After convincing a federal court to toss claims that Bank of America failed in its role as trustee of dozens of residential mortgage-backed securities (RMBS) trusts, Munger, Tolles & Olson scored another win for the bank when the case was taken up by the U.S. Court of Appeals for the Second Circuit. On Aug. 2, 2018, the panel unanimously affirmed that the lower court got it right in dismissing the case on the grounds that the plaintiff lacked standing.
The National Credit Union Administration Board (NCUA), a federal agency overseeing credit unions, brought suit against Bank of America, alleging that the bank and another financial institution failed to fulfill their duties as RMBS trustees, causing the plaintiff hundreds of millions of dollars in damages. While the NCUA had brought similar claims against other RMBS trustees, Bank of America and its co-defendant were the first RMBS trustee defendants to argue successfully that the NCUA lacked standing to bring the majority of its claims. The NCUA sought permission to amend its complaint and substitute a new plaintiff, but the district court rejected the request, holding that the NCUA had waited too long.
In its published opinion, the Second Circuit unanimously affirmed. The core issues on appeal were whether the lower court correctly held that the NCUA lacked standing to bring suit, and whether it properly exercised its discretion in denying the NCUA leave to substitute the new plaintiff. The Second Circuit affirmed on both grounds. It reasoned that the language in the relevant NCUA contracts did not provide the plaintiff with standing, and that the trial court acted appropriately in refusing the NCUA’s request to substitute a new plaintiff. The appellate court concluded that the NCUA had had the opportunity to do so but “decided to use its final amendment to double down on its already-dismissed theory of standing.”
The Munger, Tolles & Olson attorneys involved in the case include Fred A. Rowley, Jr., James C. Rutten, Michael E. Soloff, Kathleen M. McDowell, Jacob S. Kreilkamp, Wesley T.L. Burrell, Adam P. Barry and Matthew K. Donohue.