holding that plaintiff’s delay of “over a year after Defendants challenged its standing . . . . was not a reasonable time after the standing objection was raised” (alterations adopted) (internal quotation marks and citation omitted)
How later courts described this case
- holding that plaintiff’s delay of “over a year after Defendants challenged its standing . . . . was not a reasonable time after the standing objection was raised” (alterations adopted) (internal quotation marks and citation omitted)
- stating that the granting clause effected a “complete transfer” of the estate of trusts to an indenture trustee
- When a plaintiff was aware of the deficiencies in his complaint when he first amended, he clearly has no right to a second amendment even if the proposed second amended complaint in fact cures the defects of the first. Simply put, a busy district court need not allow itself to be imposed upon by the presentation of theories seriatim. (alteration adopted) (footnote and quotation marks omitted)
- ‘When a plaintiff was aware of the deficiencies in his complaint when he first amended, he clearly has no right to a second amendment even if the proposed second amended complaint in fact cures the defects of the first.” (alteration and internal quotation marks omitted)
Written by the judges who cited it.
The opinion
17‐756‐cv
Nat’l Credit Union Admin. Bd. v. U.S. Bank Nat’l Ass’n
In the
United States Court of Appeals
for the Second Circuit
AUGUST TERM 2017
No. 17‐756‐cv
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,
NATIONAL CREDIT UNION ADMINISTRATION BOARD
on Behalf of the NGN Trusts,
GRAEME W. BUSH, as Separate Trustee,
Plaintiffs‐Appellants,
v.
U.S. BANK NATIONAL ASSOCIATION,
BANK OF AMERICA, NATIONAL ASSOCIATION,
Defendants‐Appellees,
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,
Nominal Defendants.
On Appeal from the United States District Court
for the Southern District of New York.
ARGUED: MARCH 8, 2018
DECIDED: AUGUST 2, 2018
Before: CABRANES and CARNEY, Circuit Judges, and CAPRONI, District
Judge.*
The Plaintiff‐Appellant National Credit Union Administration
Board manages the National Credit Union Administration (together,
“NCUA”), an independent federal agency responsible for regulating
and insuring federal credit unions. In 2009 and 2010, NCUA
liquidated five corporate credit unions and succeeded to ownership
of their assets. These assets included certificates they held in
Judge Valerie Caproni, of the United States District Court for the Southern
*
District of New York, sitting by designation.
2
residential mortgage‐backed securities trusts (“RMBS Trusts”).
NCUA then entered into a series of agreements to resecuritize the
certificates and transferred most of the certificates into newly created
and independent statutory trusts.
In late 2014 and early 2015, NCUA brought contractual,
common law, and statutory claims against the trustees of the RMBS
Trusts, Defendants‐Appellees U.S. Bank National Association (“U.S.
Bank”) and Bank of America, National Association (“Bank of
America”; jointly, “Defendants”). Where NCUA had placed an RMBS
Trust certificate into a statutory trust, it brought derivative claims on
behalf of the statutory trust.
The United States District Court for the Southern District of
New York (Katherine B. Forrest, Judge) twice dismissed the derivative
claims. The District Court subsequently denied NCUA’s motion for
leave to supplement its Second Amended Complaint. Judgment was
entered on March 16, 2017.
On appeal, NCUA argues that the District Court
(1) erroneously determined that NCUA lacks derivative standing and
(2) abused its discretion when it denied NCUA’s motion for leave to
supplement the Second Amended Complaint. Following the plain
language of the contracts under which NCUA transferred the RMBS
Trust certificates, we conclude that the District Court correctly found
that NCUA lacks derivative standing to bring claims based on those
certificates. We also conclude that the District Court did not abuse its
discretion when it denied NCUA’s motion for leave to supplement.
3
Accordingly, we AFFIRM the District Court’s judgment.
DAVID C. FREDERICK, Kellogg, Hansen,
Todd, Figel & Frederick, P.L.L.C.,
Washington, DC (Scott K. Attaway and
Frederick Gaston Hall, Kellogg, Hansen,
Todd, Figel & Frederick, P.L.L.C.,
Washington, DC; and George A. Zelcs and
John A. Libra, Korein Tillery LLC, Chicago,
IL, on the brief), for Plaintiffs‐Appellants.
FRED A. ROWLEY, Munger, Tolles & Olson
LLP, Los Angeles, CA (James C. Rutten,
Jacob S. Kreilkamp, Wesley T.L. Burrell,
and Adam P. Barry, Munger, Tolles &
Olson LLP, Los Angeles, CA; David F.
Graham, Sidley Austin LLP, Chicago, IL;
and Isaac S. Greaney and Daniel Gimmel,
Sidley Austin LLP, New York, NY, on the
brief), for Defendant‐Appellee Bank of America,
National Association.
David F. Adler, Louis A. Chaiten, and
Amanda R. Parker, Jones Day, Cleveland,
OH, for Defendant‐Appellee U.S. Bank
National Association.
4
JOSÉ A. CABRANES, Circuit Judge:
The Plaintiff‐Appellant National Credit Union Administration
Board manages the National Credit Union Administration (together,
“NCUA”), an independent federal agency responsible for regulating
and insuring federal credit unions. In 2009 and 2010, NCUA
liquidated five corporate credit unions and succeeded to their assets,
including certificates they held in residential mortgage‐backed
securities trusts (“RMBS Trusts”). NCUA then entered into a series of
agreements to resecuritize the certificates and transferred most of the
certificates into newly created and independent statutory trusts.
In late 2014 and early 2015, NCUA brought contractual,
common law, and statutory claims against the trustees of the RMBS
Trusts, Defendants‐Appellees U.S. Bank National Association (“U.S.
Bank”) and Bank of America, National Association (“Bank of
America”; jointly, “Defendants”). Where NCUA had placed an RMBS
Trust certificate into a statutory trust, it brought derivative claims on
behalf of the statutory trust.
The United States District Court for the Southern District of
New York (Katherine B. Forrest, Judge) twice dismissed the derivative
claims. The District Court subsequently denied NCUA’s motion for
leave to supplement its Second Amended Complaint. Judgment was
entered on March 16, 2017.
5
On appeal, NCUA argues that the District Court
(1) erroneously determined that NCUA lacks derivative standing and
(2) abused its discretion when it denied NCUA’s motion for leave to
supplement the Second Amended Complaint. Following the plain
language of the contracts under which NCUA transferred the RMBS
Trust certificates, we conclude that the District Court correctly found
that NCUA lacks derivative standing to bring claims based on those
certificates. We also conclude that the District Court did not abuse its
discretion when it denied NCUA’s motion for leave to supplement.
