Commercial Division Blog

Posted: December 5, 2019 / Categories Commercial, Standing

Directing RMBS Certificateholder Not "Effective" Plaintiff Causing Suit to Fail for Lack of Standing Under PSA's No Action Clause

On November 21, 2019, Justice Friedman of the New York County Commercial Division issued a decision in Natixis Real Estate Capital Trust 2007-HE-2 v Natixis Real Estate Capital, Inc., 2019 NY Slip Op. 33438(U), holding that a directing RMBS certificateholder was not the "effective" plaintiff in an RMBS put-back action, which would cause the action to fail for lack of standing under the PSA's no action clause, explaining:

Nataxis cites no authority in support of its contention that a certificateholder, or other trust beneficiary, may be considered the "effective" plaintiff in an action brought by a trust representative. Put another way, Nataxis fails to show how, in the event Computershare demonstrates that it was a duly appointed trust representative, and therefore authorized to prosecute this action, Computershare can be deprived of this status--i.e. its status as a plaintiff with standing--by virtue of communications with a directing certificateholder as to the conduct of the litigation. This contention not only is unsupported by any legal authority, but also ignores that a trustee or securities administrator acts on behalf of the trust and its beneficiaries and would reasonably be expected to communicate with them in order to insure the protection of their interests.

(Internal citations omitted).

Schlam Stone & Dolan represents investors in RMBS actions against underwriters and trustees and in related proceedings, such as trust instruction proceedings where an RMBS trustee seeks court guidance regarding the management of an RMBS trust. If you or a client are RMBS investors and have questions regarding potential claims against a trustee or how to influence the trustee's prosecution of a put back action like the one at issue here, contact Schlam Stone & Dolan partner John Lundin at