Judge Grants Stay in U.S. Bank Fee Suit

 

S.D.N.Y. Judge Victor Marrero granted a stay in a proposed class action that alleges that U.S. Bank as trustee improperly used money from trusts to fund its defense in an RMBS suit. Royal Park Investments filed the underlying RMBS trustee suit in 2014 (Royal Park Investments SA/NV v. U.S. Bank National Association, No. 1:14-cv-02590), alleging that U.S. Bank breached its duties as trustee. While the suit was pending, Royal Park Investments filed another suit against U.S. Bank in 2017 (Royal Park Investments SA/NV v. U.S. Bank National Association, No. 1:17-cv-06778) for misuse of trust funds to fund the underlying suit. U.S. Bank contends that indemnification clauses in the trusts’ governing documents allow it to reimburse itself for these legal expenses. Royal Park counters that legal fees are not recoverable if the relevant litigation is the result of U.S. Bank’s gross negligence. Because this gross negligence is a “central factual question” in both suits, Judge Marrero granted the stay to resolve the claim first in the underlying RMBS suit.