Nat’l Credit Union Admin. Bd. v. Barclays Capital Inc., No. 13-3183 (10th Cir. Mar. 3, 2015).
The NCUA is the FDIC for credit unions: it insures the deposits at federal credit unions and puts the credit unions into conservatorship when they fail. After two large credit unions failed in 2009, the NCUA determined that they had failed because they’d invested in residential mortgage-backed securities whose offering documents had misrepresented the quality of the underlying mortgages. (For a snappy primer on mortgage-backed securities, listen here.)
The NCUA entered into negotiations with the issuers and underwriters of the mortgage-backed securities, including Barclays, hoping to settle potential claims without litigation. The NCUA and Barclays entered into tolling agreements during the negotiations. Under these agreements, they agreed that time spent in settlement negotiations would be excluded from the statute of limitations. They also agreed that even if the limitations period couldn’t be directly tolled by agreement, Barclays wouldn’t assert a statute-of-limitations defense based on the excluded time.
Negotiations eventually broke down, though, and the NCUA sued Barclays under the Securities Act of 1933.
There were potential timeliness problems with this suit. The NCUA filed suit more than five years after the mortgage-backed securities were sold. Normally, that’d be a problem, because the Securities Act contains a statute of repose that provides a nonwaivable bar to any action that is filed more than three years after the sued-on security is sold. But the NCUA also has an “extender statute,” which gives the NCUA three years to file any claim that existed at the time it took over the failed credit unions, even in the teeth of the Securities Act’s statute of repose. Still, there’s a problem with that argument, too: the NCUA filed suit three years and 190 days after it took over the credit unions. The NCUA, however, cites its tolling agreements with Barclays—tolling agreements that, if enforceable, excluded 596 days from that three-year-and-190-day period. Which would then make this suit timely.
The primary question before the Tenth Circuit is whether the tolling agreement’s exclusion of time is enforceable. The Tenth Circuit holds that the language of the NCUA’s extender statute makes the tolling agreement unenforceable.
That’s not the end of the story, however, because the NCUA also argues that Barclays is estopped from asserting untimeliness as an affirmative defense. Why is that? Well, because the extender statute is a statute of limitations, and not a statute of repose—and hence creates an affirmative defense to an action rather than wholly extinguishing it. This distinction matters, since litigants can lawfully waive affirmatively defenses. That is what Barclays did here: by entering into the tolling agreements, it waived its ability to argue untimeliness. The suit can proceed.