Accordingly, we AFFIRM the District Court’s judgment.
I. BACKGROUND1
A. Overview of NCUA
NCUA is an independent federal agency managed by the
NCUA Board.2 It is responsible for, among other things, chartering
and regulating federal credit unions, and operating and managing
credit union insurance and stabilization funds. Two of NCUA’s
capacities are relevant here: (1) to act as liquidating agent for failing
or failed credit unions (“NCUA Liquidating Agent”), and (2) to act as
1 On review of a District Court’s decision granting a motion to dismiss, we
take as true the facts set forth in the complaint. Horowitz v. 148 S. Emerson Assocs.
LLC, 888 F.3d 13, 16 n.1 (2d Cir. 2018). The facts recited in this section are thus
stated as alleged in NCUA’s Second Amended Complaint and the documents
attached to it.
2 12 U.S.C. § 1752a(a).
6
guarantor of debts (“NCUA Guarantor”). In this litigation NCUA
alleges that these are “distinct capacit[ies],”3 and in other litigation
NCUA has represented that they are “separate legal entit[ies].”4
Where appropriate, we distinguish between these two “capacities” or
“entities.”
NCUA Liquidating Agent. When an insured credit union is in
danger of failing, NCUA Liquidating Agent may close the credit
union and appoint itself liquidating agent.5 Upon liquidation, NCUA
Liquidating Agent “succeed[s] to . . . all rights, titles, powers, and
privileges of the credit union, and of any member, accountholder,
officer, or director of such credit union with respect to the credit union
and the assets of the credit union.”6 NCUA Liquidating Agent
thereafter can “collect all obligations and money due the credit
union,”7 and may “realize upon the assets of the credit union.”8
3 Second Am. Verified Derivative Compl. (“SAC”) at 6, Nat’l Credit Union
Admin. Bd. v. U.S. Bank Nat’l Ass’n, No. 1:14‐cv‐9928 (S.D.N.Y. July 17, 2015), ECF
No. 92 (“Second Amended Complaint”).
4 Reply Mem. of Law to Pls.’ Obj. to Mot. to Substitute the National Credit
Union Administration Board, as Liquidating Agent for the New London Security
Federal Credit Union, in Place of Pls. at 4–5, Goldblatt v. Wells Fargo Advisors LLC,
No. 3:10‐cv‐924 (D. Conn. Jan. 18, 2011), ECF No. 76.
5 See 12 U.S.C. § 1787(a)(1)(A).
6 12 U.S.C. § 1787(b)(2)(A)(i).
7 12 U.S.C. § 1787(b)(2)(B)(ii).
8 12 U.S.C. § 1787(b)(2)(E).
7
NCUA Guarantor. NCUA Guarantor acts as an agency of the
executive branch, and can provide a guarantee, backed by the full
faith and credit of the United States, of the timely repayment of debts.
B. NCUA Liquidates Credit Unions and Succeeds to Certificates in
Residential Mortgage‐Backed Securities Trusts
In 2009 and 2010, NCUA Liquidating Agent placed five failing
corporate credit unions (jointly, “the CCUs”) into conservatorship
and involuntary liquidation.9 At the time of their liquidation, the
CCUs held investment securities, commercial mortgages, and other
“securitized” assets10 (the “Legacy Assets”). Those Legacy Assets
included certificates in ninety‐eight residential mortgage‐backed
securities trusts (“RMBS Trusts”). Each RMBS Trust consisted of
hundreds of individual residential mortgage loans that were pooled
together and securitized to investors. The RMBS Trust certificates
entitled the CCUs to fixed principal and interest payments, which
derived from the income streams generated as borrowers made
monthly payments on the mortgage loans in the RMBS Trusts. The
9 The five CCUs were 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.
10 Securitization is the process of converting assets “into negotiable
securities for resale in the financial market, allowing the issuing financial
institution to remove assets from its books, and thereby improve its capital ratio
and liquidity, and to make new loans with the security proceeds if it so chooses.”
Securitize, Black’s Law Dictionary (10th ed. 2014).
8
CCUs purchased the certificates at a combined original face value of
approximately $6.8 billion.
On liquidation, NCUA Liquidating Agent succeeded to the
Legacy Assets, including the certificates in the ninety‐eight RMBS
Trusts. NCUA Liquidating Agent also succeeded to any claims that
the CCUs had as certificateholders in the RMBS Trusts.
C. NCUA’s Resecuritization of the RMBS Trust Certificates
In 2010, the NCUA Board created the NCUA Guaranteed Notes
(“NGNs”) Program to liquidate and resecuritize the Legacy Assets.
Under the program, NCUA Liquidating Agent transferred certain
Legacy Assets, including most of the RMBS Trust certificates, into
trusts (the “NGN Trusts”). The NGN Trusts then issued
approximately $28.3 billion in NGNs, holders of which would receive
payment from the Legacy Assets’ cash flows. NCUA Guarantor
provided a guaranty of the timely repayment of all principal and
interest to the investors in the NGNs.
Each NGN Trust issued the NGNs pursuant to a set of three
key agreements (“Agreements”): (1) an NGN Trust Agreement, (2) an
9
NGN Indenture Agreement, and (3) an NGN Guaranty Agreement.11
The NGN Agreements12 were executed on the same day.13
1. NGN Trust Agreements
The NGN Trust Agreements established each NGN Trust as “a
‘statutory trust’ under the Delaware Statutory Trust Act,”14 and are
governed by Delaware law.15 As Delaware statutory trusts, the NGN
Trusts are “separate legal entit[ies].”16 The Trust Agreements
appointed Wells Fargo Delaware Trust Company, N.A. (“Wells
11 Each NGN Trust entered into its own separate NGN Agreements. In its
Second Amended Complaint, NCUA represented that the sets of NGN
Agreements “are substantially similar” to one another, and attached
“[r]epresentative examples.” Second Amended Complaint at 9 n.4. Because those
documents were incorporated by reference into the complaint, we may consider
them when reviewing the District Court’s decision here. DiFolco v. MSNBC Cable
L.L.C., 622 F.3d 104, 111 (2d Cir. 2010).
In this opinion, we use the following pairs of terms interchangeably:
12
“NGN Agreements” and “Agreements”; “NGN Trust Agreements” and “Trust
Agreements”; “NGN Indenture Agreements” and “Indenture Agreements”; and
“NGN Guaranty Agreements” and “Guaranty Agreements.”
Opinion & Order at 8, Nat’l Credit Union Admin. Bd. v. U.S. Bank Nat’l
13
Ass’n, No. 1:14‐cv‐9928 (S.D.N.Y. Feb. 25, 2016), ECF No. 120 (“May 2015 Order”).
