Citibank

SDNY Dismisses FDIC Claims for Lack of Standing Again

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The Federal Deposit Insurance Corporation (FDIC) as receiver for Guaranty Bank brought claims against The Bank of New York Mellon, U.S. National Bank Association, and Citibank, N.A. alleging breach of contract, violation of the Streit Act, and violation of the Trust Indenture Act for allegedly failing to carry out their duties as trustees. Judge Carter dismissed the same claims in September of 2016 for lack of subject matter jurisdiction, holding that the FDIC lacked standing to sue because the FDIC had sold its ownership of the certificates at issue in 2010 to Wilmington Trust Co., as owner trustee, with Citibank acting in as indenture trustee. The Court had held that after that sale, the plaintiff’s claims had travelled with the securities to the resecuritized trust and thus the plaintiff no longer had standing to bring the claims it asserted. The Court had granted leave to amend the complaint to permit FDIC to resolve the standing issues by seeking ratification of the claims by the trust pursuant to FRCP 17(a)(3). After the 2016 dismissal, Wilmington Trust ratified the claims, but Citibank refused to ratify the claims without indemnity from FDIC. As a result, the standing issues remained unresolved, and the court dismissed the claims once again for lack of subject matter jurisdiction without prejudice. Decision.

Claims Dismissed From RMBS Class Action Against Citibank

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On September 8, 2015, the Southern District of New York dismissed, for lack of jurisdiction, a large portion of claims from a derivative class action alleging that Citibank NA, as trustee of 27 trusts, had breached its contractual, statutory, and common law duties in connection with $17 billion of pooled loans.  Plaintiffs invoked federal jurisdiction based on the Trust Indenture Act of 1939 (“TIA”) and asked the court to take supplemental jurisdiction over the accompanying state law claims.  Plaintiffs asserted TIA claims in connection with just 3 of the 27 trusts.  The court held that those claims could proceed, denying Citibank’s argument that the TIA does not provide a private right of action.  However, the court declined to exercise supplemental jurisdiction over state law claims relating to the other 24 trusts.  The court concluded that supplemental jurisdiction was permissible, but that it should nonetheless decline such jurisdictions because the claims as to each trust—which must be litigated loan-by-loan and trust-by-trust—were not sufficiently related.  Order.

Fund Managers Sue Citibank for Breach of Contract and Fiduciary Duty

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On November 24, financial institutions including AEGON, Pacific Investment Management Co., Prudential Financial Inc., Kore Advisors LP, Sealink Funding Ltd., TIAA-CREF Bond Fund, and affiliates, sued Citibank N.A. in the United States District Court for the Southern District of New York.  The plaintiffs purport to sue derivatively on behalf of the securitization trustee, and in the alternative bring a putative class action on behalf of all current certificateholders. The complaint asserts six causes of action: (1) breach of contract; (2) violation of the Trust Indenture Act; (3) negligent breach of pre-default duty of independence; (4) breach of the fiduciary duty of care; (5) negligent breach of the duty of care; and (6) breach of the post-default fiduciary duty of independence.  The plaintiffs seek damages and costs, as well as an order requiring Citibank to undertake “corrective actions.”  Complaint.