt., LLC v. Rhone Grp. L.L.C.,15 N.Y.3d 147, 154 (2010)................................................................................. 25

Easyriders Freedom F.I.G.H.T. v. Hannigan,92 F.3d 1486 (9th Cir. 1996)................................................................................ 7

Envo, Inc. v. Walters2009 WL 5173807 (Del. Ch. Dec. 30, 2009) ..................................................... 32

Epstein v. Haas Sec. Corp.,731 F. Supp. 1166 (S.D.N.Y. 1990)............................................................. 14, 16

In re Estate of McLaughlin,78 A.D.3d 1304 (3d Dep’t 2010) ....................................................................... 13

Estate of Stonecipher v. Estate of Butts,591 S.W.2d 806, 809 (Tex. 1979) ...................................................................... 20

Exxon Corp. v. Emerald Oil & Gas Co., L.C.,348 S.W.3d 194 (Tex. 2011) .............................................................................. 22

FDIC v. Cohen,1996 WL 87248 (S.D.N.Y. Feb. 29, 1996) .......................................................... 7

Fite v. Fite,1999 WL 317102 (Tenn. Ct. App. May 19, 1999)............................................. 25

Five Points Hotel P’ship v. Pinsonneault,2011 WL 6153623 (D. Ariz. Dec. 12, 2011)...................................................... 25

Genesee Cty. Emps. Ret. Sys. v. Thornburg Mortg. Sec. Trust 2006-3,2011 WL 5840482 (D.N.M. Nov. 12, 2011)................................................ 24, 37


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GML, Inc. v. Cinque & Cinque, P.C.,2005 WL 5960011 (N.Y. Sup. Ct. N.Y. Cty. Sept. 29, 2005) ............................. 7

Glick v. Berk & Michaels, P.C.,1991 WL 152614 (S.D.N.Y. Jul. 26, 1991) ....................................................... 14

Global Fin. Corp. v. Triarc Corp.,93 N.Y.2d 525 (1999)..................................................................................passim

Griffin v. Singletary,17 F.3d 356 (11th Cir. 1994).............................................................................. 36

Grosser v. Commodity Exch., Inc.,639 F. Supp. 1293 (S.D.N.Y. 1986)................................................................... 14

Guenther v. Cooper Life Scis., Inc.,1992 WL 206256 (N.D. Cal. Apr. 7, 1992) ....................................................... 26

Gust, Rosenfeld & Henderson v. Prudential Ins. Co. of Am.,182 Ariz. 586 (1995) .......................................................................................... 29

Haas v. Pitt. Nat’l Bank,526 F.2d 1083 (3d Cir. 1975) ............................................................................. 36

Heraeus Metal Processing v. PGP Industries,2006 WL 4682143 (N.Y. Sup. Ct. N.Y. Cty. Oct. 31, 2006)............................... 7

Hobbs v. Police Jury of Morehouse Parish,49 F.R.D. 176 (W.D. La. 1970).......................................................................... 37

In re IndyMac Mortg.-Backed Sec. Litig.,718 F. Supp. 2d 495 (S.D.N.Y. 2010)................................................................ 24

In re IndyMac Mortg.-Backed Sec. Litig.,793 F. Supp. 2d 637 (S.D.N.Y. 2011)................................................................ 36

Intellivision v. Microsoft Corp.,784 F. Supp. 2d 356 (S.D.N.Y. 2011).......................................................... 15, 16

Isaacson, Stolper & Co. v. Artisans’ Sav. Bank,330 A.2d 130 (Del. 1974)................................................................................... 32

Island Farm, Inc. v. Master Sidlow & Assocs., P.A.,2007 WL 2758775 (Del. Super. Ct. Sept. 20, 2007).......................................... 34

Joseph v. Wiles,223 F.3d 1155 (10th Cir. 2000).......................................................................... 38

Kahn v. Trans World Airlines, Inc.,82 A.D.2d 696 (2d Dep’t 1981) ......................................................................... 11

Kelley v. Rinkle,532 S.W.2d 947 (Tex. 1976) .............................................................................. 21


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Koster v. (Am.) Lumbermens Mut. Cas. Co.,330 U.S. 518 (1947) ........................................................................................... 12

Lang v. Paine, Webber, Jackson & Curtis,582 F. Supp. 1421 (S.D.N.Y. 1984)....................................................... 14, 15, 16

Lincoln Nat’l Life Ins. Co. v. Snyder,722 F. Supp. 2d 546 (D. Del. 2010) ................................................................... 32

Little v. Smith,943 S.W.2d 414 (Tex. 1997) .................................................................. 17, 18, 22

Littlefield v. Tilley,2006 WL 2585048 (M.D. Tenn. Sept. 7, 2006) ................................................. 26

Luther v. Countrywide Home Loans Servicing LP,BC380698 (Cal. Super. Ct. 2007) ...................................................................... 36

Martin v. Dierck Equip. Co.,43 N.Y.2d 583 (1978)......................................................................................... 15

Maiden v. Biehl,582 F. Supp. 1209 (S.D.N.Y. 1984)............................................................. 14, 15

MIG, Inc. v. Paul, Weiss, Rifkind, Wharton & Garrison, L.L.P.,701 F. Supp. 2d 518 (S.D.N.Y. 2010), aff’d, 410 F. App’x 408 (2d Cir. 2011).. 7

Maine State Ret. Sys. v. Countrywide Fin. Corp.,722 F. Supp. 2d 1157 (C.D. Cal. 2010).............................................................. 36

Maine State Ret. Sys. v. Countrywide Fin. Corp.,No. 10-cv-00302 (C.D. Cal. 2010)..................................................................... 36

Mass. Mut. Life Ins. Co. v. Countrywide Fin. Corp,2012 WL 1322884 (C.D. Cal. Apr. 16, 2012).............................................passim

Mass. Mut. Life Ins. Co. v. Residential Funding Co., LLC,2012 WL 479106 (D. Mass. Feb. 14, 2012)................................................. 24, 26

Mastellone v. Argo Oil Corp.,46 Del. 102 (Del. 1951)...................................................................................... 32

MBIA Ins. Corp. v. Countrywide Home Loans, Inc.,27 Misc. 3d 1061 ................................................................................................ 34

MBIA Ins. Corp. v. GMAC Mortg. LLC,30 Misc. 3d 856 (N.Y. Sup. Ct. N.Y. Cty. 2010)............................................... 25

MBIA Ins. Corp. v. Royal Bank of Can.,28 Misc. 3d 1225(A) (N.Y. Sup. Ct. Westchester Cty. 2010) ........................... 34

McKowan Lowe & Co, Ltd. v. Jasmine, Ltd.,295 F.3d 380 (3d Cir. 2002) ............................................................................... 36


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McMahan & Co. v. Donaldson, Lufkin & Jenrette Sec. Corp.,727 F. Supp. 833 (S.D.N.Y. 1989)................................................................. 6, 12

Merck & Co. v. Reynolds,__ U.S. __, 130 S. Ct. 1784 (2010) .............................................................. 30, 31

Milin Pharm. Inc. v. Cash Register Sys., Inc.,173 A.D.2d 686 (2d Dep’t 1991) ......................................................................... 1

Mister Donut of Am., Inc. v. Harris,723 P.2d 670 (Ariz. 1986) .................................................................................. 17

In re Morgan Stanley Mortg. Pass-Through Certificate Litig.,810 F. Supp. 2d 650 (S.D.N.Y. 2011)..............................................24, 26, 37, 38

N.J. Carpenters Vacation Fund v. Royal Bank of Scotland Grp., PLC,720 F. Supp. 2d 254 (S.D.N.Y. 2010).......................................................... 24, 27

Nat’l Sur. Co. v. Ruffin,242 N.Y. 413 (1926)............................................................................................. 9

Nat’l Union Fire Ins. Co. of Pitt., PA v. Ramierz,1995 WL 479508 (S.D.N.Y. Aug. 10, 1995) ....................................................... 9

Nat’l Union Fire Ins. Co. of Pitt. v. Davis, Write, Todd, Reise & Jones,157 A.D.2d 571 (1st Dep’t 1990)......................................................................... 9

Nat’l Union Fire Ins. Co. of Pitt. v. Forman 635 Joint Venture,1996 WL 507317 (S.D.N.Y. Sep. 6, 1996) ................................................ 8, 9, 12

Nat’l Integrity Life Ins. v. Countrywide Fin. Corp.,2012 WL 1097244 (C.D. Cal. Mar. 9, 2012) ........................................... 2, 11, 16

Ne. Knox Util. Dist. v. Stanfort Constr. Co.,206 S.W.3d 454 (Tenn. Ct. App. 2006) ............................................................. 25

Owen v. King,111 S.W.2d 695, 697 (Tex. 1938) ...................................................................... 26

Pack & Process, Inc. v. Celotex Corp.,503 A.2d 646 (Del. Super. 1985) ....................................................................... 34

Palmer v. Stassinos,236 F.R.D. 460 (N.D. Cal. 2006) ....................................................................... 37

Pereira v. Cogan,2001 WL 243537 (S.D.N.Y. Mar. 8, 2001) ......................................................... 7

Petroplast Petrofisa Plasticos S.A. v. Ameron Intern. Corp.,2011 WL 2623991 (Del. Ch. July 1, 2011)........................................................ 31

Playtex, Inc. v. Columbia Cas.,1993 WL 390469 (Del. Super. Ct. Sept. 20, 1993)............................................ 32


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Polk Terrace, Inc. v. Curtis,422 S.W.2d 603 (Tex. Civ. App. 1967) ............................................................. 19

Port Arthur Rice Milling Co. v. Beaumont Rice Mills,143 S.W. 926 (Tex. 1912) .................................................................................. 19

Prefabco, Inc. v. Olin Corp.,71 A.D.2d 587 (1st Dep’t 1979)......................................................................... 16

Pricaspian Dev. Corp. v. Total S.A.,397 F. App’x 673 (2d Cir. 2010).......................................................................... 7

Proforma Partners, L.P. v. Skadden Arps Slate Meagher & Flom,280 A.D.2d 303 (1st Dep’t 2001)......................................................................... 7

Protostorm, LLC v. Antonelli, Terry, Stout & Kraus, LLP,__ F. Supp. 2d __, 2011 WL 5975896 (S.D.N.Y. Nov. 29, 2011)....................... 8

Pryor Cashman v. Tract Manager, Inc.,2007 WL 2175666 (N.Y. Sup. Ct. N.Y. Cty. May 18, 2007) .......................... 6, 7

Pub. Emps. Ret. Sys. of Miss. v. Goldman Sachs Grp., Inc.,2011 WL 135821 (S.D.N.Y. Jan. 12, 2011)....................................................... 24

Pub. Emps. Ret. Sys. of Miss. v. Merrill Lynch & Co. Inc.,714 F. Supp. 2d 475 (S.D.N.Y. 2010)................................................................ 24

Puig v. Seminole Night Club, LLC,2011 WL 3275948 (Del. Ch. July 29, 2011)...................................................... 32

Putnam Bank v. Countrywide Fin. Corp.,No. 2:11-cv-04698-MRP (MANx).............................................17, 27, 28, 35, 38

Ruebeck v. Hunt,176 S.W.2d 738 (Tex. 1944) .................................................................. 19, 20, 24

Samson Lone Star, Ltd. Partnership v. Hooks,2012 WL 691584 (Tex. App. Mar. 1, 2012) ...................................................... 19

Sease v. Cen. Greyhound Lines, Inc.,306 N.Y. 284 (1954)......................................................................................... 5, 6

Seghers v. Deloitte & Touche USA LLP,17 Misc. 3d 1118(A) (N.Y. Sup. Ct. N.Y. Cty. Aug. 13, 2007) .......................... 7

Serrano v. Serrano,2012 WL 75639 (Ariz. Ct. App. Jan. 10, 2012)................................................. 25

Shamrock Assoc. v. Sloane,738 F. Supp. 109 (S.D.N.Y. 1990)....................................................................... 7

Shell Oil Co. v. Ross,356 S.W.3d 924 (Tex. 2011) .............................................................................. 23


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Smith v. Mattia,2010 WL 412030 (Del. Ch. Feb. 1, 2010).......................................................... 32

Snyder v. Butcher & Co.,1992 WL 240344 (Del. Super. Sept. 15, 1992).................................................. 33

Solow v. Tanger,258 A.D.2d 323 (1st Dep’t 1999)......................................................................... 1

Sperber Adams Assoc. v. JEM Mgmt. Assoc. Corp.,1992 WL 138344 (S.D.N.Y. June 4, 1992)........................................................ 26

Stewart v. Johnson,2007 WL 1345372 (Tex. App. May 8, 2007) .................................................... 19

Stichting Pensioenfonds ABP v. Countrywide Fin. Corp.,802 F. Supp. 2d 1125 (C.D. Cal. 2011).......................................................passim

Styles v. Blackwood,2008 WL 5396804 (Tenn. Ct. App. Dec. 29, 2008)........................................... 29

Superior Laminate & Supply, Inc. v. Formica Corp.,93 S.W.3d 445 (Tex. App. 2002) ....................................................................... 19

S.V. v. R.V.,933 S.W.2d 1 (Tex. 1996) ...................................................................... 20, 21, 22

THC Holdings Corp. v. Chinn,1998 WL 50202 (S.D.N.Y. Feb. 6, 1998) ............................................................ 8

Thomson v. Canyon,198 Cal. App. 4th 594 (2011)............................................................................. 25

TIG Ins. Co. v. Weil, Gotshal & Manges LLP,2005 WL 5959978 (N.Y. Sup. Ct. N.Y. Cty. Nov. 10, 2005).............................. 7

Val-Com Acquisitions Trust v. Bank of America, N.A2011 WL 4591959 (E.D. Tex. Sept. 30, 2011) .................................................. 22

Verizon Directories Corp. v. Continuum Health Partners,2009 WL 1116113 (N.Y. Sup. Ct. N.Y. Cty. Apr. 21, 2009), aff’d, 74 A.D.3d 416 (1st Dep’t 2010)........................................................................................... 13

Vesicol Chem. Corp. v. Winograd,956 S.W.2d 529 (Tex. 1997) .............................................................................. 24

Wal-Mart Stores v. AIG Life Ins. Co.,860 A.2d 312 (Del. 2004)............................................................................. 33, 34

Walters v. Edgar,163 F.3d 430 (7th Cir. 1998).............................................................................. 37

Washington State Plumbing & Pipefitting Pension Trust v. Countrywide Fin. Corp., BC392571 (Cal. Super. Ct. 2008) ...................................................................... 36


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In re Wells Fargo Mortg.-Backed Certificates Litig.,712 F. Supp. 2d 958 (N.D. Cal. 2010) ......................................................... 24, 26

In re Wells Fargo Mortg.-Backed Certificates Litig.,2010 WL 4117477 (N.D. Cal. Oct. 19, 2010).................................................... 37

West v. American Tel. & Tel. Co.,311 U.S. 223 (1940) ............................................................................................. 8

Williams v. Beltz,107 A. 298 (Del. 1919)................................................................................. 17, 31

In re WorldCom Sec. Litig.,496 F.3d 245 (2d Cir. 2007) ............................................................................... 36

Wydallis v. U.S. Fiduciary and Guar. Co.,63 N.Y.2d 872 (1984)..................................................................................passim

Yencer Builders, Inc. v. Fabi,2010 Del. Super. LEXIS 594 (Del. Super. Oct. 1, 2010)................................... 34

Statutes

15 U.S.C. § 77a(11) ................................................................................................. 35

15 U.S.C. § 77a(12) ................................................................................................. 35

15 U.S.C. § 77a(15) ................................................................................................. 35

ARIZ. REV. STAT. § 12-543 ...................................................................................... 25

CAL. CIV. PROC. CODE § 338(d) .............................................................................. 25

DEL. CODE ANN. § 8106 .......................................................................................... 31

N.Y. C.P.L.R. § 213(8).............................................................................................. 1

N.Y. C.P.L.R.. § 202 ........................................................................................passim

TENN. CODE ANN. § 28-3-105 ................................................................................. 26

TEX. CIV. PRAC. & REM. CODE ANN. § 16.004(a)(4) ............................................... 18

Other Authorities

5-72 Dorsaneo, Texas Litig. Guide § 72.03 ............................................................ 22

14 N.Y. Jur. 2d Bus. Relationships § 205 (2011)...................................................... 6

David D. Siegel, N.Y. Prac. § 57 (5th ed. 2011)....................................................... 6

N.Y. Civ. Prac. § 202.03 n.35 (1989)...................................................................... 12


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N.Y. Civ. Prac. CPLR P 202.03 (2012) .................................................................... 6

N.Y. Prac. Series, Comm. Litig. in N.Y. St. Cts., § 17:29 n.2 (3d ed. 2011) ........... 5


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1

PRELIMINARY STATEMENT

Defendants (collectively, “Countrywide”) do not dispute that New York

imposes a six-year statute of limitations on the common-law claims alleged in the

Complaint,1 and that those claims are all timely if New York’s statute of limitations

applies. Countrywide concedes that New York’s six-year statute of limitations

applies to five Plaintiffs, and thus does not seek dismissal of their common-law

claims.2 Countrywide, however, veers fundamentally off course in its supplemental

brief, when it asserts—contrary to its original moving brief—that incorporation is

the sole determinant of residency.

Tellingly, Countrywide correctly recognized in its opening brief that a

corporation’s principal place of business in New York is sufficient to confer

residency there. As it told the Court: “For purposes of C.P.L.R. § 202, a

corporation’s principal place of business, rather than its state of incorporation,

determines its residence.” Mot. 14 (citation omitted).3 In its supplemental brief,

however, Countrywide reverses itself, claiming that the “single determination” of a

corporation’s residency under New York law is its “state of incorporation.” 4

Supp. Mem. 3 (emphasis added). Countrywide’s flip-flop expediently allows it to

assert that eight additional Plaintiffs, who indisputably have long maintained their

1 See N.Y. C.P.L.R. § 213(8) (McKinney 2004) (fraud); Solow v. Tanger, 258

A.D.2d 323, 323 (1st Dep’t 1999) (aiding and abetting fraud); Milin Pharm. Inc. v. Cash Register Sys., Inc., 173 A.D.2d 686, 687 (2d Dep’t 1991) (negligent misrepresentation).

2 These Plaintiffs are American Home Assurance Company, Commerce and Industry Insurance Company, First SunAmerica Life Insurance Company, and The United States Life Insurance Company in the City of New York, each of which is incorporated and has its principal places of business in New York, see Compl. ¶¶ 27–50; Supp. Mem. 2, and the unincorporated American International Group Retirement Plan administered in New York, see Compl. ¶ 36; Supp. Mem. 2.

3 Thus, Countrywide initially did not move against thirteen Plaintiffs whose principal places of business are in New York. These Plaintiffs include the five Plaintiffs listed in footnote 2 and the eight additional plaintiffs listed in footnote 5.

4 Countrywide only reversed its position after the Court, during a March 15, 2012 telephonic conference, directed the parties to the New York Court of Appeals decision in Wydallis v. U.S. Fiduciary and Guaranty Co., discussed infra, and indicated that it would accept supplemental briefing from Countrywide.


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principal place of business in New York and have always considered New York

their home (the “New York Plaintiffs”5), should not get the benefit of New York’s

six-year statute of limitations under New York’s borrowing statute, N.Y. C.P.L.R. §

202 (McKinney 2011) [“C.P.L.R. § 202”], because they were incorporated

elsewhere. Countrywide’s newly minted position, if accepted, would undermine

decades of settled New York law.6

First, for decades, New York law has held that a corporation’s residency may

be defined by its principal place of business. Not only does Countrywide offer no

plausible justification for abandoning this long-standing rule, see infra at I.A, but

the absurdity of its position is apparent considering that AIG, Inc. and its New York-

based subsidiaries are fixtures of downtown Manhattan, where they run their

business operations, occupy six sky-scraper buildings with thousands of New York

employees and have routinely been governed by New York law.7 Taken to its

logical conclusion, Countrywide’s position would treat other quintessentially New

York establishments, such as the New York Stock Exchange, Madison Square

Garden, the Empire State Building, and countless others, as non-residents, merely

because they are organized in other states. No reasonable reading of the case law

would countenance such a bizarre result.

