On June 14, 2016, Justice Friedman of the New York County Commercial Division issued a decision in Wilmington Trust Co. v. Morgan Stanley Mortgage Capital Holdings LLC, 2016 NY Slip Op. 31130(U), analyzing the question of when a claim for breach of representations and warranties accrues.
In Wilmington Trust Co., the court decided a motion to dismiss in an RMBS trustee put-back action. One issue raised by the defendants was whether the plaintiff’s claim for breach of representations and warranties was timely brought. The court held that it was, explaining:
The court rejects defendants’ claim that the action is time-barred because it was filed more than six years after the July 1, 2007 “as of” or “effective date” of the [governing agreements]. In claiming that the action is time-barred defendants equate the “as of” dates of the governing agreements with the effective dates. Defendants do not argue that the execution dates are the same as the “as of’ dates. Nor do they dispute that the representations and warranties were made as of the July 31, 2007 Closing Date.
The authority does not support defendants’ contention that the cause of action for breach of the representations and warranties accrues on the “as of’ date of an RMBS contract. As the Appellate Division has held in the RMBS context, claims for breaches of representations and warranties typically accrue at the time the contract containing the representations is executed. Even if a PSA is executed prior to the Closing Date, however, where the representations and warranties are made effective as of the Closing Date the claims accrue on that date and not earlier.
(Internal quotations and citations omitted) (emphasis added).