Aaron M. Rubin

Senior Associate

Orange County


Read full biography at www.orrick.com

Aaron M. Rubin is a Senior Associate in the Orange County office and a member of the Complex Litigation and Dispute Resolution group.

Aaron has experience with a wide array of matters, including securities and commercial litigation, accountants’ liability, mass torts, and insurance. He has represented clients in federal and state courts. He is also active in pro bono matters.  Prior to working in Orrick's Orange County office, Aaron worked in Orrick's New York office.

Posts by: Aaron Rubin

Nearly All Claims Against U.S. Bank Dismissed in Ambac RMBS Trustee Suit

 

On July 16, Judge Schofield in the United States District Court for the Southern District of New York dismissed four out of five claims in a suit filed by Ambac Assurance Corp. (Ambac) against U.S. Bank National Association (U.S. Bank), challenging the Bank’s actions as trustee for a Harborview Mortgage Loan Trust. Ambac insured certain certificateholders against low cashflow from the Trust, which was backed by Countrywide-originated mortgages. In August 2011, U.S. Bank filed suit in New York state court against Countrywide and Bank of America, as its successor, alleging failure to comply with representations and warranties. When U.S. Bank agreed to stay the state suit after Countrywide proposed a $56.96 million settlement, Ambac sued U.S. Bank in the S.D.N.Y. to enjoin the settlement, alleging that the Bank breached its obligations to trust beneficiaries by accepting a low settlement amount. In March 2017, U.S. Bank initiated a trust instruction proceeding (TIP) in Minnesota to address its claims against Countrywide; meanwhile, Judge Stein in the S.D.N.Y. found in the Ambac-led suit that, because of the ongoing TIP, U.S. Bank had not yet breached its duties, and therefore Ambac’s claims were not yet ripe. On June 1, 2018, U.S. Bank disclosed its $94 million settlement with Countrywide, conditioned on approval by the Minnesota court.

In the case before Judge Schofield, Ambac alleged that U.S. Bank accepted an unreasonably low settlement, that it improperly released other lucrative claims, and that by agreeing to stay the New York state court action and bringing the TIP, U.S. Bank had wasted trust funds, harming trust beneficiaries. Judge Schofield dismissed four of Ambac’s five claims based on these facts, finding that any alleged injury was hypothetical and far too speculative, and that Ambac had not adequately alleged that U.S. Bank taking different actions would have resulted in a more favorable settlement or negotiation position. She also rejected Ambac’s counts for declaratory judgment, because such a finding would serve no useful purpose and would not resolve all of the outstanding cases. Judge Schofield let Ambac’s breach of contract claim continue, finding that Ambac sufficiently alleged that U.S. Bank’s improper accounting of recoveries under the Pooling and Servicing Agreement harmed Ambac, because it affected the amount and timing of the insurance payments that it made. Opinion and Order.

FHFA Sues Wells Fargo Regarding Underwriting of RMBS

 

On June 3, the Federal Housing Finance Agency (FHFA), as conservator for the Federal Home Loan Mortgage Corporation (Freddie Mac), filed a lawsuit in the United States District Court for the Southern District of New York against Wells Fargo Securities, LLC (Wells Fargo) (as successor to Wachovia Capital Markets, LLC (Wachovia)), alleging a violation of Section 11 of the Securities Act. FHFA’s lawsuit alleges losses resulting from Wachovia’s underwriting of two NovaStar securitizations purchased in 2006. FHFA alleges that Freddie Mac was misled about the quality of the loans in the bond deals, and that Wachovia, which Wells Fargo acquired in 2008, participated in drafting the registration statements at issue. These registration statements allegedly contained material misstatements and omissions. FHFA further alleges that its claims are timely because of various tolling agreements entered into between FHFA, Freddie Mac and Wells Fargo. The two deals at issue in FHFA’s Complaint are among six securitizations subject to a $165 million class-action settlement between investors and underwriters, including Wells Fargo, from 2017. FHFA has made multiple unsuccessful bids to be excluded from the settlement, including an appeal that the Second Circuit denied in January of this year, where it argued that the settlement would infringe on the agency’s statutorily-authorized conservatorship powers. FHFA has since filed another appeal, which the agency contends permits it to pursue the claims in this Complaint against Wells Fargo.

