Here are some thoughts based on a first, quick reading of the Commerzbank v. U.S. Bank RMBS trustee summary judgment decision:
On standing, the court held that New York law governed the sale of the certificates because “the actual transactions did not occur in London; they occurred in New York through DTC, a clearing house.” The court further noted that “The publicly available DTC rules provide that all agreements are governed and construed in accord with New York law.” For that reason, the court held that under GOL 13-107, “claims travel with the security unless expressly reserved in writing” and because Commerzbank did not reserve ownership of the claims when it sold the bonds, it transferred its claims when it sold its bonds and thus lacked standing to sue on the sold bonds.
On statute of limitations, the court held that the German statute of limitations applied, and that Commerzbank’s claims were barred by the three-year German statute of limitations. The court calculated the statute of limitations from the date of U.S. Bank’s first alleged failure to act, not when the SOL ran out for it to act. This seems clearly wrong (compare Justice Borrok’s November 13, 2019, decision in MLRN v. U.S. Bank, which recognized that the statute of limitations did not begin to run on MLRN’s claims until the six-year SoL for the trustee to take action ran out).
The court rejected the First Department’s 2018 prevention doctrine rulings and held that the trustee’s failure to give notice of an EoD did not prevent an EoD from occurring. The court went on to hold that there was a question of fact whether EoDs occurred.
On pre-EoD breaches, the court held that where someone other than the trustee was obligated to cure document defects, there could be no document defect claim against the trustee. I think this narrow approach could not apply post-EoD. If the trustee had the power to take action to deal with document defects (which it
The court held that with respect to tort claims, the no action clauses barred claims in trusts where notice had to be given to the Trust Administrator, not the trustee. This ignores a significant body of caselaw that looks to whether the Trust Administrator’s conflicts also excused compliance with the no action clauses (see, e.g., Justice Borrok’s MLRN decision).