Investors seeking recovery on RMBS claims have had mixed results pursuing their claims in class actions. Recently, an investor in two trusts involving Wells Fargo Bank N.A. as trustee requested class certification in a suit against the bank. Royal Park Invs. SA/NV v. Wells Fargo Bank NA, No. 1:14-cv-09764 (S.D.N.Y. June 29, 2017). Royal Park claimed in the lawsuit Wells Fargo knew or should have known about widespread problems with the underlying mortgages in the two trusts (ABFC 2006-OPT1 and SASCO 2007-BC1) as well as misconduct by loan servicers. As a result, Royal Park alleged that certificates in the two trusts “are now near or total losses, having been written down to the point that they are worthless or virtually worthless.”
In support of its request for class certification, Royal Park stated: “Plaintiff’s allegations present a predominant question of liability that is susceptible to common proof — whether Wells Fargo’s course of conduct breached the governing agreements, . . . The predominance of common issues, and the impracticability of bringing individual actions to redress Wells Fargo’s wrongful conduct, renders this case ideally suited for class certification.”
The proposed class would cover approximately 185 investors whose holdings in the trusts range from less than $10,000 to more than $10 million. Wells Fargo is expected to oppose the request for class certification.
In a similar case also involving Royal Park, but involving a different trustee, a New York federal judge recently denied Royal Park’s motion to certify the case because the proposed class, as defined, failed to satisfy the “implied” ascertainability requirement. See Royal Park Invs. SA/NV v. Deutsche Bank Nat’l Trust Co., No. 14-CV-4394 (AJN), 2017 WL 1331288 (S.D.N.Y. Apr. 4, 2017).Royal Park is continuing to attempt to certify that case as a class action, and briefing on its latest motion to certify was completed on May 30, 2017.
These cases, as well as others, highlight the challenges in utilizing the class action vehicle to assert RMBS claims. Investors with holdings in trusts that are at issue in class actions, and who receive notices that their claims have been asserted in a pending class action, should not automatically assume the class action is the best vehicle for recovering their RMBS damages. Such investors should consider seeking legal advice from law firms with securitization litigation experience to help evaluate whether a given class action is adequately protecting the investor’s interests, and whether the better course might be to opt out of the class action.