234 F. Supp. 3d 462
S.D.N.Y.2017Background
- Commerzbank (Germany) sues Deutsche Bank National Trust Company (trustee) over poor performance of 74 investments in 50 RMBS trusts, asserting TIA, PSA/Indenture breaches, fiduciary duty, negligence, New York Streit Act violations, and breach of covenant of good faith.
- Many allegations mirror claims in Phoenix Light SF Ltd. v. Deutsche Bank; this case was stayed pending resolution of motions in Phoenix Light, and Commerzbank filed an Amended Complaint after that decision.
- Commerzbank alleges third-party sponsors/originators committed widespread misconduct and that Deutsche Bank (as trustee) failed to monitor, investigate, or notify investors; losses alleged exceed hundreds of millions.
- Procedural/limitation issues: claims arose between 2005–2013; Commerzbank acquired some certificates via merger or assignment (Dresdner, Eurohypo); timeliness governed by New York borrowing statute, applying foreign (German) limitation periods where claims accrued abroad.
- Contract-interpretation/standing issues: 46 trusts governed by PSAs; ten PSAs contain negating clauses barring enforcement by non-registered holders (DTC is registered holder); Commerzbank is beneficial owner and seeks authorization from DTC.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Timeliness re: Palmer 3, Commerzbank, Eurohypo certificates (foreign accrual/German law) | Commerzbank: claims accrued at London branch or otherwise tolled (American Pipe) so New York/German limitations do not bar suit | Deutsche Bank: claims accrued abroad (Germany) and are time-barred under German limitations | Court: denied dismissal on timeliness without prejudice; American Pipe tolling potentially applies for Palmer 3; German statute issues require factual development and are not resolved at 12(b)(6) stage |
| TIA claims under PSAs | Commerzbank pursues TIA claims for trustee failures | Deutsche Bank: Second Circuit precedent forecloses these TIA claims | Court: TIA claims dismissed with prejudice (governed by precedent) |
| Streit Act §§126 and 130-e remedies | Commerzbank: seeks money damages under Streit Act sections 126 and 130-e | Deutsche Bank: §126 mandates form of indenture only, not enforcement remedy; §130-e provides removal, not damages | Court: §126 claim dismissed with prejudice; §130-e damages claim dismissed with prejudice (statute provides removal as remedy) |
| Breach of contract standing where PSAs contain negating clauses and DTC is registered holder | Commerzbank: as beneficial owner (and asserting DTC is its agent) has standing; seeking DTC authorization | Deutsche Bank: negating clauses bar enforcement by beneficial owners; only registered holders (DTC) may enforce absent DTC authorization | Court: breach claims dismissed without prejudice for ten trusts due to lack of standing; Commerzbank may cure by obtaining DTC authorization |
| Breach of implied covenant of good faith | Commerzbank: asserts separate implied-covenant claim based on hindering contractual conditions that would have mitigated loss | Deutsche Bank: implied-covenant claim duplicates contract claims and is not separately recognized | Court: implied-covenant claims dismissed with prejudice as duplicative of contract claims |
Key Cases Cited
- Phoenix Light SF Ltd. v. Deutsche Bank Nat’l Trust Co., 172 F. Supp. 3d 700 (S.D.N.Y. 2016) (prior related decision resolving similar trustee claims and guiding dismissal rulings)
- Ret. Bd. of the Policemen’s Annuity & Ben. Fund of the City of Chicago v. Bank of N.Y. Mellon, 775 F.3d 154 (2d Cir. 2014) (precludes certain TIA claims against trustees under PSAs)
- American Pipe & Constr. Co. v. Utah, 414 U.S. 538 (U.S. 1974) (class-action tolling doctrine invoked by plaintiff)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (pleading standard for plausibility)
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (legal conclusions not accepted as true on a motion to dismiss)
- IKB Deutsche Industriebank AG v. McGraw Hill Fin., Inc., 634 Fed. Appx. 19 (2d Cir. 2015) (interpreting German limitation law and accrual standard for RMBS claims)