Allstate Ins. Co. v. Credit Suisse Sec. (USA) LLC

Allstate Ins. Co. v. Credit Suisse Sec. (USA) LLC

Opinion

Marcy S. Friedman, J.

This fraud action arises out of the Allstate plaintiffs' purchase of residential mortgage backed securities (RMBS) Certificates from the Credit Suisse defendants.¹ Defendants move to dismiss the Amended Complaint, pursuant to CPLR 3211 (a) (5) and (7), on the grounds that it is barred by the statute of limitations and fails to state a cause of action.

BACKGROUND / THE AMENDED COMPLAINT

Plaintiffs Allstate Insurance Company (Allstate Insurance) and Allstate Life Insurance Company (Allstate Life) are insurance companies domiciled in, and with their principal places of business in, Illinois. Allstate Life is a wholly-owned subsidiary of Allstate Insurance, which is the successor-in-interest  [***2] to Allstate Bank. Plaintiff Kennett Capital, Inc. is a Delaware  [****2]  corporation and, along with Allstate Insurance and Allstate Life, an indirect, wholly-owned subsidiary of non-party The Allstate Corporation. (Am. Compl., ¶¶ 14-17). Between December 2005 and November 2007, plaintiffs purchased $231,999,837 in RMBS Certificates from Credit Suisse First Boston Corporation, the predecessor to defendant Credit Suisse Securities (USA) LLC, in eleven offerings.²

The RMBS Certificates are mortgage pass-through securities which represent interests in a pool of mortgage loans. The cash flows from the borrowers who make interest and principal payments on the individual mortgages comprising the mortgage pool are "passed through" to the certificate holders. (Am. Compl., ¶ 33.)

The securities are created in a multi-step process which, according to the complaint, was entirely controlled by defendants. (Id., ¶ 18.)³ More particularly, a "sponsor" or "seller"  [****3]  originates the loans or acquires the loans from third-party lenders. (Id., ¶ 34.) Here, defendant DLJ Mortgage Capital, Inc. acted as the sponsor or seller (or both) for all of the securitizations at issue. It also originated and/or acquired some of the mortgage loans underlying ARMT 2005-6A, ARMT 2007-1, CSMC 2006-8, CSMC 2007-3 and CSMC 2007-5. (Id., ¶¶ 19, 61, 65.) Defendant Credit Suisse Financial Corporation originated a significant portion of the loans securitized in ARMT 2007-1, CSMC 2007-3, CSMC 2007-5, and HEMT 2006-2. (Id., ¶¶ 21, 61.) The remaining loans were originated by third-party mortgage lenders that received substantial "warehouse" lines of credit from  [***4] defendants to do so. These lenders included Countrywide Home Loans Inc. ("Countrywide"), Option One Mortgage Corp. ("Option One"), and Taylor, Bean and Whitaker Mortgage Corp. ("TBW"). (Id.,¶ 62.) Countrywide originated a significant percentage of loans underlying the ARMT 2007-1, CSMC 2006-8, CSMC 2007-3 and CSMC 2007-5 offerings (id., ¶ 165); Option One originated 100% of the mortgage loans underlying the ABSC 2006-HE5 offering (id., ¶ 180); and TBW originated 100% of the loans underlying the TBW 2006-4 offering. (Id., ¶ 189.)

After the loans are pooled, the sponsor transfers them to the "depositor," which is typically  [***5] a special-purpose affiliate of the sponsor. (Id., ¶ 35.) Here, the depositors for all of the securitizations were defendants Credit Suisse First Boston Mortgage Securities Corp. and Asset Backed Securities Corporation. (Id., ¶¶ 35, 67.)

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