1 20

- 1312

- cv Phoenix Light SF DAC, et al. v. U.S. Bank National Association

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT



## SUMMARY ORDER

Rulings by summary order do not have precedential effect. Citation to a summary order filed on or after January 1, 2007, is permitted and is governed by Federal Rule of Appellate Procedure 32.1 and this Court’s Local Rule 32.1.1. When citing a summary order in a document filed with this Court, a party must cite either the Federal Appendix o r an electronic database (with the notation “summary order”). A party citing a summary order must serve a copy of it on any party not represented by counsel.

At a stated term of the United States Court of Appeals for the Second Circuit, held at the Thurgo od Marshall United States Courthouse, 40 Foley Square, in the City of New York , on the 4 th day of October two thousand twenty

- one

.

PRESENT: J OSÉ A. C ABRANES
, R OSEMARY S. P OOLER , J OSEPH F. B IANCO
, Circuit Judges

.

P HOENIX L IGHT SF DAC et al

. ,

Plaintiff s

-

Appell ant s , 20

- 1312

- cv

v.

U.S. B ANK N ATIONAL A SSOCIATION
,
Defendant

- Appellee

. *

FOR PLAINTIFF S

- APPELLANT S : W ILLIAM A. M AHER (David H. Wollmuth, Lyndon M. Tretter, Steven S. Fitzgerald, on the brief ), Wollmuth Maher & Deutsch LLP, New York, NY

* The Clerk of Court is directed to amend the caption as set forth above.2 FOR DEFENDANT

- APPELLEE : L OUIS A. C HAITEN ( Amanda R. Parker, David F. Adler, Michael T. Marcucci, on the brief ) Jones Day, Cleveland, OH, Boston, MA.

Appeal from order s of the United States District Court for the Southern District of New York ( Vernon S. Broderick

, J udge ).

UPON DUE CONSIDERATION WHEREOF, IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that the order s of t he District Court be and hereby are AFFIRMED

.

Plaintiffs

— Phoenix Light SF Limited (“Phoenix Light”), Blue Heron Funding VI Ltd., Blue Heron Funding VII Ltd., Kleros Preferred Funding V PLC, Silver Elms CDO PLC, Silver Elms CDO II Limited, C

- Bass CBO XIV Ltd., and C

- bass CBO XVII Ltd.

— appeal orders gr anting summary judgment and denying reconsideration.

Plaintiffs are issuers of collateralized debt obligations (“CDOs”), who bring breach of contract claims, alleg ing that they have suffered losses from their investments in certain Residential Mortgage Ba cked Securities (“RMBS”) trusts. Defendant U.S. Bank National Association is one of the RMBS trustees. Plaintiffs purchased RMBS certificates from third parties and then used those RMBS certificates as collateral to back the CDO notes they issued. Plaintif fs transferred their RMBS certificates to CDO Indenture Trustees and conveyed to them “all

. . . right, title, and interest” in the
certificates. Special App. 64

– 65. When Plaintiffs initially filed suit, the District Court ( Katherine B. Forrest, J udge ) dis missed the complaint for lack of standing. The CDO Indenture Trustees subsequently assigned the rights to pursue these claims back to the Plaintiffs, the Plaintiffs filed an amended complaint, and the District Court allowed the matter to proceed to discove ry. The matter

was re

- assigned, and the District Court ( Vernon S. Broderick, J udge ) granted Defendant’s motion for

summary judgment. The District Court found the assignments champert ous under New York law

, rendering them invalid and leaving Plaintiffs with out standing. We assume the parties’ familiarity with the underlying facts, the procedural history of the case, and the issues on appeal.

We review a district court’s grant of summary judgment de novo. In re World Trade Ctr. Lower
Manhattan Disaster Site Litig. , 846 F.3d 58, 63 (2d Cir. 2017 ). We review a district court’s denial of a
motion for reconsideration for an “ abuse of discretion. ” Cohen v. UBS Fin. Servs., Inc. , 799 F.3d 174, 177 (2d Cir. 2015) ; s ee generally, In re Sims, 534 F.3d 117, 132 (2d Cir. 2008)

.

A.

Where, as here, a case presents questions of both constitutional and prudential standing, “ we may assume Article III standing and address ‘the alternative threshold question’ of whether a party has prudential standing. ” Hillside Metro Assocs., LLC v. JPMorgan Chase Bank, Nat ’l Ass ’ n , 747 F.3d 44, 48 (2d Cir. 2014) ( quoting Kowalski v. Tesmer

, 543 U.S. 125, 129 (2004) )

. Because Plaintiffs granted3 the CDO Indenture Trustees “all of [their] right, title, and interest” in the RMBS certificates, valid assignments

— from the CDO Indenture Trustees back to the Plaintiffs

— of the right to bring claims against the RMBS trustees were necessar y in order for Plaintiffs to have prudential standing. Special App. 64

– 65 . Defendant argue s that the assignments made were invalid because they constitute d champerty under New York Judiciary Law § 489 . Based on the factual findings of the District Court, it is clear that the assig nments made we re indeed champertous, as they were made “ with the intent and for the primary purpose of bringing a lawsuit

