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Yes the combination of direct takings claims (on behalf of JPS holders), derivative takings claims (on behalf of the GSEs), as well as the direct contract claims (on behalf of JPS holders), are all based off challenging the CSHIP/HERA itself (different than all the other cases challenging the NWS). But none of remedy requests are looking to "unwind" or "undo" any previous transactions, such as reverse the CSHIP or PSPAs, they are just seeking monetary damages/compensation for the takings and/or breach of contracts, either on behalf of JPS shareholders, or the GSEs themselves.
I don't have a copy of it to share but I did get to read it and can provide brief recap of the claims.
Kelly's amended complaint has 5 claims total. 4 out of the 5 claims are for JPS shareholders, and 1 is derivative claim for GSEs that should benefit JPS + common.
1-2) Direct takings claims that would only benefit JPS shareholders at the time CSHIP took place (no common claim here)
3) Derivative takings claim that would (in theory) benefit all shareholders today (would include JPS + common)
4-5) Direct JPS contracts claims that would benefit JPS shareholders today (no common claim here)
Collins plaintiffs are already alleging an appropriations violation?
Let me know when a shareholder brings this claim up in court and then we can have a serious dialogue about it. Until then its just fluff
How did that work against the first net worth sweep?
Inconjuntion with treasury yes. Scotus already ruled nws was legal bc was for best interest of public. Affordable housing = best interest of public
A. government monetizes its equity position (senior pfds + warrants, either one or both) via recap+release and uses the proceeds for affordable housing
B. government turns on the NWS cash sweep again and uses the proceeds for affordable housing
I'm not sure what the process looks like to request stay
I would advise anything w/ josh angels name on it going straight to garbage.
Even if congress "fixes" the appropriations issue present in CFPB (and potentially FHFA) today, that would only provide "prospective relief", and plaintiffs may still be entitled to "retrospective" relief. For example in Collins, SCOTUS provided "prospective relief" by making it so the Director moving forward is removable at will, and left the door open for "retrospective relief" by remanding it back for further deliberations re: potential remedy.
In this type of separation of powers case (appropriations vs removal provision), the 5th circuit claims relief is more straight forward, and retrospective relief should be granted to vacate the challenged action w/o a need for further deliberations.
“To remedy the separation of powers violation arising from the CFPB’s budgetary independence, I see no other option than dismissing the enforcement action against these appellants. The reason is simple. Just as a government actor cannot exercise power that the actor does not lawfully possess, so, too, a government actor cannot exercise even its lawful authority using money the actor cannot lawfully spend. Indeed, a constitutionally proper appropriation is as much a precondition to every exercise of executive authority by an administrative agency as a constitutionally proper appointment or delegation of authority. Accordingly, as in cases involving Appointments Clause defects or other separation of powers problems with a government actor’s authority to act, the proper remedy here is to disregard the government action. Because the CFPB has prosecuted this enforcement action using funds derived without a constitutionally footed appropriation or oversight, the court should dismiss the enforcement action against the appellants. A dismissal also comports with the Supreme Court’s admonition that courts should “create incentives to raise” separation of powers challenges by providing adequate remedies. (Lucia)”
It's due on March 15. 3 more motion to amends are due today, Quinn, 683, and Patt (similar to the Wazee one that was due this week).
Ultimately - isnt it correct to assume that we would not expect any good outcome from the DC Circuit Enbanc?
The best possible outcomes seems to be that Wazee would be willing to appeal a loss En Banc back for Cert and see if it will take up the unjust enrichment cause of action?
I am trying to figure out why Hamish Hume would have taken this strategy with the likely DOA outcome as you suggest
The 5th circuit asked a series of questions to figure out if an agency such as the CFPB violates the appropriations clause, such as:
1) Is the agency headed by a single director? (Yes for both CFPB and FHFA)
2) Does the agency receive appropriations of any kind from congress? (No for both CFPB and FHFA)
... Continuing #2, CFPB’s funding is "drawn from a source that is itself outside the appropriations process," 5th circuit called this "double-insulation" since not only does CFPB not draw its funding from congress, but it draws its funding from the FED, which also doesn’t draw its funding from congress. (The same logic can be applied for FHFA, since it draws its funding from the GSEs and FHLBs, which fund themselves outside the appropriations process).
3) Does the agency do "important work" with significant consequences for the national economy? (Yes for both CFPB and FHFA).
