Preview
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SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
NOMURA ASSET ACCEPTANCE CORPORATION,
MORTGAGE PASS-THROUGH CERTIFICATES,
SERIES 2006-AF2 TRUST, by HSBC BANK USA, Index No. 652614/2012
National Association, as Trustee,
IAS Part 60
Plaintiff,
Justice Marcy S. Friedman
-against-
NOMURA CREDIT & CAPITAL, INC.,
Defendant.
NOMURA HOME EQUITY LOAN, INC., HOME
EQUITY LOAN TRUST, SERIES 2007-2, by HSBC
BANK USA, National Association, as Trustee, Index No. 650337l2013
Plaintiff, IAS Part 60
-against- Justice S. Friedman
Marcy
NOMURA CREDIT & CAPITAL, INC.,
Defendant.
NOMURA CREDIT & CAPITAL, INC.'S MEMORANDUM OF LAW
IN SUPPORT OF ITS MOTION FOR LEAVE TO AMEND ITS ANSWERS
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TABLEOFCONTENTS
Page
PRELIMINARY STATEMENT .....................................................................................................1
ARGUMENT...................................................................................................................................3
D~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
I. The Proposed Amendment to Add a Statute of Limitations Defense Does Not
Clearly Lack Merit Because HSBC's Claims Are Time-Barred Under
DBNT/HSBC............................................................................................................3
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
A. HSBC Was a Delaware Resident in 2006 and 2007....................................4
....................................4
B. HSBC's Assertions About Its New York Branch Are Unavailing ..............6
Office"
1. HSBC's "Principal Executive Allegation Does Not
Change HSBC's Delaware Residence .............................................6
2. HSBC's Principal Place of Business Assertions Are Otherwise
~~
Unavailing........................................................................................8
........................................................................................
C. Using A Multifactor Test Does Not Undermine the Applicability of
the Borrowing Statute Here .......................................................................10
"Discovery"
D. HSBC's Allegations of Do Not Preclude Application of
the Borrowing Statute ................................................................................11
II. Leave to Amend Is Freely Granted and Is Clearly Warranted Here......................13
A. The First Department's Decision in DBNT/HSBC Constitutes a
Development in Law Independently Justifying Leave to Amend .............15
B. Leave to Amend Is Also Proper Because There Is No Prejudice ..............16
1. HSBC Has Not Been Hindered in The Preparation of Its Case.....16
.....16
2. Neither Lateness Nor Costs of Discovery Constitute Prejudice
Sufficient To Preclude Leave To Amend ......................................18
3. HSBC's Decision to Serve Its Opening Expert Reports Cannot
Preclude Amendment.....................................................................19
III. Nomura May Amend Its Answers by Right ..........................................................20
CONCLUSION..............................................................................................................................22
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
.
1
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TABLE OF AUTHORITIES
Page
Cases
ACE Secs. Corp. v. DB Structured Prods., Inc.,
25 N.Y.3d
~ ~ 581 13
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
(2015)..........................................................................................................4,
Armstrong v. Peat, Marwick, Mitchell & Co.,
150 A.D.2d 189 (1st Dep't 14
........................................................................................3,
1989)........................................................................................3,
Barbour v. Hosp. for Special Surgery,
169 A.D.2d 385 (1st Dep't 18
................................................................................14,
1991)................................................................................14,
16,
Central Mortg. Co. v. Morgan Stanley Mortg. Cap. Holdings LLC,
No. 5140-CS, 2012 WL 3201139 (Del. Ch. Aug. 7, 2012).......................................................4
.......................................................4
Deutsche Bank Nat'l Trust Co. v. Barclays Bank PLC,
156 A.D.3d 401 (1st Dep't 2017)....................................................................................
....................................................................................
passim
Deutsche Bank Nat'l Trust Co. v. Barclays Bank PLC,
No. 651338/2013, 2015 WL 7625829 (Sup. Ct. N.Y. Cnty. Nov. 25, 18
....................15,
2015)....................15,
Edenwald Contr. Co. v. City of New York,
60 N.Y.2d
~ ~ 957 18
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
(1983)........................................................................................................14,
Fed. Hous. Fin. Agency for Fed. Home Loan Mortg. Corp. v. Morgan Stanley
ABS Capital I Inc., No. 650291/2013, 2018 WL 1187676
(Sup. Ct. N.Y. Cnty. Mar. 6, 2018)..............................................................................
