On June 1, 2015, Judge Shira Scheindlin of the United States District Court for the Southern District of New York issued a Decision and Order granting in part and denying in part HSBC Bank USA, National Association’s (“HSBC”) motion to dismiss three related actions brought by BlackRock, Royal Park Investments SA/NV, and Phoenix Light SF Ltd., claiming $34 billion in damages. The suits allege that HSBC breached a fiduciary duty to investors as a trustee in 283 residential mortgage backed securities trusts by failing to require lenders and bond issuers to buy back loans that breached representations and warranties. Judge Scheindlin rejected HSBC’s argument that the plaintiffs had failed to plead breaches of representations and warranties on a sufficiently granular basis and also held that plaintiffs had sufficiently alleged that the bank had specific knowledge of breaches of the representations and warranties. Judge Scheindlin dismissed claims for negligent misrepresentation and negligence as time-barred. Judge Scheindlin gave the plaintiffs 30 days to amend their complaint to attempt to cure the deficiencies in their dismissed claim. Order.
Jennifer Lee is a Partner in Orrick’s San Francisco office who focuses her practice on complex commercial litigation in the financial services industry. She defends investment banks, corporations and financial services companies and has deep knowledge of the structured finance and mortgage servicing industries, having spent nearly a decade representing financial institutions in million and billion-dollar cases arising from the fallout of the 2009 financial crisis.
Jennifer defends her clients in federal and state litigation across the country that allege fraud, breach of contract, or securities law violations. She is a key member of an Orrick trial team that has shaped the legal landscape of RMBS litigation after the 2009 financial crisis, delivering out-of-the box arguments and innovative solutions for her clients, from initial receipt of pre-litigation demands through expert work, summary judgment and trial.
Jennifer's mortgage-backed securities litigation experience, which spans the last decade, includes:
Jennifer defends her clients in federal and state litigation across the country that allege fraud, breach of contract, or securities law violations. She is a key member of an Orrick trial team that has shaped the legal landscape of RMBS litigation after the 2009 financial crisis, delivering out-of-the box arguments and innovative solutions for her clients, from initial receipt of pre-litigation demands through expert work, summary judgment and trial.
Jennifer's mortgage-backed securities litigation experience, which spans the last decade, includes:
- Representing Credit Suisse Securities in multiple million and billion-dollar actions across the country brought by monoline insurers, trustees, and regulators alleging breaches of representations and warranties, fraud, and securities violations. Recent highlights include conducting direct examination of an expert witness in a trial in February 2023, and securing partial dismissal of claims in December 2023 after arguing a motion to dismiss.
- Representing Goldman Sachs in two RMBS putback actions pending in the Southern District of New York alleging that Goldman breached representations and warranties regarding the characteristics of the deal loans.
- Representing Nationstar in a breach of contract dispute alleging that Nationstar failed to properly service and made misrepresentations regarding thousands of early buy-out loans.
- Representing Ocwen Mortgage Servicing in a consumer class action in the Eastern District of California alleging numerous claims including RICO, California consumer protection statutes and fraud.
- Representing Pipe Technologies, Inc. in multiple commercial disputes regarding payment of services.
- Representing a large financial services platform in multiple subpoenas issued for production of documents.
Jennifer is dedicated to pro bono work, including asylum claims, a cause close to her heart as a child of immigrants. Prior to joining Orrick, she held a fellowship position in the Law Reform Unit at the Legal Aid Society of New York, litigating both individual cases as well as class actions.
Jennifer is a leader and advocate for diversity and inclusion initiatives in the legal profession. She leads Orrick's Diversity, Equity and Inclusion Committee in San Francisco. She has served as a fellow for the Leadership Council on Legal Diversity, and is active in the California Minority Counsel Program.
Posts by: Jennifer Lee
US Bank and Bank of America Prevail on Motions to Dismiss
On May 18, 2015, Judge Katherine Forrest of the United States District Court for the Southern District of New York dismissed claims in two suits brought by private investors and the National Credit Union Association, respectively, against U.S. Bank and Bank of America in their capacity as trustees for RMBS trusts. The lawsuits asserted several causes of action arising out of the trustees’ alleged failure to fulfill their contractual, statutory, and fiduciary obligations to hundreds of RMBS trusts.
In the first case, brought by a number of institutional investors led by BlackRock, Judge Forrest dismissed claims brought under the federal Trust Indenture Act as to 810 of the 843 trusts at issue because they were governed by Pooling and Servicing Agreements (“PSAs”), rather than indentures, and the TIA does not apply to PSA trusts. She declined to exercise supplemental jurisdiction over the state law claims asserted in connection with the 810 PSA Trusts, holding that allowing 33 indenture trusts to pull in another 810 would allow “a federal tail to wag a state dog.” For the remaining 33 indenture trusts, Judge Forrest dismissed the claims because the plaintiffs failed to make a demand on the proper party (the “Owner Trustee”) or allege any that such demand would have been futile. Judge Forrest granted plaintiffs leave to amend as to the indenture trusts. Order.
