DENVER—The NCUA has won a victory in litigation against Barclays Capital with a ruling by the Tenth Circuit Court of Appeals that revives a suit that had been dismissed.
In the litigation, NCUA is alleging that Barclays Capital Inc. misrepresented the quality of more than $555 million in residential mortgage-backed securities (RMBS) that went south and contributed to the failure of two corporates.
The NCUA suit was originally filed in September 2012 and alleged that Western Corporate (WesCorp) and U.S. Central Federal Credit Union failed as a result of RMBS investments that tanked as the result of a large number of defaults in the underlying mortgages. The case was dismissed by in July 2013 by U.S. District Judge John W. Lungstrumm, who ruled that the charges were time-barred and the NCUA filed its case too late.
But the Tenth Court of Appeals overturned that ruling, and found that while NCUA’s claims were filed six months past its deadline (the agency was required to bring suit by March 20, 2012, three years after its appointment as conservator of the failed credit unions, but did not file its lawsuit until Sept. 25, 2012), Barclays had nonetheless agreed to “a series of tolling agreements that purported to exclude all time that passed during the settlement negotiations when ‘calculating any statute of limitations, period of repose or any defense related to those periods or dates that might be applicable to any Potential Claim that the NCUA may have against Barclays.’”
The appeals court added, “Thus, while it is true that the NCUA’s claims are outside the statutory period and therefore untimely, that argument is unavailable to Barclays because the NCUA reasonably relied on Barclays’ express promise not to assert that defense.”