Nat'l Credit Union Admin. Bd. v. Ubs Sec., LLC
| Decision Date | 19 January 2017 |
| Docket Number | Case No. 12-2591-JWL,Case No. 12-2648-JWL |
| Parties | NATIONAL CREDIT UNION ADMINISTRATION BOARD, Plaintiff, v. UBS SECURITIES, LLC, et al., Defendants. NATIONAL CREDIT UNION ADMINISTRATION BOARD, Plaintiff, v. CREDIT SUISSE SECURITIES (USA) LLC, et al., Defendants. |
| Court | U.S. District Court — District of Kansas |
Plaintiff National Credit Union Administration Board brings these related suits as conservator and liquidating agent of credit unions. The suits relate to a number of offerings involving different residential mortgage-backed securities ("RMBS" or "certificates") purchased by the credit unions. Plaintiff asserts claims under federal and state law against sellers, underwriters, and issuers for the certificates, based on alleged untrue statements or omissions of material facts relating to each certificate.1
The cases presently come before the Court on two motions by defendants for summary judgment with respect to certain misrepresentations and omissions, and on various related motions by the parties to exclude expert testimony. As more fully set forth herein, the Court rules as follows:
Defendants' separate motions for summary judgment with respect to certain alleged misrepresentations and omissions (Doc. # 437 in UBS, Case No. 12-2591; Doc. # 403 in Credit Suisse, Case No. 12-2648) are granted in part and denied in part. Defendants' motions are granted with respect to any claims under Section 11 based directly on mortgage loan schedules (MLSs) and with respect to any other claims based directly on MLSs that were not filed with the SEC. Defendants' motions are also granted with respect to claims based on certain representations concerning summary statistical tables. Credit Suisse's motion is also granted with respect to claims based on representations concerning compliance with applicable laws. Defendants are granted judgment to the extent that plaintiff asserts such claims. The motions are otherwise denied.
Plaintiff's motion to exclude certain testimony by defendants' reunderwriting rebuttal experts, W. Barefoot Bankhead (UBS) and Peter Kempf (Credit Suisse), (Doc. # 423 in UBS, Case No. 12-2591; Doc. # 389 in Credit Suisse, Case No. 12-2648) isdenied.
Defendants' separate motions to exclude certain testimony by plaintiff's reunderwriting experts, Richard Payne (UBS) and Steven Butler (Credit Suisse), (Doc. # 432 in UBS, Case No. 12-2591; Doc. # 405 in Credit Suisse, Case No. 12-2648) are granted in part and denied in part. The motions are granted with respect to any testimony regarding stratified statistical summary tables in the offering documents and any testimony regarding an MLS that is not the subject of a surviving claim. Credit Suisse's motion is also granted with respect to any testimony by Mr. Butler concerning materiality to a reasonable investor in these securities. Such testimony shall be excluded at trial. The motions are otherwise denied.
Defendants' joint motion to exclude certain credit risk opinions by plaintiff's experts (Doc. # 427 in UBS, Case No. 12-2591; Doc. # 394 in Credit Suisse, Case No. 12-2648) is granted in part and denied in part. The motion is granted with respect to any testimony by Mr. Butler concerning an increase in credit risk in an absolute sense, and such testimony shall be excluded. The motion is otherwise denied.
Summary judgment is appropriate if the moving party demonstrates that there is "no genuine dispute as to any material fact" and that it is "entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(a). In applying this standard, the court views theevidence and all reasonable inferences therefrom in the light most favorable to the nonmoving party. Burke v. Utah Transit Auth. & Local 382, 462 F.3d 1253, 1258 (10th Cir. 2006). An issue of fact is "genuine" if "the evidence allows a reasonable jury to resolve the issue either way." Haynes v. Level 3 Communications, LLC, 456 F.3d 1215, 1219 (10th Cir. 2006). A fact is "material" when "it is essential to the proper disposition of the claim." Id.
The moving party bears the initial burden of demonstrating an absence of a genuine issue of material fact and entitlement to judgment as a matter of law. Thom v. Bristol-Myers Squibb Co., 353 F.3d 848, 851 (10th Cir. 2003) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986)). In attempting to meet that standard, a movant that does not bear the ultimate burden of persuasion at trial need not negate the other party's claim; rather, the movant need simply point out to the court a lack of evidence for the other party on an essential element of that party's claim. Id. (citing Celotex, 477 U.S. at 325).
