Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

National Credit Union Administration Board v. HSBC Bank US, National Association

United States District Court, S.D. New York

January 8, 2020

NATIONAL CREDIT UNION ADMINISTRATION BOARD, et al., Plaintiffs,
v.
HSBC BANK US, NATIONAL ASSOCIATION, Defendant.

          ORDER AND ORDER

          LORNA G. SCHOFIELD, UNITED STATES DISTRICT JUDGE

         Plaintiffs, the National Credit Union Administration Board (“NCUAB”), as liquidating agent for five corporate credit unions, sue HSBC Bank USA, National Association (“HSBC”) for HSBC's alleged breach of contractual and fiduciary duties and the covenant of good faith and for violation of the Streit Act and the Trust Indenture Act of 1939. On September 12, 2018, NCUAB moved for leave to file a supplemental First Amended Complaint and substitute Graeme W. Bush (the “Separate Trustee”) as Plaintiff for certain claims. In an Opinion and Order, filed May 22, 2019 (the “Order”), Magistrate Judge Sarah Netburn granted Plaintiffs' motion. HSBC timely objected and moved to vacate the Order. For the following reasons, the objection is overruled and the motion to vacate is denied.

         I. BACKGROUND

         Familiarity with the Order, the underlying facts and procedural history is assumed.

         NCUAB brought this action on March 20, 2015, against HSBC, for damages arising from five corporate credit unions' purchase of residential mortgage-backed securities (“RMBS”) certificates from thirty-seven trusts, for which HSBC was acting as trustee. NCUAB also brought similar suits against other banks, including U.S. Bank and Wells Fargo.

         As part of NCUAB's liquidation of the credit unions, NCUAB liquidated the distressed RMBS certificates held by the credit unions and re-securitized and transferred the certificates to newly-created NCUA Guaranteed Notes Trusts (“NGN Trusts”). The NGN Trusts then issued NCUA Guaranteed Notes (“NGN Notes”), under (i) an Indenture Agreement between the NGN Trusts, as Issuers, and the Bank of New York Mellon (“BNYM”), as Indenture Trustee, and (ii) guaranty agreements among NCUAB as Guarantor, the NGN Trusts and BNYM.

         On April 27, 2015, HSBC moved to dismiss the Complaint, arguing in part that NCUAB lacked standing to sue on behalf of the NGN Trusts. In July 2015, Judge Scheindlin, then assigned to this case, denied the motion to dismiss, finding that while NCUAB did not have direct standing, it may have derivative standing to bring the NGN Trust-related Claims. The order directed NCUAB to amend the Complaint to assert the claims derivatively. See Nat'l Credit Union Admin. Bd. v. HSBC Bank USA, Nat. Ass'n, 117 F.Supp.3d 392 (S.D.N.Y. 2015) (“HSBC I”). NCUAB filed a First Amended Verified Derivative Complaint (“FAC”), which Defendant answered.

         While the parties were briefing the first motion to dismiss in this case, Judge Forrest granted a motion to dismiss in the suit between NCUAB and U.S. Bank, ruling that NCUAB lacked derivative standing to bring claims on behalf of the NGN Trusts, but permitting the plaintiff to replead. Nat'l Credit Union Admin. Bd. v. U.S. Bank Nat. Ass'n, No. 14 Civ. 9928, 2015 WL 2359295, at *3-6 (S.D.N.Y. May 18, 2015) (“U.S. Bank I”). Judge Forrest then granted a second motion to dismiss an Amended Complaint against U.S. Bank, on grounds that NCUAB was contractually foreclosed from asserting derivative claims, pursuant to the Indenture Agreement, and that only BNYM had the right to bring claims on behalf of the NGN Trusts.[1] Nat'l Credit Union Admin. Bd. v. U.S. Bank Nat'l Ass'n, No. 14 Civ. 9928, 2016 WL 796850, at *9-10 (S.D.N.Y. Feb. 25, 2016) (“U.S. Bank II”). A year later, Judge Failla similarly granted in part a motion to dismiss by Wells Fargo, finding that NCUAB lacked derivative standing in that case due to the language in the Indenture Agreement. See BlackRock Allocation Target Shares: Series S. Portfolio v. Wells Fargo Bank, Nat'l Ass'n, 247 F.Supp.3d 377, 412-15 (S.D.N.Y. 2017) (“Wells Fargo I”).

         Following Judge Forrest's rulings, NCUAB asked BNYM to appoint a Separate Trustee to pursue the claims. BNYM then appointed Graeme W. Bush as Separate Trustee, and NCUAB moved to supplement its complaint and substitute the Separate Trustee as Plaintiff in the U.S. Bank case. Judge Forrest denied the motion, and NCUAB appealed. While the appeal was pending, Judge Failla granted NCUAB's similar motion to supplement the complaint and substitute the Separate Trustee as Plaintiff in the Wells Fargo case. See BlackRock Allocation Target Shares: Series S Portfolio v. Wells Fargo Bank, Nat'l Ass'n, No. 14 Civ. 10067, 2017 WL 3610511, at *14-21 (S.D.N.Y. Aug. 21, 2017) (“Wells Fargo II”).

         On August 2, 2018, the Second Circuit affirmed U.S. Bank II, finding that NCUAB lacked derivative standing to sue on behalf of either the NGN Trusts or the Indenture Trustee “under the clear and unambiguous language of the Trust and Indenture Agreements.” Nat'l Credit Union Admin. Bd. v. U.S. Bank Nat'l Ass'n, 898 F.3d 243, 252 (2d Cir. 2018) (“U.S. Bank III”). The Court of Appeals also found that Judge Forrest had not abused her discretion in denying NCUAB's motion to supplement its complaint and substitute the Separate Trustee as Plaintiff. Id.

         In the instant case, NCUAB moved for leave to file a supplemental First Amended Complaint and to substitute the Separate Trustee as Plaintiff for the NGN Trust-related Claims, on September 12, 2018. The Order granted Plaintiffs' motion, finding that NCUAB had not engaged in undue delay, bad faith, or dilatory tactics, and that the requested relief was neither futile nor unduly prejudicial to HSBC. HSBC timely objected and moved to vacate.

         II. STANDARD

         A. Standard of Review

         For objections to a magistrate judge's ruling on nondispositive matters, district courts must “modify or set aside any part of the order that is clearly erroneous or is contrary to law.” Fed.R.Civ.P. 72(a); accord 28 U.S.C. § 636(b)(1)(A). The Order, which grants leave to supplement the Complaint and substitute the Separate Trustee, is a nondispositive matter. See Fielding v. Tollaksen, 510 F.3d 175, 178 (2d Cir. 2007) (“[A] district judge may refer nondispositive motions, such as a motion to amend the complaint, to a magistrate judge for [a] decision, ” subject to review under the “clearly erroneous or contrary to law” standard); see also Kilcullen ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.