U.S. Bank prevails on summary judgment in case alleging hundreds of millions of dollars in losses relating to residential mortgage-backed securities

Client(s) U.S. Bank National Association

Jones Day secured summary judgment on behalf of U.S. Bank National Association in a lawsuit seeking hundreds of millions of dollars in alleged losses concerning investments in certificates issued by residential mortgage-backed securities trusts for which U.S. Bank served as trustee. The plaintiffs, issuers of collateralized debt obligations backed by the certificates, alleged that U.S. Bank breached its duties under the trusts' governing agreements by, among other things, failing to investigate and remedy defective mortgage loans collateralizing the certificates. After U.S. Bank prevailed on several claims at the motion to dismiss stage, the case proceeded to summary judgment solely on the plaintiffs' breach of contract claims.

On March 18, 2020, the United States District Court for the Southern District of New York granted U.S. Bank a complete victory, agreeing with U.S. Bank that the plaintiffs lacked standing to pursue their breach of contract claims. The plaintiffs argued that they had standing based on assignments that granted them the legal claims they asserted. But the court held that the assignments were void under New York's champerty statute, which prohibits assignments of claims where the "primary purpose" of acquiring the claims is to bring a lawsuit. Having found the assignments—the plaintiffs' only argued basis for standing—void, the court granted U.S. Bank's motion for summary judgment and entered judgment in favor of U.S. Bank.

Phoenix Light SF, et al. v. U.S. Bank National Association, et al., No. 1-14-cv-10116 (S.D.N.Y.)