Fed. Deposit Ins. Corp. v. Banc of Am. Sec. LLC (In re Countrywide Fin. Corp. Mortg.-Backed Sec. Litig.), Case No. 2:11-ML-02265-MRP (MANx)
| Decision Date | 21 March 2013 |
| Docket Number | Case No. 2:11-ML-02265-MRP (MANx),Case No. 2:12-CV-6690 MRP (MANx),Case No. 2:12-CV-6692 MRP (MANx) |
| Parties | In re COUNTRYWIDE FINANCIAL CORPORATION MORTGAGE-BACKED SECURITIES LITIGATION FEDERAL DEPOSIT INSURANCE CORPORATION AS RECEIVER FOR SECURITY SAVINGS BANK Plaintiff, v. BANC OF AMERICA SECURITIES LLC, et al., Defendants. FEDERAL DEPOSIT INSURANCE CORPORATION AS RECEIVER FOR SECURITY SAVINGS BANK Plaintiff, v. COUNTRYWIDE FINANCIAL CORPORATION, et al., Defendants. |
| Court | U.S. District Court — Central District of California |
LINKS: 97; 79
Security Savings Bank ("SSB,") a federally insured depository institution, failed on February 27, 2009. Plaintiff Federal Deposit Insurance Corporation ("FDIC") was appointed receiver for Security Savings Bank. The FDIC has the authority to pursue any claims held by SSB. 12 U.S.C. § 1821(d)(2)(A). The FDIC files these lawsuits asserting securities law claims arising from SSB's purchase of six residential mortgage-backed securities ("RMBS" or "certificates").
The certificates that SSB purchased were created through a process known as "securitization." See, e.g., Bank Hapoalim B.M. v. Bank of Am. Corp., 12-CV-4316, 2012 WL 6814194, at *1 (Dec. 21, 2012). In both cases, non-defendant Countrywide Home Loans, Inc. extended home loans to borrowers. The loans were pooled, sold to trusts, and backed certificates issued by trusts. Those certificates entitled the holders to receive cash flows from the pool of mortgage loans. The certificates were sold to underwriters, who sold them to SSB. According to the FDIC, the documents used to create and market the securities (called the "Offering Documents,") included materially untrue or misleading statements.
On February 24, 2012, the FDIC filed two separate lawsuits against the Defendants in Nevada state court alleging those misrepresentations. The Amended Complaint in the 12-CV-6690 matter ("6690 Complaint") is brought against defendants Banc of America Securities LLC ("Banc of America Securities"), Barclays Capital Inc. ("Barclays,") and Morgan Stanley & Company LLC f/k/a Morgan Stanley & Company, Inc. (collectively, the "6690 Defendants") for their role in selling or underwriting five certificates1 sold to SSB. In a second suit, the FDIC sues Countrywide Securities Corporation, CWALT, Inc., CountrywideFinancial Corporation and Bank of America Corporation ("6692 Defendants") for selling, underwriting and issuing one certificate2 to SSB, and controlling and succeeding to the liabilities of the primary actors (the Amended Complaint in the 12-CV-6692 action is called the "6692 Complaint").
After the Defendants removed these cases and they were transferred to this Court, the FDIC filed these Amended Complaints. The complaints allege that the Offering Documents included false representations of the ratio of the value of the loans to the underlying value of the homes, the appraisal value of the homes, the rate of occupancy by the owners of the properties, the underwriting standards used to originate the home loans and the credit ratings of the certificates. Despite the fact that the FDIC filed different lawsuits, the factual allegations and claims of misrepresentation are identical in each suit. The FDIC argues that the 6690 Defendants are liable for those false statements under Section 11 of the federal Securities Act of 1933, and that Banc of America Securities LLC and Barclays are liable under the Nevada Securities Act and Sections 12(a)(2) of the Securities Act for two of the certificates.3 The FDIC claims that Countrywide Securities Corporation and CWALT, Inc. are liable for false statements for the certificate in the 6692 Complaint under Section 11, that Countrywide Financial Corporation is liable as a controlling person under Section 15, and that Bank of America Corporation is liable as successor of these entities.
Both the 6690 and 6692 Defendants move to dismiss on the grounds that the Complaints are time-barred.4 According to the Defendants, the statute of limitations on the federal claims had already run as of February 27, 2009, when theFDIC became receiver of SSB. They urge that there is no reason to extend the statute of limitations. Even if any federal claims were live on February 27, 2009, Defendants argue that the statute of repose now bars the FDIC's claim. The 6690 Defendants also argue that the statute of limitations for the Nevada Securities Act expired by February 27, 2009, and that Nevada, the transferor court, does not have personal jurisdiction over Barclays.