SDNY Denies Class Certification in Royal Park Action Against Trustee Bank of New York

 

On February 15, Judge Gregory H. Woods in the United States District Court for the Southern District of New York denied certificateholder Royal Park Investments SA/NV’s (“Royal Park“) renewed motion for class certification in its lawsuit against RMBS trustee Bank of New York Mellon. This was the second time Judge Woods denied Royal Park’s motion for class certification in this case, and it is consistent with other judges’ rulings on Royal Park’s class certification motions in its lawsuits against trustees. Judge Woods found that Royal Park failed to demonstrate that questions of law or fact common to class members predominated over individualized questions. Judge Woods held that liability must be determined individually on a loan-by-loan and trust-by-trust basis, and that none of the inquiries required to prove liability were susceptible to simple, class-wide proof. Further, each putative class member needed to demonstrate that it holds litigation rights, which requires the court to undertake a difficult, fact-dependent analysis of individualized legal issues. In addition, the Court found that each putative class member would present a different statute of limitations defense, and these defenses would apply different time periods under New York law because the trusts were non-residents. Finally, the Court held that the damage calculation in this case required hundreds of fact intensive inquiries that could not be answered on a class-wide basis.

Nomura Settles DOJ RMBS Claims for $480 Million

 

Nomura Holdings, Inc. (“Nomura”) and its U.S. affiliates agreed to pay $480 million to resolve claims brought by the United States Department of Justice (“DOJ“) for alleged misrepresentations in connection with RMBS offerings made prior to 2009. The DOJ alleged that Nomura violated the Financial Institutions Reform, Recovery and Enforcement Act by misleading investors about the risks associated with over $13 billion in RMBS securities that Nomura marketed, sold, and issued. Although Nomura reportedly represented its due diligence process as robust and extensive, the DOJ alleged that Nomura ignored those findings and securitized loans that did not meet underwriting guidelines and continually transacted with loan originators with questionable practices. Nomura disputes the DOJ’s characterization of its practices, and released a statement advising that it settled the dispute to avoid incurring additional legal expense related to the transactions at issue in the investigation. DOJ Press Release. Nomura Press Release. Settement Agreement.

New York High Court Affirms Dismissal of Repurchase Claims As Untimely

 

On October 16, the New York Court of Appeals affirmed the dismissal of the RMBS repurchase action brought by Deutsche Bank National Trust Company, in its capacity as Trustee of the Harborview Mortgage Loan Trust Series 2007-7, against Quicken Loans Inc., the originator of the loans at issue. Although the Court of Appeals’ earlier decision in ACE found that causes of action for breaches of representations and warranties contained in an RMBS contract accrue on the closing date, the Trustee here relied on language in the Mortgage Loan Purchase and Warranties Agreement (“MLPWA“) that it claimed extended the statute of limitations. Specifically, the Trustee cited language in the MLPWA stating that a cause of action arising from a breach of a representation or warranty shall accrue upon the discovery of a breach by the purchaser and the failure by the seller to repurchase the defective loan at issue. The Court of Appeals affirmed the First Department’s holding that the Trustee’s claims were time-barred, rejecting the Trustee’s argument that the MLPWA created a substantive condition precedent. The Court of Appeals held the provision at issue merely set forth a remedy for a preexisting wrong, the breach of representations and warranties at the time of sale. It further found that an agreement to postpone the accrual of the cause of action would be inconsistent with New York law and public policy, which does not allow for parties to enter into an agreement that would preemptively extend the statute of limitations in this manner.

New York Court of Appeals Requires Ambac to Follow Repurchase Protocol and Prove Elements of Fraud Claim

 

On June 27, 2018, the New York Court of Appeals ruled that Ambac Assurance Corporation (“Ambac“) could not recover the full $2.2 billion in damages it sought in the form of claim payouts on $25 billion worth of securitized mortgages from Countrywide Home Loans, Inc. (“Countrywide“). Ambac, a monoline financial guaranty insurer, had agreed to insure payments of principal and interest owed to holders of 17 RMBS securitizations that had been sponsored by Countrywide. Ambac sued Countrywide, alleging claims for fraudulent inducement and breach of contractual representations and warranties. At summary judgment, Ambac contended that it was not required to prove justifiable reliance or loss causation for the fraudulent inducement claim, and that the contract’s repurchase protocol—specified to be the sole remedy for breaches of representations and warranties—did not govern its contractual claims. READ MORE

RMBS Trustees Defeat Motion for Class Certification in California State Court

 

