Morgan Stanley 2014 Annual Report Download - page 51

On April 28, 2014, Deutsche Bank National Trust Company, in its capacity as trustee for Morgan Stanley
Structured Trust I 2007-1, filed a complaint against the Company. The matter is styled Deutsche Bank National
Trust Company v. Morgan Stanley Mortgage Capital Holdings LLC and is pending in the SDNY. The complaint
asserts claims for breach of contract and alleges, among other things, that the loans in the trust, which had an
original principal balance of approximately $735 million, breached various representations and warranties. The
complaint seeks, among other relief, specific performance of the loan breach remedy procedures in the
transaction documents, unspecified compensatory and/or rescissory damages, interest and costs. On July 21,
2014, the Company filed a motion to dismiss the complaint.
On September 19, 2014, Financial Guaranty Insurance Company (“FGIC”) filed a complaint against the
Company in the Supreme Court of the State of New York, New York County (“Supreme Court of New York”)
styled Financial Guaranty Insurance Company v. Morgan Stanley ABS Capital I Inc. et al. The complaint asserts
claims for breach of contract and alleges, among other things, that the net interest margin securities (“NIMS”) in
the trust breached various representations and warranties. FGIC issued a financial guaranty policy with respect to
certain notes that had an original balance of approximately $475 million. The complaint seeks, among other
relief, specific performance of the NIM breach remedy procedures in the transaction documents, unspecified
damages, reimbursement of certain payments made pursuant to the transaction documents, attorneys’ fees and
interest. On November 24, 2014, the Company filed a motion to dismiss the complaint.
On September 19, 2014, Deutsche Bank National Trust Company, in its capacity as trustee of Morgan Stanley
ABS Capital I Inc. Trust, Series 2007-NC4, filed a summons with notice against the Company in the Supreme
Court of New York styled Deutsche Bank National Trust Company, solely in its capacity as Trustee of the
Morgan Stanley ABS Capital I Inc. Trust, Series 2007-NC4 v. Morgan Stanley Mortgage Capital Holdings LLC,
as successor-by-merger to Morgan Stanley Mortgage Capital Inc., and Morgan Stanley ABS Capital I Inc. The
notice asserts claims for breach of contract and alleges, among other things, that the loans in the trust, which had
an original principal balance of approximately $1.05 billion, breached various representations and
warranties. The trustee filed its complaint on January 23, 2015, alleging breaches of representations and
warranties, the repurchase obligation, and the duty to notify, and seeking, among other relief, specific
performance of the loan breach remedy procedures in the transaction documents; compensatory, consequential,
rescissory, equitable and/or punitive damages; attorneys’ fees, costs and other related expenses, and interest.
On September 23, 2014, FGIC filed a complaint against the Company in the Supreme Court of New York styled
Financial Guaranty Insurance Company v. Morgan Stanley ABS Capital I Inc. et al. The complaint asserts
claims for breach of contract and fraudulent inducement and alleges, among other things, that the loans in the
trust breached various representations and warranties and defendants made untrue statements and material
omissions to induce FGIC to issue a financial guaranty policy on certain classes of certificates that had an
original balance of approximately $876 million. The complaint seeks, among other relief, specific performance
of the loan breach remedy procedures in the transaction documents, compensatory, consequential and punitive
damages, attorneys’ fees and interest. On November 24, 2014, the Company filed a motion to dismiss the
complaint.
Other Matters. On a case-by-case basis the Company has entered into agreements to toll the statute of
limitations applicable to potential civil claims related to RMBS, CDOs and other mortgage-related products and
services when the Company has concluded that it is in its interest to do so.
On October 18, 2011, the Company received a letter from Gibbs & Bruns LLP (the “Law Firm”), which is
purportedly representing a group of investment advisers and holders of mortgage pass-through certificates issued
by RMBS trusts that were sponsored or underwritten by the Company. The letter asserted that the Law Firm’s
clients collectively hold 25% or more of the voting rights in 17 RMBS trusts sponsored or underwritten by the
Company and that these trusts have an aggregate outstanding balance exceeding $6 billion. The letter alleged
generally that large numbers of mortgages in these trusts were sold or deposited into the trusts based on false
and/or fraudulent representations and warranties by the mortgage originators, sellers and/or depositors. The letter
also alleged generally that there is evidence suggesting that the Company has failed prudently to service
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