United States Court of Appeals for the Second Circuit

Second Circuit Holds that Trust Indenture Act Does Not Apply and Dismisses RMBS Investor Claims Against BNY Mellon

On December 23, the United States Court of Appeals for the Second Circuit dismissed claims against Bank of New York Mellon, as trustee, by four pension funds in a putative class action relating to 530 Countrywide RMBS trusts worth $424 billion. The Second Circuit affirmed the district court’s holding that the plaintiffs did not have standing to assert claims related to certificates issued by trusts in which no plaintiff ever invested. The court further held that the Trust Indenture Act (TIA) does not apply to the trusts because they are “certificate[s] of interest or participation in two or more securities having substantially different rights and privileges” and therefore within an exemption to the TIA. As a result, the court reversed the district court’s decision denying the bank’s motion to dismiss claims under the TIA.  Decision.

Second Circuit Upholds Dismissal of $37 Million CDO Suit Against Goldman Sachs

On April 19, 2012, the United States Court of Appeals for the Second Circuit affirmed a lower court’s dismissal of a lawsuit brought by Landesbank Baden-Wurttemberg (“Landesbank”) lawsuit against Goldman Sachs & Co. (“Goldman Sachs.”) Landesbank asserted claims for fraud, negligent misrepresentation, and unjust enrichment, alleging that Goldman Sachs misstated the quality of the mortgages underlying the collateral that backed a CDO and secretly took a position to profit from the CDO’s failure. In affirming the lower court, the Second Circuit determined that Landesbank failed to allege a specific motive for Goldman to commit fraud and failed to allege the existence of any special relationship between Goldman and Landesbank sufficient to support a negligent misrepresentation claim.  Order.