On March 8, 2023, the First Department heard argument on the appeal in MLRN v. U.S. Bank. [The link is to the court’s YouTube channel, which has an advertisement before you can see the argument]
The issues on appeal (taken from U.S. Bank’s opening brief) were:
- For 57 certificates, MLRN brings claims that accrued to prior certificateholders in California and Texas, but it brought those claims outside of those states’ four-year limitations periods, even measured from MLRN’s asserted accrual date. Are MLRN’s claims nonetheless timely?
The trial court answered yes.
- For all 122 certificates on which MLRN sues, the claims accrued to prior certificateholders, not to MLRN. Thus, to establish that it owns the claims and has standing, MLRN needed to show that, when prior certificateholders transferred the certificates, the claims transferred with them. And to do that, MLRN needed to show that New York substantive contract law governed all transfer contracts between prior certificateholders.
a. For 21 certificates, the record shows that Texas has the most significant relationship to the transfer contracts between prior holders and HBK Master Fund (from which MLRN acquired the certificates), meaning that Texas law governs the transfers and the claims did not transfer. Does MLRN nonetheless own the claims and have standing? The trial court
b. For 101 certificates, the record reveals little, if anything, about the transfers between prior holders. Did MLRN meet its burden to show that New York law governed these transfers and that it therefore owns the claims and has standing? The trial court answered yes.
- The record below shows that HBK Master Fund purchased many at-issue certificates under circumstances that would allow a jury to conclude that the primary purpose of the purchases was for litigation—they were purchased for fractions of a penny on the dollar, after claims against other deal parties had expired, and days before (and in some cases after) MLRN filed this suit. Did material fact questions remain as to whether these purchases were champertous? The trial court answered no.
- As the trial court concluded, MLRN had no admissible evidence showing that any EOD occurred. Could MLRN nonetheless
conclusively establish that EODs occurred based on a federal court decision denying U.S. Bank’s summary-judgment motion as to whether EODs occurred? The trial court answered yes.