OPINION & ORDER U.S. Bank National Association serves as the trustee for a trust containing a pool of mortgage loans used to back residential mortgage-backed securities. After U.S. Bank learned that many of the loans were “junk” loans that failed to meet applicable underwriting standards, it brought suit against the seller of the loans and an affiliated company created to deposit the loans in the trust — Goldman Sachs Mortgage Company, L.P. (“GSMC”) and GS Mortgage Securities Corp. (“GSMSC”). The two defendants (collectively, “Goldman”) move to dismiss. Goldman principally contends that the agreement through which it transferred loans to the trust forbids the trustee from suing to enforce the agreement without GSMSC’s consent. It also contends that the agreement’s exclusive remedy provision bars U.S. Bank’s claims for damages. The Court disagrees, and so denies the motion except as to the failure-to-notify claims that U.S. Bank now abandons. I. Background For purposes of this motion, the Court takes as true all factual allegations in U.S. Bank’s complaint, Dkt. No. 22, and draws all reasonable inferences in its favor. In February 2007, Goldman entered into a Pooling and Servicing Agreement (“the PSA”) with U.S. Bank and other banking companies to securitize a pool of mortgages for sale as residential mortgage-backed securities (“RMBSs”). Complaint 22. In the typical process for issuing RMBSs, a sponsor originates or acquires mortgage loans, creates a trust and a special-purpose business entity to deposit the loans into that trust, and then transfers the mortgage loans to the trust via the depositor. Id. 17. The trust then issues certificates backed by the mortgage loans, which underwriters purchase and sell to investors. Id.
17-18. Investors, who lack access to the files for individual loans held in trust, rely on the sponsor’s representations and warranties about the quality of the loans in the pooling and servicing agreement. Id. 21. Goldman’s PSA followed this model. GSMC, as sponsor, transferred about 3,625 mortgage loans to the GSAMP 2007-HE1 trust via GSMSC, as depositor. The trust issued and sold about $607,700,200 in certificates to investors. Id. 25. U.S. Bank later succeeded LaSalle Bank as trustee of the trust. Id. 22. Under the PSA, “[t]he Depositor [GSMSC]…sells, transfers, assigns, sets over and otherwise conveys to the Trustee [now U.S. Bank] for the benefit of the Certificateholders, without recourse, all the right, title and interest of the Depositor in and to the Trust Fund, and the Trustee on behalf of the Trust, hereby accepts the Trust Fund.” PSA §2.01(a), Dkt. No. 22-1, at 69. The interest in the trust fund that GSMSC conveyed under the agreement “include[ed], without limitation, the Mortgage Loans, the Assignment Agreements, the Representations and Warranties Agreement, the Interest Rate Cap Agreement and the Interest Rate Swap Agreement.” Id. §2.01(d), Dkt. No. 22-1, at 73. That is, the PSA transferred all the depositor’s rights in the trust fund to the trustee, including all rights in the underlying mortgage loans and in the other agreements annexed to the PSA. Id.; see Complaint 33. Among these other agreements was the Representations and Warranties Agreement between GSMC and GSMSC (“the RWA”), included as Exhibit S to the PSA. The RWA requires GSMC to cure any breach of its warranty obligations that materially and adversely affects the value of the mortgage loans or the depositor’s interest therein or to repurchase the adversely affected loan. RWA §3(a), Dkt. No. 22-1, at 231. It designates cure or repurchase as the “sole remedy” for any breach of warranty. Id. §3(b), Dkt. No. 22-1, at 232. Following its general provisions, the RWA sets out detailed warranties as to the quality of the mortgage loans transferred to GSMSC, spanning five exhibits and approximately fifty printed pages. See id. Ex. I-V, Dkt. No. 22-1, at 234-285. This lengthy list of warranties is central to the PSA, because potential investors lack the information to independently assess the quality of the individual mortgage loans held by the trust. Complaint 21. The Pooling and Servicing Agreement does not leave this obvious conclusion to subtext. In the agreement’s only statement of policy, it declares that “it is the policy and intention of the Trust to acquire only Mortgage Loans meeting the requirements set forth in this Agreement.” PSA §2.01(e), Dkt. No. 22-1, at 73. To further effectuate this policy, the PSA requires the depositor to “use reasonable efforts to assist the Trustee in enforcing the obligations of the Sponsor [GSMC] under the applicable Assignment Agreement and the Representations and Warranties Agreement.” Id. §2.01, Dkt. No. 22-1, at 71. Section 2.07 charges the trustee to enforce the rights of the trust under the RWA and allows the use of trust funds for enforcement actions as follows: “Upon discovery…of a breach of a representation or warranty made by…the Sponsor pursuant to the Representation and Warranties Agreement, the party discovering such breach shall give prompt written notice thereof to the other parties to this Agreement…. The Trustee shall take such action, with the Depositor’s consent, with respect to such breach under the applicable Assignment Agreement or the Representations and Warranties Agreement, as applicable, as may be necessary or appropriate to enforce the rights of the Trust with respect thereto. In such event, the legal expenses and costs of such action and any liability resulting therefrom shall be expenses, costs and liabilities of the Trust Fund, and the Trustee shall be entitled to be reimbursed therefor out of the Collection Account.” PSA §2.07, Dkt. No. 22-1, at 77. U.S. Bank alleges that Goldman systematically betrayed its obligations under the PSA and RWA by turning a blind eye to indications that the mortgage loans it deposited in the trust were defective. Complaint
