NEW YORK–NCUA has been OK’d to amend its complaint to add a new plaintiff to attempt to establish standing and proceed with its lawsuit against Deutsche Bank National Trust Company (DBNTC), while the same court also ruled in part in favor DBNTC’s motion to dismiss, which limited the proceeding to NCUA’s breach of contract claims.
The rulings were made by Judge Sidney H. Stein of the United States District Court for the Southern District of New York.
NCUA’s complaint was originally filed in November of 2014 and alleges Deutsche Bank failed in its duties as trustee for 37 RMBS trusts, resulting in losses to those trusts and their investors, including five failed corporate credit unions later placed into conservatorship by NCUA. Judge Stein ruled in favor of allowing NCUA to amend its complaint to insert a different plaintiff—Graeme W. Bush, a specially-appointed trustee selected by Bank of New York Mellon—with direct standing for a variety of NCUA Guaranteed Notes created by the agency using assets from the five failed corporates.
Statement from Court
“Because Bank of New York Mellon serves as the trustee for the NGN Trusts, NCUA does not have direct standing, and courts had not settled on whether NCUA had derivative standing on behalf of the NGN Trusts,” said JDSupra.com in its analysis. “The NCUA’s substitution followed a Second Circuit decision in a similar case affirming the dismissal of NCUA’s derivative claims for lack of standing. NCUA also successfully substituted itself as a direct plaintiff for NGN Trusts that have ‘unwound’ and whose underlying certificates have been returned to NCUA.”
After allowing the amendment, Judge Stein went on to grant in part and deny in part DBNTC’s motion to dismiss the amended complaint, JDSupra.com reported.
Additional Explanation
“While Judge Stein found that NCUA had stated a claim for breach of contract, he found that NCUA’s negligence and breach of fiduciary duty claims were barred by the economic loss doctrine,” the analysis states. “Further, Judge Stein stayed NCUA’s claims regarding DBNTC’s use of trust funds for indemnification, finding that DBNTC may be required to return the trust funds if there is a negligence finding against it, pursuant to the terms of the governing agreements.”