Alert September 03, 2013

Tenth Circuit Rules that “Extender Statutes” Permit NCUA to Bring Otherwise Time-Barred RMBS Suits

The Tenth Circuit has held that provisions of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (“FIRREA”) that extend the time period for a government regulator to bring “any action” on behalf of a failed financial organization, often referred to as “extender statutes,” permit the National Credit Union Administration to sue various defendants for state and federal securities laws violations on behalf of two credit unions that were in conservatorship (and, later, involuntary liquidation).  The credit unions had purchased various residential mortgage-backed securities in 2006 and 2007.  The NCUA sued various parties in 2011, alleging materially false and misleading statements in the offering documents.  The defendants argued that that the extender statutes do not apply to repose periods (which are similar to the time limits of statutes of limitations), that the repose period of the relevant portion of the Securities Act is three years, and that the NCUA cannot bring suit because more than three years had passed since the RMBS were offered and purchased.  They also argued that the extender statutes cover only state common law claims, not statutory claims such as those arising from the Securities Act.

The Tenth Circuit explained the distinction between statutes of limitations and statutes of repose by noting that, although statutes of limitations begin running when an injury is discovered or reasonably should have been discovered, statutes of repose are fixed cutoff dates usually independent of variables such as a plaintiff’s awareness of a violation.  Furthermore, although statutes of limitation may be tolled for equitable reasons, repose periods generally cannot be. 

The Tenth Circuit concluded, based on an analysis of the language used in the extender statutes as well as how certain terms are used in other legislation and in case law, that the extender statutes apply to statutes of repose as well as statutes of limitations.  The court also held that the extender statutes apply to statutory as well as common law claims.  As a result, the court ruled that the extender statutes permit the NCUA to bring the suits.

Although the ruling technically applies only to the extender statute applicable to the NCUA, a similar analysis would seem to hold for the extender statute included in FIRREA applicable to the Federal Deposit Insurance Corporation, which, the Tenth Circuit noted, uses identical language.  The court’s opinion also notes, in a footnote, that other courts have construed “materially similar” extender statutes to find that they cover federal and state statutory claims.

NCUA v. Nomura Home Equity Loan, Case Nos. 12-3295 and 12-3298 (Tenth Cir. Aug. 27, 2013).