National Credit Union Administration Board v. Morgan Stanley & Co., Inc. et al

Filing 203

ORDER denying 163 Motion for Reconsideration re 54 Memorandum & Opinion; denying 163 Motion for Certificate of Appealability; denying 163 Motion to Stay. (Signed by Judge Denise Cote on 9/30/14) (SR)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
------------------------------------------X
:
NATIONAL CREDIT UNION ADMINISTRATION
:
BOARD, as Liquidating Agent of
:
Southwest Corporate Federal Credit
:
Union and Members United Corporate
:
Federal Credit Union,
:
:
Plaintiff,
:
-v:
:
MORGAN STANLEY & CO., INC. and MORGAN
:
STANLEY CAPITAL I INC.,
:
:
Defendants.
:
:
------------------------------------------X

13cv6705 (DLC)
OPINION & ORDER

USDC SDNY
DOCUMENT
ELECTRONICALLY FILED
DOC #: _________________
DATE FILED: ______________
9/30/14
9/30/

APPEARANCES:
For Plaintiff:
David C. Fredrick, Wan J. Kim, Gregory G. Rapawy, Andrew C.
Shen, and Daniel V. Dorris
KELLOGG, HUBER, HANSEN, TODD, EVANS & FIGEL, P.L.L.C.
Sumner Square, 1615 M Street, N.W., Suite 400
Washington, DC 20036
Erik Haas, Peter W. Tomlinson, Philip R. Forlenza, and Henry J.
Ricardo
PATERSON BELKNAP WEBB & TYLER LLP
1133 Avenue of the Americas
New York, NY 10036
George A. Zelcs
KOREIN TILLERY LLC
205 North Michigan Avenue, Suite 1950
Chicago, IL 60601
Stephen M. Tillery, Greg G. Gutzler, and Robert L. King
KOREIN TILLERY LLC
505 North Seventh Street, Suite 3600
St. Louis, MO 63101
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For Defendants:
James P. Rouhandeh, Paul S. Mishkin, Daniel J. Schwartz, Jane M.
Morril, and Scott Wilcox
DAVIS POLK & WARDWELL LLP
450 Lexington Avenue
New York, NY 10017
DENISE COTE, District Judge:
On July 11, 2014, defendants Morgan Stanley & Co., Inc. and
Morgan Stanley Capital I Inc. (collectively, “Morgan Stanley”)
filed a motion for reconsideration of the decision in NCUA v.
Morgan Stanley & Co. (“Morgan Stanley I”), No. 13cv6705 (DLC),
2014 WL 241739 (S.D.N.Y. Jan. 22, 2014), denying Morgan
Stanley’s motion to dismiss state law claims brought by
plaintiff National Credit Union Administration Board (“NCUA”),
or for certification of an interlocutory appeal.
fully submitted on August 1, 2014.

The motion was

For the reasons that follow,

the motion is denied.
Background
This action is one of a set of coordinated actions brought
by NCUA in this District, the District of Kansas, and the
Central District of California against banks.

See NCUA v.

Morgan Stanley & Co., No. 13cv6705 (DLC), 2014 WL 1673351, at *1
& n.1 (S.D.N.Y. Apr. 28, 2014), reconsideration denied in part,
No. 13cv6705 (DLC), 2014 WL 1909499 (S.D.N.Y. May 13, 2014).
This motion raises issues that have been previously addressed by
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this and other Courts.

Accordingly, some background is in

order.
These actions plead violations of the Securities Act of
1933 and state blue sky laws.

Similar cases have also been

brought against many of the same defendants by the Federal
Housing Finance Agency (“FHFA”).

As a result, the issues raised

by this motion have been previously addressed not only in Morgan
Stanley I, but also in this Court’s 2012 decision in FHFA v. UBS
Americas, Inc. (“UBS I”), 858 F. Supp. 2d 306 (S.D.N.Y. 2012),
motion to certify appeal granted (June 19, 2012), aff'd, 712
F.3d 136 (2d Cir. 2013).

UBS I addressed the FHFA Extender

Statute, 12 U.S.C. § 4617(b)(12), which empowers FHFA to bring
claims as the conservator for the Government Sponsored
Enterprises Fannie Mae and Freddie Mac.

UBS I held that the

FHFA Extender Statute preempts both statutes of limitations and
statutes of repose.

The Court of Appeals affirmed that decision

in FHFA v. UBS Americas Inc. (“UBS II”), 712 F.3d 136 (2d Cir.
2013).

As part of the NCUA litigation pending in the District

of Kansas, the Tenth Circuit in NCUA v. Nomura Home Equity Loan,
Inc. (“Nomura I”), 727 F.3d 1246 (10th Cir. 2013), relying in
part on the Second Circuit’s decision in UBS II, held that the
virtually indistinguishable NCUA Extender Statute, 12 U.S.C.
§ 1787(b)(14), preempts both statutes of limitations and
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statutes of repose.
On January 22, 2014, relying on UBS II and citing Nomura I,
this Court in Morgan Stanley I denied Morgan Stanley’s motion to
dismiss NCUA’s claims under the Illinois and Texas Blue Sky
Laws, concluding that the NCUA Extender Statute preempts both
states’ statutes of repose and Illinois’s six-month notice
requirement.

In the instant motion, Morgan Stanley argues that

neither Morgan Stanley I nor UBS II can stand in light of the
Supreme Court’s recent decision in CTS Corp. v. Waldburger, 134
S. Ct. 2175 (2014).

There the Court held that a provision in

the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980 (the “CERCLA Statute”), 42 U.S.C. § 9658,
does not preempt state statutes of repose.

Id. at 2189.

