National Credit Union Administration Board v. J.P. Morgan Securities LLC et al

RESPONSE to J.P. Morgan Defendants' Notice of Supplemental Authority Concerning Credit Suisse Securities v. Simmonds

D. Kan.April 5, 2012

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF KANSAS NATIONAL CREDIT UNION ADMINISTRATION BOARD, as Liquidating Agent of U.S. Central Federal Credit Union, Western Corporate Federal Credit Union, Members United Corporate Federal Credit Union, and Southwest Corporate Federal Credit Union, Plaintiff, v. J.P. MORGAN SECURITIES LLC., J.P. MORGAN ACCEPTANCE CORPORATION I, AMERICAN HOME MORTGAGE ASSETS LLC, INDYMAC MBS, INC., and BOND SECURITIZATION, LLC, Defendants. ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) Case No.11-cv-2341 EFM/JPO NCUA RESPONSE TO J.P. MORGAN’S NOTICE OF SUPPLEMENTAL AUTHORITY CONCERNING CREDIT SUISSE SECURITIES v. SIMMMONDS Plaintiff National Credit Union Administration Board (“NCUA”) respectfully submits this response to the J.P Morgan defendants’ (“JP Morgan”) Notice of Supplemental Authority (Doc. 48) concerning Credit Suisse Securities (USA) LLC v. Simmonds, --- S. Ct. ---, No. 10-1261, 2012 WL 986812 (U.S. Mar. 26, 2012). Simmonds does not support JP Morgan here in any way. Simmonds concerned a different statute than those at issue here. Under 15 U.S.C. § 78p(b), suits for disgorgement of short-swing profits must be brought within “two years after the date such profit was realized.” In Simmonds, the Court found that this language was inconsistent with the Ninth Circuit’s holding that this limitations period should be tolled until the alleged profiteer later filed a disclosure statement required by statute, “regardless of whether the plaintiff knew or should have known of the conduct at issue.” Simmonds, 2012 WL 986812, at *3 (internal quotation marks Case 2:11-cv-02341-EFM-JPO Document 51 Filed 04/05/12 Page 1 of 6 2 omitted). The Court reasoned that Congress could have triggered the limitations period from the disclosure rather than realization of the profit, and that any “equitable tolling” would have to consider the plaintiff’s knowledge and diligence. See id. at *4-5. 1. JP Morgan mistakenly claims that Simmonds supports JP Morgan’s reading of the extender statute, 12 U.S.C. § 1787(b)(14)(A). No textual parallel exists between those unrelated provisions, and JP Morgan provides none. The extender statute plainly applies to federal and state statutory securities claims, as courts have ruled, because statutory securities claims have long been viewed as sounding in tort, and because Congress intended the extender statute to be broadly applied in order to preserve claims brought by this federal entity. See NCUA Opp. at 43-44. 2. JP Morgan likewise errs in claiming (at 2) that “the extender statute applies only to extend procedural statutes of limitations, not statutes of repose.” As an initial matter, JP Morgan has waived this argument by failing to assert it in JP Morgan’s memorandum supporting its motion to dismiss. See Doc. 29, at 40-41. In any event, § 13 of the Securities Act of 1933 combines both limitation and repose periods under a single title, “Limitation of Actions.” 15 U.S.C. § 77m. So, too, do the state statutes relevant to NCUA’s claims, see Cal. Corp. Code § 25506 (“Limitation of actions”); 815 Ill. Comp. Stat. Ann. 5/13(D)(2) (“period of limitation”); Kan. Stat. Ann. § 17- 12a509(j) (“Statute of limitations”); Tex. Rev. Civ. Stat. Ann. art. 581, § 33(H)(2) (“Statute of Limitations”). The extender statute likewise refers to the “applicable statute of limitations” contained in other sources of state and federal law. 12 U.S.C. § 1787(b)(14)(A). None of those provisions refers to a “statute of repose,” let alone identifies one period as one of “limitations” and the other as one of “repose.” Hence, the periods of “limitation” encompassed by the extender statute mirror the inclusive structure of the periods of “limitation” established in § 13 and the analogous state blue-sky statutes. In each instance, Congress and the relevant state legislatures referred to both limitations and repose periods statutes of “limitation.” This is not surprising: the Case 2:11-cv-02341-EFM-JPO Document 51 Filed 04/05/12 Page 2 of 6 3 Supreme Court stated long ago that “[t]he statute of limitations is a statute of repose,” Guaranty Trust Co. v. United States, 304 U.S. 126, 136 (1938) (emphasis added), and lower courts have recognized that the statutory term “statute of limitations” is at best “ambiguous regarding whether it include[s] statutes of repose,” McDonald v. Sun Oil Co., 548 F.3d 774, 