In F.D.I.C. v. RBS Securities Inc., 2015 WL 4745032 (5th Cir. 2015), Federal Deposit Insurance Corporation (“FDIC”) filed two separate suits against RBS Securities, Inc., Goldman, Sachs & Co. and Deutsche Bank Securities, Inc. (collectively the “Appellees”) and other financial institutions alleging claims of securities fraud, alleging that they made false and misleading statements in selling and underwriting residential mortgage backed securities.  

The district court granted judgment on the pleadings in favor of the Appellees, holding that the FDIC Extender Statute, 12 U.S.C. § 1821(d)(14), preempted only state statutes of limitations, but not state statues of repose – drawing a distinction between the two categories of limitation statutes.  The 5th Circuit reversed, concluding that the FDIC Extender Statute preempted limitations periods and periods of repose.   

According to the complaint, Guaranty Bank invested in residential mortgage backed securities (“MBS”) sold by RBS in 2004 and 2005. These packages of residential mortgages are sold by the original lender to a trust–transferring ownership of the mortgages themselves and the right to monthly payments on those mortgages to the trust. Investors, such as Guaranty Bank, then purchased interests in the form of certificates from the trust.  On August 21, 2009, amidst the global financial crisis, the Office of Thrift Supervision closed Guaranty Bank and the FDIC was appointed receiver under the terms of the Federal Deposit Insurance Act.

On August 17, 2012, the FDIC filed its suits alleging that, in underwriting and selling the residential mortgage backed securities to Guaranty Bank, the Appellees committed securities fraud under the Securities Act of 1933 and the Texas Securities Act. The allegation of fraud was based on material misrepresentations and omissions about the quality of the MBS. 

Appellees, in their separate cases, moved for judgment on the pleadings, arguing the Texas statute of repose barred the FDIC’s claims. Although the FDIC Extender Statute allowed for the filing of an action within three years after the FDIC’s appointment as receiver, Appellees asserted that the Statute did not preempt the five year statute of repose included in the Texas Securities Act.  

To support their argument, appellees relied on CTS Corp. v. Waldburger, 134 S.Ct. 2175 (2014).  There the Supreme Court found that a provision of CERCLA, 42 U.S.C. §9658, preempted state statutes of limitations but not statues of repose. The district court relied on this case in granting Appellees’ motions for judgment on the pleadings and dismissed the FDIC’s claims as barred by the Texas statute of repose. 

The 5th Circuit, however, distinguished the case.  Analysis of the text, structure and purpose of the FDIC Extender Statute, according to the court, evinced an intent by Congress to displace any limitations period that would interfere with the FDIC’s post-appointment three-year period to investigate potential claims – regardless of the statute’s characterization as a statute of limitation or statute of repose. As the court reasoned: 

• The text and structure of the FDIC Extender Statute provide for preemption of all limitations periods—no matter their characterization as statutes of limitations or statutes of repose—to the extent that they provide less than three years from the date of the FDIC’s appointment as receiver to bring claims.14 That is also the only interpretation consistent with the statute’s purpose of providing the FDIC with a minimum period of time to investigate and evaluate potential claims on behalf of a failed bank. The contrary interpretation would thwart the purpose of Congress by truncating the FDIC’s statutory three-year minimum period and leaving tenebrous the applicable limitations period where Congress meant to elucidate it. 

Accordingly, the Court reversed the judgment of the district court and remanded the case for further proceedings.

The primary material for this case can be found on the DU Corporate Governance website.