S&C Obtains Summary Judgment for Barclays in RMBS LitigationJuly 6, 2022
Barclays Bank prevailed in a summary judgment ruling against Deutsche Bank National Trust Company, which had attempted to assert breach of contract repurchase claims involving a residential mortgage-backed securities securitization that suffered roughly $500 million in alleged losses as a result of the 2008 financial crisis.
On June 22, Justice Margaret Chan of the Supreme Court of the State of New York held that claims by Deutsche Bank, the trustee for the securitization trust, were time barred. Specifically, she concluded that California's four-year statute of limitations, and not New York's six-year limitations period, applied to these breach of contract claims because Deutsche Bank National Trust Company was a California resident. (The claims accrued in June 2007 and the lawsuit was initiated in May 2013.)
Previously, in 2019, S&C won a ruling from the New York Court of Appeals that barred Deutsche Bank from pursuing claims seeking $400 million against Barclays for a different securitization trust.
Deutsche Bank's legal argument in this case was prompted by a dissenting judge in the earlier New York Court of Appeals ruling, who maintained that Deutsche Bank should have argued that the injured party was the New York-based depositor, not Deutsche Bank, and thus New York's six-year statute of limitations could apply rather than California's shorter limitations period. Deutsche Bank then switched its argument in this case to make that claim. The depositor in this case was a New York-based Barclays affiliate, called BCAP, which served as a conduit as the loans were transferred from the sponsor to the trust in a series of transactions that simultaneously closed.
S&C argued that the depositor BCAP was never an injured party, as evidenced by the fact that it never had the right to enforce the representations and warranties and would not hold the loans if the transaction did not close.
Justice Chan agreed: “[A]ll the deal parties were aware that in light of the simultaneous nature of the transaction, that if there was any false representation and warranties, the injury would occur solely to the Trust. … [T]here was no potential for BCAP to sustain any injury.”
The S&C team representing Barclays was led by Jeffrey Scott who argued the motion and received an American Lawyer Litigation Daily recognition for the result. The team also included Jon Sedlak, Trevor Chenoweth, Kara Grandin and Cooper D'Agostino.