781 (9th Cir. 2008). To hold that the extender statute does not apply to periods of repose would thwart Congress’s careful legislative scheme enacted to facilitate maximum recoveries by NCUA for failed federally chartered credit unions. Because NCUA has only limited tools with which to learn about a failed credit union prior to taking it into conservatorship, Congress provided it with a fresh period of time in which to conduct an investigation and assess potential causes of action after asserting conservatorship. That practical concern applies equally to statutes of limitation and statutes of repose. Any perceived statutory ambiguity must be resolved in favor of Congress’s statutory policy to maximize recovery by NCUA for failed credit unions. See SEC v. Rind, 991 F.2d 1486, 1489-92 (9th Cir. 1993) (SEC enforcement action not subject to statutes of repose absent clear congressional intent). 3. Finally, JP Morgan relies on the Court’s statement in Simmonds that “[w]e are divided 4 to 4 concerning, and thus affirm without precedential effect, the Court of Appeals’ rejection of petitioners’ contention that [the statute before it] establishes a period of repose that is not subject to tolling,” 2012 WL 986812, at *6 (emphasis added), suggesting that by this dicta the Court meant that statutes of repose can never be tolled for any reason. That is incorrect, and, in fact, the Court suggested precisely the opposite. In the part of Simmonds that discussed the availability of equitable tolling for fraudulent concealment, the Court noted — without in any way questioning — lower- court precedent applying “legal tolling” under American Pipe & Construction Co. v. Utah, 414 U.S. 538, 557-58 (1974), to toll statutes of repose, on the basis that the American Pipe rule “‘is derived from a statutory source,’ whereas equitable tolling is ‘judicially created.’” Simmonds, 2012 WL 986812, at *4 Case 2:11-cv-02341-EFM-JPO Document 51 Filed 04/05/12 Page 3 of 6 4 n.6 (quoting Arivella v. Lucent Techs., Inc., 623 F. Supp. 2d 164, 176 (D. Mass. 2009)) (emphasis added); see NCUA Opp. 39-41 (discussing American Pipe tolling). Tolling under the extender statute is likewise derived from a statutory source, and is permissible legal tolling. Thus, contrary to JP Morgan’s claim, Simmonds recognizes and leaves undisturbed this line of cases holding that periods of repose are subject to legal tolling. This rule — which is the law of the Tenth Circuit, see NCUA Opp. 39 (discussing Joseph v. Wiles, 223 F.3d 1155 (10th Cir. 2000)) — dooms any suggestion that periods of repose can never be tolled for any reason. And because Simmonds concerned only “equitable tolling for fraudulent concealment,” 2012 WL 986812, at *4, it has no bearing on the legal tolling at issue here. Case 2:11-cv-02341-EFM-JPO Document 51 Filed 04/05/12 Page 4 of 6 5 Dated: April 5, 2012 George A. Zelcs KOREIN TILLERY, LLC 205 North Michigan Avenue, Suite 1950 Chicago, Illinois 60601 Phone: (312) 641-9760 Fax: (312) 641-9751 GZelcs@koreintillery.com Stephen Tillery Douglas Sprong Peter Rachman Diane Moore KOREIN TILLERY, LLC One U.S. Bank Plaza 505 North 7th Street, Suite 3600 St. Louis, MO 63101-1625 Phone: (314) 241-4844 Fax: (314) 241-3525 STillery@koreintillery.com DSprong@koreintillery.com PRachman@KoreinTillery.com DHeitman@koreintillery.com Respectfully submitted, STUEVE SIEGEL HANSON LLP /s/ Rachel E. Schwartz____________ Norman E. Siegel (D. Kan. # 70354) Rachel E. Schwartz (Kan. # 21782) STUEVE SIEGEL HANSON LLP 460 Nichols Road, Suite 200 Kansas City, MO 64112 Tel: (816) 714-7100 Fax: (816) 714-7101 siegel@stuevesiegel.com schwartz@stuevesiegel.com Mark C. Hansen David C. Frederick Wan J. Kim Joseph S. Hall Scott K. Attaway KELLOGG, HUBER, HANSEN, TODD, EVANS & FIGEL, P.L.L.C. Sumner Square 1615 M Street, N.W., Suite 400 Washington, D.C. 20036 Phone: (202) 326-7900 Fax: (202) 326-7999 mhansen@khhte.com dfrederick@khhte.com wkim@khhte.com jhall@khhte.com Attorneys for Plaintiff Case 2:11-cv-02341-EFM-JPO Document 51 Filed 04/05/12 Page 5 of 6 6 CERTIFICATE OF SERVICE I hereby certify that on April 5, 2012, I electronically filed the foregoing with the Clerk of the Court by using the CM/ECF system which will send a notice of electronic filing to all counsel of record. By: _/s/ Rachel E. Schwartz __ NATIONAL CREDIT UNION ADMINISTRATION BOARD, as Liquidating Agent of United States Central Federal Credit Union Western Corporate Federal Credit Union Members United Corporate Federal Credit Union, and Southwest Corporate Federal Credit Union Case 2:11-cv-02341-EFM-JPO Document 51 Filed 04/05/12 Page 6 of 6