Phoenix Light Sf Limited vs Morgan Stanley

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    FILED: NEW YORK COUNTY CLERK 08/26/2013 INDEX NO. 652986/2013

    NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 08/26/2013

    SUPREME COURT OF THE STATE OF NEW YORKCOUNTY OF NEW YORK

    XPHOENIX LIGHT SF LIMITED, BLUE :HERON FUNDING V LTD., BLUE HERON :FUNDING VI LTD., BLUE HERON :FUNDING VII LTD., SILVER ELMS CDO :PLC, SILVER ELMS CDO II LIMITED and :KLEROS PREFERRED FUNDING V PLC, :

    :Plaintiffs, :

    :

    vs. ::

    Index No.

    SUMMONS

    MORGAN STANLEY, MORGAN STANLEY :& CO. LLC, MORGAN STANLEY :MORTGAGE CAPITAL HOLDINGS LLC, :MORGAN STANLEY ABS CAPITAL I, :INC., MORGAN STANLEY CAPITAL I :INC., SAXON CAPITAL, INC., SAXON :FUNDING MANAGEMENT LLC and :SAXON ASSET SECURITIES COMPANY, :

    Defendants.:

    :

    X

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    TO: Morgan Stanley

    c/o James P. RouhandehDaniel J. SchwartzJane M. MorrilCarissa M. PilottiDavis Polk & Wardwell LLP450 Lexington AvenueNew York, NY 10017

    Morgan Stanley Capital I Inc.

    c/o James P. RouhandehDaniel J. SchwartzJane M. MorrilCarissa M. PilottiDavis Polk & Wardwell LLP450 Lexington AvenueNew York, NY 10017

    Morgan Stanley & Co. LLCc/o James P. Rouhandeh

    Daniel J. SchwartzJane M. MorrilCarissa M. PilottiDavis Polk & Wardwell LLP450 Lexington AvenueNew York, NY 10017

    Saxon Capital, Inc.c/o James P. Rouhandeh

    Daniel J. SchwartzJane M. MorrilCarissa M. PilottiDavis Polk & Wardwell LLP450 Lexington AvenueNew York, NY 10017

    Morgan Stanley Mortgage Capital Holdings LLCc/o James P. Rouhandeh

    Daniel J. SchwartzJane M. MorrilCarissa M. PilottiDavis Polk & Wardwell LLP450 Lexington AvenueNew York, NY 10017

    Saxon Funding Management LLCc/o James P. Rouhandeh

    Daniel J. SchwartzJane M. MorrilCarissa M. PilottiDavis Polk & Wardwell LLP450 Lexington AvenueNew York, NY 10017

    Morgan Stanley ABS Capital I, Inc.c/o James P. Rouhandeh

    Daniel J. SchwartzJane M. MorrilCarissa M. PilottiDavis Polk & Wardwell LLP450 Lexington Avenue

    Saxon Asset Securities Companyc/o James P. Rouhandeh

    Daniel J. SchwartzJane M. MorrilCarissa M. PilottiDavis Polk & Wardwell LLP450 Lexington Avenue

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    Plaintiffs designate New York County as the place of trial. Venue is proper because the

    defendants do business in or derive substantial revenue from activities carried out in this County,

    and many of the wrongful acts alleged herein occurred in this County.

    DATED: August 26, 2013 ROBBINS GELLER RUDMAN& DOWD LLP

    SAMUEL H. RUDMANWILLIAM J. GEDDISH

    s/ SAMUEL H. RUDMAN

    SAMUEL H. RUDMAN

    58 South Service Road, Suite 200Melville, NY 11747

    Telephone: 631/367-7100631/367-1173 (fax)

    ROBBINS GELLER RUDMAN& DOWD LLP

    ARTHUR C. LEAHYSCOTT H. SAHAMLUCAS F. OLTS

    NATHAN R. LINDELLCAROLINE M. ROBERT655 West Broadway, Suite 1900San Diego, CA 92101

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    SUPREME COURT OF THE STATE OF NEW YORKCOUNTY OF NEW YORK

    XPHOENIX LIGHT SF LIMITED, BLUE :

    HERON FUNDING V LTD., BLUE HERON :FUNDING VI LTD., BLUE HERON :FUNDING VII LTD., SILVER ELMS CDO :PLC, SILVER ELMS CDO II LIMITED and :KLEROS PREFERRED FUNDING V PLC, :

    :

    Plaintiffs, ::

    vs. ::

    Index No.

