United States: Second Circuit Reaffirms Its View That Extender Statutes Supersede Statutes Of Repose

The Financial Institutions Reform, Recovery, and Enforcement Act ("FIRREA") includes a so-called Extender Statute prescribing the limitations period for actions brought by the Federal Deposit Insurance Corporation ("FDIC") as conservator or receiver for a failed bank. The Housing and Economic Recovery Act of 2008 ("HERA") includes a materially identical provision governing the limitations period for actions brought by the Federal Housing Finance Agency ("FHFA") as conservator or receiver for government-sponsored entities within its regulatory purview, such as Fannie Mae and Freddie Mac. These Extender Statutes have been utilized by the FDIC and FHFA to pursue residential mortgage-backed securities ("RMBS") claims that otherwise would have been barred by various statutes of repose, and in 2013, in FHFA v. UBS, the Second Circuit held that the FHFA Extender Statute displaced the1 Securities Act's three-year statute of repose. However, in 2014, the Supreme Court held in CTS Corp. v. Waldburger that a Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA")2 provision preempting state statutes of limitations did not preempt state statutes of repose. Since then, RMBS defendants have invoked CTS to argue that the FDIC, FHFA, and similar Extender Statutes do not displace3 statutes of repose. The Fifth and Tenth Circuits have rejected such arguments (relying, in part, on UBS). In FDIC, as Receiver for Colonial Bank v. First Horizon Asset Sec., Inc., 2016 WL 2909338 (2d Cir. May 19, 2016) ("Colonial Bank"), a divided panel of the Second Circuit concluded that CTS did not undermine the rationale of UBS, and accordingly held that the FDIC Extender Statute supersedes the Securities Act's three-year statute of repose. Although the Colonial Bank decision did not result in a Circuit split that could have been helpful in obtaining Supreme Court review, the thoughtful dissent suggests that this issue may well generate ongoing judicial disagreement and find its way to the Supreme Court.

Background

Both the FDIC and FHFA Extender Statutes provide that, with respect to tort claims (usually read to include securities claims as well) brought by the agency as conservator or receiver, the applicable "statute of limitations" shall be at least three years from the date of the agency's appointment as conservator or receiver.4  The Extender Statutes make no reference to potentially applicable statutes of repose.

In 2007, Colonial Bank, a federally-insured bank headquartered in Montgomery, Alabama, invested approximately $300 million in nine residential mortgage-backed securities ("RMBS"). Colonial suffered heavy losses on those RMBS, and on August 14, 2009, the Alabama State Banking Department closed Colonial and appointed the FDIC as receiver. On August 10, 2012, within three years of its appointment as receiver, the FDIC filed suit against the issuers and underwriters of the RMBS, alleging that the prospectus supplements misrepresented the creditworthiness of the loans backing the RMBS, and asserting claims under Sections 11 and 15 of the Securities Act. Defendants moved to dismiss the complaint as time-barred under the Securities Act's statute of repose — because the action was commenced more than three years after the RMBS had been offered to the public5 - arguing that the FDIC Extender Statute did not displace the Securities Act's statute of repose.

While that motion was pending, the Second Circuit decided UBS. The UBS Court held that the timeliness of Securities Act claims brought by FHFA was governed by the HERA Extender Statute alone, without regard to the Securities Act's statute of repose. The UBS Court specifically rejected the argument that the FHFA Extender Statute's use of the term "statute of limitations" meant that it left in place otherwise applicable statutes of repose.6  In this regard, although it acknowledged a difference between statutes of limitations and statutes of repose, the UBS Court noted that Congress and the federal courts often used the term "statute of limitations" to refer to both statutes of limitations and statutes of repose.7  Moreover, the UBS Court reasoned, the text of the Extender Statute indicated that Congress intended to preclude the application of any limitations periods other than as set forth in the statute itself, because the statute provides that "'the applicable statute of limitations with regard to any action brought by [FHFA] as conservator or receiver shall be' as set forth in the extender statute."8  In light of UBS, the Colonial Bank Defendants withdrew their Securities Act statute of repose argument.

