Nat'l Credit Union Admin. Bd. v. Nomura Home Equity Loan, Inc., 12-3295

Decision Date27 August 2013
Docket NumberNo. 12-3295,No. 12-3298,12-3295,12-3298
PartiesNATIONAL CREDIT UNION ADMINISTRATION BOARD, as liquidating agent of U.S. Central Federal Credit Union and of Western Corporate Federal Credit Union, Plaintiff - Appellee, v. NOMURA HOME EQUITY LOAN, INC.; WACHOVIA CAPITAL MARKETS, LLC, n/k/a Wells Fargo Securities, LLC; WACHOVIA MORTGAGE LOAN AND TRUST, LLC; NOVASTAR MORTGAGE FUNDING CORP.; FINANCIAL ASSET SECURITIES CORP.; RBS ACCEPTANCE, INC., f/k/a Greenwich Capital Acceptance, Inc.; RBS SECURITIES, INC., f/k/a Greenwich Capital Markets, Inc., Defendants - Appellants, and FREMONT MORTGAGE SECURITIES CORP.; INDYMAC MBS, INC.; LARES ASSET SECURITIZATION, INC.; RESIDENTIAL FUNDING MORTGAGE SECURITIES II, INC., Defendants. SECURITIES INDUSTRY AND FINANCIAL MARKETS ASSOCIATION, Amicus Curiae.
CourtUnited States Courts of Appeals. United States Court of Appeals (10th Circuit)

NATIONAL CREDIT UNION ADMINISTRATION BOARD,
as liquidating agent of U.S. Central Federal Credit Union and
of Western Corporate Federal Credit Union, Plaintiff - Appellee,
v.
NOMURA HOME EQUITY LOAN, INC.; WACHOVIA CAPITAL MARKETS, LLC,
n/k/a Wells Fargo Securities, LLC; WACHOVIA MORTGAGE LOAN AND TRUST, LLC;
NOVASTAR MORTGAGE FUNDING CORP.; FINANCIAL ASSET SECURITIES CORP.;
RBS ACCEPTANCE, INC., f/k/a Greenwich Capital Acceptance, Inc.; RBS SECURITIES, INC.,
f/k/a Greenwich Capital Markets, Inc., Defendants - Appellants,
and
FREMONT MORTGAGE SECURITIES CORP.; INDYMAC MBS, INC.;
LARES ASSET SECURITIZATION, INC.;
RESIDENTIAL FUNDING MORTGAGE SECURITIES II, INC., Defendants.

SECURITIES INDUSTRY AND FINANCIAL MARKETS ASSOCIATION, Amicus Curiae.

No. 12-3295
No. 12-3298

UNITED STATES COURT OF APPEALS TENTH CIRCUIT

Filed: August 27, 2013


PUBLISH

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APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
(D.C. Nos. 2:11-CV-02340-JWL-JPO and 2:11-CV-02649-JWL-JPO)

Barry Levenstam, Jenner & Block, Chicago, Illinois (Barbara S. Steiner, Matthew J. Thomas, and Casey T. Grabenstein, Jenner & Block, Chicago, Illinois; W. Perry Brandt, Bryan Cave LLP, Kansas City, Missouri; Arthur E. Palmer, Goodell, Stratton, Edmonds & Palmer, LLP, Topeka, Kansas; Jeffrey J. Kalinowski and Richard H. Kuhlman, Bryan Cave LLP, St. Louis, Missouri; William F. Alderman, Orrick, Herrington & Sutcliffe LLP, San Francisco, California; Timothy B. Mustaine, Foulston Siefkin LLP, Wichita, Kansas; Michael Thompson and Faiza Bergquist, Husch Blackwell LLP, Kansas City, Missouri; and R. Alexander Pilmer, David I. Horowitz, and Tammy A. Tsoumas, Kirkland & Ellis LLP, Los Angeles, California, with him on the briefs), appearing for Appellants.

David C. Frederick, Kellogg, Huber, Hansen, Todd, Evans & Figel, P.L.L.C., Washington, D.C. (George Zelcs, Korein Tillery, Chicago, Illinois; Michael J. McKenna, General Counsel, and John K. Ianno, Associate General Counsel, National Credit Union Administration, Alexandria, Virginia; Wan J. Kim and Gregory G. Rapawy, Kellogg, Huber, Hansen, Todd, Evans & Figel, P.L.L.C., with him on the brief), appearing for Appellee.

Ira D. Hammerman and Kevin Carroll, Securities Industry and Financial Markets Association, Washington, D.C., and Michael J. Dell and Aaron M. Frankel, Kramer Levin Naftalis & Frankel LLP, New York, New York, filed an amicus brief for Securities Industry and Financial Markets Association.

Before KELLY, McKAY, and MATHESON, Circuit Judges.

MATHESON, Circuit Judge.

The National Credit Union Administration ("NCUA") placed two federally chartered corporate credit unions, U.S. Central Federal Credit Union ("U.S. Central") and

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Western Corporate Federal Credit Union ("WesCorp"), into conservatorship. As liquidating agent, NCUA sued 11 defendants on behalf of U.S. Central, alleging federal and state securities violations.1 In a separate case, NCUA sued one defendant on behalf of U.S. Central and WesCorp, alleging similar federal and state securities violations.2 The cases were consolidated in the United States District Court for the District of Kansas. We refer to all defendants in these actions collectively as "Defendants."

Defendants moved for dismissal, arguing that NCUA's claims were time-barred. The district court denied the motion, concluding that the so-called Extender Statute applied to NCUA's claims. See 12 U.S.C. § 1787(b)(14). Defendants successfully moved for an interlocutory appeal for this court to determine whether the Extender Statute applies to NCUA's claims.

