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UNITED STATES COURT OF APPEALS

FOR THE TENTH CIRCUIT

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AMERICAN FIDELITY ASSURANCE 

COMPANY, 

 Plaintiff - Appellant,

v.

THE BANK OF NEW YORK MELLON, 

 Defendant - Appellee.

No. 18-6210

(D.C. No. 5:11-CV-01284-D) 

(W.D. Okla.)

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ORDER AND JUDGMENT*

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Before LUCERO, EBEL, and HARTZ, Circuit Judges.

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This is a dispute between American Fidelity Assurance Company (“American 

Fidelity”), an investor in residential mortgage-backed securities (“RMBS”), and the 

Bank of New York Mellon (“BNYM”), the trustee for those securities. American 

Fidelity lost millions of dollars in the wake of the 2008 financial crisis, and it seeks 

to hold BNYM accountable for those losses. 

BNYM’s duties as trustee were governed by a contract called a Pooling and 

Service Agreement (“PSA”). American Fidelity sued BNYM in 2011, alleging

* This order and judgment is not binding precedent, except under the doctrines 

of law of the case, res judicata, and collateral estoppel. It may be cited, however, for 

its persuasive value consistent with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.

FILED

United States Court of Appeals

Tenth Circuit

July 7, 2020

Christopher M. Wolpert

Clerk of Court
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breach of contract, breach of fiduciary duty, and a violation of the Trust Indenture 

Act.

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 BNYM moved for summary judgment and the district court granted that 

motion. The district court concluded that the breach of contract and breach of 

fiduciary duty claims both failed because American Fidelity had not shown an “Event 

of Default” that was known to BNYM, as required under the PSA to trigger 

additional contractual and fiduciary duties. The court also concluded that the Trust 

Indenture Act does not apply to the certificates at issue. American Fidelity 

challenges both of those rulings on appeal. Exercising jurisdiction under 28 U.S.C. 

§ 1291, we AFFIRM.

I. BACKGROUND

Between 2004 and 2009, American Fidelity purchased investment-grade 

certificates in dozens of securitization trusts containing pools of residential mortgage 

loans. Those residential mortgages were sold and serviced by non-party Countrywide 

Financial Corporation and its subsidiaries. BNYM served as securitization trustee. 

1 American Fidelity also brought a claim for negligence against BNYM. At 

oral argument American Fidelity represented that it only challenges the district 

court’s rulings as to its claims for breach of contract, breach of fiduciary duty, and a 

violation of the Trust Indenture Act. Counsel for American Fidelity was asked: 

“Let’s assume you don’t prevail on the Event of Default part, what are your 

remaining, if any, claims? You have the Trust Indenture Act; do you have any other 

claims?” Counsel responded, “No.” Therefore, we restrict our discussion to whether 

American Fidelity has shown an Event of Default known to BNYM, and whether the 

Trust Indenture Act applies to the certificates at issue. See Towerridge, Inc. v. 

T.A.O., Inc., 111 F.3d 758, 769 (10th Cir. 1997) (“Though statements in briefs or 

during oral argument are not necessarily binding admissions, we may consider them 

as such at our discretion.”).
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Securitization enables lenders to turn mortgage loans into cash. The process 

generally involves four entities: Seller, Depositor, Master Servicer, and Trustee. The 

process begins when the Seller aggregates and sells a portfolio of mortgage loans to 

the Depositor. The Depositor then sells the mortgages to a trust. The trust pays for 

the mortgages by issuing certificates of beneficial ownership, which the Depositor 

then sells to investors. The certificates entitle holders, like American Fidelity, to a 

share of interest and principal payments from the mortgage borrowers. The Master 

Servicer is responsible, in part, for collecting principal and interest payments from 

borrowers, transferring collected funds to the Trustee, and foreclosing on properties 

with defaulted loans. The Trustee performs specified functions in administering the 

trusts and is responsible for delivering funds to certificateholders.

The certificates are governed by Pooling and Service Agreements (“PSAs”)—

detailed contracts involved in creating and managing the certificates and underlying 

loans. Under the PSA, the Trustee has certain baseline, generally ministerial,

obligations. The Trustee incurs additional obligations if an Event of Default occurs 

and is known to the Trustee. Although six events can qualify as an Event of Default 

under the PSA, American Fidelity only invokes the Event of Default that occurs 

when (1) the Master Servicer fails to perform under the PSA, (2) that failure 

materially affects the rights of certificateholders, (3) the Master Servicer receives 
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notice of its failure, and (4) the Master Servicer does not cure that failure within 60 

days.2

 

If an Event of Default occurs and is known to the Trustee, then the Trustee 

incurs a duty of care and must satisfy additional obligations under the PSA. Under 

§ 8.02(viii) of the PSA, “the Trustee shall not be deemed to have knowledge of an 

Event of Default until a Responsible Officer of the Trustee shall have received 

written notice thereof . . . .” (Aplt. App. 606). 

II. DISCUSSION

“We review a district court’s grant of summary judgment de novo, using the 

same standard applied by the district court pursuant to Fed. R. Civ. P. 56(a).” Cillo 

v. City of Greenwood Vill., 739 F.3d 451, 461 (10th Cir. 2013). Summary judgment 

must be granted “if the movant shows that there is no genuine dispute as to any 

material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. 

