### INTHE UNI TED S TATESCOU RT OFAPPEALS FORTHE FIFTH CIRCU IT

N o. 08- 11038

LON E STAR FUN D V ( U S) , LP; LS F5 BON D H OLD I N G LLC P l ai n t i f fs - A pp el l an t s v. BARCL AYS BANK P LC ; BAR CL AYS CAP I TA L I NC D efen da n t s - A pp el l ees

A p p ea lf

rom the U n i ted S tates D i stri ct C ou rt f or t h e N ort h ern D i st ri ctof T exas

B ef ore JO N E S , C h i ef

Ju dg e, an d G A R Z Aan d S T E W A R T , C i rcui tJu dg es . E D IT H H . J O N E S , C h ie f J u d g e : L o n e S ta rF u n d V ( U .S .), L .P . a n d L S F 5 B o n d H o ld in g s , L L C (c o lle c tiv e ly

“ Lone St ar ” or “A ppel l ant s” ) al l ege t hatB ar c l ays B ank P LC and B ar c l ays C ap i t al , I n c. ( col l ect i vel y “ B arcl a y s” o r “A pp el l ees” ) eng aged i n a $60 m i l l i on f rau d rel ati n g t o m ort gag e- back ed securi t i es t h at B a rc la y s s ol d to L on e Star. The di s t r i c tc o ur tdi s m i s s e d t he c as e f o rfai l ur e t o s t at e a c l ai m . Bec aus e Lo ne S t ar fai l s t o a l l ege a m i srepresentat i on in li gh tof t h e “ repu rchase or s u bsti t u t e”
c l aus e s i n t he pa r t i e s ’ m or t ga ge - ba c ke d s e c ur i t i e s c o nt r ac t s , w e a f f i r m t he d is tr ic t c o u r t's d is m is s a l. United States Court of App eals Fifth Circuit 

### F I L E D Janua ry 11, 2010 Cha rl es R. F ulb ru g e II I Clerk Case: 08-11038 Document: 00511001283 Page: 1 Date Filed: 01/11/2010N o. 08- 11038

Appell ant s do not disputeNew Century’s in demnificatio nan dco ntrib utio n obligatio ns 1 toB arclay s. 2 I . B A CK GRO UND A m on g i t s ot h er enter pri ses, B a rc l ays sel l s m ort gag e- back ed securi t i es. A s t h ei r na m e su ggests , m ort gag e- back ed securi t i es are secured by p ool s of
m ort gag e s. T o gross l y si m pl i f y t h e ser i es of

t ran sact i on s i n vol ved here,
m ort gag e- back ed securi t i es w ork i n t h e f o ll o w ing m an n er: M ort gag es are c o l l e c t e d i nt o a t r us t , m o r t ga ge pa ym e nt s ar e s e nt t o t hat t r us t , t he n po o l e d, a nd t h en paid out t o t h e hol ders of t h e sec u ri t i es. Th e qu al i t y of t h e m ort gag e pool is cr u c ia l. If

th e m o r tg a g e p o o l co m p r is e s lo a n s w h o s e b o r r o w e r s co n s is te n tly pa y i n a t i m el y m an n er, sec u ri t i es hol ders w i l lrec ei ve a st ead y st ream of i n com e. I n contr ast, i f t h e m o rtg a g e p ooli s “ sub

- pri m e, ” or at r i sk f or m i ssed p a y me n t s , t h e n s e c u r i t i e s h o l d e r s ma y n o t r e c e i v e t h e f o r e c a s ti n c o me s t r e a m. D eli nq u en t m ortg a ge s resu l t i n sm a l l er p a ym en t st rea m s an d sm a l l er p a ym en ts to s e c u r itie s h o ld e r s . Th i s d i sp u te i n vo l ve s tw o se ts of m ortg a ge -ba ck ed secu ri ti es th a t Barc l ays sol d to L on e Star. To creat e t h e sec u ri t i es, i n 200 6, B arcl ays pu rchased
r e s i de nt i alm o r t ga ge s f r o m N C C ap i t alCor po r at i o n ( “ N e w Cent ur y” ) pur s uant t o th e M o r t g a g e L o a n P u r c h a s e A g r e e m e n t( “ M L P A ” ). A c c o r d in gt o t h e M L P A 's t e r m s , N e w Cent ur y ag r e e d t o i nde m ni f y andho l d ha r m l e s s Bar c l ay s ( o rpr o vi de contribu t i on ri gh t s w h ere i n dem n i t y m i gh tn otb e a vail able) a gainstal ll osses , c l a i m s , d a m a g e s , a n d l i a b i l i t i e s i n a v a r i e t y o f c i r c u m s t a n c e s , i n c l u d i n ga ny br e ac h o f