SAC, Ex. C at 4, § 2.06, id., No. 1:14‐cv‐9928 (S.D.N.Y. July 17, 2015), ECF
14
No. 92‐3 (“Trust Agreement”).
15 Id. at 34, § 10.13.
16 Del. Code Ann. tit. 12, § 3801(g).
10
Fargo”) as Owner Trustee.17 NCUA Liquidating Agent was
designated the “Seller.”18
In the Trust Agreements’ Conveyance Clause, NCUA
Liquidating Agent (or “Seller”) agreed to “contribute, transfer,
convey and assign to, and deposit with, the [NGN] Trust[s], without
recourse, all of [NCUA’s] right, title and interest in and to the . . .
Trust Estate,” which included RMBS Trust certificates.19 The Trust
Agreements further provided that the conveyance “is absolute and is
intended by the parties, other than for federal, state and local income
and franchise tax purposes, to constitute a sale . . . to the Trust.”20
In exchange, NCUA Liquidating Agent received Notes21 and
Owner Trust Certificates in the Trust Estate.22 Wells Fargo, as Owner
Trustee, agreed to “hold the Trust Estate . . . in trust for the exclusive
17 Trust Agreement at 4, § 2.04.
18 Id. at 1, para. 1.
19 Id. at 8, § 3.01. The NCUA Board nevertheless allegedly retained some
interests not relevant here. See Appellants’ Opening Br. 8 n.5.
20 Trust Agreement at 6, § 2.14(b).
NCUA Guarantor provided a guarantee of the timely repayment of these
21
Notes, making them NCUA Guaranteed Notes, or “NGNs.” See post note 37 and
accompanying text.
22 Trust Agreement at 8, § 3.01.
11
use and benefit of all present and future Certificateholders of the
Trust Estate.”23
The Notes, which were subsequently sold to investors, entitle
the investors to cash flows from the Trust Estate. The Owner Trust
Certificates are retained by NCUA Liquidating Agent. The Owner
Trust Certificates entitle NCUA Liquidating Agent to a final
distribution of the NGN Trusts’ remaining assets after the Trusts have
satisfied and discharged all outstanding obligations, including
obligations to the holders of the Notes.24
2. NGN Indenture Agreements25
After receiving NCUA Liquidating Agent’s interests in the
Trust Estate, the NGN Trusts entered into the NGN Indenture
Agreements with The Bank of New York Mellon (“BNYM”) to fund
the Notes. The Indenture Agreements appointed BNYM as Indenture
23 Id. at 7, § 2.14(c).
24 See id. at 24–25, § 8.01.
A trust indenture transfers legal title in securities to a trustee for the
25
benefit of individual bondholders and other creditors. The device is used to settle
the security interests on a single entity when it would be “impractical to have the
security run to the group of bondholders directly or to have a separate security
instrument for each bondholder.” Myron Kove et al., The Law of Trusts and Trustees
§ 250, Westlaw (updated June 2018).
12
Trustee,26 and expressly stated that they were to be governed by New
York law.27 NCUA Liquidating Agent is not a party to the Indenture
Agreements.28 The Indenture Agreements, however, define
“Guarantor” as “NCUA in its capacity as an Agency of the Executive
Branch of the United States” (i.e., NCUA Guarantor).29
In each Indenture Agreement, the NGN Trusts granted to
BNYM as Indenture Trustee, “for the benefit of the Holders of the
Notes and the Guarantor, all of the [NGN Trusts’] right, title and
interest in and to” various assets, including the RMBS Trust
certificates in the Trust Estate.30 That grant expressly included “all
present and future claims, demands, causes and choses in action in
respect of” the assets.31
BNYM, for its part, agreed to hold the assets “in trust for the
exclusive use and benefit of all present and future Noteholders and
the Guarantor.”32 BNYM also assumed a duty “to institute . . . any suit
SAC, Ex. B at 5, paras. 1, 6, Nat’l Credit Union Admin. Bd. v. U.S. Bank Nat’l
26
Ass’n, No. 1:14‐cv‐9928 (S.D.N.Y. July 17, 2015), ECF No. 92‐2 (“Indenture
Agreement”).
27 Id. at 89, § 10.10.
28 See id. at 5, para. 1.
29 Id. at 14, para. 4.
30 Id. at 5, para. 6.
31 Id.
32 Id. at 6, para. 3.
13
or other proceeding . . . to protect the interests of the Noteholders and
the Guarantor.”33
Under the Indenture Agreements, the Noteholders have a right
to institute judicial proceedings with respect to the Indentures, but
only if each of certain conditions have been satisfied. These include:
“the Guarantor has consented,” the Noteholder has given BNYM
prior written notice of the “Event of Default” underlying the
anticipated suit, and the “Event of Default . . . occurred and [is]
continuing.”34 The Indenture Agreements do not, on their face, grant
the NGN Trusts or NCUA Liquidating Agent a right to compel any
party to initiate judicial proceedings.
When the Notes have been satisfied, BNYM as Indenture
Trustee must return the RMBS Trust certificates and any other
remaining assets to the NGN Trusts.35 The NGN Trusts, in turn, must
reconvey those assets to NCUA Liquidating Agent as holder of the
Owner Trust Certificates in the NGN Trusts.36
3. NGN Guaranty Agreements
Finally, NCUA Guarantor, the NGN Trusts, and BNYM
entered into NGN Guaranty Agreements. Under these Agreements,
33 Id. at 50, § 5.01(a)(i).
34 Id. at 46, § 4.06(i), (ii), (vii).
35 Id. at 38–39, § 3.01(a), (c).
36 Trust Agreement at 24–25, § 8.01(a), (c).
14
NCUA “absolutely . . . guarantee[d]” the timely payment of the
principal and interest due on the Notes administered by the Indenture
Trustee, BNYM.37
D. NCUA Guarantor Assigns Claims to NCUA Liquidating Agent
and Makes Demand on BNYM
In January 2015, NCUA Guarantor and NCUA Liquidating
Agent entered into an agreement in which NCUA Guarantor
consented to NCUA Liquidating Agent pursuing RMBS Trust
certificate‐related claims (“Claims”).38 NCUA Guarantor also
assigned to NCUA Liquidating Agent “any rights, under law,
contract, or equity, that it may now or in the future have in connection
with the Claims and related litigation.”39
That same day, NCUA Guarantor issued a direction letter to
BNYM, directing the Indenture Trustee to “take action to assert”
claims against the trustees of the RMBS Trusts.40 NCUA Guarantor
also notified BNYM in writing that NCUA Liquidating Agent would
SAC, Ex. D at 2, § 1(a), Nat’l Credit Union Admin. Bd. v. U.S. Bank Nat’l
37
Ass’n, No. 1:14‐cv‐9928 (S.D.N.Y. July 17, 2015), ECF No. 92‐4.
