In the Matter of: Loan Group I of the trusteeship created by Option One Mortgage Acceptance Corporation relating to the issuance of certificates by Option One Mortgage Loan Trust 2006-3 pursuant to a Pooling and Servicing Agreement dated as of October 1, 2006.

This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2016).

STATE OF MINNESOTA
IN COURT OF APPEALS
A17-0134

In the Matter of: Loan Group I of the trusteeship created by
Option One Mortgage Acceptance Corporation relating to the
issuance of certificates by Option One Mortgage Loan Trust 2006-3
pursuant to a Pooling and Servicing Agreement dated as of October 1, 2006.

Filed August 14, 2017
Affirmed
Peterson, Judge

Hennepin County District Court
File No. 27-TR-CV-16-52

Michael A. Rosow, Thomas H. Boyd, C. Richard Hansen, Winthrop & Weinstine, P.A.,
Minneapolis, Minnesota (for appellant TIG Securitized Asset Master Fund, L.P.)

Eric R. Sherman, Christina Hanson, Dorsey & Whitney LLP, Minneapolis, Minnesota (for
respondent Law Debenture Trust Company of New York)

Considered and decided by Connolly, Presiding Judge; Peterson, Judge; and Smith,
Tracy M., Judge.
U N P U B L I S H E D O P I N I O N
PETERSON, Judge
In this trust proceeding, appellant beneficiary argues that the district court erred in
determining that appellant does not have standing to object to a settlement offer made to
respondent trustee. Because the district court did not err in determining that appellant does
not have standing, we affirm and decline to address other issues that appellant has raised
on appeal.

2
FACTS
A pooling-and-servicing agreement (PSA), dated October 1, 2006, was executed by
Option One Mortgage Acceptance Corporation, as depositor; Option One Mortgage
Corporation, as servicer; and Wells Fargo Bank, N.A., as trustee. Wells Fargo maintains
a corpora te office in Minnesota, and the trust is administered in part in Minnesota.
Homeward Residential, Inc. is the successor in interest to Option One Mortgage
Corporation.
Under a Mortgage Loan Purchase Agreement (MLPA), dated October 19, 2006, the
depositor bought specified mortgage loans from Sand Canyon Corporation, formerly
known as Option One Mortgage Corporation. The PSA states that the mortgage loans are
to be held in trust for the benefit of certificate holders. The PSA assigns the mortgage
loans to two separate groups, Loan Group I and Loan Group II, and provides for the
issuance of corresponding Group I and G roup II mortgage-backed certificates. Except in
specific circumstances stated in the PSA, Group I certificates receive distributions fro m
Loan Group I, and Group I I certificates receive distributions from Loan Group II.
Appellant TIG Securitized Asset Master Fund, L.P. (TIG) holds Group II certificates.
On October 11, 2012, the Hennepin County District Court filed an order authorizing
Wells Fargo to enter into a Master Instrument of Appointment and Acceptance of Separate
Trustee (IAA) to appoint respondent Law Debenture Trust Company of New York as
separate trustee. The IAA authorizes Law Debenture to compromise and settle claims for
breaches of representations and warranties contained in the governing agreements. The
governing agreements are the PSA and the MLPA.

3
Federal Home Loan Mortgage Corporation (Freddie Mac), which is a certificate
holder and beneficial owner of Group I certificates,1 alleged that Sand Canyon breached
warranties and representations with respect to 119 mortgage loans. One hundred and nine
of those loans are in Loan Group I (the Subject Group I Mortgage Loans) and are t he
subject of this proceeding.
Under the PSA, the servicer is responsible for pursuing claims for breaches of
representations and warranties against Sand Canyon. Homeward Residential, as servicer,
brought a lawsuit against Sand Canyon in the United States District Court for the Southern
District of New York, 2 alleging breaches of representations and warranties on 96 of the
119 mortgage loans (2006 -3 Group I rep-and-warranty claims). Eighty -seven of those
loans are in Loan Group I. In December 2015, Homeward Residential moved to amend
the complaint to allege claims for breaches of representations and warranties with respect
to an additional 649 loans in Loan Group II.
On December 22, 2015, Sand Canyon made an offer to Law Debenture to settle the
claims relating to the Subject Group I Mortgage Loans. On December 30, 2015, Law
Debenture received a letter from Freddie Mac stating that it believed that the settlement
offer was in the trust’s best interests and requesting that Law Debenture accept the offer
on behalf of the trust.

