Court Dismisses Pensions’ Lawsuit Against BNY For Housing Crash Losses

An appeals court has dismissed a lawsuit brought by a handful of public pension funds against BNY Mellon. The lawsuit stemmed from investment losses on mortgage-backed securities and BNY’s alleged neglect to properly evaluate the quality of the securities.

From BenefitsPro:

The U.S. Court of Appeals for the 2nd Circuit has upheld a lower court’s decision to dismiss a class-action brought by pension funds against BNY Mellon.

Among others, Chicago’s police pension fund and the Grand Rapids, Michigan, city retirement fund sued BNY Mellon over claims related to losses from residential mortgage-backed securities suffered in the wake of the housing market crash.

BNY was trustee to 530 RMBS originated by Countrywide Home Loans. The plaintiffs alleged that BNY Mellon breached its fiduciary and trustee obligations by not overseeing the quality of the home loans built into the securities.

The plaintiffs had sought to build a class of any investors that owned any of BNY’s 530 mortgage securities.

In April of 2012, a U.S. District Court judge for the Southern District of New York granted BNY’s motion to dismiss the case on the grounds that the named plaintiffs had only invested in 26 of the securities, and the pension funds did not have the “standing” to bring claims against securities they didn’t own, according to court documents.

In upholding that decision, the appellate court deterred a much larger class-action, but did say the pension funds could bring claims against the 26 securities they actually invested in.

“In short, the nature of the claims in this case unavoidably generates significant differences in the proof that will be offered for each trust,” wrote Circuit Judge Debra Ann Livingston.

 

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