12-13, 15
Global Fin. Corp. v. Triarc Corp.,
93 N.Y.2d
~ ~ 525 (1999)............................................................................................................
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 8-9
Gordon v. Credno,
102 A.D.3d 584 (1st Dep't 2013)..............................................................................................8
..............................................................................................8
Greenburgh Eleven Union Free School Dist. v Nat'l Union Fire Ins.
Co. of Pittsburgh, Pa., 298 A.D.2d 180 (1st Dep't .......................................................17
2002).......................................................17
Ins. Co. of N. Am. v. ABB Power Generation, Inc.,
91 N.Y.2d
~ ~ 180 (1997)................................................................................................................9
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Jacobson v. McNeil Consumer & Specialty Pharm.,
68 A.D.3d 652 (1st Dep't 2009)........................................................................................
........................................................................................
16-17
Jerome Stevens Pharm., Inc. v. Budoff,
112 A.D.2d 361 (2d Dep't 1985).............................................................................................19
.............................................................................................1
..
11
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Kitchner v. Kitchner,
100 A.D.2d
~ ~ 954 (2d Dep't 1984).............................................................................................16
.............................................................................................16
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Lenio v. City of New York,
No. 154093/2014, 2016 WL 6125412 (Sup. Ct. N.Y. Cnty. Oct. 20, 2016)...........................19
...........................19
Lettieri v. Allen,
59 A.D.3d 202 (1st Dep't 2009)..............................................................................................14
..............................................................................................14
Marquette Nat. Bank of Minneapolis v. First of Omaha Serv. Corp.,
439 U.S.
~ ~ 299 1978 ...................................................................................................................5
Mendrzycki v. Cricchio,
58 A.D.3d 171 (2d Dep't 21-22
2008).........................................................................................
.........................................................................................
Miller v. Cohen,
93 A.D.3d 424 (1st Dep't 2012)................................................................................................3
................................................................................................3
Mirabella v. Banco Industrial de la Republica Argentina,
34 A.D.2d 630 (1st Dep't 1970)..............................................................................................19
..............................................................................................19
Nomura Home Equity Loan, Inc.,,Series
Series .2006
2006-FM2,
by HSBC Bank USA, N.A. v. Nomura Credit & Capital, Inc.,
30 N.Y.3d
~ ~ 572 2017 ..............................................................................................................20
O'Halloran v. Metro. Transp. Auth.,
154 A.D.3d 83 (1st Dep't 13-14
2017)........................................................................................
........................................................................................
OneWest Bank, N.A. v. Melina,
827 F.3d 214 (2d Cir. 9
2016)...........................................................................................4,
5, 8,
Pomerance v. McGrath,
124 A.D.3d 481 (1st Dep't 2015)......................................................................................
......................................................................................
18-19
Proforma Partners, LP v. Skadden Arps Slate Meagher & Flom, LLP,
280 A.D.2d 303 (1st Dep't 2001)..............................................................................................9
..............................................................................................9
Ruggiero v. Mandell,
49 A.D.2d 892 (2d Dep't 1975)...............................................................................................15
...............................................................................................15
Scharfman by Scharfman v. Nat'l Jewish Hosp. and Research Ctr.,
122 A.D.2d
~ ~ 939 (2d Dep't .............................................................................................18
1986).............................................................................................18
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Solomon Holding Corp. v. Golia,
55 A.D.3d 507 (1st Dep't 16
2008)........................................................................................14,
........................................................................................14,
Steadman v. Sinclair,
223 A.D.2d 392 (1st Dep't 1996)............................................................................................15
............................................................................................15
...
111
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U.S. Bank Nat'l Assoc. v. DLJ Mortg. Cap., Inc.,
140 A.D.3d 518 (1st Dep't 2016) ............................................................................................21
Verizon Directories Corp. v. Continuum Health Partners, Inc.,
74 A.D.3d 416 (1st Dep't 2010) ................................................................................................9
Verizon Directories Corp. v. Continuum Health Partners, Inc.,
No. 117782/05, 2009 WL 1116113 (Sup. Ct. N.Y. Cnty. Apr. 17, 2009).................................9
.................................9
Wachovia Bank v. Schmidt, 546 U.S. 303 (2006)..................................................................
