## Facts

- National Mortgage Equity Corporation (NMEC), managed and promoted by David A. Feldman, organized pools of residential mortgage loans and sold “mortgage pass-through certificates” representing undivided interests in the pools.
- The certificates were marketed to financial institutions through private placement materials that allegedly described high underwriting standards, adequate insurance/guarantees, and compliance with stated quality criteria.
- Bank of America acted as escrow agent for each pool and as trustee for most pools, reviewing pool documentation for compliance with pooling and servicing agreements.
- Plaintiffs alleged a fraudulent scheme by NMEC, Feldman, and others, including the law firm Lord, Bissell & Brook and partner Leslie W. Michael, to misrepresent the quality and risks of the underlying mortgage loans for profit.
- After being alerted to documentation irregularities, Bank of America investigated and alleged it uncovered the broader fraud.
- To resolve potential trustee liability to investors, Bank of America repaid investors through cash and collateral totaling about $133 million, allegedly resulting in a net loss to the Bank of about $38 million after offsets.
- In connection with that repayment, Bank of America obtained assignments of securities and fraud claims from nineteen investor institutions and sued both in its own right and as assignee, asserting federal securities, state securities, common-law fraud, and civil RICO claims.
- Defendants moved to dismiss, arguing that the “one-satisfaction” rule and non-assignability principles barred Bank of America from pursuing the assigned claims.

## Issues

1. Whether the one-satisfaction (one-recovery) rule barred Bank of America, after reimbursing investors and taking assignments, from suing defendants on the investors’ assigned securities and fraud claims.
2. Whether federal securities claims and related common-law fraud claims arising from commercial transactions were assignable to Bank of America.
3. Whether double-recovery concerns required dismissal at the Rule 12(b)(6) stage rather than resolution through damages offsets and accounting.

## Decision

- The court denied motions to dismiss to the extent they sought to bar Bank of America’s assigned securities and common-law fraud claims under the one-satisfaction rule.
- The court held that the one-satisfaction rule functioned as a damages limitation, not a categorical bar to suit by an assignee who reimbursed the original victims.
- The court concluded that, in principle, the investors’ federal securities claims and common-law fraud claims were assignable in this context, and Bank of America could assert them as assignee.
- The court indicated that any double-recovery risks could be addressed through offsets and damages calculations at later stages rather than by dismissal on the pleadings.

## Legal Principles

- The one-satisfaction rule limits total recovery for a single injury but does not, by itself, prohibit assignment of claims or litigation by a reimbursing party standing in the injured party’s place.
- Federal securities claims are generally assignable absent a specific statutory prohibition or policy bar, particularly where the assignee has assumed the economic loss tied to the claims.
- Common-law fraud claims connected to commercial transactions and property interests are generally assignable, unlike purely personal tort claims.
- An assignee “stands in the shoes” of the assignor, acquiring no greater rights and remaining subject to defenses that would have applied against the assignor.
- Concerns about duplicative recovery ordinarily go to the measure of damages and can be managed through credits, offsets, and accounting rather than categorical dismissal at the pleading stage.

## Conclusion

The court allowed Bank of America to proceed, at the pleading stage, on securities and fraud claims assigned by reimbursed investors, holding that assignment was permissible and that the one-satisfaction rule constrained ultimate recovery rather than barring the suit.


In re Nat’l Mortg. Equity Corp. Mortg. Pool Certificates Sec. Litig., 636 F. Supp. 1138 (C.D. Cal. 1986)