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U.S. justices send credit union case back to appeals court
June 16, 2014 / 4:25 PM / 3 years ago

U.S. justices send credit union case back to appeals court

WASHINGTON, June 16 (Reuters) - The U.S. Supreme Court on Monday threw out an appeals court ruling that had allowed a lawsuit by a federal regulatory agency to go forward against several banks over their role in selling mortgage-backed securities to now-failed credit unions.

The court’s decision means the Denver-based 10th U.S. Circuit Court of Appeals will be forced to reconsider whether the National Credit Union Administration’s litigation against the lenders, including units of Royal Bank of Scotland PLC and Wells Fargo & Co, can continue.

The other defendants in the case are units of Nomura Holdings Inc and Novation Companies Inc.

The court threw out the appeals court’s earlier ruling in favor of the agency in light of its decision last week in a case called CTS v. Waldburger, which raised a similar legal question about the timing of lawsuits.

The National Credit Union Administration is the independent federal agency that regulates, charters and supervises federal credit unions.

The regulator had sued on behalf of two failed credit unions, U.S. Central Federal Credit Union and Western Corporate Federal Credit Union. The regulator has separate litigation pending against other defendants over securities sold to other failed credit unions.

The government agency placed several credit unions into conservatorship following losses they incurred when what were considered low-risk investments in 2006 and 2007 were significantly downgraded following the 2008 financial crisis. The regulator says the lenders made misrepresentations, in violation of federal securities laws, when selling the securities.

The lenders sought high court review after the 10th U.S. Circuit Court of Appeals ruled in August 2013 that the regulator did not wait too long before filing its lawsuit.

The case is Nomura et al v. NCUA, U.S. Supreme Court, 13-576 (Reporting by Lawrence Hurley; Editing by Will Dunham and Grant McCool)

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