4-5, 10
Statutes and Rules
12 U.S.C.
~ ~ ~§ 36(g)(3) ........................................................................................................................5
28 U.S.C.
~ ~ ~§ 1348..............................................................................................................................9
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Cal. Civ. Proc. Code § 337 ............................................................................................................11
CPLR § 202............................................................................................................................
passim
CPLR § 20
.........................................................................................................................2,
3025(a).........................................................................................................................2,
CPLR § 13
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
3025(b).........................................................................................................................2,
CPLR § 21
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
3025(d).........................................................................................................................3,
CPLR § 20
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
3211(f)..........................................................................................................................2,
10 Del. Code § 8106 ........................................................................................................................4
Va. Code § 8.01-246(2) ...................................................................................................................7
.
1V
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Pursuant to this Court's April 5, 2018 Order, Defendant Nomura Credit & Capital, Inc.
("Nomura") respectfully submits this memorandum of law in support of its motion for leave to
amend itsanswers to add a statute of limitations defense in each of the above-captioned actions
"Actions").1
(the ).
PRELIMINARY STATEMENT
In New York courts, leave to amend an answer is granted liberally. Amendment is
particularly justified here in light of the First Department's new holding in Deutsche Bank Nat'l
Trust Co. v. Barclays Bank PLC, 156 A.D.3d 401 (1st Dep't 2017) ("DBNT/HSBC"). Under
DBNT/HSBC, RMBS trustees are subject to CPLR § 202 much like any other plaintiff: Where
the injury is economic, as here, the cause of action generally accrues in the plaintiff's state of
residence, and the claim must be timely under that state's statute of limitations. See id. HSBC
Bank USA, N.A. ("HSBC")-the plaintiff in these Actions-was a Delaware resident when
these Actions accrued in 2006 and 2007. Because HSBC did not bring suit until nearly six years
later, in 2012 and 2013, these Actions are untimely under Delaware's three-year statute of
limitations and must be dismissed.
HSBC has attempted since the DBNT/HSBC decision to set these Actions apart from the
five other Part 60 putback actions by HSBC against Nomura, which are similarly time-barred
under the new First Department holding. However, HSBC has engaged in the same ongoing
discovery process in those five other Nomura actions in which Nomura did include in its answers
a statute of limitations defense. Adding a statute of limitations defense here will simply
Proposed amended answers in each ofthe Actions areattached as Exhibit A and B tothe accompanying
("
affirmation of Daniel Kahn ("Kahn Aff."). Comparisons showing the proposed changes areattached as Exhibits C
and D tothe Kahn Aff. The proposed amended answers contemplate plaintiff'srequested reinstatement of claims
for attorney'sfees (asdiscussed below), which has notbeen agreed-upon or ordered. Nomura's separate request for
a stayof discovery-in particular,expert discovery-in lightoftheDBNT/HSBC decision remains pending in all
seven Part 60 actions by HSBC against Nomura.
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acknowledge the state of the law followingDBNT/HSBC, and keep these Actions on an even
footing with the remaining HSBC cases. In any event, amendment is proper here for several
additional independent reasons as well.
"freely" time."
Under CPLR 3025(b), leave to amend is granted "at any Therefore,
amendment would have been warranted here even if there had not been an intervening First
Department decision inDBNT/HSBC, in the absence of significant prejudice, which HSBC is
wholly unable to identify. Critically, HSBC complains only of time and money spent on
discovery, which are not prejudice and-as unambiguously evidenced by HSBC's continuing
litigation of its five other Part 60 putback cases against Nomura-would not have been avoided
even ifNomura's original answer had contained a statute of limitations defense. HSBC can
scarcely claim surprise, as inDBNT/HSBC, HSBC itselfsought and obtained the new precedent
cases,2
from the First Department that is fatal to HSBC's claims in these cases, and Nomura informed
HSBC within weeks of the First Department's decision that itwould be asserting a statute of
limitations defense in these Actions.