Exercising jurisdiction under 28 U.S.C. § 1292(b), we affirm.

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I. BACKGROUND

We begin by describing several statutes relevant to this litigation. We then summarize the factual and procedural history of the case before turning to a discussion of the issues.

A. Securities Laws and the Extender Statute

This case involves residential mortgage-backed securities ("RMBS"). RMBS are created through securitization by pooling residential mortgage loans and offering prospective investors the opportunity to invest in a particular loan pool through purchase of RMBS certificates granting ownership of a slice of the loan pool. Investors can buy, sell, or hold these RMBS certificates. When homebuyers pay back their loans, investors receive a positive return through payment of dividends and the increased value of the RMBS certificates. See In re Lehman Bros. Sec. & ERISA Litig., 800 F. Supp. 2d 477, 479 (S.D.N.Y. 2011) (describing mortgage securitization process). Conversely, investors lose money when homebuyers fail to repay their mortgage loans.

Several steps occur before an RMBS certificate can be offered to an investor.

First, the mortgages are separated into "tranches," or classes, based on the estimated risk of default.

Second, a ratings agency assigns a credit rating to each tranche before it is sold. This step signals to investors the risk associated with a given security. Broadly speaking, the ratings agency determines the credit risk of a loan pool based on information about

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each loan in a given tranche, each borrower's creditworthiness, and the proposed capital structure of the loans.

Third, RMBS sellers must file registration statements with the Securities and Exchange Commission ("SEC"), along with a prospectus and other offering documents, which include disclosures about the RMBS being offered. Federal and state securities laws require RMBS sellers to provide investors with truthful and accurate information about the risks involved. See In re Morgan Stanley Info. Fund Sec. Litig., 592 F.3d 347, 358 (2d Cir. 2010). Sellers are liable when offering documents include false and misleading statements.

After the foregoing steps, the RMBS are sold to investors in the form of certificates.

1. Federal securities laws

Sections 11 and 12(a)(2) of the Securities Act of 1933 impose liability on certain participants in a registered securities offering that involves material misstatements or omissions. Section 11 applies to registration statements, and Section 12(a)(2) applies to prospectus materials and oral communications.3

For private litigants bringing a claim under Sections 11 or 12(a)(2), two deadlines must be satisfied. Both appear in Section 13 of the Securities Act (codified as 15 U.S.C.

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§ 77m),4 under the heading "Limitation of actions." First, a claim must be brought within one year from the date the violation is discovered or should have been discovered through the exercise of reasonable diligence. Second, a claim is subject to a three-year limit, which provides that "[i]n no event" shall a claim under Section 11 be filed "more than three years after the security was bona fide offered to the public," and no "more than three years after the sale" in the case of a Section 12(a)(2) claim. Id. at § 77m.

2. State securities laws

The Kansas Uniform Securities Act makes a securities seller liable to a purchaser if the seller sells a security "by means of an untrue statement of a material fact or an omission." K.S.A. § 17-12a509(b). Kansas also sets two deadlines on state securities claims: a two-year limitations period from the date the claim accrues and a five-year deadline from the date of the security's issuance or sale. Id. § 17-12a509(j).

The California Corporate Securities Law of 1968 similarly makes a securities seller "liable to the person who purchases a security," Cal. Corp. Code § 25501, when the security has been sold or offered "by means of any written or oral communication which includes an untrue statement of a material fact" or is "misleading," id. § 25401. California's deadlines for securities claims are similar to those in Kansas: two years from a plaintiff's discovery "of the facts constituting the violation," or five years from "the act or transaction constituting the violation." Id. § 25506(b).

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3. Time limits specific to NCUA: the Extender Statute

The Federal Credit Union Act ("FCUA"), enacted in 1934, governs the regulation of federally chartered credit unions. It established NCUA as an independent agency charged with regulating federally chartered credit unions and set the terms of federal insurance coverage for credit union accounts.

If NCUA finds that a credit union is insolvent, or in some circumstances if it is undercapitalized, FCUA directs NCUA to place the credit union in conservatorship or liquidation and appoint itself as conservator or liquidating agent. 12 U.S.C. §§ 1787(a)(1)(A), (a)(3)(A). As conservator or liquidating agent, the Board steps into the shoes of the credit union and succeeds to "all rights, titles, powers, and privileges of the credit union." Id. § 1787(b)(2)(A)(i).

In the wake of the savings and loan crisis of the 1980s, Congress passed the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA"). FIRREA's purpose is to strengthen government regulation of federally chartered or insured financial organizations. See United States v. Winstar Corp., 518 U.S. 839, 844, 856 (1996).

FIRREA contains provisions often referred to as "extender statutes," which extend the time period for a government regulator to bring "any action" on behalf of a failed financial organization. FIRREA has two such provisions with identical language. One applies to NCUA, 12 U.S.C. § 1787(b)(14), and the other to the Federal Deposit Insurance Corporation ("FDIC"), NCUA's counterpart that regulates banks, id.

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§ 1821(d)(14). See O'Melveny & Myers v. FDIC, 512 U.S. 79, 86 (1994) (describing the FDIC extender statute).5

The NCUA Extender Statute is titled "Statute of limitations for actions brought by conservator or liquidating agent." 12 U.S.C. § 1787(b)(14). It reads:

(A) In general
Notwithstanding any provision of any contract, the applicable statute of limitations with regard to any action brought by the Board6 as conservator or liquidating agent shall be—
(i) in the case of any contract claim, the longer of—
(I) the 6-year period beginning on the date the claim accrues; or
...

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