National Credit Union Administration Board v. JP Morgan Chase Bank, N.A. et al

Filing 61

MEMORANDUM AND ORDER - The 19 Defendants' Motion to Dismiss is granted in part and denied in part, and various claims are hereby dismissed as set forth in this order. Signed by District Judge John W. Lungstrum on 9/3/2013. (ses)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS

NATIONAL CREDIT UNION
ADMINISTRATION BOARD,

)
)
)
Plaintiff,
)
)
v.
)
)
JPMORGAN CHASE BANK, N.A.,
)
as Successor-in-Interest to
)
Washington Mutual Bank, WaMu Capital
)
Corp., Long Beach Securities Corp., and
)
WaMu Asset Acceptance Corp.;
)
WAMU CAPITAL CORP.;
)
LONG BEACH SECURITIES CORP.; and
)
WAMU ASSET ACCEPTANCE CORP.,
)
)
Defendants.
)
)
_______________________________________)

Case No. 13-2012-JWL

MEMORANDUM AND ORDER
This matter is presently before the Court on defendants’ motion to dismiss (Doc.
# 19).

The Court concludes that certain of plaintiff’s claims are time-barred.

Accordingly, the motion is granted in part and denied in part, as set forth more
specifically herein.

I.

Background

Plaintiff National Credit Union Administration Board brings this suit as
conservator and liquidating agent of the following three credit unions: U.S. Central

Federal Credit Union (“U.S. Central”), Western Corporate Federal Credit Union
(“WesCorp”), and Southwest Corporate Federal Credit Union (“Southwest”). The suit
relates to 49 different residential mortgage-backed securities (“RMBS” or “certificates”),
each purchased by one of the credit unions between March 2006 and June 2007. By the
present suit, filed on January 14, 2013, plaintiff brings claims under the federal
Securities Act of 1933 and under California, Kansas, and Texas statutes, based on
alleged untrue statements or omissions of material facts relating to each RMBS.
Defendant WaMu Capital Corp. was the underwriter or seller for the certificates, while
defendants Long Beach Securities Corp. and WaMu Asset Acceptance Corp. issued the
certificates. Plaintiff has also brought its claims against defendant JPMorgan Chase
Bank, N.A. (“JPMC”) as successor-in-interest to those defendants and as successor-ininterest to non-party Washington Mutual Bank (“WaMu Bank”), which plaintiff alleges
became liable to the credit unions as a “control person” under the Securities Act.
Defendants have moved to dismiss all claims.
Plaintiff has brought eight other similar suits, involving different certificates, in
this district, which cases have been re-assigned to the undersigned judge. In one of those
actions, Case No. 12-2648, by Memorandum and Order dated April 8, 2013, the Court
granted in part and denied in part the motion to dismiss filed by the Credit Suisse
defendants (“Credit Suisse”). See National Credit Union Admin. Bd. v. Credit Suisse
Sec. (USA) LLC, __ F. Supp. 2d __, 2013 WL 1411769 (D. Kan. Apr. 8, 2013) (“Credit
Suisse”). In that opinion, the Court held as follows: (1) Credit Suisse did not show that
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the Court lacked venue over plaintiff’s claims asserted on behalf of credit unions
WesCorp and Southwest; (2) plaintiff’s claims were not untimely as a matter of law with
respect to the applicable one- and two-year discovery limitations periods; (3) the socalled Extender Statute, 12 U.S.C. § 1787(b)(14), which provides the limitations period
for claims brought by plaintiff as conservator or liquidator, applies to federal and
statutory claims; (4) the Extender Statute displaces both limitations periods in the
otherwise-applicable federal (Section 13, 15 U.S.C. § 77m) and state statutes; (5)
plaintiff’s three-year limitations period under the Extender Statute was triggered by
plaintiff’s appointment as conservator for a credit union, not by its later appointment as
liquidator; (6) the Extender Statute’s three-year limitations period may not be extended
by a tolling agreement; (7) plaintiff’s assertion of American Pipe tolling with respect to
its federal claims based on some certificates did not fail as a matter of law at this stage;
and (8) plaintiff’s substantive allegations were sufficient to state plausible and
cognizable claims against Credit Suisse. In some of its rulings, the Court followed the
reasoning of Judge Rogers in ruling on a motion to dismiss in another of these nine
similar cases (before the case was reassigned). See id. (citing National Credit Union
Admin. Bd. v. RBS Sec., Inc., 900 F. Supp. 2d 1222 (D. Kan. 2012) (“RBS”)). Last week,
in an interlocutory appeal in RBS, the Tenth Circuit affirmed Judge Rogers with respect
to two of the issues listed above, holding that the Extender Statute does apply to federal
and statutory claims and does displace Section 13’s three-year limitations period. See
National Credit Union Admin. Bd. v. Nomura Home Equity Loan, Inc., __ F.3d __, 2013
3