a re pr e s e nt at i o n a bo utt he m o r t ga ge s ( s uc h a s pa ym e ntde faul t s ) , a nd
a n y cl a i m s m ade a gai nstB ar c l ays by t hi r d par t i es . Thi s al l ow ed Barc l ays to 1
serve as an ef

fect i ve di st ribu t or of m o rtgage-backed sec u ri t i es. N ew C en t u ry
w o u ld b e a rth e ris k o f h a v in gs o ld b a d m o r tg a g e lo a n s , w h ile B a r c la y s co u ld f oc us o n packag i ng t he l oans i nt o s ec uri t i es a n d m ar ket i ng t hem t o po t ent i al in v e s to r s . Case: 08-11038 Document: 00511001283 Page: 2 Date Filed: 01/11/2010N o. 08- 11038

On April 2 , 20 07, however , N ewC entury file d for reorgani zationinDelaware, and 2 B arclay s l ater file d ap ro of of cl aimf

orp ot enti al in de mnif

ic ation . 3 A f t er purch asi n g t h e m ort gag es f rom N ew C en t u ry, B arcl ays pooled t h em i n t o t wo s e p a r a t e t r u s t s : t h e BR2 Tr u s ta n d t h e BR3 Tr u s t
. Th e BR2 a n d BR3 Trust s i ss ued t he s ec uri t i es t o Lone St ari n t w o s epar at e t r ansac t i ons . I n M ay 2 0 0 7 , B a r c la y s C a p ita l, In c . a s u n d e r w r ite r , so ld a p p r o x im a te ly$ 4 5 m illio n in
s e c ur i t i e s b a c ke d b yt he BR2 Tr us tm o r t g ages to L SF5 Bo ndH o l d i ng s , LLC purs uant t o a pr os pec t us and pro sp ec t us s uppl em ent(t he “ B R 2 Suppl em ent al P rospect u s” )

. I n Ju n e 2 0 0 7 , i n a si m i l ar t ran sact i on , B arcl ays C ap i t al , I n c.
u n d erw rote a p p rox i m a tel y $ 1 6 m i l l i on o f secu ri ti es b a ck ed by the B R 3 T ru st t o LSF5 Bond H o l di ngs , LLC pur s uant t o a pr o s pe c t us a nd p r o s pe c t us s upp l e m e nt ( t he “ B R 3 Supp l em ent alPro spe c t us” )

. Bot h t he B R 2 and B R 3 Suppl em ent al Pr o s pe c t us e s i nc l ude d, i nt e ra l i a, r e pr e s e nt at i o ns and war r ant i e s g uar ant e e i ng t h e qu al i t y of

t h e m ort gag e pool s, w h i ch toget h er c on t ai n ed m ore t h an t en t h ou san d resi den t i alm ort gag es. 2 S h o r tly a fte r th e p u r c h a s e s , L o n e S ta rd is c o v e r e d th a t 2 9 0 m o r tg a g e s in t h e B R 2 T rust w ere m ore t h an t h i rt y da ys overdu e ( “ del i n qu en t ” ) at t h e t i m e of pur c has e . I n a l e t t e rdat e d N o ve m be r7, 200 7, B ar c l ay s adm i t t e d t hat144 of t he
m ort gag es w ere del i n qu en t an d prom ptl y sub st i t u t ed new m ort gag es t o repl ace an y t h at w ere s t i l ldel i n qu en t
. Lon e Star i n vest i gated the B R 3 T rust f u rther andf o und t hat8 48 o f