38 SAC, Ex. H at 1, id., ECF No. 92‐8.
39 Id.
40 SAC, Ex. F at 2, Nat’l Credit Union Admin. Bd. v. U.S. Bank Nat’l Ass’n, No.
1:14‐cv‐9928 (S.D.N.Y. July 17, 2015), ECF No. 92‐6; see also id. at 1–2.
15
assert and prosecute those claims on behalf of the NGN Trusts if
BNYM would not do so itself.41
In February 2015, BNYM responded to the direction letter,
stating that it did “not intend to pursue the claims,” but that NCUA
Guarantor had a right to pursue the claims itself.42 BNYM later
submitted a declaration stating that it “takes a neutral position with
respect to any challenge to NCUA’s standing” to assert the claims.43
E. Procedural History
In December 2014, NCUA Liquidating Agent initiated this
action against Defendants. A First Amended Complaint was filed in
February 2015.
NCUA Liquidating Agent’s claims stem from Defendants’
service as trustees for the ninety‐eight RMBS Trusts in which the
CCUs held certificates.44 NCUA Liquidating Agent alleged that, as
41 Id. at 2.
SAC, Ex. G, Nat’l Credit Union Admin. Bd. v. U.S. Bank Nat’l Ass’n, No.
42
1:14‐cv‐9928 (S.D.N.Y. July 17, 2015), ECF No. 92‐7.
43 SAC, Ex. I at 1, para. 5, Nat’l Credit Union Admin. Bd. v. U.S. Bank Nat’l
Ass’n, No. 1:14‐cv‐9928 (S.D.N.Y. July 17, 2015), ECF No. 92‐9. Although the
declaration does not expressly distinguish between NCUA’s two capacities or
entities, it does define “NCUA” as “the National Credit Union Administration
Board.” Id. at 1, para. 3.
According to the Second Amended Complaint, U.S. Bank currently
44
serves as trustee for all ninety‐eight trusts. Second Amended Complaint at 1 n.1.
U.S. Bank was originally the trustee for forty‐seven of the trusts; it became a
16
trustees, Defendants had contractual, common law, and statutory
duties to address and correct problems with the underlying mortgage
loans, and to protect the RMBS Trusts’ and certificateholders’
interests. According to NCUA Liquidating Agent, Defendants
breached their duties by, among other things, failing to take full
possession of the original notes and mortgages, failing to review
mortgage loan files for irregularities, and failing to take steps to hold
parties accountable for the repurchase or substitution of defective
mortgage loans. At oral argument, counsel for NCUA Liquidating
Agent stated that it believes Defendants’ failures caused “hundreds
of millions of dollars” in losses to the RMBS Trusts and
certificateholders.
1. The District Court dismisses First Amended Complaint
On May 18, 2015, the District Court dismissed in part NCUA
Liquidating Agent’s First Amended Complaint for lack of standing.
In its Opinion and Order, the District Court found that NCUA
Liquidating Agent had failed to plead adequate facts establishing that
it had either direct or derivative standing to assert claims that
Defendants violated their obligations as trustees of the RMBS Trusts.
The District Court also identified what it believed to be the “core
standing issue”: “whether and to what extent NCUA’s broad powers
successor trustee for the other fifty‐one trusts through acquisition of other trustees
and appointment. Id. Bank of America served as trustee for some of the trusts
between approximately October 2007 and December 2010. Id.
17
as conservator or liquidating agent of the CCUs survived after NCUA
placed the CCUs’ assets . . . into new, independent trusts.”45
The District Court cautioned NCUA Liquidating Agent that it
would have only “a single opportunity to replead,”46 and instructed
that the Indenture Agreements “should be included as part of any
proposed amendment.”47
2. The District Court dismisses Second Amended
Complaint
NCUA Liquidating Agent used its Second Amended
Complaint to allege derivative claims based on 137 certificates in
eighty‐nine RMBS Trusts and direct claims based on nine certificates
in nine RMBS Trusts. NCUA Liquidating Agent based its derivative
standing on the assignment of rights from NCUA Guarantor to
NCUA Liquidating Agent, the direction letter NCUA Guarantor sent
to BNYM, BNYM’s refusal to bring the claims itself, and BNYM’s
decision not to object to a suit brought on its behalf.
The District Court again dismissed the derivative claims for
two principal reasons. First, NCUA Liquidating Agent did not stand
“in direct line to assert a derivative claim” because the NGN Trusts
45 May 2015 Order at 8 (emphasis in original).
46 Id. at 3.
47 Id. at 7 n.2.
18
had themselves conveyed the claims to BNYM.48 NCUA Liquidating
Agent, in other words, was “twice removed” from the claims.49
Second, the Indenture Agreements’ Granting Clause “effected a
complete transfer of all rights including explicitly the right to sue,”
which precluded the NGN Trusts, as transferor, from bringing any
derivative claims.50 Because NCUA Liquidating Agent was one step
further removed from the claims than the NGN Trusts, NCUA
Liquidating Agent likewise could not bring any derivative claims.
3. The District Court denies NCUA’s motion to supplement
the Second Amended Complaint
Following the District Court’s dismissal in part of the Second
Amended Complaint for lack of derivative standing, NCUA
Liquidating Agent attempted yet again to remedy its standing
defects, this time “through a two‐prong maneuver.”51 First, NCUA
Liquidating Agent moved to supplement its Second Amended
Complaint under Federal Rule of Civil Procedure 15(d) to add new
allegations regarding the December 2015 “winding up” of one NGN
Trust and the April 2016 appointment of Graeme W. Bush as a
Opinion & Order at 20, Nat’l Credit Union Admin. Bd. v. U.S. Bank Nat’l
48
Ass’n, No. 1:14‐cv‐9928 (S.D.N.Y. Feb. 25, 2016), ECF No. 120 (“February 2016
Order”) (emphasis in original).
49 Id. at 20.
50 Id. at 22 (emphasis in original).
Memorandum Decision & Order at 2, Nat’l Credit Union Admin. Bd. v. U.S.
51
Bank Nat’l Ass’n, No. 1:14‐cv‐9928 (May 11, 2016), ECF No. 141 (“May 2016 Order”).
19
“Separate Trustee.” Second, NCUA Liquidating Agent sought to
substitute Bush as the real party in interest under Federal Rule of Civil
Procedure 17(a)(3).