1 Freddie Mac is a certificate holder and beneficial owner of about 22% of the outstanding
principal balance of all certificates and about 50% of the outstanding ba lance of Group I
certificates.
2 Homeward Residential, Inc. v. Sand Canyon Corporation, No. 12-CV-7319.

4
On January 13, 2016, Law Debenture sent a notice to certificate holders informing
them about the settlement offer and the Freddie Mac letter. The original February 20, 2016
deadline for accepting the settlement offer was extended until April 5, 2016. On March
25, 2016, Law Debenture notified certificate holders that its financial adviser had
concluded that the settlement offer was within a reasonable range for settlement of the
representation-and-warranty claims after considering various factors, “including
underwriting breach rates, certain litigation factors, and investor support.” A copy of the
financial adviser’s summary of findings was made available to certificate holders. On
April 1, 2016, Law Debenture sent a notice to certificate holders that the acceptance da te
had been extended through April 12, 2016.
On April 11, 2016, Law Debenture sent a notice to certificate holders informing
them that Sand Canyon had modified the settlement offer . Law Debenture also made the
modified offer available to certificate ho lders. The acceptance date was extended until
April 15, 2016. The modified offer includes the following release:
The Trust, the Accepting Separate Trustee, and any Persons
claiming by, through, or on behalf of any one of them
(collectively, the “ Releasors”), irrevocably and uncondition -
ally grant a full, final, and complete release, waiver, and
discharge of (a) the 2006-3 Group I Rep and Warranty Claims
with respect to the Subject Group I Mortgage Loans; and (b) in
connection with, related to or arising from the Subject Group I
Mortgage Loans, all alleged or actual claims, demands to
repurchase, demands to cure, demands to substitute,
counterclaims, crossclaims, defenses, rights of setoff, rights of
rescission, liens, disputes, liabilities, losses, debts, costs,
expenses, obligations, demands, damages, rights, and causes of
action of any kind or nature that (i) previously existed,
currently exists, exists as of the Effective Date, would exist
with discovery or the giving of notice, would exist with (or but

5
for) the passage of time, or would exist in the event of a default,
delinquency, or other loss; (ii) could have been or could be
asserted against Sand Canyon by the Releasors directly,
indirectly, derivatively, or upon demand or direction by any
Releasor to any other Person, alone or in conjunction with one
or more other Persons; and (iii) are based in contract or equity
and assert a breach of the Representations and Warranties
(collectively, the “Released Claims”). . . . For the avoidance of
doubt, nothin g herein shall release or otherwise affect any
claims for breaches of Representations and Warranties,
including the 2006-3 Rep and Warranty Claims, in connection
with, related to or arising from Mortgage Loans that are not
Subject Group I Mortgage Loans. (emphasis added).

In exchange for the release, the trust would receive a $1,000,000 settlement payment.
Before the April 15 deadline, Law Debenture received an e-mail from TIG objecting
to the settlement offer. TIG referred to Homeward Residential’s m otion to amend the
complaint in the federal action in New York with respect to the 649 mortgage loans in Loan
Group II and stated, “By settling the bulk of the pre -existing breach claims, [Law
Debenture] would be creating a risk that the judge finds that t here are insufficient
remaining loans in the case to justify the proposed expansion by allowing relation back and
granting the Motion [to Amend].” TIG stated that it would reconsider its objection if the
acceptance date was extended beyond the date when t he court ruled on the motion to
amend.
Law Debenture determined that the modified settlement offer was in the certificate
holders’ best interests and accepted it on behalf of the trust subject to Law Debenture
obtaining the relief requested in this proceeding. Law Debenture, as separate trustee, filed
a verified petition for instructions in administering a trust under Minn. Stat. § 501C.0201
(2016), seeking an order authorizing Law Debenture to accept on behalf of the trust the