WL 4516997 (10th Cir. Aug. 27, 2013).
After issuing its opinion in Credit Suisse, the Court invited the parties in seven
of the other similar cases (one case had not yet been filed) to submit briefs addressing
(a) the application of the Court’s rulings in Credit Suisse to the motions to dismiss filed
by the defendants in those cases and (b) the specific issue of the enforceability of
plaintiff’s tolling agreements.

II.

Analysis
A.

Exhaustion of Claims Against JPMC

In the initial briefing on defendants’ motion to dismiss, defendant JPMC moved
to dismiss all claims against it as successor-in-interest to WaMu Bank and the other
defendants on the basis that plaintiff did not exhaust its administrative remedies by filing
its claims with the Federal Deposit Insurance Corporation (“FDIC”) pursuant to the
Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (“FIRREA”), 12
U.S.C. § 1821(d)(3)-(13). JPMC again asserted this basis for dismissal in defendants’
supplemental briefs.
In its complaint, plaintiff has alleged as follows: On September 25, 2008, the
United States Office of Thrift Supervision (“OTS”) closed WaMu Bank and named the
FDIC as receiver. Subsequently, the FDIC entered into a Purchase and Assumption
Agreement (“the PAA”) with JPMC, under which JPMC agreed to purchase substantially
all of WaMu Bank’s assets (including its subsidiaries, which included the other
4

defendants) and to assume substantially all of WaMu Bank’s liabilities, including
liability for the claims asserted in this case.1
FIRREA establishes administrative procedures for bringing claims against
institutions for which the FDIC is acting as receiver. If the FDIC disallows a claim, the
claimant may pursue an administrative appeal or commence a lawsuit; if the claimant
does neither, “such disallowance shall be final, and the claimant shall have no further
rights or remedies with respect to such claim.” See id. § 1821(d)(6)(B). Subject to that
exception, FIRREA deprives courts of jurisdiction over the following:
(i)
any claim or action for payment from, or any action seeking a
determination of rights with respect to, the assets of any depository
institution for which the Corporation [FDIC] has been appointed receiver,
including assets which the Corporation may acquire from itself as such
receiver; or
(ii)
any claim relating to any act or omission of such institution or the
Corporation as receiver.
See id. § 1821(d)(13)(D).
JPMC argues that because plaintiff has asserted claims based on acts and
omissions of WaMu Bank, for which the FDIC was appointed receiver, and plaintiff
failed to present those claims to the FDIC pursuant to FIRREA, this Court has no
jurisdiction over those claims pursuant to Section 1821(d)(13)(D)(ii). In support of that
argument, JPMC cites a number of cases in which courts, including federal circuit courts

1

JPMC does not concede the truth of these allegations, but it does not contest
them for purposes of this motion.
5

