Freddie Mac (FMCC)

[obiterdictum]

Thoughts on the order released today? Perry vs Mnuchin.

https://www.cadc.uscourts.gov/internet/opinions.nsf/

What occurs now?

Not much.

The two Circuit judges, Millett and Ginsburg Circuit, like Lamberth, took the biased perspective and narrative of the US Government including GSE insolvency in 2008, the "death spiral," and the necessity for the Third Amendment and NWS to save the GSEs.

Institutional Plaintiffs' Claims
Using that perspective and narrative and precedent from their Court, the two Circuit judges denied the institutional Plaintiffs (Fairholme, et, al. and Perry Capital) claims and request for declaratory and injunctive relief. The two judges denied that the FHFA and Treasury agreement made in the Third Amendment exceeded their authority under HERA and that that action by FHFA and Treasury was not arbitrary and capricious conduct that violated the Administrative Procedure Act (APA). The two judges affirmed Lamberth's ruling that the HERA and APA claims made by the Institutional plaintiffs was barred by HERA's limitation on judicial review at 12 U.S.C. § 4617(f). They also affirmed the dismissal of the Institutional Plaintiffs' claims for breach of fiduciary duty (the common-law claim)
against the FHFA because they did not raise the matter and appeal it properly.

Class Plaintiffs Claims
Millet and Ginsburg recognized and agreed with the Class Plaintiffs (American
European Insurance Company, et al, Arrowwood, etc.) claims that in enacting the Third Amendment and NWS, the FHFA "breached the terms governing dividends, liquidation preferences, and voting rights in the stock certificates for Freddie’s Common Stock and for both Fannie’s and Freddie’s Preferred Stock." Also recognized by the Court was the Class Plaintiffs' claims that FHFA "breached the implied covenants of good faith and fair dealing in those certificates" and that FHFA and Treasury breached state law fiduciary duties owed by FHFA (GSEs) and Treasury. The judges did not deny the class plaintiffs request to "declare their lawsuit a “proper derivative action," and did not affirm an award of damages and injunctive and declaratory relief. Instead, the two judges remand these specific claims to be adjudicated in the District Court. The Class Plaintiffs’ claims for breach of fiduciary duty are barred but their contract-based claims may proceed in alignment with the Court's opinion.

Dissenting Opinion
Judge Brown, in dissent has it right according to what happened and in accordance with the rule of law.

More ominously, the existence of a predictable rule of
law has made America’s enviable economic progress
possible. See, e.g., TOM BETHELL, THE NOBLEST TRIUMPH:
PROPERTY AND PROSPERITY THROUGH THE AGES 3 (1998)
(“When property is privatized, and the rule of law is
established, in such a way that all including the rulers
themselves are subject to the same law, economies will
prosper and civilization will blossom.”). Private individual
and institutional investors in regulated industries rightly
expect the law will protect their financial rights—either
through an agency interpreting statutory text or a court
reviewing agency action thereafter. They are also entitled to
expect a conservator will act to conserve and preserve the
value of the company in which they have invested, honoring
the capital and investment conventions of governing law. A
rational investor contemplating the terms of HERA would not
conclude Congress had changed these prevailing norms. See
generally Yates v. United States, 135 S. Ct. 1074, 1096 (2015)
(Kagan, J., dissenting) (noting statutory text may be drafted
“to satisfy audiences other than courts”). Today, however,
the Court explains this rational investor was wrong.
And its bold and incorrect statutory interpretation could dramatically affect
investor and public confidence in the fairness and predictability of the
government’s participation in conservatorship and insolvency proceedings.

When assessing responsibility for the mortgage mess
there is, as economist Tom Sowell notes, plenty of blame to
be shared. Who was at fault? “The borrowers? The lenders?
The government? The financial markets? The answer is yes.
All were responsible and many were irresponsible.” THOMAS
SOWELL, THE HOUSING BOOM AND BUST 28 (2009). But that
does not mean more irresponsibility is the solution.
Conservation is not a synonym for nationalization.
Confiscation may be. But HERA did not authorize either,
and Conservation is not a synonym for nationalization.

Unfortunately, he is the minority. Worth reading.

Next Steps
1. Class Plaintiffs and Defendants will go back to District Court to resolve the claims that FHFA "breached the terms governing dividends, liquidation preferences, and voting rights" and that FHFA "breached the implied covenants of good faith and fair dealing in those certificates."

2. Institutional Plaintiffs may request an en banc rehearing at the US Court of Appeals, DC or approach the SCOTUS for a writ of certiorari.

Source:
CADC Perry Capital Opinion and Ruling
https://www.cadc.uscourts.gov/internet/opinions.nsf/66A4E1FEF4BB8401852580CE005620C3/$file/14-5243-1662090.pdf

Institutional Plaintiffs Initial Opening Brief
http://gselinks.com/Court_Filings/Perry/14-5243-1560310.pdf

Class Plaintiffs Initial Opening Brief
http://gselinks.com/Court_Filings/Perry/14-5243-1560310.pdf