In May 2016, the District Court denied NCUA Liquidating
Agent’s motion, “principally on the basis that any amendment of the
pleadings is untimely.”52 The District Court stated that it had already
“entertained several complaints,” having “made it perfectly clear a
year ago that [NCUA Liquidating Agent’s] assertions of derivative
standing were legally infirm and [having] allowed one final
amendment to address the deficiencies.”53 The District Court also
faulted NCUA Liquidating Agent for not invoking Rule 17 before it
dismissed the derivative claims, and for “[sitting] silently” instead of
notifying it of the unwinding of one NGN Trust.54 Finally, the District
Court found that an amendment to the pleadings would be futile
because NCUA Liquidating Agent lacked Article III standing at the
time it first brought the action.55
NCUA Liquidating Agent thereafter voluntarily dismissed the
remaining direct claims with prejudice. This appeal followed.
52 Id.
53 Id. at 2–3.
54 See id. at 3–5.
55 See id. at 5–6.
20
II. DISCUSSION
We consider, first, whether NCUA Liquidating Agent has
derivative standing to bring claims on behalf of the NGN Trusts or
BNYM as Indenture Trustee. We conclude that it does not. Second,
we address whether the District Court abused its discretion when it
denied NCUA Liquidating Agent’s motion to supplement the Second
Amended Complaint. We hold that the District Court did not abuse
its discretion. Accordingly, we affirm the judgment of the District
Court.
A. Whether NCUA Liquidating Agent Has Derivative Standing
NCUA Liquidating Agent seeks to recover losses that
Defendants allegedly caused when they breached their duties as
trustees of the RMBS Trusts. NCUA Liquidating Agent brought these
claims derivatively on behalf of the nominal defendants, the NGN
Trusts. On appeal, NCUA Liquidating Agent argues that the District
Court erred when it dismissed the derivative claims for lack of
standing. We disagree. Under the clear and unambiguous language
of the Trust and Indenture Agreements,56 NCUA Liquidating Agent
56 The Trust and Indenture Agreements are governed by Delaware and
New York law, respectively. Under the law of both jurisdictions, “[w]hen the
contract is clear and unambiguous, we [must] give effect to the plain‐meaning of
the contract’s terms and provisions.” Osborn ex rel. Osborn v. Kemp, 991 A.2d 1153,
1159–60 (Del. 2010); see also Vintage, LLC v. Laws Constr. Corp., 13 N.Y.3d 847, 849
(2009) (“Where an agreement is unambiguous on its face, it must be enforced in
accordance with the plain meaning of its terms.”).
21
lacks derivative standing to sue on behalf of either the NGN Trusts or
BNYM.
1. Standard of review
We review de novo the District Court’s dismissal of a complaint
under Federal Rule of Civil Procedure 12(b)(6).57 We “accept[ ] as true
the factual allegations of the complaint and draw[ ] inferences based
upon these allegations in the light most favorable to the plaintiffs.”58
To survive a motion to dismiss, the complaint must “contain[ ]
The District Court appeared, at certain points, to view its dismissal of the
57
derivative claims as grounded in a lack of subject‐matter jurisdiction under
Federal Rule of Civil Procedure 12(b)(1). See February 2016 Order at 14–15;
May 2016 Order at 5–6. But unlike Article III standing, derivative standing does
not necessarily present a jurisdictional issue. See In re Facebook, Inc. Initial Pub.
Offering Derivative Litig., 797 F.3d 148, 156–58 (2d Cir. 2015); cf. Strougo v. Bassini,
282 F.3d 162, 167–68 (2d Cir. 2002) (treating “issue of ‘shareholder standing’—
whether the plaintiff may bring direct claims against the defendants” as a
Rule 12(b)(6) question). We adhere to that view here, treating the District Court’s
dismissal for lack of derivative standing as premised on Rule 12(b)(6). Cf. Byrd v.
United States, 138 S. Ct. 1518, 1530 (2018) (stating that Fourth Amendment standing
“should not be confused with Article III standing, which is jurisdictional and must
be assessed before reaching the merits”); Lexmark Int’l, Inc. v. Static Control
Components, Inc., 134 S. Ct. 1377, 1386 (2014) (emphasizing that “‘prudential’
branch of standing . . . [is] not derived from Article III”).
Kaliski v. Bacot (In re Bank of N.Y. Derivative Litig.), 320 F.3d 291, 297 (2d
58
Cir. 2003) (internal quotation marks and alterations omitted).
22
sufficient factual matter, accepted as true, to state a claim to relief that
is plausible on its face.”59
2. Whether NCUA Liquidating Agent has derivative
standing to sue on behalf of the NGN Trusts
NCUA Liquidating Agent lacks derivative standing to bring
claims on behalf of the NGN Trusts for the simple reason that the
NGN Trusts themselves do not have claims to bring. To the contrary,
the NGN Trusts conveyed the RMBS Trust certificates—and any
claims based on those certificates—in their entirety to the Indenture
Trustee, BNYM. We reach this conclusion by following the transfer of
the RMBS Trust certificates from the CCUs to NCUA Liquidating
Agent, to the NGN Trusts, and finally to BNYM.
We begin with NCUA Liquidating Agent’s succession to the
CCUs’ claims. When NCUA Liquidating Agent liquidated the five
CCUs, it “succeed[ed] to . . . all rights, titles, powers, and privileges”60
that the CCUs had as certificateholders in the RMBS Trusts. Those
rights included any claims that the CCUs might have had against the
trustees of the RMBS Trusts, who are the Defendants here.
But NCUA Liquidating Agent did not retain the RMBS Trust
certificates, in which the claims inhered. Instead, it entered into the
Irrera v. Humphreys, 859 F.3d 196, 198 (2d Cir. 2017) (internal quotation
59
marks and alterations omitted).
60 12 U.S.C. § 1787(b)(2)(A)(i).
23
Trust Agreements, in which it agreed to “contribute, transfer, convey
and assign to, and deposit with, the [NGN] Trust[s], without recourse,
all of [NCUA Liquidating Agent’s] right, title and interest in and to”
the Trust Estate, including the RMBS Trust certificates.61 And the
Trust Agreements expressly stated that that conveyance was “absolute
. . . other than for federal, state and local income and franchise tax
purposes.”62
The NGN Trusts then conveyed their interests in the RMBS
Trust certificates to BNYM in the Indenture Agreements. That too was
a complete transfer: the NGN Trusts granted to BNYM “all of [their]
right, title and interest in and to” the Trust Estate, including “all
present and future claims, demands, causes and choses in action in
respect of” assets in the Trust Estate.63
BNYM did not further convey the Trust Estate, which includes
the RMBS Trust certificates. BNYM therefore currently holds the
RMBS Trust certificates and any claims based on those certificates.
