Maryland District Court Partially Dismisses Claims by Thornburg Mortgage that Barclays Made Improper Margin Calls and RMBS Seizures

On September 7, 2011, District Court of Maryland Judge Ellen Lipton Hollander granted in part and denied in part Barclays Capital, Inc.’s motion to dismiss Thornburg Mortgage, Inc.’s Chapter 11 trustee’s claims for breach of contract and the covenants of good faith and fair dealing. The Trustee alleged that in August 2007 Barclays made improper margin calls and seizures of MBS that Thornburg financed through a repurchase agreement with Barclays. According to the Trustee, Barclays based its margin calls on inappropriately low valuations and liquidated Thornburg’s MBS at low prices, thereby causing Thornburg economic losses. While Judge Hollander upheld the Trustee’s allegations on the breach of contract claim as sufficient, she granted Barclays’ motion to dismiss the bad faith claim, finding it was redundant with the breach of contract claim. Decision.