PACIFIC LIFE INSURANCE COMPANY PACIFIC LIFE ANNUITY COMPANY v. THE BANK OF NEW YORK MELLON (2024)

REPORT AND RECOMMENDATION TO HON. KATHERINE POLK FAILLA: SUMMARY JUDGMENT (PART II)

Plaintiffs Pacific Life Insurance Company and Pacific Life & Annuity Company (collectively “PacLife”) sued the Bank of New York Mellon (“Mellon”), claiming that Mellon breached its contractual and fiduciary duties and was negligent as trustee of 13 residential mortgage-backed security (“RMBS”) trusts (the “Trusts”) sponsored by Countrywide Home Loans, Inc. (“Countrywide”). The parties completed discovery and cross-moved for summary judgment in 2022. As the parties had moved on numerous grounds, the Court first tackled jurisdictional, procedural, and other issues most likely to affect the scope of the case. In particular, the Court addressed issues concerning standing, preclusion, statute of limitations, certain additional affirmative defenses, and PacLife's tort claims. With respect to preclusion, the Court determined that a settlement with Countrywide (the “Settlement”) precluded PacLife's claims for at least matters preceding the Settlement. The instant decision now resolves the remaining issues, which concern PacLife's claims related to events of default (“EODs”) occurring after court approval of the Settlement.

BACKGROUND

This Report and Recommendation follows on the heels of several earlier substantive decisions in the case, including: Pacific Life Insurance Co. v. Bank of New York Mellon, 17-CV-1388, 2018 WL 1382105 (S.D.N.Y. March 16, 2018) (“PacLife I”) (granting in part and denying in part Mellon's motion to dismiss); Pacific Life Insurance Co. v. Bank of New York Mellon, 17-CV-1388, 2018 WL 1871174 (S.D.N.Y. Apr. 17, 2018) (“PacLife II”) (denying Mellon's motion for reconsideration); Pacific Life Insurance Co. v. Bank of New York Mellon, 17-CV-1388, 2022 WL 1446552 (S.D.N.Y. Feb. 22, 2022) (“PacLife III”) (report and recommendation (“R&R”) addressing affirmative defenses and tort claims); Pacific Life Insurance Co. v. Bank of New York Mellon, 17-CV-1388, 2023 WL 5128079 (S.D.N.Y. Aug. 10, 2023) (“PacLife IV”) (adopting R&R in most respects). The Court assumes the parties’ familiarity with the facts and procedural history of this case and the factual statements set forth in PacLife I, II, III, and IV.

As noted in PacLife III, “the landscape of RMBS basics has been well-trod.” 2022 WL 1446552 at *2 (citing cases). The Second Circuit has succinctly described the parties to and structure of RMBS:

“To raise funds for new mortgages, a mortgage lender sells pools of mortgages into trusts created to receive the stream of interest and principal payments from the mortgage borrowers. The right to receive trust income is parceled into certificates and sold to investors, called certificateholders. The trustee hires a mortgage servicer to administer the mortgages by enforcing the mortgage terms and administering payments. The terms of the securitization trusts as well as the rights, duties, and obligations of the trustee, seller, and servicer are set forth in a Pooling and Servicing Agreement.”

Blackrock Financial Management, Inc. v. The Segregated Account Of Ambac Assurance Corp., 673 F.3d 169, 173 (2d Cir. 2012). Here, the relevant agreements for the trusts at issue are referred to collectively as the “Governing Agreements.”

PACLIFE IV

In PacLife IV, the Court resolved the first tranche of summary judgment issues as follows. First, the Court held that PacLife has standing to assert claims for RMBS security certificates that it had sold. 2023 WL 5128079 at *4-9. As a result, all of the Trusts on which PacLife sued are still in play.