of appeal, seemingly applied this exhaustion requirement in suits against institutions that
succeeded failed institutions under agreements with the FDIC as receiver—including
claims against JPMC itself as successor to WaMu Bank. See Acosto-Ramirez v. Banco
Popular de Puerto Rico, 712 F.3d 14, 20-21 (1st Cir. 2013); Farnik v. FDIC, 707 F.3d
717, 722-24 (7th Cir. 2013); Tellado v. IndyMac Mtge. Servs., 707 F.3d 275, 280 (3d Cir.
2013); Benson v. JPMorgan Chase Bank, N.A., 673 F.3d 1207, 1212-15 (9th Cir. 2012)
(involving JPMC as successor to WaMu Bank); American Nat’l Ins. Co. v. FDIC, 642
F.3d 1137, 1141-44 (D.C. Cir. 2011) (involving JPMC as successor to WaMu Bank);
Village of Oakwood v. State Bank & Trust Co., 539 F.3d 373, 384-86 (6th Cir. 2008).
Plaintiff argues that it was not required to exhaust any administrative remedy by
submitting to the FDIC its claim against JPMC as successor to WaMu Bank. Plaintiff
relies on FHFA v. JPMorgan Chase & Co., 902 F. Supp. 2d 476 (S.D.N.Y. 2012), in
which the court rejected this same argument involving the same successor (JPMC) and
failed institution (WaMu Bank). The FHFA court began by noting that although Section
1821(d)(13)(D)(ii), in barring “any claim relating to any act or omission of such
institution or the Corporation as receiver,” appears strikingly broad, the Second Circuit
had interpreted “claim” in that provision to mean “only claims that could have been
brought under the administrative procedures of § 1821(d).” See id. at 501 (quoting Bank
of N.Y. v. First Millenium, Inc., 607 F.3d 905, 921 (2d Cir. 2010)); see also Bank of N.Y.,
607 F.3d at 921 (following interpretation of D.C. and Third Circuits). Then, after noting
that JPMC did not directly contest the allegations that it had assumed WaMu Bank’s
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liabilities relating to the RMBS certificates at issue in the case, the FHFA court reasoned
as follows:
Thus, for purposes of this motion, there is no dispute that
JPMorgan is a proper defendant with respect to FHFA’s WaMu-related
claims. In insisting that FHFA was required to exhaust FIRREA’s
administrative procedures before filing suit, however, the JPMorgan
defendants have failed to explain how the Agency’s claims against them
“could be brought” through that procedure. Indeed, as FIRREA’s judicial
review provision suggests, the administrative procedures were designed
to permit a claimant to “seek[] a determination of rights with respect to,
the assets of any depository institution for which the Corporation has been
appointed receiver.” But the assets—and liabilities—at issue here have
passed, by operation of the PAA, to JPMorgan, and FIRREA’s claims
procedure includes no provision for impleading the purchaser of a failed
bank’s assets and liabilities. Thus, the claims that FHFA asserts here
could not be brought under the administrative procedures of § 1821(d),
making FIRREA’s exhaustion requirement inapplicable. Bank of New
York, 607 F.3d at 921.
See FHFA, 902 F. Supp. 2d at 502 (emphasis in original) (footnote omitted).
The same reasoning, which the Court finds persuasive, would apply in the present
case. JPMC allegedly assumed these particular liabilities from the FDIC; thus, plaintiff’s
assertion of these claims against JPMC instead of the FDIC as receiver must be
considered proper at this stage. Moreover, like the Second Circuit, the Tenth Circuit has
interpreted the “claims” barred by Section 1821(d)(13)(D) “to parallel those
contemplated under FIRREA’s administrative claims process laid out in the greater part
of § 1821(d).” See Homeland Stores, Inc. v. RTC, 17 F.3d 1269, 1274 (10th Cir. 1994).
Indeed, the Tenth Circuit noted that because the “claims” at issue in that case were not
contemplated under FIRREA’s administrative process, if the claims were nonetheless

7

barred by Section 1821(d)(13)(D), the plaintiff there “would have neither an
administrative nor a judicial forum for the claims,” which outcome would raise
constitutional problems. See id. at 1274 n.5 (citing Coint Independence Joint Venture
v. FSLIC, 489 U.S. 561, 579 (1989)). Thus, the Court is persuaded that the Tenth Circuit
would not require exhaustion in this case unless plaintiff could have pursued its claims
against JPMC as successor within the FIRREA administrative process. As the FHFA
court pointed out, that process does not appear to allow for such claims against a party
that has assumed the liability from the FDIC. Moreover, in none of its three briefs
submitted since plaintiff cited FHFA on this point has JPMC addressed this issue and
explained how plaintiff could have pursued these claims administratively.2 Accordingly,
under the reasoning of FHFA, plaintiff was not required to exhaust these claims pursuant
to FIRREA’s administrative process.
This conclusion is not necessarily inconsistent with most of the circuit court
decisions cited above. As the FHFA court pointed out, see FHFA, 902 F. Supp. 2d at
502, in Village of Oakwood, although the plaintiff brought suit only against the successor
institution, those claims were based on alleged acts and omissions by the FDIC as

