Nomura

Nomura Settles DOJ RMBS Claims for $480 Million

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Nomura Holdings, Inc. (“Nomura”) and its U.S. affiliates agreed to pay $480 million to resolve claims brought by the United States Department of Justice (“DOJ“) for alleged misrepresentations in connection with RMBS offerings made prior to 2009. The DOJ alleged that Nomura violated the Financial Institutions Reform, Recovery and Enforcement Act by misleading investors about the risks associated with over $13 billion in RMBS securities that Nomura marketed, sold, and issued. Although Nomura reportedly represented its due diligence process as robust and extensive, the DOJ alleged that Nomura ignored those findings and securitized loans that did not meet underwriting guidelines and continually transacted with loan originators with questionable practices. Nomura disputes the DOJ’s characterization of its practices, and released a statement advising that it settled the dispute to avoid incurring additional legal expense related to the transactions at issue in the investigation. DOJ Press Release. Nomura Press Release. Settement Agreement.

Court Denies Summary Judgment on Issues of Timeliness in NCUA RMBS Suit

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On September 1, 2016, Judge John W. Lungstrum of the U.S. District of Kansas denied cross-motions for summary judgment on the issue of timeliness brought by RBS, Nomura and the NCUA in NCUA v. RBS Securities, et al. NCUA alleges in its 2011 complaint that it suffered losses of $800 million on 2006-2007 vintage RMBS certificates based on misstatements by the defendants. Defendants RBS and Nomura argued on summary judgment that NCUA’s claims must be dismissed because they were not brought within one year after discovering the allegedly untrue statement or omission, or after such discovery should have been reasonably made. NCUA argued in opposition that it did not have constructive notice of the facts underlying its claims by the relevant dates and that its claims were timely. The Court found that “a jury could reasonably find in favor” of either party as to what a “reasonably diligent investor would have known and done in 2007 and 2008 on the timeliness issue” and that as a result fact questions remained precluding summary judgment for either side. Memorandum and Court Order.

Ninth Circuit Revives RMBS Claims against Nomura

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On August 15, 2016, the Ninth Circuit Court of Appeals vacated the Central District of California’s order dismissing claims brought by the National Credit Union Administration Board (“NCUA”), as liquidating agent of Western Corporate Federal Credit Union (“Wescorp”), against Nomura Home Equity Loan, Inc. (“Nomura”) under the Securities Act of 1933.  In 2014, the district court granted Nomura’s motion to dismiss claims that it had made materially false and misleading statements in the offering documents in respect of certificates sold to Wescorp in 2006 and 2007, holding that the NCUA’s claims were barred by the statute of repose established in Section 13 of the 1933 Act, which runs three years after the securities were offered or sold.  The Ninth Circuit disagreed with the district court, concluding that both the text and the legislative purpose of the Extender Statute in the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (“FIRREA”) indicate that Congress intended it to supplant the 1933 Act statute of repose and to further a policy of “protecting the government’s right to recovery.” Opinion at 13.  The Ninth Circuit further concluded that, although the text of the Extender Statute only mentions contract and tort claims, because its dictate is to cover “all actions” brought by the NCUA, it also applies to statutory claims, such as the 1933 Act claims at issue in this case.  Thus, the Ninth Circuit held that the NCUA’s claims against Nomura are not time-barred and remanded the case to the Central District for further proceedings. Summary.

 

Court Enters $806 Million Judgment in FHFA v. Nomura

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On May 16, 2015, Judge Denise Cote of the United States District Court for the Southern District of New York entered a judgment requiring Nomura and RBS to buy back, at a total cost of $806 million, seven RMBS certificates sold to Fannie Mae and Freddie Mac from 2005 to 2007.  The judgment stemmed from Judge Cote’s May 11, 2015 Opinion finding Nomura and RBS liable for violations of the Securities Act of 1933, the D.C. Securities Act, and the Virginia Securities Act.  For those certificates for which FHFA prevailed under multiple statutes, FHFA was permitted to, and did, elect the maximum available remedies.  Judge Cote also ordered that FHFA is entitled to post-judgment interest, reasonable attorneys’ fees, and costs.  Judgment.