Second, the Court held that the Settlement precludes all of PacLife's claims based on events pre-existing the Settlement, id. at *9-24, but not all of those based on events post-dating the Settlement, id. at *24-25. In its limited objections to PacLife III, Mellon urged the Court “to expand [PacLife III]’s preclusion analysis to effectively encompass all of [PacLife]’s claims.” PacLife IV, 2023 WL 5128079, at *24 (emphasis added). District Judge Failla declined to pass upon those objections in PacLife IV, noting that “[Mellon]’s objection invites consideration of a whole host of issues that are not clearly addressed by the parties in the underlying summary judgment briefing and that are subject to a fair amount of ambiguity concerning [PacLife's] servicing expert's opinion and interpretation of the post-servicing standards set by the Settlement.” Id. at *25; see also id. n.17. In adopting the preclusion analysis of PacLife III, Judge Failla acknowledged that she was remanding the case for consideration of remaining issues and saw “no reason to go beyond Judge Lehrburger's explicit preclusion findings at this juncture.” Id. The Court thus left open the issue of the extent to which post-Settlement claims are precluded.

Third, the Court found that PacLife's pre-Settlement claims additionally are barred by the statute of limitations. Id. at * 25-32. Fourth, the Court granted summary judgment to Mellon dismissing PacLife's tort claims. Id. at *32-34. Fifth, the Court granted summary judgment to PacLife dismissing several of Mellon's affirmative defenses, including those based on champerty, monoline insurance, collateral source, mitigation, and reliance. Id. at *34. Finally, the Court denied summary judgment with respect to Mellon's request to dismiss claims for two trusts that incurred no monetary damages. Id.

THE CURRENT ISSUES

At the end of PacLife IV, Judge Failla referred the matter back to me for proceedings consistent with the opinion and to resolve the remaining summary judgment issues. 2023 WL 5128079 at *34. At my request, the parties each submitted a supplemental brief setting forth their respective views of the issues remaining to be decided in the wake of PacLife IV. (Dkts. 328-29.) The Court heard oral argument on December 7, 2023. Unsurprisingly, the parties do not share the same view.

PacLife contends that “[t]he net effect of the [Court's] rulings is that Plaintiff's post-Settlement breach of contract claims remain alive after [PacLife IV].” (PacLife Supp. Mem. at 2.¹ ) In particular, “[t]he relevant issues are whether Events of Default (“EODs”) occurred and whether [Mellon] fulfilled its duties to pursue remedies against the Master Servicer [i.e., Countrywide] for its post-Settlement servicing-related failures.”² Id. at 3. PacLife argues that Mellon's motion for summary judgment on those claims should be denied because courts in this District have repeatedly rejected trustees’ motions for summary judgment regarding EOD claims. Id. (citing cases).

Mellon has a different perspective. Mellon argues that PacLife's post-Settlement claims are foreclosed by the Settlement's broad release of both past and future claims (the “Settlement Release”), and that Judge Failla did not hold otherwise, instead referring the question back to me. (Mellon Supp. Mem. at 1, 4-8.) Mellon further argues that although a post-Settlement claim could be viable for a claim of breach of the Settlement's augmented servicing provisions, PacLife has not asserted any such claim and, in any event, failed to develop and provide any such evidence on summary judgment. (Id. at 8-10.) In the event the Court were to find that post-Settlement EOD claims are not foreclosed, Mellon contends there is no genuine dispute that the servicing failures asserted by PacLife either did not occur or do not otherwise give rise to an EOD, that Mellon did not have the requisite notice of the alleged EODs, and that Mellon did not improperly fail to act on any actual EODs. (Id. at 10.)

There are several categories of post-Settlement EODs at issue.³ They are, in each case, an alleged default by the master servicer (i.e., Countrywide),⁴ about which Mellon allegedly knew or should have known, and for which Mellon allegedly is liable for not taking appropriate action. (See Dkt. 332.) The relevant EOD categories consist of the following: Countrywide's (1) failure to maintain an eligible bank account for holding investor funds and depositing payments received (“Ineligible Account EODs”); (2) liquidation of loans with uncured document exceptions (“Liquidation EODs”); (3) failure to properly attend to properties for which Countrywide became the owner – so-called “Real Estate Owned” or “REO” properties (“REO EODs”); (4) failure to comply with requisite foreclosure timelines, and foreclosing without curing document defects (“Foreclosure EODs”); and (5) failure to repurchase modified loans (“Modified Loan EODs”).⁵