t he l o ans i n t he BR 3 Tr us tha d b e e n de l i nque nta tt he tim e o f p u r c h a s e . I n January 2 008, Lone S tar s ued B ar c l ays under bot h st at e a nd fede r al l a w form at er i alm i sr epr es ent at i ons and f r aud i n a D al l as , Texas s t at e c our t. Lo n e S t a ra l l e g e d t h a t , c o n t r a r yt o Ba r c l a y s ’r e p r e s e n t a t i o n s , t h e BR2 a n d BR3 Tr us t s had a s ubs t ant i al num be r o f de l i nque nt l o ans , and t h at t he
m i sr epr es ent at i ons c ons t i t ut ed f r aud. Barc l a ys re m ove d t he c as e t o f ede r al court pu rsuan t t o 28 U

. S

. C

. §§ 133 4(b) an d 14 52(a)

. Th e di st ri ctcourtaccept ed Case: 08-11038 Document: 00511001283 Page: 3 Date Filed: 01/11/2010N o. 08- 11038

4 t h e rem oval, up h ol di n g j u ri sdi ct i o n b ecau se t h e di spu t e w as “ rel ated t o” N ew Cent ur y’ s b ank r upt cy. Fo l l o w i ng t he r e m o va l , Bar c l ay s m o ve d t o di s m i s s t he case pu rsuan tt o F ed. R u l e C i v. P ro c 12 (b) ( 6) f or Lon e Star’ s fai l u re t o st ate a
c la im

. T h e d is tr ic t c o u r t g r a n te d th e m o tio n . L o n e S ta ra p p e a ls

. I I . J URI S DI CT I ON B ef ore di scussi n g t h e m eri t s, t h i s c ou rtm u stf i rstadd ress th e is su e of
s u b j e c tmat t e rj u r i s d i c t i o n , wh i c h i s r e v i e we d d e novo . G asch v. Hartf ord A cci d ent & I

n d em . Co. , 4 91 F. 3d 2 78 , 2 81 ( 5t h Ci r . 2 00 7)

. Ban kru ptcy ju r is d ic tio n , lik e a ll fe d e r a l ju r is d ic tio n , m u s t b e b a s e d i n s t a tu te
. In reB ass , 1 7 1 F

. 3 d 10 1 6 , 10 2 2 ( 5 th C i r. 19 9 9 ). In this case , the M L P A ’ s i n d em n i ty p r o v is io n s a r e s u ff

ic ie n t t o c r e a t e a d is p u t e t h a t is “ r e la t e d t o ” N e w C e n t u r y ’s ban kru ptcy. 28 U

. S

. C

. § 133 4(b)

. F ederal courts h ave “r el ated t o” subj ectm att er j ur i s di c t i o n o ve r l i t i ga t i o n ar i s i ng f r o m a ba nkr upt c y c as e i f t h e “ pr o c e e di ng c o u ld con ceiva b l y a ff ect th e es tate b ein g a d m i n i stere d i n ba n k ru p tcy.” I n re T X N B I n t ernal C ase , 4 8 3 F .3 d 2 9 2 , 2 9 8 (5 th C ir .) (c ita tio n o m itt e d ), cer tden i ed , 12 8 S. Ct

. 6 13 ( 20 07 )

. “ Rel at e d t o ” j ur i s di c t i o n i nc l ude s any l i t i ga t i o n wher e t he

“ ou t com e coul d alt er, posi t i vel y or nega t i vel y, t h e deb to r’ s r i gh t s, l i abil i t i es, o pt i o ns , o rf

r e e do m o f

a c t i o n o rc ou l d i nf l ue nc e t he a dm i ni s t r at i o n o f t he b a n k ru p t estate.” I

d. B arcl ays m ai n t ai n s t h at because t h e M L P Arenders N ew C e n tu r ylia b le fo ra ll d a m a g e s th a t c o u ld b e i m p o s e d o n B a r c la y s b yth is litig a tio n , th e d is tr ic t c o u r t h a d ju r is d ic tio n to ru le o n th e ca s e . O n a ppe al , Appe l l ant s ha ve s upp l e m e nt e d t he i ra r gum en t and c o nt e nd th a t “ related to” j u ri sd i cti on on l y a ri ses i f cl a i m s f or co n trib u ti on or i n d em n i ty h ave “ accrued. ” A pp el l an t s m ean t h at a r i gh tt o i n dem n i t y or c on t ribu t i on m u st be est abli shed such tha tno f u rt h er l i t i gati on i s r equ ire d to substanti ate s u ch ri gh t s agai n stth e d e btor

