On May 2, 2022, Justice Borrok of the New York County Commercial Division issued a decision in Finkelstein v U.S. Bank, N.A., 2022 NY Slip Op 50338(U), denying U.S. Bank’s motion to dismiss in its entirety. A few key points:
- The no action clauses did not bar plaintiff’s claim.
- Even when PSAs did not have language explicitly requiring the trustee to enforce the trusts’ rights, the trustee still had a duty to do so:
The fact is that, at a bare minimum, the PSAs required the Trustee to review the Mortgage Files and to hold the Mortgage Files for the benefit of the certificateholders. These obligations they breached if the Mortgage Files were deficient and they did not require the Sellers to meet their obligation because the Mortgage Files would be unenforceable. Holding otherwise makes zero sense. This does not otherwise impute a duty to which the Trustee did not agree (ARMT 2005-6A, ARMT 2005-7, and ARMT 2005-10). Stated differently, the Trustee could not simply review the Mortgage Files, find problems and do nothing while still meeting their obligations. The argument to the contrary twists logic beyond all recognition.
- The court denied U.S .Bank’s attempt to stay the claims relating to its use of trust funds to indemnify itself.