The U.S. Supreme Court earlier this week rejected a petition by several banks hoping to review a May ruling that challenged the statute of limitations on when federal regulators could sue financial institutions, in this case regarding mortgage-backed securities.
Last may, the Second Circuit court granted the Federal Deposit Insurance Corporation “extender provisions” that allowed the FDIC to sue banks regarding mortgage-backed securities purchased by the now-defunct Colonial Bank of Montgomery, Ala. The challenge was based on the fact that the FDIC filed its claims after the three-year mark to sue, according to the Securities Act of 1933.
The ruling was related to a 2013 ruling in a case concerning UBS that opened the door for what several banks thought was an overreach of federal securities laws defining the time frame when institutions could have suits brought against them.
In October, several banks‒‒First Horizon, Credit Suisse, Deutsche Bank, HSBC, RBS, UBS, and Wells Fargo‒‒petitioned the court in October to review a ruling in the U.S. Court of Appeals that allows the FDIC more time to sue banks. The banks at the time faced a dozen lawsuits from federal regulators, amounting to more than $30 billion in claims.
On Monday, the Supreme Court concluded that the banks’ case “concerns a purely legal question of federal statutory interpretation” of whether the extender provision overstepped the Securities Act’s Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) statute.
“The defendants have not identified any aspect of the Supreme Court’s decision in CTS that requires us to revisit our UBS holding,” the ruling stated. “Accordingly, that holding controls this case, and mandates the conclusion that the FDIC’s complaint was timely.”
Robert J. Giuffria, Partner with Sullivan & Cromwell, representing the banks, said in an email to DS News, “We're disappointed and hope the court decides to review this important legal issue in a later case.”
Click here to view the Supreme Court's decision.