. Th ei r r el i an ce f or t h i s proposi t i on on the T h i rd Ci r c ui t ’ s de c i s i o n In reF ederal

- Mogu lG loba l, I n c. , 300 F

. 3d 368 , 382 ( 3d C i r. 2 0 0 2 ), i s m i sp l a c e d

. F ed er a l-Mog u l concerned t ortcontr ibu t i on pri n ci pl es w h ere Case: 08-11038 Document: 00511001283 Page: 4 Date Filed: 01/11/2010N o. 08- 11038

5 t he deb t or ’ s l i abi l i t y f oras bes t os - c ause d i nj uri es w oul d ul t i m at el y have t o b e l i t i gated bef

ore contribu t i on ri gh t s w ou l d “acc rue” i n favor of ot h er produ cers of asbestos produ ct s. W e t ak e no p osi t i on on the F ederal

- M

oguls itu a tio n . Compa re A rnold v. G arl ock, I

n c. , 288 F

. 3d234 , 238

- 39 ( 5t h C i r . 200 2) (ho l di ng t hata bs e nt a j u dg m en tagainsta defen da n tat t i m e of rem oval, com m on l aw contr ibu t i on coul d n otgi ve ri se t o “ rel a te d to” j u ri sdi ct i on )

. I n t h i s c ase, B arcl ays rel i es h eavil y, if

not excl u si vel y, on contract u ali n dem n i t y provi si on s w i t h N ew Cent ur y c o nt ai ni ng repre s e nt at i o ns a bo utt he q ual i t y o f t he m o r t ga ge l o ans pu r c h a s e d b yBa r c l a y s , wh i c h a r e n e a r l yi d e n t i c a lt o t h e r e p r e s e n t a t i o ns B ar c l ays m ade t o Lone St ar . Th i s c i r c ui t has al r eady r ul ed, m or eo ver , that
c o n tr a c tu a l in d e m n ific a tio n rig h ts m a yg iv e r is e t o “ r e la te d t o ” ju r is d ic tio n . S ee In re S t on ebri dge T

echs. , I n c. , 4 3 0 F

. 3 d 2 6 0 , 2 6 6 (5th C i r. 2 0 0 5 ) (ho l d i n g t h a t a d eb tor’ s l etter of cred i t ob l i ga ti on tri gg ere d “related to” j u ri sd i cti on i n a d i sp u te b e tw e e n tw o n o n -b a n k ru p t th ird p a rtie s). I I I . DI S CU S S I ON A p p e lla te re v ie w o f a d is tr ic t c o u r t’s d is m is s a l f o rfa ilu r e t o s ta te a cla im
u n der R u l e 12(b) ( 6) i s de no vo . Jon es v. G reni nger , 188 F

. 3d 322 , 324 ( 5th C i r. 19 99 )

. The ul t i m at e q ue s t i o n i n a Rul e 12 (b) ( 6) m o t i o n i s w he t he rt he c o m pl ai nt st ates a vali d cl ai m w h en a l lw el l

- pl ead ed fact s are assum ed tr u e an d are vi ew ed in th e lig h t m o s t fa v o r a b le to th e p la in tiff

. I n r e K at r i na C analB r e ache s Li t ig. , 4 9 5 F

. 3 d 1 9 1 , 2 0 5 (5th C i r. 2 0 0 7 ). T h e cou rt’ s rev i ew is li m i ted to th e com p l a i n t, any d o c u m e n t s a t t a c h e d t o t h e c o m p l a i n t , a n d a n y d o c u m e n t s a t t a c h e d t o t he
m oti on to d i sm i ss th a t are ce n tral t o th e claim an d referen ced by the com p l a i n t. Col l i n s v. Morgan S t an l ey D ean Wi t t er , 2 2 4 F .3d 4 9 6 , 4 9 8 -9 9 (5t h C ir. 2 0 0 0 ). T h e co u r t’s ta s k is to d e te r m in e w h e th e rth e p la in tiff h a s s ta te d a le g a lly cognizabl e cl ai m th a t is p l au sibl e, not t o eval u ate t h e pl ai n t i f f ’ s l i keli h ood of
s u c c e s s . Ash c r of

tv . I qb al , ___ U

. S

. ___, 129 S. C t
. 193 7, 194 9 ( 200 9)

