Fannie Mae (FNMA)

[obiterdictum]

1. The article refers to the request (application) and argument made by the Plaintiffs' to the United States District Court to certify two categorical questions of law (the questions demand a yes or no answer) to the Delaware and Virginia Supreme Courts.

See the application here: http://gselinks.com/Court_Filings/Jacobs_Hindes/15-00708-0024.pdf

The two questions are:

1. Does Delaware law permit preferred stock of a corporation to have a cumulative
dividend right equal to the entire net worth of the corporation, payable quarterly in perpetuity, as
provided in Section 2 of Fannie Mae’s Amended and Restated Certificate of Designation of
Terms of Variable Liquidation Preference Senior Preferred Stock, Series 2008-2, dated September
27, 2012 (which is attached hereto as Exhibit A)?

2. Does Virginia law permit preferred stock of a corporation to have a cumulative
dividend right equal to the entire net worth of the corporation, payable quarterly in perpetuity, as
provided in Section 2 of Freddie Mac’s Amended and Restated Certificate of Creation,
Designation, Powers, Preferences, Rights, Privileges, Qualifications, Limitations, Restrictions,
Terms and Conditions of Variable Liquidation Preference Senior Preferred Stock (Par Value
$1.00 Per Share), dated September 27, 2012 (which is attached hereto as Exhibit B)?

Since these questions have not been previously resolved in the Supreme Courts of Delaware and Virginia (they are first impressions), the presiding federal judge is placed in the position to decide the legal issues (the two questions) by interpreting and applying state laws. In short, the federal judge will "predict" how the Supreme Courts of those states would resolve the legal issues.

The Plaintiffs' attorneys applied for certifying the two questions of law to the State Supreme Courts so that the federal judge's "predictions" are replaced with the Supreme Courts' "actualities." In this way, certifying questions takes the decision-making on these specific questions out of the hands of the federal judge who may or may not be an expert on state laws concerning the corporate bylaws and the issuing of senior preferred stock or who may or may not be biased towards the government Defendants. By certifying state law questions the presiding federal judge can save time and energy in deciding or predicting answers to questions of state law and rule out explicit or implicit biases by simply following the law as laid down. Legal precedents for pending cases can be set in this manner and the federal judge is obliged, more or less, to follow the law as decided in those State Supreme Courts.

Plaintiffs' "predict" that the Supreme Courts of Delaware and Virginia will decide the legal answers of no to both questions. It is anticipated by the Plaintiffs, that such decisions would make the 3rd amendment invalid, void ab initio and unenforceable for both Fannie Mae and Freddie Mac, and in doing so, move the pending cases along. In addition, decisions against the net worth sweep can prevent negative affects on state law and policies regarding corporations, stockholders, mergers and acquisitions and other corporate matters.

Next steps are: The presiding federal judge will decide to certify or not. Then, if the application is affirmed, the State Supreme Courts will, at their discretion, accept or decline the certification questions. The decision to accept or deny certification may require a separate round or rounds of briefing.
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2. Also, what is your opinion on/of the H&J ask relating to the old 'oh well, but HERA says so...' retort?

Not sure what is meant. Could you clarify?