5 The eight New York Plaintiffs include American International Group, Inc.,

AIG Securities Lending Corp., Chartis Select Insurance Company, Chartis Specialty Insurance Company, Chartis Property Casualty Company, National Union Fire Insurance Company of Pittsburgh, Pa., New Hampshire Insurance Company, and The Insurance Company of the State of Pennsylvania. See Compl. ¶¶ 27–50; Supp. Mem. 2.

6 The magnitude of Countrywide’s reversal is underscored by its reply brief in National Integrity Life Insurance Co. v. Countrywide Fin. Corp., 11-cv-9889, (doc. no. 100) (C.D. Cal. Feb. 3, 2012), which is also part of this MDL. Countrywide pointed out that Wydallis had never been cited, argued that it had been superseded, and stated that “since Wydallis, the Court of Appeals has held that both a corporation’s state of incorporation and its principal place of business are relevant for determining whether the corporation is a resident under C.P.L.R. § 202.” Countrywide Reply Brief, National Integrity, 11-cv-9889, at 36 (emphasis in original) (citations omitted). See Ex. A.

7 AIG’s presence in New York is described in more detail in the Complaint at ¶¶ 102-103, at pages 8-9 and 15, infra.


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Second, Countrywide’s untenable position fails for the independent reason

that the borrowing provision of C.P.L.R. § 202 does not even apply unless

Plaintiffs’ claims accrued outside of New York. See infra at I.B. Because each

Plaintiff suffered loss inside New York, their claims “accrued” in, and are governed

by, the laws of New York. Plaintiffs maintained billions of dollars in New York

accounts where New York-based personnel conducted all the due diligence, made

all of the investment decisions, and managed all Plaintiffs’ accounts. When the

residential mortgage-backed securities (“RMBS”) collapsed, Plaintiffs suffered

devastating losses, and “accrued” claims, in New York. See infra at I.B. For this

reason alone, irrespective of residency, the borrowing statute compels all Plaintiffs

to receive the benefit of New York’s statutes of limitations.

Third, even if Countrywide could identify credible legal authority to support

its arguments as to the applicable state law (which it cannot), nearly all of the claims

are timely under the laws of the other states Countrywide asserts control. None of

this Court’s precedents establish inquiry notice as of the relevant threshold dates,

nor do any other cases addressing RMBS claims. See infra at II.

Finally, Countrywide seeks to divert attention from its own misconduct by

arguing that AIG is supposedly the most “knowledgeable” RMBS “investor in the

world,” and should bear sole responsibility for Countrywide’s fraud. Mot. 1. But

AIG cannot at once be the world’s savviest investor and Countrywide’s biggest

victim. If, as Countrywide contends, AIG knew of Countrywide’s fraud, it defies

logic that it would have invested billions of dollars in such securities. Yet, the very

documents Countrywide trumpets show that—contrary to suspecting fraud—AIG

believed it had protected itself by buying high quality, senior RMBS tranches that

were structured to withstand a housing crisis. See infra at II.B. Moreover,


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Countrywide’s passing references to e-mails or inflammatory books about AIG’s

alleged “fatalities” are hardly probative, especially on a motion to dismiss.8

Countrywide’s attempts to shield itself from accountability are thus

unavailing. Plaintiffs’ claims are timely, and the motion should be denied.

PROCEDURAL BACKGROUND

On January 13, 2011, Plaintiffs and Countrywide entered into an agreement

(the “Agreement”) tolling all time-related defenses, including statutes of limitations

or repose, on all claims related to certain RMBS offerings (“the claims subject to the

Agreement”). The Agreement terminated on August 5, 2011. On August 8, 2011,

AIG filed its Complaint, which also included claims related to RMBS not in the

Agreement (“the claims not subject to the Agreement”). See Ex. B (listing RMBS

offerings subject to the Agreement). On February 27, 2012, Countrywide filed a

Motion to Dismiss (“Mot.”), and on March 23, 2012, it filed a Supplemental

Memorandum of Points and Authorities (“Supp. Mem.”).

ARGUMENT

I. PLAINTIFFS’ COMMON LAW CLAIMS ARE TIMELY UNDER NEW YORK’S SIX-YEAR STATUTES OF LIMITATIONUnder the plain language of C.P.L.R. § 202, Plaintiffs’ claims receive the

benefit of New York’s six-year statutes of limitations if either of two independent

conditions are met: (1) the Plaintiff is a resident of New York, or (2) the cause of

8 Since Countrywide neither discusses these documents in its arguments in either

brief nor requests judicial notice, Plaintiffs do not discuss them further, except to note that Countrywide’s references to United Guaranty and AIG-FP are irrelevant as neither is a party to this case. Moreover, as pleaded in the Complaint, Plaintiffs did not have access to mortgage loan files when they invested, and repeatedly have been thwarted from obtaining access thereafter. Compl. ¶¶ 8, 125. Whatever access United Guaranty had to mortgage files for the individual loans that it insured (as opposed to the RMBS Plaintiffs purchased) is irrelevant, as it was required to keepthe information it received from Countrywide about the mortgages it insuredconfidential. Similarly, Countrywide’s point that AIG-FP stopped writing CDS on CDOs in 2005 has no bearing here as those were different transactions with different risk profiles. The very documents Countrywide cites for this proposition undermine its point as they show Plaintiffs believed that their senior RMBS tranches were secure and would survive a housing downturn. See infra at 30-31.


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action accrued in New York.9 Since many of the Plaintiffs are New York residents

and all of Plaintiffs’ common law claims accrued in New York, C.P.L.R. § 202 does

not apply, and New York’s limitations period governs.

A. The New York Plaintiffs Are New York Residents Subject to New York’s Statutes Of Limitation

Although “CPLR 202 has remained substantially unchanged since 1902,”

Global Fin. Corp. v. Triarc Corp., 93 N.Y.2d 525, 528 (1999), Countrywide’s

position on how residency is determined under that statute has been a moving target.

Compare Mot. 14 (“For Purposes of C.P.L.R. § 202, [a] corporation’s principal

place of business, rather than its state of incorporation, determines its residence”)

with Supp. Mem. 3 (“For purposes of N.Y. C.P.L.R. 202, the Residence of a

Corporation Is Its State of Incorporation”). Countrywide’s about-face contravenes

long-standing precedent and the purpose of C.P.L.R. § 202.

Principal Place Of Business Confers Residency. New York state and federal

courts repeatedly have held that a corporation is a “resident” of the state in which it

maintains its principal place of business. Decades ago, the New York Court of

Appeals addressed the distinction between domicile and residency, recognizing that

the domicile is the state of incorporation, whereas residency can be in a separate

state where the principal place of business is located:

It is generally recognized that a corporation, like an individual, may have a place of residence other than its domicile. Corporations often have their principal places of business outside of the State of incorporation. The domicile of a corporation is the State in which it is incorporated.

Sease v. Cen. Greyhound Lines, Inc., 306 N.Y. 284, 286 (1954); see also N.Y. PRAC.

SERIES, COMM. LITIG. IN N.Y. ST. CTS., § 17:29 n.2 (3d ed. 2011) (“A corporation . .

. resides in its principal place of business.”) (citing Sease).

9 See C.P.L.R. § 202 (“An action based upon a cause of action accruing without

the state cannot be commenced after the expiration of the time limited by the laws of either the state or the place without the state where the cause of action accrued, except that where the cause of action accrued in favor of a resident of the state the time limited by the laws of the state shall apply.”) (emphasis added).


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In Antone v. General Motors Corp., Buick Motor Division, the New York

Court of Appeals, applying this principle, held that “when the term ‘residence’ is

employed in the CPLR, it is not equivalent to domicile.” 64 N.Y.2d 20, 29

(1984).10 “Rather, the determination of whether a plaintiff is a New York resident,

for purposes of CPLR 202, turns on whether he has a significant connection with

some locality in the State as a result of living there for some length of time during

the course of a year.” Id. at 30; see also David D. Siegel, N.Y. PRAC. § 57 (5th ed.

2011) (“For a time ‘resident’ . . . was construed to mean ‘domiciliary’ but the Court

of Appeals rejected that construction in Antone . . ., holding that it means just what it

says: resident.”); 1-202 M. Bender & Co., N.Y. CIV. PRAC. CPLR P 202.03 (2012)

[“Bender, CPLR P”] (noting that when ‘residence’ and ‘domicile’ are used together

in the CPLR, they are generally separated by the disjunctive ‘or.’”).

Antone’s recognition of the distinction between residency and domicile

applies to corporate plaintiffs that “often have their principal place of business

outside of the state of incorporation.” 14 N.Y. JUR. 2D BUS. RELATIONSHIPS § 205

(2011). New York case law and treatises have recognized Antone’s application to

corporate plaintiffs. See Pryor Cashman v. Tract Manager, Inc., 2007 WL

2175666, at *10–11 (N.Y. Sup. Ct. N.Y. Cty. May 18, 2007) (applying Antone to

corporate plaintiff); McMahan & Co. v. Donaldson, Lufkin & Jenrette Sec. Corp.,

727 F. Supp. 833, 834 (S.D.N.Y. 1989) (applying Antone to partnership plaintiff);

Bender, CPLR P 202.03 n.16 (“[a]fter Antone, the existence of a principal office in

New York should result in a finding of residence under CPLR § 202.”).

Countrywide does not even address Antone or Sease. Countless New York

state appellate, trial, and federal cases, however, have affirmed that a business

resides in its principal place of business for purposes of C.P.L.R. § 202. For

example, in Brinckerhoff v. JAC Holding Corp., 263 A.D.2d 352, 353 (1st Dep’t

10 Antone was decided one month after Wydallis v. United States Fid. & Guar.

Co., relied upon by Countrywide and discussed infra at pp. 10–11.


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1999), the Appellate Division held that “the applicable Statute of Limitations is that

of Georgia, since that is where Hoover had its principal office.” Similarly, in

Proforma Partners, L.P. v. Skadden Arps Slate Meagher & Flom, 280 A.D.2d 303,

303 (1st Dep’t 2001), the Appellate Division held that “a partnership’s legal

residence is where it maintains its principal place of business.” And in Heraeus

Metal Processing v. PGP Industries, 2006 WL 4682143, at *10 (N.Y. Sup. Ct. N.Y.

Cty. Oct. 31, 2006), the Supreme Court confirmed that “‘principal place of business

determines residency under CPLR § 202,’” and thus ruled that a plaintiff was not a

New York resident where it had “its principal place of business in California.”

Numerous other state and federal decisions are in accord.11

This Court is bound by this authority. As the Ninth Circuit held in

Easyriders Freedom F.I.G.H.T. v. Hannigan, 92 F.3d 1486, 1494 n.4 (9th Cir. 1996)

(citation omitted), “[i]n the absence of convincing evidence that the state supreme

11 Countrywide mistakenly claims that federal New York cases should be

discounted because they “flow from a pre-Wydallis decision”—Allegaert v. Warren, 480 F. Supp. 817 (S.D.N.Y. 1979). Supp. Mem. 4 n.2. But numerous post-Wydallis state and federal cases reach the same conclusion. See, e.g., Seghers v. Deloitte & Touche USA LLP, 17 Misc. 3d 1118(A), at *5 (N.Y. Sup. Ct. N.Y. Cty. Aug. 13, 2007) (where plaintiff alleged its principal place of business was New York, it was a resident of New York); Pryor Cashman, 2007 WL 2175666, at *10–11 (corporation feels injury where it resides which is its principal place of business); TIG Ins. Co. v. Weil, Gotshal & Manges LLP, 2005 WL 5959978, at *10 (N.Y. Sup. Ct. N.Y. Cty. Nov. 10, 2005) (plaintiff’s claims accrued in state of its principal place of business, not incorporation); GML, Inc. v. Cinque & Cinque, P.C., 2005 WL 5960011, at *4 (N.Y. Sup. Ct. N.Y. Cty. Sept. 29, 2005) (claims accrued where the plaintiffs resided, which was their principal places of business); Pricaspian Dev. Corp. v. Total S.A., 397 F. App’x 673, 675–76 (2d Cir. 2010) (claim accrued at plaintiff’s residence, which was its principal place of business); MIG, Inc. v. Paul, Weiss, Rifkind, Wharton & Garrison, L.L.P., 701 F. Supp. 2d 518, 531 (S.D.N.Y. 2010) (plaintiff corporation resided in state of principal place of business, not incorporation), aff’d, 410 F. App’x 408 (2d Cir. 2011); Bank Brussels Lambert v. Credit Lyonnais (Suisse), 2001 WL 492363, at *4 n.4 (S.D.N.Y. May 9, 2001) (the place of residence of a corporation is either the place of incorporation or principal place of business); Pereira v. Cogan, 2001 WL 243537, at *18 (S.D.N.Y. Mar. 8, 2001) (a corporation is a resident of New York when it has its principal place of business in New York); FDIC v. Cohen, 1996 WL 87248, at *3 (S.D.N.Y. Feb. 29, 1996) (corporation is a resident of the state in which it has its principal place of business); Shamrock Assoc. v. Sloane, 738 F. Supp. 109, 113 (S.D.N.Y. 1990) (“The principal place of business determines residency under CPLR 202”). Countrywide itself cited McMahan & Co., 727 F. Supp. at 834, for the proposition that principal place of business establishes corporate residency. See Mot. 14.


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court would decide differently, ‘a federal court is obligated to follow the decisions

of the state’s intermediate courts.’” Accord West v. American Tel. & Tel. Co., 311

U.S. 223, 236 (1940) (“A state is not without law save as its highest court has

declared it.”).

The foregoing rule reflects the practical reality that the locus of a

corporation’s actual operations is often different from where it is formally

organized. See Protostorm, LLC v. Antonelli, Terry, Stout & Kraus, LLP, __ F.

Supp. 2d __, 2011 WL 5975896, at *9 (S.D.N.Y. Nov. 29, 2011) (although plaintiff

“is registered in Delaware, its principal place of business is in New York, making it

a New York resident for purposes of C.P.L.R. § 202”); THC Holdings Corp. v.

Chinn, 1998 WL 50202, at *5 (S.D.N.Y. Feb. 6, 1998) (C.P.L.R. § 202 did not

apply because plaintiff, though incorporated in Delaware, had its principal place of

business in New York); Nat’l Union Fire Ins. Co. of Pitt. v. Forman 635 Joint

Venture, 1996 WL 507317, at *4 (S.D.N.Y. Sep. 6, 1996) (plaintiff was a resident of

New York even though it was incorporated in Pennsylvania, because its principal

place of business was New York). For similar reasons, the court in Antone focused

on real-world connections as the lynch-pin of residency, requiring a plaintiff’s

“significant connection” to the state. Antone, 64 N.Y.2d at 30.

It is indisputable that the New York Plaintiffs with their principal place of

business in New York satisfy this test. For example, AIG, Inc., and the seven

subsidiaries that are based in New York but incorporated elsewhere, have thousands

of employees in New York, and less than 150 in their states of incorporation; all of

the New York companies hold their regular board meetings in New York; between

2005 and 2007, these Plaintiffs paid nearly ten times more in taxes to the State of

New York than to Delaware. According to AIG database records, while AIG, Inc.

occupies over 670,000 square feet of real estate in New York (85% of its national

footprint), it occupies only 380 square feet in Delaware (.03% of its national

footprint). See also Pltf. RJN Ex. 16 (showing AIG’s New York headquarters in


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2007). For these and other reasons, Plaintiffs pleaded that New York was their

principal place of business. Compl. at ¶¶ 28, 29, 35–41, 43, 44, 47, 48.

Not only must these representations be accepted as true at the pleading stage,

but New York courts have repeatedly treated the Plaintiffs in accordance with these

facts, routinely applying New York’s statutes of limitation. See, e.g., Am. Home

Assur. Co. v. Nausch, Hogan & Murray, Inc., 71 A.D.3d 550, 552 (1st Dep’t 2010)

(applying New York statute of limitations to claims asserted by AIG subsidiaries

incorporated in Pennsylvania but with principal places of business in New York);

Nat’l Union Fire Ins. Co. of Pitt. v. Davis, Write, Todd, Reise & Jones, 157 A.D.2d

571, 572 (1st Dep’t 1990) (same); Nat’l Union Fire Ins. Co. of Pitt., PA v. Forman

635 Joint Venture, 1996 WL 507317, at *4 (S.D.N.Y. Sep. 6, 1996) (same); Nat’l

Union Fire Ins. Co. of Pitt., PA v. Ramierz, 1995 WL 479508, at *2 (S.D.N.Y. Aug.

10, 1995) (same). The same result is compelled here.

C.P.L.R. § 202’s Purpose Confirms That Principal Place of Business Confers

Residency. The New York Court of Appeals has recognized the “obvious purpose”

of C.P.L.R. § 202: “to prevent a nonresident claimant from coming into [New York]

and prosecuting a claim . . . under [New York’s] statutes of limitations if they are

more favorable [to him].” Nat’l Sur. Co. v. Ruffin, 242 N.Y. 413, 417 (1926)

(emphasis added). In Antone, the court held that this goal of discouraging forum-

shopping was “better effectuated by protecting residents, instead of domiciliaries,

with a longer New York limitations period” because a plaintiff with a permanent

presence in New York “would not be forum-shopping by bringing the case in New

York; yet, C.P.L.R. § 202 would not protect that plaintiff if ‘residence’ were

construed to mean domicile.” Bender, CPLR P 202.03 (citing Antone, 64 N.Y.2d at

29–30).

A corporation that places its base of operations in New York does not “come

into” New York to forum shop—it is already there. As one court stated:


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There is no reason not to extend [statute of limitation] protections to a corporation having its principal home in New York merely because it is incorporated in a foreign state. . . . Plaintiff[] . . . chose New York as its business center . . . [and] is not forum shopping simply because it avails itself of a court in New York. Moreover, New York has a strong interest in extending to corporations maintaining their principal offices here the benefits economic or otherwise of a longer statute of limitations. Strong policy considerations therefore support the conclusion that plaintiff[] . . . should be treated as a resident under C.P.L.R. § 202 and the New York statute of limitations should apply.

Allegaert, 480 F. Supp. at 820 (emphasis added).

Countrywide Offers No Plausible Basis for Determining Residency Based

Solely on Incorporation. None of the authorities on which Countrywide relies even

remotely establishes that residency can only be determined by the state of

incorporation. Countrywide mistakenly contends that Wydallis v. U.S. Fiduciary

and Guaranty Co., 63 N.Y.2d 872 (1984), holds that “the state of incorporation is

controlling.” Supp. Mem. 3. But Countrywide’s interpretation is inconsistent with

the Court of Appeals’ decision in Antone and the consistent holdings of the other

New York state and federal cases cited above. Moreover, the fact that Wydallis, a

contract case, permitted an entity incorporated in New York—with its principal

place of business in Massachusetts—to avoid the shorter limitations period under

Massachusetts law does not mean that place of incorporation is the only determining

factor. To the contrary, Wydallis says nothing about whether it would apply New

York’s borrowing statute to a company incorporated outside of New York but with

its principal place of business in New York. Nor have any state or federal courts

cited Wydallis for the novel proposition Countrywide advances. See also

Countrywide Reply Brief, National Integrity, 11-cv-9889, at 36 (“In any event,

Wydallis has never once been cited by a single New York court (state or federal) on

this issue. Moreover, Wydallis has effectively been superseded on this issue.”).

Countrywide likewise misconstrues National Integrity Life Insurance v.

Countrywide Financial Corp., 2012 WL 1097244 (C.D. Cal. Mar. 9, 2012).