. Fu rt h er, as t h e cl ai m s soun d i n f rau d and n egl i gen t m i srepresentat i on , A pp el l an t s m u st Case: 08-11038 Document: 00511001283 Page: 5 Date Filed: 01/11/2010N o. 08- 11038

B arcl ay s a ls o c on t en ds that LoneStar di d not me et the plea ding requir ement s of 3 Rule 9(b). Lone Star asserts that it doe s not n eed to satisfyRule9(b) for clai ms that do not involve fraud. Belying this contentionis the fact that LoneStar’s complaint, on its face, pl eads with particul arity the ex act represe nt at io ns i t cl aims were false. Moreover, Rule9(b) doe s app ly. “ [T] hiscourthas app liedthe heighte ned p leading requir em ents when th e part ieshave not urged aseparatefocu s onth e n egligent misreprese ntationcl aims” such as whe n “frau d a n d n egli gent mi sr ep re se ntation cl aim s are b a se d on th e sa me se t of all eged fact s.” Benchmark , 34 3 F .3d at 7 24. Wen eed not d et er m in e, h ow ever, wh ether LoneStar fully compli ed withRule9(b) be cau se taken, a s a whole , the agre ement s covere d by the complaint donotall ege ami sr ep re se ntationinth e firs t in st a nce . B arclay s c onte n dsth at Lon e St ar Fu n d V doe s noth ave st a n din gto b rin ganyclaim s 4 because it did notp ur c ha s e the securities or suffer anydirect har m. Only LSF 5 Bond Holdin gs LL C, Lone St ar Fund V’s subsidiar y, p urchased the securities and suffere d direct economic har m. If LoneStar FundV were the sole plaintiff, wem ighth ave toaddress th e issue of s t a n din g o r r e al p arty in int e r e s t
. Howeve r , L S F 5 B o n d Hol din g s LL C , whi ch u n qu es tion ab lyh a s s tan din g , isc o- pl aintiff

. Appell ant s alleged clai ms rel ated to S ectio ns 1 1, 1 2(a)(2) and 15 of the Securiti es Act 5 of 1 933 , 15 U.S.C. §§ 77k, 77l (a)(2) and 77o ; Section33of the Texas Se curities Act, Tex. Rev. Civ. Stat. art. 581 -33(A )(2); T ex . Bus. and Co m m . C od e § 2 7.01 ; an d co mmon l aw fraud, frau dule nt inducement, and negligent misreprese ntation

. 6 p lea d th e m isre p re se n ta tion s w ith p a rticu la rityu n d e r F e d

. R u le C iv. P ro c. 9 (b ). Be n c h m a r k Ele c s . , I n c . v . J

. M

. Hub e rCo r p. , 3 4 3 F

. 3d 719 , 723

- 24 (5t h C i r. 2 0 0 3 ). 3 A l lof A pp e ll a n ts’ vari ou s c l ai m s are predi cat ed u pon B arcl ays’al l eged 4 5
m i s r e p r e s e n t at i o n t h a tt h e r e we r e n o d e l i n q u e n tl o a n s i n t h e BR2 a n d BR3 T r u s ts w h e n L o n e S ta rp u r c h a s e d th e s e c u r itie s . C o n s e q u e n tly , to p r e v a il, Ap p e l l a n t s mus ts u c c e s s f u l l ya l l e g e b o t h t h a tB a r c l a y s r e p r e s e n t e d t h a tt h e BR2
an d B R 3 T rusts ha d n o del i n qu en tm ort gag es and t h at t h e representat i on s w ere fal se w h en m ad e. W e accept as t rue f or present pu rposes t h at t h ere w ere del i n qu en tm ort gag es i n t h e t rusts w h en L on e Star pu rchased the securi t i es. A pp el l an t s’rem ai n i n g bu rden i s t o dem on st rat e h ow B arcl ays m i srepresented th a t t h e B R 2 a n d B R 3 T r u s ts co n ta in e d n o d e lin q u e n t m o r tg a g e s . To do t hi s, A ppel l ant s f i r str efer enc e t he B R 2 and B R 3 Suppl em ent al P r o s p e c tu s e s , e a c h o f w h ic h s ta te d : Case: 08-11038 Document: 00511001283 Page: 6 Date Filed: 01/11/2010N o. 08- 11038

