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National Credit Union Administration Board v. U.S. Bank National Association

United States District Court, S.D. New York

May 18, 2015

NATIONAL CREDIT UNION ADMINISTRATION BOARD, as Liquidating Agent of U.S. Central Federal Credit Union, Western Corporate Federal Credit Union, Members United Corporate Federal Credit Union, Southwest Corporate Federal Credit Union, and Constitution Corporate Federal Credit Union, in its own right, and on behalf of NCUA GUARANTEED NOTES TRUST 2010-R1, NCUA GUARANTEED NOTES TRUST 2010-R2, NCUA GUARANTEED NOTES TRUST 2010-R3, NCUA GUARANTEED NOTES TRUST 2011-R1, NCUA: GUARANTEED NOTES TRUST 2011-R2, NCUA GUARANTEED NOTES TRUST 2011-R3, NCUA GUARANTEED NOTES TRUST 2011-R4, NCUA GUARANTEED NOTES TRUST 2011-R5, NCUA GUARANTEED NOTES TRUST 2011-R6, NCUA GUARANTEED NOTES TRUST 2011-M1, Plaintiffs,
v.
U.S. BANK NATIONAL ASSOCIATION and BANK OF AMERICA, NA, Defendants.

OPINION & ORDER

KATHERINE B. FORREST, District Judge.

This is principally a breach of contract and tort action brought by the National Credit Union Administration Board ("NCUA" or the "NCUA Board") on its own behalf, as liquidating agent of five failed corporate credit unions-the U.S. Central Federal Credit Union, Western Corporate Credit Union, Members United Corporate Federal Credit Union, Southwest Corporate Federal Credit Union, and Constitution Corporate Federal Credit Union (referred to together as the "Corporate Credit Unions" or "CCUs")-and on behalf of several NGN trusts (as described below). NCUA has sued defendants U.S. Bank National Association and Bank of America, NA, in their roles as trustees for 82 trusts that issued residential mortgage-backed securities ("RMBS"). (Amended Complaint ("Am. Compl.") ¶ 2, ECF No. 46.) The CCUs purchased certificates in the trusts at an original face value of approximately $5.3 billion. (Id. ¶ 3.) NCUA alleges that that the trustees breached various contractual, statutory, and common law duties with regard to those trusts. (Id. ¶ 1.)

Before this Court is defendants' motion to dismiss. (ECF No. 59.) Defendants' motion rests principally on an assertion that NCUA has relinquished any standing it had in its capacity as the liquidating agent of the CCUs when it resecuritized most of the CCUs' RMBS certificates as part of the NCUA Guaranteed Note ("NGN") Program. According to defendants, NCUA placed assets that are at issue in this lawsuit into NGN trusts ("NGN Trusts"), and, in so doing, transferred the assets to separate legal entities, thereby eliminating any standing NCUA may have previously had.

This Court agrees that-as currently pled-the Amended Complaint contains insufficient allegations to support NCUA's standing to pursue any of the claims it has asserted as to the certificates in 74 of the 82 RMBS trusts. Defendants' motion is therefore GRANTED as to those certificates on that basis. Defendants also argue that plaintiffs' statutory and tort claims should be dismissed. The Court declines to resolve the remaining issues at this time, as it will provide plaintiffs with a single opportunity to replead.[1]

I. STANDARD OF REVIEW

Standing is a jurisdictional question properly raised in a motion pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure. Alliance for Envtl. Renewal, Inc. v. Pyramid Crossgates Co., 436 F.3d 82, 88 n.6 (2d Cir. 2006). "[W]here jurisdictional facts are placed in dispute, the court has the power and obligation to decide issues of fact by reference to evidence outside the pleadings, such as affidavits." Tandon v. Captain's Cove Marina of Bridgeport, Inc., 752 F.3d 239, 243 (2d Cir. 2014) (quoting APWU v. Potter, 343 F.3d 619, 627 (2d Cir. 2003)) (internal quotation marks omitted).

II. FACTUAL BACKGROUND

The following facts are taken from the Amended Complaint and assumed to be true for purposes of this motion.

A. Creation of the NGN Trusts

In 2009 and 2010, the CCUs failed. (See Am. Compl. ¶ 25.) NCUA took them into conservatorship pursuant to statutory authorization granted by the Federal Credit Union Act, 12 U.S.C. § 1786(h). (Id.) By October 2010, NCUA had placed all of the CCUs into involuntary liquidation pursuant to 12 U.S.C. §§ 1766(a) and 1787(a)(1)(A) and became their statutory liquidating agent. (Id.) In such capacity, NCUA was statutorily entitled to exercise "all rights, titles, powers, and privileges" of the CCUs. (Id. ¶ 26.) This included all rights and claims the CCUs may have had as certificateholders of the RMBS certificates at issue in this lawsuit. (Id.)

Thereafter, NCUA transferred the certificates in 74 of the 82 RMBS trusts to the NGN Trusts. (See id. ¶¶ 27-28.) The NGN Trusts then issued approximately $28.3 billion of NGNs (notes), backed by the cash flows from the certificates (and other re-securitized assets). (Id. ¶ 27.) This was, in substance, a re-securitization of the RMBS certificates. The timely repayment of principal and interest to investors in the NGN Trusts is guaranteed by NCUA and backed by the full faith and credit of the United States. (Id.)

Each of the NGN Trusts is a Delaware statutory trust and exists as an independent legal entity, and each NGN Trust has entered into an Indenture with an indenture trustee. (Id. ¶¶ 32-41.) Each Indenture is alleged to provide holders of its notes with cash flows from the CCUs' re-securitized holdings, including the RMBS certificates. NCUA appointed Bank of New York Mellon ("BNY Mellon") as indenture trustee for each of the NGN Trusts. (See id.) NCUA alleges that it has maintained "certain certificates" (the "Owner Trust Certificates") in each of the NGN Trusts, entitling it to payments from the NGN Trusts if there are remaining funds after a number of other payments have been made. (Id. ¶ 29.)

The NCUA Board notified investors in the NGN Trusts that it was pursuing legal claims in connection with the securities underlying the NGN Trusts and that "any recovery on those claims would benefit the NCUA Board as Liquidating Agent for the CCUs... exclusively." (Id. ¶ 30.)

The NCUA Board asserts that it brings this action "in its own right as the duly-appointed liquidating agent for each of the CCUs" with respect to the certificates that were not re-securitized and "in the right of, and on behalf of, the NGN Trusts with respect to" the certificates (in 74 trusts) that were re-securitized. (Id. ¶ 31.) The NCUA Board also asserts that it "brings the claims on behalf of the NGN Trusts as the holder of the NGN Owner Trust Certificates, as an ...


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