Justia U.S. 2nd Circuit Court of Appeals Opinion Summaries

The Bank of New York Mellon, acting in its capacity as trustee of trusts established to hold residential mortgage-backed securities, settled claims that the originator and servicer breached obligations owed to the trusts. Then, as a condition precedent to the settlement, the Bank initiated an Article 77 proceeding in New York Supreme Court to confirm that it had the authority to enter into the settlement under the governing trust documents and that entry into the settlement did not violate its duties under the governing trust agreements. On appeal from an order of the district court denying petitioners' motion to remand the proceeding to New York Supreme Court, the court considered the application of 28 U.S.C. 1453(d)(3) and 1332(d)(9)(C), exceptions to the federal jurisdiction conferred by the Class Action Fairness Act of 2005 (CAFA), Pub.L. No. 109-2, 119 Stat. 4. The court held that the case fell within CAFA's securities exception as one that solely involved a claim that "related to the rights, duties (including fiduciary duties), and obligations relating to or created by or pursuant to" a security. Accordingly, the court dismissed the petition for lack of jurisdiction, reversed the order of the district court, and instructed it to vacate its decision and order and remanded the matter to state court.

Petitioners appealed from a Memorandum and Order and Final Order of Forfeiture entered by the district court dismissing their petition for an ancillary hearing and rejecting their claim as beneficiaries of a putative constructive trust in defendant's forfeiture assets. At issue was whether the remission provision of 21 U.S.C. 853(i) precluded the imposition of a constructive trust in petitioners' favor and whether imposing a constructive trust would be consistent with a forfeiture statutory scheme provided by section 853. Because the court concluded that section 853(i) did not preclude, as a matter of law, recognizing a constructive trust and because a constructive trust was not inconsistent with the forfeiture statute, the court vacated the Final Order of Forfeiture and remanded the case to the district court to consider whether, pursuant to Vermont law, a constructive trust should be recognized in favor of petitioners.