Royal Park, an investment company, recently suffered its second defeat in its attempt to certify a class action against Deutsche Bank regarding bond-like instruments collateralized by mortgages held in trusts entitling instrument-holders to the mortgages’ cash flow for various contractual and common law claims. The Southern District of New York denied Royal Park’s first motion to certify on the grounds the proposed class was insufficiently ascertainable, finding it was not administratively feasible to identify individual investors in the trust instruments. After revising its proposed class definition, Royal Park filed a renewed motion to certify, which the court again denied in the present opinion.
The court first addressed a significant change in the law on administrative feasibility following its decision on initial motion. In In re Petrobras the Second Circuit declined to adopt a freestanding administrative feasibility requirement for class certification, instead folding it into the superiority analysis. The Second Circuit disagreed with a case—specifically relied upon by the Royal Park district court in rejecting the initial motion to certify—that endorsed a “heightened” ascertainability threshold. Although it noted its concerns persisted, the court found Royal Park’s revised class definition was sufficiently ascertainable in light of the “modest threshold ascertainability requirement” adopted in Petrobras.
Royal Park’s revised class definition nevertheless entailed individualized inquiries that predominated over common issues, thereby precluding certification. The nature of the trusts at issue made it difficult to identify which investors had standing to sue where the instruments lacked unique identifying information linked to individuals’ ownership interests, were traded on an active secondary market, and where many certificates are not held in the name of their ultimate beneficial owners. Likewise, Deutsche Bank’s statute of limitations defense required individualized inquiries to determine the original owner’s residence, trace subsequent assignments, and identify the claim owner at the time of each breach. Furthermore, the determination of damages was influenced by individualized factors such as when investors purchased the instruments, the seniority of instruments, each instrument’s purchase price, and repurchase information. While each individual issue might have been surmountable on its own, the court found the combination of individualized inquiries predominated common issues.
Finally, the court noted Royal Park’s failure to demonstrate superiority “largely follow[ed]” its failure to establish predominance and that certifying an issue class under Rule 23(c)(4) would not resolve the identified issues preventing class certification. Thus, the court again denied Royal Park’s motion for class certification.
Royal Park Invs. SA/NV v. Deutsche Bank Nat’l Tr. Co., Case No. 14-4394 (S.D.N.Y. Apr. 11, 2018).