Bank of New York Mellon Faces Lawsuit for Breach of Fiduciary Duty
Posted on Jan 01, 2016
On Tuesday, April 3, U.S. District Court Judge William Pauley ruled in Manhattan that bondholders who invested in 26 trusts may pursue claims against Bank of New York Mellon based upon breach of fiduciary duty. The bondholders allege that they purchased products containing risky mortgage loans from the former Countrywide Financial Corporation. Bank of New York Mellon serves as trustee for mortgage-backed securities.
In their lawsuits, the bondholders assert that Bank of New York Mellon’s obligations as trustee included ensuring that underlying home loans are properly documented and that bondholders’ rights are protected. Bank of New York Mellon attempted to have the lawsuit dismissed. Judge Pauley’s ruling means that the bondholders may go forward with their claims that they suffered more than $9 billion of losses or delinquencies. The claims involve securities that are backed by more than $30 billion worth of loans.
In their complaint, the plaintiffs assert that Bank of New York Mellon breached its fiduciary duty when it failed to take action to remedy Countrywide’s inadequate servicing of the home loans contained in the trusts. They claim that the defendant:
- Failed to take possession of loan files;
- Failed to take possession of the original mortgage notes; and
- Failed to require Countrywide to fix or buy back defective loans.
Judge Pauley’s ruling allows bondholders to sue on the basis of the 26 trusts in which they invested, and upon claims that Bank of New York Mellon did not properly notify them that Countrywide had defaulted on some obligations.
To learn more about the New York legal principles involved in this case, contact a New York breach of fiduciary duty lawyer at (888) 497-3410.