On Wednesday, April 12, Justice Ramos of the Commercial Division of the New York Supreme Court dismissed with prejudice four lawsuits filed by Royal Park Investments SA/NV (“Royal Park”). The lawsuits alleged fraud and negligent misrepresentation with respect to residential mortgage-backed securities (“RMBS”) sold to Fortis NV/SA (“Fortis”) – formerly an independent Belgian bank that was sold off to BNP Paribas during the financial crisis – between 2005 and 2007. The claims sought damages totaling $3.7 billion from four of the world’s largest banks: Morgan Stanley, Credit Suisse, Deutsche Bank, and UBS.
In 2009, Fortis and its affiliates transferred “all right, title and interest in and to” their RMBS holdings to Royal Park through the use of a portfolio transfer agreement (“PTA”), which did not expressly address the right to assert legal causes of action. The four defendant banks moved to dismiss the complaints, contending that the representations made in the RMBS transaction documents were only made to the original purchaser (Fortis) and, under both New York and Belgian law, no transfer of the rights to sue for breaches of such representations had been made in the PTA, as the transfer of such rights must be explicit.
Justice Ramos agreed and – after determining New York law should be applied to the dispute – found that the only rights that had been explicitly transferred under the PTA were contractual rights unrelated to the right to assert legal causes of action, with no express assignment of the right to bring the common law misrepresentation claims.
Royal Park attempted to introduce a 2013 letter as extrinsic evidence purporting to show the intent to transfer all rights at law to sue over the RMBS holdings, but Justice Ramos found any such evidence was barred, holding that “[Royal Park] has failed to persuade this court that the plain terms of the [PTA] are ambiguous . . . [t]here is simply no language in the documents evidencing an outward expression of intent to assign the tort claims at issue.”
The cases are Royal Park Investments SA/NV v. Morgan Stanley et al., index number 653695/2013, Royal Park Investments SA/NV v. Deutsche Bank AG et al., index number 652732/2013, Royal Park Investments SA/NV v. Credit Suisse AG et al., index number 653335/2013, and Royal Park Investments SA/NV v. UBS AG et al., index number 653901/2013, in the Supreme Court of the State of New York, County of New York.