7 B a rclay s w i l lm a k e rep rese n tati on s an d w a rra n ti es w i th resp ect to e ac h m o r t ga ge l o an [ N e w Cent ur y] s o l d t o t he s po ns o ra s o f t he cl osi n g da t e, i n cl u di n g, bu tnot l i m i t ed to: (1) A s of t h e se rv i ci n g t ra n sfer d a te, ex cep t w i th resp ect to t h e D el i n qu en tm ort gag e l oan s descr ibed un der “ The Mortgage L oan Pool

– G e ne r al” i n t hi s pr o s pe c t us suppl em ent , no paym entrequi r ed un derthe m or t gage l o an i s 3 0 da ys o rm ore D el i nque ntno rha s a ny pa ym en tu n der t h e m ort gag e l oan been 30 da ys or m ore D e l i nque nta ta ny t i m e s i nc e t he o r i gi n at i o n o f t he m o r t ga ge l o an. In ad di t i on , both prospect u ses ref erence a R epresentati on s and W arran t i es Agr e e m e ntt hatBar c l ay s s i gne d, detai l i ng s i m i l arr e pr e s e nt at i o ns a nd
w ar r ant i e s a bo utt he m o r t ga ge s . Appe l l an t s a s s e r tt hatt he Rep r e s e nt at i o ns andW arran t i e s Agr e e m e ntr e pe at e d Bar c l ay s ’m i s r e pr e s e nt at i o ns i n t he fo llo w in gp e r tin e n t c la u s e : Pay m e nt s Cur r e nt
. (i) Al lpa ym e nt s r e qui r e d t o b e m ad e up t o t he Cl o s i n g Da t e f

o r t h e M o r t g a g e Lo a n u n d e r t h e t e r m s o f t he M ort gage N ot e, ot hert han paym ent s notye t30 day s del i nquent, h ave been m ad e an d credi t ed, [ an d] (i i) n o p aym en trequ i red un der t h e Mo r t g a g e L o a n h a s b e e n 3 0 d a y s o r mo r e d e l i n q u e n ta ta n yt i me s in c e th e o r ig in a tio n o f th e M o r tg a g e L o a n [.] Ap pel l ant s a l s o a l l e ge t hatl e s s t han t w o m o nt hs b e f o r e N e w Cent ur y w e nt ba nkr upt , Bar c l ay s t o ut e d t he due di l i ge nc e i tha d p e r f o r m e d o n t he und e r l yi ng
m o r tg a g e lo a n p o o ls b e fo r e s o lic itin gL o n e S ta rto b u yth e S e c u r itie s . S t an di n g al on e, t h ese “ n o del i n qu e n cy ” provi si on s w ou l d su pp ort Appe l l ant s ’c o nt e nt i o ns . N e v e r t he l e s s , t he r e pr e s e nt at i o ns a r e i s o l at e d p o r t i o ns of com pl ex contract u aldocum en t s t h at m u stb e read i n t h ei r enti ret y t o be gi ven e ffe c t. Tran si t i on al L earning C om m u n i ty atG alve st on , I n c. v. U

. S

. Of

f i ce of Pe r s o n n e l M

g m t., 220 F. 3d 427, 431 ( 5t h C i r. 2 0 0 0) ( “ [A ] c ont r ac ts houl d be i n t erpret ed as to gi ve m ean i n g t o al lof i t s t erm s— presu m in g th a tevery provi si on w as i n t en ded t o accom pl i sh som e pu rpose, an d that non e are deem ed Case: 08-11038 Document: 00511001283 Page: 7 Date Filed: 01/11/2010N o. 08- 11038

