Deutsche Bank

New York Intermediate Appellate Court Holds that Accrual Provision Does Not Save RMBS Trustee’s Time-Barred Putback Claim

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On August 11, 2016, the First Department of the Appellate Division of the Supreme Court of the State of New York affirmed dismissal of an action brought by Deutsche Bank National Trust Company, as RMBS Trustee, against Quicken Loans, Inc. Following the New York Court of Appeals decision in the closely-followed case of ACE Securities Corp., Home Equity Loan Trust, Series 2006-SL2 v. DB Structured Products, Inc. (covered here) – which held that a breach of contract claim in an RMBS putback action accrues on the date the representations and warranties are made – the First Department concluded Deutsche Bank’s action was time-barred, notwithstanding the presence of an accrual provision in the transaction documents that might have otherwise delayed the accrual of putback claims indefinitely. The decision holds that such accrual provisions are unenforceable attempts to extend the statute of limitations. Order.

WMC Settles $1 Billion RMBS Suit During Pendency Of Appeal

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On August 9, 2016, RMBS trustee Deutsche Bank National Trust Company and WMC Mortgage, LLC, filed a joint motion to stay an appeal pending in the Court of Appeals for the Second Circuit. The parties requested the stay to allow them time to finalize the settlement of a lawsuit alleging that WMC misrepresented the quality of loans it sold in a $1 billion 2006 RMBS offering. The trial court had previously dismissed the lawsuit in 2015 (covered here) as time-barred under New York’s six-year statute of limitations. Joint Motion.

Agencies Extend Deadline for Certain Foreign Banking Organizations’ Resolution Plan Submissions

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On June 8, 2016, the Federal Reserve Board and the Federal Deposit Insurance Corporation extended the deadline for Barclays PLC, Credit Suisse Group, Deutsche Bank AG, and UBS to present their upcoming resolution plans to July 1, 2017, as a result of these entities engaging in restructuring in order to be in “compliance with the Federal Reserve Board’s Intermediate Holding Company (IHC) requirement[.]” Press release.  Press release.

5th Circuit Revives FDIC’s Suit Against Goldman, Deutsche Bank, and Royal Bank of Scotland

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On August 10, 2015, the Fifth Circuit revived a securities fraud suit brought by the Federal Deposit Insurance Corporation (“FDIC”) as receiver for Guaranty Bank against Goldman Sachs & Co., Deutsche Bank AG, and the Royal Bank of Scotland PLC. The FDIC brought claims under the federal Securities Act and the Texas Securities Act, alleging that the defendants made false and misleading statements in selling and underwriting $2.1 billion in RMBS to Guaranty Bank. The suit was filed within the limitations period in the FDIC Extender Statute, 12 U.S.C. § 1821(d)(14), but outside of the limitations period in the Texas Securities Act. The district court held that state law statutes of repose are not pre-empted by the FDIC Extender Statute, and it therefore dismissed the case as untimely. The Fifth Circuit reversed and remanded. The appellate court held that the FDIC Extender Statute preempts all state limitations periods, whether characterized as statutes of limitations or as statutes of repose. The court distinguished the Supreme Court’s decision in CTS Corp. v. Waldburger, 134 S. Ct. 2175 (2014), which held that a similar extender provision in CERCLA did not preempt state statutes of repose. The Fifth Circuit characterized the similarities between the two provisions as “superficial,” and cited legislative history as supporting Congress’s intent to preempt state statutes of repose.  Opinion.

RMBS Class Action Against Deutsche Bank Dismissed

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On December 18, Deutsche Bank was dismissed from an RMBS action brought by the New Jersey Carpenters Health Fund regarding certificates backed by RALI and HarborView trusts.  Judge Harold Baer of the United States District Court for the Southern District of New York granted in part and denied in part defendants’ motion to reconsider their motions to dismiss in light of the Second Circuit’s 2013 decision that claims brought under Section 13 of the Exchange Act are not subject to equitable tolling of the statute of limitations by a prior class action complaint.  The court dismissed claims with respect to two HarborView trusts and all claims against Deutsche Bank securities as untimely because plaintiffs could no longer rely on equitable tolling.  Claims against Citigroup and Goldman Sachs remain in the case.  Decision.