If the movant carries this initial burden, the nonmovant may not simply rest upon the pleadings but must "bring forward specific facts showing a genuine issue for trial as to those dispositive matters for which he or she carries the burden of proof." Garrison v. Gambro, Inc., 428 F.3d 933, 935 (10th Cir. 2005). To accomplish this, sufficient evidence pertinent to the material issue "must be identified by reference to an affidavit, a deposition transcript, or a specific exhibit incorporated therein." Diaz v. Paul J. Kennedy Law Firm, 289 F.3d 671, 675 (10th Cir. 2002).
Finally, the court notes that summary judgment is not a "disfavored procedural shortcut;" rather, it is an important procedure "designed to secure the just, speedy and inexpensive determination of every action." Celotex, 477 U.S. at 327 (quoting Fed. R. Civ. P. 1).
Defendants first seek summary judgment with respect to any alleged false or misleading statement contained in a document (a prospectus supplement, free writing prospectus (FWP), or mortgage loan schedule (MLS)) that was filed with the SEC after the trade date for that certificate and thus was not available or conveyed to the credit union at the time that the credit union made its purchase commitment. As they do with respect to most of the arguments in these motions for summary judgment, defendants make only summary arguments and incorporate by reference the arguments made by defendant RBS in a summary judgment motion filed in a related case in this Court. As set forth below, the Court denies the motions as they relate to such allegations.
The Court first addresses this argument as it relates to plaintiff's claims under Section 11 of the federal Securities Act, 15 U.S.C. § 77k. Those claims include claims based on prospectus supplements, but they do not include any claims directly based on free writing prospectuses (as ruled in a prior order in these cases, see NCUAB v. RBS Sec., Inc., 2015 WL 789983, at *3 (D. Kan. Feb. 25, 2015) (Lungstrum, J.)) or on MLSs (see infra Part III.A).
In arguing that Section 11 liability may not be based on prospectus supplements issued after the applicable purchase commitments, defendants rely on APA Excelsior III L.P. v. Premiere Technologies, Inc., 476 F.3d 1261 (11th Cir. 2007), in which the Eleventh Circuit held that a Section 11 claim could not be based on a registration statement issued after the time of the purchase commitment. See id. That case and others following it are easily distinguished, however, because in the present case there is no contention that the purchase commitments preceded the issuance of the applicable registration statements. Rather, the present cases concern prospectus supplements arguably issued after the purchase commitments. Thus, SEC Rule 430B—a rule not discussed in the cases on which defendants rely—is applicable here.
Rule 430B was promulgated as a part of 2005 reforms in the SEC's rules relating to the offering process. See FHFA v. Bank of America Corp., 2012 WL 6592251 (S.D.N.Y. Dec. 18, 2012) (Cote, J.) (). Prior to 2005, written offers could be made only through a prospectus meeting all of the requirements of Section 10(a) of the Securities Act, but the reforms allowed for offers without the provision of all required disclosures, as long as a final prospectus was eventually issued within a certain time frame. See id. at *3-4. As a part of that new scheme, Rule 430B provides that information contained in a required final prospectus "shall be deemed to be part of and included in the registration statement on the earlier of" (i) the date the final prospectus is first used and (ii) the date of the first contract of sale for those securities. See 17 C.F.R. 230.430B(f)(1). Thus, as the court held in Bank of America,the prospectus supplements at issue are deemed to be part of the registration statements at least as of dates prior to any sale contracts, which fact undermines the premise of defendants' argument against Section 11 liability.
Defendants do not argue that Rule 430B does not apply to these prospectus supplements. Defendants' sole response to this effect of Rule 430B is to argue that the rule is actually concerned with timing only for purposes of applying the statute of repose. The Court rejects that argument, however, as this provision of the rule contains no such limiting language, see id., and the language that mirrors language in the statute of repose is actually found in the following separate provision in Rule 430B, see id. § 230.430B(f)(2). See also Bank of America, 2012 WL 6592251, at *4 n.6 ().
Finally, the SEC's 2005 Release in which it explained the new regulations (to which both sides cite) supports this conclusion that Section 11 liability may be based on these prospectus supplements, even if the supplements were issued after the relevant purchase commitments. For instance, the SEC stated: "Information contained in a prospectus or prospectus supplement that is part of a registration statement that is filed after the time of the contract of sale will be part of and included in a registration statement for...
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