B oth the BR 2 and BR 3 Prospectu ses stat ed: 6 Th e obligatio ns of Barclays to cure such breach or to subs titute or p urch ase the applicab le mortgage loanw illconstitute the sole remedie s respecting

a materi al breach of any s uch represe ntation or warr a nty t o th e h o l d e r s o f th e [ S e c uriti e s ] , th e s e rvic e r , th e tru st ee , th e de po sitor a n d a nyof it s aff iliate s. Th e R ep re se ntation s an d Warr a nti esAgre em entsinclu de d th e followin gclau se : 7 It is unde rs too d and agree d thatthe obligat ion of [ Barcl ays PLC] setf o rthinS e c ti o n3 ( a) top urch a s eo rs ub s titut ef o raN ew CenturyMortgage Loanin br ea ch of arep resentation or warranty cont ain ed in Section 2 c onstitute s thes ol e r emedyof the Depositoror any oth er person or entity with respect to such breach. 8 s u p e r f l u o u s ”); als o se e O l key v. H yperi on 199 9 T

erm Trust , I

n c. , 9 8 F .3 d 2 , 5 (2d C i r. 19 9 6 ) (“ It i s u n d i sp u ted tha t t h e p rosp ectu ses m u st b e read a s a w h ole. ”) (in te r n a l q u o ta tio n s a n d cit a tio n s o m itt e d ); K ass v. K ass , 696 N E 2d 174, 180- 81 ( N

. Y. 19 98 ) ( “ Par t i c ul ar w o r ds s ho ul d be c o ns i de r e d, no t as i f i s o l at e d f

r o m t he
c o nt e xt , b uti n t he l i ghto f t he o bl i ga t i o n a s a w ho l e a nd t he i nt e nt i o n o f t he par t i es as m ani f

es t ed t her eby. ” ) ( quot i ng A t w ate r & C o. v. Pan am a R

. R

. Co. , 15 9 N

. E. 4 18 , 4 19 ( N

. Y. 1 92 7) )

. Rea d a s a w h ol e, the p r o s pe c t us e s a nd
w arran t i es provi de that t h e m ort gag es s houl d be n o n - d e l i n q u e n t , b u ti f s o me
m ort gag es w ere del i n qu en tt h en B arcl ays w ou l d ei t h er r epu rchase t h em or subs t i t ut e pe r f

or m i ng m or t gage s i nt o t he t r ust s. O ne w ay or anot her , B ar c l ays com m i t t ed that t h e m ort gag e l oan pool s w ou l d be f ree of d el i n qu en tm ort gag es. Th e s e “ r e p u r c h a s e o rs u b s t i t u t e ” c l a u s e s a p p e a ri n b o t h t h e BR2 a n d BR3 S u pp l em en t alP rosp ect u ses an d the R epresentati on s and W arran t i es 6 A gr ee m ent
. M or eo ver , t he c l ause s c ons t i t ut e t h e “ so l e r em edy” f orm at er i al 7 breach f

or purch asers l i ke L on e Star. T h u s , B a r c la y s d id n o t r e p r e s e n t t h a t t h e B R 2 a n d B R 3 m o r tg a g e p o o ls
w e r e a bs o l ut e l y f

r e e f r o m de l i nque nt loa ns a tt he t i m e o f pur c has e . The ag r e e m e nt s e nvi s i o n t hatt he m o r t ga ge po o l s m i ghtc o nt ai n de l i nquent Case: 08-11038 Document: 00511001283 Page: 8 Date Filed: 01/11/2010N o. 08- 11038

9 m o r t ga ge s , a nd t he y i m po s e a “ s o l e ” re m e dyt o co r r e c tsuc h m i s t ak e s . I nde e d, B ar c l ays f

ul f i l l ed t he r epur c hase ors ubst i t ut e o bl i gat i ons w hen Lone St ar i n f orm ed i tof

t h e del i n qu en tm ort gag es i n N ovem ber 200 7. L on e S t ar does not and ca nnotal l ege t hatB ar c l ays bre ac hed i t s dut y t o r em edi at e t he m or t gage pool s. Thes e pr o vi s i o ns a r e s e ns ibl e g i ve n t he di f f i c ul t i e s o f