Although this Court in National Integrity cited Wydallis’s holding that “a New


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York-incorporated insurance company was a New York resident despite the fact that

its principal place of business was elsewhere,” it also recognized that “[m]ore recent

decisions, without reference to Wydallis, have held that a corporation is a resident

where it has its principal place of business.” Id., at *16. This Court further ruled

that the plaintiff there, which was expressly “formed under the laws of, and

domiciled in, the State of New York,” id., was a New York resident. No court,

state or federal, has ever cited Wydallis for the proposition that the state of

incorporation exclusively controls residence, and doing so would contravene the

authority cited supra. At most, Wydallis and National Integrity establish that

incorporation in New York is a sufficient, but not exclusive, basis for residency.

Countrywide’s reliance on American Lumbermens Mutual Casualty Co. of

Illinois. v. Cochrane, 129 N.Y.S.2d 489 (N.Y. Sup. Ct. N.Y. Cty. 1954), aff’d

without opinion, 284 A.D. 884 (1st Dep’t 1954), aff’d without opinion, 309 N.Y.

1017 (1956), is also misplaced. Far from being “seminal,” Supp. Mem. 3,

Lumbermens was a trial court decision affirmed without opinion, and thus has little

precedential value. See Adrico Realty Corp. v. City of New York, 250 N.Y. 29, 44

(1928) (“[a]ffirmance . . . without opinion does not mean that we have adopted the

opinion of the court below in its entirety”); Kahn v. Trans World Airlines, Inc., 82

A.D.2d 696, 701 (2d Dep’t 1981) (affirmance without opinion “sheds little, if any,

light upon whether [a] line of reasoning was ultimately adopted.”).

The trial court, moreover, did not even discuss whether the plaintiff had a

principal place of business in New York, and relied instead on the fact that the

plaintiff was a corporation “qualified to do business in the State of New York” and

“maintain[ed] an office in the City of New York.” Am. Lumbermens, 129 N.Y.S.2d

at 490. While Countrywide cites the dissenting opinion in the Appellate Division

(despite no affirming opinion) to suggest that the plaintiff had a principal office in

New York, see Supp. Mem. 3–4 n.1, the dissent’s characterization conflicts with the


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trial court findings and, of course, is not controlling.12 Subsequent cases addressing

Lumbermens have recognized as much. See Forman 635 Joint Venture, 1996 WL

507317, at *3–4 (stating that plaintiff in Lumbermens “did not claim that its

principal place of business was in New York,” and thus Lumbermens did not make

law regarding principal places of business); Allegaert, 480 F. Supp. at 820 n.8

(stating that the trial court’s opinion in Lumbermens “is clear that plaintiff

maintained only an office in New York, and there is no reason to assume that the

majority in the Appellate Division found anything to the contrary”). Although

Countrywide relies on language in Lumbermens that the state of incorporation

governs residency for “most” purposes, see Supp. Mem. 3, a long line of cases either

has construed such language as dicta or recognized that the case has been

superseded by “more recent[]” authority.13

Finally, Countrywide erroneously relies on Verizon Directories Corp. v.

Continuum Health Partners, 2009 WL 1116113 (N.Y. Sup. Ct. N.Y. Cty. Apr. 21,

2009), aff’d, 74 A.D.3d 416 (1st Dep’t 2010), in which the trial court ruled, and the

Appellate Division affirmed in a one-paragraph decision, that a corporation

incorporated in Delaware—with its principal place of business in Texas—was not a

New York resident. Id. at *3 n.1, *3–4. Verizon, like Lumbermens, stands at most

for the narrow proposition that a corporation that lacks a New York principal place

12 Am. Lumbermens, 129 N.Y.S.2d at 490. Lumbermens’ principal place of

business appears to have been Illinois. See Koster v. (Am.) Lumbermens Mut. Cas. Co., 330 U.S. 518, 520 (1947) (American Lumbermens company has its “home and principal place of business . . . in Illinois.”) (emphasis added).

13 Forman 635 Joint Venture, 1996 WL 507317, at *4; see also Pereira, 2001 WL 243537, at *18 (“as other district courts have recognized, Lumbermens’ actual holding was narrower than [its] language suggests”); McMahan & Co., 727 F. Supp. at 834 (declining to follow Lumbermens because it is “of questionable validity”) (citing 1 Weinstein et al (Bender), N.Y. CIV. PRAC. § 202.03 n.35 (1989) (“After Antone, the existence of a principal office in New York should result in a finding of residence under CPLR § 202”)); Allegaert, 480 F. Supp. at 820 (Lumbermens at most “stands for the proposition that a foreign corporation cannot take advantage of the borrowing statute simply because it is qualified to do business in New York and maintains an office [though not a principal place of business] in the state”); Bender, CPLR P 202.03 (“The validity of [Lumbermens] may be questionable after [Antone]”).


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of business is not a resident merely because it is licensed to, and transacts, business

there. Since the New York Plaintiffs all have principal places of business in New

York, this holding is inapposite. In short, nothing in Countrywide’s submission

refutes that the New York Plaintiffs are residents of New York and thus subject to

its statutes of limitation.

B. All Plaintiffs’ Claims Accrued in New York and Are Subject To New York’s Statutes Of Limitation

Countrywide’s motion should be denied for a second, independently

sufficient reason: Under C.P.L.R. § 202, claims that “accrue” in New York are

subject to New York’s statutes of limitations, regardless of residency.

Claims Accrue In The Place Of Injury. As this Court recognized in Allstate

Insurance Co. v. Countrywide Financial Corp., under C.P.L.R. § 202, a cause of

action “accrues where the injury is sustained rather than where the defendant

committed the wrongful acts.” __ F. Supp. 2d __, 2011 WL 5067128, at *8 (C.D.

Cal. Oct. 21, 2011) (internal quotation marks omitted). New York case law is

unequivocal. The Court of Appeals held in Global Financial that a cause of action

accrues at “the time when, and the place where, the plaintiff first had the right to

bring the cause of action.” 93 N.Y.2d at 528; see also In re Estate of McLaughlin,

78 A.D.3d 1304, 1306 (3d Dep’t 2010) (“Generally, a cause of action accrues at the

place of the injury”); Ackerman v. Price Waterhouse, 252 A.D.2d 179, 196 (1st

Dep’t 1998) (“Most courts that have addressed this issue have applied a ‘place of

injury’ test in determining where a cause of action has accrued for purposes of the

borrowing statute.”).

New York courts have engaged in a fact-specific inquiry to ascertain where a

plaintiff “more acutely sustained the impact of its loss.” Global Fin., 93 N.Y.2d at

530. Although the place of residence is ordinarily the situs of the injury, see id.,

courts have rejected a rigid formula, emphasizing that “no cases hold that the

residency of the plaintiff always determines where a cause of action accrued,”


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Maiden v. Biehl, 582 F. Supp. 1209, 1217 (S.D.N.Y. 1984); see also Glick v. Berk &

Michaels, P.C., 1991 WL 152614, at *5 (S.D.N.Y. Jul. 26, 1991) (“The courts do

not mechanistically look to a plaintiff’s residence to determine the appropriate

statute of limitations”). Rather, “the question of accrual is clearly one of fact.”

Allen v. Handszer, 148 Misc.2d 334, 344 (N.Y. Sup. Ct. N.Y. Cty. 1990); see also

Bender, CPLR P 202.04 (“[W]hen the cause of action is for economic harm,

determination of the place of injury is not so automatic.”).

In financial fraud cases, a fact-specific inquiry is particularly appropriate

since courts must examine “where and how the plaintiff paid for the securities,

where plaintiff maintained accounts which reflected the loss, and where the

securities were actually handled.” Epstein v. Haas Sec. Corp., 731 F. Supp. 1166,

1178 (S.D.N.Y. 1990); see also Grosser v. Commodity Exch., Inc., 639 F. Supp.

1293, 1300 (S.D.N.Y. 1986) (“[T]he plaintiff’s residence need not necessarily be the

situs of the economic impact of the fraud, and the court can properly consider all

relevant factors in determining where the loss is felt.”) (quoting Lang v. Paine,

Webber, Jackson & Curtis, Inc., 582 F. Supp. 1421, 1425 (S.D.N.Y. 1984)).

All The Claims Accrued In New York. Under this fact-specific inquiry, all

of Plaintiffs’ claims accrued in New York. As the Complaint alleges, and must be

presumed as true, all 22 Plaintiffs purposefully created and managed the

investments at issue from a separate financial base in New York, and thus incurred

their losses in New York. Plaintiffs purposefully consolidated billions of dollars of

RMBS investments under the management of AIG Investments personnel in New

York. The RMBS were purchased from separate New York-based investment

accounts. AIG subsidiaries maintained billions of dollars in New York accounts for

investing. These New York funds were managed by New York-based portfolio

managers, who conducted due diligence in New York, and made investment

decisions in New York. See Compl. ¶ 103. The hundreds of RMBS investments at

issue were all made in New York. See id. ¶ 102.


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On analogous facts, courts have held that accrual of claims takes place where

the loss occurred, irrespective of residency or domicile. In Lang v. Paine, Webber,

Jackson & Curtis, 582 F. Supp. 1421 (S.D.N.Y. 1984), the plaintiff asserted

securities fraud and breach of fiduciary duty claims in New York in connection with

a brokerage account he maintained in Massachusetts. See id. at 1422, 1426. The

plaintiff funded the account with monies from Canada, and all trades were placed

through the plaintiff’s Massachusetts investment advisor. See id. at 1426.

Because the Lang plaintiff “intentionally maintained [a] separate financial base in

Massachusetts,” Global Fin., 93 N.Y.2d at 530, he sustained injury, and accrued

claims, in Massachusetts. Lang, 582 F. Supp. at 1426.14

And while the Court of Appeals in Global Financial did not have to reach the

question of where the plaintiffs’ claims accrued since they were untimely under any

of the possible laws, the Court of Appeals elucidated C.P.L.R. § 202’s place-of-

injury test by favorably citing Lang. See Global Fin., 93 N.Y.2d at 530

(summarizing Lang: “Canadian plaintiff intentionally maintained separate financial

base in Massachusetts; under the circumstances, injury of losing Massachusetts

funds was felt in Massachusetts, not Canada.”).

14 Recently, in Intellivision v. Microsoft Corp., 784 F. Supp. 2d 356, 358

(S.D.N.Y. 2011), a district court reaffirmed this place-of-injury analysis. There, three individual partners in an unincorporated partnership alleged that Microsoft made fraudulent or negligent misrepresentations that induced them to enter into an agreement. See id. The partnership’s principal place of business was in Connecticut but the partners resided in three separate states. See id. at 369–70. The court rejected the plaintiffs’ argument that their causes of action accrued in their separate states of residence, ruling that the claims accrued in Connecticut, “the base of their business dealings.” Id. at 370. Likewise, in Maiden, a case involving securities fraud, a Trust accrued injury in New York for purposes of C.P.L.R. § 202 because “[t]he corpus of the trust diminished as a result of the investment [in New York],” the investment decisions were made in New York, and the securities were physically kept in New York. 582 F. Supp. at 1218. Cf, Martin v. Dierck Equip. Co., 43 N.Y.2d 583, 591 (1978) (negligence and warranty claims of a D.C. resident injured while operating a forklift in Virginia accrued in Virginia even though the forklift manufacturer, distributor and forklift sale were in New York as “[p]laintiff possessed no cause of action, in tort or in contract, anywhere in the world until he was injured in Virginia.”).


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These decisions compel the conclusion that Plaintiffs’ claims accrued in New

York, their RMBS investment base. The reasoning in Countrywide’s prior briefing

in this MDL concedes as much. In a motion to dismiss filed in Sealink Funding

Ltd. v. Countrywide Financial Corp., No. 2:11-cv-08896-MRP (MANx) (C.D. Cal.

Dec. 7, 2011) (doc. no. 37) (consolidated with Nat’l Integrity, 2012 WL 1097244

(C.D. Cal. Mar. 9, 2012)), Countrywide itself relied on Lang, Intellivision, and

Epstein—the very cases that Plaintiffs cite.

Alternatively, even if the Court were to conclude that all the Plaintiffs who set

up a financial base in New York did not suffer injury there, then the Court can only

plausibly find that Plaintiffs suffered the injury in their principal places of business,

not their states of incorporation. See Brinckerhoff, 263 A.D.2d at 353 (plaintiff felt

damages where its principal place of business was located); Prefabco, Inc. v. Olin

Corp., 71 A.D.2d 587, 588 (1st Dep’t 1979) (for purposes of borrowing statute,

injury accrued where plaintiff resided, which was “more properly viewed as the

place of plaintiff’s office”).15 As noted above, see supra at 8-9, Plaintiffs are

significantly more active in the states in which they maintain their principal places

of business than their states of incorporation. Accordingly, New York’s limitations

period must apply regardless of whether the Court looks at the location of their

RMBS investment base or their principal place of business.16 In addition to the

eight Plaintiffs in dispute that have their principal place of business in New York,

the other Plaintiffs have principal places of business in Arizona, California,

Tennessee and Texas. If the Court does not find that all these Plaintiffs’ injuries

were felt in New York, it must find that they were incurred in their respective

principal places of business, as set forth below.

15 See also cases discussed above at footnote 11.16 Factual disputes preclude a contrary holding at this stage. See Allen, 148

Misc.2d at 344 (noting that accrual is a factual inquiry usually “preserved for a jury.”); Antone, 64 N.Y.2d at 30 (determination of residency is “one of fact”).


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II. PLAINTIFFS’ COMMON LAW CLAIMS ARE TIMELY EVEN IF THE COURT APPLIES OTHER STATES’ LIMITATIONS PERIODSPlaintiffs’ claims also are timely under the statutes of limitations of Texas,

Arizona, California, Tennessee, Delaware, and Illinois, where certain Plaintiffs

either have their principal places of business or are incorporated. See Compl. ¶¶

27–50; Supp. Mem. 2. 17 The statutes of limitations in each of these states

incorporate the traditional “inquiry notice” standard—meaning that the limitations

period does not begin to run until “the plaintiff has information which would put a

reasonable person on inquiry” that “the injury was caused by wrongdoing.”

Stichting Pensioenfonds ABP v. Countrywide Fin. Corp., 802 F. Supp. 2d 1125,

1140 (C.D. Cal. 2011) (internal quotation marks omitted).18 As the Court has

recognized, “[t]he Ninth Circuit has held that, “‘[t]he question of what a reasonably

prudent investor should have known is particularly suited to a jury determination’

and that ‘the defendant bears a considerable burden in demonstrating, at the

summary judgment stage, that the plaintiff’s claim is time barred. It follows that

the burden is even higher at the pleading stage.’” Id. at 1136 (internal citations

omitted). Although the Court recognized that a court may dismiss a claim based on

facts in the public record, it may only do so where the “documents referred to [in the

Complaint and] public press reports yield no other plausible inference” than that

dismissal is appropriate. Id.

17 Seventeen Plaintiffs either have their principal place of business or state of

incorporation outside New York. Ex. B; Supp. Mem. 2. Countrywide has not moved to dismiss the claims by four plaintiffs incorporated in New York or by the American International Group Retirement Plan, which is administered in New York. Countrywide seeks dismissal of the claims of Lexington Insurance Company only under Delaware law, where it is incorporated, but not under Massachusetts law, where it has its principal place of business.

18 Accord Little v. Smith, 943 S.W.2d 414, 420 (Tex. 1997); Mister Donut of Am., Inc. v. Harris, 723 P.2d 670, 672 (Ariz. 1986); City State Bank v. Dean Witter Reynolds, Inc., 948 S.W.2d 729, 735 (Tenn. Ct. App. 1996); Williams v. Beltz, 107 A. 298, 300 (Del. 1919); Putnam Bank v. Countrywide Fin. Corp., No. 2:11-cv-04698-MRP (MANx), slip op. at 18-19 (C.D. Cal. Mar. 9, 2012) (Illinois Securities Law statute of limitations requires “actual notice” of facts which “in the exercise of reasonable diligence would lead to actual knowledge of the alleged violation”).


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For Plaintiffs’ Texas claims to be timely, inquiry notice must be lacking

before January 15, 2007 for claims covered by the Agreement and August 8, 2007

for claims not covered by the Agreement. With respect to Arizona, California,

Delaware, Illinois and Tennessee law, the relevant threshold date is January 15,

2008 for claims covered by the Agreement. In the four times this Court has

addressed threshold dates in Countrywide RMBS claims, it has not held that RMBS

investors had inquiry notice as of even the latest of those threshold dates. Nor do

the materials submitted by Countrywide support a finding of inquiry notice. See

infra at II.B. Thus, irrespective of whether the Court borrows the statutes of

limitation of Plaintiffs’ non-New York principal places of business or states of

incorporation, virtually all of Plaintiffs’ claims are timely.

A. Fraud Claims Subject To Texas’s Four-Year Statutes of Limitation Are Timely19

The Claims Are Governed By An Inquiry Notice Standard. There is no

dispute that Texas applies a four-year statute of limitations to fraud claims. 20

Countrywide, however, erroneously asserts that the statute of limitations begins to

run from the date of the RMBS sale when the alleged wrongdoing occurred. See

Supp. Mem. 10 (framing the legal injury as “the moment at which any of the alleged

misstatements, if proven, would become actionable.”). In so arguing, Countrywide

ignores blackletter law establishing that the statute of limitations for fraud claims

does not begin to run until inquiry notice; that is, when plaintiffs “knew or should

have known of facts that in the exercise of reasonable diligence would have led to

the discovery of the wrongful act.” Little, 943 S.W.2d at 420.

19 American General Life Insurance Company, The Variable Annuity Life

Insurance Company, and Western National Life Insurance Company are incorporated and have their principal place of business in Texas. American General Assurance Company and American General Life Insurance Company of Delawarehave their principal place of business in Texas but are incorporated elsewhere. Ex. B.

20 Mot. 14–15; Supp. Mem. 10–12; see also TEX. CIV. PRAC. & REM. CODE ANN.§ 16.004(a)(4). Countrywide concedes that all RMBS purchases made by the Texas plaintiffs in 2007 are timely. Mot. 17 & Ex. D-7; Supp. Mem. 12 n.7 & Rev. Ex. D-10.


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At least since the 1800s, Texas courts have tolled the statute of limitations for

fraud claims until the plaintiff had inquiry notice. See Cooper v. Lee, 75 Tex. 114,

121–22 (1889) (affirming the “well-established rule in this state that fraud will

prevent the running of the statute of limitations until it is discovered, or until, by the

use of reasonable diligence, it might have been discovered.”); see also Port Arthur

Rice Milling Co. v. Beaumont Rice Mills, 143 S.W. 926, 926 (Tex. 1912) (“[I]t is a

definitely and well settled rule in this state that fraud prevents the running of the

statute of limitation until it is discovered, or until, by the use of reasonable

diligence, it might have been discovered”); Ruebeck v. Hunt, 176 S.W.2d 738, 739

(Tex. 1944) (restating the “knew or should have known” standard for fraud claims

and clarifying that “[k]nowledge of facts that would cause a reasonably prudent

person to make inquiry, which if pursued would lead to a discovery of fraud, is in

law equivalent to knowledge of the fraud”).

Modern courts in Texas have faithfully applied the same standard to fraud

claims. See, e.g., Samson Lone Star, Ltd. Partnership v. Hooks, 2012 WL 691584,

at *14 (Tex. App. Mar. 1, 2012) (applying an inquiry notice standard to fraud

claim); Polk Terrace, Inc. v. Curtis, 422 S.W.2d 603, 605 (Tex. Civ. App. 1967)

(“the statute of limitation begins to run from the time the fraud is discovered, [o]r

could have been discovered by the defrauded party by the exercise of reasonable

diligence.”) (citation omitted); Stewart v. Johnson, 2007 WL 1345372, at *3 (Tex.

