U.S. Bank and Bank of America won't have to face lawsuits claiming they failed to safeguard the interests of investors as required by their contracts.
U.S. District Judge Katherine B. Forrest in Manhattan threw out three suits alleging breaches over mortgage-backed securities. The cases are part of a move by investors to target banks in their role as trustees of securities backed by home loans that defaulted after the 2008 credit crisis.
Bank of America and the U.S. Bancorp unit were defendants in two cases. In all three, Forrest allowed the plaintiffs to refile at least some of the claims.
In one of the cases, the banks were trustees of securities with an original face value of $5.3 billion, according to a court filing. Forrest ruled the National Credit Union Administration Board didn't have standing to sue after it moved the securities at issue into new, independent trusts. Nothing in federal securities law "authorizes NCUA to sue on behalf of separate statutory trusts," Forrest ruled.
In another case, a BlackRock Inc. fund sued U.S. Bank as trustee of 843 trusts, claiming it failed to give written notice of breaches of mortgage loan representations. Forrest ruled each of the trusts was subject to the governing documents for different groups of loans.
"That is plainly significant in what is, at its core, a breach of contract case," Forrest said. "Contrary to plaintiffs' assertion, the misconduct alleged in the complaint must be established 'loan-by-loan and trust-by-trust.'"
John Fairbanks, a spokesman for the NCUA board, didn't immediately respond to phone and e-mail messages after regular business hours seeking comment on the decision.
BlackRock Spokesman Brian Beades also didn't immediately respond to phone and e-mail messages after regular business hours.
The cases are National Credit Union Administration Board v. U.S. Bank N.A., 14-cv-09928; Phoenix Light SF Limited v. U.S. Bank N.A., 14-cv-10116; BlackRock Allocation Target Shares v. U.S. Bank N.A., U.S. District Court, Southern District of New York (Manhattan).