May 22, 2016
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The Financial Institutions Reform, Recovery, and Enforcement Act (“FIRREA”) includes a so-called Extender Statute prescribing the limitations period for actions brought by the Federal Deposit Insurance Corporation (“FDIC”) as conservator or receiver for a failed bank. The Housing and Economic Recovery Act of 2008 (“HERA”) includes a materially identical provision governing the limitations period for actions brought by the Federal Housing Finance Agency (“FHFA”) as conservator or receiver for government-sponsored entities within its regulatory purview, such as Fannie Mae and Freddie Mac. These Extender Statutes have been utilized by the FDIC and FHFA to pursue residential mortgage-backed securities (“RMBS”) claims that otherwise would have been barred by various statutes of repose, and in 2013, in FHFA v. UBS, the Second Circuit held that the FHFA Extender Statute displaced the Securities Act’s three-year statute of repose. However, in 2014, the Supreme Court held in CTS Corp. v. Waldburger that a Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”) provision preempting state statutes of limitations did not preempt state statutes of repose. Since then, RMBS defendants have invoked CTS to argue that the FDIC, FHFA, and similar Extender Statutes do not displace statutes of repose. The Fifth and Tenth Circuits have rejected such arguments (relying, in part, on UBS). In FDIC, as Receiver for Colonial Bank v. First Horizon Asset Sec., Inc., 2016 WL 2909338 (2d Cir. May 19, 2016) (“Colonial Bank”), a divided panel of the Second Circuit concluded that CTS did not undermine the rationale of UBS, and accordingly held that the FDIC Extender Statute supersedes the Securities Act’s three-year statute of repose. Although the Colonial Bank decision did not result in a Circuit split that could have been helpful in obtaining Supreme Court review, the thoughtful dissent suggests that this issue may well generate ongoing judicial disagreement and find its way to the Supreme Court.