2

JPMC’s only response to FHFA has been that “that decision was based entirely
on the court’s incorrect assumption the JPMC had ‘assumed WaMu Bank’s liabilities
with respect to the securitizations at issue.’” Although JPMC has emphasized in both this
case and in its FHFA litigation that it has not conceded such an assumption of liabilities,
it has not directly contested that allegation, which therefore must be credited at this stage
of the litigation. Thus, JPMC has failed to distinguish FHFA or explain why that case
was wrongly decided.
8

receiver, see Village of Oakwood, 539 F.3d at 386; thus, it is understandable that the
Sixth Circuit required the plaintiff to have pursued those claims against the FDIC
administratively. Similarly, in Farnik and Acosto-Ramirez, the Seventh Circuit and the
First Circuit each relied on the fact that the defendant successor in its case had not
assumed the particular liabilities from the FDIC; thus, each held that the plaintiff’s
claims were more properly against the FDIC and thus should have been asserted pursuant
to the administrative process. See Acosto-Ramirez, 712 F.3d at 18-21; Farnik, 707 F.3d
at 723-24. In the present case, plaintiff has not alleged wrongdoing by the FDIC as
receiver, and plaintiff has alleged that JPMC assumed these liabilities from the FDIC.
Thus, there is no basis to argue here that plaintiff’s claims are essentially claims against
the FDIC that could have been pursued within the administrative process.
In American National Insurance, the D.C. Circuit reversed the district court’s
dismissal of claims against JPMC for lack of exhaustion. See 642 F.3d 1137. As the
Tenth Circuit has done, the court held that “claim” in Section 1821(d)(13)(D)’s
jurisdictional bar “is a term-of-art that encompasses only demands that are resolvable
through the administrative process set out by FIRREA.” See id. at 1142. The court then
held that because the plaintiff in that case had alleged wrongdoing by JPMC (and not by
the FDIC or WaMu Bank), the plaintiff could not have brought its claims
administratively and thus no exhaustion was required. See id. at 1142-43. The court
rejected JPMC’s argument that the broad language in Section 1821(d)(13)(D) indicated
that the claims against it could have gone through the administrative process. See id. at
9

1143. In this way, the D.C. Circuit did distinguish claims involving wrongdoing by the
new institution from claims for which the FDIC or the failed institution might be legally
responsible. See id. It did not comment, however, on this question whether claims
against the successor institution based on wrongdoing by the failed institution must be
exhausted, and under its interpretation of “claims”, that court would only require such
exhaustion if the claims could have been brought administratively.
In Tellado, the Third Circuit held that the plaintiff’s claims against the successor
institution based on wrongdoing of the failed institution were jurisdictionally barred
under Section 1821(d)(13)(D) because of a lack of exhaustion. See Tellado, 707 F.3d
at 280. The court did not address, however, this question of how the plaintiff could have
pursued its claims administratively—even though the Third Circuit had previously
concluded that the “claims” barred by Section 1821(d)(13)(D) must coincide with those
that may be filed under the administrative procedures in Section 1821(d). See Hudson
United Bank v. Chase Manhattan Bank of Conn., N.A., 43 F.3d 843, 848-49 (3d Cir.
1994). Thus, Tellado is not persuasive on the question whether exhaustion was required
in this case.
Benson provides JPMC with its strongest support in the caselaw. In that case, the
Ninth Circuit held that “FIRREA’s jurisdictional bar applies to claims asserted against
a purchasing bank when the claim is based on the conduct of the failed institution.” See
Benson, 673 F.3d at 1214. The Ninth Circuit did acknowledge its statement in a
previous case that FIRREA “bars judicial review of any non-exhausted claim, monetary
10