RMBS Trustee Files New Repurchase Action Against Nomura

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On September 17, HSBC Bank USA NA, as trustee for an RMBS trust, filed suit in the Supreme Court for the State of New York against Nomura Credit & Capital Inc. over approximately $613 million in RMBS issued in May 2007. The complaint alleges that Nomura failed to repurchase securitized mortgage loans that breached representations and warranties made by Nomura concerning, among other things, the loans’ credit characteristics, origination, and compliance with applicable laws and regulations. The lawsuit seeks Nomura’s repurchase of the allegedly defective loans or equivalent money damages. The complaint follows the dismissal of a prior complaint in federal court that was dismissed for lack of subject matter jurisdiction. Complaint.

NY Court Dismisses Repurchase Suit Against Nomura In Part

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On June 26, 2014,  Justice Friedman of the Supreme Court of the State of New York partially granted Nomura Credit & Capital Inc.’s (Nomura) motion to dismiss a repurchase suit brought by Nomura Asset Corporation Alternative Loan Trust, Series 2006-S4 (the Trust). The Trust alleged breach of contract in connection with the securitization of $254 million in mortgage loans.  The court dismissed the plaintiff’s claim for rescission and for breach of contract.  The court did not dismiss the plaintiff’s breach of contract claims based on the statute of limitations, holding that those claims accrued on the Closing Date of the transaction and were brought within six years of accrual.  The court also denied Nomura’s motion to dismiss based on the contractual sole remedy provision, holding that equitable damages for failure to repurchase loans are allowable where specific performance is unavailable.  Order.

Court Grants in Part and Denies in Part Nomura’s Motion to Dismiss Trustee Repurchase Action

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On July 18,  Justice Marcy Friedman of the New York County Supreme Court, Commercial Division, granted in part and denied in part Nomura Credit & Capital Inc.’s motion to dismiss claims brought by HSBC, as Trustee for the NAAC 2006-AF2 RMBS Trust, seeking damages, specific performance and indemnification for alleged breach of contract.  Relying on her order from a prior case involving Nomura, Justice Friedman held that the causes of action for damages and specific performance were adequately pled to the extent they were based on Nomura’s alleged breaches of representations and warranties regarding mortgage loans.  Justice Friedman held that the relief available to the plaintiff was limited, by operation of the sole remedy provision of the parties’ contract, to specific performance of the repurchase protocol or damages consistent with the protocol’s terms.  She thus dismissed plaintiff’s cause of action seeking rescissory damages.  Justice Friedman also rejected the plaintiff’s argument that alleged willful misconduct rendered the sole remedy provision unenforceable, holding both that plaintiff failed to adequately allege intentional wrongdoing by Nomura and that the sole remedy provision was not the type of exculpatory clause that could be rendered unenforceable by willful misconduct.  Finally, Justice Friedman rejected plaintiff’s request for attorneys’ fees, holding that the indemnification provision in the parties’ contract did not clearly provide for fee shifting in lawsuits between the parties.  Order.

New York State Court Dismisses RMBS Putback Action Against Nomura As Time-Barred

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On May 10, Justice Sherwood of the Supreme Court of the State of New York dismissed on statute of limitations grounds an RMBS putback action brought against Nomura Credit & Capital, Inc. (Nomura).  Plaintiff alleged that Nomura breached representations and warranties concerning mortgage loans securitized in a $259 million RMBS trust and sought to compel Nomura to buy back the loans or rescind the entire transaction.  Justice Sherwood held that plaintiff’s claim for breach of contract accrued at the time of the transaction – when the representations were made – not when Nomura declined to repurchase allegedly breaching loans.  Applying that accrual date, Justice Sherwood found the claims untimely.  The amended complaint was filed by the trustee more than six years after the time of the transaction, and it did not relate back to the filing of the original complaint and summons with notice because the original hedge fund plaintiffs lacked standing to sue under the governing agreements.  Orrick, Herrington & Sutcliffe represents Nomura in this case.  Order.