In August, the Tenth Circuit considered whether CTS
required it to alter its conclusion about the NCUA Extender
Statute.

In NCUA v. Nomura Home Equity Loan, Inc. (“Nomura

II”), No. 12-3295, 2014 WL 4069137 (10th Cir. Aug. 19, 2014),
the Tenth Circuit reinstated its original opinion, concluding
that it was not altered by CTS.
Also after CTS, defendants in one of the FHFA cases pending
before this Court filed motions for summary judgment, arguing
that, in light of CTS, the Second Circuit’s decision in UBS II
no longer binds this Court.

Relying in part on the Tenth
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Circuit’s reasoning in Nomura II reinstating its original
opinion, this Court denied those motions and their accompanying
requests for certification of the issue for interlocutory
appeal.

FHFA v. HSBC N. Am. Holdings Inc. (“HSBC”), No.

11cv6189 (DLC), 2014 WL 4276420 (S.D.N.Y. Aug. 28, 2014).

As

explained in Nomura II, the text and structure of the CERCLA
Statute “are fundamentally different” from the extender statutes
invoked by FHFA and NCUA.

Id. at *3.

Discussion
Morgan Stanley makes three arguments.

First, it argues

that CTS demonstrates that the NCUA Extender Statute does not
preempt statutes of repose.

This argument is rejected for the

reasons set forth both in the Tenth Circuit’s decision in Nomura
II reinstating its original opinion and in this Court’s decision
in HSBC.
Second, Morgan Stanley argues that CTS demonstrates that
the NCUA Extender Statute does not impliedly preempt Illinois’s
six-month notice provision.

The Illinois notice provision is

not a statute of repose, and thus is only obliquely affected by
CTS.

It is, instead, akin to a condition precedent.

Stanley I, 2014 WL 241739, at *9.

Morgan

In CTS the Court found no

implicit preemption because it declined to frame the purpose of
the CERCLA Statute at the high level of generality urged by
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respondents -- namely, “to help plaintiffs bring tort actions
for harm caused by toxic contaminants.”

134 S. Ct. at 2188.

This refusal to cast statutory purpose at a high level of
generality has no impact here.

Applying the doctrine of

obstacle preemption, Morgan Stanley I concluded that the NCUA
Extender Statute impliedly preempts Illinois’s six-month notice
provision, resting on the specific finding that “Congress has
decided that the NCUA shall be given three years from the
commencement of a conservatorship to decide what claims to
pursue on behalf of the financially distressed credit union over
which it has just been given control.”

2014 WL 241739, at *10. 1

Third, Morgan Stanley argues that the question of CTS’s
impact on the NCUA Extender Statute’s preemptive effect should
be certified to the Second Circuit.

For certification to be

appropriate, there must exist, among other things, “a
controlling question of law as to which there is substantial
ground for difference of opinion.”

28 U.S.C. § 1292(b).

For

the reasons set forth both in the Tenth Circuit’s decision in
Nomura II reinstating its original opinion and in this Court’s
Morgan Stanley I noted that the NCUA Extender Statute could not
resuscitate time-barred claims, and invited an early summary
judgment motion to construe the application of the Illinois
notice statute to a claim of material misrepresentation in
offering documents for registered securities. Id. at *11. The
parties have not yet brought such a motion.
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decision in HSBC, CTS disturbs neither the Second Circuit’s
decision in UBS II nor this Court’s decision relying on UBS II
in Morgan Stanley I.

Accordingly, there is no “substantial

ground for difference of opinion.”

28 U.S.C. § 1292(b).

To suggest that there is a ground for difference of
opinion, Morgan Stanley cites decisions in both this District,
FDIC v. Chase Mortgage Fin. Corp., No. 12cv6166 (LLS), 2014 WL
4354671 (S.D.N.Y. Sept. 2, 2014), and the Western District of
Texas, FDIC v. Merrill Lynch, Pierce, Fenner & Smith Inc., No.
A-14-CA-126-SS, 2014 WL 4161561 (W.D. Tex. Aug. 18, 2014); FDIC
v. Goldman, Sachs & Co., No. A-14-CA-129-SS, 2014 WL 4161567
(W.D. Tex. Aug. 18, 2014), holding that, in light of CTS, the
FDIC Extender Statute, 12 U.S.C. § 1821(d)(14), does not preempt
state statutes of repose.

Respectfully, these district court

decisions do not alter this Court’s conclusion that
certification is unwarranted.

For instance, the recent decision

in this District does not cite Nomura I or Nomura II, nor does
it grapple with the Tenth Circuit’s detailed exegesis of the
history of the statutes at issue here and the material
distinctions that exist between the CERCLA Statute’s language
construed in CTS and the several extender statutes that have
created limitations periods for identified federal agencies to
file claims.
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Moreover, certification of this issue would not materially
advance this litigation.

This case is one of a suite of seven

cases pending before this Court and one of fourteen coordinated
actions pending in three districts.

Where certification would

advance the resolution of complex litigation, this Court has not
hesitated to grant certification over the opposition of a
plaintiff.

See UBS I, 858 F. Supp. 2d at 341.

But the most

efficient way to advance the ultimate termination of this
litigation, 28 U.S.C. § 1292(b), is to complete discovery and
motion practice and to set these cases down for trial.

Two

Circuits have already addressed the statute of limitations
issues pressed in this motion, and a further interlocutory
appeal is not warranted.
CONCLUSION
Morgan Stanley’s July 11, 2014 motion for either
reconsideration or certification of an interlocutory appeal is
denied.
SO ORDERED.
Dated:

New York, New York
September 30, 2014
____________________________
DENISE COTE
United States District Judge
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