New York Court of Appeals Affirms Dismissal of Half-Billion Dollar Case Against HSBC

November 2019

On November 25, in a case that will redefine how disputes involving trusts are litigated in New York, Williams & Connolly client HSBC Bank USA won a precedent-setting ruling from New York’s highest court that affirmed dismissal of claims seeking more than half a billion dollars against the bank.  This landmark ruling also could lead to the dismissal of billions of dollars in additional claims in similar cases that have been stayed pending this ruling.  

In 2013, Deutsche Bank National Trust Company, as trustee of a 2007 RMBS (residential mortgage-backed securities) trust, sued HSBC, the sponsor of the securitization, in New York Supreme Court, seeking $508 million in damages.  Deutsche Bank alleged that HSBC had failed to repurchase defective mortgage loans, and had failed to alert investors regarding the defects.  In 2017, Williams & Connolly represented HSBC in obtaining dismissal of the case on appeal in a widely-reported decision by New York’s First Department that embraced a novel argument—not raised in nearly a decade and scores of RMBS cases—that the case was time-barred based on the location of the RMBS trustee. Nick Boyle argued the appeal before New York’s First Department, alongside Jeff Scott of Sullivan & Cromwell, who was arguing on behalf of Barclays in a parallel case.  Williams & Connolly Partner David Riskin also played a major role in the briefing.  Law360 reported that “the ruling marks the first time a case of its kind has been dismissed on this basis.”  

Williams & Connolly then served as lead counsel defending the judgment before the New York Court of Appeals.  In its ruling, the Court held that repurchase claims that had been asserted against HSBC by Deutsche Bank were time barred.  More specifically, the 4-2 majority concluded that California’s four-year statute of limitations, and not New York’s six-year limitations period, applied to these breach of contract claims because Deutsche Bank was a California resident.  In its penultimate paragraph, the Court of Appeals observed that “[d]espite the enormity of the financial stakes, we continue to approach these cases in a manner that emphasizes the importance of clear and balanced rules.”  The court also awarded the defendant banks’ costs for the appeal. 

The team representing HSBC included Nick Boyle, David Riskin, Noah Weiss, Mindy Johnson and Liat Rome.

Click here to read The American Lawyer's coverage of the case.

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