P. 56(a). When applying this standard, “we view the evidence and draw reasonable 

2 Section 7.01(ii) of the PSA states:

[A]ny failure by the Master Servicer to observe or perform in any 

material respect any other of the covenants or agreements on the part of 

the Master Servicer contained in this Agreement . . . which failure 

materially affects the rights of Certificateholders, that failure continues 

unremedied for a period of 60 days after the date on which written 

notice of such failure shall have been given to the Master Servicer by 

the Trustee or the Depositor, or to the Master Servicer and the Trustee 

by the Holders of Certificates evidencing not less than 25% of the 

Voting Rights evidenced by the Certificates . . . .

(Aplt. App. 601).
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inferences therefrom in the light most favorable to the nonmoving party.” T.D. v. 

Patton, 868 F.3d 1209, 1219 (10th Cir. 2017). On issues for which the nonmovant 

bears the burden of proof at trial, the nonmovant “must go beyond the pleadings and 

designate specific facts so as to make a showing sufficient to establish the existence

of an element essential to its case in order to survive summary judgment.” Mountain 

Highlands, LLC v. Hendricks, 616 F.3d 1167, 1170 (10th Cir. 2010) (internal 

quotation marks and alterations omitted). “Failure of proof of an essential element 

renders all other facts immaterial.” Id. (internal quotation marks and alterations 

omitted).

A. Breach of Contract and Breach of Fiduciary Duty

In support of its claims for both breach of contract and breach of fiduciary 

duty, American Fidelity argues that BNYM’s additional duties under the PSA were 

triggered by an Event of Default that was known to BNYM. As described above, a 

trustee is only deemed to have knowledge of an Event of Default if the trustee 

receives “written notice thereof.” (Aplt. App. 606). 

American Fidelity has not shown that BNYM received written notice of an 

Event of Default. In arguing that BNYM did receive written notice of an Event of 

Default, American Fidelity cites only one letter. The letter, dated October 18, 2010, 

was sent by a group of certificateholders, via the law firm Gibbs & Bruns LLP, to 

BNYM and the Countrywide subsidiary serving as Master Servicer for a group of 
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trusts (the “Gibbs & Bruns Letter”).3

 The Gibbs & Bruns Letter served as a 

notification that Countrywide was failing to perform its duties as Master Servicer, 

and that those failures were materially affecting the rights of certificateholders. The 

letter cautioned that if the failures remained uncured after 60 days, the failures would 

ripen into Events of Default. In other words, no Event of Default had yet occurred, 

and therefore the Gibbs & Bruns Letter could not have provided written notice to 

BNYM of an Event of Default. 

Absent written notice to BNYM of an Event of Default, nothing triggered 

BNYM’s heightened contractual and fiduciary duties under the PSA, upon which 

American Fidelity seeks to rely. Therefore, the district court correctly concluded that 

BNYM is entitled to summary judgment on American Fidelity’s breach of contract 

and breach of fiduciary duty claims. 

B. Trust Indenture Act

American Fidelity also brought a claim against BNYM under the Trust 

Indenture Act (“TIA”). However, the TIA exempts some investments from its scope, 

including “any certificate of interest of participation in two or more securities having 

substantially different rights and privileges.” 15 U.S.C. § 77ddd(a)(2). The district 

court, citing Retirement Board of the Policemen’s Annuity and Benefit Fund of the 

City of Chicago v. Bank of New York Mellon, 775 F.3d 154 (2d Cir. 2014) for its 

3 The Gibbs & Bruns Letter only concerned two of the 21 trusts at issue in this 

case. 
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well-reasoned analysis, concluded that the RMBS certificates at issue here fall within 

that exemption. We agree.

In Retirement Board, the Second Circuit noted that the certificates at issue had 

“different obligors, payment terms, maturity dates, interest rates, and collateral.” 775 

F.3d at 169. The court therefore concluded that the certificates qualified under the 

TIA’s exemption for securities “having substantially different rights and privileges.”

§ 77ddd(a)(2). The district court reasoned that the certificates in this case are 

virtually identical to those at issue in Retirement Board, and the court therefore chose 

to follow the rationale set forth in Retirement Board.

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 We agree and we affirm the 

district court’s conclusion that BNYM is entitled to summary judgment because the 

TIA does not apply to the certificates at issue here. 

4 American Fidelity argues that the Second Circuit’s holding in Retirement 

Board was in error because in Reves v. Ernst & Young, 494 U.S. 56 (1990), the 

Supreme Court held that mortgage loans were not securities under either the 1933 or 

1934 Securities Acts. BNYM responds that the Reves holding was not categorical; 

the Court there simply concluded that mortgage notes typically should not be 

regarded as securities under the Exchange Act or the Securities Act. We agree with 

the Second Circuit that “while it might be incongruous to apply the registration 

provisions of the Securities Act or the anti-fraud provisions of the Exchange Act to 

residential mortgages, there is nothing odd about classifying residential mortgages 

under [the] TIA.” Retirement Board, 775 F.3d at 169.
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III. CONCLUSION

We AFFIRM the district court’s order granting BNYM’s Motion for Summary 

Judgment. 

Entered for the Court

David M. Ebel

Circuit Judge