There is an additional EOD category that PacLife contends is at issue but which indisputably is not because the alleged EODs all occurred pre-Settlement, not post-Settlement. Eight of the Trusts at issue are so-called Reg-AB Trusts.⁶ (See Houpt Decl. Ex. 57 at 10 (identifying the Reg-AB Trusts).⁷ ) Reg-AB Reports are annual compliance statements issued by loan servicers such as Countrywide. (See id.) PacLife alleges that various Reg-AB Reports issued by Countrywide both contained admissions of Countrywide servicing EODs and at the same failed to disclose other EODs. (PacLife SJ Mem. at 8-9.⁸ ) According to PacLife, “Reg AB compliance-statement admissions constituted both EODs and notice of those EODs.” (PacLife SJ Mem. at 8 (citing Commerzbank AG v. U.S. Bank National Association, 457 F. Supp.3d 233 (S.D.N.Y. 2020)).)

The Reg-AB Reports identified by PacLife, however, cover servicing for only the years 2011-2014. (Dkt. 332 at 3 (Servicer Admissions – Reg-AB Trusts – “EODs occurred in 2011-2014”, and 4 (Master Servicer reporting – Failure to Disclose Non-compliance – EODs occurred in 2011-2014); see also Houpt Decl. Ex. 57 at 10-16 (identifying relevant reports, last of which is dated February 24, 2015).) Yet the Settlement released Countrywide from, and precludes PacLife from claiming Mellon failed to act on, all servicing-related actions or inactions prior to court approval of the Settlement, which occurred on March 5, 2015 (the “Approval Date”). In re Bank of Mellon, 127 A.D.3d 120, 4 N.Y.S.3d 204 (1st Dep't 2015). (See Settlement ¶¶ 5 and 10(b) (identifying the Approval Date as the demarcation between “before” (i.e., “pre”) and “after” (i.e,, “post”) claims.⁹ ) Accordingly, Mellon cannot be held liable for failing to act on EODs set forth in or omitted from Countrywide's Reg-AB Reports and should be granted summary judgment as to claims based on those alleged EODs.¹⁰

Likewise, as discussed below, the Court concludes that Mellon should be granted summary judgment on PacLife's remaining EOD claims; they are precluded for the same reason the Court previously found PacLife's pre-Settlement EOD claims to be precluded: namely, the Settlement and the Settlement Release.

SUMMARY JUDGMENT STANDARDS

To obtain summary judgment under Rule 56 of the Federal Rules of Civil Procedure, the movant must show that there is no genuine dispute of material fact. Fed. R. Civ. P. 56(a). A fact is material “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The moving party bears the initial burden of identifying “the absence of a genuine issue of material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The opposing party must then come forward with specific materials establishing the existence of a genuine dispute. Anderson, 477 U.S. at 248; Geyer v. Choinski, 262 F. App'x 318, 318 (2d Cir. 2008). Where the nonmoving party fails to make “a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial,” summary judgment must be granted. Celotex, 477 U.S. at 322; accord El-Nahal v. Yassky, 835 F.3d 248, 252 (2d Cir. 2016).

The moving party may demonstrate the absence of a genuine issue of material fact “ ‘in either of two ways: (1) by submitting evidence that negates an essential element of the non-moving party's claim, or (2) by demonstrating that the non-moving party's evidence is insufficient to establish an essential element of the non-moving party's claim.’ ” Nick's Garage, Inc. v. Progressive Casualty Insurance Co., 875 F.3d 107, 114 (2d Cir. 2017) (quoting Farid v. Smith, 850 F.2d 917, 924 (2d Cir. 1988)). A party asserting that a fact cannot be, or is genuinely, disputed “must support the assertion by” either “citing to particular parts of materials in the record” or “showing that the materials cited do not establish the absence or presence of a genuine dispute, or that an adverse party cannot produce admissible evidence to support the fact.” Fed. R. Civ. P. 56(c)(1); see also Powell v. National Board of Medical Examiners, 364 F.3d 79, 84 (2d Cir. 2004) (if movant demonstrates absence of genuine issue of material fact, nonmovant bears burden of demonstrating “specific facts showing that there is a genuine issue for trial”) (citation omitted).