On May 30, 2018, Judge Ronald L. Bauer of the Superior Court of the State of California, County of Orange denied investor Plaintiffs’ (led by BlackRock Balanced Capital Portfolio (FI)) Motion for Class Certification and Appointment of Class Representative and Class Counsel in an action alleging breach of contract against RMBS Trustees Deutsche Bank National Trust Company and Deutsche Bank Trust Company Americas. Ruling from the bench, Judge Bauer based his decision on the difficulties Plaintiffs would face in “presenting evidence of causation and damages” in a class action without making an individualized showing. He further noted that the analysis would be “intensely factually oriented” and would require reviewing “an enormous number of detailed transactions.” Judge Bauer also referred to the issues of standing, statute of limitations, and choice of law in the case as “impossible” to pursue in a class action. Order.

Delaware Federal Court Grants RMBS Trustee’s Motion to Dismiss

 

On May 14, 2018, Judge John E. Jones III of the United States District Court for the District of Delaware granted the Trustee-Defendant Wilmington Trust Company’s (“Wilmington Trust”) motion to dismiss in IKB International, S.A. v. Wilmington Trust Co. Plaintiffs IKB International, S.A. (“IKB S.A.“) and IKB Deutsche Industriebank, A.G. (“IKB A.G.“) are holders of certain securities issued by various RMBS trusts, and they sued Wilmington Trust, as Owner Trustee of the various trusts, for breach of contract and the implied covenant of good faith and fair dealing. The Court first dismissed the claims asserted by IKB S.A., holding that IKB S.A. lacked standing to assert claims under the governing agreements because it transferred all of its claims to third parties. The Court next held that IKB A.G. failed to adequately state its claims. The Court found that Wilmington Trust’s obligations were limited by the terms of the governing agreements, and thus had no extra-contractual duties to ensure that the Indenture Trustees and Sellers complied with their obligations regarding the mortgage loan files, notify any other parties of breaches of Sellers’ representations and warranties, or address uncured servicing defaults. The Court also rejected IKB A.G.’s claim that Wilmington Trust breached the implied covenant of good faith and fair dealing as duplicative of the breach of contract claim. Memorandum & Order

New York Supreme Court Grants in Part and Denies in Part Cross Motions for Summary Judgment in RMBS Action

 

On May 16, 2018, Justice Shirley W. Kornreich of the New York Supreme Court granted in part and denied in part the parties’ summary judgment motions in Merrill Lynch Mortgage Investors Trust Series 2006-RM4 v. Merrill Lynch Mortgage Lending, Inc. Defendants Merrill Lynch Mortgage Lending, Inc. (“Merrill“) and Bank of America National Association (“BANA“) and Plaintiff-Trustee U.S. Bank National Association (“Trustee“) cross-moved for partial summary judgment regarding the scope and enforceability of an allocation agreement between Merrill and BANA and certain provisions therein about the release of Merrill’s contractual liability to the Trustee (the “Release”). Justice Kornreich granted summary judgment for Defendants with respect to the Release language being unambiguous but denied summary judgment as to its enforceability. Justice Kornreich concluded that material questions of fact exist as to whether Merrill’s and BANA’s negotiation and execution of the Release was a true arm’s length transaction and whether the Release was unconscionable. Justice Kornreich also denied the Trustee’s motion for a ruling that Merrill provided a backstop to originator ResMAE Mortgage Corporation’s putback liability. The Court granted summary judgment to the Trustee regarding the meaning of certain sections of the mortgage loan purchase agreement, the existence of warranty breaches on certain loans, and Defendants’ causation defenses. In addition, Justice Kornreich granted the Trustee’s motion for leave to amend to add a “breach of trust” cause of action against BANA. Decision & Order

S.D.N.Y. Denies Motion for Sampling in Trustee Action

 

On May 17, 2018, Judge Jesse M. Furman of the United States District Court for the Southern District of New York denied the BlackRock Plaintiffs’ request to use sampling to prove their case against an RMBS trustee in BlackRock Balanced Capital Portfolio (FI) v. Deutsche Bank National Trust Company. In reaching this conclusion, Judge Furman noted that his decision was consistent with those reached by other S.D.N.Y. judges in similar actions against RMBS trustees Wells Fargo and HSBC (previously covered here and here). Echoing those decisions, Judge Furman held that sampling was of limited benefit because the BlackRock Plaintiffs had to prove liability and damages loan-by-loan and trust-by-trust. Memorandum Opinion & Order