Judge Katherine B. Forrest

Claims Against RMBS Trustee U.S. Bank Partially Dismissed

On February 26, Judge Katherine B. Forrest of the U.S. District Court for the Southern District of New York denied U.S. Bank N.A.’s (“U.S. Bank”) motion to dismiss claims for breach of contract and violation of the Trust Indenture Act (“TIA”) with regard to the 27 trusts that remain before the Court after it previously declined to exercise supplemental jurisdiction over claims arising from an additional 810 trusts.  Orrick covered that decision here. The Court dismissed plaintiffs’ claims for breach of fiduciary duty and extra-contractual duties under the economic loss doctrine, but did not dismiss plaintiffs’ TIA-based claim, holding that the statute provides plaintiffs with a private right of action.  Judge Forrest also held that the Indentures’ no-action clauses have no effect in suits against RMBS trustees, rejecting U.S. Bank’s attempt to dismiss all claims against it on the basis of plaintiffs’ non-compliance with those provisions.  Opinion and Order.

Court Approves RMBS Settlement, Rejecting Institutional Investors’ Attempts to Scuttle It

On March 12, 2015, Judge Katherine B. Forrest of the United States District Court for the Southern District of New York approved a $69 million settlement between the plaintiffs and defendants in Policemen’s Annuity & Benefit Fund of the City of Chicago v. Bank of America and dismissed the case with prejudice.  Plaintiffs, a class of investors, had sued Bank of America and U.S. Bancorp in their capacity as trustees for 50 Washington Mutual RMBS.  Plaintiffs alleged that the trustees breached the Trusts’ Governing Agreements and the duty of food faith and fair dealing, and violated the Trust Indenture Act.  Judge Forrest’s approval of the settlement came one week after she denied certain institutional investors’ motion to intervene in the action for purposes of blocking the settlement.  The institutional investors, led by BlackRock and PIMCO, currently are asserting derivative claims against U.S. Bank, as Trustee, on behalf of 843 RMBS Trusts, and asserted that the settlement excluded them while simultaneously releasing their claims as to RMBS Trusts that overlapped between the two actions.  The Court disagreed, finding that although BlackRock and PIMCO were excused from the settlement, the settlement did not release the claims they were pursuing.  Order Approving Settlement.  Stipulation and Settlement.  Order Re Motion to Intervene.