App. May 8, 2007) (same); Anderson v. Cocheau, 176 S.W.3d 685, 690 (Tex. App.

2005) (same); Superior Laminate & Supply, Inc. v. Formica Corp., 93 S.W.3d 445,

447 (Tex. App. 2002) (same).

Countrywide mistakenly ignores this well-established standard, and argues

instead that accrual of Plaintiffs’ claims is not deferred unless Plaintiffs can show

that “the injury is ‘inherently undiscoverable’ and the evidence of injury is

‘objectively verifiable.’” Supp. Mem. 11; Mot. 15–16. But this assertion mixes

apples and oranges. While this “inherently undiscoverable/objectively verifiable”


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requirement is applicable to certain categories of claims, it does not apply to causes

of action based on fraud, which are governed solely by inquiry notice.

Countrywide’s conflation of these two distinct bases for extending the limitations

period is improper.

A pair of Texas Supreme Court decisions issued the same year, Computer

Assoc. Int’l Inc. v. Altai, Inc., 918 S.W.2d 453, 455 (Tex. 1996), and S.V. v. R.V.,

933 S.W.2d 1 (Tex. 1996), underscore Countrywide’s confusion regarding the

applicable legal standards—a confusion mirrored by some lower courts which the

Supreme Court sought to correct. See S.V., 933 S.W.2d at 5–6 (noting that “[t]he

justifications we have offered for deferring accrual have been diverse, somewhat

inconsistent, and often overly broad.”).

In Altai, the Supreme Court recognized two exceptions to the general rule that

a cause of action accrues, and the statute of limitations begins to run, at the time of

legal injury. First, with respect to fraud-based causes of action—the claims at issue

here—the Supreme Court affirmed the aforementioned principle that a plaintiff

asserting a fraud claim is given “the benefit of deferring the cause of action until the

claimant discovered or should have discovered the fraud.” 918 S.W.2d at 455

(citing Ruebeck, 176 S.W.2d at 739). Claims based on fraudulent concealment are

likewise subject to an inquiry notice standard: “We have also permitted claimants to

receive the benefit of deferring the accrual of a cause of action in cases where the

facts forming the basis of an injury were concealed.” Id. ((citing Estate of

Stonecipher v. Estate of Butts, 591 S.W.2d 806, 809 (Tex. 1979); Owen v. King, 111

S.W.2d 695, 697 (Tex. 1938)). Both fraud and fraudulent concealment claims

warrant deferred accrual of the causes of action because “‘fraud vitiates whatever it

touches,’” Altai, at 455–56, and thus, the statute of limitations should only “‘begin

to run from the time the fraud is discovered or could have been discovered by the

defrauded party by exercise of reasonable diligence.’” Id. at 456 (quoting Estate of

Stonecipher, 591 S.W.2d at 809); accord S.V., 933 S.W.2d at 6 (“Fraud, . . . in and


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of itself prevents running the statute of limitations . . . as does fraudulent

concealment.”) (emphasis added).

Distinct from this fraud-based exception to the legal injury rule, accrual of a

cause of action is deferred in “certain limited circumstances” entirely “[u]nrelated

to fraud or concealment . . . where the nature of the injury incurred is inherently

undiscoverable and the evidence of injury is objectively verifiable.” Altai, 918

S.W.2d at 455. In other words, accrual is deferred precisely because “it is difficult

for the injured party to learn of the negligent act or omission.’’’ Id. (citation

omitted); accord S.V., 933 S.W.2d at 5–6 (detailing non-fraud examples where “the

alleged wrongful act and resulting injury were inherently undiscoverable at the time

they occurred but may be objectively verifiable.”).

In short, as these decisions make clear, the “inherently

unknowable/objectively verifiable” test is separate and apart from the inquiry notice

standard applicable to fraud-based claims. 21 See Altai, 918 S.W.2d at 456

21 Plaintiffs satisfy this standard in any event. The mere availability of public

information relating to a plaintiff’s claim does not prevent the claim from being “inherently undiscoverable.” See Kelley v. Rinkle, 532 S.W.2d 947, 949 (Tex. 1976) (false credit report not discoverable until credit denied). BP Am. Prod. Co. v. Marshall, 342 S.W.3d 59, 66 (Tex. 2011), did not rule otherwise, but instead relied on prior Texas Supreme Court cases holding that the landowners at issue had a heightened duty to search public records affecting their interests in land. Countrywide, moreover, cites no authority holding that RMBS investors had a heightened duty, or that evidence of the fraud as to Plaintiffs’ RMBS was publicly available. Plaintiffs did not discover the misrepresentations as to its RMBS until it conducted an extensive forensic analysis, which could not be performed until mid-2009 at the earliest. Compl. at ¶¶ 124–126, 129–132, 147–152 (describing analysis). The Court’s characterization of the forensic analysis in Allstate does not apply here. 2011 WL 5067128, at *12. Countrywide’s RMBS offering materialsdid not disclose the specific property addresses or borrower names associated with the loans. Until Plaintiffs’ forensic consultant had developed a complex algorithm to test Countrywide’s representations about the appraised values and owner occupancy status of these properties, Plaintiff had no way to test the representations. Plaintiffs’ forensic consultant had to develop a complex computer algorithm that matched information in one proprietary database (which included basic loan-level information like zip code, origination date, and loan amount on most public RMBS offerings) with information in another proprietary database (which included property record information on almost all of the properties in the United States). Special code also had to be developed to match owner-occupancy data. Because the technology necessary to uncover Countrywide’s misrepresentations was not


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(“Although similar in effect, the discovery rule exception and deferral based on

fraud or concealment exist for different reasons.”); S.V., 933 S.W.2d at 4 (Although

some cases have used the term “discovery rule” “to refer generally to all instances in

which accrual of a cause of action is deferred, including fraud or fraudulent

concealment . . . strictly speaking, the cases in which we have deferred accrual of

causes of action for limitations purposes fall into two categories: those involving

fraud and fraudulent concealment, and all others.”); BP Am. Prod. Co., 342 S.W.3d

at 65 (“We have recognized two doctrines that may apply to extend the statute of

limitations.”); 5-72 Dorsaneo, TEXAS LITIG. GUIDE § 72.03 (see Ex. C) (noting that

although courts sometimes have used the term “discovery rule” in fraud cases, they

are a separate category of cases).

Countrywide’s fraud cases embody these principles. In Exxon Corp. v.

Emerald Oil & Gas Co., L.C., 348 S.W.3d 194 (Tex. 2011), the Texas Supreme

Court applied an inquiry notice standard—not the “inherently

unknowable/objectively verifiable” test—and held that a fraudulent inducement

claim was timely because it was filed within four years of the date the plaintiff had

inquiry notice. See id. at 216 (“The statute of limitations does not begin to run until

the claimant knew or should have known of facts that in the exercise of reasonable

diligence would have led to the discovery of the wrongful act.”) (citing Little, 943

S.W.2d at 420. Val-Com Acquisitions Trust v. Bank of America, N.A., , likewise

recognized that “[a] claim for fraud accrues when the fraud should have been

discovered by reasonable diligence,” and barred the plaintiff’s claim because the

complaint conceded that the fraud had been “apparent on the face of the loan

documents and closing documents.” 2011 WL 4591959, *4 (E.D. Tex. Sept. 30,

2011) (internal quotation marks omitted).

available at the threshold dates, Plaintiffs’ injuries were “inherently undiscoverable.”


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Finally, in BP Am. Prod. Co., 342 S.W.3d at 66, the Texas Supreme Court

declined to defer accrual of fraudulent concealment claims arising from termination

of oil and gas mineral leases, which were brought 20 years after the limitations

period. The court held that industry-specific information in the public record,

including a Railroad Commission report, precluded such claims from being

categorically inherently undiscoverable. See id. (analogizing to accrual of royalty

owners’ claims for underpayments, and claims arising from damage to a common

oil and gas reserve, which can be revealed through public records). For similar

reasons, the court found that public data precluded tolling the limitations period

based on fraudulent concealment. See id. at 68–69.

BP’s holdings are of limited utility, however, because the court expressly

declined to consider whether the kind of general fraud claim at issue here could be

tolled. See id. at 66 n.4. BP is also part of a distinct body of oil and gas case law

in which the Texas Supreme Court has categorically found that claims involving

breaches of such leases are not subject to deferred accrual in light of industry-

specific data revealing the wrong-doing. BP is thus simply a reiteration of prior

holdings in which the Supreme Court determined that the underpayment of royalties

owed to lessors by oil companies lessees were generally discoverable through

documents unique to that industry. 342 S.W.3d at 66. Here, however, this Court

and other courts already have held that generalized news articles and other data

about the mortgage industry were insufficient to place RMBS investors on inquiry

notice of Countrywide’s fraud, see infra at II.B, making BP inapplicable.22 In any

case, “the question as to whether a party has exercised diligence in discovering fraud

is for the jury.” Ruebeck, 176 S.W.2d at 740.

22 For similar reasons, Shell Oil Co. v. Ross, 356 S.W.3d 924 (Tex. 2011), is

inapplicable since, again, the court’s holding turned on the existence of “[r]eadilyaccessible and publicly available information” indicating that Shell was underpaying mineral interest royalties, including large differences the Plaintiffs were paid for the Unit Wells and Lease Wells which “triggered a duty to investigate the royalty payments.” Id. at 928-29.


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Under This Court’s Precedent, The Claims Are Not Time Barred. In

Massachusetts Mutual Life Insurance Co. v. Countrywide Financial Corporation,

this Court rejected inquiry notice to Countrywide RMBS investors as of August 31,

2007.23 2012 WL 1322884 (C.D. Cal. Apr. 16, 2012). There, Countrywide relied

on articles and public documents similar to those they submit here. See id. at *4

However, since both of the relevant threshold dates for Texas claims here (January

15 and August 8, 2007) are before August 31, 2007, the claims are timely under

Mass Mutual.

Countrywide’s Deception Tolled the Statute of Limitations. Plaintiffs’

claims also are timely because Countrywide’s concealment tolled the statute of

limitations. See Vesicol Chem. Corp. v. Winograd, 956 S.W.2d 529, 531 (Tex.

1997) (concealment tolls the limitations period until the fraud is discovered or could

have been discovered with reasonable diligence). On multiple occasions between

2005 and 2007, AIG met with Countrywide employees to conduct due diligence and

discuss their operations. See Compl. ¶ 368. As late as August 3, 2007,

Countrywide gave AIG investment managers “the same false assurances about the

integrity of [Countrywide’s] underwriting practices” as in the Offering Materials.

Id. Plaintiffs relied on these assurances in their investment decisions. See id.

¶ 369. Countrywide’s public statements also misrepresented the credit quality of its

23 No other court has found that investors were on inquiry notice in similar

RMBS cases at any time in 2007. See, e.g., Mass. Mut. Life Ins. Co. v. Residential Funding Co., LLC, 2012 WL 479106, at *11 (D. Mass. Feb. 14, 2012) (no inquiry notice as of May 7, 2007); N.J. Carpenters Vacation Fund v. Royal Bank of Scotland Grp., PLC, 720 F. Supp. 2d 254, 267 (S.D.N.Y. 2010) (no inquiry notice as of May 14, 2007); In re Morgan Stanley Mortg. Pass-Through Certificate Litig., 810 F. Supp. 2d 650, 665 (S.D.N.Y. 2011) (no inquiry notice as of December 2, 2007); Pub. Emps. Ret. Sys. of Miss. v. Merrill Lynch & Co. Inc., 714 F. Supp. 2d 475, 480 (S.D.N.Y. 2010) (no inquiry notice as of December 5, 2007); Pub. Emps. Ret. Sys. of Miss. v. Goldman Sachs Grp., Inc., 2011 WL 135821, at *9 (S.D.N.Y. Jan. 12, 2011) (no inquiry notice as of February 6, 2008); Genesee Cty. Emps. Ret. Sys. v. Thornburg Mortg. Sec. Trust 2006-3, 2011 WL 5840482, at *65 (D.N.M. Nov. 12, 2011) (no inquiry notice as of February 27, 2008); In re Wells Fargo Mortg.-Backed Certificates Litig., 712 F. Supp. 2d 958, 968 (N.D. Cal. 2010) (no inquiry notice as of March 27, 2008); In re IndyMac Mortg.-Backed Sec. Litig., 718 F. Supp. 2d 495, 505 (S.D.N.Y. 2010) (no inquiry notice as of May 14, 2008).


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loans, its compliance with underwriting guidelines, the superiority of its appraisers,

and its contrast with the practices of other lenders, and downplayed potential fraud.

See Ex. E (collecting Countrywide’s statements).24

B. Claims Subject To Arizona’s, California’s, Or Tennessee’s Three-Year Statutes Of Limitations Are Timely25

Arizona, California, and Tennessee have three-year statutes of limitations for

fraud claims.26 These statutes run from inquiry notice,27 and the fact-intensive

determinations of when a fraud claim accrues is reserved for a jury. See Five

Points Hotel P’ship v. Pinsonneault, 2011 WL 6153623, at *6 (D. Ariz. Dec. 12,

2011) (“When discovery occurs and a cause of action accrues are usually and

necessarily questions of fact for the jury.”) (internal quotation marks omitted);

Thomson v. Canyon, 198 Cal. App. 4th 594, 604 (2011) (same); Fite v. Fite, 1999

WL 317102, at *8 (Tenn. Ct. App. May 19, 1999) (same). Because Countrywide

cannot show that Plaintiffs subject to Arizona, California, or Tennessee’s statutes of

limitation (the “Three-Year Plaintiffs”) had inquiry notice by January 15, 2008 (for

the claims covered by the Agreement), its motion should be denied.

24 That AIG was a sophisticated investor does not preclude it from being a fraud victim, particularly given Countrywide’s affirmative representations: “[W]here a plaintiff has gone to the trouble to insist on a written representation that certain facts are true, it will often be justified in accepting that representation rather than making its own inquiry.” DDJ Mgmt., LLC v. Rhone Grp. L.L.C., 15 N.Y.3d 147, 154 (N.Y. 2010); see also MBIA Ins. Co. v. GMAC Mortg. LLC, 30 Misc. 3d 856, 862 (N.Y. Sup. Ct. N.Y. Cty. 2010) (a “sophisticated” insurer could rely on representations and warranties made by RMBS sponsors and underwriters) (citing DDJ Mgmt.).

25 SunAmerica Annuity and Life Assurance Company is incorporated in and has its principal place of business in Arizona. SunAmerica Life Insurance Company isincorporated in Arizona and has its principal place of business in California. American General Life and Accident Insurance Company is incorporated in and has its principal place of business in Tennessee.

26 ARIZ. REV. STAT. § 12-543; CAL. CIV. PROC. CODE § 338(d); TENN. CODE ANN. § 28-3-105. California and Tennessee also apply a three-year statute of limitations to negligent misrepresentation claims. CAL. CIV. PROC. CODE § 338(d); TENN. CODE ANN. § 28-3-105. For the reasons stated herein, the negligent misrepresentation claims of the California and Tennessee plaintiffs covered by the Agreement are timely.

27 See Serrano v. Serrano, 2012 WL 75639, at *3 (Ariz. Ct. App. Jan. 10, 2012); Stichting, 802 F. Supp. 2d at 1140; Ne. Knox Util. Dist. v. Stanfort Constr. Co., 206 S.W.3d 454, 459 (Tenn. Ct. App. 2006) (same); Agristor Leasing v. Saylor, 803 F.2d 1401, 1404 (6th Cir. 1986) (applying Tennessee law).


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Countrywide merely rehashes its contention that public data placed the Three-

Year Plaintiffs on inquiry notice. This Court held in Mass Mutual that the generic

public documents cited by Countrywide did not put investors on inquiry notice by

August 31, 2007. 2012 WL 1322884, at *4. Countrywide has not cited a single

additional article between August 31, 2007 and the January 15, 2008 inquiry notice

date for the Three-Year Plaintiffs’ claims under the Agreement. In any event, the

articles Countrywide does cite only address new no- or low- document mortgage

products, conflicts of interest for appraisers, and the general trend toward riskier

products. See Ex. D (describing articles). Only four even mention Countrywide,

and two of those include reassuring statements by Countrywide. Id. Thus, again,

Countrywide’s inquiry notice argument fails.28

The two complaints Countrywide identifies as filed before January 15,

2008—Luther v. Countrywide and Ark. Teacher Ret. Sys. v. Mozilo—are deficient

since only well-publicized lawsuits can trigger inquiry notice. See Guenther v.

Cooper Life Scis., Inc., 1992 WL 206256, at *6 (N.D. Cal. Apr. 7, 1992)

(information that was not highly publicized could not be attributed to plaintiffs at

pleading stage); Sperber Adams Assoc. v. JEM Mgmt. Assoc. Corp., 1992 WL

138344, at *3 (S.D.N.Y. June 4, 1992) (prior lawsuit that was not widely publicized

did not trigger inquiry notice). Countrywide has not cited a single article

mentioning these suits before the January 15, 2008 threshold date.29 Countrywide,

28 See Littlefield v. Tilley, 2006 WL 2585048, at *4 (M.D. Tenn. Sept. 7, 2006)

(under Tennessee law, questions of fact precluded dismissal of fraud claim as untimely despite a TV news broadcast and an “extensive” government investigation); In re Wells Fargo Mortg.-Backed Certificates Litig., 712 F. Supp. 2d at 967 (news articles giving rise to “competing inferences” insufficient to trigger inquiry notice); see also Morgan Stanley, 810 F. Supp. at 665 (news articles unconnected to defendant too general to trigger inquiry notice); N.J. Carpenters Vacation Fund, 720 F. Supp. 2d at 267 (news articles and documents unconnected to trusts or loan pools underlying RMBS too general to trigger inquiry notice); Mass Mut. Life Ins. Co. v. Residential Funding Co., LLC, 2012 WL 479106, at *10 (articles and documents unconnected to specific allegations too general to trigger inquiry notice).

29 Counsel ran searches in the ALLNEWS and ALLNWS databases of Westlaw and Lexis (which include over 11,000 and 5,000 publications, respectively) and


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moreover, failed to disclose either lawsuit in its 2007 Form 10-K, filed February 29,

2008, or any Form 8-K, but instead waited until its Form 10-Q, dated August 11,

2008. If these lawsuits were not material enough to timely include in

Countrywide’s public filings, they can hardly warn investors of fraud.

This Court’s prior decisions in four cases considering when purchasers of

Countrywide’s RMBS had inquiry notice also justify denial of Countrywide’s

motion as to the Three-Year Plaintiffs. In Stichting, this Court found that RMBS

investors had inquiry notice of Countrywide’s fraud as of the February 14, 2008

threshold date in that case—not by “late 2007,” as Countrywide asserts. Mot. 5.

See Stichting, 802 F. Supp. 2d at 1140; accord Putnam No., 2:11-cv-04698 at 18

(reiterating that “the Court has held that Countrywide RMBS plaintiffs were on

inquiry notice by February 14, 2008.”) (Mar. 9, 2012); Allstate, at *13 (reiterating

its Stichting ruling that “an RMBS plaintiff had notice of potential claims against

Countrywide by February 14, 2008.”)

In Allstate, in which the threshold date was December 27, 2007, this Court

declined to hold as a matter of law that RMBS investors had inquiry notice. Noting

a “critical” distinction between Allstate and Stichting, this Court stated that:

[T]he period between December 27, 2007 and February 14, 2008 was an important time in the Countrywide saga. Bank of America announced its acquisition of Countrywide on January 11, 2008. That acquisition was for a substantial discount from book price and may itself have served as a warning regarding Countrywide’s core business operations. At the same time . . . Countrywide continued to be covered in the press, the New York City Employees Retirement Systemplaintiffs filed their complaint, and various Countrywide suits were consolidated before this Court.