In assessing the record to determine whether there is a genuine issue of material fact, a court must resolve all ambiguities and draw all reasonable inferences in favor of the nonmoving party. Anderson, 477 U.S. at 255; Smith v. Barnesandnoble.com, LLC, 839 F.3d 163, 166 (2d Cir. 2016); Sutera v. Schering Corp., 73 F.3d 13, 16 (2d Cir. 1995) (“The district court must draw all reasonable inferences and resolve all ambiguities in favor of the nonmoving party and grant summary judgment only if no reasonable trier of fact could find in favor of the nonmoving party.”). The court must inquire whether “there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party.” Anderson, 477 U.S. at 249. Summary judgment may be granted, however, where the nonmovant's evidence is conclusory, speculative, or not significantly probative. Id. at 249-50. If there is nothing more than a “metaphysical doubt as to the material facts,” summary judgment is proper. Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986).

DISCUSSION

The issues before the Court are whether either party has established the absence of genuinely disputed material facts with respect to (1) the extent to which the Settlement Release forecloses PacLife's post-Settlement EOD claims; (2) whether post-Settlement EODs occurred; (3) whether Mellon received the requisite notice of EODs sufficient to trigger any duty to act; and (4) whether Mellon had a duty to act on the EODs of which it had notice. Because resolution of the first issue disposes of PacLife's remaining claims, the Court's discussion begins and ends with analysis of that issue.

To determine the extent to which the Settlement Release precludes PacLife's post-Settlement EOD claims, the Court must consider the contractual language set forth in the Settlement.¹¹ The Settlement Release is quite clear in some respects and less so in others that are not outcome determinative in this instance. As relevant here, Paragraph 9 of the Settlement provides, “except as set forth in Paragraph 10,” a “complete release” with respect to, among other things, “the servicing” of the loans held by the Trusts “in all cases prior to or after the Approval Date.” (Settlement ¶ 9 (emphasis added).) That statement of what is released is straight-forward. All claims based on servicing of the loans are released both before and after March 5, 2015 (the Approval Date), except as set forth in Paragraph 10. Paragraph 10, however, denominated as “Claims Not Released,” is more challenging to parse.

Paragraph 10 has two subsections, (a) and (b). Paragraph 10(a) is denominated “Administration of the Mortgage Loans.” It states, in relevant part, that the release “does not include claims ․ in connection with ․ the ministerial operation and administration of the Covered Trusts” ․ “unless, as of the Signing Date [i.e., the date of the Settlement's signing], the Trustee [i.e., Mellon] has or should have knowledge of the action, inactions, or practices of the Master Servicer in connection with such matters.” (Settlement ¶ 10(a) (emphasis added).) In other words, claims against Countrywide concerning administration of the Trusts are not released except that those claims are released if Mellon had knowledge or should have known of the basis for the claim.

Of the EOD categories at issue, only one falls within the ambit of Paragraph 10(a) of the Settlement Release: PacLife's claim that EODs occurred when Countrywide deposited funds generated by the loans in an account deemed ineligible under the relevant Governing Agreement.¹² All of PacLife's EOD claims against Mellon, including claims based on Ineligible Account EODs, are premised on allegations that Mellon had either actual or constructive notice of those EODs. (See, e.g., Houpt Decl. Ex. 57 at 3 (charging Mellon employees with knowledge of all EODs); 5-6 (setting out facts specifically as to Ineligible Account EODs).) Those same allegations, however, bring the Ineligible Account EOD claims within the scope of administrative-related claims released because they are ones about which Mellon “has or should have knowledge.” (See Settlement ¶ 10(a).) PacLife's Ineligible Account EOD claims thus cannot survive summary judgment, and summary judgment should be granted in favor of Mellon for those EOD claims.

