KANSAS CITY (11/20/12)--J.P. Morgan Chase has asked a U.S. District Court in Kansas City to delay proceedings or a decision in the National Credit Union Administration's (NCUA) lawsuit against it over residential mortgage backed securities (RMBS) it sold to corporate credit unions until after an appeals court in the Tenth Circuit in Denver has ruled on whether NCUA filed a similar lawsuit in time.
The Kansas case against J.P. Morgan's securities and brokerage firms and other securities firms involves the same arguments used by NCUA in seven cases, including against RBS Securities and Wachovia Capital Markets. The RBS and Wachovia cases were consolidated by U.S. District Court Judge Richard D. Rogers in Denver. On July 25, Judge Rogers denied in part the RBS defendants' motions to dismiss the consolidated action, ruling that an Extender Statute to the statute of limitations in the case was applicable and "tolled" NCUA's claims, which meant NCUA had filed its suit within the timeframe allowed by law.
On Sept. 19, Rogers certified two issues for appeal: whether the Extender Statute applies to the state of repose as outlined in the Securities Act and whether it applies to federal and state statutory claims. On Nov. 6, the Tenth Circuit Court of Appeals granted an appeal.
"The extender statute issues currently before the Tenth Circuit are identical to the extender statute issues raised here," said J.P. Morgan. If the appeals court reverses the decision "it will, at a minimum, require the dismissal of federal claims relating to 11 of the 34 RMBS certificates and two of the five defendants in the case," said J.P. Morgan's petition for the stay.
The petition, which asks that the proceedings don't progress and a r mentioned that there is "unsubstantial uncertainty as to whether RBS was properly decided," citing a set of decisions in the U.S. District Court in the Central District of California that concluded the extender statute did not apply to the statutes of repose.
NCUA's lawsuits allege that the banks in question made numerous misrepresentations and omissions of material fact in the RMBS documents presented to U.S. Central FCU, Western Corporate FCU, Members United Corporate FCU and Southwest Corporate FCU. The RMBS investments contributed to the corporates' collapse and NCUA sued as the corporates' liquidating agent.