April 19, 2018 / 6:24 PM / 10 months ago

Royal Park strikes out again in last-gasp wave of MBS trustee suits

(Reuters) - It’s been a tough few months for Royal Park Investments and its lawyers at Robbins Geller Rudman & Dowd. On Tuesday, U.S. District Judge Katherine Polk Failla of Manhattan refused to certify a class led by Royal Park, which sued Wells Fargo for failing in its duties as the trustee of two mortgage-backed securities trusts. Judge Failla adopted the recommendation of the magistrate in the Wells Fargo case, U.S. Magistrate Judge Sarah Netburn, who found individual issues – including constitutional standing to sue, timeliness of claims and potential damages - predominated over common issues for investors in the trusts overseen by Wells Fargo.

As Judge Failla noted, she is actually the fourth Manhattan federal judge to deny class certification in an MBS trustee suit by Royal Park – and the third since the beginning of 2018. Earlier this month, U.S. District Judge Alison Nathan issued her denial (2018 WL 1750595) of Royal Park’s renewed class certification motion in an MBS trustee case against Deutsche Bank. U.S. District Judge Lorna Schofield denied class certification in January in Royal Park’s suit against HSBC (2018 WL 679495). Last August, U.S. District Judge Gregory Woods refused to certify an investor class against MBS trustee BNY Mellon (2017 WL 3835339), though Royal Park has filed a renewed motion for class certification in that case.

U.S. District Judge Victor Marrero hasn’t yet ruled on class certification in a fifth Royal Park trustee class action, this one against U.S. Bank, but his colleagues’ decisions will undoubtedly weigh on his analysis. As Judge Failla wrote in this week’s Wells Fargo ruling, judges’ reasons for denying class certification in these MBS trustee cases has evolved in light of last summer’s precedent from the 2nd U.S. Circuit Court of Appeals on ascertaining class membership, but “none has found that a class action would be an appropriate vehicle for prosecuting such a case,” the judge wrote. “The court finds no reason to chart a new course here.”

Just over a year ago, I told you that MBS noteholders had fared better than trustees hoped in fending off dismissal motions, but that lawyers for the trustees planned to make post-dismissal litigation as tough as possible for investors, demanding loan-by-loan, trust-by-trust proof. Royal Park’s disappointing track record on class certification is a pretty good indicator that MBS trustees made a smart strategic decision to keep litigating instead of settling investor class actions. I’m not aware of any MBS trustee that has settled a noteholder class action claiming the trustee breached its duties to investors. I’d guess the Royal Park rulings make such a settlement increasingly unlikely.

Royal Park has been a determined plaintiff, too. The Brussels-based company, which consists of onetime assets of Fortis Bank, exists only to prosecute MBS litigation claims. Its lawyers at Robbins Geller fought hard to get the New York cases to class certification, only to see them falter.

I emailed two of the Robbins Geller lawyers, Lucas Olts and Darryl Alvarado, to ask what’s next for Royal Park, but didn’t hear back. Wells Fargo is represented by Jones Day and Drinker Biddle & Reath.

The views expressed in this article are not those of Reuters News.

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