Plaintiffs argue that FHFA's funding scheme may be more constitutionally problematic than CFPB since CFPB's assessments are limited to no more than 12% of the operations expenses of the FED, while FHFA can collect an unlimited amount of funding from the GSEs.
I'm not sure if you are aware, yes while SCOTUS left the door open to potential remedy on remand, two of the lower district circuit cases (Collins and Bhatti) already had a crack at this last year and ruled based off the SCOTUS ruling, shareholders are not entitled to ANY remedy. Both of these cases are currently being appealed so it's not over yet, but if those rulings were to stand, even with SCOTUS leaving the door open to potential remand, shareholders don't get any.
As it stands the unjust enrichment claim is DOA unless en banc reverses precedent which barred this claim from being allowed in COFC. I wouldnt get my hopes up or spend too much time digging into weeds here.
Wazee (represented by Hamish Hume) filed its amended complaint, and I would say odds are looking slim to none.
They are taking two approaches here, planning to file two separate en banc petitions.
1) First, excluding the newly added "unjust enrichment" claims, which I will get to after, no other claims were amended in this complaint, i.e. its the same exact claims that were already tossed and dismissed by the federal appellate court (that SCOTUS declined to review). The strategy here is to appeal that ruling en banc. So unless en banc accepts the petition and reverses the ruling, these claims are all dead.
2) Now for the "unjust enrichment" claims, there is a catch with this claim, plaintiffs admit that under federal circuit precedent unjust enrichment claims are barred from review under the tucker act, so they are giving Sweeney notice they first plan to file a (separate) banc petition to overturn that precedent. So, before Sweeney can even entertain this "new claim", en banc must agree to hear the petition and overturn its precedent on this claim, otherwise, this new claim is also dead before it even got a chance (bc as of today that claim is DOA and can't proceed further as precedent stands).
There were 2 petitions related to this case, one posted by defendants (government) and one posted by plaintiffs. Again, SCOTUS only granted defendants petition and plaintiffs petition was denied. So the only issue(s) SCOTUS will review is if CFPB violates the appropriations clause, and if yes, what is the appropriate remedy.
This is the CFPB petition that was granted (titled "22-448 CFPB, ET AL. V. COM. FIN. SERVICES ASSN., ET AL."):
"QUESTION PRESENTED
Whether the court of appeals erred in holding that the statute providing funding to the Consumer Financial Protection Bureau (CFPB), 12 U.S.C. 5497, violates the Appropriations Clause, U.S. Const. Art. I, § 9, Cl. 7, and in vacating a regulation promulgated at a time when the CFPB was receiving such funding."
SCOTUS only granted defendants petition, plaintiffs petition was denied. So the only issue(s) SCOTUS will review is if CFPB violates the appropriations clause, and if yes, what is the appropriate remedy.
"The court of appeals recognized that “every court to consider [the CFPB’s] funding structure,” including the D.C. Circuit and at least six district courts, “has deemed it constitutionally sound.” App., infra, 39a. But the court “respectfully disagree[d] with” those decisions."
"This Court’s review is warranted because the court of appeals’ decision declared an Act of Congress unconstitutional, because it squarely conflicts with a decision of the D.C. Circuit"
This Court’s review is also necessary because the decision below conflicts with the D.C. Circuit’s decision in
PHH Corporation. Indeed, the court of appeals expressly acknowledged the conflict, “respectfully disagree[ing]” with the D.C. Circuit. App., infra, 39a. In PHH Corpo- ration, the D.C. Circuit considered a challenge to “Congress’s choice to allow the CFPB to claim funds from 22-58 (oral argument scheduled for Nov. 29, 2022). The Court need not consider those arguments in this case: The severability and other principles discussed here apply regardless of whether the remedy is nationwide vacatur of the CFPB’s past actions or more traditional party-specific equitable relief. the Federal Reserve rather than through the congressional appropriations process.” 881 F.3d at 95. The D.C. Circuit recognized that “Congress can, consistent with the Appropriations Clause, create governmental institutions reliant on fees, assessments, or investments rather than the ordinary appropriations process.” Ibid. It observed that Congress has “consistently” chosen such funding mechanisms for “financial regulators.” Ibid. And the D.C. Circuit upheld the CFPB’s funding mechanism because it “fits within the tradition of independent financial regulators.” Ibid.
No have you not been paying attention? SCOTUS hates the GSEs and will not entertain any argument for them and against the government. First they rule NWS is legal act of conservator, then they decline to take the issue of whether the NWS was a takings.
