Wilmington Trust

Delaware Federal Court Grants RMBS Trustee’s Motion to Dismiss

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On May 14, 2018, Judge John E. Jones III of the United States District Court for the District of Delaware granted the Trustee-Defendant Wilmington Trust Company’s (“Wilmington Trust”) motion to dismiss in IKB International, S.A. v. Wilmington Trust Co. Plaintiffs IKB International, S.A. (“IKB S.A.“) and IKB Deutsche Industriebank, A.G. (“IKB A.G.“) are holders of certain securities issued by various RMBS trusts, and they sued Wilmington Trust, as Owner Trustee of the various trusts, for breach of contract and the implied covenant of good faith and fair dealing. The Court first dismissed the claims asserted by IKB S.A., holding that IKB S.A. lacked standing to assert claims under the governing agreements because it transferred all of its claims to third parties. The Court next held that IKB A.G. failed to adequately state its claims. The Court found that Wilmington Trust’s obligations were limited by the terms of the governing agreements, and thus had no extra-contractual duties to ensure that the Indenture Trustees and Sellers complied with their obligations regarding the mortgage loan files, notify any other parties of breaches of Sellers’ representations and warranties, or address uncured servicing defaults. The Court also rejected IKB A.G.’s claim that Wilmington Trust breached the implied covenant of good faith and fair dealing as duplicative of the breach of contract claim. Memorandum & Order

RMBS Suit to Proceed Against Morgan Stanley

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On June 16, 2016, Justice Marcy S. Friedman of the Supreme Court of the State of New York largely denied Morgan Stanley’s motion to dismiss a breach of contract action brought by RMBS trustee Wilmington Trust Company. The court dismissed the trustee’s claim for indemnification of attorney’s fees, finding that the contracts did not unmistakably contemplate such indemnification. The court denied without prejudice defendant’s motion to dismiss the trustee’s claim as to non-Morgan Stanley loans in the offering at issue, as the parties did not have the opportunity to address the import of recent RMBS precedent or whether the repurchase demand in this case included any such loans. The court will receive further briefing on the import of a 2015 intermediate appellate court decision, previously covered here, on plaintiff’s claim that the bank improperly failed to notify the trustee of breaches Morgan Stanley discovered. The court denied the remainder of Morgan Stanley’s motion to dismiss. Following her prior decisions (such as her decision in ACE on remand from the Court of Appeals, covered here), Justice Friedman held that the trustee’s claims for breach of contract were timely filed within the statute of limitations, and that its claim for damages was not precluded by the repurchase protocol. Order.