European Commission Imposes EUR 1.71 Billion Fine for Participating in Illegal Cartels

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On December 4, the European Commission announced that it had fined eight international banks a total of more than 1.7 billion for their participation in illegal cartels in markets for financial derivatives covering the European Economic Area.

Using the cartel settlement procedure, the Commission reached two separate decisions; one decision involved seven separate bilateral infringements relating to interest rate derivatives denominated in Japanese yen.  The companies involved were UBS, RBS, Deutsche Bank, JPMorgan, Citigroup and RP Martin.

The other decision was made in relation to a collusion by four banks in relation to interest rate derivatives denominated in euro.  The banks were Barclays, Deutsche Bank, RBS and Société Générale.  Utilizing the Commission’s 2006 Leniency Notice, Barclays and UBS received complete immunity from fines.  Announcement.

Deutsche Bank Files $666 Million Suit Against GE Capital

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On September 13, Deutsche Bank, acting in its capacity as Trustee of the Morgan Stanley ABS Capital I Inc. Trust, Series 2007-HE6 (the Trust), filed a lawsuit in the United States District Court for the District of Connecticut against General Electric Capital Corp. and its subsidiary, WMC Mortgage L.L.C.  Plaintiff alleges that WMC breached representations and warranties concerning 3,399 mortgage loans securitized into the Trust.  Plaintiff also alleges that WMC breached certain repurchase, notification and indemnification obligations.  Plaintiff seeks specific performance of the alleged repurchase obligations or damages totaling at least $500 million.  Complaint.

Deutsche Bank Sued for Fraud in Connection with US$535 Million in RMBS

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In a lawsuit filed in New York State Court on August 5, Royal Park Investments SA/NV (RPI) alleged that several Deutsche Bank affiliates fraudulently induced it to invest in more than US$535 million worth of RMBS in connection with 18 different offerings.  RPI alleges that the offering documents for the RMBS contained material misrepresentations and omissions concerning compliance with underwriting guidelines, loan-to-value ratios, owner occupancy rates, credit ratings, and transfer of title of the underlying mortgage loans.  RPI further alleges that Deutsche Bank knew its representations were false but concealed that information and even used it to take a short position on different RMBS while still marketing these RMBS certificates to RPI as a good investment.  RPI asserts claims for common law fraud, fraudulent inducement, aiding and abetting fraud, negligent misrepresentation, and rescission based on mutual mistake.  Complaint.

Federal Court Dismisses In Part Putback Claims Against Deutsche Bank

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On July 23, Judge Robert W. Sweet of the United States District Court for the Southern District of New York dismissed in part a suit asserting putback claims against Deutsche Bank.  HSBC, as trustee of the securitization at issue, brought suit for (i) alleged breaches of Deutsche Bank’s representations and warranties regarding underlying mortgage loans and (ii) Deutsche Bank’s failure to repurchase the loans upon request by the trustee.  The court held that failure to provide the repurchase remedy is not an “independent” breach of contract.  The court also dismissed HSBC’s declaratory judgment claim for reimbursement of its out-of-pocket expenses as duplicative of HSBC’s breach of contract claims.  The court held, however, that plaintiff had adequately pled claims for breach of contract, including as to mortgages no longer held by the trust, and could pursue money damages allegedly required to make the plaintiff whole, as well as rescissory damages.  Order.

Bundesbank Opens Deutsche Bank Investigation

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The German central bank, the Bundesbank, has launched an investigation into Deutsche Bank following claims that it lost billions on credit derivatives during the financial crisis.  Investigators from the Bundesbank are scheduled to fly to New York next week as part of an inquiry into allegations that misvaluing credit derivatives allowed Deutsche to hide up to $12 billion in losses, which helped it avoid a government bailout.  The investigators will interview people, including former employees, who have knowledge of Deutsche’s credit derivatives dealings between 2006 and 2009.  It is alleged that had the proper valuations been made on the positions during the relevant period, the losses for the whole portfolio would have exceeded $4 billion and could have risen to $12 billion.

Deutsche Bank has denied the allegations and stated that the allegations were “more than two and a half years old,” and had been the subject of a thorough investigation, which found them “wholly unfounded.”