The next year, the Supreme Court decided CTS. The issue in CTS was whether CERCLA § 9658, which provides for limited preemption of state statutes of limitations otherwise applicable to state-law toxic tort actions, also preempted state statutes of repose. The Supreme Court conceded that Congress sometimes used the term "statute of limitations" to refer to both statutes of limitations and statutes of repose, but held that features of § 9658 precluded reading it to extend to statutes of repose.9

Relying on CTS, the Colonial Bank Defendants moved for judgment on the pleadings, renewing their argument that the FDIC Extender Statute did not displace the Securities Act's statute of repose and that the action was therefore time-barred. The district court (Stanton, J.) agreed, and entered judgment for Defendants.10

The Colonial Bank Decision

A divided panel of the Second Circuit vacated the judgment. Judge Lynch, joined by Judge Carney, noted that Defendants made no attempt to distinguish the FDIC Extender Statute from the FHFA Extender Statute, and that the outcome was therefore controlled by UBS unless Defendants could show that its rationale had been explicitly or implicitly overruled by CTS.11  The majority concluded that Defendants had not made such a showing. As a threshold matter, the majority observed that CTS did not hold that a federal statute extending "statutes of limitation" must always be read to leave in place existing statutes of repose.12  The majority then catalogued the key ways that, in its view, CERCLA § 9658 differed from the Extender Statutes, leading the majority to conclude that CTS had "limited bearing" on the case at bar.13

Most significantly, the majority determined that the FDIC Extender Statute and § 9658 "are structured and worded in fundamentally different ways."14 Specifically, § 9658 "[did] not purport to create an entirely new statute of limitations framework for state toxic tort actions; instead, it provided a limited '[e]xception to State statutes.'"15  "By contrast, the Extender Statute establishes 'the applicable statute of limitations with regard to any action brought by the [FDIC] as conservator or receiver.'"16  The majority concluded that "this structure suggests that Congress intended the Extender Statute to supersede any and all other time limitations, including statutes of repose."17

Defendants argued that, like § 9658, the Extender Statute refers to statute of limitations in the singular, and that CTS had reasoned that this was an "'awkward way to mandate the pre-emption of two different time periods with two different purposes.'"18

The majority did not find this persuasive, noting that CERCLA refers to existing statute of limitations periods whereas the Extender Statute refers to a statute of limitations period newly created by the Extender Statute itself.19  Nor did the majority view the fact that the Extender Statute's limitations period is tied to accrual as supporting Defendants' position; rather, the majority took this to mean only that the Extender Statute is itself a statute of limitations, but irrelevant to whether it displaced otherwise applicable statutes of repose (a question already answered in the affirmative by UBS).20  The majority also contrasted the legislative histories of the two provisions. With respect to CERCLA § 9658, the Congressional report recommending a preemption amendment had distinguished between statutes of limitations and statutes of repose, but the statute as enacted did not. The majority observed that there was no legislative history to the FDIC Extender Statute making such a distinction, thereby undermining Defendants' argument that the Extender Statute's failure to refer to statutes of repose was of significance.21

Given these differences in the statutes' structure, wording, and histories, the majority was of the view that "much of CTS's reasoning is simply inapplicable to the Extender Statute."22  Accordingly, the majority "perceive[d] nothing in CTS that undercuts the UBS opinion's analysis of the Extender Statute."23  Following from that conclusion, the outcome in Colonial Bank was dictated by stare decisis.

Judge Parker dissented. He was of the view that the majority's reasoning failed to adequately account for the differences between statutes of limitation and statutes of repose as discussed in CTS, the holding of which he characterized as having "direct relevance to this case."24  He disagreed with the majority's premise that CTS's importance turned on whether § 9658 and the Extender Statute were "textually congruent." Rather, in Judge Parker's view, "[the importance of CTS] derives from its instruction on how to read extender statutes." In this regard, he observed that whereas UBS had interpreted "the statute of limitations" in the Extender Statute as evidence that Congress intended one limitations period to apply, CTS had "treated virtually identical language describing the covered period in the singular as evidence that Congress did not intend to alter 'two different time periods with two different purposes.'"25  Judge Parker concluded that when the FDIC Extender Statute was enacted in 1989 "Congress understood the distinction between statutes of limitations and statutes of repose,"26 and stressed that the Extender Statute does not reference statutes of repose yet "contains numerous references to the accrual of claims," which, the CTS Court emphasized, is relevant to statutes of limitations but not statutes of repose.27  Given the foregoing, Judge Parker concluded that the Extender Statute did not reflect the clear and unmistakable Congressional intent necessary to constitute an implied repeal of "a widely relied on and widely applied statute of repose."28