2011 WL 5067128, at *14; see also Mass Mutual, 2012 WL 1322884, at *4 (“In

[Allstate], the Court found that December 27, 2007 was too early to start the clock

running without discovery”); Putnam at 18 (“[I]t was not clear that Allstate was on

found no articles referencing either lawsuit before the spring of 2008. The same searches were run on Argent v. Countrywide—included in Countrywide’s RJN but not in its brief—with the same result.


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inquiry notice by December 27, 2007”). This Court in Putnam extended Allstate’s

holding, finding that the plaintiff was not on notice of the claims on March 22, 2008

under the Illinois Securities Law standard. And in Mass Mutual, the Court declined

to hold, “based solely on the FAC and judicially noticeable documents,” that “by

August 31, 2007 a reasonably diligent investor” was on inquiry notice. Id.

Taken together, these holdings clearly do not support Countrywide’s claim

that the Three-Year Plaintiffs had inquiry notice as a matter of law by January 15,

2008. Countrywide’s assertion that the Court should abandon these rulings is

incompatible with its argument that Plaintiffs’ claims are largely indistinguishable

from Stichting and Allstate. See Mot. 4–5; Def. Ex. B. Notably, the January 15,

2008 threshold date is after the August 31, 2007 and December 27, 2007 threshold

dates that the Court found insufficient in Mass Mutual and Allstate and is before the

February 14, 2008 inquiry notice date the Court upheld in Stichting. Thus, none of

these cases establish inquiry notice as of January 15, 2008.

Furthermore, the factors the Court found relevant to finding inquiry notice as

of February 14, 2008 rebut a finding of inquiry notice here. The public fall-out

from Bank of America’s acquisition of Countrywide, the consolidation of various

cases before this Court, and the filing of the New York City Employees Retirement

Plan complaint, No. 2:08-cv-00492 (C.D. Cal. 2008) (doc. no. 1) all occurred after

January 15, 2008. Bank of America’s acquisition of Countrywide was announced

on January 11, 2008—only four days before the threshold date, and at a minimum,

raises complex factual issues as to how a reasonable investor would have responded

and whether the acquisition established the requisite “link” that “something material

was amiss with the Offering Documents for the particular tranches” Plaintiffs

purchased. Mass Mutual, 2012 WL 1322884, at *4; see Ex. F.

Moreover, the press surrounding the Countrywide acquisition sent reassuring

messages to investors. For example, on January 11, 2008, Bank of America’s CFO

touted both the benefits of the Countrywide acquisition and its confidence in its


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extensive diligence of Countrywide, thereby reassuring the market that

Countrywide, and its securities, were sound: “the due diligence on this deal was

extensive. We had more than 60 people on the ground for the better part of the last

30 days, with more focus picking up through the holidays. The focus of the due

diligence, as you would expect, was on the mortgage servicing rights, credit, and

legal, as well as accounting and operational areas.” Ex. F at 1.30

Finally, Countrywide fails to show how any Plaintiffs were on inquiry notice

of wrongful injury before January 15, 2008. Under the Arizona, California, and

Tennessee inquiry notice standards, plaintiffs must have notice of facts showing not

only that a wrongful act was committed, but that the plaintiff was injured by the

wrongful act of another. See Stichting, 802 F. Supp. 2d at 1140 (“The courts

interpret discovery in this context to mean . . . when the plaintiff suspected or should

have suspected that an injury was caused by wrongdoing.”) (internal quotation

marks omitted); Gust, Rosenfeld & Henderson v. Prudential Ins. Co. of Am., 182

Ariz. 586, 589 (1995) (same); Styles v. Blackwood, 2008 WL 5396804, at *5 (Tenn.

Ct. App. Dec. 29, 2008) (same). For these reasons, in Mass Mutual, the Court

found unproven “the link that a reasonable investor would have needed to make in

order to know that something material was amiss with the Offering Documents for

the particular tranches that are at issue in this case.” Mass Mutual 2012 Wl

1322884, at *4. No such link is present here either.

The AIG earnings call and presentation Countrywide cites shows that at least

through January 15, 2008, AIG believed Countrywide’s AAA-rated RMBS would

not suffer losses in the long-term, and that the declines were due to market

conditions, not fraud. See Def. RJN Ex. 1, at 12, 16; see also Ex. G (collecting

AIG statements). For example, on a November 8, 2007 investor call, Bob Lewis,

30 For the reasons stated above, see supra at II.A, Countrywide’s fraudulent

concealment also tolled the limitations periods in Arizona, California, and Tennessee.


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AIG’s chief risk officer, stated that “AIG views much of the recent pricing

developments as more a result of market turmoil than indicating fundamental and

permanent deterioration in the credit characteristics of our holdings.” Def. RJN Ex.

1, at 12, 16. Although AIG marked down its RMBS portfolio pursuant to

accounting policy, AIG believed “the structural protections in our RMBS holdings

will result in full recovery on the vast majority of our holdings even in the severe

housing downturn.” Id.

Likewise, on a December 5, 2007 investor call, Mr. Richard Scott, head of the

division at AIG Investments that managed the RMBS portfolios, reiterated AIG’s

belief that “[AIG’s] RMBS portfolio is reasonably well positioned to withstand even

a severe downturn in the U.S. [h]ousing market” due to “the subordination level

[AIG] bought.” Id. at 4. Mr. Scott indicated that the “housing market goes

through cycles,” and therefore AIG bought RMBS with a “level of subordination

that was multiples of what had been experienced in the last recent downturn.” Id.

Plaintiffs thus believed their investment in senior tranches, based on the credit

characteristics of the underlying loans Countrywide stated, would protect them from

market turmoil.

Similarly, market data on AIG’s RMBS portfolio did not trigger inquiry

notice. The first time Countrywide failed to make a monthly interest payment was

in July 2008, almost six months after the January 15, 2008 threshold date. See Ex.

H. The first write-down31 of these securities was in May 2009, almost 14 months

after this threshold date. See Ex. I. Because Countrywide cannot establish that

Plaintiffs had inquiry notice before January 15, 2008, its motion fails.32

31 A write-down occurs when the RMBS trustee determines that the value of the

collateral supporting the RMBS is no longer sufficient to cover the value of the securities in a particular tranche.

32 Merck & Co. v. Reynolds, __ U.S. __, 130 S. Ct. 1784 (2010), if extended to claims covered by the common law of any of the relevant states, provides an additional basis to find Plaintiffs’ claims timely. In Merck, the Supreme Court held that the limitations period does not begin to run until “a reasonably diligent plaintiff would have discovered ‘the facts constituting the violation,’ including scienter—


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C. Claims Subject To Delaware’s Three-Year Statutes Of Limitation Are Timely33

Delaware has a three-year statute of limitations for fraud and negligent

misrepresentation. See DEL. CODE ANN. § 8106; Puig v. Seminole Night Club,

LLC, 2011 WL 3275948, at *4 (Del. Ch. July 29, 2011). Contrary to

Countrywide’s assertions, see Supp. Mem. 6, Delaware law has a traditional inquiry

notice standard for fraud, fraudulent concealment, or where the injury is inherently

unknowable. Delaware courts thus routinely toll the statute of limitations until a

plaintiff discovers facts “constituting the basis of the cause of action or the existence

of facts sufficient to put a person of ordinary intelligence and prudence on inquiry

which, if pursued, would lead to the discovery of such facts.” Coleman v.

PricewaterhouseCoopers, 854 A.2d 838, 842 (Del. 2004) (internal quotation marks

omitted). Application of this tolling doctrine is necessarily fact-intensive and

generally not suitable for resolution at the pleading stage. See id.; Petroplast

Petrofisa Plasticos S.A. v. Ameron Intern. Corp., 2011 WL 2623991, at *16 (Del.

Ch. Jul. 1, 2011). Under this standard, the claims are timely.

Plaintiffs’ Claims Are Tolled Until Inquiry Notice Because They Allege

Fraud. Delaware applies an inquiry notice standard when a plaintiff alleges fraud.

In 1919, the Delaware Supreme Court in Williams v. Beltz considered a case

analogous to this one, where the plaintiff alleged fraud in a stock purchase. The

court held that “the statute does not begin to run until the fraud has been discovered,

or, perhaps, should have been discovered.” 107 A. 298, 300 (Del. 1919). The

court also recognized that questions concerning “the time of discovery of the fraud”

irrespective of whether the actual plaintiff undertook a reasonably diligent investigation.” Id. at 1798. The Court held that inquiry notice itself does not trigger the statute of limitations, because even a diligent investigation may not feasibly lead to “facts constituting the violation.” Id. at 1788. Under Merck, Plaintiffs could not have feasibly uncovered facts regarding the misrepresentations as to each RMBS until well after the threshold dates because the forensic tools were not yet available. See supra n.21.

33 American International Group, Inc., AIG Securities Lending Corporation,American General Life Insurance Company of Delaware, Chartis Select Insurance Company, and Lexington Insurance Company are incorporated in Delaware.


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or whether the “plaintiff should, by the exercise of reasonable diligence, have

discovered the fraud earlier” were jury determinations. Id.

More recently, in Envo, Inc. v. Walters, the Delaware Court of Chancery

applied the inquiry notice standard to claims of fraudulent inducement and negligent

misrepresentation, ruling that misstatements made during the execution of an

agreement were sufficient to put the plaintiff “off the trail of inquiry.” 2009 WL

5173807, at *10 (Del. Ch. Dec. 30, 2009); accord Lincoln Nat’l Life Ins. Co. v.

Snyder, 722 F. Supp. 2d 546, 563 (D. Del. 2010) (denying motion to dismiss

because the underlying fraud “alone, if proven, was sufficient to toll the start time of

the statute of limitations” until inquiry notice); Playtex, Inc. v. Columbia Cas., 1993

WL 390469, at *6 (Del. Super. Ct. Sept. 20, 1993) (plaintiffs’ fraud claims took the

plaintiff “off the trail of inquiry” and tolled the statute until inquiry notice).

Although some Delaware decisions discuss tolling in fraud cases under the

doctrine of “fraudulent concealment,” other decisions make clear that the inquiry

notice standard applies to standard allegations of fraud or fraudulent inducement and

that post-transaction acts of concealment are not necessary for tolling. See, e.g.,

Snyder v. Butcher & Co., 1992 WL 240344, at *5 (Del. Super. Ct. Sept. 15, 1992)

(“A primary cause of action for fraud is in itself sufficient to toll the statute of

limitations.”); Smith v. Mattia, 2010 WL 412030, at *5 (Del. Ch. Feb. 1, 2010)

(“[T]he [plaintiffs] pleaded fraudulent inducement with particularity, and the factual

basis for this allegation further supports the fraudulent concealment exception. On

a motion to dismiss, the Court must accept that the Defendants’ allegedly fraudulent

representations not only induced [the defendants], but also concealed the

Defendants’ wrongdoing.”).34 For the reasons set forth above, see supra at II.B,

34 Accord Coleman, 854 A.2d at 842 (recognizing that “concealment or fraud”

tolls statute of limitations); Isaacson, Stolper & Co. v. Artisans’ Sav. Bank, 330 A.2d 130, 132 (Del. 1974) (same); Mastellone v. Argo Oil Corp., 46 Del. 102, 109 (Del. 1951) (listing “certain types of fraud,” as among the exceptions that toll the statute of limitations).


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Countrywide cannot show that Plaintiffs had inquiry notice of Countrywide’s fraud

by January 15, 2008 (for the claims subject to the Agreement).35 Thus, claims

subject to Delaware law are timely.36

The Injuries Were Inherently Unknowable. The claims also are timely

because Plaintiffs’ injuries were inherently unknowable. Countrywide concedes

that Delaware tolls the statute of limitations when an injury is “inherently

unknowable and the claimant is blamelessly ignorant of the wrongful act and the

injury complained of.” Coleman, 854 A.2d at 842; Supp. Mem. 6. Injuries satisfy

this standard when the information necessary to discover the wrong was uniquely

within the defendant’s knowledge, even if the plaintiff was “sophisticated.”

In Wal-Mart Stores Inc., 860 A.2d at 320, the Delaware Supreme Court set a

low threshold for the inherently unknowable standard, holding that Wal-Mart—a

large corporation with significant legal resources—could not be expected to

discover that the IRS would deny the tax-avoidance strategy advocated by insurance

brokers. The court rejected defendants’ contention—similar to Countrywide’s

here—that newspaper articles and government rulings triggered inquiry notice of the

legal risk. See id.

Similarly, in Coleman, the Delaware Supreme Court held that the plaintiffs’

injuries were “inherently unknowable” because, inter alia, the plaintiffs were unable

to acquire by other means the information underlying their accounting malpractice

claim. 854 A.2d at 842. The same is true here where Countrywide had unique

knowledge of its mortgage origination and securitization business that it withheld

from Plaintiffs, including hundreds of thousands of underlying loan files, property

35 As with the aforementioned states, under Delaware law, generalized news

articles are insufficient to put a plaintiff on inquiry notice. See Wal-Mart Stores v. AIG Life Ins. Co., 860 A.2d 312, 320–21 (Del. 2004).

36 Similarly, as indicated above, the Delaware Plaintiffs’ claims are timely because Countrywide fraudulently concealed its misconduct until at least January 15, 2008. See Clarkson v. Goldstein, 2007 WL 914635, at *6 (Del. Super. Ct. Apr. 17, 2007) (tolling statute of limitations where “[d]efendants affirmatively concealed their pattern of fraud and uninterrupted artifice”).


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addresses, home valuations and other data necessary to evaluate Countrywide’s

representations. See supra at n.21; see also Boerger v. Heiman, 965 A.2d 671, 675

(Del. 2009) (claim “inherently unknowable” where plaintiff inquired about a

particular issue and “was assured ‘the whole thing was safe’”); Yencer Builders, Inc.

v. Fabi, 2010 Del. Super. LEXIS 594, at *5–6 (Del. Super. Ct. Oct. 1, 2010) (real

estate buyer’s claim against defendant seller for misrepresentations regarding

property’s suitability tolled until inquiry notice); Pack & Process, Inc. v. Celotex

Corp., 503 A.2d 646, 650–51 (Del. Super. Ct. 1985) (roof defects in plaintiff’s home

were uniquely within knowledge of defendant roof manufacturer, and thus

inherently unknowable).

Likewise, in the context of RMBS fraud, courts have recognized that loan

files and other key information was not available to even sophisticated RMBS

participants. See MBIA Ins. Corp. v. Royal Bank of Can., 28 Misc. 3d 1225(A), at

*40 (N.Y. Sup. Ct. Westchester Cty. 2010) (even if insurer was able to gain access

to the bank’s “crucial loan information,” it would have been only “through

extraordinary effort or great difficulty.”); MBIA Ins. Corp. v. Countrywide Home

Loans, Inc., 27 Misc. 3d 1061, 1077 (N.Y. Sup. Ct. N.Y. Cty. 2010) (noting that

“[a] significant portion of the documents MBIA would have used to verify

Countrywide’s purported misrepresentations would have come from Countrywide”

and thus “to suggest that discovery of the true nature of the securitizations could

have been achieved through reasonable investigation severely oversimplifies a

product that has humbled many financial titans . . . .”). In any case, factual disputes

preclude dismissal. See Island Farm, Inc. v. Master Sidlow & Assocs., P.A., 2007

WL 2758775, at *4 (Del. Super. Ct. Sept. 20, 2007); Wal-Mart, 860 A.2d at 321

(“conflicting inferences of fact” improper to resolve on motion to dismiss).37

37 To the extent New York’s borrowing statute requires application of

Delaware’s pleading requirements, Supp. Mem. 6, Plaintiffs satisfied any such requirement by pleading specific facts concerning their discovery of Countrywide’s


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D. Claims Subject to Illinois’s Three-Year Statute Of Limitations AreTimely38

The Illinois Securities Law (“ISL”) provides a three-year statute of limitations

for the fraud, aiding and abetting fraud, and negligent misrepresentation claims at

issue here. See Allstate, 2011 WL 5067128, at *13; 815 I.L.C.S. 5/13(D) (1997).

Under the ISL, the statute of limitations begins to run when the plaintiff has actual

knowledge of the violation, or has actual notice of facts which, in the exercise of

reasonable diligence, would lead to actual knowledge of the violation. See id.; see

also Putnam, No. 2:11-cv-04698, at 18–19. Because, as explained above,

Countrywide cannot show that Plaintiffs had actual notice of Countrywide’s fraud

by January 15, 2008, Plaintiffs’ claims are timely.39 Further, this Court has already

determined that a Countrywide RMBS investor did not have notice under the ISL as

of March 22, 2008—after the relevant threshold date for claims covered by the

Agreement. Putnam, 2:11-cv-4698, at 20. Regardless, whether a plaintiff had

actual notice is a factual question inappropriate for disposition at the pleading stage.

See Allstate, 2011 WL 5067128, at *13; Putnam, No. 2:11-cv-04698, at 19.40

III. PLAINTIFFS’ 1933 ACT CLAIMS ARE TIMELYCountrywide asserts that AIG’s causes of action under Sections 11, 12, and

15 of the Securities Act of 1933 (the “1933 Act”), 15 U.S.C. § 77a et seq. are

fraud. See Compl. ¶¶ 125 n.1, 350, 368–69 & supra n.22. For the same reason, any such requirement in California, if any, is satisfied. Mot. 18.

38 American General Assurance Company and Chartis Specialty Insurance Company are incorporated in Illinois.

39 All claims by the Plaintiffs incorporated in Illinois are tolled under the Agreement.

40 Because the ISL has a five-year statute of repose, AIG does not argue that the one purchase made by American General Assurance on October 12, 2005 is timely. Given the Court’s February 14, 2008 inquiry notice date, Plaintiffs do not dispute the untimeliness of the claims subject to Pennsylvania’s statutes of limitation, the negligent misrepresentation claims subject to Texas’s and Arizona’s statutes of limitation, or the common law claims not covered by the Agreement and subject to Arizona’s, California’s, Delaware’s, or Tennessee’s statutes of limitation. However, all claims are timely because, as discuss supra, all of the claims accrued in New York and are properly governed by New York’s statutes of limitations.


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untimely. Under American Pipe & Construction Co. v. Utah, 414 U.S. 538 (1974),

however, AIG’s claims were tolled by the Luther, Washington State, and Maine

State class actions.41 Contrary to this Court’s ruling in Maine State, the fact that the

named Plaintiffs lacked standing as to certain securities does not deny AIG the

benefits of tolling. Although this Court stated that it was following “multiple other

courts,”42 the Court’s decision, in fact, conflicts with two courts of appeals and the

vast majority of district courts that have considered the issue.

As the Eleventh Circuit recognized in Griffin v. Singletary, 17 F.3d 356 (11th

Cir. 1994), “putative class members should be entitled to rely on a class action as

long as it is pending” since denying tolling would give “class members uncertain of

the district court’s standing analysis . . . ‘every incentive to file a separate

action’”—”precisely the situation” that Rule 23 was designed to avoid. Id. at 360

(quoting Crown, Cork & Seal Co. v. Parker, 462 U.S. 345, 351 (1983)) (emphasis

added). Likewise, the Third Circuit has held that the “broad tolling principle” of

American Pipe tolls class members’ claims where lead plaintiff is found to lack

standing. Haas v. Pitt. Nat’l Bank, 526 F.2d 1083, 1086 (3d Cir. 1975); see also

McKowan Lowe & Co, Ltd. v. Jasmine, Ltd., 295 F.3d 380, 385–86 (3d Cir. 2002).

Indeed, one district court recently observed after surveying the case law that “[t]he

majority of courts . . . have concluded that [American Pipe] tolling applies to

situations where the district court ultimately determines that the plaintiff lacks

standing.” Genesee Cty. Emp. Ret. Sys., 2011 WL 5840482, at *61 (D.N.M. Nov.

12, 2011). See also In re Morgan Stanley, 810 F. Supp. 2d at 668–69; In re

IndyMac Mortg.-Backed Sec. Litig., 793 F. Supp. 2d 637, 646 (S.D.N.Y. 2011); cf.