The four remaining EOD categories all relate to servicing of the loans in the Trusts and therefore are governed by Paragraph 10(b), denominated “Servicing of the Mortgage Loans.” While Paragraph 10(a) is couched in terms of claims not included by the Settlement Release, Paragraph 10(b) is phrased in terms of what the release under Paragraph 9 does include. In relevant part, Paragraph 10(b) provides:

[T]he release and waiver in Paragraph 9 includes: (i) all claims based in whole or in part on any actions, inactions, or practices of the Master Servicer prior to the Approval Date as to the servicing of the Mortgage Loans held by the Covered Trusts; and (ii) as to all actions, inactions, or practices by the Master Servicer after the Approval Date, only (A) actions, inactions, and practices that relate to the aspects of servicing addressed in whole or in part by the [servicing] provisions of Paragraph 5 (material compliance with which shall satisfy the Master Servicer's obligation to service the Mortgage Loans prudently in accordance with all relevant sections of the Governing Agreements) and (B) actions, inactions, or practices that relate to the aspects of servicing not addressed by the provisions of Paragraph 5 that are consistent with (or improvements over) the Master Servicer's course of conduct prior to the Signing Date.

(Settlement ¶ 10(b) (emphases added).)

As the quoted language shows, the Settlement Release distinguishes between pre-Approval Date servicer conduct and post-Approval Date servicer conduct. Claims based on all pre-Approval Date servicer conduct are released without qualification. As to post-Approval Date servicer conduct, the Settlement Release describes two categories of released claims based on whether the conduct at issue touches upon aspects of servicing covered by Paragraph 5 of the Settlement. Paragraph 5 of the Settlement sets forth specific servicing requirements covering a range of subjects such as foreclosure timelines and modified loans. (Settlement ¶ 5.) For aspects of servicing addressed in part or in whole by Paragraph 5 of the Settlement, post-Approval Date claims are released, although, as set forth elsewhere in the Settlement and suggested by the language of the Settlement Release, claims could be brought for Countrywide's failure to materially comply with Paragraph 5's standards. (See Settlement ¶¶ 5 and 10(f).) For aspects of servicing not addressed at all by Paragraph 5, post-Approval Date claims are released only if the servicing conduct is consistent with or better than the Master Servicer's conduct prior to signing of the Settlement.

Having parsed relevant terms of the Settlement Release, the Court turns back to answering the question of whether the four remaining categories of EOD claims are indisputably precluded by the Settlement Release. In short, they are – each category is based on post-Approval Date servicing conduct addressed in whole or in part by Paragraph 5. Foreclosure timelines are addressed in Paragraph 5(c). (Settlement ¶ 5(c); see also Oral Arg. Tr. at 5-6 (PacLife counsel acknowledging that foreclosure timelines are addressed in Paragraph 5).) The remaining categories – liquidation of loans, foreclosure of loans, maintenance of REOs, and repurchase of modified loans – all are encompassed, at least in part, by Paragraph 5(e), which broadly addresses factors to be considered with respect to “loss mitigation strategies” for dealing with distressed loans. (Settlement ¶ 5(e); see also Oral Arg. Tr. at 7 (PacLife counsel acknowledging that Paragraph 5 covers “loss mitigation, so that's a broad set of the activities a servicer does that's at issue in this case,” and, although “not exactly sure about what falls within” aspects of servicing not covered at all by Paragraph 5, identifying only ineligible accounts as an example). All such claims are released. And, because none of the at-issue EOD categories are aspects of servicing not addressed in whole or in part by Paragraph 5, consistency with or improvement upon servicing conduct prior to signing of the Settlement is irrelevant to the instant motion, as is whether or not that language is ambiguous or fraught with disputed issues of material fact. (See Oral Arg. Tr. at 7 (PacLife arguing that consistency with prior conduct standard is ambiguous).)

PacLife argues otherwise, focusing in particular on language in the Settlement that “[n]othing in this Settlement Agreement is intended to, or does, amend any of the Governing Agreements.” (Settlement ¶ 21; see also id. ¶ 5(g) (“Nothing in this Paragraph 5 is, or shall be construed to be, an amendment of any Governing Agreement”).) But that argument is inapt. Whether the Governing Agreements were or were not amended in any way by the Settlement does not affect the scope of claims released by the Settlement.

