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.
United States District Court for the Southern District of New York
JP Morgan Reaches Agreement in Principle to Settle Dispute Over $17.6B in MBS
On January 8, 2015, plaintiffs in a class action lawsuit against JP Morgan Chase informed the court that the parties had an agreement in principle to settle the case. The suit was initially commenced against Bear Stearns in August of 2008, and alleged that the bank misrepresented the underwriting process and the quality of the underlying loans in connection with $17.6 billion in RMBS. The settlement will be subject to approval by Judge Swain of the United States District Court for the Southern District of New York. Preliminary papers seeking such approval are scheduled to be filed on February 2, 2015. Endorsed Status Report.
NCUA Sues U.S. Bank and Bank of America for Allegedly Failing to Comply with RMBS Trustee Duties
On December 16, National Credit Union Administration filed a lawsuit in the United States District Court for the Southern District of New York against U.S. Bank N.A. and Bank of America N.A., in their capacity as trustees for 99 RMBS trusts. NCUA filed the suit as liquidating agent for five failed credit unions collectively alleged to have purchased certificates in the trusts at issue. NCUA alleges that U.S. Bank and Bank of America breached their duties under the governing trust agreements by failing to properly review and monitor the loans backing the RMBS, failing to notify the investors of deficiencies in the loans, failing to take action to address those alleged deficiencies, and failing to require the repurchase of defective loans. The complaint asserts causes of action under the Trust Indenture Act and the Streit Act, a New York statute that governs administration of mortgage trusts, and seeks compensatory damages and unspecified equitable relief. Complaint.
$95 Million Settlement Approved in Morgan Stanley RMBS Case
On December 18, Judge Katherine B. Forrest of the United States District Court for the Southern District of New York approved a $95 million settlement to end a class action brought by RMBS investors against Morgan Stanley. The complaint alleged that Morgan Stanley made material misrepresentations regarding its appraisals and underwriting standards of the underlying mortgages in the marketing and sale of the RMBS. Judge Forrest also granted lead plaintiffs’ application for approximately $17.2 million in attorneys’ fees and expenses. Final Judgment. Order Granting Attorneys’ Fees and Expenses.
UBS Settles RMBS Lawsuit
On April 21, Union Central Life Insurance Co., Ameritas Life Insurance Corp. and Acacia Life Insurance Company, on the one hand, and UBS AG, UBS Securities LLC and Mortgage Asset Securitization Transactions, Inc., (collectively, UBS), on the other, filed a motion in the United States District Court for the Southern District of New York seeking voluntary dismissal based on the fact that they had reached a settlement. The settled action related to alleged misstatements by UBS relating to RMBS sold to the three insurance company plaintiffs. The settlement agreement was reached on March 5, 2014, and the parties now seek, in addition to voluntary dismissal, a bar order relating to UBS. The terms of the settlement were not disclosed. Motion.
Federal Court Dismisses In Part Putback Claims Against Deutsche Bank
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.
Walnut Place Investors Remove Proceeding Concerning Bank of America’s Proposed $8.5 Billion Settlement to Federal Court
On August 26, 2011, Walnut Place Investors removed Bank of America’s proposed $8.5 billion settlement with holders of Countrywide Financial Corporation’s RMBS from New York State Court to the United States District Court for the Southern District of New York. The attorneys for Walnut Place Investors, Grais & Ellsworth, noted that the case is subject to federal jurisdiction as a mass action under the Class Action Fairness Act (“CAFA”). In a letter addressed to counsel for Bank of New York Mellon, Grais & Ellsworth argued that removal should not create any additional delay in ultimately settling the action. Grais & Ellsworth also represents several other parties that intervened in the proposed settlement including several Federal Home Loan Banks, pension funds, and private equity firms. Letter and Notice of Removal.
New York State Common Retirement Fund Settles Securities Suit With Merrill Lynch/Bank of America
On January 13, 2011, the New York State Common Retirement Fund announced a $4.25 million settlement of a securities suit against Merrill Lynch and two former officers. In the suit, the Fund alleged that Merrill Lynch tried to cover up the extent of its involvement in subprime mortgage-backed securities, thus artificially inflating the value of its stock. The lawsuit had been filed in the United States District Court for the Southern District of New York in July. Press Release.
Plaintiff Seeks Class Certification Against Credit Suisse
On December 10, 2010, a Plaintiff filed a motion for class certification in an action regarding a $633 million mortgage-backed securities offering by Credit Suisse in 2006. The Plaintiff alleges that it has specifically identified 97 investors who are members of the putative class, and that 569 additional market participants purchased or sold the Certificates since 2006. The case is pending in the United States District Court for the Southern District of New York before Judge Lewis A. Kaplan. Memo of Law.