6
settlement offer for breac h-of-warranty and breach -of-representation claims relating to
mortgage loans held by the trust and granting Law Debenture a release and exculpation
from claims and liability relating to Law Debenture’s evaluation and acceptance of the
settlement offer. TIG filed objections to the relief sought by Law Debenture.
Following an initial hearing, Law Debenture moved for judgment on the pleadings,
arguing that TIG lacked standing to object to the settlement offer and that the relief
requested in the petition shou ld be granted as a matter of law. TIG moved to dis miss,
arguing that, under a forum-selection clause in the trust agreement, the district court lacked
subject-matter jurisdiction.
Meanwhile, in the federal action, the district court granted Homeward Residential’s
motion to amend the complaint. Sand Canyon filed a motion to dismiss the second
amended complaint and a motion for leave to appeal the order granting the motion to
amend.3
In this proceeding, following a hearing, a referee recommended that th e district
court (1) deny TIG’s objections, (2) authorize Law Debenture to accept the settlement
offer, and (3) grant Law Debenture’s motion for judgment on the pleadings. The referee
also recommended determining that TIG had no legal standing to object t o the settlement
offer because, as a holder of Group II certificates, TIG had no economic interest in and was
not an interested person in the settlement offer and its alleged injury was “totally
speculative.” The district court confirmed the referee’s recommended order. TIG appeals.

3 The motions were pending when the parties filed their briefs in this appeal.

7
D E C I S I O N
“Appellate courts review a district court’s findings of fact concerning . . . trusts
under a clearly erroneous standard and review conclusions of law de novo.” In re Estate
of King, 668 N.W.2d 6, 9 (Minn. App. 2003).
Whether a party has standing is a question of law we
review de novo. . . . The lack of standing bars judicial
consideration of a claim. A party acquires standing by statute
or as an aggrieved party suffering an injury -in-fact. To
demonstrate an injury-in-fact, [a party] must point to an injury
that is fairly traceable to the [other party’s] challenged action
and that is likely to be redressed by a favorable decision.

Scheffler v. City of Anoka , 890 N.W.2d 437, 451 (Minn. App. 2017) (citations omitted),
review denied (Minn. Apr. 26, 2017).
Statutory Standing
The district court concluded that “TIG[,] as a holder of Group II Certificates[,] has
no economic interest in Group I Certificates, and therefore has no financial stake or claim
in the Settlement Offer[,] which applies only to Group I Certificate holders.” TIG argues
that “as a beneficiary of the Trust and ‘interested person’ statutorily entitled to notice of
the Petition, TIG was a beneficiary of a legislative grant of standing under M innesota’s
Trust Code.” See State by Humphrey v. Philip Morris Inc. , 551 N.W.2d 490, 493 (Minn.
1996) (stating that a party has standing when it “is the beneficiary of some legislative
enactment granting standing”).
The trust code states:
(a) An interested person may petition the district court
and invoke its jurisdiction as provided in sections 501C.0201
to 501C.0208 for those matters specified in section 501C.0202.

8

(b) As used in sections 501C.0201 to 501C.0208,
“interested person ” includes an acting trustee, any person
named as successor trustee under the trust instrument, any
person seeking court appointment as trustee whether or not
named in the trust instrument, a beneficiary, a creditor, and any
other person having a property or other right in or claim against
the assets of the trust. Interested person also includes a
fiduciary representing an interested person and any other
person acting in a representative cap acity as provided in
sections 501C.0301 to 501C.0305, any person who takes action
with respect to a trust in the absence of an acting trustee or
otherwise within the meaning of section 501C.0701, an agent
to whom a trustee has delegated a duty or power within the
meaning of section 501C.0807, and any person with a power
to direct the trustee within the meaning of section 501C.0808.
The meaning of interested person, as it relates to a particular
person, may vary from time to time and must be determined
according to the particular purposes of, and matter involved
in, any petition.

Minn. Stat. § 501C.0201 (2016) (emphasis added). The trust code further states:
Notice of the judicial pro ceeding must be given by an interested
person as follows: (1) by publishing, at least 20 days before the
date of the hearing, a copy of the order for hearing one time in a
legal newspaper for the county in which the petition is filed; and
(2) by mailing, at least 15 days before the date of the hearin g, a
copy of the order for hearing to those current trustees and
qualified beneficiaries of the trust whose identity is known and
whose location is known or reasonably ascertainable to the
petitioner after making reasonable efforts to locate such persons.

