FEDERAL HOUSING FINANCE AGENCY, As Conservator for the Federal National Mortgage Association and The Federal Home Loan Mortgage Corporation v. UBS AMERICAS INC., UBS Real Estate Securities Inc., UBS Securities, LLC, Mortgage Asset Securitization Transactions, Inc., David Martin, Per Dyrvik, Hugh Corcoran, and Peter Slagowitz
Docket No. 12-3207-cv.
United States Court of Appeals, Second Circuit.
Argued: Nov. 26, 2012. Decided: April 5, 2013.
712 F.3d 136
Jay B. Kasner (Scott D. Musoff, Joseph N. Sacca, Robert A. Fumerton, Alexander C. Drylewski, on the brief), Skadden, Arps, Slate, Meagher & Flom LLP, New York, NY, for Defendants-Appellants.
Daniel Tenny (Mark B. Stern and Thomas M. Bondy, on the brief), for Stuart F. Delery, Acting Assistant Attorney General, Civil Division, U.S. Department of Justice, Washington, D.C., and Preet Bharara, United States Attorney for the Southern District of New York, New York, NY, for Amicus Curiae United States.
Michael J. Dell and Aaron M. Frankel, Kramer Levin Naftalis & Frankel LLP, New York, NY, and Ira D. Hammerman and Kevin Carroll, Washington, D.C., for Amicus Curiae Securities Industry and Financial Markets Association.
Richard W. Painter (Mary-Christine Sungaila, Snell & Wilmer L.L.P., Costa Mesa, CA, on the brief), University of Minnesota Law School, Minneapolis, MN, for Amicus Curiae Professor Richard W. Painter.
Michael O. Ware, Catherine A. Bernard, and Mark G. Hanchet, Mayer Brown LLP, New York, NY, and Washington, D.C.; Matthew Solum, Robert J. Kopecky, and Devon M. Largio, Kirkland & Ellis LLP, New York, NY, and Chicago, IL; David Blatt and John McNichols, Williams & Connolly LLP, Washington, D.C.; David H. Braff, Brian T. Frawley, Jeffrey T. Scott, Joshua Fritsch, Bruce Clark, Amanda F. Davidoff, Richard H. Klapper, Theodore Edelman, Michael T. Tomaino, Jr., Tracy Richelle High, Penny Shane, Sharon L. Nelles, and Jonathan M. Sedlak, Sulli-
Before: CHIN and LOHIER, Circuit Judges, and GARDEPHE, District Judge.*
CHIN, Circuit Judge:
In this case, the Federal Housing Finance Agency (“FHFA“), as conservator of the Federal National Mortgage Association (“Fannie Mae“) and the Federal Home Loan Mortgage Corporation (“Freddie Mac“), sued UBS Americas Inc., certain affiliated entities, and several officers (collectively, “UBS“) for fraud and misrepresentation in connection with the marketing and sale of mortgage-backed securities. FHFA has filed some seventeen other similar actions against other financial institutions involved in the mortgage-backed securities industry.
In the district court, UBS moved to dismiss on the grounds, inter alia, that (1) the action was untimely and (2) FHFA lacked standing to bring suit. The district court (Cote, J.) denied these prongs of the motion, and certified its decision for interlocutory appeal. We granted UBS‘s petition for leave to bring this interlocutory appeal. We now affirm.
Statement of the Case
A. Statutory Background
In July 2008, in response to the national housing and economic crisis, Congress passed the Housing and Economic Recovery Act of 2008 (“HERA“). See
HERA set forth provisions governing the limitations period for actions brought by FHFA as conservator or receiver. Section 4617(b)(12) of HERA (the “extender statute“) provides:
(A) In General
Notwithstanding any provision of any contract, the applicable statute of limitations with regard to any action brought by the Agency as conservator or receiver shall be—
(i) in the case of any contract claim, the longer of—
(I) the 6-year period beginning on the date on which the claim accrues; or
(II) the period applicable under State law; and
(ii) in the case of any tort claim, the longer of—
(I) the 3-year period beginning on the date on which the claim accrues; or
(II) the period applicable under State law.
(B) Determination of the date on which a claim accrues
For purposes of subparagraph (A), the date on which the statute of limitations begins to run on any claim described in such subparagraph shall be the later of—
(i) the date of the appointment of the Agency as conservator or receiver; or
(ii) the date on which the cause of action accrues.
On July 30, 2008, as HERA was signed into law, Congress appointed James B. Lockhart III Acting Director of FHFA. Lockhart had previously been nominated by President Bush and confirmed by the Senate as Director of the Office of Federal Housing Enterprise Oversight (“OFHEO“) of the U.S. Department of Housing and Urban Development. On August 25, 2009, after Lockhart resigned his position from FHFA, President Obama designated Edward DeMarco—who was then Deputy Director of FHFA—as its Acting Director, effective September 1, 2009.
