Commercial Division Blog
Compliance with No-Action Clauses Excused in Suit Against RMBS Trustee
On October 18, 2018, the First Department issued a decision in Blackrock Balanced Capital Portfolio (FI) v. U.S. Bank N.A., 2018 NY Slip Op. 06990, holding that the plaintiff's compliance with no-action clauses was excused in a suit against an RMBS trustee, explaining:
We reject defendant's argument that all of the breach of contract claims must be dismissed because plaintiffs have failed to assert that they have complied with all of the requirements of the no-action clauses in each of the PSAs. Compliance with the clauses was excused because it would be futile to demand that the trustee commence an action against itself for breaches of the PSA. Once performance of the demand requirement in the no-action clause is excused, performance of the entire provision is excused, including the requirement that demand be made by 25% of the certificate holders. Under the plain language of the no-action clause, there is no basis for requiring that the suit be supported by 25% of certificate holders.
(Internal citations omitted).
Schlam Stone & Dolan represents investors in RMBS actions against underwriters and trustees. If you or a client are RMBS investors and have questions regarding potential claims against a trustee, a trustee instruction proceeding or how to influence the trustee's prosecution of a put back action, contact Schlam Stone & Dolan partner John Lundin at email@example.com.