At oral argument, PacLife argued that the Settlement Release was ambiguous as to the claims not released. (Oral Arg. Tr. at 4.) Putting aside the fact that PacLife never argued ambiguity in its briefing, the relevant release language is not ambiguous. To be ambiguous, the language of the contract must be susceptible to more than one reasonable interpretation. Summit Health, Inc. v. APS Healthcare Bethesda, Inc., 993 F. Supp.2d 379, 391 (S.D.N.Y. 2014) (“a contract is ambiguous where its language is susceptible to multiple reasonable interpretations”). PacLife has not offered any such alternative with respect to the language governing the claims released. PacLife has pointed out potential ambiguity with respect to the governing post-Settlement servicing standards and the continuing vitality of the standards set forth by the Governing Agreements. (See Oral Arg. Tr. at 23-24.) But ambiguity in that respect does not give rise to ambiguity in the scope of claims released vis-à-vis the EOD-based claims at issue here.

For the same reason, PacLife gains no traction by arguing, as it did for the first time in reply, that its proof with respect to EODs in violation of the standards of the Governing Agreements necessarily demonstrates EODs in violation of Paragraph 5 of the Settlement. (Dkt. 275 at 22-23.) More particularly, PacLife argues that the findings and conclusions of its servicing expert, Ingrid Beckles, that numerous EODs occurred based on the standards applicable under the Governing Agreements, apply equally if not more so to the standards applicable under Paragraph 5 of the Settlement because the Paragraph 5 requirements are, as Mellon itself has argued, stricter than those under the Governing Agreements.¹³ (Id. (“Given Plaintiffs’ evidence that the Master Servicer failed to satisfy the [Underlying Agreements]’s minimum servicing standards ․, by definition, the Master Servicer did not meet the ‘higher level’ [Mellon] said the Settlement required”) (citing expert Beckles report); see also Oral Arg. Tr. at 14-15 (Mellon counsel explaining that in connection with approval of Settlement, expert opined that Paragraph 5 standards were “either at current standards or it's above current standards. And so that gave us comfort that by imposing paragraph five and releasing the vague prudent servicing standard, we were not lowering the standard.”).)

PacLife's argument again conflates the distinctly separate issues of governing servicing standards and the scope of claims released by the Settlement. Further, over six years of litigation, from commencement of the lawsuit and throughout discovery, PacLife nowhere alleged that Mellon failed to act on EODs that constitute breaches of the standards imposed under Paragraph 5 of the Settlement (or any other provision of the Settlement for that matter). PacLife concedes as much. (See Oral Arg. Tr. at 31 (PacLife counsel stating “it's correct that we don't allege a claim for breach of the [Settlement] contract, that's not our claim).)¹⁴

Finally, to the extent PacLife suggests otherwise, the Court's conclusion that PacLife's post-Settlement EOD claims are precluded is consistent with the Court's assessment of the issue in PacLife III. In PacLife III, I agreed, “to a certain extent,” with Mellon that “under the Settlement even post-Settlement servicing claims are res judicata because the Settlement released Countrywide from liability for post-Settlement servicing activity.” 2022 WL 1446552 at *24. At the same time, I stated that the Settlement did not preclude claims “based on post-settlement events” in their entirety. 2022 WL 1446552 at *25. That remains true – the Settlement does not preclude claims based on Mellon's knowledge and obligations with respect to EODs in violation of the Settlement; nor does it foreclose claims not released by the Settlement, such as those under Paragraph 10(b)(ii)(B).

Further, the Court, at the time, predicated its conclusion that at least some of PacLife's post-Settlement servicing claims were not precluded on the alleged admissions of EODs in Countrywide's annual reporting between 2012-2015. Although those years post-date signing of the Settlement, however, they do not post-date approval of the Settlement. As explained above, the relevant dividing line for pre- and post-Settlement events is approval, and because the 2012-2015 annual reporting addressed only EODs preceding the Settlement's Approval Date, PacLife's claims based on those EODs are precluded. To be sure, that was just as true at the time the Court issued PacLife III. There, however, the Court framed its analysis in terms of pre- and post-Settlement without accounting for the difference between the signing and approval dates.