Separately, amendment as of right in accordance with CPLR 3025(a) is also applicable
here. Nomura may do so because the Court of Appeals recently rendered a decision on
Nomura's motion to dismiss, for which a notice of entry has not yet been served. Thus, once the
notice of entry is served, Nomura will have ten days in which to amend its answers under CPLR
3025(a) and 3211(f).
Further, the pleadings in these Actions remain in flux, which independently provides a
justification for amendment of the answers. In addition to the recent Court of Appeals decision
on Nomura's motion to dismiss, which substantially limited HSBC's claims, HSBC has been
2
HSBC was one ofthe defendants and appellants inDBNT/HSBC.
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attorneys'
seeking to alter its own pleadings in these Actions to reinstate purported claims for
fees. These supplemental claims also permit-and indeed require-Nomura to amend its
answers under CPLR 3025(d).
In sum, amendment in accordance with New York's "liberal policy of granting motions
answer,"
for leave to amend an including to add a statute of limitations defense, Armstrong v.
Peat, Marwick, Mitchell & Co., 150 A.D.2d 189, 190 (1st Dep't 1989), plainly applies in these
Actions at this time.
ARGUMENT
I. The Proposed Amendment to Add a Statute of Limitations Defense Does Not
Clearly Lack Merit Because HSBC's Claims Are Time-Barred Under DBNT/HSBC
merit"
On a motion for leave to amend a pleading, a movant "need not establish the of the
proposed amendment, but must show only that itis not "palpably insufficient or clearly devoid of
merit." 2012).3
Miller v. Cohen, 93 A.D.3d 424, 425 (1st Dep't 2012). Nomura's request to add a
merit."
statute of limitations defense is not "palpably insufficient or clearly devoid of Indeed,
HSBC's claims are time-barred under the First Department's new holding in DBNT/HSBC,
which is directly on point and dispositive. Pursuant to DBNT/HSBC, RMBS trustees are subject
202,4
to New York's borrowing statute, CPLR § 202, just as any other plaintiff: Where the injury is
economic, as here, the cause of action generally accrues in the plaintiff's state of residence, and
state'
the claim must be timely under both New York's statute of limitations and the foreign state's
statute of limitations. See DBNT/HSBC, 156 A.D.3d at 402. At the time these Actions accrued
3
Unless otherwise indicated herein,internalcitations and quotation marks are omitted.
CPLR § 202 provides: "An actionbased upon a cause ofaction accruing without the statecannot be
commenced afterthe expirationof thetime limited by the laws of eitherthe stateor theplace without the statewhere
the cause of action accrued, except thatwhere the cause of actionaccrued infavor of a residentof the statethetime
apply."
limited by the laws of the stateshall
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2007,5
in 2006 and 2007, HSBC Bank USA, N.A. was a Delaware resident.
This means that under CPLR § 202, HSBC's actions must be timely under both New
York's six-year statute of limitations and Delaware's three-year statute of limitations, 10 Del.
Code § 8106. See Central Mortg. Co. v. Morgan Stanley Mortg. Capital Holdings LLC, No.
("
5140-CS, 2012 WL 3201139, at *16 (Del. Ch. Aug. 7, 2012) ("Here, Delaware's three-year
limitations period governs [plaintiff's] breach of contract claims . .. because itis shorter than the
equivalent period prescribed by New York law, which is six years."). Because HSBC did not
bring these Actions until 2012 and 2013, they are untimely and subject to dismissal. Nomura's
proposed amendment to add a statute of limitations defense plainly has merit.
A. HSBC Was a Delaware Resident in 2006 and 2007
At the time of the securitizations at issue in these Actions in 2006 and 2007, HSBC was a
Delaware resident. This is not subject to reasonable dispute. The residence of a national bank
like HSBC is the location of itsmain office. OneWest Bank, N.A. v. Melina, 827 F.3d 214, 219
(2d Cir. 2016) ("[A] national bank is a citizen only of the state listed in its articles of association
as its main office."). And HSBC's Articles of Association in effect in 2006 and 2007
unambiguously designated that state as Delaware: "The main office . .. shall be located in the
Delaware."
City of Wilmington, County of New Castle, and State of See Kahn Aff. Ex. E (2004
HSBC Articles of Association, Paragraph Second).
