Chancellor Carol McCoy allowed a Tennessee state retirement fund’s securities suit over decades-old RMBS purchases to continue last week, holding that time doesn’t run against the king – even on statutes of repose.
The suit was originally brought under the TN False Claims Act over RMBS purchases made in 2006-2007, alleging common-law fraud, negligent misrepresentation and violations of the Tennessee Securities Act. Plaintiffs alleged the bank defendants sold or promoted the securities while knowing the underlying assets failed to meet the proclaimed underwriting standards, misrepresenting to and/or pressuring ratings agencies. The Court held that the doctrine nullum tempus occurrit regi, codified at TCA 28-1-113, prevents limitations periods from applying to the State.
While the statutory version applies only to limitations, the Court held the common-law version is sufficient to apply even to the TSA’s 5-year period of repose. The Court went on to apply a very broad and lenient construction of Tennessee’s discovery rule.
Though a ruling of first impression under the nullum tempus doctrine, the Court noted Tennessee cases having held that TRCS was a government agency for other purposes and wrote: “TCRS is a state-administered pension fund. It was created by the state, it is funded by the state, and the Tennessee General Assembly is statutorily required to make annual appropriations to meet TCRS’s liabilities.”
Expect an appeal.
The case is Tennessee Consolidated Retirement Sys. v. JP Morgan Securities, LLC et al., No. 13-1729-II (Davidson County Chancery, TN).