Fund Liquidation Holdings LLC v. Bank of America Corp.
991 F.3d 370
| 2d Cir. | 2021

Background

  • In July 2016 two Cayman Islands investment vehicles (FrontPoint and Sonterra) filed a class action alleging banks manipulated SIBOR/SOR; both funds had been dissolved years earlier and had assigned claims to Fund Liquidation Holdings LLC.
  • Initial pleadings omitted that the funds were dissolved and that Fund Liquidation was the assignee; defendants later learned of dissolution and assignment during litigation.
  • The district court concluded the suits were commenced by non-existent plaintiffs, held there was no Article III case or controversy, treated the actions as nullities, and dismissed with prejudice; it also questioned validity/scope of the assignments and denied settlement approval.
  • Fund Liquidation appealed, arguing (1) pre-suit assignment does not eliminate Article III standing and (2) as the real party in interest it may substitute under Fed. R. Civ. P. 17(a)(3); it also moved to add two Moon Funds as class representatives.
  • The Second Circuit considered: (i) whether the dissolved funds had Article III standing at filing; (ii) whether Fund Liquidation may nonetheless be substituted as the real party in interest under Rule 17; and (iii) related procedural issues (including appealability and proposed addition of Moon Funds).

Issues

Issue Plaintiff's Argument Defendant's Argument Held
1) Did the dissolved funds have Article III standing when the suit was filed? Assignment to Fund Liquidation does not erase the assignors’ concrete injury or redressability; assignment affects real-party-in-interest, not Article III standing. The funds had assigned away claims and, critically, had been dissolved under Cayman law and thus lacked legal existence and standing. Assignment alone does not defeat Article III standing, but under Cayman law the dissolved funds lacked legal existence at filing and therefore lacked Article III standing.
2) If the nominal plaintiffs lacked standing, can Fund Liquidation nonetheless be substituted under Rule 17? The real party in interest (Fund Liquidation), having standing at relevant times, may ratify/join/substitute and relate back; dismissal as a nullity is unnecessary. The action was a legal nullity from inception (nullity doctrine) and cannot be cured by Rule 17; statute of limitations bars substitution. The court rejected treating the action as an incurable nullity here: Article III is satisfied because a real party in interest with standing exists and may be substituted under Rule 17; remanded for further proceedings (including timeliness/assignment issues).
3) Does the Court of Appeals have jurisdiction over Sonterra’s claims on appeal? Fund Liquidation’s notice, read liberally, sought review of all orders adverse to it, including dismissal of Sonterra claims. The notice named only FrontPoint as the assignor and so failed to preserve Sonterra’s claims for appeal. The notice complied with Rule 3 and/or was sufficiently clear to preserve appellate review of Sonterra’s dismissed claims; appellate jurisdiction exists.
4) May Fund Liquidation add the Moon Funds as class representatives given timeliness and China Agritech? Adding Moon Funds within the same action is an ordinary amendment; American Pipe tolling supports adding new reps for efficiency; China Agritech does not prohibit adding new representatives in the original action. China Agritech bars maintaining follow-on class actions beyond the statute of limitations; Moon Funds’ claims are untimely and not equitably tolled. Remand: district court should reconsider the proposed amendment. China Agritech did not categorically bar adding new class representatives within the same pending class action; evaluate amendment under Rule 15(c)(1)(B) and other prerequisites.

Key Cases Cited

  • Lujan v. Defs. of Wildlife, 504 U.S. 555 (1992) (Article III standing elements)
  • Sprint Commc’ns Co. v. APCC Servs., 554 U.S. 269 (2008) (redressability analysis after assignment)
  • W.R. Huff Asset Mgmt. Co. v. Deloitte & Touche LLP, 549 F.3d 100 (2d Cir.) (discussed limits on asserting another’s claim)
  • Cortlandt St. Recovery Corp. v. Hellas Telecomms. S.à.r.l., 790 F.3d 411 (2d Cir. 2015) (panel declined to decide nullity doctrine; concurrence rejected it)
  • Zurich Ins. Co. v. Logitrans, Inc., 297 F.3d 528 (6th Cir. 2002) (articulation of nullity doctrine)
  • Isthmian Lines, Inc. v. Rosling, 360 F.2d 926 (2d Cir. 1966) (discussed estate/administrator substitution)
  • Northstar Fin. Advisors Inc. v. Schwab Inv’ts, 779 F.3d 1036 (9th Cir. 2015) (standing cured post-filing by assignment under Rule 15(d))
  • Mathews v. Diaz, 426 U.S. 67 (1976) (Rule 15(d) may eliminate jurisdictional issues)
  • China Agritech, Inc. v. Resh, 138 S. Ct. 1800 (2018) (limits on follow-on class actions after statute of limitations)
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