On Tuesday, two Merrill Lynch mortgage-backed securities trusts, with original principal of more than $1 billion, filed a complaint in New York State Supreme Court against two Merrill units and Bank of America, claiming that Merrill is responsible for the repurchase of deficient loans underlying the trusts. The backstory on these particular put-back claims is complicated because the trusts have already reached settlements in the bankruptcy of the loan originator, ResMAE Mortgage, and Merrill asserts that it has been released from liability as a result. But in the burgeoning arena of put-back litigation, what may be more interesting than the specific details of this case is the caption: The trusts themselves -- rather than U.S. Bank as MBS trustee -- are named as plaintiffs.

The complaint, filed by Quinn Emanuel Urquhart & Sullivan, says that the trusts are bringing claims "by" U.S. Bank but goes on to say that the "plaintiffs are two securitization trusts that hold and administer mortgage loans on behalf of investors who own securities collateralized by such loans (and) seek to enforce their contractual rights." U.S. Bank itself is not named as a party.

This isn't the only recent put-back suit in which MBS trusts are named as plaintiffs, instead of the trustee. Two different Manhattan state court suits against Morgan Stanley, one brought by Grais & Ellsworth, the other by MoloLamken, are, for instance, styled the same way as the new Merrill complaint, naming trusts as plaintiffs instead of an MBS trustee. Morgan Stanley doesn't seem to think that's a significant point: In its motion to dismiss one of the put-back suits, the bank's lawyers at Davis Polk & Wardwell address the claims as though they were brought by U.S. Bank, the trustee.

But in a case in federal court in Manhattan, UBS's lawyers at Skadden, Arps, Slate, Meagher & Flom are arguing that put-back cases can't be brought by trusts, which, according to UBS, cannot bring their own claims under either New York law or MBS pooling and servicing agreements. I've previously talked about the UBS put-back case because an MBS investors' trade group has moved to intervene, but the new Merrill suit, as well as a new filing by UBS, put a spotlight on this question: Can trusts bring claims in their own name?

The brief UBS filed Monday, asking U.S. District Judge Harold Baer to toss the case, argues that they cannot. Trusts are "non-juridical entities that lack the legal capacity to sue," the filing said. Moreover, the brief cast doubt on the trusts' assertion that they're bringing claims through U.S. Bank, the trustee. To support that point, UBS cited a brief by U.S. Bank that opposed an unrelated motion to intervene in the case. "The trustee has now stated ... that it 'is not a party -- as a plaintiff, defendant, or otherwise -- to this action,'" the UBS brief said. "Given this admission and the opacity of the pleading regarding the trustee's role, if any, in this litigation, the complaint should be dismissed."

U.S. Bank may have denied being a party in the case, but when I went back to check the brief UBS quoted, it's clear that the trustee is not disavowing the trusts' put-back suit. Indeed, the trustee said explicitly that the trusts were acting through U.S. Bank (as a trustee) when they filed their claims against UBS. The trustee's brief acknowledged that trusts don't have a legal right to sue on their own but also said, in a footnote, that in this case, "as a technical matter, the trustee filed its lawsuit solely in its capacity as trustee of the trusts."

This whole issue might seem like a matter of sheer semantics or, at most, a problem that could be solved through amending complaints to reflect that put-back suits are being filed at the direction of MBS trustees. But that leads to another interesting question: Are trustees concerned about their own liability if they appear as parties in put-back captions? Remember, two New York federal district judges have now concluded that MBS trustees can be sued by noteholders for failing to exercise their responsibilities. The intervenors in the UBS case want to bring such claims against U.S. Bank, so it's in the bank's interest to be able to argue that it can't be roped into the put-back case because it's not a party. In essence, by having trusts sue in their own names, MBS trustees can indeed have their cake and eat it too.

I left requests for comment with a U.S. Bank representative and with Philippe Selendy of Quinn, who represents the trusts suing both UBS and Merrill. Neither got back to me.

(Reporting by Alison Frankel)

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