In sum, PacLife's post-Settlement EOD claims are precluded by the Settlement, and Mellon is entitled to summary judgment dismissing PacLife's remaining claims. The Court therefore does not address the issues of whether either party is entitled to summary judgment on whether EODs occurred, whether Mellon received requisite notice of those EODs, and whether Mellon fulfilled its obligations to act on those EODs.

CONCLUSION

For the foregoing reasons, I recommend that the Court find that PacLife's remaining claims are precluded by virtue of the Settlement and that summary judgment be granted in favor of Mellon.

DEADLINE TO OBJECT AND APPEAL

Pursuant to 28 U.S.C. § 636(b)(1) and Rules 72, 6(a), and 6(d) of the Federal Rules of Civil Procedure, the parties have fourteen (14) days to file written objections to this Report and Recommendation. Such objections shall be filed with the Clerk of Court, with extra copies delivered to the Chambers of the Honorable Katherine Polk Failla, United States Courthouse, 40 Foley Square, New York, New York 10007, and to the Chambers of the undersigned, 500 Pearl Street, New York, New York 1007. FAILURE TO FILE TIMELY OBJECTIONS WILL RESULT IN WAIVER OF OBJECTIONS AND PRECLUDE APPELLATE REVIEW.

FOOTNOTES

1.   “PacLife Supp. Mem.” refers to Plaintiffs’ Memorandum Regarding Outstanding Issues In The Parties’ Motions For Summary Judgment” at Dkt. 328. “Mellon Supp. Mem.” refers to Mellon's Supplemental Memorandum Of Law In Further Support Of Its Motion For Summary Judgment at Dkt. 329.

2.   Statutes of limitation are not an impediment to the post-Settlement claims. Under the Court's adoption of the “stacking” framework, PacLife IV at *29 n.21, all of PacLife's post-Settlement claims are timely. (See PacLife Supp. Mem. at 3 (“Because ․ Judge Failla's limitations analysis renders timely PacLife's claims brought within ten years of [Mellon]’s breaches (i.e., 6 years for [Mellon] to enforce and 4 years thereafter for PacLife to sue), all claims for post-Settlement breaches are timely.”)

3.   PacLife identified the categories of post-Settlement EODs in dispute by a separate filing in response to the Court's request following the first summary judgment decision in PacLife IV. (See Dkt. 332).

4.   Countrywide was acquired by Bank of America in 2008.

5.   At oral argument, PacLife confirmed that there are no other post-Settlement servicing EODs at issue beyond those covered by the specific categories identified above despite sometimes referring generally to Countrywide's violation of servicing standards under the Governing Agreements. (Oral Argument Transcript (“Oral Arg. Tr.”), Dkt. 338 at 34-35.)

6.   “Reg-AB” refers to the SEC's regulations for asset-backed securities informally called “Regulation AB.” See 17 C.F.R. 229.1100, et seq.

7.   “Houpt Decl.” refers to the Declaration of Christopher J. Houpt filed on June 7, 2021 at Dkt. 234. Exhibit 57 is PacLife's supplemental interrogatory responses in which PacLife details its contentions about the EODs it alleges.

8.   “PacLife SJ Mem.” refers to Plaintiffs’ Memorandum Of Law In Opposition To Defendant's Motion For Summary Judgment And In Support Of Their Cross-Motion For Partial Summary Judgment at Dkt. 256.

9.   The Settlement Agreement can be found at Exhibit 17 to the Houpt Declaration.

10.   In PacLife III, I made the observation that res judicata based on the Settlement would not apply to admissions of EODs in the Reg-AB Reports “[t]o the extent the events of default reported (or collateral report issues such as failure to provide, or timely provide, a report) are based on post-Settlement events.” 2022 WL 1446552, at *25. Because all of the Reg-AB reports PacLife asserts as a basis for liability issued prior to the Settlement Approval Date, all of the claims against Mellon for failure to act on EODs reported in the Reg-AB reports are barred. Put another way, there are no post-Settlement events with respect to the Reg-AB Reports, and thus no surviving Reg-AB Report-related claims. Moreover, PacLife concedes that EODs reported in the Reg-AB Reports are duplicative of, not in addition to, the other categories of EODs alleged. (Oral Arg. Tr. at 34.)

