Cases & Deals

U.S. Bank obtains another appellate victory in cases alleging hundreds of millions of dollars in losses relating to residential mortgage-backed securities

Clients U.S. Bank National Association

Jones Day successfully defended on appeal the dismissal of an action against U.S. Bank seeking hundreds of millions of dollars in alleged losses in connection with certificates issued by 32 residential mortgage backed securities trusts for which U.S. Bank serves as trustee.

The plaintiffs, who were the issuers of three collateralized debt obligations (“CDOs”), asserted contract and tort claims against U.S. Bank, claiming that it breached its duties as RMBS trustee. U.S. Bank moved to dismiss the issuers' claims for lack of standing. The district court granted the motion, concluding that the issuers had granted away their right to bring claims under the CDO agreements. The issuers then filed an amended complaint, which again asserted contract and tort claims against U.S. Bank as RMBS trustee, and added a claim for equitable relief against U.S. Bank as CDO indenture trustee. The district court once more dismissed the issuers' claims, this time with prejudice. The district court reiterated its prior holding that the issuers lacked standing to bring contract claims because the issuers' grant under the CDO agreements included the transfer of the right to bring contract claims. Moving to the tort claims, the district court held that the issuers' claims were based on alleged breaches of duties owed to certificateholders, and because the issuers were not certificateholders, the issuers failed to plead that U.S. Bank owed them any tort duty. The district court also dismissed the fiduciary-duty claims as abandoned and as barred by the economic-loss doctrine. Lastly, the district court dismissed the issuers' claim for equitable relief, finding that there was an adequate remedy at law.

The Second Circuit affirmed the district court's decision, marking the second significant victory for U.S. Bank this year in the Second Circuit.

Triaxx Prime CDO 2006-1, Ltd., et al. v. JP Morgan Chase & Co., et al., Nos. 18-00939 (2d Cir.), 1-16-cv-01597 (S.D.N.Y.)

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