Bank of New York Mellon

Walnut Place Files Derivative Suit Against Bank of New York Mellon and Countrywide in Response to Recent Settlement

On August 2, 2011, several investment entities under the name Walnut Place (“Plaintiffs”) filed a derivative complaint against Countrywide Home Loans on behalf of Bank of New York Mellon (“BNYM”) in New York State Court. Plaintiffs allege that Countrywide breached representations and warranties concerning the mortgage loans underlying Countrywide RMBS that Plaintiffs purchased. According to the Complaint, upon realization of the breach, Plaintiffs demanded in May 2011 that Countrywide repurchase the loans, which Countrywide allegedly refused to do. Plaintiffs are now suing Countrywide on behalf of BNYM, the Trustee to the RMBS that Plaintiffs purchased, to enforce the rights of the Trust on behalf of themselves and other RMBS certificateholders. According to Plaintiffs, because Countrywide and BNYM have since announced a proposed settlement that would extinguish Plaintiffs’ claims against Countrywide, it is futile to expect BNYM to sue Countrywide to enforce its repurchase obligations and Plaintiffs therefore bring their suit in a derivative action. Complaint.

New York Attorney General and Other Parties Move to Intervene in the Bank of America and Bank of New York Mellon Settlement

On August 4, 2011, New York Attorney General Eric T. Schneiderman moved to intervene in the June 29, 2011 settlement between Bank of America and Bank of New York Mellon (“BNYM”), the trustee for 530 trusts created by Countrywide entities. The Attorney General argued that the settlement should not be approved because it was negotiated by BNYM and Bank of America, without input from other beneficiaries who would also be bound by the settlement. According to the Attorney General, he moved to intervene to protect the marketplace, the interests of New York investors, and the Attorney General’s own ability to pursue claims against BNYM, Countrywide, Bank of America, and affiliated entities. NYAG Motion to Intervene.

The Attorney General also attached a proposed pleading to his motion to intervene that described the proposed settlement as “unfair” and included counterclaims against BNYM for breach of fiduciary duty and violations of state anti-fraud statutes, including the Martin Act. These causes of action arise out of BNYM’s alleged failure to properly transfer loans from Countrywide to the trusts and its failure to notify certificateholders of Countrywide’s delivery of incomplete mortgage files. NYAG Proposed Pleading in Intervention.

A few days earlier, on August 2, 2011, Cranberry Park, who allegedly owns securities in 28 of the 530 trusts at issue, also moved to intervene, arguing that BNYM may not adequately represent its interests in the settlement. If the judge grants these motions to intervene, the Attorney General and Cranberry Park will become parties to the settlement proceedings before the New York Supreme Court. Cranberry Park Motion to Intervene.