We lost that case (appointments claim) 2-1, and plaintiffs are petitioning it to SCOTUS now (unlikely it gets picked up).
jtimothyhoward
February 22, 2023 at 8:50 am
GSE investor–Taking a look at this piece, I’ll amend my statement: I AM familiar with the legal argument underpinning the SCOTUS decision in West Virginia vs EPA, I just didn’t know it was called the Major Questions Doctrine. Now that I do, though, it doesn’t change my opinion about the chances of this doctrine being used to overturn the net worth sweep; to the contrary, it reinforces that opinion.
As the article states, prior to West Virginia vs EPA, the “Supreme Court had never before invoked the major questions doctrine by name” until this case, in which the six conservative justices (with all three liberals dissenting) “cited a line of recent precedents in support of the Court’s holding that ‘in certain extraordinary cases’ where there is reason to doubt that Congress authorized a particular agency action, ‘both separation of powers principles and a practical understanding of legislative intent’ require the agency to point to ‘clear congressional authorization’ for its action.
I have two reactions to the application of the Major Questions Doctrine (MQD) to FHFA, and Fannie and Freddie. The first is, what “particular agency action” by FHFA required “clear congressional action” by Congress? Was it the net worth sweep? If so, what are the chances that the Roberts court–which just contorted itself a year and a half ago to justify finding the net worth sweep to be a legal action by FHFA under the APA–would cite the MQD as a reason for reversing itself? Somewhere, I think, in the range of zero, zilch and nada.
Which brings me to my second point. The conservative lawyers in the Federalist Society have been looking for legal arguments that can be used to justify rulings that limit “the administrative state” (i.e., regulatory agencies) for some time. The MQD was the weapon chosen to try to limit the power of the EPA, which the Federalist Society abhors. But just as Federalist Society lawyers would never use the SCOTUS ruling in Collins to allow the FDIC as conservator of a bank to give all of its future earnings to Treasury under the Incidental Powers section of the FDIC Act, it’s not going to use the MQD in an attempt to block FHFA’s ability to use the net worth sweep to keep Fannie and Freddie (also abhorred by the Federalist Society) in indefinite conservatorship.
ruleoflawguy
February 22, 2023 at 9:25 am
just saw Tim reply, so I will be brief. MQD is a gussying up of J. Scalia’s quote, to the effect that Congress doesnt hide elephants in molehills when it writes a statute. that is, a major exercise of administrative power must be tied to clear congressional authority. eg if FTC promulgates a rule banning non-compete provisions nationwide, it will be attacked by plaintiffs under the MQD, as the FTC’s authority to label non-competes as a restraint of trade is not apparent from its organic statute.
MQD’s possible applicability to the GSEs? well, the statute of limitations on the NWS has lapsed, so not applicable there. Maintaining the GSEs in conservatorship for over 14 years where there is no rational basis for continuing conservatorship, given reform over the past 14 years leading to current capital levels, elimination of loan warehousing and elimination of toxic mortgages? based upon the judiciary’s (other than 5th circuit) treatment of the GSEs to date, that argument wont fly…HERA authorizes conservatorship, and leaves it open as to how long and on what basis it should be ended. so the judiciary will find that not only is there no molehill in HERA, but it will find an elephant-sized hole for FHFA/Treasury to dither.
Theres a split circuit opinion here (DC Circuit ruled that CFPB does not violate the appropriations claim), they pretty much have to grant cert to settle the dispute (throw in that DOJ is special requesting it). Them granting cert on a split circuit opinion sheds very little light if they want to affirm or reverse the ruliung.
ICYMI-
gseinvestor
February 21, 2023 at 3:05 pm
Tim, ROLG … any comments on litigants potentially pursuing the Major Questions Doctrine in the courts? … Given Congress created HERA, HERA created FHFA, and with all the litigation to-date basically siding with HERA, FHFA, UST, etc. … is there any viability?
ruleoflawguy
February 21, 2023 at 5:19 pm
there is no litigious path forward with the GSEs. this has become a workout with the executive branch as the decision maker…14 years and counting. gift your grandkids your GSE stock and wish them well.
jtimothyhoward
February 21, 2023 at 5:33 pm
I’m not familiar with the Major Questions Doctrine, but as I said in my current post, I don’t believe there is any theory of law that will result in a successful challenge to the Fannie and Freddie net worth sweep that will be upheld by the Roberts Supreme Court, given its ruling on the APA issue in Collins.
