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Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: September 19, 2019

First Department Approves Sampling in RMBS Actions

On September 17, 2019, the First Department issued a decision in Home Equity Mtge. Trust Series 2006-1 v DLJ Mtge. Capital, Inc., 2019 NY Slip Op 06576, holding that sampling was appropriate to determine both liability and damages in RMBS put-back actions, explaining:

The court correctly granted plaintiffs’ motion and denied defendant’s motion regarding the use of statistical sampling to prove plaintiffs’ breach of contract claims for both liability and damages. In 2013, the trustee sought approval from the court for the use of statistical sampling to prove liability and damages for its claims. On November 18, 2013, the court (Schweitzer, J.) ordered that the trustee may use statistical sampling to prove liability and damages, and ordered the parties to meet and confer as to the sample to be used. DLJ noticed an appeal from this order, but failed to withdraw or perfect the appeal. Thereafter, the parties spent four years agreeing on the correct loan files and underwriting guidelines for the sample loans, and engaged in extensive expert discovery. In light of DLJ’s failure to pursue an appeal from the court’s November 18, 2013 order, and given the extensive discovery already taken place on this issue, we find no reason in this case to disturb the court’s decision to permit the use of statistical sampling to prove liability and damages.

To the extent defendant challenges the sample size or the particular loans chosen to be included within the sample, defendant will have a further opportunity to raise those arguments, as the motion court noted that issues concerning the sufficiency of the sample itself will be addressed pre-trial in motions in limine.

The same day, the First Department issued a decision in Ambac Assur. Corp. v Countrywide Home Loans Inc., 2019 NY Slip Op 06570, making the same holding regarding RMBS monoline insurer actions, holding:

The court correctly denied the motion to preclude Ambac from using statistical sampling to prove its breach of contract claims in terms of both liability and damages. While the motion was not procedurally barred, we find that despite the language of the repurchase protocol, RMBS plaintiffs like Ambac are entitled to introduce sampling-related evidence to prove liability and damages in connection with repurchase claims.

(Internal citations omitted).

Schlam Stone & Dolan represents investors in RMBS actions against underwriters and trustees and in related proceedings, such as trust instruction proceedings where an RMBS trustee seeks court guidance regarding the management of an RMBS trust. If you or a client are RMBS investors and have questions regarding potential claims against a trustee or how to influence the trustee’s prosecution of a put back action like the one at issue here, contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com.

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