In the second case, brought by NCUA, Judge Forrest dismissed claims as to 74 out of the 82 Trusts at issue on standing grounds. Judge Forrest held that the Amended Complaint failed to demonstrate that NCUA retained any right to sue when it re-securitized its certificates in the 74 trusts as part of the NCUA Guaranteed Note Program. She rejected NCUA’s statutory standing argument, holding that 12 U.S.C. § 1787 does not authorize NCUA to sue on behalf of separate statutory trusts created to re-securitize the CCUs’ assets. Additionally, Judge Forrest held that the PSAs did not allow third party beneficiary status to extend beyond direct certificateholders, meaning that NCUA no longer had standing once it ceased being a certificateholder following the re-securitization. Order.
Court Enters $806 Million Judgment in FHFA v. Nomura
On May 16, 2015, Judge Denise Cote of the United States District Court for the Southern District of New York entered a judgment requiring Nomura and RBS to buy back, at a total cost of $806 million, seven RMBS certificates sold to Fannie Mae and Freddie Mac from 2005 to 2007. The judgment stemmed from Judge Cote’s May 11, 2015 Opinion finding Nomura and RBS liable for violations of the Securities Act of 1933, the D.C. Securities Act, and the Virginia Securities Act. For those certificates for which FHFA prevailed under multiple statutes, FHFA was permitted to, and did, elect the maximum available remedies. Judge Cote also ordered that FHFA is entitled to post-judgment interest, reasonable attorneys’ fees, and costs. Judgment.
Prudential Settles $2B RMBS Suit with Bank of America and Merrill Lynch & Co.
On April 22, 2015, Bank of America and Merrill Lynch reached an agreement with several Prudential Insurance Co. affiliates to settle two lawsuits brought by Prudential. Prudential had alleged that Bank of America and Merrill Lynch made false statements about the quality of $2.1 billion worth of residential mortgage backed securities they sold to Prudential. The parties filed a stipulation of dismissal with prejudice but the settlement terms are otherwise undisclosed. Stipulation.
Second Circuit Vacates Dismissal of $25M CDO Case Against Citi
On April 22, 2015, the Second Circuit vacated and remanded a district court’s decision dismissing on statute of limitations grounds claims Woori Bank brought against Citigroup Global Markets arising out of Woori’s purchase of $25 million in collateralized debt obligations. Woori asserted claims for fraud, fraudulent inducement, negligent misrepresentation, and unjust enrichment, alleging that Citi made misrepresentations in connection with its sale of the CDO to Woori. The district court dismissed the action as time-barred, holding that Woori had knowledge of its claim prior to May 2009, the date after which an action would be time-barred under the applicable South Korean statute of limitations. The Second Circuit reversed. It held that the news reports and pitch materials on which the district court had relied to establish Woori’s knowledge were not sufficient to put it on notice of its specific claim against Citi because none of them suggested that Citi acted fraudulently in connection with the CDO at issue. Summary Order.
Morgan Stanley Mortgage Capital Holdings LLC Motion to Dismiss RMBS Claims Granted in Part
On April 3, 2015, Judge Laura Swain of the U.S. District Court for the Southern District of New York granted in part and denied in part Morgan Stanley Mortgage Capital Holdings LLC’s (“MSMC”) motion to dismiss breach of contract and breach of the covenant of good faith and fair dealing claims brought by Deutsche Bank National Trust Company (“Deutsche Bank”), in its capacity as Trustee for the Morgan Stanley Structured Trust I 2007-1. Deutsche Bank alleged that MSMC, as the sponsor of the RMBS securitization, breached the representations and warranties in the Mortgage Loan Purchase Agreement, and was therefore obligated to cure or repurchase breaching loans. Judge Swain granted MSMC’s motion to dismiss Deutsche Bank’s claims that MSMC breached an implied covenant of good faith and fair dealing, holding that this was based on the same facts as, and therefore impermissibly duplicative of, the breach of contract claim. However, Judge Swain denied MSMC’s arguments that the breach of contract claims should be dismissed. Judge Swain found that Deutsche Bank had provided adequate notice of breaches beyond the 1,620 loans specifically addressed in Deutsche Bank’s breach notice letter because the letter gave MSMC notice of pervasive breaches. She also declined to dismiss Deutsche Bank’s claims for compensatory, rescissory, and consequential damages at the pleadings phase. Order.