11.   The Settlement is governed by New York law. (Settlement ¶ 23.) “A settlement agreement is a contract that is interpreted according to general principles of contract law.” Powell v. Omnicon, 497 F.3d 124, 128 (2d Cir. 2007). “As with any issue of contract interpretation, the court begins with the language of the contracts at issue.” Biremis, Corp. v. Merrill Lynch, Pierce, Fenner & Smith Inc., No. 11-CV-4934, 2012 WL 760564, at *5 (E.D.N.Y. March 8, 2012).

12.   At oral argument, PacLife's counsel asserted that Ineligible Account EODs fell within the ambit of Settlement Paragraph 10(b)(ii)(B) as described further below (i.e., “actions ․ that relate to the aspects of servicing not addressed by the provisions of Paragraph 5”). (Oral Arg. Tr. at 7.) The plain language of Paragraph 10(a) indicates otherwise, referencing “action, inaction, or practices of the Master Servicer in its aggregation and remittance of Mortgage Loan payments, accounting for principal and interest, ․ and the ministerial operation and administration of the Covered Trusts.” (Settlement ¶ 10(a).) See Krumme v. WestPoint Stevens Inc., 238 F.3d 133, 139 (2d Cir. 2000) (“When interpreting an unambiguous contract, words and phrases are given their plain meaning”) (citation omitted); Wang v. Paterson, No. 07-CV-2032, 2008 WL 5272736, at *4 (S.D.N.Y. Dec. 18, 2008) (“Where the language of the release is clear, effect must be given to the intent of the parties as indicated by the language employed”) (citation omitted). PacLife's interrogatory responses specifically characterize the bank accounts at issue as those “for holding investor funds and depositing payments received” and held “in the name of the Master Servicer for the benefit of the Trustee on behalf of Certificateholders.” (Houpt Decl. Ex. 57 at 3-4.) Whether the investor fund accounts are eligible or ineligible thus has nothing to do with the servicing of the mortgage loans and everything to do with “aggregation and remittance of Mortgage Loan payments” and “ministerial operation and administration” of the trusts.

13.   The Paragraph 5 servicing standards do not entirely supplant the standards of the Governing Agreements. To the contrary, the Paragraph 5 standards expressly incorporate standards from the Governing Agreements in several respects. (See, e.g., Settlement ¶ 5(a) at pp. 22, 24, 25.) Moreover, Paragraph 5 is not couched in terms of replacing servicing standards of the Governing Agreements but instead provides that Countrywide shall implement Paragraph 5's “servicing improvements” and that material compliance with those provisions “shall satisfy” Countrywide's “obligation to service the Mortgage Loans prudently in accordance with the relevant provisions of the Governing Agreements.” (Settlement Agreement ¶ 5 at p.14.) As explained above, however, the question of which servicing standards govern surviving EOD claims is distinct from the question of what EOD claims were released under the Settlement.

14.   Nor could PacLife now introduce such a claim at this late juncture. See Fed. R. Civ. P. 16(b) (requiring good cause to amend expired court-ordered deadline). To do so would severely prejudice Mellon. For example, discovery did not address servicing standards under Paragraph 5 of the Settlement, and Mellon's servicing expert had no opportunity to respond on the issue. And, even if PacLife could proceed with a claim based on Mellon's knowledge of and failure to act on EODs in violation of Paragraph 5 of the Settlement, or its argument that any EOD under the Governing Agreement servicing standards constitutes an EOD under Paragraph 5's standards, PacLife still would face evidentiary hurdles. For example, Ms. Beckles’ expert report does not appear to isolate and analyze EODs post-dating the Settlement Approval Date; to the contrary, it appears largely based on servicing failures and EODs preceding that date. The briefing with respect to that issue, however, is not developed, and the Court does not rest any part of the instant decision on that basis.

Robert W. Lehrburger United States Magistrate Judge