B. The Facts
As relevant to this appeal, the allegations of the second amended complaint are assumed to be true and may be summarized as follows:
From September 2005 through August 2007, Fannie Mae and Freddie Mac purchased $6.4 billion in residential mortgage-backed securities sponsored or underwritten by UBS. They did so in reliance on certain false and misleading statements contained in the offering documents. In particular, UBS represented to potential investors that the mortgage loans serving as collateral for the securitizations were underwritten in accordance with established guidelines to ensure that borrowers could meet their payment obligations, and UBS provided statistical material relating to the likelihood that underlying mortgage loans would be repaid. These representations were false. As a consequence of their reliance on these representations, Fannie Mae and Freddie Mac sustained massive losses.
Acting Director Lockhart appointed FHFA conservator of Fannie Mae and Freddie Mac on September 6, 2008.
C. The Proceedings Below
On July 27, 2011, more than three years after the last of the securities offerings in question but within three years of FHFA‘s appointment as conservator, FHFA commenced this action below. It did so at the direction of Acting Director DeMarco.
On September 2, 2011, FHFA filed some seventeen other similar actions against other financial institutions. Sixteen of these actions were assigned to Judge Cote in the Southern District of New York as related to this case, but one was subsequently transferred to the Central District of California. The seventeenth case was filed in the District of Connecticut.
The second amended complaint asserted claims under §§ 11, 12(a)(2), and 15 of the Securities Act of 1933 (the “Securities Act“),
On May 4, 2012, in a thorough and carefully considered opinion and order, the district court denied the motion to dismiss with respect to the statutory claims and granted it only with respect to the negligent misrepresentation claim. See FHFA v. UBS Americas, Inc., 858 F.Supp.2d 306 (S.D.N.Y.2012). By order entered June 19, 2012, the district court certified an interlocutory appeal from its May 4th opinion and order. On August 14, 2012, we granted UBS‘s petition for interlocutory appeal.
DISCUSSION
On this appeal from the district court‘s ruling on a motion to dismiss, we review the district court‘s legal conclusions de novo, accepting the factual allegations of the second amended complaint as true. See Commack Self-Serv. Kosher Meats, Inc. v. Hooker, 680 F.3d 194, 203 (2d Cir. 2012).
Two issues are presented: first, the timeliness of this action, and, second, FHFA‘s standing to bring this suit.
A. Timeliness
The principal question is whether FHFA‘s claims under the Securities Act and the Virginia and D.C. Blue Sky laws are governed by HERA‘s extender statute, including, in particular, the provision extending the “statute of limitations” for tort claims to the three-year period after the appointment of FHFA as conservator or receiver.
1. Applicable Law
“Statutes of repose and statutes of limitations are often confused, though they are distinct.” Ma v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 597 F.3d 84, 88 n. 4 (2d Cir.2010). Statutes of limitations limit the availability of remedies and, accordingly, may be subject to equitable considerations, such as tolling, or a discovery rule. See P. Stolz Family P‘ship L.P. v. Daum, 355 F.3d 92, 102 (2d Cir.2004). In contrast, statutes of repose affect the underlying right, not just the remedy, and thus they “run without interruption once the necessary triggering event has occurred, even if equitable considerations would warrant tolling or even if the plaintiff has not yet, or could not yet have, discovered that she has a cause of action.” Id. at 102-03. In fact, a statute of repose may bar a claim even before the plaintiff suffers injury, leaving her without any remedy. See id. at 103; accord Stuart v. Am. Cyanamid Co., 158 F.3d 622, 627 (2d Cir.1998).
As UBS correctly notes, we have characterized the three-year statute of limitations in § 13 of the Securities Act as a “statute of repose.” P. Stolz, 355 F.3d at 96; see also Lampf, Pleva, Lipkind, Prupis & Petigrow v. Gilbertson, 501 U.S. 350, 360 & n. 5, 362 (1991)
In construing a statute, we begin with the plain language, giving all undefined terms their ordinary meaning. See Schindler Elevator Corp. v. United States ex rel. Kirk, 131 S.Ct. 1885, 1891 (2011); United States v. Desposito, 704 F.3d 221, 226 (2d Cir.2013); 23-34 94th St. Grocery Corp. v. N.Y.C. Bd. of Health, 685 F.3d 174, 182 (2d Cir.2012). Absent ambiguity, our analysis also ends with the statutory language. See Schindler Elevator Corp., 131 S.Ct. at 1893; Devine v. United States, 202 F.3d 547, 551 (2d Cir.2000). “[W]e must presume that the statute says what it means.” Devine, 202 F.3d at 551. In interpreting a statute, however, courts are not to “construe each phrase literally or in isolation.” Pettus v. Morgenthau, 554 F.3d 293, 297 (2d Cir.2009). We must “attempt to ascertain how a reasonable reader would understand the statutory text, considered as a whole.” Id. If we conclude that the text is ambiguous, we will look to legislative history and other tools of statutory interpretation. See Auburn Hous. Auth. v. Martinez, 277 F.3d 138, 143-44 (2d Cir.2002).
