US judge tosses most of Commerzbank $1 bln mortgage lawsuit against BNY Mellon

Novation Companies

28/08/2023 22:13

By Jonathan Stempel
       NEW YORK, Aug 28 (Reuters) - A U.S. judge on Monday
dismissed most of a lawsuit where Germany's Commerzbank
 CBKG.DE  sought to hold Bank of New York Mellon  BK.N  liable
for more than $1 billion of losses on toxic mortgages purchased
before the 2008 global financial crisis.
    U.S. District Judge George Daniels in Manhattan rejected
Commerzbank's claims on all but 13 of the 100 certificates and
notes it bought, and dismissed all negligence claims against BNY
Mellon, which had been serving as trustee.
    The securities had been issued from 72 residential
mortgage-backed securities (RMBS) trusts and a collateralized
debt obligation that had been backed by home loans from
Countrywide, NovaStar and other lenders.
    Dave Wollmuth, a lawyer for Commerzbank, declined to
comment. A lawyer for BNY Mellon also declined to comment.
    Investors suffered huge losses before, during and after the
financial crisis on RMBS they once thought safe, prompting a
slew of litigation against lenders, servicers and trustees over
more than a decade.
    Trustees handle back-office work after securities are sold,
and ensure that investors receive payments.
    They have long said their contracts shielded them from
liability for RMBS losses, and that particularly sophisticated
investors should have known the risks.
    In its December 2015 complaint, Commerzbank accused BNY
Mellon of sitting "idly" as losses piled up, rather than force
lenders to buy back and servicers to address troubled loans.
    Daniels, however, said Commerzbank lacked standing to sue
over 76 securities because it sold them before suing, and waited
too long under German law to sue over 11 other certificates.
    He also said recent rulings including a June decision by New
York state's highest court, the Court of Appeals, required
dismissal of Commerzbank's negligence claims because they
essentially duplicated its breach-of-contract claims.
    The surviving claims cover 13 certificates that Commerzbank
bought from Barrington II CDO Ltd, but only as to whether BNY
Mellon acted as a "prudent person" following borrower defaults.
    The case is Commerzbank AG v. The Bank of New York Mellon et
al, U.S. District Court, Southern District of New York, No.
15-10029.

 (Reporting by Jonathan Stempel in New York; editing by Grant
McCool)
 ((jon.stempel@thomsonreuters.com; +1 646 223 6317; Reuters
Messaging: jon.stempel.thomsonreuters.com@reuters.net))