Davis Polk Wins Dismissal of RMBS Action for Morgan Stanley
4/14/2017

On April 12, 2017, Justice Ramos of the New York Supreme Court, Commercial Division, dismissed with prejudice four complaints filed by Royal Park Investments SA/NV (“Royal Park”) alleging fraud and negligent misrepresentation claims against Morgan Stanley, UBS, Deutsche Bank and Credit Suisse in connection with the purchase of nearly $2 billion worth of residential mortgage-backed securities (“RMBS”) that were offered or sold by the defendants. Davis Polk, as counsel for Morgan Stanley, took the lead in drafting the consolidated briefs, and partner Jim Rouhandeh argued the motion to dismiss on behalf of all defendants.

The RMBS at issue were originally purchased by a large Belgian bank, between 2005 and 2007. In 2009, that bank transferred the RMBS to Royal Park, pursuant to a Portfolio Transfer Agreement (“PTA”). Defendants moved to dismiss the complaints on the ground that Royal Park lacked standing to sue over misrepresentations that allegedly had been made to the original purchaser. Royal Park claimed that it had acquired the right to bring the claims under the PTA, but Davis Polk argued that under both New York and Belgian law, such a transfer of the right to sue must be explicit, and the PTA did not expressly provide for any transfer of misrepresentation claims.

Justice Ramos granted the motions to dismiss in their entirety. Justice Ramos ruled that Royal Park’s standing should be determined under New York law, holding that the PTA lacked any language transferring tort claims. In ruling on the standing issue, Justice Ramos relied on two prior decisions in which Davis Polk had previously prevailed for Morgan Stanley: Commonwealth of Pennsylvania Public School Employees’ Retirement System v. Morgan Stanley & Co. and Sealink Funding Ltd. v. Morgan Stanley, both of which were argued by Jim Rouhandeh.

The Davis Polk team consisted of partner James P. Rouhandeh, counsel Daniel J. Schwartz, associates Carissa M. Pilotti, David Nestor, Samantha Schnier and Benjamin Setel and former associate Nickolaus Williams, with additional assistance from associate M. Nick Sage. Members of the Davis Polk team are based in the New York office.

The case is Royal Park Investments S.A./N.V. v. Morgan Stanley, Index No. 653695/2013.