The statute of limitations for federal claims under the Securities Act of 1933 is "one year after the discovery of the untrue statement or the omission, or after such discovery should have been made by the exercise of reasonable diligence," and "[i]n no event shall any such action be brought to enforce a liability created under section [11] . . . more than three years after the security was bona fide offered to the public, or under section [12(a)(2)] more than three years after the sale." 15 U.S.C. § 77m ("Section 13"). The one-year statute of limitations on any live claims on February 27, 2009 was extended by at least three years. 12 U.S.C. § 1821(d)(14) ("Section 1821") ("the applicable statute of limitations with regard to any action brought by the Corporation as conservator or receiver shall be . . . the longer of the 3-year period beginning on the date the claims accrues," which in this case is "the date of the appointment of the Corporation as conservator or receiver").
The Defendants argue, though, that the three-year statute of repose is not extended by Section 1821, which would mean that the Securities Act claims are untimely for any security purchased before February 24, 2009. The relevant question under Ninth Circuit precedent is whether the term "statute of limitations" in Section 1821 was understood to include the "statute of repose" when the extender statute was passed. McDonald v. Sun Oil Co., 548 F.3d 774, 781 (9th Cir. 2008). The extender statute was enacted in 1989. See Financial InstitutionsReform, Recovery, and Enforcement Act of 1989, Pub. L. 101-73, § 212, 103 Stat. 183 ("CONSERVATORSHIP AND RECEIVERSHIP POWERS OF THE CORPORATION.") The Ninth Circuit determined that "[t]he term 'statute of limitations' was ambiguous regarding whether it included statutes of repose . . . in 1986." McDonald, 548 F.3d at 781. This Court has concluded that because Congress and numerous federal judges used the word "limitation" interchangeably to refer to both statutes of limitations and repose between 1986 and 2008, the term "statute of limitations" did not exclude periods of repose in 2008. Fed. Hous. Fin. Agency v. Countrywide Fin. Corp., No. 12-CV-1059, 2012 WL 5275327, at *8 (C.D. Cal. Oct. 18, 2012). That means the term did not exclude periods of repose in 1989. Ambiguous statutes of limitations must be interpreted in "a light most favorable to the government." F.D.I.C. v. Former Officers and Dirs. of Metro. Bank, 884 F.2d 1304, 1309 (9th Cir. 1989). Therefore, the extender statute of Section 1821 extends both statutes of limitations and repose by at least three years from the date of appointment of the FDIC as receiver. Any claims still viable on February 27, 2009 could be brought by the FDIC until February 27, 2012.
Three of the FDIC's claims, though, were clearly not live on February 27, 2009. Those claims were brought for violations of Section 11 and are based on three securities issued pursuant to shelf registration statements filed before December 1, 2005. See 6692 Complaint ¶ 27, Schedule Item 27(g) (CWALT 2005-83CB B-2 was "issued pursuant or traceable to a registration statement filed by CWALT, Inc. with the SEC on form S-3 on July 25, 2005."); 6690 Complaint ¶ 25, Schedule 4 Item 27(h) (CWALT 2005-74T1 B-2 was "issued pursuant or traceable to a registration statement filed by CWALT, Inc. with the SEC on form S-3 on July 25, 2005."); 6690 Complaint ¶ 25, Schedule 5 Item 27(h) (CWALT 2005-19CB B-2 was "issued pursuant or traceable to a registration statement filed by CWALT, Inc. with the SEC on form S-3 on April 21, 2005."). A mortgage-backed security was bona fide offered to the public, for purposes of the statute ofrepose, on the effective date of the registration statement for registration statements filed before December 1, 2005. Me. State Ret. Sys. v. Countrywide Fin. Corp. ("Me. State I,") 722 F. Supp. 2d 1157, 1165 n.8 (C.D. Cal. 2010). The three-year repose period for these securities ended by July 25, 2008 at the latest. Section 11 claims based on CWALT 2005-83CB B-2, CWALT 2005-74T1 B-2 and CWALT 2005-19CB B-2 were not live on February 27, 2009 when the FDIC became receiver. Because Section 1821 does not revive time-barred claims, the FDIC could not bring those claims unless the statute of limitations was tolled on another ground.
The 6690 Defendants argue that the legal claims on the remaining securities, CWALT 2006-29T1 B-1, CWALT 2006-26CB B-2 and CWALT 2006-21CB B-2, are also time-barred, because the one-year statute of limitation ended before February 27, 2009. The statute of limitations in Section 13 commences "when the plaintiff did or should have actually discovered that the defendant made an 'untrue statement or omission.'" Fed. Deposit Ins. Corp. as Receiver for Strategic Capital Bank v. Countrywide Fin. Corp., 12-CV-4354, 2012 WL 5900973, at *3 (C.D. Cal. Nov. 21, 2012) (citing Merck & Co., Inc. v. Reynolds, 130 S.Ct. 1784 (2010)). A plaintiff did or should have actually discovered misstatements when a "'reasonably diligent plaintiff would have sufficient information about that fact to adequately plead it in a complaint . . . with sufficient detail and particularity to survive a 12(b)(6) motion to dismiss.'" Id. ...
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