Minn. Stat. § 501C.0203, subd. 1 (2016) (emphasis added).
Section 501C.0201(b) identifies specific classes of persons who can be an
“interested person,” but it also expressly states that “[t]he meaning of interested person, as
it relates to a particular person, may vary from time to time and must be determined
according to the particular purposes of, and matter involved in, any petition. ” Under this

9
express statement, the mere fact that TI G is a beneficiary of the trust does not mean that
TIG is an “interested person,” and whether TIG is an interested person must be determined
according to the particular purposes of, and matter involved in, the petition.
TIG contends that, as a certifica te holder, it is a beneficiary of the trust and,
therefore, qualifies as an “interested person” under Minn. Stat. § 501C.0201(b). TIG
argues:
If interested persons such as TIG have a recognized interest in
the outcome of the proceedings requiring notice, it follows that
such interested persons must also be afforded an opportunity
to participate in those proceedings. It is incongruous that the
Legislature would provide that interested persons shall be
entitled to notice of a trust proceeding, but shall not have
standing to act on the concerns that they may have and wish to
bring to the court’s attention pursuant to that notice.

This argument fails to recognize that, under the plain language of section
501C.0203, subdivision 1, TIG was not required to rece ive notice of this proceeding
because it is an interested person; it was required to receive notice because it is a
beneficiary of the trust. The requirement that TIG receive notice is not a recognition that
TIG has an interest in the outcome of the proce eding sufficient to give it standing to
participate. Consequently, section 501C.0201(b) and section 501C.0203, subdivision 1, do
not act together to grant TIG standing.
Standing Based on Injury-In-Fact
To have standing based on an injury-in-fact, a party must “have a sufficient stake in
a justiciable controversy to seek relief from a court.” Enright v. Lehmann, 735 N.W.2dd
326, 329 (Minn. 2007) (quotation omitted). Standing may be based on “some actual or

10
threatened injury” that flows from the challenged conduct. Builders Ass’n of Minn. v. City
of St. Paul, 819 N.W.2d 172, 176 (Minn. App. 2012) (quotation omi tted). “However, an
organization’s abstract concern with a subject which may be affected by an adjudication
does not substitute for the injury -in-fact requirement.” Byrd v. Indep. Sch. Dist. No. 194,
495 N.W.2d 226, 231 (Minn. App. 1993), review denied (Minn. Apr. 20, 1993).
TIG contends that it has standing because it is threatened with an injury-in-fact. TIG
argues that “[t]he relief Law Debenture seeks in its Petition poses a real economic danger
to TIG because it threatens to thwart Homeward’s abil ity to succeed on hundreds or
thousands of additional claims [in the federal action] for the benefit of the Trust and all
certificate holders including TIG.” Although the federal court in New York granted
Homeward Residential’s motion to amend, TIG argues that the potential for injury remains
because Sand Canyon is challenging the order that granted the motion to amend. Citing
Bhatia v. Piedrhita, 756 F.3d 211, 218 (2d Cir. 2014), the Minnesota district court rejected
this argument.
The Bhatia court stated that a nonsettling defendant generally lacks standing to
object to “a partial settlement because a non -settling defendant is ordinarily not affected
by such a settlement.” Id. The court then stated:
However, there is a recognized exception to this general
rule which permits a non -settling defendant to object where it
can demonstrate that it will sustain some formal legal prejudice
as a result of the settlement.

That level [of legal prejudice] exists only in those rare
circumstances when, for example, the settlement agreement
formally strips a non-settling party of a legal claim or cause of
action, such as a cross -claim for contribution or

11
indemnification, invalidates a non -settling party’s contract
rights, or the right to present relevant evidence at trial.