41 See Luther v. Countrywide Home Loans Servicing LP, BC380698 (Cal. Super.

Ct. 2007); Washington State Plumbing & Pipefitting Pension Trust v. Countrywide Fin. Corp., BC392571 (Cal. Super. Ct. 2008). Luther and Washington State were consolidated and refiled as Maine State Ret. Sys. v. Countrywide Fin. Corp., No. 10-cv-00302 (C.D. Cal. 2010).

42 See Maine State Ret. Sys. v. Countrywide Fin. Corp., 722 F. Supp. 2d 1157, 1166–67 (C.D. Cal. 2010).


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In re WorldCom Sec. Litig., 496 F.3d 245, 255 (2d Cir. 2007) (tolling is proper

because “the initiation of a class action puts the defendants on notice of the claims

against them”).

In departing from the majority view, this Court cited three district court

decisions that declined to apply American Pipe tolling after misreading the Seventh

Circuit’s decision in Walters v. Edgar, 163 F.3d 430 (7th Cir. 1998). Walters

merely held that a class representative must have standing to represent the class—

not that standing of the named plaintiffs is a prerequisite for tolling. See id. at 435.

Walters neither mentioned American Pipe tolling nor addressed the application of

American Pipe where the named plaintiff lacked standing.

The cases this Court cited mistakenly assumed that Walters “ha[d] decided

the issue” of the applicability of American Pipe tolling in the absence of standing.

Palmer v. Stassinos, 236 F.R.D. 460, 465 (N.D. Cal. 2006). Palmer asserted

without explanation that Walters held “that the filing of a purported class-action

complaint by a plaintiff who lacks standing does not toll the statute of limitations for

those who later seek to intervene as a plaintiff.” Id. Since tolling was never even

discussed in Walters, Palmer is simply incorrect.43 Boilermakers Nat’l Annuity

Trust Fund v. WaMu Mortg. Pass-Through Certificates, Series AR1, 748

F. Supp. 2d 1246, 1259 (W.D. Wash. 2010), also asserted without explanation—

citing only Walters and Palmer—that “[c]ourts since American Pipe have found that

the statute of limitations does not toll for putative class actions whose named

plaintiff lacks standing.” And In re Wells Fargo Mortg.-Backed Certificates Litig.,

2010 WL 4117477, at *4 (N.D. Cal. Oct. 19, 2010), compounded this error, adding

Boilermakers to Walters and Palmer as evidence that “[o]ther district courts have

reached the same conclusion.”

43 Curiously, the Palmer court cited a 1970 pre-American Pipe decision, Hobbs

v. Police Jury of Morehouse Parish, 49 F.R.D. 176 (W.D. La. 1970), that supportsthe view that a filing of a class action suspends the running of the limitations period for the absent class members. See id. at 180–81.


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38

In its recent decision in Putnam, this Court acknowledged that “it may well be

unfair to subsequently bar plaintiffs who reasonably-but-mistakenly relied on [the

original class] plaintiff to represent their interests,” but still denied tolling to the

plaintiffs there on the ground that reliance on Luther was not reasonable because it

was not plausible that the Luther plaintiffs “had purchased every one” of the

Certificates. Putnam, No. 2:11-cv-04698, at 7–8. Respectfully, this Court’s focus

on reliance in Putnam contradicts the Supreme Court’s holding that the statute of

limitations is tolled “even as to asserted class members who were unaware of the

proceedings brought in their interest or who demonstrably did not rely on the

institution of those proceedings.” American Pipe, 414 U.S. at 552. Further, as the

Southern District of New York recognized, when Luther was filed in 2007, it was by

no means clear whether “a reasonable class member could have believed that [a

named plaintiff] had standing to sue on behalf of purchasers from other [MBS]

trusts.” In re Morgan Stanley, 810 F. Supp. 2d at 670. Indeed, this Court itself has

recognized that “it is not necessarily the case that someone who purchased securities

that were . . . issued with different prospectus or pricing supplements, lacks standing

to represent prior purchasers.”44 In re Countrywide Fin. Corp. Sec. Litig., 588 F.

Supp. 2d 1132, 1166 (C.D. Cal. 2008). Plaintiffs’ claims should thus be tolled,

irrespective of the Luther plaintiffs’ standing.45

44 Contrary to Defendants’ assertion (Mot. at 11), AIG adequately pleaded

compliance with the statute of limitations “by virtue of the timely filing of the Luther, Washington State Plumbing . . . . complaints” (Compl. at ¶ 485; see alsoCompl. ¶ 500) (emphasis added). This Court has not questioned the timeliness of the Luther plaintiffs’ pleadings on this matter. See Stichting, 802 F. Supp. 2d at 1131 (holding that tolling may be asserted on the basis of the Luther and Washington State Plumbing class actions if plaintiffs owned the same tranches as the named plaintiffs).

45 This Court’s proper determination that American Pipe applies to the three-year statute of repose requires no revisiting. See Mot. 9 n.8. Because Plaintiffs are treated “as having instituted” their action on the filing date of Luther and Washington State, the filing dates are relevant for measuring both limitations andrepose periods. See Joseph v. Wiles, 223 F.3d 1155, 1168 (10th Cir. 2000)(American Pipe “does not involve ‘tolling’ at all” because the absent class member “has effectively been a party.”).


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39

IV. PLAINTIFFS’ CLAIMS AGAINST BANK OF AMERICA AND MERRILL LYNCH ARE NOT BEFORE THIS COURTAs AIG explained in the Joint Case Management Statement submitted to the

Court on February 8, 2012 (the “CMC Statement”), the Judicial Panel on

Multidistrict Litigation (“JPML”) expressly transferred to this Court AIG’s claims

against Countrywide and remanded claims against Merrill Lynch and Bank of

America to the Southern District of New York. In re: Countrywide Fin. Corp.

Mortg.-Backed Sec. Litig., Transfer Order and Simultaneous Separation and

Remand of Certain Claims, at 2 (J.P.M.L. Jan. 11, 2012). Contrary to the JPML’s

Order, however, Countrywide argues that the case should be divided not by claim,

but by RMBS. See Mot. 4 n.5.

Countrywide’s complicated proposal (see Mot. 4 n.5; CMC Statement at 14)

finds no support in the transfer order, and will result in certain claims against

Countrywide remaining in the Southern District, while certain claims against Bank

of America and Merrill Lynch are litigated here. This will create overlapping

discovery and potentially inconsistent results. See CMC Statement, at 8–9. In any

event, Countrywide has offered no argument as to when Plaintiffs were on inquiry

notice of Bank of America’s or Merrill Lynch’s securitization fraud, suggesting that

Countrywide concedes either that these defendants are not before the Court or that

the claims are timely. Under no circumstances, then, is dismissal of Plaintiffs’

claims against Bank of America or Merrill Lynch proper.

CONCLUSION

For the reasons stated, this Court should deny Countrywide’s Motion.


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40

DATED: April 23, 2012 RESPECTFULLY SUBMITTED,

By: /s/ James R. Asperger

James R. [email protected] EMANUEL URQUHART & SULLIVAN, LLP865 South Figueroa Street, 10th FloorLos Angeles, CA 90017Tel: 213-443-3000Fax: 213-443-3100

Michael B. [email protected] [email protected] EMANUEL URQUHART & SULLIVAN, LLP51 Madison Avenue, 22nd FloorNew York, NY 10010Tel: 212-849-7000Fax: 212-849-7100

Attorneys for Plaintiffs


Exhibit A

Case 2:11-cv-10549-MRP-MAN Document 125-1 Filed 04/23/12 Page 1 of 45 Page ID #:6518

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OMNIBUS REPLY IN SUPPORT OF THE COUNTRYWIDE DEFENDANTS’ MOTIONS TO DISMISS

Brian E. Pastuszenski (pro hac vice) [email protected] Inez Friedman-Boyce (pro hac vice) [email protected] Brian C. Devine (SBN 222240) [email protected] Caroline H. Bullerjahn (pro hac vice) [email protected] GOODWIN PROCTER LLP Exchange Place Boston, MA 02109-2802 Tel.: 617-570-1000 Fax: 617-570-1231 Lloyd Winawer (SBN 157823) [email protected] GOODWIN PROCTER LLP 601 South Figueroa Street, 41st Floor Los Angeles, California 90017 Tel.: 213-426-2500 Fax: 213-623-1673 Attorneys for Defendants Countrywide Financial Corporation, Coun-trywide Home Loans, Inc., CWALT, Inc., CWMBS, Inc., CWABS, Inc., CWHEQ, Inc., Countrywide Capital Markets, Countrywide Securities Corporation, and N. Joshua Adler

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

In re COUNTRYWIDE FINANCIAL CORP. MORTGAGE-BACKED SE-CURITIES LITIGATION

Case No. 11-ML-02265-MRP (MANx)

OMNIBUS REPLY MEMORANDUM OF POINTS & AUTHORITIES IN SUPPORT OF COUNTRYWIDE DEFENDANTS’ MOTIONS TO DISMISS

Date/Time: February 13, 2012 11:00 a.m. Date/Time: February 14, 2012 1:00 p.m. Courtroom: 12 Judge: Hon. Mariana R. Pfaelzer

Case 2:11-cv-09889-MRP-MAN Document 100 Filed 02/03/12 Page 1 of 76 Page ID #:6650

A-1


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27, citing Fed. Deposit. Ins. Corp. v. Nichols, 885 F.2d 633, 637-38 (9th Cir. 1989)

(“the district judge abused her discretion in abstaining”) and Keystone Fruit Mktg. v.

Nat’l Fire Ins. Co., 2011 WL 3293390, at *2 (E.D. Wash. Aug. 1. 2011) (plaintiff

moved “under a theory of abstention”).

National Integrity correctly notes that courts typically exercise discretion to

dismiss a second-filed suit only in “exceptional circumstances.” WS/NI Opp. at 27

n.22. In Kellen Co. v. Calphalon Corp., 54 F. Supp. 2d 218, 221 (S.D.N.Y. 1999),

such circumstances were found where, like here, where the second-filed suit in the

Southern District of New York was the “same” as an earlier-filed suit in Ohio. It is

undisputed here that National Integrity asserts in New York precisely the same alle-

gations against the same defendants for the same MBS purchases challenged by its

corporate affiliates in other pending litigation before this Court—litigation in Ohio

in which it originally was a plaintiff. See generally CW Op. Br. at 40-45. In aban-

doning its chosen forum, New York, for all proceedings (including trial) (WS/NI

Opp. at 27-29), National Integrity concedes the duplicative nature of the present ac-

tion and the lack of any meaningful connection with New York. Its separate action

should therefore be dismissed.

B. National Integrity’s Common Law Fraud Claims Are Time-Barred.

National Integrity does not dispute that, according to its own allegations, its

principal place of business is in Ohio. See NI Compl. ¶¶ 16-18. In an attempt to

avoid dismissal of its untimely clams under Ohio’s statutes of limitations, however,

National Integrity argues that it is incorporated in New York and that a New York

corporation is a resident of New York for purposes of the New York borrowing stat-

ute “even if its principal place of business is outside the state.” WS/NI Opp. at 25.43 43 For the purposes of the borrowing statute (N.Y. C.P.L.R. § 202), National Integ-rity bears the burden to show that it was a resident of New York when its cause of action accrued. 2A Carmody-Wait 2d New York Prac. § 13:47 (West 2011). Na-tional Integrity’s perfunctory assertion that it is incorporated in New York (WS/NI Opp. at 25; NI Compl. ¶ 15) fails to meet this burden, particularly given that its own complaint confirms that its principal place of business is not in New York, and the cases cited by Countrywide holding that it is a corporation’s principal place of busi-


A-2


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National Integrity is wrong.

National Integrity cites Wydallis v. U.S. Fid. & Guar. Co., 63 N.Y.2d 872,

873-75 (1984), in which the court held that the plaintiff—a corporation incorporated

in New York that had its principal place of business in another state—was a New

York resident under the borrowing statute. WS/NI Opp. at 25. Wydallis, however,

contains no analysis whatsoever regarding how that determination was made in that

case or how courts generally should determine a corporation’s residency under the

New York borrowing statute. See Wydallis, 63 N.Y.2d at 873.44 It is entirely un-

clear what factors, if any, the Court considered in reaching the conclusion it did, and

it certainly does not stand for the proposition that a New York corporation with its

principal place of business elsewhere will in all instances be treated as a “resident”

under the borrowing statute. It also does not appear that residency was even dis-

puted by the parties in Wydallis.

In any event, Wydallis has never once been cited by a single New York court

(state or federal) on this issue. Moreover, Wydallis has effectively been superseded

on this issue. Since Wydallis, the New York Court of Appeals has held that for a

plaintiff to be considered a New York resident for purposes of C.P.L.R. § 202, it

must have a “significant connection” to the state. Antone v. Gen. Motors Corp. v.

Buick Motor Div., 473 N.E.2d 742, 746 (N.Y. 1984). In addition, since Wydallis,

the Court of Appeals has held that both a corporation’s state of incorporation and its

principal place of business are relevant for determining whether the corporation is a

resident under C.P.L.R. § 202. See Global Fin. Corp. v. Triarc Corp., 715 N.E.2d

482, 485 (N.Y. 1999) (noting that “[w]hen an alleged injury is purely economic, the

place of injury usually is where the plaintiff resides” and holding that “plaintiff[]

ness that determines residency for purposes of C.P.L.R. § 202. 44 Rather, in its analysis of whether a particular provision of an insurance policy (which limited the time period in which a suit could be filed) applied to suits filed outside of Massachusetts, the court held that “an action lawfully instituted in New York by a New York resident” is governed by New York’s statute of limitations. Id. at 875.


A-3


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[corporation’s] causes of action are time-barred whether one looks to its State of in-

corporation or its principal place of business”) (emphasis added).

Indeed, Southern District of New York Judge Stanton noted this development

in New York law in applying the borrowing statute in Nat’l Union Fire Ins. Co. of

Pittsburgh v. Forman 635 Joint Venture, 1996 WL 507317, at *3-4 (S.D.N.Y. Sept.

6, 1996), explaining that although “[t]here is authority which seems to hold that a

corporation’s residence is its state of incorporation,” “[m]ore recently, courts have

stated that a corporation’s state of incorporation is its domicile, and its principal

place of business is its residence.” Accord Fed. Deposit Ins. Corp. v. Cohen, 1996

WL 87248, at *3 (S.D.N.Y. Feb. 29, 1996) (same). And the cases Countrywide

cited in its opening brief (see CW Op. Br. at 49-50), which National Integrity fails to

meaningfully distinguish, reflect this development in New York law as well, ex-

pressly holding that “[a] corporation’s principal place of business, rather than its

state of incorporation, determines its residence” for purposes of N.Y. C.P.L.R. §

202. McMahan & Co. v. Donaldson, Lufkin & Jenrette Sec. Corp., 727 F. Supp.

833, 834 (S.D.N.Y 1989) (citing Allegaert v. Warren, 480 F. Supp. 817, 820

(S.D.N.Y. 1979)).45

Under this current formulation for assessing residency for purposes of the

New York borrowing statute, the National Integrity complaint and the WS/NI oppo-

sition both make clear that National Integrity’s only connection to New York with

respect to this action for purposes of the borrowing statute is that it is technically in-

corporated in the state. Its complaint and opposition brief likewise confirm that the

state with which it has a “significant connection” is Ohio. NI Compl. ¶¶ 15-18 (al-

45 See also In re Magnesium Corp. of Am., 399 B.R. 722, 743 (Bankr. S.D.N.Y. 2009) (“In New York, residency is defined as a corporation’s principal place of business.”); Pereira v. Cogan, 2001 WL 243537, at *18 (S.D.N.Y. March 8, 2001) (a plaintiff’s “state of residence for purposes of the borrowing statute is New York, where it maintains its principal place of business”); The Investigative Grp., Inc. v. Brooke Grp. Ltd., Inc., 1997 WL 727484, at *3 (S.D.N.Y. Nov. 21, 1997) (“For pur-poses of the borrowing statute, plaintiff is not a resident of New York because a corporation’s residence is its principal place of business.”).


A-4


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leging that all senior management is located in Ohio, that all of its “investment deci-

sions, including the decision to purchase [the] Certificates” were made in Ohio, and

that its investments are managed in Ohio by portfolio managers located in Ohio).

New York law thus requires borrowing Ohio’s two-year limitations period, under

which National Integrity’s common law claims are time-barred. See CW Op. Br. at

38-39; 49-52.

V. THE BANKERS PLAINTIFFS’ CLAIMS ARE BARRED.

In their opposition (“Sterling & Bankers Opp.”),46 the Bankers plaintiffs con-

tend that their claims are not time-barred because either: (i) it is “premature” for

this Court to determine whether California or Florida has the most significant rela-

tionship to the parties and the action; or (ii) this determination would not be prema-

ture, and their complaint contains sufficient allegations to conclude that Florida’s

statute of limitations, as opposed to California’s, applies. Sterling & Bankers Opp.

at 16. They are wrong on both points. Even taking into account the additional facts

that the Bankers plaintiffs say they can allege (but have not alleged),47 which they

say would show that the Bankers plaintiffs received and acted on the alleged misrep-

resentations in Florida,48 California would still have the most significant relationship

46 The Bankers and Sterling plaintiffs, represented by the same counsel, have filed a joint opposition brief, with one section of that brief addressed to the Bankers case and the other to the Sterling case. In the joint opposition, the Bankers plaintiffs in-corporate by reference many of the arguments also made in the Sterling case. To avoid duplication, the Countrywide Defendants address in this Bankers section of their reply brief (and do not repeat in full in the Sterling section) points from both the Bankers and the Sterling sections of the opposition brief, to the extent they are overlapping. Although the points made in this section are denominated as pertain-ing to Bankers, the points pertain equally to Sterling, and the Countrywide Defen-dants respectfully request that this Court consider these arguments in relation to Sterling also. 47 The Bankers plaintiffs concede that their complaint does not allege where the al-leged misrepresentations were received or relied upon, but ask this Court to con-clude that receipt and reliance occurred in Florida, and offer to amend their com-plaint as necessary. See Sterling & Bankers Opp. at 18. 48 The Countrywide Defendants take these facts as true solely for purposes of this motion to dismiss and do not otherwise concede that the Bankers plaintiffs received or relied upon the claimed representations in Florida.


A-5


Exhibit B


EXHIBIT B ALL OF PLAINTIFFS’ COMMON LAW CLAIMS ARE TIMELY UNDER NEW YORK’S SIX-YEAR STATUTE OF LIMITATIONS

B-1

Plaintiff1 Claims Accrued In

Principal Place of Business

State of Incorporation

NY SOL for Common Law

Claims

Are Common Law Claims

Timely?2

AIG Securities Lending Corp. New York New York Delaware 6 years from purchase YES

American Gen. Assurance Co. New York Texas Illinois 6 years from purchase YES

American Gen. Life Ins. Co. of Del. New York Texas Delaware 6 years from

purchase YES

American General Life and Accident Ins. Co. New York Tennessee Tennessee 6 years from

purchase YES

American General Life Ins. Co. New York Texas Texas 6 years from purchase YES

American International Group, Inc. New York New York Delaware 6 years from

purchase YES

1 Countrywide concedes that the Plaintiffs incorporated in New York (with New York principal places of

business) are New York residents subject to New York’s six-year statute of limitations, and thus has not moved to dismiss the common law claims of American Home Assurance Company, Commerce and Industry Insurance Company, First SunAmerica Life Insurance Company, and The United States Life Insurance Company in the City of New York. Supp. Mem. 2. Countrywide also has not moved to dismiss the common law claims of unincorporated American International Group Retirement Plan. Id.

