United States District Court, District of Columbia
N. McFADDEN UNITED STATES DISTRICT JUDGE
case represents one piece of the litigation resulting from
the 2008 financial crisis. The Plaintiff, Long Beach
Securities Corporation, previously settled a suit with the
National Credit Union Administration Board over certain
residential mortgage-backed securities. Long Beach now argues
that the settlement agreement requires the Board to relieve
Long Beach of its liability for a third-party indemnity claim
based on those same securities, or, alternatively, that
unjust enrichment principles require the same result. I
conclude that one of Long Beach's two contract arguments,
and the unjust enrichment count, survive the Board's
Motion to Dismiss.
National Credit Union Administration is an independent
federal agency that charters and regulates federal credit
unions "under the management of a National Credit Union
Administration Board." 12 U.S.C. § 1752a; Compl. 1.
Beginning in 2008, some credit unions under the Board's
authority were decimated by failed investments in residential
mortgage-backed securities, and the Board stepped in to act
first as the credit unions' conservator, and ultimately
as their liquidating agent. Def.'s Mot. Dismiss 2-3. In
this liquidating agent capacity, the Board filed civil cases
against various entities that had been involved in selling
the securities to the credit unions-suits that led to this
The Board Settles with JPMorgan and Long Beach
2011-2013, the Board filed four suits against entities owned
directly or indirectly by JPMorgan Chase & Co.
(JPMorgan), "relating to the purchase of residential
mortgage-backed securities" by credit unions then in
liquidation. Compl. ¶ 1. Long Beach Securities
Corporation (Long Beach) was included in that suit as "a
subsidiary of non-party JPMorgan Chase Bank, NA., which, in
turn, is a wholly owned bank subsidiary of JPMorgan."
Id. ¶¶ 1, 8. JPMorgan entered into a
global settlement of all four cases, paying the Board over
$1.4 billion under a Settlement Agreement signed in November
2013. 7tf.¶ 1, Ex. A, ECF No. 1-1 (Settlement
Agreement). The agreement included two paragraphs dealing
with the Board's suits against third parties-sections
8(a) and 8(b)-that Long Beach now attempts to enforce in this
action. Settlement Agreement 7-8.
The Board Accepts an Offer of Judgment Against Credit
the Board settled with JPMorgan, it was also in active
litigation against Credit Suisse Securities (USA) LLC and
Credit Suisse First Boston Mortgage Securities Corp. Compl.
¶ 3. That suit alleged, among other things, that Credit
Suisse USA had made "misstatements concerning the
standards applied in originating the mortgage loans"
associated with two securities transactions covered by the
JPMorgan Settlement Agreement. Id. ¶ 28. The
Credit Suisse defendants made an offer of judgment "that
involved paying the  Board the full amount of damages it
was claiming ... while otherwise limiting the judgment to one
that would have no precedential or res judicata
effect and treating it as though it were a settlement of
disputed matters." Id. ¶ 29. The Board had
14 days to accept the offer or it would lapse, and the Board
would have to pay the defendants' "costs incurred
after the offer was made" unless they later obtained a
more favorable judgment. Fed.R.Civ.P. 68. The Board accepted
the offer one day before the deadline, and the court in April
2016 entered a Stipulated Judgment for over $50 million,
including amounts for pre-judgment interest and
attorney's fees that the parties had negotiated. Compl.
¶¶ 30-31. "During the negotiations it had with
[the Credit Suisse defendants], the  Board .. . made no
effort to obtain ... a release" "from contribution
or indemnity for [Long Beach] or any other JPMorgan
entity." Id. ¶ 33. The Board also did not
reduce the Stipulated Judgment "to account for [Credit
Suisse USA's] alleged indemnification rights against
[Long Beach]." Id. ¶ 33.
Long Beach Settles an Indemnity Claim With Credit
securities transactions with federal credit unions that
caused the Board suits, Credit Suisse USA had acted as the
underwriter, and Long Beach as the depositor. Id.
¶¶ 3, 23 (the Long Beach Mortgage Loan Trust 2006-1
transaction, and the Long Beach Mortgage Loan Trust 2006-6
transaction). Each transaction had an Underwriting Agreement,
under which Long Beach "agreed to indemnify and hold
harmless [Credit Suisse] USA against various matters arising
out of the [pertinent] Transaction, including liability for
alleged misstatements as to matters other than information
relating to the underwriters." Id. ¶¶
24, 26. After the Stipulated Judgment with the Board, Credit
Suisse USA "demanded indemnity" from Long Beach in
the amount of $ 19.62 million, invoking these Underwriting
Agreements. Id. ¶ 34.