And BNYM will continue to hold the claims until the Indenture Notes
are satisfied and the NGN Trusts dissolve.64 Because BNYM—not the
61 Trust Agreement at 8, § 3.01 (emphasis added).
62 Id. at 6, § 2.14(b) (emphasis added).
63 Indenture Agreement at 5, para. 6 (emphasis added).
64 At least one NGN Trust has been dissolved during the litigation, and the
claims held by that trust have been reconveyed to the NCUA Board. [Blue Br. at
3] The implications of the dissolution of that NGN Trust are discussed below.
24
NGN Trusts—currently possesses the claims, NCUA Liquidating
Agent cannot bring the claims derivatively on behalf of the NGN
Trusts.
NCUA Liquidating Agent’s invocations of the Delaware
Statutory Trust Act (“DSTA”) do not disturb this conclusion. It argues
that the DSTA authorizes trust beneficiaries to bring derivative
actions on behalf of the trust,65 that it satisfied Delaware’s demand
requirements,66 and that the DSTA retains the historical distinction
between legal and equitable title in trust property,67 all with the result
that NCUA Liquidating Agent, as beneficiary of the NGN Trusts, is
entitled to sue to enforce the trusts. These assertions of Delaware law
may all be correct, but they are beside the point. Because the NGN
Trusts themselves do not hold the claims, whether Delaware law
permits NCUA Liquidating Agent to bring derivative claims on their
behalf is irrelevant.
3. Whether NCUA Liquidating Agent has standing to bring
claims on behalf of BNYM
If NCUA Liquidating Agent, then, cannot bring the claims on
behalf of the NGN Trusts, can it bring the claims on behalf of the
65 See Appellants’ Opening Br. 23–24.
66 See id. at 24–26.
67 See id. at 29–32.
25
Indenture Trustee, BNYM? The Indenture Agreements are
unambiguous; it cannot.
As Indenture Trustee, BNYM holds the Trust Estate, including
the claims, “in trust for the exclusive use and benefit of all present and
future Noteholders and the Guarantor.”68 Reflecting that beneficiary
status, the Indenture Agreements authorize BNYM “to institute,
appear in or defend any suit or other proceeding . . . to protect the
interests of the Noteholders and the Guarantor.”69 And in the event that
BNYM fails to adequately protect the Noteholders’ interests, the
Agreements provide the Noteholders with a limited right to institute
judicial proceedings themselves.70
But the Indenture Agreements do not authorize the NGN
Trusts or NCUA Liquidating Agent to institute judicial proceedings.
The NGN Trusts and NCUA Liquidating Agent are not beneficiaries
under the Indenture Agreements. Only the Noteholders and NCUA
Guarantor are beneficiaries, and thus only they might—if they
complied with the requirements in the Indenture Agreements—
exercise any control over judicial proceedings.
68 Indenture Agreement at 6, para. 3 (emphasis added); see also id. at 5, para.
6 (granting the NGN Trusts’ “right, title and interest in and to” the Trust Estate
“to the Indenture Trustee, for the benefit of the Holders of the Notes and the
Guarantor”).
69 Id. at 50, § 5.01(a)(i).
70 See id. at 46–47, § 4.06; id. at 48, § 4.11.
26
Nor would it be appropriate for us to read into the Indenture
Agreements a right of the NGN Trusts or NCUA Liquidating Agent
to institute judicial proceedings. Applying “the standard canon of
contract construction expressio unius est exclusio alterius,”71 we
presume that the express grant of the right to institute proceedings to
the Noteholders entails the denial of such a right to others, including
the NGN Trusts and NCUA Liquidating Agent.72 Adopting any other
reading would contravene the intent of the parties. That intent plainly
was to identify and circumscribe the circumstances under which a
beneficiary could compel BNYM to institute judicial proceedings.
The question then becomes whether NCUA Guarantor, as a
beneficiary under the Indenture Agreements, can compel BNYM to
institute proceedings. Notably, NCUA Liquidating Agent does not
argue that the Indenture Agreements authorize NCUA Guarantor to
institute proceedings. This is for good reason. NCUA Liquidating
Agent does not identify, and we do not find, any provision of the
Indenture Agreements authorizing the Guarantor to initiate—or
71 Croteau v. A.C. & S. (In re N.Y. City Asbestos Litig.), 41 A.D.3d 299, 302
(N.Y. 1st Dep’t 2007); see also Two Guys from Harrison‐N.Y., Inc. v. S.F.R. Realty
Assocs., 63 N.Y.2d 396, 404 (1984).
72 See Novak & Co. v. Travelers Indem. Co., 56 A.D.2d 418, 428 (N.Y. 2d Dep’t
1977) (“Plaintiff is not among the classes listed as having a direct right of action
against the surety under the payment bond. Hence its claim to have a right of
action, if one exists . . . , can flow only from the performance bond and can find no
basis in the language of the payment bond.”).
27
compel BNYM to initiate—judicial proceedings under the facts
alleged in the Second Amended Complaint.
NCUA Liquidating Agent makes several attempts to create a
beneficial interest for itself under the Indenture Agreements, but
these all miss the mark. First, NCUA Liquidating Agent makes much
of a clause in the “Tax Administration” section providing “that, for
federal, state and local income and franchise tax purposes . . . the
Certificates [held by NCUA] be treated as beneficial ownership
interests in the Trust Estate.”73 But as the qualification “for federal,
state and local income and franchise tax purposes” makes clear, this
provision concerns only the desired allocation of tax liability on the
Trust Estate. It does not, by its plain terms, create a beneficial interest
for any other purposes.
NCUA also invokes the Delaware Statutory Trust Act’s
codification of “the longstanding historical distinction between legal
title and equitable title, recognizing that a trustee does not act on its
own behalf but rather on behalf of trust beneficiaries.”74 Delaware
law, however, does not govern the Indenture Agreements; New York
law does. And New York law requires that we give effect to the plain
meaning of the Indenture Agreements’ unambiguous terms.75 We
73 Indenture Agreement at 71, § 6.07(b).
74 Appellants’ Opening Br. 27.
75 See Vintage, LLC v. Laws Constr. Corp., 13 N.Y.3d 847, 849 (2009) (“Where
an agreement is unambiguous on its face, it must be enforced in accordance with
the plain meaning of its terms.”).
28
must therefore enforce the provisions of the Indenture Agreements
requiring that the Indenture Trustee hold the Trust Estate for the
exclusive benefit of the Noteholders and Guarantor, not the NGN
Trusts or NCUA Liquidating Agent.
