11.  In addition, RPI alleges HSBC discovered and knew of numerous loan servicer events  of default (“Events of Default”) committed by the loan Servicers or Master Servicers (collectively  “Servicers”) under the Governing Agreements, but failed to give notice and cure those Events of  Default.  HSBC also willfully failed to discharge its fiduciary duty to protect the interests of the  certificateholders following the Events of Default, once again, electing to place its conflicted  financial self-interest ahead of the interests of certificateholders.   12.  The Complaint expressly and repeatedly alleges that HSBC acted negligently and  engaged in willful misconduct.  See ¶¶148, 150, 152, 154, 156, 174, 176.   13.  For example, the Complaint describes lawsuits regarding specific loans in the specific  Covered Trusts that informed HSBC that there were numerous defective mortgage loans in the  Covered Trusts that breached the Warrantors’ representations and warranties.  ¶95.  Moreover,  HSBC had granular visibility into the breaches of representations and warranties, such as misstated  income or debt ratios, learned through the bankruptcies of the mortgage loan borrowers and through  the due diligence of its own affiliates.  ¶¶98-104.   15.  In defending itself against the Litigation, HSBC has and continues to spend an  enormous amount on legal expenses, which has been paid from the assets of the Covered Trusts –  the investors’ money.  As of the filing of this complaint, it has filed an unsuccessful motion to  dismiss the Litigation Complaint, opposed two class certification motions, engaged in a “scorched  earth” defense strategy, and engaged in unmeritorious discovery practice.  It has undertaken wholly  irrelevant and wasteful discovery, including harassing plaintiff with 176 individual requests for  admission, serving approximately 25 non-party subpoenas, and taking irrelevant or duplicative fact  and expert depositions, again using the investors’ money.   17.  Despite the excessive legal expenses racked up in the Litigation, HSBC has not paid  or advanced its own legal costs and attorney fees, nor has it sought to control its litigation expenses.   As a result, the Covered Trusts, and by way of the beneficial ownership structure of the RMBS in the  Covered Trusts, RPI and the class, have been improperly and illegally paying for HSBC’s defense in  the Litigation, even though HSBC’s negligence, willful conduct and bad faith as alleged (and being  proven through discovery) in failing to perform its mandated duties for investors is the cause of the  Litigation.  Perversely, the investors were damaged by HSBC’s wrongdoing in the Litigation and  now HSBC is defending such wrongdoing with the funds of the investors it wronged.   18.  Because the certificateholders are the sole beneficiaries of the Covered Trusts,  HSBC’s improper use of the Covered Trusts’ funds reduces the amount of money that the  certificateholders are entitled to receive as part of their beneficial ownership of the certificates.   Certificateholders have a beneficial interest in the interest and principal payments derived from the  mortgage loans that serve as the corpus for each Covered Trust.  However, before the  certificateholders receive their monthly remittances, the trustee (and certain other deal parties) to the  Governing Agreements may withdraw funds from the Covered Trusts’ assets to pay for their costs  administering the trust or servicing the loans.   20.  The obligations, duties and rights of HSBC as trustee for the Covered Trusts are  expressly delineated in the Covered Trusts’ Governing Agreements, known as “Pooling and  Servicing Agreements” (or “PSAs”) and documents related thereto.  All of the Governing  Agreements for the other Covered Trusts are substantially similar to and are incorporated herein by  reference.  The three Governing Agreements are attached hereto as Exhibits A, B, and C.   21.  Each PSA is governed by New York state law.  See Ex. A, DBALT 2006-AR5 PSA  §12.4.; Ex. B, FHLT 2006-C PSA §10.03; Ex. C, WFHET 2006-2 PSA §11.04.   22.  The purpose of having trustees, such as HSBC, for the Covered Trusts is to ensure  that there is at least one independent party to the Governing Agreements that – unlike plaintiff and  the class – does not face collective action, informational, or other limitations, thereby allowing and  requiring the trustee to protect the interests of plaintiff and the class, and administer the Covered  Trusts for their benefit.   