Nat'l Credit Union Admin. Bd. v. U.S. Bank Nat'l Ass'n
898 F.3d 243
2d Cir.2018Background
- NCUA (in its capacities as Liquidating Agent and as Guarantor) succeeded to assets and certificateholder claims when it liquidated five corporate credit unions that held RMBS certificates.
- NCUA transferred most RMBS certificates into newly formed NGN statutory trusts and received Notes and Owner Trust Certificates; the NGN Indenture Agreements then conveyed the trusts’ interests (including all present and future claims) to BNY Mellon as Indenture Trustee for the benefit of Noteholders and the Guarantor (NCUA Guarantor).
- NCUA Guarantor guaranteed NGN investor payments and later assigned any rights in RMBS-related claims to NCUA Liquidating Agent and directed BNYM to pursue claims; BNYM declined to sue.
- NCUA Liquidating Agent sued trustees of the original RMBS Trusts (U.S. Bank, Bank of America), asserting contractual, common-law, and statutory claims derivatively on behalf of NGN Trusts (and, alternatively, on behalf of BNYM).
- The district court dismissed the derivative claims (twice) for lack of derivative standing and denied NCUA’s motion to supplement the complaint and substitute a separately appointed trustee; NCUA appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether NCUA Liquidating Agent has derivative standing to sue on behalf of the NGN Trusts | NCUA says it retained and/or reacquired rights to pursue RMBS-related claims (via assignments/direction letters and Delaware trust-law derivative remedies) and satisfied demand requirements | Defendants argue the Trust and Indenture Agreements transferred all rights and claims away from the NGN Trusts to BNYM, so the NGN Trusts have no claims for NCUA to assert derivatively | Court held NCUA lacks derivative standing for NGN Trusts because the NGN Trusts conveyed all rights/claims to BNYM (BNYM currently holds the claims) |
| Whether NCUA can sue on behalf of BNYM or otherwise compel BNYM to sue | NCUA argues its Guarantor assignment, direction letter, tax-benefit clauses, and Delaware law distinctions create a beneficial interest or authority to pursue claims | Defendants point to unambiguous Indenture terms: BNYM holds the Trust Estate for the exclusive benefit of Noteholders and Guarantor; only Noteholders (subject to conditions) and the Guarantor have rights to compel or institute suits; NGN Trusts/NCUA are not beneficiaries | Court held NCUA cannot sue on behalf of BNYM or compel BNYM to sue because the Indenture unambiguously grants enforcement rights only to Noteholders and the Guarantor and does not authorize NCUA Liquidating Agent to institute proceedings |
| Whether the district court abused its discretion by denying leave to supplement the complaint and substitute the Separate Trustee | NCUA contends late factual developments (winding-up of an NGN Trust and appointment of a Separate Trustee) justified supplementation/substitution under Rules 15(d) and 17(a)(3) | Defendants contend NCUA had prior notice of pleading deficiencies, was given a final opportunity to amend, unduly delayed, and failed to act within a reasonable time after standing objections | Court held the denial was not an abuse of discretion: NCUA had been warned, chose to replead the same deficient theory, delayed over a year in seeking substitution, and supplementation would be untimely or futile |
Key Cases Cited
- Osborn ex rel. Osborn v. Kemp, 991 A.2d 1153 (Del. 2010) (clear-contract terms must be enforced under Delaware law)
- Vintage, LLC v. Laws Constr. Corp., 13 N.Y.3d 847 (N.Y. 2009) (unambiguous agreements are enforced according to plain meaning under New York law)
- In re Facebook, Inc. Initial Pub. Offering Derivative Litig., 797 F.3d 148 (2d Cir. 2015) (distinguishing Article III and derivative standing)
- Loreley Fin. (Jersey) No. 3 Ltd. v. Wells Fargo Sec., LLC, 797 F.3d 160 (2d Cir. 2015) (procedural fairness in pleading opportunities and standing-related guidance)
- Quaratino v. Tiffany & Co., 71 F.3d 58 (2d Cir. 1995) (Rule 15(d) supplementation should be freely granted absent undue delay or prejudice)
- Denny v. Barber, 576 F.2d 465 (2d Cir. 1978) (plaintiff aware of pleading defects has no right to repeated amendments)