United States District Court, W.D. Kentucky, Louisville Division
MEMORANDUM OPINION AND ORDER
N. Stivers, United States District Court Judge
matter is before the Court on Defendant's Motion to
Dismiss (DN 20) and Plaintiff's Motion for Oral Argument
(DN 22). The motions are ripe for adjudication. For the
reasons outlined below, the motions are
STATEMENT OF FACTS AND CLAIMS
Century Mortgage Company (“Century”) is a
privately-held mortgage bank and Kentucky corporation
headquartered in Louisville, Kentucky. (Compl. ¶ 10, DN
1). Century's primary business involves the origination
and sale of residential mortgage loans. (Compl. ¶ 10).
Plaintiff EMC Mortgage, LLC (“EMC”) is a Delaware
corporation with its principal place of business located in
Lewisville, Texas. (Compl. ¶ 9).
February 1, 2005, Century and EMC entered into a Mortgage
Loan Purchase Agreement (“MLPA”) to purchase a
number of loans, including the eleven loans at issue in this
litigation. (Compl. ¶¶ 2, 7, 30; Compl. Ex. B, DN
5). The MLPA incorporated the Seller Guide, which sets forth
numerous representations and warranties concerning the
characteristics of the loans and the manner in which they
originated. (Compl. ¶¶ 2, 3, 14; Compl. Ex. A-1, DN
1-2 [hereinafter MLPA]; Compl. Ex. A-2, DN 1-3 [hereinafter
Seller Guide]). In the event of discovery of a breach of one
of more of the representations and warranties, the Seller
Guide required Century to cure the breach or, failing that,
to repurchase the loans from EMC. (Seller Guide 13). Both the
Seller Guide and the MLPA also include indemnification
provisions in the event of a breach. (Seller Guide 13; MLPA
purchasing the at-issue loans from Century, EMC either
securitized or sold the loans to third parties, including
residential mortgage backed securities (“RMBS”)
trusts and government sponsored entities such as
Federal National Mortgage Association (“Fannie
Mae”) or the Federal Home Loan Mortgage Corporation
(“Freddie Mac”) (collectively
“GSEs”), pursuant to pooling and servicing
agreements and/or mortgage loan purchase agreements
(“the Third Party Agreements”). (Compl.
¶¶ 4, 5). Under the Third Party Agreements, EMC
made representations and warranties to the Trusts and GSEs
about the Century loans that were materially identical to the
representations and warranties Century made to EMC. (Compl.
¶¶ 26-27). Furthermore, the Third Party Agreements
obligated EMC to repurchase any defective loan or to
compensate the Trust or GSEs for losses arising from any
breach of warranty or misrepresentation. (Compl. ¶¶
to the third-party sales, EMC became aware of alleged
breaches of the loan-level representations and warranties,
which triggered its potential obligations and liability to
the Third-Party Purchasers. (Compl. ¶ 6). EMC then
repurchased the at-issue mortgage loans or compensated the
Third Parties for their losses. (Compl. ¶ 6).
alleges that its breaches under the Third-Party Agreements
also constituted breaches of the corresponding
representations and warranties made by Century to EMC.
(Compl. ¶¶ 6, 31). Compensating or repurchasing the
loans from the third parties led EMC to incur losses in
excess of $1 million. (Compl. ¶¶ 6-7, 31-32).
According to EMC, Century is required per the indemnification
provision in the MLPA and Seller Guide to compensate EMC for
these losses. (Compl. ¶ 33). Between January 2013 and
August 2015, EMC notified Century of its obligation to
indemnify EMC for the losses it incurred in connection with
the subject loans, and Century has allegedly failed to honor
those demands. (Compl. ¶ 34, Compl. Ex. B).
Consequently, EMC filed this action seeking indemnity for its
losses incurred under the various agreements. (Compl.
Court has “original jurisdiction of all civil actions
where the matter in controversy exceeds the sum or value of
$75, 000, exclusive of interest and costs, and is between . .
. the citizens of different States . . . .” 28 U.S.C.
Defendant's Motion to Dismiss
complaint must contain “a short and plain statement of
the claim showing that the pleader is entitled to relief,
” and is subject to dismissal if it “fail[s] to
state a claim upon which relief can be granted.”
Fed.R.Civ.P. 8(a)(2); Fed. R. Civ. P 12(b)(6). When
considering a motion to dismiss, courts must presume all
factual allegations in the complaint to be true and make all
reasonable inferences in favor of the non-moving party.
Total Benefits Planning Agency, Inc. v. Anthem Blue Cross
& Blue Shield, 552 F.3d 430, 434 (6th Cir. 2008)
(citing Great Lakes Steel v. Deggendorf, 716 F.2d
1101, 1105 (6th Cir. 1983)). To survive a motion to dismiss
under Rule 12(b)(6), the plaintiff must allege “enough
facts to state a claim to relief that is plausible on its
face.” Traverse Bay Area Intermediate Sch. Dist. v.
Mich. Dep't of Educ., 615 F.3d 622, 627 (6th Cir.
2010) (internal quotation marks omitted) (quoting Bell
Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A
claim becomes plausible “when the plaintiff pleads
factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct
alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009) (citing Twombly, 550 U.S. at 556).
moving to dismiss, Century maintains that EMC's indemnity
claim is barred by the applicable statute of limitations. As
the Sixth Circuit has noted, however, “before
discovery, [a plaintiff] [has] no duty to ‘respond to a
motion to dismiss with affirmative matter raising a triable
issue of fact on an affirmative defense.'”
Michalak v. LVNV Funding, LLC, 604 F. App'x 492,
494 (6th ...