WASHINGTON (9/4/13)--The Federal Deposit Insurance Corp. has entered the fray in the National Credit Union Administration's suit against Barclays Capital, supporting an NCUA appeal and arguing that the statute of limitations had not expired when the agency filed suit against the financial firm in September 2012.
U.S. District Judge John W. Lungstrum in Wichita, Kan., dismissed the agency's $550 million claim against Barclays in July, stating that they were time-barred and NCUA hadn't filed the case in time. The judge at that time claimed a tolling agreement NCUA had entered into with the defendants, and which NCUA had argued extended the time allowed to file the lawsuits, was "not effective in extending the applicable three-year limitations period under the Extender Statute." A tolling agreement allows more time in which to file a lawsuit after the statute of limitations time expires.
The NCUA appealed this decision this summer.
The FDIC in its brief echoed elements of the NCUA appeal, saying that Lungstrum erred when he misread the extender statute. The extender statute, the FDIC said, does not prohibit tolling agreements. This argument is also upheld by the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), the FDIC said, arguing that a contrary ruling could limit the FDIC's ability to apply its own statute of limitations extender provisions in suits related to failed banks.
"There is simply nothing in the structure, purposes, goals, relevant case law, or legislative history of FIRREA to support the District Court's conclusion that the Extender Statute precludes the use of tolling agreements," the FDIC said. FIRREA "was intended by Congress to stabilize the banking system by protecting depositors and creditors of failed banks and the public generally," the FDIC added.
The NCUA Barclays suit is one of many filed by the agency in a bid to reclaim losses stemming from residential mortgage-backed securities (RMBS) sold to corporate credit unions.
The U.S. 10th Circuit Court of Appeals last week ruled that the agency may move forward with lawsuits against Barclays and 11 other firms. That decision related to a separate NCUA case against RBS Securities. There was no mention of tolling agreements in that case.
NCUA has also filed suit against Barclays Capital, Credit Suisse, Goldman Sachs, J.P. Morgan Securities, UBS Securities, Wachovia, Washington Mutual, and Bear Stearns alleging violations of federal and state securities laws in the sale of mortgage-backed securities to the five corporate credit unions.
In related actions, the agency has reached $335 million in settlements with Bank of America, Citigroup, Deutsche Bank Securities and HSBC.