This month, we discuss Retirement Board v. The Bank of New York Mellon,1 in which the U.S. Court of Appeals for the Second Circuit resolved two matters relating to residential mortgage backed securities (RMBS) on which district courts have been divided. In a decision written by Judge Debra A. Livingston and joined by Judge Dennis Jacobs and Judge José A. Cabranes, the court held that a named plaintiff in a putative class action does not have standing to assert breach-of-duty claims against an RMBS trustee on behalf of absent class members who had invested in trusts other than those in which the named plaintiff had invested.
The court also addressed the scope of the Trust Indenture Act of 1939 (TIA). Where applicable, the TIA obligates a trustee to disclose information relating to the securities underlying the trust, among other things. As a matter of first impression, the court held that the TIA does not apply to RMBS trusts governed by pooling and servicing agreements (PSAs). Accordingly, the court affirmed in part and reversed in part the district court order, remanding the case for further proceedings consistent with its opinion.
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