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Federal Deposit Insurance Corp. v. First Horizon Asset Sec., Inc.

United States Court of Appeals, Second Circuit

May 19, 2016

FEDERAL DEPOSIT INSURANCE CORPORATION, as Receiver for Colonial Bank, Plaintiff-Appellant, -
v.
FIRST HORIZON ASSET SECURITIES, INC., FIRST HORIZON HOME LOAN CORPORATION, CREDIT SUISSE SECURITIES (USA) LLC, DEUTSCHE BANK SECURITIES INC., FTN FINANCIAL SECURITIES CORP., HSBC SECURITIES (USA) INC., RBS SECURITIES INC., UBS SECURITIES LLC, and WELLS FARGO ASSET SECURITIES CORPORATION, Defendants-Appellees, CHASE MORTGAGE FINANCE CORP., JP MORGAN CHASE & CO., JP MORGAN SECURITIES LLC, CITICORP MORTGAGE SECURITIES, INC., CITIMORTGAGE, INC., CITIGROUP GLOBAL MARKETS INC., ALLY SECURITIES LLC, and MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, Defendants

         Argued October 8, 2015

         Plaintiff-Appellant Federal Deposit Insurance Corporation (" FDIC" ) appeals from a decision of the United States District Court for the Southern District of New York (Louis L. Stanton, Judge) dismissing its complaint, which asserts claims under the Securities Act of 1933, as untimely. The FDIC brought this action within the limitations period provided by the FDIC Extender Statute, 12 U.S.C. § 1821(d)(14), but outside the Securities Act's three-year statute of repose. In Federal Housing Finance Agency v. UBS Americas Inc., 712 F.3d 136 (2d Cir. 2013), we held that a materially identical extender statute for actions brought by the Federal Housing Finance Agency displaced the Securities Act's statute of repose. We now further hold that the Supreme Court's decision in CTS Corp. v. Waldburger, 134 S.Ct. 2175, 189 L.Ed.2d 62 (2014), did not abrogate our holding in UBS, which remains good law. Accordingly, the FDIC's complaint was timely.

         JAMES SCOTT WATSON, Counsel (Colleen J. Boles, Assistant General Counsel, Kathryn R. Norcross, Senior Counsel, Jaclyn C. Taner, Counsel, on the brief), Federal Deposit Insurance Corporation, Arlington, Virginia, for Plaintiff-Appellant.

         ROBERT J. GIUFFRA, JR. (Bruce E. Clark, David B. Tulchin, Amanda Flug Davidoff, Jeffrey B. Wall, on the brief), Sullivan & Cromwell LLP, New York, New York, for Defendants-Appellees First Horizon Asset Securities, Inc., First Horizon Home Loan Corporation, FTN Financial Securities Corp., and UBS Securities, LLC.

         Richard W. Clary, Cravath, Swaine & Moore LLP, New York, New York, for Defendant-Appellee Credit Suisse Securities (USA) LLC.

         Thomas C. Rice, Andrew T. Frankel, Simpson Thacher & Bartlett LLP, New York, New York, for Defendants-Appellees Deutsche Bank Securities Inc. and RBS Securities Inc.

         Marc T.G. Dworsky, Munger, Tolles & Olson LLP, Los Angeles, California, for Defendant-Appellee Wells Fargo Asset Securities Corporation.

         Michael O. Ware, Mayer Brown LLP, New York, New York, for Defendant-Appellee HSBC Securities (USA) Inc.

         KATHLEEN M. SULLIVAN, Quinn Emanuel Urquhart & Sullivan, LLP, New York, New York (Philippe Z. Selendy, Adam M. Abensohn, Quinn Emanuel Urquhart & Sullivan, LLP, New York, New York, David C. Frederick, Wan J. Kim, Gregory G. Rapawy, Kellogg, Huber, Hansen, Todd, Evans & Figel, P.L.L.C., Washington, District of Columbia, on the brief), for Amici Curiae Federal Housing Finance Agency and National Credit Union Administration Board in Support of Plaintiff-Appellant.

         Michael J. Dell, Kramer Levin Naftalis & Frankel LLP, New York, New York, Ira D. Hammerman, Kevin Carroll, Securities Industry and Financial Markets Association, Washington, District of Columbia, Thomas Pinder, American Bankers Association, Washington, District of Columbia, for Amici Curiae Securities Industry and Financial Markets Association, The American Bankers Association, and The Clearing House LLC in Support of Appellees and Affirmance.

         William M. Jay, Goodwin Procter LLP, Washington, District of Columbia, Joshua M. Daniels, Goodwin Procter LLP, Boston, Massachusetts, for Amicus Curiae The Business Roundtable in Support of Defendants-Appellees.

         Before: PARKER, LYNCH, and CARNEY, Circuit Judges. Judge Parker dissents in a separate opinion.

          OPINION

Page 373

          Gerard E. Lynch, Circuit Judge

         Plaintiff-Appellant Federal Deposit Insurance Corporation (" FDIC" ) brought this action under the Securities Act of 1933 as receiver for Colonial Bank (" Colonial" ). Because the complaint was filed less than three years after the FDIC was appointed receiver, it was timely under the terms of

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the FDIC Extender Statute, which provides " the applicable statute of limitations with regard to any action brought by the [FDIC] as conservator or receiver." 12 U.S.C. § 1821(d)(14)(A). But because the complaint was filed more than three years after the securities at issue were offered to the public, it would be untimely under the terms of the Securities Act's statute of repose, 15 U.S.C. § 77m. Although they recognize that the FDIC Extender Statute displaces otherwise applicable statutes of limitations, the defendants argue that it does not displace the Securities Act's statute of repose, and that the complaint should be dismissed as untimely.

