Cases & Deals

U.S. Bank defeats appeal alleging hundreds of millions of dollars in losses related to residential mortgage-backed securities

Client(s) U.S. Bank National Association

Jones Day successfully defended U.S. Bank National Association on appeal against an action seeking hundreds of millions of dollars in alleged losses in connection with certificates issued by 98 residential mortgage-backed securities trusts for which U.S. Bank serves as trustee.

The plaintiff, the National Credit Union Administration Board ("NCUA"), in its capacity as liquidating agent of five credit unions, brought derivative claims on behalf of separate NCUA Guaranteed Note ("NGN") Trusts, which NCUA had created to re-securitize the credit unions' assets. U.S. Bank moved to dismiss NCUA's claims for lack of standing. The district court granted the motion, giving NCUA a single opportunity to amend. In its amended complaint, NCUA once more asserted derivative claims, which the district court again dismissed for lack of standing. NCUA then moved to supplement its complaint to seek another attempt to allege standing. The district court denied the motion as untimely.

In a significant victory for U.S. Bank, the Second Circuit affirmed the district court's decision. The Second Circuit agreed with U.S. Bank that NCUA lacked derivative standing to bring claims on behalf of the NGN Trusts because the NGN Trusts themselves did not have claims—the NGN Trusts had conveyed the certificates and any claims on those certificates to a separate entity, the NGN Trusts' indenture trustee. The Second Circuit also concluded that the district court had not abused its discretion in denying NCUA's motion for leave to supplement. The court reasoned that NCUA had decided to use its final opportunity to amend to assert an already-dismissed theory of standing and so must live with the consequences of its decision.

National Credit Union Administration Board v. U.S. Bank National Association, No. 17-00756 (2d Cir.); National Credit Union Administration Board v. U.S. Bank National Association et al., No. 1-14-cv-09928 (S.D.N.Y.)