NCUA alternatively argues that we should read the Indenture
and Trust Agreements as a single contract because they were
executed at the same time and are related to the same subject‐matter.76
Application of this canon of contract construction does not change our
conclusion. The unambiguous terms in the individual Agreements
remain unambiguous when they are read together.
Finally, NCUA contends that Defendants themselves lack
standing to challenge actions BNYM took as Indenture Trustee
because “a trustee’s actions may not be challenged by non‐
beneficiaries.”77 But Defendants are not challenging actions taken by
BNYM as trustee. They are simply relying on the Trust and Indenture
Agreements to demonstrate that NCUA Liquidating Agent and the
NGN Trusts assigned their claims to BNYM.
In short, the District Court correctly held that NCUA
Liquidating Agent lacks derivative standing to bring claims based on
the RMBS Trust certificates on behalf of the NGN Trusts or BNYM.
For this canon of construction see Nau v. Vulcan Rail & Construction Co.,
76
286 N.Y. 188, 197 (1941) (citing, inter alia, Restatement of Contracts § 235(c) (Am. Law
Inst. 1932)).
77 Appellants’ Opening Br. 39.
29
B. Denial of Motion for Leave to Supplement the Second Amended
Complaint
Following the District Court’s dismissal in part of the Second
Amended Complaint for lack of derivative standing, NCUA78 moved
for leave to (1) supplement its complaint to add new allegations under
Federal Rule of Civil Procedure 15(d), and (2) substitute a newly
appointed Separate Trustee, Graeme W. Bush, as plaintiff under
Federal Rule of Civil Procedure 17(a)(3). The District Court denied the
motion “principally on the basis that any amendment of the pleadings
is untimely under Rule 15.”79 On appeal, NCUA argues that this
denial constituted reversible error. We disagree.
1. Standard of review
We review the District Court’s denial of a motion under Rules
15 and 17(a)(3) for “abuse of discretion.”80 Under this deferential
standard, we will reverse a district court only “if it based its ruling on
an erroneous view of the law or on a clearly erroneous assessment of
78 Because the distinction between NCUA’s various capacities is not central
to issues discussed in this section, we hereafter refer simply to “NCUA.”
79 May 2016 Order at 2.
80 See McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184, 200 (2d Cir. 2007)
(Rule 15); Commonwealth of Pa. Pub. Sch. Emps.’ Ret. Sys. v. Morgan Stanley & Co.,
814 F.3d 641, 643 (2d Cir. 2016) (Rule 17(a)).
30
the evidence, or rendered a decision that cannot be located within the
range of permissible decisions.”81
Rule 15(d) provides in part: “On motion and reasonable notice,
the court may, on just terms, permit a party to serve a supplemental
pleading setting out any transaction, occurrence, or event that
happened after the date of the pleading to be supplemented.”82
Although language of Rule 15(d) is plainly permissive, we have held
that “[a]bsent undue delay, bad faith, dilatory tactics, undue
prejudice to the party to be served with the proposed pleading, or
futility, [a Rule 15(d)] motion should be freely granted.”83
Rule 17(a)(3) provides that a “court may not dismiss an action
for failure to prosecute in the name of the real party in interest until,
after an objection, a reasonable time has been allowed for the real
party in interest to ratify, join, or be substituted into the action.” A
district court may deny a Rule 17(a) motion as untimely if it is not
filed “within a ‘reasonable time’ after a standing objection is raised.”84
81 In re Sims, 534 F.3d 117, 132 (2d Cir. 2008) (internal quotation marks and
citations omitted).
82 Fed. R. Civ. P. 15(d) (emphasis added).
83 Quaratino v. Tiffany & Co., 71 F.3d 58, 66 (2d Cir. 1995).
84 Commonwealth of Pa. Pub. Sch. Emps.ʹ Ret. Sys., 814 F.3d at 643.
31
2. Whether the District Court abused its discretion
Whether a district court “abused its discretion” is a case‐
specific and often fact‐intensive inquiry.85 We must therefore examine
the District Court’s denial of leave to supplement NCUA’s Second
Amended Complaint in light of the facts of the case, including the
events preceding the denial decision. Upon such review, we conclude
that the District Court acted within its discretion.86
In May 2015, the District Court dismissed the derivative claims
in NCUA’s First Amended Complaint. In its well‐reasoned Opinion
and Order, the District Court aptly identified the “core standing
issue”: “whether and to what extent NCUA’s broad powers as
conservator or liquidating agent of the CCUs survived after NCUA
placed the CCUs’ assets . . . into new, independent trusts.”87 Finding
that NCUA had failed to plead facts establishing that “it specifically
retained . . . the right to assert claims on behalf of [the NGN Trusts],”
the District Court advised it that “[i]f such facts exist, they should be
85 Cf. Jones v. Murphy, 694 F.3d 225, 241 (2d Cir. 2012).
We note that our conclusion in this respect does not mean that a district
86
court’s grant of leave to supplement in a similar situation would be an abuse of
discretion. See generally BlackRock Allocation Target Shares: Series S Portfolio v. Wells
Fargo Bank, Nat’l Ass’n, Nos. 14 Civ. 9371 (KPF) (SN), 14 Civ. 9764 (KPF) (SN), 14
Civ. 10067 (KPF) (SN), 14 Civ. 10102 (KPF) (SN), 15 Civ. 10033 (KPF) (SN), 2017
WL 3610511, at *13–21 (S.D.N.Y. Aug. 21, 2017). Because this is a discretionary call,
the two are not mutually exclusive.
87 May 2015 Order at 8 (emphasis in original).
32
pled.”88 “In the absence of such facts,” the District Court continued,
“the Court is left with the fact that the NGN Trusts are Delaware
statutory trusts, which are separate legal entities with their own
indenture trustee.”89
Having thus identified the relevant standing inquiry, the
District Court advised NCUA that it would have only “a single
opportunity to replead.”90 The District Court also observed that
NCUA had “not provided the Court with copies of the NGN/BNY
Indentures,”91 and instructed that the Indenture Agreements must be
included “as part of any proposed amendment.”92
At this point, NCUA was fully apprised of the stakes involved
in filing a second amended complaint. It had received “a definitive
ruling” on the deficiencies of its initial theory of derivative standing,93
and guidance on how to remedy them. It was told this would be the
last chance to amend. And it knew the District Court would consider
the contents of the Indenture Agreements.
88 Id.
89 Id.
90 Id. at 3.
91 Id. at 7 n.2.
92 Id.
93 See Loreley Fin. (Jersey) No. 3 Ltd. v. Wells Fargo Sec., LLC, 797 F.3d 160, 190
(2d Cir. 2015).
