First Department Issues New Decision Relating to Claims Against RMBS Trustees

On March 30, 2023, the First Department issued a decision in MLRN LLC v. U.S. Bank, N.A., 2023 NY Slip Op. 01748, deciding several issues relating to investor claims against RMBS trustees.

Among the court’s holdings were:

  • “[P]laintiff has not established, as a matter of law, standing to pursue claims on all 122 certificates at issue. Although we have stated that matters of procedure are governed by the law of the forum state and that standing is a procedural matter (see Royal Park Invs. SA/NV v Morgan Stanley, 165 AD3d 460, 461-462 [1st Dept 2018], lv denied 32 NY3d 1143 [2019]), that rule is not applicable here as the relevant issue is not procedural. Rather, the substantive issue here is which law applies to plaintiff’s ownership of the certificates and associated claims. This issue may not be properly resolved by applying the forum law. Instead, the issue is properly resolved by applying New York’s choice-of-law rules, which for contractual choice-of-law disputes applies a “center of gravity” or “grouping of contacts” approach that determines the state with the most significant relationship to the relevant contract. We reject defendant’s argument that the record demonstrates that the relevant contracts were made in Texas and under Texas contract law. The record evidence is not conclusive as to the place of contracting and center of gravity with respect to the 122 certificates (see Zurich Ins. Co. v Shearson Lehman Hutton, 84 NY2d 309, 317 [1994]). Thus, it is premature to rule on summary judgment with respect to the plaintiff’s ownership of the claims and the related standing to assert them.
  • “The claims regarding the pre-EOD document defect repurchase should be reinstated. Defendant does not establish, as a matter of law, what constitutes a “reasonable time” for the trustee to perform its document defect repurchase duties, as required to sustain the cause of action (see IKB Intl., S.A. v Wells Fargo Bank, N.A., 208 AD3d 423, 429 [1st Dept 2022]). Thus, defendant has not conclusively established that plaintiff untimely filed these claims.”
  • It was error to dismiss the champerty defense on summary judgment.

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