The New York Appellate Division, First Department earlier this week held that Nationstar Mortgage LLC was indeed entitled to indemnification for losses from Generation Mortgage Company and Guggenheim Partners, LLC under the terms of a 2015 purchase agreement, in which Nationstar acquired the servicing rights for tens of thousands of reverse mortgage loans.

The issue at hand stems from a contract that Nationstar entered with Generation and Guggenheim, as seller and guarantor respectively, which included a “survival period” – a negotiated timeframe within which the acquiring party must provide notice of any claims against the seller for indemnification. Prior to the period expiring, Nationstar provided the defendants notice of its indemnification claims against the defendants. Defendants refused to indemnify Nationstar on its claims and renounced any obligation for losses incurred outside the Survival period. In response, Nationstar brought a suit seeking indemnification and a declaration from the court. 

On Defendants’ motion to dismiss, the trial court sided with the Defendants in part and dismissed Nationstar’s indemnification claims for future losses along with its claim for declaratory relief.  On Appeal, the Appellate Division reversed that decision in all material respects.  Amongst the most important takeaways from the Appellate Court’s decision are:(1) a claim does not require a showing that plaintiff actually realized the loss;” (2) under the purchase agreement, Generation’s indemnification obligation includes losses not realized until after the end of the survival period; and (3) the declaratory judgment claim is not duplicative of the indemnification claim and should not have been dismissed. 

In light of this decision, which may affect other mortgage servicing purchasing agreements, both Generation and Guggenheim are now obligated to indemnify Nationstar for future losses on noticed loans – whenever the loss was incurred. 

Nationstar is represented by McKool Smith principals Robert Manley, John Briody, and David Schiefelbien. 

With 135 trial lawyers across offices in Austin, Dallas, Houston, Los Angeles, Marshall, and New York, and Washington, D.C., McKool Smith has established a reputation as one of America’s leading trial firms. Since 2006, the firm has secured 12 nine-figure jury verdicts and 14 eight-figure jury verdicts, obtaining more VerdictSearch and The National Law Journal “Top 100 Verdicts” than any other law firm in the country. Courtroom successes like these have earned McKool Smith critical acclaim and helped the firm become what The Wall Street Journal describes as “one of the biggest law firm success stories of the past decade.” McKool Smith represents clients in complex commercial, intellectual property, bankruptcy, and insurance recovery litigation as well as white-collar defense matters.

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