Compass Lexecon Client U.S. Bank Prevails as Court Approves RMBS Settlement

Compass Lexecon Executive Vice President Gerald Lumer Makes Recommendations and Testifies at Trial

In this matter, Bank of America offered a $77 million settlement to U.S. Bank, the Trustee for two RMBS Trusts, to settle claims relating to representations and warranties on mortgages conveyed to the Trusts. The claims had been litigated in the New York State Supreme Court and survived motions to dismiss and a motion for summary judgment. U.S. Bank retained Compass Lexecon Executive Vice President Gerald Lumer to provide an independent opinion on the reasonableness of the settlement for one of the Loan Groups in each Trust and to identify the factors the Trustee should consider in evaluating the settlement as a whole.

Dr. Lumer analyzed the settlement, explained his methodology to the Trustee and advised the Trustee that the settlement was reasonable for each Loan Group. He also identified the factors the Trustee should consider to evaluate the settlement as a whole. The Trustee relied on the advice of Dr. Lumer and concluded the settlement was in the best interests of the Trusts.

The Trustee then asked the District Court of the State of Minnesota to approve the settlement. Two investors in the Trusts filed objections to the settlement and subsequently retained experts who submitted expert reports opining that the settlement was inadequate. The Trustee asked Dr. Lumer to review the objections and expert reports. Dr. Lumer submitted two reports, explaining his analysis of the settlement and the reasons the objectors’ experts’ reports did not change his views on it. In April 2021, the District Court held a proceeding on the settlement. Dr. Lumer testified for two days before Judge Laura Nelson of the District Court of the State of Minnesota. He explained his methodology, the basis for his conclusions, and the reasons the objectors’ experts’ reports did not change his views. In her opinion, Judge Nelson described Dr. Lumer as “highly qualified and experienced” and relied upon his analyses and opinions. She authorized and approved the Trustee’s entry into the settlement and ruled that its conduct had been in good faith and reasonable and in the best interests of the Trusts.

U.S. Bank was successfully represented by Michael C. McCarthy, James F. Killian, and Michael L. Sheran of Maslon LLP. Dr. Lumer was supported by Kevin Hartt and Donald Hong of Compass Lexecon’s Chicago office.