         We do not consider this argument on a blank slate. In Federal Housing Finance Agency v. UBS Americas Inc., 712 F.3d 136 (2d Cir. 2013), we held that a materially identical extender statute for actions brought by the Federal Housing Finance Authority (" FHFA" ) did displace the Securities Act's statute of repose. The defendants do not argue that the FDIC Extender Statute is in any way distinguishable from the one at issue in UBS; rather, they assert that our UBS holding was abrogated by the subsequent Supreme Court decision in CTS Corp. v. Waldburger, 134 S.Ct. 2175, 189 L.Ed.2d 62 (2014), which construed yet another, somewhat different federal limitations-extending provision -- 42 U.S.C. § 9658, enacted as an amendment to the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (" CERCLA" ) -- to preempt only state statutes of limitations, and not state statutes of repose. The district court agreed, and dismissed the complaint. We conclude, to the contrary, that UBS remains good law and that, under UBS, the FDIC's complaint was timely. Accordingly, the judgment of the district court is VACATED, and the case is REMANDED for further proceedings consistent with this opinion.

         BACKGROUND

         Between June 5 and October 19, 2007, Colonial, a federally insured bank headquartered in Montgomery, Alabama, invested approximately $300 million in nine residential mortgage-backed securities (" RMBS" ) issued or underwritten by the defendants. In a now-familiar turn of events, 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, but more than three years after the RMBS had been offered to the public -- the FDIC brought this action in the Southern District of New York, asserting claims under § § 11 and 15 of the Securities Act, which render several classes of persons liable for material misstatements or omissions in securities registration statements. 15 U.S.C. § § 77k, 77o. Specifically, the complaint alleges that prospectus supplements for the RMBS at issue misrepresented the loan-to-value ratios of the mortgage loans backing the RMBS, the occupancy status of the properties that secured the mortgage loans, and the underwriting standards used to originate those loans.

         The defendants moved to dismiss the complaint on several grounds, including that it was barred by the Securities Act's statute of repose, which, the defendants argued, was not displaced by the FDIC Extender Statute. While that motion was pending, this Court decided UBS. One of the issues in that case, which was brought by the FHFA and also involved claims under § § 11 and 15 of the Securities Act, was whether those claims' timeliness was governed by the Securities Act's statute of

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repose ore by the FHFA Extender Statute, 12 U.S.C. § 4617(b)(12). Examining the text and legislative history of the FHFA Extender Statute, we concluded that Congress intended for it to supplant " any other time limitations that otherwise might have applied." UBS, 712 F.3d at 143-44. We emphasized that the statute by its terms established " the applicable statute of limitations with regard to any action brought by [FHFA] as conservator or receiver." Id. at 141, quoting 12 U.S.C. § 4617(b)(12)(A) (emphasis and alteration in UBS). And we rejected the argument that the Extender Statute's use of the term " statute of limitations " meant that it left in place otherwise applicable statutes of repose, observing that Congress frequently uses the term " statute of limitations" to refer to what might more precisely be designated as statutes of repose. Id. at 143.

         The FHFA Extender Statute was modeled on, and is materially identical to, the FDIC Extender Statute.[1] Recognizing that UBS controlled, the defendants in this case withdrew their Securities Act statute of repose argument (reserving the right to reassert it at a later date), and the district court (Louis L. Stanton, J.) denied the rest of the motion to dismiss.

         The following year, the Supreme Court decided CTS, in which the plaintiffs alleged injury and damage from contaminants on land on which the defendant had previously operated an electronics plant. The plaintiffs argued that their claims were timely under § 9658, the CERCLA amendment, which creates an " [e]xception" to state statutes of limitations for state-law toxic tort actions. 42 U.S.C. § 9658(a)(1). The Supreme Court, however, held that CERCLA preempted state statutes of limitations but left state statutes of repose in place, and that the applicable statute of repose barred the action. CTS, 134 S.Ct. at 2180. It chided the court below, which had come to the opposite conclusion, for using " the proposition that remedial statutes should be interpreted in a liberal manner" as a " substitute for a conclusion grounded in the statute's text and structure." Id. at 2185.

         Armed with the CTS decision, the defendants here reasserted their argument that this action is barred by the Securities Act's statute of repose, in a motion for judgment on the pleadings under Fed.R.Civ.P. 12(c). They claimed that UBS was inconsistent with CTS, because it failed to give weight to the textual markers that the CTS Court found instructive in its analysis of § 9658, and instead put too much emphasis on the FDIC Extender Statute's remedial purpose. The district court agreed, holding that, after CTS, the FDIC Extender Statute could not be read to displace the Securities Act's statute of repose. Accordingly, it granted judgment in favor of the defendants. The FDIC timely appealed.

         DISCUSSION

          " In general, a panel of this Court is bound by the decisions of prior panels until such time as they are overruled either by an en banc panel of our Court or by the Supreme Court." Lotes Co. v. Hon Hai Precision Indus. Co., 753 F.3d 395, 405 (2d Cir. 2014) (internal quotation marks omitted). The defendants make no attempt to distinguish the FDIC Extender Statute from the FHFA Extender Statute at issue in UBS. Consequently, the outcome here is controlled by UBS, unless the defendants can show that its " rationale [was] overruled, implicitly or expressly, by the Supreme Court" in CTS. United States v. Ianniello,

Page 376

808 F.2d 184, 190 (2d Cir. 1986), abrogated on other grounds by United States v. Indelicato,865 F.2d 1370 (2d Cir. 1989).[2] For the following reasons, the ...


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