Royal Park Investments SA/NV

HSBC Motion to Dismiss Denied in Part in Trustee RMBS Suits by Blackrock, Royal Park Investments, and Phoenix Light

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.

Royal Park Sues RBS Over $1.6 Billion in RMBS

On October 11, Royal Park Investments SA/NV sued several Royal Bank of Scotland (RBS) entities in New York state court over its purchase of $1.6 billion worth of residential mortgage-backed securities.  At issue in the suit are fifty-three RMBS securitizations that RBS underwrote between 2005 and 2007.  Royal Park, which initiated the action as the assignee of Fortis Bank and its subsidiaries, alleges that the offering documents on which the assignors relied contained misrepresentations about the quality of the certificates and underlying mortgage loans.  Specifically, Royal Park claims that RBS failed to disclose that due diligence providers had concluded that a significant percentage of the underlying mortgage loans did not comport with underwriting guidelines and made knowing misrepresentations concerning loan-to-value ratios, owner occupancy ratios, certificate credit ratings, and transfer of title to the underlying mortgage loans.  Royal Park further alleges that RBS had simultaneously taken short positions through credit default swaps on RMBS similar to those at issue in this case.  Royal Park asserts claims for fraud, fraudulent inducement, aiding and abetting fraud, and negligent misrepresentation and seeks both compensatory and punitive damages.  Complaint.