14-1790
Wells Fargo Bank, Nat’l Ass’n v. Davidson Kempner Capital Mgmt.

                           UNITED STATES COURT OF APPEALS
                               FOR THE SECOND CIRCUIT

                                     SUMMARY ORDER

Rulings by summary order do not have precedential effect. Citation to a summary order filed on or
after January 1, 2007, is permitted and is governed by Federal Rule of Appellate Procedure 32.1
and this court’s Local Rule 32.1.1. When citing a summary order in a document filed with this
court, a party must cite either the Federal Appendix or an electronic database (with the notation
“summary order”). A party citing a summary order must serve a copy of it on any party not
represented by counsel.

        At a stated Term of the United States Court of Appeals for the Second Circuit, held at the
Thurgood Marshall United States Courthouse, at 40 Foley Square, in the City of New York, on
the 30th day of September, two thousand fifteen.

Present:    ROBERT A. KATZMANN,
                  Chief Judge,
            PETER W. HALL,
            DEBRA ANN LIVINGSTON,
                  Circuit Judges.
____________________________________________________________

WELLS FARGO BANK, NATIONAL ASSOCIATION, as Trustee,
          Interpleader Plaintiff - Counter-Defendant - Appellee,

               -v-                                                         No. 14-1790-cv

BEDFORD CMBS ACQUISITIONS LLC,
         Interpleader Defendant - Counter-Claimant - Appellant,

               -v-

STS PARTNERS FUND, LP, WATERFALL ASSET MANAGEMENT LLC, DAVIDSON
KEMPNER CAPITAL MANAGEMENT LLC,
          Interpleader Defendants - Counter-Claimants - Appellees,

NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY, DELAWARE
INVESTMENTS, CEDE & CO., as holder of certain certificates and nominee name of THE
DEPOSITORY TRUST COMPANY, DOES, 1 THROUGH 50,
            Interpleader Defendants - Cross-Defendants.
____________________________________________________________




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For Interpleader Defendant-Counter-Claimaint-Appellant:
       KATHLEEN M. SULLIVAN (Isaac Nesser, Yelena Konanova, on the brief), Quinn Emanuel
       Urquhart & Sullivan, LLP, New York, New York; Y. David Scharf, Morrison Cohen
       LLP, New York, New York
For Interpleader Defendants-Counter-Claimants-Appellees:
      MICHAEL A. HANIN (Henry B. Brownstein, Washington, D.C., on the brief), Kasowitz,
      Benson, Torres & Friedman LLP, New York, New York
____________________________________________________________

       Appeal from the United States District Court for the Southern District of New York

(Scheindlin, J.).

       ON CONSIDERATION WHEREOF, IT IS HEREBY ORDERED, ADJUDGED,

and DECREED that the order of the district court is hereby AFFIRMED. The interpleader

appellant Bedford CMBS Acquisitions LLC (“Bedford”) appeals from the May 12, 2014,

judgment by the district court, which granted judgment on the pleadings to the appellees STS

Partners Fund, LP, Waterfall Asset Management LLC, and Davidson Kempner Capital

Management LLC (collectively, the “DWS Parties”). We assume the parties’ familiarity with the

relevant facts, the procedural history of the case, and the issues presented for review.

       Bedford contends that the Pooling Agreement governing the operation of the trust

provides for each successive Directing Securityholder to receive its own option to purchase

defaulted Pooled Certificates owned by the trust. The plain language of the Pooling Agreement

forecloses the appellant’s argument. The first sentence of Section 7.13 of the Pooling Agreement

provides:

       In the event a Pooled Certificate becomes a Defaulted Security or an Imminently
       Defaulted Security, the Directing Securityholder will have an assignable option to
       purchase . . . such Defaulted Security or Imminently Defaulted Security from the
       Trust at a price . . . equal to (i) if the Trustee has not yet determined the Fair
       Value . . . , the unpaid principal amount thereof plus accrued and unpaid interest
       thereon, or (ii) if the Trustee has made a Fair Value determination, . . . the Fair
       Value as so determined.


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J.A. 150. This provision ties the creation of the option to the “event” of a Pooled Certificate

defaulting. Each default creates a single option, which the Directing Securityholder must then

either exercise or waive within ten days of receiving the relevant notice from the Trustee.

       In addition to the word “event,” there are two other textual clues that each purchase

option must be tethered to a specific default. First, that same first sentence of Section 7.13 refers

to a “Pooled Certificate becom[ing] a Defaulted Security or an Imminently Defaulted Security.”

This language creates the option based on a discrete occurrence—the Pooled Certificate

“becoming” a Defaulted Security—rather than existing due to the defaulted status of Pooled

Certificates. J.A. 150. Second, the first paragraph of Section 7.13 concludes by specifying “that

if the related Pooled Certificate subsequently becomes a Defaulted Security or Imminently

Defaulted Security based on a different or additional event within the definition of ‘Defaulted

Security,’ . . . the Directing Securityholder shall have an assignable Purchase Option with

respect to such Defaulted Security, without regard to the prior waiver.” Id. This provision

confirms that each option corresponds to a specific default event by providing the Directing

Securityholder with a new option if there is a new default. If the option to purchase the securities

was freestanding, such that the Directing Securityholder had an option whenever the securities

were in default, it is unclear why the Pooling Agreement would need to specifically provide for

“a different or additional event within the definition of ‘Defaulted Security.’”

       Because each default event creates only a single purchase option, Bedford cannot prevail.

The securities at issue defaulted only once, generating only a single purchase option for each

security. Bedford’s predecessor as Directing Securityholder waived these options by (1) not

purchasing the securities at par value within ten business days of receiving notice that the

securities had defaulted and (2) not purchasing the securities at the Fair Value within ten


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business days of receiving the valuation. By the time Bedford became the new Directing

Securityholder in August 2013, then, there were no longer any options for Bedford to exercise.

Accordingly, to the extent that Bedford argues that its predecessor could not have waived

Bedford’s purchase options, we agree with the district court that Bedford has “put[] the cart

before the horse by presuming that a valid option exists.” Special App. 38.

       We have considered all of the appellant’s remaining arguments, and do not find that they

require us to reach a contrary result. Accordingly, for the foregoing reasons, the judgment of the

district court is AFFIRMED.

                                             FOR THE COURT:
                                             CATHERINE O’HAGAN WOLFE, CLERK




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