24.  While the PSAs contain a number of provisions governing the indemnification of  legal fees and costs related to the discharge of HSBC’s mandated duties under the Governing  Agreements, there are some significant restrictions of HSBC’s ability to use Covered Trust funds.   Absent from these provisions is any unequivocal language explicitly indemnifying lawsuits between  indemnitor and indemnitee, parties to the Governing Agreements or beneficiaries themselves to be  enforced under New York contract law, as required to be applied by the PSAs.  For purposes of the  Litigation, the certificateholders suing the trustee operate functionally similar to a first-party lawsuit  as it pertains to indemnification provisions.  Accordingly, in the Litigation, the purported indemnitor  is suing the indemnitee and indemnification is prohibited by New York law.   25.  Most relevant to the Litigation and this action is §8.05 of the FHLT 2006-C PSA,  which prohibits trustee HSBC from using funds from the Covered Trusts whenever HSBC’s conduct  is “incurred by reason of willful misfeasance, bad faith or negligence in the performance of duties  hereunder.”  Ex. B, FHLT 2006-C PSA §8.05(a); see also Ex. A, DBALT 2006-AR5 PSA §9.5  (prohibiting indemnification for “any loss, liability or expense incurred by reason of willful  misfeasance, bad faith or gross negligence by the Trustee”); Ex. C. WFHET 2006-2 PSA §8.05  (prohibiting indemnification for “any such expense, disbursement or advance as may arise from  [Trustee’s] gross negligence or bad faith”).   27.  In the Litigation, RPI alleged that “HSBC’s failures to act, and its breaches and  violations alleged herein, were grossly negligent and willful misconduct.”  ¶148; see also ¶¶150,  152, 154, 156, 174, 176.  Indeed, the Governing Agreements provide that “[n]o provision of this  Agreement shall be construed to relieve the Trustee . . . from liability for its own negligent action, its  own negligent failure to act or its own misconduct.”  See, e.g., Ex. C, WFHET 2006-2 PSA §8.01.   28.  In addition, under New York law, it is well settled that parties are responsible for their  own legal fees and expenses.  Therefore, where, as in the Litigation, the dispute is between or among  parties to an agreement, indemnification for legal fees and expenses is prohibited unless expressly  stated in the contract.  The Governing Agreements do not authorize indemnification for legal  expenses or costs in internecine disputes between the parties to the Governing Agreements,  including the Litigation.   29.  Moreover, the Governing Agreements do not contain provisions providing for an  advancement of HSBC’s legal fees and costs.  HSBC may only receive indemnification and  subsequent reimbursement of those fees and costs which are permitted, and only if it can establish  that the fees and costs are expressly permitted – which here, they are not.  See Ex. C, WFHET 2006- 34.  The members of the class are so numerous that joinder of all members is  impracticable.  While the exact number of class members is unknown to plaintiff at this time and can  only be ascertained though appropriate discovery, plaintiff believes that there are at least hundreds of  members of the proposed class.  Record owners and other members of the class may be identified  from records maintained by HSBC, Depository Trust Company or others and may be notified of the  pendency of this action by mail, using the form of notice similar to that customarily used in  securities class actions.   35.  Plaintiff’s claims are typical of the claims of the members of the class, as they all  acquired RMBS certificates in the Covered Trusts and held the RMBS certificates during the time  when HSBC began impermissibly billing the Covered Trusts for its Litigation fees and costs; all the  claims are based upon the Governing Agreements for the three Covered Trusts at issue; HSBC’s  alleged misconduct was substantially the same with respect to all class members; and all class  members suffered similar harm as a result.  Thus, all members of the class are similarly affected by  HSBC’s contractual breaches and common law violations that are alleged herein.   36.  