2 The relevant RMBS purchase dates for each Plaintiff are listed in Exhibit A to Plaintiffs’ Complaint, dated August 8, 2011. Pursuant to the parties’ Agreement, dated January 13, 2011, tolling all time-related defenses, including statutes of limitations or repose, certain RMBS claims are deemed to have been asserted on January 15, 2011. These RMBS are listed below.



B-2

Plaintiff1 Claims Accrued In

Principal Place of Business

State of Incorporation

NY SOL for Common Law

Claims

Are Common Law Claims

Timely?2

Chartis Prop. Cas. Co. New York New York Pennsylvania 6 years from purchase YES

Chartis Select Ins. Co. New York New York Delaware 6 years from purchase YES

Chartis Specialty Ins. Co. New York New York Illinois 6 years from purchase YES

Lexington Ins. Co. New York Massachusetts Delaware 6 years from purchase YES

National Union Fire Ins. Co. of Pittsburgh, Pa. New York New York Pennsylvania 6 years from

purchase YES

New Hampshire Ins. Co. New York New York Pennsylvania 6 years from purchase YES

SunAmerica Annuity and Life Assurance Co. New York Arizona Arizona 6 years from

purchase YES

SunAmerica Life Ins. Co. New York California Arizona 6 years from purchase YES

The Insurance Co. of the State of Pennsylvania New York New York Pennsylvania 6 years from

purchase YES

The Variable Annuity Life Ins. Co. New York Texas Texas 6 years from

purchase YES

Western National Life Ins. Co. New York Texas Texas 6 years from purchase YES



B-3

On January 13, 2011, AIG and Countrywide entered into an agreement (the “Agreement”) tolling all time-related defenses, including statutes of limitations or repose, on all claims related to certain RMBS offerings. The Agreement terminated on August 5, 2011. The relevant RMBS offerings covered by the parties’ Agreement include: ABSHE 2005-HE3 AHM 2007-1 BAFC 2006-D BAFC 2007-1 BAFC 2007-3 BAFC 2007-4 BAFC 2007-A BAFC 2007-C BALTA 2005-7 BALTA 2006-2 BALTA 2006-3 BALTA 2006-4 BALTA 2006-5 BALTA 2006-6 BALTA 2006-7 BALTA 2007-1 BCAP 2007-AA1 CMLTI 2006-AR5 CMLTI 2006-AR7 CMLTI 2007-AR4 CSAB 2007-1 CWALT 2005-10CB

CWALT 2005-1CB CWALT 2005-20CB CWALT 2005-28CB CWALT 2005-6CB CWALT 2005-7CB CWALT 2005-9CB CWALT 2005-AR1 CWALT 2005-J2 CWALT 2006-4CB CWALT 2006-OA11 CWALT 2006-OA12 CWALT 2006-OA16 CWALT 2006-OA17 CWALT 2006-OA8 CWALT 2006-OC1 CWALT 2006-OC11 CWALT 2006-OC2 CWALT 2006-OC8 CWALT 2007-23CB CWALT 2007-HY3 CWALT 2007-HY5R CWALT 2007-OH1

CWHEL 2005-E CWHEL 2005-M CWHEL 2006-C CWHEL 2006-G CWHEL 2007-A CWHEL 2007-C CWHL 2005-12 CWHL 2005-13 CWHL 2005-19 CWHL 2005-20 CWHL 2005-24 CWHL 2005-25 CWHL 2005-28 CWHL 2005-6 CWHL 2005-J2 CWHL 2005-J3 CWHL 2006-11 CWHL 2006-8 CWHL 2007-HY4 CWL 2005-1 CWL 2005-11 CWL 2005-13



B-4

CWL 2005-16 CWL 2005-17 CWL 2005-7 CWL 2005-AB4 CWL 2005-AB5 CWL 2005-IM3 CWL 2006-10 CWL 2006-11 CWL 2006-15 CWL 2006-16 CWL 2006-21 CWL 2006-23 CWL 2006-25 CWL 2006-26 CWL 2006-6 CWL 2006-8 CWL 2006-9 CWL 2006-ABC1 CWL 2006-S1 CWL 2006-S10 CWL 2006-S2 CWL 2006-S4 CWL 2006-S5 CWL 2006-S8 CWL 2006-S9

CWL 2007-1 CWL 2007-10 CWL 2007-11 CWL 2007-4 CWL 2007-5 CWL 2007-6 CWL 2007-7 CWL 2007-8 CWL 2007-S1 CWL 2007-S2 CWL 2007-S3 DBALT 2006-AR3 DBALT 2006-AR6 DBALT 2007-1 DBALT 2007-AR3 GSAA 2005-15 GSAA 2005-8 GSAA 2006-1 GSAA 2006-12 GSAA 2006-3 GSAA 2007-5 GSR 2007-OA1 IMM 2005-1 IMM 2005-2 IMM 2005-4

IMM 2005-5 IMM 2005-8 IMSA 2006-2 IMSA 2006-3 IMSA 2006-4 IMSA 2006-5 IMSA 2007-1 IMSA 2007-2 IMSA 2007-3 IXIS 2006-HE1 JPMMT 2005-S3 JPMMT 2006-A4 LXS 2005-3 MSAC 2007-NC1 NCHET 2005-A SARM 2005-18 SARM 2006-10 SARM 2006-5 SASC 2005-15 SVHE 2005-OPT3 SVHE 2005-OPT4 SVHE 2007-1 TMST 2007-3


Exhibit C


C-1


C-2


C-3


C-4


C-5


Exhibit D


EXHIBIT D

Articles and Documents Cited by Defendants

D-1

Date Ex. Title Summary

6/24/04 Ex. 17 New York Times: “The Ever More Graspable, And Risky, American Dream”

The article discusses the increasing ease of obtaining a mortgage through less rigorous guidelines. A primary concern was an increase in interest rates and home price risk. The article does not mention Countrywide.

4/9/05 Ex. 18 Chicago Tribune: “More and more mortgages aimed at first-time buyers”

The article discusses particular loan products that could be risky, such as “80/10/10” (80% first mortgage, 10% second mortgage, and 10% down payment) loans, interest-only loans, and other products, but maintains that the outlook in the mortgage market is positive. The article does not mention Countrywide.

6/19/05 Ex. 19 Chicago Tribune: “Pressure on appraisers gets renewed attention”

The article discusses possible incentives for appraisers to inflate appraisals. The article is addressed to homebuyers and provides recommendations for obtaining accurate appraisals. The article does not mention Countrywide.

7/30/05 Ex. 20 Washington Post: “Lies Are Growing In Loan Process”

The article discusses an FBI report finding that the largest portion of mortgage fraud was borrower fraud, and that incidences of such fraud were growing. The article says stated-income products can be problematic. The article does not mention Countrywide.


EXHIBIT D


D-2


11/16/05 Ex. 21. Wall Street Journal: “Is Getting a Home Loan Becoming Too Easy”

The article discusses the risks of low document and no document loan programs, noting that although the programs were designed to help self-employed persons without a regular paycheck buy a home, their use had been expanded. The article cites an economist’s study of low-doc loans to borrowers with blemished credit records that concluded that lenders were “prudent.” The article notes that several lenders have a no-doc program, including one at Countrywide that “eliminates much of the paperwork normally required.” There is no suggestion that Countrywide is using this program to perpetuate a fraud.

7/22/06 Ex. 22 Wall Street Journal: “New Headache for Homeowners: Inflated Appraisals; Rosy Valuations, Common in Boom, Now Haunt Sellers; ‘It’s Pay-the-Piper Time’”

The article discusses the risk of inflated appraisals and the conflict-of-interest in the system since appraisers are often “hired by loan officers or mortgage brokers, whose compensation depends on how many loans go through.” An official of the Mortgage Bankers Association says lenders do not want inflated appraisals either because investors can putback the loan or sue and sees no “broad” problem with inflated appraisals. The article does not mention Countrywide.


EXHIBIT D


D-3


8/22/06 Ex. 23 Wall Street Journal: “‘Stated Income’ Home Mortgages Raise Red Flags”

The article discusses abuses and potential abuses in mortgage lending business, in particular on the no-documentation and low-documentation programs. In the article, Countrywide reassures the reader, maintaining that it has proper safeguards and controls:

“If the income amount seems reasonable, we then use it to help assess [borrowers’] overall qualifications,” Countrywide said in a statement. “Otherwise, we will verify the income provided.” The company also said “we have not found a significant enough difference in performance between fully documented loans and stated income loans to cause us concern.”

8/27/06 Ex. 24 New York Times: “Mortgages; When the Truth Goes Begging”

The article discusses the risks of stated-income loan programs. The article discusses borrower fraud cases involving criminal rings that set up complex schemes, and notes that sometimes borrowers may make up income on applications as well. The article does not mention Countrywide.

10/26/06 Ex. 25 Wall Street Journal: “More Home Loans Go Sour; Though New Data Show Rising Delinquencies, Lenders Continue to Loosen Mortgage Standards”

The article discusses increasing delinquencies and notes that the economy drives delinquencies, and that the present downturn may be related to risky loan products. The article also attributes delinquencies to property speculation by homebuyers. The article does not mention Countrywide.


EXHIBIT D


D-4


January 15, 2007 Threshold Date

3/18/07 Ex. 26 SF Chronicle: “In tough real estate market, appraisers under pressure”

The article discusses the risks of appraisal inflation. It notes that the problem is not something new and that the increasing attention to the problem is related to slowing home price appreciation. The article says it can be dangerous to the banking system in the long run, referencing the savings and loan bailout of the 1980s. It says inaccurate appraisals can, in the long run, make it harder for lenders to sell loans and thus reduce liquidity. The article does not mention Countrywide.

4/21/07 Ex. 27 Washington Post: “Appraisal Inflation”

The article discusses the risks of appraisal inflation, specifically focusing on complicated “schemes,” such as the “cash out at closing” scheme, in which a real estate agent uses inflated appraisals to artificially raise the price of his or her listings and then passes a resulting bad loan on to an unsuspecting wholesale lender. The article does not address lender fraud and there is no mention of Countrywide in the article.


EXHIBIT D


D-5


5/8/07 Ex. 28 Reuters: “Frenzy of risky mortgages leaves path of destruction”

The article discusses the booming mortgage market and the increasingly lax lending standards. The focus of the article was Ameriquest Mortgage. In the article, Countrywide CEO Angelo Mozilo characterized Countrywide as a “traditional lender” that tried to originate no-doc loans safely:

“Traditional lenders such as ourselves looked around and said, ‘Well, maybe there’s a (new) paradigm here. Maybe we’ve just been wrong. Maybe you can originate these loans safely without verifications, without documentation,” Mozilo said.

The head of RMBS at Bear Stearns says investors are comfortable with expansion because of rising housing prices. He also says he does not think “lenders purposely originated loans they thought would fail.”

5/16/07 Ex. 29 Financial Times: “Failing grades?”

The articles discusses how ratings are “the subject of growing anxiety” with concerns about conflicts of interest and whether ratings agencies understand complex deals. Moody’s and S&P downgraded dozens of newly-issued RMBS, suggesting assumptions might have been flawed. The article states that some investors are very reliant on ratings, specifically mentioning insurance companies. The article does not mention Countrywide.


EXHIBIT D


D-6


6/26/07 Ex. 30 Appraisal Trade Organizations’ Testimony before Senate Committee on Banking Hearing on Ending Mortgage Abuse: Safeguarding Homebuyers

The document is the prepared testimony of an appraisal organization for a Congressional hearing. The head of an industry organization argues for additional power to be given to his organizations to protect the appraisal industry’s independence from “real estate-rogues.” The spokesman states that the biggest problem is with mortgage companies not subject to federal jurisdiction, especially non-bank mortgage lenders or mortgage brokers. The speaker wants to extend existing federal and state legislation to non-federally regulated entities, except for the appraiser bond requirement. The article does not mention Countrywide.

August 8, 2007 Threshold Date

8/13/07 Ex. 31 Portfolio.com: “Overrated”

The article, published on a financial news website, discusses the role of the credit rating agencies in the subprime mortgage market. It focuses on possible conflicts of interest between the agencies and banks. The only mention of Countrywide is that in late July, Countrywide reported it was seeing a sharp rise in defaults.


EXHIBIT D


D-7


8/27/07 Ex. 32 Wall Street Journal: “Can the Financial Markets Make a Comeback?”

The article discusses the decrease in liquidity and the poor incentives of banks paying the ratings agencies to rate structured products, focusing on CDOs rather than RMBS. The former Nomura CEO says there are problems with liquidity, but not in the underlying asset quality. He “firmly believe[s] that securitization will survive and continue to grow significantly. . . . and that those firms and the markets will emerge stronger.” The article does not mention Countrywide.

8/29/07 Ex. 33 Bloomberg: “Unsafe at Any Rating, CDO Speeds to CCC from AAA”

The article addresses the rating of CDOs—not RMBS, and how ratings downgrades and mark to market rules could cause liquidity problems at banks. Some AAA CDOs by some special investment vehicles were slashed to CCC+ and CCC. The article claims that Moody’s reevaluation of its models means that “its historical models say absolutely nothing about how the future might turn out.” The article does not mention Countrywide.

January 15, 2008 Threshold Date

1/17/08 Ex. 34 Bloomberg Businessweek.com: “One insider’s view of Countrywide”

A posting on an online business journal blog from Bloomberg briefly discusses a former Countrywide employee, now at another lender, who says he is saddened by the disintegration of Countrywide. He believes the company became too focused on meeting quarterly expectations and loan quality decreased as a result. The employee does not allege that Countrywide engaged in fraud.


EXHIBIT D


D-8


3/8/08 Ex. 35 Wall Street Journal: “FBI investigates Countrywide; U.S. Scrutinizes Filings on Financial Strength, Loan Quality for Fraud”

The article discusses an FBI investigation of Countrywide regarding whether officials made misrepresentations about the company’s financial position and the quality of its mortgage loans in securities filings. Countrywide was quoted as saying “we are not aware of any investigation being conducted by the FBI.” The article also mentions the SEC investigation of its accounting, and the New York City Emps. suit.

3/17/08 Ex. 36 LA Times: “Sub-prime mortgage watchdogs kept on leash”

The article discusses third-party subprime loan reviewers who say they raised several red flags but were ignored or stifled by their clients, the securitizing banks. The article focuses on experiences at Bohan and Clayton, but does not mention the banks behind the deals. The article does not mention Countrywide.

5/6/08 Ex. 37 NPR: “Woman: Countrywide Proposed Fibbing to Get Loan”

The document is a transcript of a short radio broadcast on National Public Radio’s Morning Edition. On the radio broadcast, a borrower is interviewed and states that a Countrywide employee tried to convince her to lie about her income on a loan, saying he could get it approved because her husband had a job title of manager. Countrywide said it was looking into the incident and that this incident would violate Countrywide policies.


EXHIBIT D


D-9


7/1/08 Ex. 38 MSNBC.com/NBC Nightly News: “Countrywide whistleblower reports ‘liar loans’”

The document is a posting on the website MSNBC.com that appears to be discussing a story covered on the NBC Nightly News. In the posting, a former Countrywide employee claims he warned superiors about questionable practices including inflating home appraisals, flipping loans (“moving an unqualified buyer from a conventional loan to one that doesn’t require documentation, knowing they couldn’t afford it”), and coaching borrowers to lie on stated income loans. Countrywide denied the allegations and said that the company’s “lending operations are prudently and effectively managed,” and that “Countrywide’s ethical standards are rigorously enforced.”

7/15/08 Ex. 39 Larry King Live: “Mortgage Crisis Affects Thousands of Homeowners”

The document is a transcript of a short segment on Larry King Live. King hosted a round-table on the mortgage market, and one guest was the former Countrywide employee covered in the article at Exhibit 38, above. The whistleblower repeated the same allegations. King read a prepared statement from Countrywide that it had investigated the whistleblower’s allegations and found they had no merit and would have been against Countrywide policy.

August 8, 2008 Threshold Date

No Further Articles Cited


Exhibit E


EXHIBIT E Countrywide’s Reassuring Statements

E-1

Transcript of Countrywide Presentation at the 2005 Piper Jaffray Financial Conference (March 15, 2005)

Mr. Angelo Mozilo, Countrywide’s CEO

“I’m deeply concerned about credit quality in the overall industry . . . . The overall industry I am troubled; Countrywide I’m not, because we have remained very disciplined in our origination of subprime loans.”1 (Pltf. RJN Ex. 1, at 4-5.)

Transcript of the American Financial Services Association Finance Industry Conference for Fixed Income Investors

(May 17, 2006)

Mr. Vincent Breitenbach, Countrywide’s Managing Director, Treasury-Finance

“[W]e do have a very healthy conservative approach to credit . . . . We want strong FICO scores, we want high down payments or low LT[V]s.” (Pltf. RJN Ex. 2, at 5.)

Q2 2006 Countrywide Financial Corporation Earnings Conference Call (July 25, 2006)


Mr. Mozilo says he is preparing the company for the “worse [sic]” but his view is that “the market itself” and “comments by [Mr. Ben Bernanke, Chairman of the Federal Reserve] were quite optimistic.” (Pltf. RJN Ex. 3, at 5.) Mr. Mozilo says competitors have become very aggressive in the correspondent channel, and Countrywide has “chosen to back off” because it is Countrywide’s “nature” to “back away” rather than make “uneconomic decisions,” explaining Countrywide’s reduction in market share in that channel. (Pltf. RJN Ex. 3, at 6.) Mr. Mozilo says Countrywide “will not sacrifice economics for marketshare.” (Pltf. RJN Ex. 3, at 15.) When asked if the credit quality of option ARMs securitized are different from those held by Countrywide, Mr. Mozilo says, “I don’t think in general my answer would be, no.” He continues, “In general, we originate these loans on an equal basis and the decision in securitization is more of a timing decision than it is a credit quality decision.” Mr. Mozilo also says even if loans in securitization “show a Continued below.

1 Emphases added throughout.



E-2

Continued from above. higher delinquency,” this will be priced into the product, but there is “no conscious decision on [Countrywide’s] part” to select less creditworthy loans for securitization. (Pltf. RJN Ex. 3, at 18.) Mr. Mozilo says Countrywide has “a panel of appraisers, approved appraisers, that work through LandSafe” as well as internal appraisers to review the outside appraisers. Countrywide only uses its approved appraisers and “that panel is screened very carefully from time to time to make sure that we’re getting rid of the bad ones and we’re only putting in good ones.” (Pltf. RJN Ex. 3, at 31.)

Transcript of Countrywide Presentation at the 2006 Fixed Income Investor Forum (September 13, 2006)


“Not only did we drive efficiency in the marketplace, but as an industry leader we served as a role model to others in terms of responsible lending.” (Pltf. RJN Ex. 4, at 5.)

Q3 2006 Countrywide Financial Corporation Earnings Conference Call (October 24, 2006)


Mr. Mozilo says Countrywide has a “high-quality portfolio by virtue of its FICO scores, the loan to value ratios.” He says “a lot depends upon the economy, unemployment and those issues.” Mr. Mozilo says he doesn’t think “there is any similar portfolio perform[ing] any better than the one we have because [of its] inherent qualities . . . .” He thinks it is “44 basis points performing better than the peer group” although he would hesitate to “call a top on that.” (Pltf. RJN Ex. 5, at 7.)

Mr. Carlos Garcia, Countrywide’s Chief of Banking and Insurance

Mr. Garcia says Countrywide’s portfolio “outperforms the industry—or our pay option portfolio outperforms the industry and other products by a material amount” when you compare “apples-to-apples in terms of vintage, product type, etc.” (Pltf. RJN Ex. 5, at 18)

Q4 2006 Countrywide Financial Corporation Earnings Conference Call (Jan. 30, 2007)


Mr. Mozilo says that current delinquencies are related to unemployment and real estate values and points out that the previous market environment resulted in “unprecedented low levels” of delinquencies, while the new environment is “more normal.” Less mortgagors can “sell their home, get out some equity and move on.” (Pltf. RJN Ex. 6, at 26-27.)