2. Application
We hold that
a. The Statutory Text
The words of the statute make clear that HERA applies to the claims brought by FHFA in this case. Section 4617(b)(12) sets forth “the applicable statute of limitations with regard to any action brought by [FHFA] as conservator or receiver.”
By explicitly stating that “the” statute of limitations for “any action” brought by FHFA as conservator “shall be” as specified in
b. The Legislative History
To the extent there is any ambiguity in the words of the extender statute, the legislative history eliminates any doubt. Congress enacted HERA and created FHFA in response to the housing and economic crisis, precisely because it wanted to address the dire financial condition of Fannie Mae and Freddie Mac. As HERA makes clear, Congress intended FHFA to take action to “collect all obligations and money due” to the GSEs, to restore them to a “sound and solvent condition.”
Congress obviously realized that it would take time for this new agency to mobilize and to consider whether it wished to bring any claims and, if so, where and how to do so. Congress enacted HERA‘s extender statute to give FHFA the time to investigate and develop potential claims on behalf of the GSEs—and thus it provided for a period of at least three years from the commencement of a conservatorship to bring suit.2
Of course, the collapse of the mortgage-backed securities market was a major cause of the GSEs’ financial predicament, and it must have been evident to Congress when it was enacting HERA that FHFA would have to consider potential claims under the federal securities and state Blue Sky laws. It would have made no sense for Congress to have carved out securities claims from the ambit of the extender statute, as doing so would have undermined Congress‘s intent to restore Fannie Mae and Freddie Mac to financial stability.
c. Statutes of Limitations and Statutes of Repose
We turn, then, to UBS‘s argument that
Although statutes of limitations and statutes of repose are distinct in theory,
In view of the text of the statute and its legislative history as discussed above, it is clear that Congress intended one statute of limitations—
The more natural reading of the provision, the one that is both inline with everyday usage and consistent with the objectives of the statute overall, is that by including in HERA a provision explicitly setting out the “statute[s] of limitations” applicable to claims by FHFA, Congress intended to prescribe comprehensive time limitations for “any action” that the Agency might bring as conservator, including claims to which a statute of repose generally attaches.
UBS Americas, 858 F.Supp.2d at 316-17.
Accordingly, we hold that
B. Standing
UBS argues that FHFA lacks standing to prosecute this action because the appointments of Lockhart and DeMarco as Acting Directors of FHFA were unconstitutional as: (1) Lockhart was appointed by Congress without being nominated by the President and (2) DeMarco was appointed by the President without Senate confirmation.5 Both arguments fail.
First, Lockhart had been earlier nominated by the President and confirmed by the Senate to serve as Director of OFHEO. As the district court correctly held, “Congress may confer on validly appointed officers ‘additional duties, germane to the offices already held by them . . . without thereby rendering it necessary that the incumbent should be again nominated and appointed.‘” UBS Americas, 858 F.Supp.2d at 322 (quoting Shoemaker v. United States, 147 U.S. 282, 301 (1893)); accord Weiss v. United States, 510 U.S. 163, 171-75 (1994) (holding that second appointment in accordance with Appointments Clause was not necessary for military judges, who are “Officers” who must be appointed in accordance with Appointments Clause of Constitution, where they were commissioned officers who had already been appointed by the President with advice and consent of the Senate). Here, the functions assigned to Lockhart by Congress as Acting Director of FHFA were “germane” to the functions he had previously served as Director of OFHEO, as Congress essentially converted OFHEO into FHFA and transferred OFHEO‘s functions to FHFA. See
Second, after Lockhart resigned, DeMarco was properly designated by the President as Acting Director of FHFA, as HERA provides that “[i]n the event of the death, resignation, sickness, or absence of the Director, the President shall designate [one of three enumerated Deputy Directors] to serve as acting Director until the return of the Director, or the appointment of a successor. . . .”
Accordingly, FHFA had standing to bring this action.
CONCLUSION
For the reasons set forth above, the order of the district court denying UBS‘s
Notes
No action shall be maintained to enforce any liability created under section 77k [§ 11] or 77l(a)(2) [§ 12(a)(2)] of this title unless brought within one year after the discovery of the untrue statement or the omission, or after such discovery should have been made by the exercise of reasonable diligence. . . . In no event shall any such action be brought to enforce a liability created under section 77k or 77l(a)(1) of this title more than three years after the security was bona fide offered to the public, or under section 77l(a)(2) of this title more than three years after the sale.