Fed. Deposit Ins. Corp. v. Merrill Lynch, Pierce, Fenner & Smith Inc.
| Decision Date | 18 August 2014 |
| Docket Number | Case No. A-14-CA-126-SS |
| Parties | FEDERAL DEPOSIT INSURANCE CORPORATION AS RECEIVER FOR GUARANTY BANK, Plaintiff, v. MERRILL LYNCH, PIERCE, FENNER & SMITH INC. and RBS SECURITIES INC., Defendants. |
| Court | U.S. District Court — Western District of Texas |
BE IT REMEMBERED on this day the Court reviewed the file in the above-styled cause, and specifically Defendants Merrill Lynch, Pierce, Fenner & Smith, Inc., and RBS Securities Inc.'s Motion for Judgment on the Pleadings [#41], Plaintiff Federal Deposit Insurance Corporation's Response [#45], and Defendants' Reply [#46]. Having reviewed the documents, the governing law, and the file as a whole, the Court now enters the following opinion and orders GRANTING the motion.
In 2004 and 2005, Guaranty Bank paid some $2.1 billion for twenty residential mortgage-backed securities certificates, including three certificates from the Defendants in this case. Guaranty Bank subsequently failed, and the FDIC was appointed as receiver on August 21, 2009. The FDIC filed this lawsuit in Texas state court on August 17, 2012, alleging the live Defendants and severalothers violated the Securities Act of 1933 and the Texas Securities Act by making material misstatements and omissions concerning the mortgages underlying the securities.
The case was initially removed to this Court, but the FDIC prevailed on a motion to remand and the case was returned to the state court. See FDIC v. J.P. Morgan Secs. LLC, No. 1:12-CV-878-SS (W.D. Tex. Dec. 5, 2012). The case proceeded before the State district court, and the parties eventually briefed and argued a summary judgment motion. Before the state court could render a decision on that dispositive motion, the FDIC settled all of its 1933 Act claims, leaving only its TSA claims against the live Defendants. The case was then removed to this Court for the second time.
Defendants now move for judgment on the pleadings under Federal Rule of Civil Procedure 12(c). Defendants contend the FDIC's TSA claims are barred by the TSA's five-year statute of repose,1 relying heavily on the United States Supreme Court's recent decision in CTS Corp. v. Waldburger, 134 S. Ct. 2175 (2014), which held state statutes of repose are not preempted by the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA). The FDIC counters the TSA's statute of repose is preempted by the FDIC Extender Statute, 12 U.S.C. § 1821(d)(14), a provision of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA). Because the FDIC Extender Statute allows the FDIC up to three years from the date on which it is appointed as receiver for a failed bank to bring claims on behalf of the bank, the FDIC contends its TSA claims are timely.
Federal Rule of Civil Procedure 12(c) provides: "After the pleadings are closed—but early enough not to delay trial—a party may move for judgment on the pleadings." FED. R. CIV. P. 12(c). Motions for judgment on the pleadings are "designed to dispose of cases where the material facts are not in dispute and a judgment on the merits can be rendered by looking to the substance of the pleadings and any judicially noticed facts." Great Plains Trust Co. v. Morgan Stanley Dean Witter & Co., 313 F.3d 305, 312 (5th Cir. 2002) (internal quotation marks omitted). "A motion for judgment on the pleadings under Rule 12(c) is subject to the same standard as a motion to dismiss under Rule 12(b)(6)." Doe v. MySpace, Inc., 528 F.3d 413, 418 (5th Cir. 2008).
A motion under Federal Rule of Civil Procedure 12(b)(6) asks a court to dismiss a complaint for "failure to state a claim upon which relief can be granted." FED. R. CIV. P. 12(b)(6). The plaintiff must plead sufficient facts to state a claim for relief that is facially plausible. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 566 U.S. at 678. Although a plaintiff's factual allegations need not establish that the defendant is probably liable, they must establish more than a "sheer possibility" that a defendant has acted unlawfully. Id. Determining plausibility is a "context-specific task," and must be performed in light of a court's "judicial experience and common sense." Id. at 679.