Plaintiff will fairly and adequately protect the interests of the members of the class  and has retained counsel competent and experienced in class action and RMBS litigation.   38.  Common questions of law and fact exist as to all members of the class and  predominate over any questions solely affecting individual members of the class.  Among the  questions of law and fact common to the class are:  (a)  whether HSBC is contractually permitted under the Governing Agreements to  receive indemnification of any of its legal fees and costs from the Covered Trusts incurred in relation  to the Litigation;  (b)  whether HSBC must seek indemnification from the Warrantors and/or  Servicers for legal fees and costs incurred in relation to the Litigation;  (c)  whether HSBC is permitted to obtain indemnification of legal fees and costs  incurred in relation to the Litigation because of willful misconduct, bad faith or negligence in the  performance of any of its duties;  (d)  whether HSBC’s legal fees and costs incurred in relation to the Litigation  were unreasonable;  (e)  whether HSBC, as trustee, was permitted to bill the Covered Trusts for the  Litigation expenses as a principle of trust law;  (f)  whether HSBC’s conduct in obtaining its legal fees and costs out of the  Covered Trusts’ assets is tortious or inequitable; and  (g)  whether HSBC is entitled to the advancement of its legal fees and costs  incurred in relation to the Litigation.   40.  Plaintiff repeats and realleges each and every allegation set forth in the preceding  paragraphs as if fully set forth herein.   41.  As set forth in detail above, the Governing Agreements are contracts setting forth the  duties HSBC owed to plaintiff, the class and the Covered Trusts, along with the conditions and  limitations governing its rights to indemnification or use of Covered Trust funds.  HSBC took  actions not permitted by the Governing Agreements or by New York law, including, without  limitation:  (a)  using Covered Trust funds for legal fees and costs HSBC incurred in  defending the Litigation because the Governing Agreements and New York law do not permit  indemnification of first-party claims or those between indemnitor and indemnitee;  (b)  using the Covered Trust funds for legal fees and costs incurred in defending  against allegations of negligence, bad faith and willful misconduct in the Litigation because the  Governing Agreements and New York law prohibit the use of Covered Trust funds for such  purposes;  (c)  using the Covered Trust funds for unreasonable legal fees and costs incurred  in defending itself in the Litigation; and  (d)  obtaining advancement of its legal fees and costs from the Covered Trusts  incurred in relation to the Litigation.   43.  Plaintiff and the class did not receive the benefit of their bargain under the Governing  Agreements when HSBC took actions that resulted in the payment of legal fees and costs from the  Covered Trusts incurred in defending against allegations of bad faith and willful or negligent  misconduct.   44.  Furthermore, plaintiff and the class did not receive the benefit of their bargain under  the Governing Agreements when HSBC took actions that resulted in it receiving an advancement of  legal fees and costs from the Covered Trusts incurred in relation to the Litigation.   45.  Finally, plaintiff and the class did not receive the benefit of their bargain under the  Governing Agreements when HSBC billed unreasonable legal fees and costs to the Covered Trusts.   46.  As a result of HSBC’s multiple breaches of the Governing Agreements alleged  herein, HSBC is liable to plaintiff, the class and the Covered Trusts for the damages they suffered as  a direct result of HSBC’s actions alleged herein in contravention of the Governing Agreements.   48.  Plaintiff repeats and realleges each and every allegation set forth in the preceding  paragraphs as if fully set forth herein.   49.  HSBC has received a specific benefit from its use of the Covered Trust funds for legal  fees and costs at the expense of plaintiff and the class.   50.  As trustee, HSBC had a fiduciary relationship to plaintiff, the class and the Covered  Trusts, and HSBC was aware of that relationship.   51.  In light of the egregious use of Covered Trust funds to finance the defense of the  Litigation, restitution is necessary because equity and good conscience cannot permit HSBC to retain  the legal fees and costs.  