Moreover, HSBC's decision to locate itsmain office in Delaware meant that, under the
federal statutory framework for national banks, HSBC was representing that its "operations of
5
Itis well-settledthatcontractual claims seeking repurchase based upon allegedbreaches ofrepresentations
accrue under the applicablestatuteof limitationswhen the representations were made. See ACE Secs. Corp. v. DB
Structured Prods.,,Inc
Inc., ,25
25 N.Y.3d 581, 598 (2015). Here, those representations were made no laterthan July28,
2006 (NAAC 2006-AF2) and January 31,2007 (NHELI 2007-2), which arethe dates the securitizationsclosed,
respectively. See, NAAC
e.g., 2006-AF2 Compl. ¶ 39 ; NHELI 2007-2 Compl. ¶ 39. HSBC did not file
these Actions
untilJuly 27, 2012 (NAAC 2006-AF2) and January 30, -2013
2013 (NHELI 2007-2).
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on"
discount and deposit [were] to be carried in Delaware. See Wachovia Bank v. Schmidt, 546
State."
U.S. 303, 307 n.1 (2006). It also meant that Delaware was considered HSBC's "home
12 U.S.C. § 36(g)(3)(B). In contrast, all HSBC offices in states other than Delaware were
"branch" State[s]."
considered offices, and those states were consequently deemed mere "host
12 U.S.C. § 36(g)(3)(C). Since 2009, HSBC has designated Virginia as the state of itsmain
office. Kahn Aff. Ex. E at 1 (December 16, 2008 Letter from the Comptroller of the Currency);
see also Kahn Aff. Ex. F (HSBC Amended and Restated Articles of Association, Paragraph
Second). In deliberately choosing Delaware-and, subsequently, Virginia-as itshome state,
offices.6
HSBC clearly perceived an advantage as compared to the states of itsbranch offices.
In addition, HSBC has used its Delaware home state to establish diversity with New York
plaintiffs. See, e.g., Kahn Aff. Ex. 6 at 1 (Opp'n to Mot. to Rem., Manufacturers and Traders
Tr. Co. v. HSBC Bank USA, N.A., No. 08-cv-3093 (S.D.N.Y. filed May 12, 2008), Dkt. No. 13)
("[A] national association is a citizen of only one state, the state designated as the place where its
Association" -
main office is located in itsArticles of "[i]n this case, that is Delaware.").
Indeed, the Supreme Court has held clearly that banks are citizens of their home state, regardless
of where their branch offices may be located. See Wachovia, 546 U.S. at 307 & n.1. And
following the Wachovia decision, the Second Circuit clarified that a national bank is a citizen
only of its home state, and nowhere else, even if the national bank claims that one of those
branch offices is itsprincipal place of business. OneWest, 827 F.3d at 219. HSBC is bound by
that same rule here.
For example, nationalbanking associations may be able tocharge more favorable interestrates based on
the laws intheir home states.See Marquette Nat. Bank of Minneapolis .v.
v.First ofOmaha Serv. Corp., 439 U.S.
.U.S. 299,
301 (1978).
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B. HSBC's Assertions About Its New York Branch Are Unavailing
HSBC can be expected to argue-as itdid, for the very first time, in its March 20, 2018
position statements-thatDBNT/HSBC should not apply because HSBC's "Complaint alleges
York."
that the Trustee's principal place of business is in New See Kahn Aff. Exs. H, I (March
20, 2018 Joint Letters, HSBC Statement). HSBC is incorrect, as its own complaints allege not
that HSBC's principal place of business was New York, but rather that HSBC's "principal
office" 22.7
executive was in New York. Compl. ¶ 22. Attempting to avoid the implications of
DBNT/HSBC, however, HSBC asserts now that itsprincipal place of business was New York.
business"
But even if "principal place of were relevant to the residence of national banks-which
itis not-HSBC's own filings in other cases demonstrate that place was Delaware at the time
these claims accrued. Moreover, the fact that HSBC's complaints omitted itsDelaware
residence further supports the basis for amendment.
Office"
1. HSBC's "Principal Executive Allegation Does Not Change
HSBC's Delaware Residence
Without acknowledging itsDelaware residence, HSBC's complaints in these Actions
office"
alleged that HSBC's "principal executive is in New York. See Compl. ¶ 22. But ithas
come to light in the wake of the First Department'sDBNT/HSBC ruling that HSBC had