or nonmonetary, which is susceptible of resolution through the claims procedure.” See
id. at 1213 (citing Henderson v. Bank of New England, 986 F.2d 319, 321 (9th Cir.
1993). Thus it appears that the Ninth Circuit, like the Tenth Circuit, would require that
the particular claim be able to be addressed by the administrative process before the
exhaustion requirement would apply. The Benson court nonetheless applied the
jurisdictional bar, rejecting the plaintiffs’ argument as follows:
Although plaintiffs assert that their claims are not currently susceptible to
the claims process, plaintiffs give us no reason to believe that FIRREA
exhaustion would have been futile had they submitted them within the
appropriate time frame.
See id. Thus it appears that the Ninth Circuit has taken the contrary position to that taken
by the FHFA court on this issue of whether claims against the purchasing bank are
susceptible to the FIRREA claims process. In reaching its conclusion, however, the
Ninth Circuit conducted no analysis and failed to explain how FIRREA would have
permitted a claim against the purchasing institution. Nor has JPMC essayed such an
explanation. Thus, the Court is more persuaded by the FHFA court’s conclusion that
FIRREA’s claims process does not contemplate such a claim.
For these reasons, the Court concludes that because plaintiff’s claims against
JPMC are not susceptible to resolution pursuant to the FIRREA claims process, plaintiff
was not required to exhaust any administrative remedies before bringing these claims
against JPMC, and the jurisdictional bar of Section 1821(d)(13)(D) does not apply.
Accordingly, the Court denies JPMC’s motion to dismiss the claims against it for lack

11

of subject matter jurisdiction.
B.

Initial Application of Credit Suisse

The Court notes that defendants, in their supplemental briefing in support of their
motion to dismiss, have not renewed their arguments relating to the sufficiency of
plaintiff’s substantive allegations, the application of the discovery limitations periods,
the displacement of Section 13’s limitations periods by the Extender Statute, and the
application of the Extender Statute to statutory claims. Thus, defendants have not
distinguished the Court’s Credit Suisse rulings concerning those issues, and the Court
resolves the issues in plaintiff’s favor in this case as well, for the reasons stated in Credit
Suisse and as held by the Tenth Circuit in the appeal in RBS.
Nevertheless, defendants seek dismissal of some of plaintiff’s claims on behalf
of U.S. Central and WesCorp as time-barred pursuant to the three-year limitations period
imposed by the Extender Statute. Absent some form of tolling, plaintiff was required to
file those claims by March 20, 2012, three years after its appointment as conservator for
those credit unions. Plaintiff did not initiate this action, however, until January 14, 2013.
Nor may plaintiff rely on the Extender Statute’s alternative reference to the applicable
state-law limitations periods, as this case was filed more than five years (the applicable
repose period for all three states) after the purchases of these certificates.
Plaintiff has asserted tolling pursuant to an agreement executed by the parties, but
the Court has, by an opinion issued in the Credit Suisse case on July 10, 2013, reaffirmed
its ruling that plaintiff may not rely on such an agreement to avoid application of the
12

Extender Statute’s limitations period, and that ruling will also be applied in the present
case. Thus, with respect to certificates for which plaintiff has not asserted some other
form of tolling, plaintiff’s federal and state claims on behalf of U.S. Central and
WesCorp would be time-barred and subject to dismissal. Based on plaintiff’s complaint
and the parties’ supplemental submissions, such claims include those based on the
following certificates:
Purchaser

Issuing Entity

CUSIP

U.S. Central
U.S. Central
U.S. Central
U.S. Central
U.S. Central
U.S. Central
U.S. Central
U.S. Central
U.S. Central
U.S. Central
U.S. Central
WesCorp
WesCorp
WesCorp
WesCorp
WesCorp
WesCorp
WesCorp
WesCorp
WesCorp
WesCorp
WesCorp
WesCorp
WesCorp
WesCorp
WesCorp
WesCorp

