Commerzbank AG v. Bank of New York Mellon

Background

Commerzbank’s remaining claims alleged violations of the Trust Indenture Act of 1939, breach of contract, and negligence. The defendants served as trustee for certificates and notes issued from residential mortgage-backed securities trusts and the Millstone II collateralized debt obligation. Commerzbank alleged that the defendants breached duties that impaired its ability to collect the full principal and interest due on those instruments.

In an earlier summary-judgment decision, the court denied Commerzbank’s motion for partial summary judgment. It granted in part and denied in part the defendants’ cross-motion for summary judgment. The court granted the defendants’ motion as to the Trust Indenture Act claims, negligence claims, and certain pre-event-of-default contract claims involving duties to notify or repurchase. It denied the defendants’ motion as to contract claims involving pre-event-of-default investigative duties, alleged events of default, and post-event-of-default duties requiring prudent conduct.

The earlier decision also held that Commerzbank lacked standing to assert claims involving certificates it had sold before the lawsuit began. It held that the applicable German statute of limitations barred claims involving 11 certificates and the Millstone II collateralized debt obligation. The court further held that claims involving the remaining certificates were not barred by claim preclusion or issue preclusion based on the Countrywide Settlement because the alleged servicing problems either continued or were disclosed after the settlement.

Commerzbank’s Rule 54(b) Motion

Commerzbank moved under Federal Rule of Civil Procedure 54(b) for partial final judgment on two sets of dismissed claims: claims involving the Millstone II collateralized debt obligation and claims involving 59 residential mortgage-backed securities trusts dismissed on standing and statute-of-limitations grounds. Rule 54(b) allows a court to enter a final judgment on fewer than all claims only when at least one claim has been finally resolved and there is no just reason to delay judgment.

Commerzbank argued that the Millstone II claims were separate from the residential mortgage-backed securities claims and that the standing and statute-of-limitations rulings were clear, self-contained decisions. The defendants opposed certification, arguing that the dismissed and remaining claims shared limitations, claim-preclusion, and contract issues. They also argued that partial judgment could lead to repetitive appeals before the factual record was complete. The defendants noted that two appeals involving similar standing and statute-of-limitations issues were already pending.

The court denied Commerzbank’s motion for entry of partial final judgment. It concluded that overlapping defenses and issues created a plausible risk that successive appeals would require multiple appellate panels to review the same matters. The court also found that avoiding a possible second trial was not enough to justify partial final judgment and that Commerzbank had not identified prejudice from waiting. The court stated that the case was in its ninth year, expert discovery was approaching, and the action was not yet close to trial.

Defendants’ Motion for Clarification or Reconsideration

The defendants moved under Federal Rule of Civil Procedure 60 and Local Rule 6.3 for clarification or reconsideration of the earlier ruling concerning whether the Countrywide Settlement barred Commerzbank’s claims based on servicing after the settlement. Clarification is used to resolve an ambiguity or correct an omission; reconsideration is an extraordinary remedy generally limited to overlooked controlling law or facts, new evidence, an intervening change in law, clear error, or manifest injustice.

The court denied clarification because the defendants had not identified an ambiguity. The court said its earlier ruling was straightforward: claim preclusion and issue preclusion did not bar claims that arose after approval of the Countrywide Settlement.

The court also denied reconsideration. It acknowledged that the earlier decision had incorrectly relied on another decision for the proposition that post-settlement claims were not subject to claim or issue preclusion. But the defendants did not ask the court to reverse its ultimate conclusion or immediately dismiss any post-settlement claims. The court was not inclined to grant relief beyond what the defendants requested, and it stated that further factual development was needed before considering the issue. The court said the defendants could renew that part of their summary-judgment argument after expert discovery if they had a good-faith evidentiary basis.

Disposition

The court denied Commerzbank’s motion for entry of partial final judgment and denied the defendants’ motion for clarification or reconsideration. The Clerk of Court was directed to close the two motions.