On January 19, Judge Richard Berman of the Southern District of New York dismissed, for lack of jurisdiction, the vast majority of claims asserted against Deutsche Bank and Wells Fargo in their respective capacities as RMBS trustees for 564 and 273 RMBS trusts, pooling a collective $826.5 billion in securitized loans. Plaintiffs in the two actions claimed the court had federal jurisdiction over certain of the claims arising from the Trustee Indenture Act of 1939, and asked the court to exercise supplemental jurisdiction over the accompanying state law claims as well. Judge Berman held that while the court was empowered to exercise supplemental jurisdiction it would not do so, because the state claims pressed by Plaintiffs predominated over the federal ones. Judge Berman stressed that Plaintiffs asserted no federal claims in connection with almost 90% of the trusts at issue in the Deutsche Bank action and roughly 96% of trusts at issue in the Wells Fargo action. The court concluded that to permit such a relatively small number of federal claims to pull in a much larger body of state claims would improperly allow "a federal tail...to wag what is in substance a state dog." The court granted plaintiffs three weeks to file a joint amended complaint with the state law claims removed. The court did not rule on the merits of Plaintiffs' TIA or state law claims. Order.
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