You Know That Award For Most Boring Case Ever Written? Yeah, We Have A Winner.

BlackRock Fin. Mgmt. Inc. v. Segregated Account of AMBAC Assur., 673 F.3d 169 (2d Cir. 2012).

Here is a rare appellate snoozer that we have boiled down for you.

The Bank of New York Mellon (BoNY), acting in its capacity as trustee of trusts established to hold residential mortgage-backed securities, settled claims that the originator and servicer had breached obligations owed to the trusts. As a condition precedent to the settlement, BoNY then initiated a proceeding in the New York Supreme Court to confirm that it had the authority to enter into the settlement under the governing trust documents, and that its entry into the settlement did not violate its duties under the governing trust agreements and state law.

Certain investors intervened in the special proceeding, and removed the proceeding to federal court under CAFA.

BoNY filed a motion to remand, arguing that the controversy fell within CAFA's "securities" exception.

The district court denied BoNY's motion to remand, and it appealed.

The Second Circuit Court of Appeals reversed, finding that the case did fall within the "securities" exception.

At issue was some 530 trusts created between 2004 and 2008 for which BoNY was the trustee. The mortgages were sold into the trusts by Countrywide Home Loans, Inc. One set of investors complained to BoNY that a large number of mortgages that Countrywide sold into the trusts failed to comply with the applicable representations and warranties contained in the pooling and servicing agreements (the "PSAs").

Another set of investors demanded that BoNY sue Countrywide to enforce the terms of the PSAs.

Eventually, the parties reached a settlement, in which Countrywide would pay $8.5 billion to be allocated among all the MBS trusts; however, the settlement agreement was contingent on court approval – and would not become effective until BoNY brought a special proceeding in New York state court and obtained entry of a judgment sanctioning its execution of the agreement.

Several investors moved to intervene in the special state court proceeding, chiefly to exclude the trusts that they had invested in from the settlement because BoNY allegedly had negotiated the agreement "in secret." These investors removed the case to federal court, alleging that the proceeding was a "mass action" under CAFA. BoNY and the other investors moved...