NEW YORK, March 3 (Reuters) - Bank of New York Mellon Corp must face a lawsuit seeking to hold it liable for causing$1.12 billion of investor losses by failing to properly monitorfive trusts backed by toxic residential mortgages, a Manhattanfederal judge ruled.
U.S. District Judge Gregory Woods said Belgium's Royal ParkInvestments SA/NV may pursue claims that the bank, as trusteefor trusts dating from 2005 to 2007, ignored widespread,systemic abuse in how the underlying loans were underwritten andserviced, and failed to require that bad loans be repurchased.
"Indeed," Woods wrote in his decision on Wednesday, "itwould be implausible to assume that somehow all of the mortgageloans underlying the trusts miraculously avoided the pervasivepractices of the industry at the time."
The judge let Royal Park pursue claims including breach ofcontract, breach of trust, and violations of the federal TrustIndenture Act. Some other claims were dismissed.
Royal Park contended that Bank of New York breached itsduties in part out of fear it might anger or lose business fromother financial services companies in retaliation.
Other Manhattan federal judges have in the last year letRoyal Park pursue similar claims against Deutsche Bank AG and HSBC Holdings Plc.
A spokesman for Bank of New York Mellon declined immediatecomment.
Royal Park has sought class-action status on behalf of otherinvestors. It said its own residential mortgage-backedsecurities in the five trusts overseen by Bank of New YorkMellon have become "completely worthless."
Bond issuers appoint trustees to ensure that payments arefunneled to investors, and handle back-office work aftersecurities are sold.
The case is Royal Park Investments SA/NV v. Bank of New York Mellon, U.S. District Court, Southern District of New York,No. 14-06502. (Reporting by Jonathan Stempel in New York; Editing by TomBrown)