USA – NEW YORK Trends and Developments Contributed by: Sam Lieberman, Ben Hutman and Claiborne Hane, Sadis & Goldberg LLP
of an Article 77 proceeding can usually be charged by a trustee to the trust, under standard indemnification or similar provisions. Thus, it is in both the trustees’ and the beneficiaries’ best interest to resolve the Arti- cle 77 proceeding in an efficient manner. It is only where there is a large amount of money at stake, and there is a particularly genuine issue of material fact in dispute, that an Article 77 proceeding is likely to go to trial. Indeed, in a recent Article 77 proceeding, the authors prevailed by filing a motion for judgment on the pleadings, before conducting discovery ( In the Matter of U.S. Bank N.A. , Index No 652307/2022, NYSCEF No 185 at 1–2 (Oct. 6, 2023)) (Amended & Restated Decision & Order on Motion for Judgment in the Pleadings). New York law expressly authorises the court in an Arti- cle 77 proceeding to “order a severance of a particular claim, counterclaim or cross-claim” from the rest of the Article 77 proceeding (a “severance order”) (N.Y. CPLR Section 407). For example, where an Article 77 proceeding petition raises a specific issue regard- ing one of several trusts, and all parties that appear for that one trust agree about that issue, the parties may seek a severance order resolving that issue in their favour for this trust, and severing the claim as to that one trust from the rest of the case. In turn, a severance order typically provides that, given that all appearing parties agree on the issue, the trustee shall administer the trust as requested by all appearing par- ties, and all other (non-appearing) parties are barred from asserting claims against the trustee for acting in accordance with the severance order. This express severance order provision allows the parties to the proceeding to reach agreement and quickly and effi- ciently resolve undisputed issues. It also encourages the parties to reach agreements that can quickly and efficiently resolve the entire litigation. Accordingly, Article 77 proceedings are increasingly being used to efficiently provide judicial guidance about the rights and duties of a trustee, and the inter- pretation of relevant trust documents. In the past 15 years alone, such proceedings have become a com- mon method for resolving billions of dollars in disputes in the RMBS industry. Further, with CMBS and other structured financial products also being created as New York trusts, a further increase in the use of Article
77 proceedings to resolve potential trust disputes, and to give trustees clear guidance about difficult legal issues, is expected. Class Actions Regarding Digital Assets Theft or Fraud As more financial industry customers and market participants have embraced the use of digital assets like Bitcoin, there has been an increase in damages from the hacking or theft of digital assets. The last few years have seen a significant increase in class actions seeking to hold digital asset issuers and exchanges responsible for the hacking or theft of digital assets from their platforms or client accounts. These class actions have focused on several theories. In Re Coinbase Customer Data Security Breach Litigation, 25-MD-03153 (S.D.N.Y., Aug. 13, 2025) Twenty cases have been consolidated in the US Dis- trict Court for the Southern District of New York arising out of Coinbase Global Inc’s significant cybersecurity incident, which compromised the personally identifi- able information (PII) of over 60,0000 customers (the “data breach”). The data breach was a result of an insider threat through social engineering and bribery of Coinbase’s contractors to hack and exploit clients’ PII, including through attempts to steal their money. These cases have alleged breaches of the Federal Trade Commission Act’s and New York General Busi- ness Law’s bars on unfair or deceptive acts or prac- tices (15 U.S.C. Section 45, N.Y. GBL Section 349, the Driver’s Privacy Protections Act (DPPA), 18 U.S.C. Section 2721–22), negligence, breach of implied con- tract, invasion of privacy and unjust enrichment. Harden et al. v Tron Foundation et al., 20-CV-02804 (S.D.N.Y., decided Oct. 23, 2024) A class of investors sued Tron Foundation and its co-founders Justin Sun and Zhiqiang Chen for the unregistered offering of securities in selling Tron’s TRX token. TRX fell in value by 95% after its opening. The court upheld claims under Section 12 (a)(1) of the Securities Act of 1933, and the blue sky laws of various states for conducting an unregistered offering.
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