    COMPLAINT

    MORGAN STANLEY, MORGAN STANLEY :& CO. LLC, MORGAN STANLEY :MORTGAGE CAPITAL HOLDINGS LLC, :MORGAN STANLEY ABS CAPITAL I, :INC., MORGAN STANLEY CAPITAL I :

    INC., SAXON CAPITAL, INC., SAXON :FUNDING MANAGEMENT LLC and :SAXON ASSET SECURITIES COMPANY, :

    D f d:

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    TABLE OF CONTENTS

    Page

    I. SUMMARY OF THE ACTION ......................................................................................... 1II. PARTIES ............................................................................................................................ 3

    A. Plaintiffs ...................................................................................................................3B. The Morgan Stanley Defendants ..........................................................................7

    III. JURISDICTION AND VENUE ........................................................................................10IV. BACKGROUND ON RMBS OFFERINGS IN GENERAL AND

    DEFENDANTS INVOLVEMENT IN THE PROCESS ..................................................12

    A. The Mortgage-Backed Securities Market ...............................................................12B. Organizations and Defendant Entities Involved in the SecuritizationProcess .................................................................................................................. 12C. To Market the Certificates, Defendants Registered Them with the SEC on

    InvestmentGrade Shelves ................................................................................. 17

    V. C.P.L.R. 3016 PARTICULARITY ALLEGATIONS ......................................................18A. Each of the Offering Documents Omitted Material Information ............................ 18B. Each of the Offering Documents Contained Material Misrepresentations ............... 21

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    Page

    c. Owner Occupancy Rates ................................................................33d. Credit Ratings ................................................................................34e. Transfer of Title ............................................................................ 35

    3. The MSAC 2006-HE8 Certificates ............................................................35a. Underwriting Guidelines ................................................................36b. Loan-to-Value Ratios .....................................................................39c. Owner Occupancy Rates ................................................................40d. Credit Ratings ................................................................................40e. Transfer of Title ............................................................................ 42

    4. The MSAC 2006-NC2 Certificates ............................................................42a. Underwriting Guidelines ................................................................43b. Loan-to-Value Ratios .....................................................................44c. Owner Occupancy Rates ................................................................45

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    a. Underwriting Guidelines ................................................................54b. Loan-to-Value Ratios .....................................................................55c. Owner Occupancy Rates ................................................................56d. Credit Ratings ................................................................................57e. Transfer of Title ............................................................................ 58

    7. The MSAC 2007-HE1 Certificates ............................................................59a. Underwriting Guidelines ................................................................59b. Loan-to-Value Ratios .....................................................................62c. Owner Occupancy Rates ................................................................62d. Credit Ratings ................................................................................63e. Transfer of Title ............................................................................ 64

    8. The MSAC 2007-HE2 Certificates ............................................................65a. Underwriting Guidelines ................................................................66b. Loan-to-Value Ratios .....................................................................68c. Owner Occupancy Rates ................................................................69

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    10. The MSAC 2007-NC1 Certificates ............................................................78a. Underwriting Guidelines ................................................................79b. Loan-to-Value Ratios .....................................................................80c. Owner Occupancy Rates ................................................................81d. Credit Ratings ................................................................................81e. Transfer of Title ............................................................................ 83

    11. The MSAC 2007-NC4 Certificates ............................................................83a. Underwriting Guidelines ................................................................84b. Loan-to-Value Ratios .....................................................................86c. Owner Occupancy Rates ................................................................86d. Credit Ratings ................................................................................87e. Transfer of Title ............................................................................ 88

    12. The MSAC 2005-HE7 Certificates ............................................................89a. Underwriting Guidelines ................................................................90b. Loan-to-Value Ratios .....................................................................92

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