52.  Plaintiff repeats and realleges each and every allegation set forth in the preceding  paragraphs as if fully set forth herein.   53.  As described above, HSBC’s administration of the Covered Trusts and the funds  therein must only be for the benefit of the certificateholders unless provided for by the Governing  Agreements.   54.  By using Covered Trust funds for unlawful and unreasonable legal fees and costs,  HSBC has wrongfully converted Covered Trust funds belonging to plaintiff and the class.   56.  At no point did plaintiff or class members consent to HSBC’s use of Covered Trust  funds for defending itself in the Litigation.   57.  HSBC’s conduct was gross, willful and wanton, and at the least was undertaken with  reckless disregard of plaintiff’s rights, and therefore warrants the imposition of punitive damages.  58.  Plaintiff repeats and realleges each and every allegation set forth in the preceding  paragraphs as if fully set forth herein.   59.  Under the common law, HSBC had a duty to plaintiff and the class to only seek  indemnification of permitted legal fees and costs incurred for the benefit of the Covered Trusts.   60.  As a result of HSBC’s actions in relation to allegations in the Litigation, HSBC is not  entitled to indemnity.   61.  HSBC breached its duty of trust owed to plaintiff and the class by advancing its own  interests at the expense of plaintiff and the class, because it is being sued in the Litigation in its  capacity as trustee for failing to protect the interests of plaintiff and the class but billing the Covered  Trusts for its defense.  Accordingly, the legal fees and expenses incurred in defending itself in the  Litigation are for the exclusive benefit of HSBC and not for the benefit of the Covered Trusts.   62.  In addition, HSBC breached its duty of trust owed to plaintiff and the class by seeking  unreasonable legal fees and expenses from the Covered Trusts assets.   64.  As a result of HSBC’s breach of its duty of trust, unpermitted legal fees and costs  were billed to and paid from the Covered Trusts assets, causing the plaintiff and class damages.   65.  HSBC’s conduct was gross, willful and wanton, and at the least was undertaken with  reckless disregard of plaintiff’s rights, and therefore warrants the imposition of punitive damages.  66.  Plaintiff repeats and realleges each and every allegation set forth in the preceding  paragraphs as if fully set forth herein.   67.  As an RMBS trustee, HSBC had, and continues to have, a fiduciary relationship with  and duty to certificateholders regarding the assets of the Covered Trusts in which certificateholders  have a beneficial interest.   68.  The funds held in the Covered Trusts are entrusted to HSBC’s administration and  oversight.   69.  HSBC’s fiduciary duty and control of entrusted funds impose a burden of accounting.   70.  Plaintiff and the class require an accounting of the legal fees and costs paid for using  Covered Trust assets to determine the amount improperly taken.  71.  Plaintiff repeats and realleges each and every allegation set forth in the preceding  paragraphs as if fully set forth herein.   73.  Plaintiff seeks a declaration that HSBC is not permitted indemnification from the  Covered Trusts for any loss, liability or expense associated with the Litigation, and that HSBC is not  entitled to draw against the Covered Trusts for the purpose of advancing its attorneys’ fees and  expenses associated with the Litigation.  The requested declaratory judgment will serve a useful  purpose in clarifying and settling the legal issue regarding whether HSBC is entitled to indemnity  from the Covered Trusts against any loss, liability or expense associated with the Litigation.  9.  RPI is the plaintiff in the Litigation currently proceeding against HSBC.  In that case,  RPI alleges that HSBC failed to fulfill its duties as trustee of the Covered Trusts and thereby  damaged RPI and the class of RMBS certificateholders.  The operative complaint in the Litigation  (the “Complaint”) is found at Dkt. No. 1 of the Litigation and incorporated by reference herein.1   Breach of Contract   Breach of Trust   Conversion   Declaratory Judgment Regarding HSBC’s Right  to Indemnification for Legal Fees and Costs Incurred in  Defending the Litigation from the Covered Trusts   Equitable Accounting   Unjust Enrichment  