Retirement Board of the Policemen's Annuity & Benefit Fund v. Bank of New York Mellon
2014 U.S. App. LEXIS 24264
| 2d Cir. | 2014Background
- Plaintiffs are public pension funds that bought certificates in 26 of 530 RMBS trusts for which BNYM served as trustee; they sued on behalf of a putative class of investors in all 530 trusts, alleging trustee breaches (fiduciary, contractual, TIA) tied to Countrywide-originated loan defects and failures to enforce repurchase/curative rights and to ensure documentation.
- The trusts at issue include PSA-governed New York trusts (most) and SSA/indenture-governed Delaware trusts (some); plaintiffs’ claims target BNYM’s alleged inaction across trusts.
- District court (1) dismissed claims concerning trusts in which no named plaintiff invested for lack of standing, and (2) held that PSA-governed New York certificates were subject to the Trust Indenture Act (TIA); BNYM appealed both rulings; plaintiffs also sought review of standing decision.
- The court applied NECA’s two-part class-standing test (actual injury + implicates same set of concerns) to determine whether named plaintiffs may assert claims for trusts they did not own.
- The Second Circuit concluded plaintiffs lack class standing for trusts they did not invest in (trust-by-trust liability requires different proof) and held PSA-governed New York RMBS certificates are exempt from the TIA under § 304(a)(2) as "certificates of interest or participation in two or more securities having substantially different rights and privileges."
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Class standing to assert trustee breach claims for trusts where named plaintiffs did not invest | Plaintiffs rely on NECA to permit class standing for RMBS claims across multiple trusts; widespread trustee "inaction" makes proof similar across trusts | BNYM: trustee duties and breaches are trust- and loan-specific; named plaintiffs lack a personal stake in proving other trusts’ claims | Held: No class standing; NECA test fails because proving trustee liability is trust-by-trust and requires different proof |
| Applicability of the Trust Indenture Act (TIA) to PSA-governed New York certificates | Plaintiffs: certificates resemble debt/indentures and TIA applies; sequential-pay structure shouldn’t exempt them | BNYM: certificates are exempt — either equity/non-debt under §304(a)(1) or, alternatively, are certificates of interest/participation in multiple securities under §304(a)(2) | Held: TIA does not apply to the New York PSA certificates; they are exempt under §304(a)(2) as certificates of interest/participation in multiple securities (mortgage loans) |
Key Cases Cited
- NECA-IBEW Health & Welfare Fund v. Goldman Sachs & Co., 693 F.3d 145 (2d Cir. 2012) (articulates two-part class-standing test for RMBS putative class actions)
- Tcherepnin v. Knight, 389 U.S. 332 (1967) (treats certificates evidencing contingent payments as "certificates of interest or participation")
- Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992) (Article III standing requirements: injury, causation, redressability)
- DaimlerChrysler Corp. v. Cuno, 547 U.S. 332 (2006) (standing requires injury for each claim pressed)
- FDIC v. Philadelphia Gear Co., 476 U.S. 426 (1986) (administrative practice and agency interpretation can be persuasive in statutory interpretation)