Looking Ahead

The FDIC, FHFA, and the National Credit Union Administration Board ("NCUA") have filed billions of dollars' worth of claims against RMBS issuers and underwriters that would have been barred by statutes of repose, but for the Extender Statutes as construed by various decisions. The CTS decision gave RMBS defendants encouragement that courts would revisit the issue and adopt a narrow reading of the term "statute of limitations" as used in the Extender Statutes, and their arguments have been successful in some district courts. With Colonial Bank, the Second Circuit has joined the Fifth and Tenth Circuits in holding that CTS is of limited, and ultimately not determinative, application to the Extender Statutes.29  The Supreme Court denied certiorari in both of those cases,30 and had the outcome in Colonial Bank been different, the issue would have been more strongly positioned for Supreme Court review. However, given the split panel in the Second Circuit, the fact that the Circuit courts are interpreting a very recent Supreme Court decision, and that the Ninth Circuit is currently considering the same issue in NCUA v. Wachovia Mortg. Tr. et al., No. 13-56620 (9th Cir. filed Sept. 17, 2013), the prospect of Supreme Court review remains real.

Special thanks to Shearman & Sterling LLP Associate James Lee for his contributions to this client publication.

Footnotes

1 FHFA v. UBS Americas Inc., 712 F.3d 136, 141-44 (2d Cir. 2013).

2 CTS Corp. v. Waldburger, 134 S.Ct. 2175, 2185-88 (2014).

3 See FDIC v. RBS Sec. Inc., 798 F.3d 244 (5th Cir. 2015) (FDIC Extender Statute held to displace Texas Securities Act statute of repose); Nat'l Credit Union Admin. Bd. v. Nomura Home Equity Loan, Inc., 764 F.3d 1199 (10th Cir. 2014) (NCUA Extender Statute, which is materially identical to the FDIC and FHFA Extender Statutes, held to displace Securities Act statute of repose).

4 See 12 U.S.C. § 1821(d)(14)(A) (FIRREA); 12 U.S.C. § 4617(b)(12)(A) (HERA).

5 See 15 U.S.C. § 77m.

6 See UBS, 712 F.3d at 142-43.

7 Id.

8 Id. at 143 (quoting 12 U.S.C. § 4617) (emphasis and brackets added by Court).

9 CTS, 134 S.Ct. at 2185-88.

10 FDIC, as Receiver for Colonial Bank v. Chase Mortgage Finance Corp., No. 12-cv-6166 (S.D.N.Y. Sep. 2, 2014).

11 Colonial Bank, at 9.

12 Id. at 10.

13 Id. at 4.

14 Id.

15 Id.

16 Id. at 5.

17 Colonial Bank, at 5.

18 Id. (quoting CTS, 134 S.Ct. at 2186-87).

19 Id. at 17.

20 Id. at 18.

21 See id. at 11.

22 Id. at 5.

23 Colonial Bank, at 6.

24 Id. at 8 (Parker, J. dissenting).

25 Id. at 10 (quoting CTS, 134 S.Ct. at 2186-87).

26 Id. at 9.

27 Id. at 11.

28 Id. at 11.

29 See FDIC v. RBS Sec. Inc., 798 F.3d 244; NCUA v. Nomura Home Equity Loan, Inc., 764 F.3d 1199.

30 RBS Sec. Inc. v. FDIC, 136 S. Ct. 1492, 1493 (2016); Nomura Home Equity Loan, Inc. v. Nat'l Credit Union Admin. Bd., 135 S. Ct. 949, 190 L. Ed. 2d 830 (2015).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions