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

Filing 128

MEMORANDUM AND ORDER granting 115 Motion to Certify. The court shall certify for appeal the issues of whether the extender statute descibed in the court's order dated 7/25/12 applies to the 3-year time limitation (statute of repose) contained in § 77m and whether the extender statute applies to federal and state statutory claims. Signed by District Judge Richard D. Rogers on 9/19/2012. (meh)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS

NATIONAL CREDIT UNION
ADMINISTRATION BOARD,
Plaintiff,
vs.

Case No. 11-2340-RDR

RBS SECURITIES, INC., et al.,
Defendants.
NATIONAL CREDIT UNION
ADMINISTRATION BOARD,
vs.

Case No. 11-2649-JAR

WACHOVIA CAPITAL MARKETS, LLC,
Defendant.
MEMORANDUM AND ORDER
These consolidated cases are before the court upon the motion
of defendant Nomura Home Equity Loan, Inc. (“Nomura”) to certify an
interlocutory appeal pursuant to 28 U.S.C. § 1292(b).
115.

Doc. No.

This motion is joined in by five of the ten defendants listed

in the amended complaint in Case No. 11-2340:

NovaStar Mortgage

Funding Corporation, Financial Asset Securities Corporation, RBS
Securities, Inc., Greenwich Capital Acceptance, Inc., and Wachovia
Mortgage Loan Trust, LLC.

Defendant Wachovia Capital Markets, LLC

has also joined in the motion for purposes of Case No. 11-2649.
Defendants seek to appeal this court’s July 25, 2012 order which
granted in part and denied in part defendants’ motions to dismiss

in both cases.

Doc. No. 112.

Background
These cases allege violations of federal and state securities
statutes

in

connection

with

the

underwriting

residential mortgage-backed securities.
certificates
securities

involved

in

certificates

Case

No.

involved

in

and

sale

of

There are 29 securities

11-2340.
Case

There

No.

are

11-2649.

five
The

certificates were purchased by two large corporate credit unions
which subsequently failed.
Plaintiff in both cases is acting as a liquidating agent of
the credit unions.

The motions to dismiss decided by the court

were filed on behalf of most of the defendants in Case No. 11-2340
and by the only defendant in Case No. 11-2649.
several issues.

The motions raised

Among those issues was whether plaintiff’s claims

were timely filed.

Defendants argued in part that plaintiff’s

claims under § 11 and § 12(a)(2) of the Securities Act of 1933, 15
U.S.C. §§ 77k and 77l(a)(2), are barred by the statute of repose
provisions contained in § 13 of the Securities Act, 15 U.S.C. §
77m.

Section 13 states that in no event shall a § 11 claim be

brought more than three years after the security is offered to the
public and that a § 12(a)(2) claim may not be brought more than
three years after the sale of the security.
It is undisputed that the certificates at issue were offered
and sold more than three years before these cases were filed. But,

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plaintiff has asserted that its claims are timely filed because the
three-year time limit set forth in the Securities Act is extended
by the provisions of 12 U.S.C. § 1787(b)(14)(A) (the “extender
statute”) which allows plaintiff additional time from the date it
is appointed as liquidator to bring claims in that capacity.
Plaintiff has also claimed that the running of the relevant filing
periods as to some, but not all, of the certificates was tolled
under the American Pipe doctrine.

Defendants argued in their

motions to dismiss that the extender statute does not apply to the
three-year statute of repose provisions in § 13.

Defendants also

argued that the extender statute does not apply to federal and
state statutory claims; rather, just state contract and tort
claims.
The court ruled that the extender statute applied to the
three-year repose period set forth in § 13 and that the extender
statute applied to federal and state statutory claims.

These

rulings made it unnecessary for the court to decide any issue
regarding the application of the American Pipe doctrine.
Pursuant to 28 U.S.C. § 1292(b), defendants wish to proceed
with an interlocutory appeal of the court’s rulings regarding the
application of the extender statute.

Specifically, defendants ask

that the court certify an appeal of its rulings that the extender
statute applies to a statute of repose and that the extender
statute applies to statutory causes of action.

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Defendant Nomura

wishes to appeal the issue of whether the extender statute applies
to a federal statutory cause of action. Defendant RBS has asked to
appeal whether the extender statute applies to federal and state
statutory claims.
As stated, Case No. 11-2340 involves the purchase of 29
mortgage-backed security certificates.

Case No. 11-2649 involves

5 mortgage-backed security certificates.

There are state and

federal statutory claims against one defendant (RBS Securities,
Inc.) in Case No. 11-2340, and the remaining defendants have only
federal statutory claims against them.

The single defendant in

Case No. 11-2649 is defending against state and federal statutory
claims.

According to plaintiff’s response to the motion for

certification, state law claims involve 24 of the 29 certificates
in Case No. 11-2340 and 2 of the 5 certificates in Case No. 112649.

Plaintiff further contends under the American Pipe doctrine

that the federal claims involving 11 of the 29 certificates in Case
No. 11-2340 and 3 of the 5 certificates in Case No. 11-2649 are
timely, regardless of any decision on the matters suggested for
interlocutory appeal.
Relevant factors
Under § 1292(b), “[w]hen a district judge . . . shall be of
the opinion that [an] order involves a controlling question of law
as to which there is substantial ground for difference of opinion
and that an immediate appeal from the order may materially advance

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the ultimate termination of the litigation,” the court may so
certify and allow the Court of Appeals to exercise its discretion
as to whether to consider an interlocutory appeal.

So, the court

should focus upon three elements in determining whether to grant
defendants’ motion:

1) whether the order involves a controlling

question of law; 2) whether there is a substantial ground for
difference of opinion as to that question; and 3) whether an
immediate appeal to determine the issue may materially advance the
ultimate termination of the litigation.
Controlling question of law
Plaintiff

does

not

directly

dispute

that

the

questions

defendants seek to appeal involve controlling questions of law.
Plaintiff, however, does assert that an appellate decision would
not materially advance this litigation.

This is a related matter.

See In re 650 Fifth Avenue, 2012 WL 363118 *2 (S.D.N.Y. 2/2/2012);
Grimes v. Cirrus Industries, Inc., 2010 WL 2541664 *2 (W.D.Okla.
6/18/2010);

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Wright,

Miller

&

Cooper,

FEDERAL

PRACTICE

&

PROCEDURE § 3930 at p. 426 (1996) (suggesting that an issue is
controlling if interlocutory reversal might save time for the
district court and time and expense for the litigants).

The court

believes the issues defendants seek to appeal are controlling
questions of law because, as explained in more detail later in this
opinion, they control whether plaintiff may proceed with claims
involving

many

of

the

certificates

5

which

are

part

of

this

litigation.
Substantial ground for difference of opinion
The

court

believes

there

are

substantial

grounds

for

a

difference of opinion as to the issues defendants wish to certify
for appeal.

As defendant Nomura notes, the only other district

court to address the application of the same extender statute has
reached a different result than this court.

There is no circuit

court authority regarding this extender statute or any similar
extender statute in this situation.

A district court construing a

similar extender statute in a similar situation has certified its
ruling for an interlocutory appeal.

FHFA v. UBS Americas, Inc.,

2012 WL 1570856 *25-26 (S.D.N.Y. 6/19/2012).

Finally, while the

court rejected defendants’ arguments, the court did not find the
arguments to be implausible or without force.

See Rural Water

Dist. No. 4 v. City of Eudora, 2012 Wl 2339743 *10 (D.Kan.
6/19/2012) (finding “substantial ground for difference of opinion”
where

colorable

arguments

were

made

based

on

an

alternative

construction of the rules regarding retroactivity of statutes and
other matters).
Materially advance the ultimate termination of the litigation
Defendant Nomura states that “there are 12 defendants, more
than 30 securities and hundreds of millions of dollars at issue .
. . [g]iven the stakes and complexities of this case, discovery and
trial of this action will likely be protracted, burdensome and

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expensive.” Doc. No. 116, p. 14. Defendant Nomura further asserts
that

a

decision

upon

the

extender

statutes

issues

“could

significantly streamline the litigation and conserve the valuable
resources of the parties, the Court and the public.”