E-3

Mr. Carlos Garcia, Countrywide’s Chief of Banking and Insurance

Mr. Garcia says, “Market conditions, as we’ve noted, resulted in a lower volume of attractive portfolio products, especially at attractive returns, and also increased our credit concerns which required us to be more selective.” (Pltf. RJN Ex. 6, at 6.)

Q1 2007 Countrywide Financial Corporation Earnings Conference Call (April 26, 2007)

Mr. David Sambol, Countrywide’s President and COO

Mr. Sambol says that “the current turmoil in subprime was precipitated in our view by a convergence of several things; expansion of program and credit guidelines in the industry over the last several years, followed by a flattening of home price appreciation and in fact, declines in home prices in some markets over the last year, which in turn has resulted in increasing delinquencies and defaults in the sector . . . . These conditions were further exacerbated by significant overcapacity and competition in the subprime sector and really the resulting lack of profitability even before increased credit costs and losses . . . . In reaction to all this, there has been a significant industry tightening of credit and underwriting guidelines over the last several months and really a reversal of much of the expansion that occurred over the last several years.” (Pltf. RJN Ex. 7, at 4.) Mr. Sambol says Countrywide has also “significantly tightened [its] own credit guidelines and programs” by taking such measures as “materially restricting 100%” LTV, “carving back materially reduced documentation programs,” and “eliminating subprime second mortgages . . . .” (Pltf. RJN Ex. 7, at 5.)

Mr. John McMurray, Countrywide’s Chief Risk Officer

Mr. McMurray says that representation and warranty exposure “is generally related to loan manufacturing issues.” Early payment default exposure is “de minimis” because Countrywide has “never been as reliant on whole loan sales as some lenders.” (Pltf. RJN Ex. 7, at 10.)


Mr. Sambol says that because Countrywide has “not yet seen significant availability of residential loans in the market for sale that meet [its] return and credit risk criteria, [Countrywide has] elected to expand [its] security acquisition program”—predominantly “short duration, AAA quality mortgage-backed securities.” (Pltf. RJN Ex. 7, at 22.)

Transcript of the American Financial Services Association 7th Finance Industry Conference for International Fixed-Income Investors

(April 26, 2007)

Ms. Jennifer Sandefur, Countrywide’s

“Many of the players that originated [subprime loans] . . . lowered a Continued below.



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Managing Director and Treasurer

Continued from above. lot of the underwriting standards which caused a lot of these delinquency problems . . . . I’d like to differentiate Countrywide here.” (Pltf. RJN Ex. 8, at 4-5.)

Q2 2007 Countrywide Financial Corporation Earnings Conference Call (July 24, 2007)


Mr. Mozilo says, “Looking to the second half of 2007, we expect difficult housing and mortgage market conditions to persist. Nonetheless, we remain optimistic that the long-term future growth prospects and profitability of the Company as the industry continues to consolidate.” (Pltf. RJN Ex. 9, at 2.) Mr. Mozilo says, “We have a very good team here. We have been through a lot before. We’ve come out of it always stronger, and I believe we will come out of this stronger even stronger than we ever have in the past, because we are a much bigger and better Company than we ever, ever have been in the past.” (Pltf. RJN Ex. 9, at 34.) Mr. Mozilo says, “Nobody saw this coming. So it was the deterioration in real estate values that was the base cause of all of this. We had none of these problems as real estate values were going up. So it is an oversimplification, admittedly, but clearly the deterioration in real estate values—as a result of the affordability issue and an oversupply.” Mr. Mozilo also says that interest rates had a “[m]ajor, major impact.” Mr. Mozilo also discusses the use of “more technology” and “more credit scoring as a judgmental factor in whether a loan could qualify or not, versus the traditional documentation.” (Pltf. RJN Ex. 9, at 11.) When asked what he would have done differently, Mr. Mozilo says such an insight would have been one that only “a superior spirit could have had at the time.” However, exiting subprime would have negatively impacted prime lending as well since providers of loans “will not give you the prime if you’re not willing to take the subprime.” He concludes “[w]e would have done a lot of things differently. But we didn’t. The fact is we didn’t know.” (Pltf. RJN Ex. 9, at 21.) Mr. Mozilo says, “Furthermore, additional deterioration in the housing market—specifically in home prices—may further impact credit costs.” Countrywide is taking actions in response, including “tightening of credit guidelines, particularly related to subprime and prime home Continued below.



E-5

Continued from above. equity loans; further curtailment of subprime product offerings, including the recent elimination of certain adjustable-rate products; risk-based pricing adjustments; use of mortgage insurance for credit enhancement; and expense reduction initiatives.” However, Countrywide “is well positioned to capitalize on opportunities during this transitional period in the mortgage business, which we believe will enhance the Company’s long-term earnings growth prospects.” (Pltf. RJN Ex. 9, at 3.)

Mr. John McMurray, Countrywide’s Chief Risk Officer

“Countrywide’s [low documentation program] is called Fast & Easy . . . . Assets are verified for both [stated income verified asset] and [no income verified asset] programs.” (Pltf. RJN Ex. 9, at 5.) Mr. McMurray responds to “questions from investors wondering whether [market losses] mean that all prime mortgages are in trouble?” by saying “on average the FICOs are very favorable and the CLTVs very favorable” although there will be “tails at both ends” of good and bad loans. (Pltf. RJN Ex. 9, at 12-13.)


When asked if [borrower] fraud had been a cause of loss, Mozilo said, “I think the primary issue has been an issue of speculation, rather than fraud . . . . I think [fraud] appears to be de minimis.” (Pltf. RJN Ex. 9, at 28.) Mr. Mozilo says that Countrywide did not “rely upon home price appreciation. We relied upon an appraisal of current value as a lender.” Since house prices can fluctuate, “you’re limited to what you believe the value to be based upon a professional appraiser valuing a piece of property at that time.” (Pltf. RJN Ex. 9, at 14-15.)

Mr. Kevin Bartlett, Countrywide’s Executive Managing Director and CIO

Mr. Bartlett acknowledges that the rating agencies put many subprime securitizations on watch for potential downgrade, and that Moody’s downgraded many subprime deals. He says traditional investors will “reemerge as credit spreads widen and the market perceives the greater level of protection afforded by the new rating agency approaches compensates for the risks and reduces downgrade uncertainty.” Countrywide’s views are that it “will be able to sell at least the AAA-rated portions of our nonagency products; but that we are prepared to invest in the subordinate bonds until market conditions improve.” (Pltf. RJN Ex. 9, at 10.)


Mr. Mozilo says that the securities the bank is investing in are “a good safe AAA investment.” (Pltf. RJN Ex. 9, at 19.)



E-6

Mr. Kevin Bartlett, Countrywide’s Executive Managing Director and CIO

“Our expectations are that the current market forces are [] likely to force the weaker mortgage companies to either reduce their activities or align with stronger players.” (Pltf. RJN Ex. 9, at 19.)

Countrywide Financial Corporation, Form 10-Q (August 9, 2007)

Countrywide Financial Corporation

“We [] believe that the challenges facing the industry should ultimately benefit Countrywide as the mortgage lending industry continues to consolidate.” (Pltf. RJN Ex. 10, at 41.)

Q3 Countrywide Financial Corporation Earnings Conference Call (October 26, 2007)


Mr. Mozilo says Countrywide’s loss during the third quarter, “the first quarterly loss in 25 years”, was “primarily attributable to the extraordinary volatile market conditions that we experienced during the quarter . . . we expect to return to profitability in the fourth quarter and we anticipate that 2008 will also be profitable . . . . [A]s the industry leader we continue to be bullish about the long-term prospects for both Countrywide and our industry.” (Pltf. RJN Ex. 11, at 3.)


Mr. Sambol says, “I think the message that we will convey is that while we certainly hope that we don’t see another market stress like we did in the third quarter, it is very much the case that we are much more prepared and in better shape should one come.” (Pltf. RJN Ex. 11, at 17.)


Mr. Mozilo acknowledges that he previously said he did not think there would be a “soft landing” in housing but maintains that he thought that there “would be a normal hard landing” instead of the “complete collapse” that he had “never seen” before. Mr. Mozilo claims that the collapse “was not Countrywide centric in any way” and says that “we survived and nobody else did, and we came out of it . . . with more liquidity and more capital than we have had in the past [which] is a testimony to our model or more so a testament to the management team, and that is my view of it.” (Pltf. RJN Ex. 11, at 19.)


Exhibit F


EXHIBIT F Transcript of Bank of America Corporation

Strategic Announcement Discussion (January 11, 2008)

F-1

Mr. Ken Lewis, Chairman, CEO, and President of Bank of America Corporation

Mr. Lewis says: “Today’s announcement presents a unique opportunity to acquire the mortgage capabilities and scale that are critical to our customer relationships at a time when valuations are, in fact, very compelling. Our extensive due diligence supports our overall valuation and pricing of the transaction.” (Pltf. RJN Ex. 12, at 2.)

Mr. Joe Price, CFO of Bank of America Corporation

Mr. Price says that “the due diligence on this deal was extensive. We had more than 60 people on the ground for the better part of the last 30 days, with more focus picking up through the holidays. The focus of the due diligence, as you would expect, was on the mortgage servicing rights, credit, and legal, as well as accounting and operational areas. The results of our due diligence support our overall evaluation and pricing of the transaction.” (Pltf. RJN Ex. 12, at 3.)

Mr. Ken Lewis, Chairman, CEO, and President of Bank of America Corporation

When asked about the results of due diligence on the legal side “with subprime having a lot of problems, and government kind of entities looking into it” Lewis responds, “all I can say is that we have had a lot of advice from both our internal group and also from two other entities that put some parameters around it.” (Pltf. RJN Ex. 12, at 11.) Bank of America attributes Countrywide’s troubles to the market: Mr. Lewis says that “this year has been tough for [Countrywide,] as their model was severely impacted by market liquidity concerns and the ability to fund asset growth. These problems play into our strengths . . . .” (Pltf. RJN Ex. 12, at 3.) Mr. Lewis says “while [Bank of America is] regarded as one of the most efficient mortgage shops, Countrywide has product expertise and a sales culture that tops our capabilities. By utilizing their skill sets, we can offer more mortgage capabilities to our vast customer base.” (Pltf. RJN Ex. 12, at 2.) Mr. Lewis says, “at the operating level there is probably no better mortgage company in the world” than Countrywide. (Pltf. RJN Ex. 12, at 6.) Mr. Lewis says Countrywide has “industry-leading technology . . . in their front and back offices” and that they “view this as a onetime opportunity to acquire the best mortgage platform in the business at a time when the value is very attractive.” (Pltf. RJN Ex. 12, at 2.) Mr. Lewis says Countrywide is “an incredible company with areas of operational expertise that has weathered many past cycles.” (Pltf. RJN Ex. 12, at 3.)


Exhibit G


EXHIBIT G AIG’s Statements About Its RMBS Portfolio

G-1

Q2 AIG 2007 Earnings Call Transcript (August 9, 2007)

Mr. Bob Lewis AIG, Chief Risk Officer

“AIG also holds residential mortgage-related securities and recognizes that the current market dislocation has caused quoted prices in many of them to decline. AIG views such declines as temporary, as the robust cash flow characteristics combined with the reasonably short maturity structure of most of these securities will exert a very strong pull to par even if markets remain unstable. AIG views recent pricing as indicative of market turmoil unrelated to the fundamental financial characteristics of these securities.”1 (Def. RJN Ex. 1, at 4). “In addition, we believe that it would take declines in housing values to reach Depression proportions, along with default frequencies never experienced, before our AAA and AA investments would be impaired . . . .” (Def. RJN Ex. 1, at 4). “[F]rom a credit perspective, AIG views the AAA and AA RMBS market as a very safe asset class with minimal risk of ultimate loss. First the underlying mortgages have to be of high quality, with LTVs averaging around 80%. AIG’s underwriting approach is to avoid the higher risk 80/20 or so-called piggyback loans and option adjustable-rate mortgages.” (Def. RJN Ex. 1, at 8). “Second, the securities are structured in a way as to provide significant subordination cushion to absorb a certain amount of losses at the lower-level, higher risk tranches . . . . [C]leary the strength in our portfolio is also an indicator of the organizations with which we do business. The originator and servicers of the mortgage pools are generally those organizations with strong financial discipline.” (Def. RJN Ex. 1, at 8). “AIG’s investments are made up primarily of AAA and AA tranches, representing together over 97% of our exposure. Virtually all of our exposure is investment grade, with a further 2.4% in single-A and BBB tranches.” (Def. RJN Ex. 1, at 8).

Mr. Martin Sullivan AIG, CEO

“Tom Cholnoky (Analyst, Goldman Sachs): . . . I tend to think that this market is overreacting . . . Martin Sullivan: That’s why I am sleeping a little bit easier at night, Tom.” (Def. RJN Ex. 1, at 18).

1 Emphases added throughout.



G-2

Q2 AIG 2007 Residential Mortgage Presentation (August 9, 2007)

• “Holdings rated BBB or below total approximately $400 Million, well under 1% of the portfolio and less than 1/10 of 1% of total invested assets[.]” (Def. RJN Ex. 2, at 20).

• “As a general rule, AAA and AA securities can withstand default losses within the collateral that are multiples of historical norms without any loss of principal or interest[.]” (Def. RJN Ex. 2, at 20).

• Under the heading of “Sub-Prime RMBS Risk Mitigating Factors,” the presentation says, “LTV of underlying mortgages averages around 80%[.]” (Def. RJN Ex. 2, at 23)

• “The exposures to the residential mortgage-backed securities market within AIG’s portfolios are of high quality and enjoy substantial protection through collateral subordination[.]” (Def. RJN Ex. 2, at 35).

• “Temporary market disruptions may have some non-economic effect on AIG through unrealized losses. However, the sound credit quality of the portfolios should result in collection of substantially all principal and interest under any reasonable scenario[.]” (Def. RJN Ex. 2, at 35).

Q3 AIG 2007 Earnings Call Transcript (November 8, 2007)

Mr. Bob Lewis AIG, Chief Risk Officer

“Present deterioration, the reduction in liquidity in the market and actions taken by the rating agencies have resulted in market value losses on many securities issued against residential mortgage collateral, and to the extent losses have been realized upon sale or there have been other than temporary impairments losses are being recognized affecting current results in AIG’s insurance and capital markets businesses.” (Pltf. RJN Ex. 13, at 4). “AIG views much of the recent pricing developments as more a result of market turmoil than indicating fundamental and permanent deterioration in the credit characteristics of our holdings . . . . Our subprime RMBS holdings totaled $25.9 billion, 98.3% of which was rated AAA or AA as of September 30. This is down from $28.6 billion at the end of June . . . .” (Pltf. RJN Ex. 13, at 4). “While AIG has recorded these assets at fair value, consistent with our accounting policies, we believe the structural protections in our RMBS holdings will result in full recovery on the vast majority of our holdings even in the severe housing downturn.” (Pltf. RJN Ex. 13, at 6).



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AIG Residential Real Estate Investors Call Transcript (December 5, 2007)

Mr. Martin Sullivan AIG, CEO

“AIG has approximately $93 billion of mostly AAA and agency RMBS investments, about 10% of its total investment portfolio, which makes up the vast bulk of the exposure to the U.S. residential housing market. We have very little exposures to subordinated tranches of RMBS or CDO resecuritizations of RMBS. Our exposures to move to more recent vintages are high grade and of short duration. Due to our financial strength, we have the ability and intent to hold these securities to recovery, thereby minimizing liquidity-driven economic losses, even though further GAAP changes in valuation that affect net income in AOCI are possible.” (Pltf. RJN Ex. 14, at 4). “The following slides detail some important statistics that highlight the effectiveness of our risk management practices. From a risk selection and asset quality standpoint, AIG was able to better select its RMBS investments. While over 40% of all non-AAA issues were downgraded by Moody’s, less than 8% of AIG’s non-AAA RMBS investments were downgraded by Moody’s, S&P, or Fitch. Including AAAs, we had 1.64% of our RMBS investments downgraded versus 7.8% for the Moody’s rated universe overall.” (Pltf. RJN Ex. 14, at 4).

Mr. Richard Scott AIG Global Investment Corp., Head of Fixed Income

“If we believe the piece is subject to the possibility of a downgrade or ultimate loss, it will go on to our surveillance list and be referred to the Portfolio Managers for action where possible. Realistically, just to put a number on it, at the present time we have roughly $2 billion worth of securities on the surveillance list. However, I would point out that based on our reviews to date, the number of those pieces where we anticipate loss of principal is less than $5 million at the present time.” (Pltf. RJN Ex. 14, at 34). “One other just general comment I’d like to make, and I think it’s something that has been lost in the rhetoric a little bit, our view of the subprime market and, our view of the mortgage market generally is that there would be problems from time to time. When you look at the subordination levels we have under what we bought, we bought with a view that the housing market goes through cycles just like a corporate market or any other credit market. And therefore, we needed to have a level of subordination that was multiples of what had been experienced in the last recent downturn, which was really the 2001 downturn . . . .” (Pltf. RJN Ex. 14, at 37). Continued below.



G-4

Continued from above. “The other thing I’ll mention and that has really astonished me, quite frankly is, this is not new to subprime. We have had prior subprime crisis. During the 1990s, these are names that some of you may have forgotten, but I’ll remind you of them. You had a – you had the Green Tree incidents. You had the Money Store. You had 125 LTV lending, which was a very popular product during much of the 1990s. It makes 80% look fairly conservative when you get right down to it. And that all came to tiers at the end of the 1990s. But frankly, the impact on the AAA part of the spectrum has always been fairly modest . . . .” (Pltf. RJN Ex. 14, at 37). “And when we look at the not--- when we look at the non-AAA pieces, which is actually a fairly small piece of what we do, we simply have a more rigorous review of the individual loan level characteristics on the theory that at the senior level, you’re counting on the bulk of the loans will pay off. As you move down the credit spectrum, you get increasingly dependent on evaluating the loans that may not pay off . . . .” (Pltf. RJN Ex. 14, at 36). “Let me just hit my ‘in conclusion.’ We do believe our RMBS portfolio is reasonably well positioned to withstand even a severe downturn in the U.S. Housing market. This is basically a function of the subordination level we’ve bought. We have minimal holdings in RMBS-based CDOs and minimal holdings in lower-rated tranches of direct RMBS securitizations.” (Pltf. RJN Ex. 14, at 41).

Q4 AIG 2007 Earnings Call Transcript (February 29, 2008)

Mr. Win Neuger AIG, EVP & CIO

“We continue to believe that these market value declines are driven predominantly by market conditions, not by significant changes to the risk of principal repayment.” (Pltf. RJN Ex. 15, at 13). “[S]ince August 2007, the broader capital markets have emphasized liquidity and aversion to risk. The US residential mortgage market has continued to deteriorate with limited financing opportunities for mortgage borrowers and substantial increases in lifetime loss expectations on 2006 and 2007 US mortgages. This deterioration has increased our mark-to-market and downgrade risk. However, our preference for RMBS exposures high in the capital structure continues to guide our current expectation that the risk of an ultimate loss to investment principal in these securities remains low.” (Pltf. RJN Ex. 15, at 14).


Exhibit H


EXHIBIT H Countrywide RMBS in AIG's Portfolio

Experiencing First Interest Shortfall (Data Source: Intex Solutions, Inc.)

H-1

Num

ber o

f RM

BS

Expe

rienc

ing

Firs

t Int

eres

t Sho

rtfal

l


Exhibit I


EXHIBIT I Countrywide RMBS in AIG's Portfolio

Experiencing First Write-Down (Data Source: Intex Solutions, Inc.)

I-1

Num

ber o

f RM

BS

Expe

rienc

ing

Firs

t Writ

e-D

own


James R. Asperger - Typepad · James R. Asperger [email protected] QUINN EMANUEL...

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