33
Represented, as it was, by able counsel, NCUA also knew, or
should have known, one other fact: contrary to what the District
Court had reasonably assumed,94 the NGN Trusts no longer
possessed the claims. Rather, the NGN Trusts had transferred the
claims to BNYM in the Indenture Agreements. To establish derivative
standing, NCUA would therefore have to show not only that it
specifically retained the right to assert the claims that it transferred to
the NGN Trusts, but also that it specifically retained the right to assert
the claims that the NGN Trusts subsequently transferred to BNYM. In
other words, the disclosure of the Indenture Agreements would make
it even more difficult for NCUA to establish derivative standing.
NCUA nevertheless decided to use its final amendment to
double down on its already‐dismissed theory of standing. It must
now live with the consequences of that decision. When a plaintiff was
aware “of the deficiencies in his complaint when he first amended,”
he “clearly has no right to a second amendment [even if] the proposed
second amended complaint in fact cures the defects of the first.”95
See May 2015 Order at 11 (“[I]t appears that the buck stops with the NGN
94
Trusts.”); see also id. at 7–13.
95 Denny v. Barber, 576 F.2d 465, 471 (2d Cir. 1978) (Friendly, J.); cf. Loos v.
Immersion Corp., 762 F.3d 880, 890–91 (9th Cir. 2014) (“Because Plaintiff essentially
re‐pled the same facts and legal theories in his amended complaint, the district
court did not abuse its discretion in dismissing Plaintiff’s claims with prejudice.”
(internal quotation marks omitted)).
34
Simply put, “a busy district court need not allow itself to be imposed
upon by the presentation of theories seriatim.”96
We are not persuaded by NCUA’s arguments to the contrary.
First, NCUA identifies a possible legal error in one of the District
Court’s proffered rationales for denying the motion. Specifically,
NCUA contends that the District Court erroneously conflated Article
III standing with derivative standing.97 That conflation, it argues, led
the District Court to incorrectly conclude that it lacked subject matter
jurisdiction and colored its entire analysis of the merits of the motion.
Although we agree that the District Court committed the
asserted legal error, NCUA overstates its effect on the decision to
deny NCUA’s request to again amend the complaint. When a district
court offers several alternative and independent rationales for
denying a motion for leave to supplement, it does not abuse its
discretion just because one of its independent reasons for denying the
motion is flawed.98 Here, the alternative rationales independently
support the District Court’s decision denying leave to supplement,
and we see no indication that the court’s error in regard to Article III
standing infected other aspects of its analysis. Accordingly, we
96 State Trading Corp. of India v. Assuranceforeningen Skuld, 921 F.2d 409, 418
(2d Cir. 1990) (internal quotation marks and alteration omitted).
See In re Facebook, Inc., Initial Pub. Offering Derivative Litig., 797 F.3d 148,
97
156–57 (2d Cir. 2015) (distinguishing Article III and derivative standing).
The District Court emphasized that this final rationale, with which
98
NCUA takes issue, was an alternative rationale by beginning the paragraph, “In
addition, another problem . . . .” May 2016 Order at 5.
35
conclude that the District Court’s articulation of an alternative,
independent, and purportedly erroneous rationale for denying the
motion to supplement did not constitute an abuse of discretion in its
decision to deny NCUA’s request to file yet another amended
complaint.
NCUA next argues that the District Court abused its discretion
because it did not provide a definitive ruling on the derivative
standing theory before warning NCUA that it had only one final
opportunity to replead. This misrepresents the District Court’s
Opinion and Order dismissing in part the First Amended Complaint.
In that Opinion and Order, the District Court, with the benefit of full
briefing from both sides, identified the precise defects in NCUA’s
pleadings and “made it perfectly clear . . . that [NCUA’s] assertions of
derivative standing were legally infirm.”99 This stands in stark
contrast to our decision in Loreley, on which NCUA relies so heavily,
where a district court merely identified pleading defects in remarks
made in a conference held before defendants had even filed a motion
to dismiss.100
Nor did NCUA face a true “Hobson’s choice” between
abandoning the derivative standing theory and requesting BNYM
appoint a separate trustee. NCUA could have proceeded under both
theories by simply alleging that the separate trustee was willing to
99 Id. at 3.
See Loreley Fin. (Jersey) No. 3 Ltd. v. Wells Fargo Sec., LLC, 797 F.3d 160,
100
190 (2d Cir. 2015).
36
acquiesce in NCUA’s suit. If the District Court had concluded that the
separate trustee had direct standing and NCUA had derivative
standing, NCUA could have done then what it says it would do on
remand here: “request that BNYM undo the Separate Trustee
Agreement so NCUA may proceed derivatively.”101 At worst, the
District Court might have found that the appointment of the separate
trustee defeated NCUA’s derivative standing, and required the
separate trustee to litigate the claims. In that hypothetical scenario,
NCUA would have achieved what it sought to do by supplementing
its Second Amended Complaint.
NCUA’s reliance on Rule 17 fares no better. NCUA waited over
a year after Defendants challenged its standing to appoint the
Separate Trustee. This was not a “reasonable time after [the] standing
objection [was] raised.”102
Finally, NCUA claims that the District Court’s October 2015
order advising that it would accept “no more paper on this motion [to
dismiss] from either party”103 precluded it from alerting the court to
new factual developments. This excuse rings hollow. The order—
handwritten on Defendants’ motion for leave to file a sur‐rebuttal to
NCUA’s sur‐reply—referred by its plain terms only to further
Appellants’ Opening Br. 49 n.17.
101
Commonwealth of Pa. Pub. Sch. Emps.ʹ Ret. Sys. v. Morgan Stanley & Co.,
102
814 F.3d 641, 643 (2d Cir. 2016) (internal quotation marks omitted).
103 Order, Nat’l Credit Union Admin. Bd. v. U.S. Bank Nat’l Ass’n, No. 1:14‐cv‐
9928‐ (S.D.N.Y. Oct. 28, 2015), ECF No. 116.
37
briefing on that motion. Indeed, that is how NCUA interpreted the
order at the time: on February 10, 2016, after the “no more paper”
order was issued, NCUA filed a supplemental authority letter.
In sum, we conclude that the District Court did not abuse its
discretion when it denied NCUA’s motion for leave to supplement its
Second Amended Complaint.
III. CONCLUSION
To summarize, we hold as follows:
(1) NCUA Liquidating Agent lacks derivative standing to bring
the claims in the Second Amended Complaint on behalf of
the NGN Trusts or BNYM as Indenture Trustee; and
(2) The District Court did not abuse its discretion when it
denied NCUA’s motion for leave to supplement its Second
Amended Complaint.
For the foregoing reasons, we AFFIRM the District Court’s
judgment.
38