Commercial Division Blog
Court Upholds Breach of Duty of Care Claim Against Trustee
On August 7, 2018, Justice Sherwood of the New York County Commercial Division issued a decision in U.S. Educational Loan Trust IV, LLC v. Bank of N.Y. Mellon, 2018 NY Slip Op. 31924(U), upholding a claim for breach of the duty of good care against a trustee, explaining:
With respect to plaintiffs' duty of care claim, as both AG Capital and Commerce Bank demonstrate, such claims against indenture trustees should not be dismissed as duplicative to the extent they are based on basic non-discretionary ministerial tasks. Although defendant argues that the breaches alleged here do not meet this standard, they fail to provide any authority to support the claim. To the extent Commerce Bank dismissed a portion of the negligence claim as not relating to ministerial tasks, it did so on the basis that the if the act in question (that defendant failed to notify plaintiffs that other parties to the PSA had failed to perform their obligations), were a breach, defendant would have to monitor other parties. Those facts are far removed from the breaches alleged here. Additionally, although defendant contends the agreements' negating provisions defeat these claims, the court in AG Capital specifically found that the duties described above exist, notwithstanding the Trust Indenture Act's mandate that an indenture trustee shall not be liable except for the performance of such duties as are specifically set out in such indenture. Accordingly, that branch of defendant's motion which seeks to dismiss count four is denied.
(Internal quotations and citations omitted).
This decision relates to a significant part of our practice: litigation regarding structured finance transactions. Contact Schlam Stone & Dolan partner John Lundin at firstname.lastname@example.org if you or a client have questions regarding litigation about financial products and services.