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National Credit Union Administration Board v. HSBC Bank USA, N.A.

United States District Court, S.D. New York

July 20, 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.
HSBC BANK USA, NATIONAL ASSOCIATION, Defendant

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[Copyrighted Material Omitted]

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For Plaintiffs: David C. Frederick, Esq., Gregory G. Rapawy, Esq., Wan Joo Kim, Esq., Scott K. Attaway, Esq., Kellogg, Huber, Hansen, Todd, Evans & Figel, PLLC, Washington, DC; David H. Wollmuth, Esq., Ryan A. Kane, Esq., Steven S. Fitzgerald, Esq., Danielle A. D'Aquila, Esq., William A. Maher, Esq., Wollmuth Maher & Deutsch LLP, New York, NY; George A. Zelcs, Esq., Matthew Davies, Esq., Maximilian C. Gibbons, Esq., Korein Tillery, LLC, Chicago, IL; John A. Libra, Esq., Stephen M. Tillery, Esq., Korein Tillery, LLC, St. Louis, MO.

For Defendant: Andrew W. Rudge, Esq., Edward C. Reddington, Esq., George A. Borden, Esq., Kevin M. Hodges, Esq., Vidya Atre Mirmira, Esq., Williams & Connolly LLP, Washington, DC; Michael Orth Ware, Esq., Mayer Brown LLP, New York, NY; Jennifer M. Rosa, Esq., Mayer Brown LLP, Washington, DC.

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OPINION AND ORDER

Shira A. Scheindlin, United States District Judge.

I. INTRODUCTION

Plaintiffs in this case and three related cases allege the failure of HSBC Bank USA, National Association (" HSBC" ) to discharge its duties as a trustee for residential mortgage backed securities (" RMBS" ) trusts. This Court previously ruled on HSBC's motion to dismiss in the three related cases,[1] and those arguments were incorporated in the motion to dismiss this Complaint.[2] HSBC also moves to dismiss the Complaint on the grounds that the National Credit Union Administration (" NCUA" ) Board lacks standing to sue and that NCUA's claims are barred by the applicable statute of limitations. For the following reasons, HSBC's motion to dismiss is denied.

II. BACKGROUND[3]

NCUA is an independent agency of the Executive Branch of the United States Government that, among other things, regulates federal credit unions.[4] The NCUA

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Board manages NCUA, and under 12 U.S.C. § 1787 has the authority to close an insured credit union and appoint itself the liquidating agent for the credit union.[5] As the liquidating agent for a failed credit union, the NCUA Board succeeds to all rights, titles, powers, and privileges of the credit union. [6]

The five corporate credit unions[7] at issue in this case held mortgage-backed securities issued by thirty-seven trusts for which HSBC served as Indenture Trustee.[8] In 2009 and 2010, after these securities became distressed, the NCUA Board placed the corporate credit unions into conservatorship and then into involuntary liquidation and appointed itself liquidating agent.[9] In 2010, NCUA created the NCUA Guaranteed Note (" NGN" ) Program to liquidate the distressed securities (the " Legacy Assets" ) from the five failed corporate credit unions.[10] The NGN Program created ten new Delaware statutory trusts -- the NGN Trusts -- and transferred all but five of the Legacy Assets into these new trusts.[11] The Bank of New York Mellon (" BNY Mellon" ) serves as Indenture Trustee for the NGN Trusts and Wells Fargo Delaware Trust Company, N.A. (" Wells Fargo" ) serves as Owner Trustee.[12] The NGN Trusts re-securitized these Legacy Assets by issuing approximately $28.3 billion of NCUA Guaranteed Notes, backed by the cash flows from the Legacy Assets and guaranteed by NCUA in its agency capacity.[13] The NCUA Board holds certificates that represent a beneficial ownership interest in the NGN Trusts (the " Owner Trust Certificates" ).[14] These Certificates entitle the NCUA Board to payments from the NGN Trusts after the principal balance of the senior notes issued by the NGN Trusts has been reduced to zero; all accrued and unpaid interest on the senior notes has been paid; all amounts owed to the Guarantor have been reimbursed; and the Indenture Trustee, the Administrator, and the Owner Trustee have been paid.[15]

NCUA, acting in its capacity as Guarantor, issued a written demand to BNY Mellon, in its capacity as the Indenture Trustee of the NGN Trusts, to take action to assert claims on behalf of the NGN Trusts.[16] On February 25, 2015, BNY Mellon declined to do so, stating that

BNY Mellon as Indenture Trustee on the various NCUA re-securitization trusts does not intend to pursue the claims outlined in the Amended Complaints . . . . We take no position on the merits, but acknowledge and agree that the Guarantor [NCUA] has the right to pursue claims based on the re-securitization Trust Indentures when the Indenture Trustee fails to do so after receiving notice (which we have for the claims in the Amended Complaints.[17]

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NCUA as Guarantor assigned any right, title, and interest that it possessed with respect to the NGN Trusts' claims to the NCUA Board.[18]

III. APPLICABLE LAW

A. Rule 12(b)(1)

Rule 12(b)(1) provides for the dismissal of a claim when the federal court " lack[s] . . . jurisdiction over the subject matter." Plaintiff bears the burden of establishing subject matter jurisdiction by a preponderance of the evidence.[19]

In considering a motion to dismiss for lack of subject matter jurisdiction, " [t]he court must take all facts alleged in the complaint as true and draw all reasonable inferences in favor of the plaintiff, but jurisdiction must be shown affirmatively, and that showing is not made by drawing from the pleadings inferences favorable to the party asserting it." [20] " [W]here jurisdictional facts are placed in dispute, the court has the power and obligation ...


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