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$8.5 Billion Countrywide RMBS Settlement Approved in Its Entirety

Precedent–Setting Settlement Obtained by Gibbs & Bruns on Behalf of 22 Institutional Investor Clients
03.05.2015

Today, March 5, 2015, the New York Supreme Court Appellate Division approved in its entirety the $8.5 billion Countrywide RMBS settlement negotiated by Gibbs & Bruns LLP on behalf of its RMBS clients, including PIMCO, Blackrock, MetLife and others.  This is a resounding victory for the firm’s clients in this matter which received worldwide top billing in the financial press with The New York Times reporting it as “likely to be the single biggest settlement tied to the subprime mortgage boom and the subsequent financial crisis of 2008.”  The Wall Street Journal labeled the deal a “mammoth settlement” by a group of “high-profile investors” and as the “turning point in Wall Street’s epic struggle with the fallout from the financial crisis.”  An analyst for Credit Agricole, quoted in The New York Times, stated that the settlement is “the most significant step since the financial crisis that helps” in “improving the economy.” 

 

At issue in the pending settlement  was whether the trustee, Bank of New York Mellon, had acted properly in accepting the settlement.  The unanimous Appellate Division found that the “Trustee properly exercised its discretion in its settlement of all the claims.”  Importantly for other RMBS proceedings, the court clarified the discretion owed trustees when they contemplate settlements like this one: the court’s “task is limited to ensuring that the trustee has not acted in bad faith such that his conduct constituted an abuse of discretion.”  Under this standard, Bank of New York Mellon, “acted within its authority throughout the process,” “properly obtained and considered the opinions of several highly respected outside experts,” and was “eminently reasonable” in relying on the advice of its lead counsel, Jason Kravitt, a “leading expert in the field of securitization.”  

 

Gibbs & Bruns continues to prosecute the final approval of this matter, as well as the ongoing approvals of settlements with JP Morgan and Citibank.

 

View the court’s order here.