The trustees of the United Food & Commercial Workers Union & Employers Midwest Pension Fund sued Ocwen Financial Corporation and Wells Fargo Bank, alleging breach of fiduciary duty and prohibited transactions regarding the servicing of underlying mortgages.
The district court granted summary judgment for the servicers, ruling that the mortgages backing the pension fund's investments were not plan assets under ERISA because the investments lacked substantial equity features.
The Second Circuit affirmed in part and vacated in part. The court agreed with the district court that the indenture notes issued by three Delaware statutory trusts lacked substantial equity features and did not make the underlying mortgages plan assets.
However, the court reversed regarding three New York-law REMIC trusts. It held that the regular-interest certificates represented beneficial interests in those trusts, which the Department of Labor's regulation defines as equity interests.
Because the certificates are equity interests, the look-through exception in 29 C.F.R. § 2510.3-101(a)(2) applies to the mortgages underlying CSFB 2003-27, MASTR 2003-5, and GSR 2005-7F.
The court remanded the case for the district court to determine in the first instance whether the mortgages underlying the three REMIC trusts are plan assets and whether Ocwen acted in a fiduciary capacity with respect to those mortgages.