Id. TIG has not demonstrated that it has been stripped of a legal claim or cause of action.
The potential injury that TIG identified in the federal action in New York is not that
Homeward Residential will not be able to make a motion; it is that Homeward Residential’s
motion will not ultimately succeed. Homeward Residential has moved to amend its
complaint to allege claims related to 649 loans in Loan Group II, and, at this point, its
motion has been granted.
TIG argues that the district court should not have relied on Bhatia because federal
law on standing differs from Minnesota law. See Snyder’s Drug Stores, Inc. v. Minn. State
Bd. of Pharmacy , 301 Minn. 28, 31 -32, 221 N.W.2d 162, 165 (1974) (stating that
Minnesota state court was not “bound to adhere” to federal standing decisions because the
“[f]ederal doctrine of standing has been described as this complicated specialty of federal
jurisdiction” and “state courts have usually tended to adopt a much simpler ‘injury in fact’
concept of standing”). But, under Minnesota law, TIG’s concern that the settlement
regarding Group I loans may affect its interest in another action as a holder of Group II
certificates is an abstract concern that does not substitute for the injury-in-fact requirement.
TIG also contends that because Law Debenture’s expert determined that “the Trust’s
losses associated with the subject loans were $14 million,” the $1 million settlement offer
is low. TIG argues that this low offer threatens an injury-in-fact because prior settlements
are a factor used to evaluate later settlement offers, and “a low settlement of Group I
certificateholders’ claims will undoubtedly be considered by a future expert in assessing

12
the reasonable range of recovery on c laims benefitting certificateholders like TIG.” As
with TIG’s previous argument, however, the concern that the settlement in this proceeding
might have some effect on an expert’s opinion in another action is speculative and does not
constitute an injury-in-fact.
TIG argues that it is threatened with an injury-in-fact because
[t]he exculpatory relief sought by Law Debenture in the
Petition also threatens to deprive TIG of claims against Law
Debenture arising from its decision to settle a small handful of
claims in a manner that jeopardized the extensive claims of
other certificateholders like TIG, as well as its failure to timely,
diligently, and prudently investigate, identify and pursue
hundreds of additional claims against Sand Canyon on which
the Trust otherwise stood to recover.

TIG argues that Law Debenture violated the fiduciary obligation that it owed to the trust
and all certificate holders under the PSA. The district court granted Law Debenture
“exculpation from liability in connection with its evaluation and acceptance of the
Settlement Offer on behalf of the Trust and the implementation of its terms.” Under the
express terms of the settlement offer, only claims with respect to the Group I Mortgage
Loans were released. This release does not threaten to deprive TIG of claims against Law
Debenture arising from other mortgage loans.
Finally, in its reply brief, TIG cites the following provision in the PSA and argues
that the interests of Group I and Group II certificate holders are linked.
With respect to the Group II Certificates, all principal
distributions will be distributed sequentially to the Class II -A-
1, Class II-A-2, Class II-A-3 and Class II -A-4 Certificates, in
that order, until the Certificate Principal Balance of each such
Class of Certificates has been reduced to zero; provided,
however, on any Distribution Date on which the aggregate

13
Certificate Principal Balance of the Subordinate Certificates
has been reduced to zero, all principal distributions will be
distributed concurren tly to each Class of the Group II
certificates pro rata based on the Certificate Principal Balance
of each such Class.

TIG argues:
[I]n the event that the Trust were to obtain a large enough
recovery on Group I certificateholders’ claims to drive the
aggregate Certificate Principal Balance of the Subordinate
Certificates above zero, TIG would no longer receive
distributions on a pro rata basis, but would instead receive
more favorable sequential distributions. Thus, there are
instances where Group I and II certificateholders benefit and
share from the same sources of recovery; indeed, they are
supported and protected by the same Subordinate Certificates.

The mere possibility that a set of circumstances could arise under which holders of
Group I and Group II certificates could benefit and share from the same sources of recovery
is not sufficient to prove an injury -in-fact, which requires “a concrete and particularized
invasion of a legally protected interest.” Enright, 735 N.W.2d at 329.
Because TIG failed to show that it will suffer an injury that is fairly traceable to Law
Debenture’s acceptance of the settlement offer and is likely to be redressed by the district
court’s denial of Law Debenture’s petition, we agree with the district cou rt that TIG does
not have standing to object to the petition. Given our determination that TIG does not have
standing, we will not address the additional issues that TIG has raised on appeal.
Affirmed.