. ” Justinian Cap. SPC v. WestLB AG , 28 N.Y.3d 160, 163 ( N.Y. 2016)

. For substantially the reasons given by Judge Broderick , we conclude the assignments were therefore invalid

.
Plaintiffs argue that they ha d a “preexisting proprietary interest” in the RMBS certificates and the assignments were therefore valid under Tr ust f

or the Certificate Holders of Merrill Lynch Mortg age Inv estors , Inc . v. Love Funding Corp. , 13 N.Y.3d 190, 195 ( N.Y. 2009) (“ We hold that a corporation or association that takes an assignment of a claim does not violate Judiciary Law § 489(1) if its purpose is to collect damages, by means of a lawsuit, for losses on a debt instrument in which it holds a preexisting proprietary interest. ”). But Plaintiffs cannot point to sufficient facts in the record to raise a question of material fact that they had such a “preexisting proprietary interest.”

Three aspects of Plaintiff s’ arguments are noteworthy. First , to the degree they claim some
sort of residual ownership interest in the RMBS certificate s , Plaintiffs run up against both the particular language of the ir CDO indenture s and the law of our Circuit, which support the

con clusions of both Judge Forrest and Judge Broderick that a grant of “all

. . . right , title, and
interest ” to an indenture trustee is a “complete transfer

, ” Nat ’ l Credit Union Admin. Bd. v. U.S. Bank
Nat ’ l Ass ’ n , 898 F.3d 243, 253 (2d Cir. 2018)

. A CDO maki ng such a grant “ convey [s] in toto all interest that they had

. . . in the Underlying Securities. ” Nat ’ l Credit Union Admin. Bd. v. U.S. Bank
Nat ’ l Ass ’ n , No. 14

- CV

- 9928 (KBF), 2016 WL 796850, at *8 (S.D.N.Y. Feb. 25, 2016), aff’d

, 898 F.3d 243 (2d Cir. 2018)

. Second , Plaintiffs’ arguments based on various obligations they have under the
indentures were plainly not made in their opposition to summary judgm ent. We decline Plaintiffs ’ invitation to reach those arguments now. Palmieri v. Lynch , 392 F.3d 73, 87 (2d Cir. 2004) (“[Plaintiff]
failed to

. . . raise this argument in his opposition to summary judgement. Thus, this argument has been waived.”)

. Third

, Plaintiffs essentially entwine discussions of Article III standing and the Love Funding champerty analysis, arguing that because their interests in the underlying securities suffice for Article III standing, those same interests must qualify them for the Love Funding “exception

. ” We reject that proposition, which is without support in case law. Moreover, unlike the plaintiff in Love Funding , who held the underlying loan at issue, her e Plaintiffs retain no ownership interest in the
RMBS certificates.

B.

Separately, Plaintiffs contend that Phoenix Light’s Trust Agreement with Deutsche Bank
was different than the i ndenture a greements of the other P laintiffs insofar as Section 3.7 of th e Trust4 Agreement authorized Phoenix Light “to collect or have collected . . . or otherwise exercise or deal with (which terms shall, for the avoidance of doubt, include the enforcement of any security) the rights pledged under Clause 3.2.” App. 2580

. Plai ntiffs conclude that “ [ t ] his means that, from the very beginning of this case, Phoenix Light indisputably had both Article III and contractual standing to sue on claims relating to RMBS Certificates

— Phoenix Light did not grant ‘all

. . . right, title, and interest’ to the claims and retained authority to sue.” Appellant’s Br. 55. T hat is not so. Phoenix Light did grant “al l . . . right, title, and interest” in their “Account Collateral” (including the CDO

notes they held and RMBS certificates at issue in this case ) to their trustee, Deutsche Bank. See A pp. 2558

- 59

, 2577

- 78

. The Trust Agreement and U.S. Security Agreement leave no daylight between Phoenix Light and the other CDO plaintiffs for the purposes of the champerty analysis

.

C.

Plaintiffs amended their notice of appeal to include the District Court’s Opinion and Order denying their F ed. R

. C iv. P

. 59(e) motion to alter or amend the judgment

, but they appear to abandon this aspect of their appeal in brief ing . Regardless, we find no indication that the District Court abused its discretion in denying that motion. Analytical Survs., Inc. v. Tonga Partners, L.P. , 684 F.3d 36, 52 (2d Cir. 2012) ( “[T]he stan dard for granting [a Rule 59 motion for reconsideration] is strict, and reconsideration will generally be denied unless the moving party can point to controlling
decisions or data that the court overlooked. Denials of motions for reconsideration are review ed only for abuse of discretion.” (internal quotation marks omitted) (second alteration in original) )

.

CONCLUSION

We have reviewed all of the arguments raised by Plaintiffs on appeal and find them to be
without merit. For the foregoing reasons, we AFFIRM the March 18, 2020 and August 12, 2020
orders of the District Court

.

FOR THE COURT: Catherine O’Hagan Wolfe, Clerk