i nve s t i ga t i ng t he
u n derl yi n g re si den t i alm ort gag es. E ven t h e bestdu e di l i gen ce m ay overl ook p rob l em s. Am ortg a ge m a y b eco m e d eli n q u en t f rom a s i n gle m i sse d pa ym en t. So m e o f

t he l o ans m i ghtfal li nt o de l i nque nc y dur i ng t he pe nde nc y o f t he t ran sact i on s l ead i n g t o an i n vest or’ s pu rchases. B ecau se m ista k es are i ne vi t ab l e , b o t h s e l l e ra nd p ur c has e ra r e pr o t e c t ed by a pr o m i s e t hatt he
m o r tg a g e p o o ls w ill b e fr e e fr o m la te r -d is c o v e r e d d e lin q u e n t m o r tg a g e s . T h is is
w h at B ar c l ay s pr o m i s e d a nd Lo ne St ara gr e e d. As a s o phi s t i c at e d i nve s t or pl aci n g a $6 0 m i l l i on i n vest m en t i n t h e t rusts , L on e S t ar h as n o basi s t o i gn ore th e s e p r o v is io n s o rth e irco n s e q u e n c e s . C on sequ e n tl y, B arcl ays m ad e no acti on able m i srepresentat i on s. E ven t h ou gh t h e m ort gag e pool s c on t ai ne d d e l i nque ntm o r t gag es, A pp el l an t s hav e not al l e ge d t hatBar c l ay s fai l e d t o s ubs t i t ut e o rr e pur c has e t he de l i nque nt
m o r t ga ge s . Appe l l ant s ’e f f o r t s t o f o c u s o n as i n g l e r e pr e s e nt at i o n a m i d hu ndr e ds of pa ge s of con tractu a ld ocu m en ts a re m i sp l a ced

. T h ey a re b ou n d by the en ti rety of t h e con tract. A s a f al lback , A pp ell a n ts a ss e rt th a t th e “re p u rc h a se or su b stitu te ” cl au ses are voi d as aga i n stpu bl i c pol i cy becau se t h ey w ai ve A pp el l an t s’ri gh tt o sue f or f r aud

. Thi s a r gum e nt i s m e r i t l e s s . U nde r fe de r al and Tex as s e c ur i t i e s l aws and Texas c om m on l aw , a par t y c annotw ai ve i t s r i ghtt o b r i ng fra u d cl ai m s by
c o n tr a c t o ro th e r w is e . S ee 1 5 U .S .C . § 7 7 n ; T e x . R e v . C iv. S ta t. a rt. 5 8 1 -3 3 (L ); S chlum bergerT

ech. Corp. v. S w an son , 9 59 S

. W

. 2d 1 71, 1 81 ( T ex. 1 997 )

. R ather t h an w ai ve A pp el l an t s’ri gh tt o pu rsue cl a im s o f f rau d, t h e “ repu rchase or Case: 08-11038 Document: 00511001283 Page: 9 Date Filed: 01/11/2010N o. 08- 11038

10 su b sti tu te” cl a u ses ch a n ge the n a tu re of B a rclay s’ rep rese n tati on . If A p p ell a n ts h a d a lle g e d th a t B a r c la y s fa ls e lyre p r e s e n te d to p r o s p e c tiv e in v e s to r s th a t it
w ou l d repu rchase or s u bsti t u t e del i n qu en tm ort gag es, t h ey m i gh t h a v e st ated
a c a s e o f

f r a u d u n d e rt h e p e r t i n e n ta g r e e me n t s . T h i s i s n o tt h e i rc l a i m.

I V . C ONC L US I ON B ec ause a c ons i d era t i on o f t he par t i es ’ent i r e a gr ee m entr eve al s t hat B arcl ays h as not m ad e an y m i srepresentat i on s, A p p e l l an t s’cl ai m s fai las a
m att er of

l aw . Th e di st ri ctcourtcor rect l y h el d that t h e al l egati on s of A p p e lla n ts ’a m e n d e d co m p la in t d o n o t s e t fo r th s u ffic ie n t fa c ts to s ta te a cla im f or rel i ef t h at i s pl au sibl e on i t s face. T h e j u dg m en tof di sm i ssali s AF FI RM ED

. Case: 08-11038 Document: 00511001283 Page: 10 Date Filed: 01/11/2010