In deciding a motion to dismiss under Rule 12(b)(6), a court generally accepts as true all factual allegations contained within the complaint. Leatherman v. Tarrant Cnty. NarcoticsIntelligence & Coordination Unit, 507 U.S. 163, 164 (1993). However, a court is not bound to accept legal conclusions couched as factual allegations. Papasan v. Allain, 478 U.S. 265, 286 (1986). Although all reasonable inferences will be resolved in favor of the plaintiff, the plaintiff must plead "specific facts, not mere conclusory allegations." Tuchman v. DSC Commc'ns Corp., 14 F.3d 1061, 1067 (5th Cir. 1994). In deciding a motion to dismiss, courts may consider the complaint, as well as other sources such as documents incorporated into the complaint by reference, and matters of which a court may take judicial notice. Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322 (2007).
Defendants' no-preemption argument is premised on an application of the Supreme Court's reasoning in Waldburger to the FDIC Extender Statute contained in FIRREA. Because Waldburger is central to the parties' dispute, the Court begins with a discussion of the case. Then, following the analytical path laid by the Supreme Court, the Court analyzes the FDIC Extender Statute's text, legislative history, and statutory purpose. Ultimately, a faithful application of Waldburger's logic to the FDIC Extender Statute compels the conclusion the TSA's statute of repose is not preempted, and operates to bar the FDIC's untimely claims.
In Waldburger, the Supreme Court was called upon to interpret 42 U.S.C. § 9658, aprovision of CERCLA. 134 S. Ct. at 2180. Section 9658 extends the "discovery rule" to toxic tort cases because of the latent nature of many chemical-induced injuries, and "by its terms pre-empts statutes of limitations applicable to state-law tort actions in certain circumstances." Id. The question before the Court was whether § 9658 also preempts state statutes of repose.
The Supreme Court granted certiorari to resolve a split of authority among the lower courts on this question. The Fourth Circuit below had held § 9658 is ambiguous, but should be construed to preempt state statutes of repose in order to give effect to CERCLA's remedial purpose. Id. at 2181-82. In so holding, the Fourth Circuit agreed with the Ninth Circuit, which had addressed the question several years earlier. See McDonald v. Sun Oil Co., 548 F.3d 774, 779 (9th Cir. 2008), abrogated by Waldburger, 131 S. Ct. at 2180. On the other side of the divide, the Fifth Circuit and the Supreme Court of South Dakota had both held § 9658 only preempts state statutes of limitations, not state statutes of repose. See Burlington N. &SantaFeRy. Co. v. Poole Chem. Co., 419F.3d355, 362 (5th Cir. 2005) (BNSF); Clark Cnty. v. Sioux Equip. Corp., 753 N.W.2d 406, 417 (S.D. 2008). The Supreme Court sided with the latter courts, holding § 9658 does not preempt state statutes of repose. Waldburger, 132 S. Ct. at 2180.
The Supreme Court began its analysis by distinguishing between statutes of limitations and statutes of repose. Id. at 2182. Recognizing "both are mechanisms used to limit the temporal extent or duration of liability for tortious acts," the Court distinguished the two by virtue of their timing, purposes, and objectives. Id. Statutes of limitations "create[] a time limit for suing in a civil case, based on the date when the claim accrued," generally meaning the date "when the injury occurred or was discovered." Id. (internal quotation marks omitted). By contrast, statutes of repose "put[] an outer limit on the right to bring a civil action" based on "the date of the last culpable act or omission of the defendant" rather than the date of accrual. Id. The Court characterized a statute of repose as "equivalent to a cutoff," noting it may bar a suit even "before the plaintiff has suffered a resulting injury" or learned of a claim. See id. at 2182-83 (internal quotation marks omitted). Statutes of repose provide "a fresh start or freedom from liability." Id. at 2183. To highlight this distinction, theCourt noted statutes of limitations are often subject to equitable tolling in extraordinary circumstances, but statutes of repose are not. Id.
With those distinctions in mind, the Court turned to its analysis of § 9658. The Court began by analyzing the text of the statute,2 because "Congressional intent is discerned primarily from the statutory text." Id. at2185. The framework of § 9658 expressly makes preemption "an' [e]xception' to the regular rule." Id. (quoting 42 U.S.C. § 9658(a)(1)). The phrase "statute of limitations" is used"four times (not including the caption)," but "statute of repose" never appears. Id. The Court found this feature "instructive, but. .. not dispositive" because Congress has a history of using the term "statute of limitations" in a broad manner, including when enacting statutes of repose. Id. ().
Because Congress sometimes calls statutes of repose statutes of limitations, the Court looked for "other evidence of the meaning of the term 'statute of limitations' as it is used in § 9658." Id. The Court examined a range of historical legal materials in an attempt to discern what the drafters of CERCLA might have understood when they enacted the statute in 1986. Id. at 2185-86....
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