Commerzbank AG v. U.S. Bank, N.A.

Second Circuit

Commerzbank AG v. U.S. Bank, N.A.

100 F.4th 362

CourtCourt of Appeals for the Second Circuit

DecidedApril 30, 2024

Docket22-854

StatusPublished

Cited by42 cases

This text of 100 F.4th 362 (Commerzbank AG v. U.S. Bank, N.A.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Second Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook

Commerzbank AG v. U.S. Bank, N.A., 100 F.4th 362 (2d Cir. 2024).

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Opinion

22-854 Commerzbank AG v. U.S. Bank, N.A. In the United States Court of Appeals for the Second Circuit

August Term 2022 Argued: June 30, 2023 Decided: April 30, 2024

No. 22-854

COMMERZBANK AG, Plaintiff-Appellant, v. U.S. BANK, N.A., Defendant-Appellee,

BANK OF AMERICA, N.A., WELLS FARGO BANK, N.A., Defendants.

Appeal from the United States District Court for the Southern District of New York No. 16-4569, Denise L. Cote and William H. Pauley III, District Court Judges.

Before: LYNCH, BIANCO, and PÉREZ, Circuit Judges.

On appeal from five separate orders issued by the United States District Court for the Southern District of New York (Cote and Pauley, JJ.).

This appeal falls into a category of cases known as Residential Mortgage- Backed Securities suits, which arose from the collapse of the subprime mortgage market in the late 2000s. The district court, in a series of orders, grappled with a tangle of complex procedural questions, including three primary issues that we must resolve in this appeal, concerning: (1) a contractual bar to claims involving trusts with “No Action Clauses”; (2) the timeliness of claims related to certificates held through German entities; and (3) whether Commerzbank can bring claims related to certificates it had sold to third parties.

We AFFIRM the district court’s orders in all but one respect—the dismissal of Commerzbank’s claims related to trusts with No Action Clauses, which we VACATE—and REMAND for proceedings consistent with this opinion. The parties also contest, on the merits, whether the district court properly interpreted the governing contracts. We need not reach that issue, however, because claims for all the trusts related to the merits issue are either untimely or cannot be brought by Commerzbank under the relevant statute.

AFFIRMED IN PART, VACATED IN PART, AND REMANDED.

DAVID H. WOLLMUTH (Ryan A. Kane, Phillip R. Schatz, on the brief), Wollmuth Maher & Deutsch LLP, New York, NY, for Plaintiff-Appellant.

LOUIS A. CHAITEN (David F. Adler, Michael T. Marcucci, and Amanda R. Parker, on the brief), Jones Day, Cleveland, OH, Boston, MA, for Defendant-Appellee.

2 MYRNA PÉREZ, Circuit Judge:

This appeal falls into a category of cases known as Residential Mortgage-

Backed Securities (“RMBS”) suits, which arose from the collapse of the subprime

mortgage market in the late 2000s. The district court, in a series of orders, grappled

with a tangle of complex procedural questions, including three primary issues that

we must resolve in this appeal concerning: (1) a contractual bar to claims involving

trusts with “No Action Clauses” (the “Contractual Bar” issue); (2) the timeliness

of claims related to certificates held through German entities (the “Timeliness”

issue); and (3) whether Plaintiff-Appellant Commerzbank AG (“Commerzbank”)

can bring claims related to certificates it had sold to third parties (the “Cause of

Action” issue).

We affirm the district court’s orders in all but one respect—the dismissal of

Commerzbank’s claims related to trusts with No Action Clauses, which we

vacate—and remand for proceedings consistent with this opinion. We explain our

reasoning in further detail below. The parties also contest, on the merits, whether

the district court properly interpreted the governing contracts. We need not reach

that issue, however, because claims for all the trusts related to the merits issue are

either untimely or cannot be brought by Commerzbank under the relevant statute.

3 I. Prior Proceedings

Commerzbank initiated this action seeking to recover losses stemming from

its purchase of RMBS certificates related to fifty-six trusts administered by

Defendant-Appellee U.S. Bank (“USB”) and Defendant Bank of America.

Commerzbank alleged that USB had a duty to monitor, notify, and act against the

mortgage originator, sponsor, and servicer for any breaches committed under the

governing trust documents.

In this appeal, Commerzbank challenges five orders entered by the district

court: (1) granting in part USB’s motion to dismiss in September 2017; (2) granting

in part USB’s motion for summary judgment in April 2020; (3) denying

Commerzbank’s motion to reconsider the order granting summary judgment in

part to USB in February 2021; (4) granting USB’s subsequent motion for summary

judgment in September 2021; and (5) denying Commerzbank’s motion to reopen

the case to move for reconsideration of the order granting summary judgment in

part to USB in March 2022.

4 II. Introductory Context 1

We begin with a brief background on RMBS and the securitization process

before turning to our discussion of the instant case and issues presented on appeal.

An RMBS is created by an entity, such as a bank, that packages residential

mortgages into a single pool of mortgages and then sells bonds backed by that

pool of mortgages. The entities then sell to financial institutions securities that

derive their value from the right to payment on these mortgages. When

homeowners began defaulting on their mortgages in the wake of the 2008 housing

market collapse, the value of such securities plummeted.

A. The Creation of Residential Mortgage-Backed Securities

The process for creating an RMBS begins when a lender (or multiple

lenders) (the “originator”) issues mortgages and sells them to another financial

institution (the “seller” or “sponsor”). The sponsor then pools the mortgages and

transfers them to an affiliated special purpose vehicle (the “depositor”). The

depositor subsequently conveys the bundled mortgages to a trust managed by a

trustee, where they are prioritized into tranches of entitlements to payments from

1The following facts are taken largely from the various district court decisions and are undisputed unless otherwise noted. The relevant facts for each issue on appeal are provided in greater detail below, in the applicable discussion section. 5 the borrowers. Each tranche in the loan securitization reflects a different level of

risk and reward.

The trust issues certificates (i.e., RMBS) representing interests in those

tranches to underwriters, who then market and sell the certificates to investors

such as Commerzbank. Sales of RMBS in the secondary market generally occur

through a “clearing house” service. A clearing house is a designated intermediary

between a buyer and seller in a financial market, brought in to mitigate the risk of

one of the parties failing to honor their obligations. The investor (or

“certificateholder”) may pay more or less for a certificate depending on the level

of risk and reward associated with each tranche. Because the certificates are

secured by the mortgages held in trust, their expected rate of return hinges on the

performance of the mortgages and the borrowers’ ability to repay.

B. The Pooling and Servicing Agreements

Each trust is governed by a document called a Pooling and Servicing

Agreement (“PSA”). Under a PSA, a servicer is appointed to manage the collection

of payments on the mortgage loans. The servicer’s responsibilities consist of

monitoring delinquent borrowers, foreclosing on defaulted loans, checking

6 compliance with representations and warranties in the loans, tracking mortgage

documentation, and managing and selling foreclosed properties.

A PSA also enumerates the trustees’ duties and obligations. Those duties

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