Wells Fargo Bank

Commerzbank AG Sues Four RMBS Trustees Alleging Violations of Duties to Investors

On December 23 and 24, Commerzbank AG filed four actions in the Southern District of New York against Deutsche Bank National Trust Company, HSBC Bank USA, N.A., Wells Fargo Bank, N.A., and the Bank of New York Mellon in their capacities as trustees for a number of RMBS trusts.  Commerzbank, as an RMBS investor, alleges that the trustees violated their contractual, fiduciary, and statutory duties by, among other things, failing to address servicers’ “looting” of the trusts.  Commerzbank further alleges that the trustees failed to act to defend the trusts’ interest against misconduct by sponsors and originators for the deals at issue.  The complaints in these actions are substantially similar, and closely parallel other RMBS cases alleging violations of the Trust Indenture Act and the Streit Act, as well as breach of contract, breach of fiduciary duty, negligence and breach of the covenant of good faith.  We have previously covered similar suits by the National Credit Union Administration and Pacific Investment Management Company. Representative Complaint.

District Court Dismisses with Prejudice Loreley CDO Lawsuit

On March 28, Judge Richard Sullivan of the United States District Court for the Southern District of New York dismissed with prejudice a suit by five Loreley Financing entities against several banks and collateral managers stemming from Loreley’s investments in three CDOs that defaulted.  The defendants included Wells Fargo Bank, Harding Advisory, Structured Asset Investors and the three CDOs.  The court dismissed each of Loreley’s claims in their entirety.  It concluded that Loreley failed to allege adequately that an outside investor had interfered with the collateral managers’ asset selection.  The court also rejected Loreley’s allegations of material omissions in the offering documents, concluding that the information in question had been adequately disclosed to investors.  It further held that Loreley failed to plead facts giving rise to a strong inference that the defendants knew certain assets had decreased in value prior to purchasing them for one of the CDOs.  The court dismissed the remaining claims for the same reasons it dismissed the fraud claim.  Orrick represents Harding Advisory in this matter.  Order.