Beach, in turn, demanded that the Board "reduce the
Stipulated Judgment it obtained against [Credit Suisse USA]
and/or otherwise take steps to protect [Long Beach] from
[the] indemnification claim. The  Board steadfastly refused
to do so." M¶ 35. When told by the Board that it
should file an administrative proof of claim, Long Beach did
so. Id. ¶ 36. Meanwhile, Credit Suisse USA
"continued to threaten litigation against [Long Beach]
in order to seek recovery on its claim for
indemnification." Id. Long Beach and Credit
Suisse USA agreed to enter "non-binding mediation and,
in the event the mediation was unsuccessful,
arbitration." Id. ¶ 37. Their agreement to
this effect was "drafted ... to allow the  Board to
participate in the mediation discussions and/or arbitration
should it choose to do so, " and Long Beach informed the
Board of this option in December 2016, ahead of the mediation
scheduled for January 10, 2017. Id. The Board did
not respond until February 2017-after the mediation session
had occurred-stating that "it would not participate in
any future mediation or arbitration proceedings."
the initial mediation session in January 2017 was
unsuccessful, Long Beach and Credit Suisse USA
"continued to participate in follow-up discussions with
the mediator, " eventually agreeing to settle the
"$19.62 million claim for $10 million."
Id. ¶39. In April 2017, the two parties entered
into an agreement that fully released Credit Suisse USA's
claims against Long Beach, and Long Beach paid Credit Suisse
USA the $10 million in settlement funds. Id. In June
2017, the Board denied Long Beach's administrative claim.
Long Beach Sues the Board
2017, Long Beach filed this case against the Board. In Count
I of the Complaint, Long Beach argues that the Board has
breached the Settlement Agreement by (1) "failing to use
its 'good faith and best efforts' to obtain for [Long
Beach] a release from [Credit Suisse] USA of claims on the
basis of contribution [or] indemnification, " and by
(2) "refusing to reduce the Stipulated Judgment it
obtained in the Credit Suisse Action in an amount sufficient
to hold [Long Beach] harmless against [Credit Suisse]
USA's claim for indemnification." Id.
¶¶ 44-45. In Count II, Long Beach claims that by
benefiting from the $1.4 billion JPMorgan settlement, without
reducing that amount or the $50 million Credit Suisse
Stipulated Judgment to offset the Credit Suisse USA
indemnification claim against Long Beach, the "Board has
been unjustly enriched in an amount to be determined at
trial." Id. at 15.
complaint attacked by a Rule 12(b)(6) motion to dismiss does
not need detailed factual allegations." Bell Ail.
Corp. v. Twornbly, 550 U.S. 544, 555 (2007). That said,
"a complaint must contain sufficient factual matter,
accepted as true, to 'state a claim to relief that is
plausible on its face.'" Ashcroft v. Iqbal,
556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S.
at 570). "A claim crosses from conceivable to plausible
when it contains factual allegations that, if proved, would
'allow the court to draw the reasonable inference that
the defendant is liable for the misconduct
alleged.'" Banneker Ventures, LLC v.
Graham, 798 F.3d 1119, 1.129 (D.C. Cir. 2015)
(alteration omitted) (quoting Iqbal, 556 U.S. at
678). In this inquiry, a court must "draw all reasonable
inferences from those allegations in the plaintiffs favor,
" but it does not "assume the truth of legal
York law governs the interpretation of this contract, as the
parties agree. Settlement Agreement 10 ("This Agreement
is governed by and shall be construed in accordance with the
laws of the State of New York."). "Under New York
law . .. the question of whether a written contract is
ambiguous is a question of law for the court." J A
Apparel Corp. v. Abboud, 568 F.3d 390, 396 (2d Cir.
2009). "Ambiguity is determined by looking within the
four corners of the document, not to outside sources."
Id. (citation omitted). Ambiguity does not exist
"merely because the parties urge different
interpretations, " but rather when the language at issue
is "capable of more than one meaning when viewed
objectively by a reasonably intelligent person who has
examined the context of the entire integrated agreement and
who is cognizant of the customs, practices, usages and
terminology as generally understood in the particular trade
or business.'" Id. at 396-97 (quoting
Revson v. Cinque & Cinque, P.C, 221 F.3d 59, 66
(2d Cir. 2000)). "[W]here the contract language creates
ambiguity, extrinsic evidence as to the parties' intent
may properly be considered, " but "[i]f the
contract is unambiguous, its meaning is ... a question of law
for the court to decide." Id. at 397.
"Contract language is not ambiguous if it has a definite
and precise meaning, unattended by danger of misconception in
the purport of the [contract] itself, and concerning which
there is no reasonable basis for a difference of
opinion." Id. at 396 (internal quotation marks
and citations omitted).
interpreting an unambiguous contract, the court is to
consider its '[p]articular words' not in isolation
'but in the light of the obligation as a whole and the
intention of the parties as manifested thereby.'"
Id. (citation omitted); Kolbe v. Tibbetts,
3 N.E.3d 1151, 1156 (N.Y. 2013) (same). "[U]nder New
York law, words and phrases . . . should be given their plain
meaning, and the contract should be construed so as to give
full meaning and effect to all of its provisions."
Process Am., Inc. v. Cynergy Holdings, LLC, 839 F.3d
125, 133 (2d Cir. 2016) (internal quotation marks and