Id. at 15.

It is noted that a decision might also streamline the litigation in
NCUA Board v. J.P. Morgan Securities LLC, Case No. 11-2341-EFM,
which raises similar claims and issues.

The court would add NCUA

Board v. UBS Securities, LLC, Case No. 12-2591-KHV as another case
in this district which may have similar claims and issues, although
no motions have been filed in that case.
Plaintiff contends that these alleged streamlining benefits
are not real because plaintiff’s state law claims would continue
regardless of the rulings on appeal and that these claims involve
24 of the 29 certificates in Case No. 11-2340 and 2 of the 5
certificates in Case No. 11-2649.

Plaintiff further argues that

the state law claims in this litigation (which are not dependent
upon extender statute) distinguish these cases from the FHFA
opinion where the court certified an interlocutory appeal.

In

addition, as mentioned before, plaintiff asserts that it is the law
of the Tenth Circuit that the American Pipe doctrine tolls the
statute of repose in § 13 which would save plaintiff’s federal
claims as to 14 of the 34 certificates in the two consolidated
cases, regardless of an appellate decision upon the extender
statute issues.

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In reply, defendant Nomura argues that even with American Pipe
tolling, claims as to seven defendants would be dismissed if
defendants’ extender statute arguments prevail on appeal. Doc. No.
124, p. 10 n.4.

It should be noted that one of those defendants

has been dismissed (Saxon Asset Securities Co.), one has never
participated in this case (Lares Asset Securitization, Inc.), one
is subject to a bankruptcy stay (Residential Funding Mortgage
Securities II, Inc.), and one was dismissed by this court on the
basis of other statute of limitations arguments (Fremont Mortgage
Securities Corporation).

Of course, Fremont’s dismissal may be

subject to appeal.
After consideration of the authorities cited by all of the
parties, the court finds that an appeal of the issues pressed by
defendants may materially advance the ultimate termination of what
appears to be expensive and complex litigation. Depending upon the
decision of the extender statute issues, seven defendants, three of
whom are actively participating in this case, may be dismissed or
have additional grounds for dismissal which might negate an appeal.
Federal claims involving a majority of the certificates in these
cases may be dismissed, and there would be no claims remaining as
to

8

of

the

34

certificates

defendants prevail on appeal.

involved

in

this

litigation

if

As in FHFA v. UBS Americas, Inc.,

2012 WL 1570856 at * 28, a decision by the Tenth Circuit upon the
extender statute issues described herein might significantly narrow

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the scope of discovery and the proof that the parties would present
at trial.

The decision may also shorten proceedings in other

litigation filed in this district.
Conclusion
To summarize and conclude, the court finds after considering
the factors set out in § 1292(b) that it is appropriate to certify
an appeal of the extender statute issues set forth in defendant
Nomura’s motion to certify.

As noted, defendant RBS has asked in

cursory fashion that the court certify for appeal the question of
whether the extender statute applies to state statutory claims.
The court believes this would serve efficiency and economy and
notes that the Tenth Circuit, if it accepts the appeal, will have
the discretion to decide any issue reasonably bound up in the
court’s July 25, 2012 order.

See Yamaha Motor Corp. v. Calhoun,

516 U.S. 199, 205 (1996); 16 Wright, Miller & Cooper, FEDERAL
PRACTICE & PROCEDURE § 3929 at 388 (1996).

So, the court shall

certify that issue for appeal as well.
The motion to certify by Nomura as joined by the other
defendants shall be granted.

The court shall certify for appeal

the issues of whether the extender statute described in the court’s
order dated July 25, 2012 applies to the three-year time limitation
(statute of repose) contained in § 77m and whether the extender
statute applies to federal and state statutory claims.
IT IS SO ORDERED.

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Dated this 19th day of September, 2012 at Topeka, Kansas.
s/Richard D. Rogers
United States District Judge

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