National Credit Union Administration Board v. RBS Securities, Inc.

In National Credit Union Administration Board v. RBS Securities, Inc., No. 13-56620, 2016 BL 263034 (9th Cir. Aug. 15, 2016), the Court of Appeals for the Ninth Circuit reversed and remanded the ruling by the United States District Court for the Central District of California that the lawsuit was time-barred under the Securities Act of 1933. The National Credit Union Administration Board’s (“NCUA”), as liquidating agent for Western Corporate Federal Credit Union (“Wescorp”), filed a lawsuit against RBS Securities and Nomura Home Equity Loan (collectively “Defendants”) stating that the banks misrepresented the real value of residential mortgage-backed securities purchased by Wescorp. The district court reasoned that 12 U.S.C. § 1787(b)(14) (the “Extender Statute”) of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (“FIRREA”) did not supersede and replace all preexisting time limitations in any action by the NCUA acting as conservator or liquidating agent and applies to statutory claims.

According to the allegations, the NCUA is an independent federal agency responsible for chartering and regulating federal credit unions and regulating federally insured state-chartered credit unions. Pursuant to their statutory authority, the NCUA placed Wescorp, the second largest corporate credit union in the United States, into conservatorship on March 20, 2009 and later into liquidation after it failed due to heavy losses on its mortgage investments. The NCUA, with its authority to pursue claims on behalf of credit unions in conservatorship or liquidation under FIRREA, initiated a lawsuit on behalf of Wescorp against Defendants for violations of § 11 and § 12(a)(2) of the Securities Act of 1933 (the “1933 Act”) on July 18, 2011.

Pursuant to §13 of the 1933 Act, a private investor pursuing a claim under § 11 or § 12(a)(2) ordinarily must bring suit: (1) within one year after discovering a violation, and (2) within three years after the security was offered or sold. The three year period is a statute of repose, equivalent to a cutoff or an absolute bar to any claim under those sections.  FIRREA, however, included an Extender Statute that lengthened the statute of limitation for claims be brought by the NCUA as conservator or liquidating agent.  The district court held that the Extender Statute did not apply to the statute of repose in the Securities Act. 

In reviewing the determination, the court relied on the plain language of the Extender Statute.  The provision provided that "the" statute of limitations for "any action" brought by the NCUA as conservator or liquidating agent "shall be" as specified. As a result, “the Extender Statute’s plain meaning ‘indicates that it . . . supplants all other time limits.’”  The court also found that FIRREA used the term "statutes of limitations" broadly, to include what are technically statutes of repose. Likewise, the legislative history demonstrated that Congress meant any ambiguity in the term “statute of limitations” to be construed broadly to maximize potential recoveries by the Federal Government.

Finally, the circuit court found that the Defendants' heavy reliance on the Supreme Court's decision in CTS Corp. v. Waldburger, 134 S. Ct. 2175 (2014) was misplaced. In that case, the Supreme Court found that the term “statute of limitations” in another provision did not extend to statutes of repose.  The 9th Circuit, however, concluded that FIRREA's Extender Statute was "fundamentally different". 

Finally, the 9th Circuit held that Extender Statute applied to both common law and statutory claims.  The text of the Extender Statute applied to "any action," language deemed unambiguous.  Similarly, the legislative history confirmed that FIRREA was enacted to "significantly increase the amount of money that can be recovered by the Federal Government through litigation, and help ensure the accountability of the persons responsible for the massive losses the Government has suffered through the failures of insured institutions." Therefore, FIRREA reflected that Congress intended the Extender Statute to apply to statutory claims. 

Accordingly, the Ninth Circuit Court of Appeals vacated the district court's judgment and remanded the case for further proceedings consistent with the opinion.

The primary material for this case can be found on the DU Corporate Governance Website.



Sophie Fritz