LBMLT 2006-9
LBMLT 2006-9
LBMLT 2006-10
LBMLT 2006-10
LBMLT 2006-11
LUM 2007-1
WAMU 2007-HE4
WAMU 2007-HE4
WAMU 2007-OA2
WMABS 2006-HE5
WMALT 2006-AR8
INDX 2006-AR12
LUM 2007-1
LUM 2007-1
LUM 2007-1
WAMU 2007-OA2
WMALT 2006-AR2
WMALT 2006-AR3
WMALT 2006-AR4
WMALT 2006-AR4
WMALT 2006-AR5
WMALT 2006-AR5
WMALT 2006-AR6
WMALT 2006-AR7
WMALT 2006-AR9
WMALT 2006-AR9
WMALT 2007-OA1

54251WAD4
54251WAE2
54251YAD0
54251YAE8
542512AE8
55028CAA3
93363XAE3
93363XAD5
933635AA2
93934XAC7
93935LAB4
45661VAC0
55028CAA3
55028CAB1
55028CAE5
933635AD6
93934FMQ2
93934FQR6
939345AE4
939345AF1
93935AAH5
93935AAE2
93935FAE1
93935DAC0
939346AD4 (5/8/07)
939346AD4 (10/25/06)
93935NAC8

13

WesCorp

WMALT 2007-OA1

93935NAD6

Plaintiff has not disputed that, assuming the Court reaffirms and applies its prior rulings,
those claims would be subject to dismissal. Accordingly, defendants’ motion is granted
with respect to those claims based on the listed certificates, which claims are hereby
dismissed.
C.

Claims for Which American Pipe Tolling Has Been Asserted

Defendants also make several arguments for dismissal of claims on behalf of U.S.
Central and WesCorp for which plaintiff has asserted American Pipe tolling. In
particular, defendants argue (1) that American Pipe tolling should not apply to extend
the limitations periods set forth in the Extender Statute; (2) that American Pipe tolling
should not be permitted as asserted with respect to some certificates because the named
plaintiffs in the particular cited class actions asserted standing with respect to these
certificates only based on a common registration statement; and (3) that American Pipe
tolling should not apply with respect to plaintiff’s state-law claims. By Memorandum
and Order issued this same day in Bear Stearns, Case No. 12-2781, one of the similar
cases brought in this district, the Court has rejected these same arguments (raised in the
supplemental briefs submitted jointly by the Bear Stearns defendants and defendants
here). See Memorandum and Order of Sept. 3, 2013, NCUAB v. Bear Stearns & Co.,
Inc. (“Bear Stearns”), Case No. 12-2781-JWL. For the same reasons, the Court rejects
these arguments as asserted by defendants in this case.
Defendants also argue that American Pipe tolling should be deemed to have
14

ceased with respect to certain certificates based on the dismissal of certain claims in the
relevant consolidated class action. Defendants noted, however, that this argument
presupposes that American Pipe tolling does not apply to the Extender Statute’s
limitations periods. Thus, because the Court has ruled that such tolling does apply, it
need not address this argument by defendants.
Finally, Defendants argue that plaintiff has improperly asserted American Pipe
tolling with respect to one offering that was not actually involved in the cited class
action. Plaintiff concedes this point. Thus, no tolling applies to those claims on behalf
of U.S. Central and WesCorp, which include claims based on the following certificates:
Purchaser

Issuing Entity

CUSIP

U.S. Central
U.S. Central
WesCorp

WAMU 2007-OA1
WAMU 2007-OA1
WAMU 2007-OA1

92926WAB3
92926WAC1
92926WAC1

Accordingly, defendants’ motion is granted with respect to those claims based on the
listed certificates, which claims are hereby dismissed.

IT IS THEREFORE ORDERED BY THE COURT THAT defendants’ motion
to dismiss (Doc. # 19) is granted in part and denied in part, and various claims are
hereby dismissed as set forth herein.

IT IS SO ORDERED.

Dated this 3rd day of September, 2013, in Kansas City, Kansas.
15

s/ John W. Lungstrum
John W. Lungstrum
United States District Judge

16