Robert you keep discussing the MQD, but there are no legal cases attacking the NWS on these grounds, and until there are, MQD is just fluff/speculation. Who will file this case?
Were you able to gather any other information from your "source"? I.E. are they just planning to run out clock/status quo or do they have plan to exit cship in the near term (0-2 years).
No it will remain private between the two. There will probably be a disclosure saying GSEs complied and submitted the capital plans to FHFA but no details on whats actually inside of the reports.
FWIW GSEs actually already submitted a previous version of its capital plans in 2021. FHFA disclosed this fact in its annual report to Congress that the GSEs had already completed and submitted capital plans.
“Managing the Conservatorships” –
“Each Enterprise submitted a capital plan to FHFA on September 30, 2021 intended to support compliance with the ERCF [Enterprise Regulatory Capital Framework] including efforts to build, maintain, and monitor capital adequacy… FHFA reviewed the capital plans and provided feedback to the Enterprises, including enhancements required to future capital plans submissions related to capital generation and regulatory capital metrics. FHFA is actively engaging with the Enterprises in preparation for their 2022 capital plan submissions. Furthermore, in June[?] 2022, FHFA finalized a rule relating to capital planning to enhance the capital planning process.”
This will be private between GSEs/FHFA. Public will never see this report/timeline.
If SCOTUS takes the case, it may shed some light on a) what kind of proof is actually required to prove the president would have fired the director if not for the at will removal provision, b) is concrete proof required that the outcome would have been different if the President could have fired the director (alternative universe argument), and c) who has the burden of proof (defendants or plaintiffs).
This is good news if it allows 5th circuit to rule on the Collins FHFA w/o SCOTUS interference (if 5th circuit applies their CFPB ruling to the Collins case, it would be ideal). But it wouldnt be great if 5th circuit decides to stay the case until SCOTUS rules. If the Collins case was only re: appropriations I would think that's more likely, but since Collins involves a second independent claim (removal provision remedy), they may want to rule on that regardless so they wouldn't wait until SCOTUS.
The CFPB case was not on today's SCOTUS order list, tee'ing it up for next Monday instead. But you would think if there was urgency to accept the case for this term it would have made today's list. So I expect it for next term assuming they grant the petition on Monday.
No action from Supreme Court today in this case -- almost certainly means that if they grant, it will be for next term. So CFPB may have another year-plus of uncertainty. https://t.co/B17OqGq5U9
— Greg Stohr (@GregStohr) February 21, 2023
You seem to not understand what happened if you think Sweeney is the problem here.
1. Sweeney rules for shareholders and allows shareholders derivative takings claim to proceed.
2. Appeals court rules 3-0 to overturn her ruling.
3. SCOTUS declines to take the case, which essentially makes the appeals court ruling the law of the land.
At this point Sweeney is powerless, thanks to her ruling being overturned. To blame her at this stage is misplaced.
FOFreddie with all due respect, and I do respect you as you seem like a genuine person on this board, I will say this in the nicest way possible, "Ano" has no idea what hes talking about and is talking out of his you know what ... so I would advise against listening to any of his nonsense.
"it would be nice if Bryndon could comment .."
you wont have to wait long to see if he has anything left up his sleeve or will finally call it quits. his filing is due a less than a month from now on march 15.
From what I know of Kelly, they were challenging the beginning of the CSHIP, not passage of HERA. Kelly has 3 claims, 2 of which were copycat cship challenges that Washington Federal tried and lost (so those 2 are dead), and 1 is a JPS direct contract claim, which i dont think helps anyone but them even if they prevail there. Kelly would have to amend their complaint to challenge the passage of HERA itself like I suggested for the other cases. Yes well find out there on March 6 as well.
Unless they can come up with a completely new amended claim out of their back pocket, the takings cases as we know them are dead.
One angle of attack I was thinking may be worth exploring would be to amend the complaint to attack the passage of HERA as the actual takings event. Because based off the takings rulings as is, NWS wasnt a takings because HERA removed any private property rights by that point so there was nothing left to take. So its possible HERA itself was what violated our 5th amendment rights as it stripped us of our private property rights. This line of attack could be enough to "keep the lights on" in the COFC to proceed further. (I could be way off here and just wishful thinking).
Wazees motion to amend or drop the case is due 2/27,
Quin, 683, and Patt motion to amend or drop the case is due 3/1,
And Brandon Fisher's filing is due 3/15.
We'll find out shortly if any of the 5 plaintiffs above think there is any point of filing an amended complaint or just drop the cases like the other plaintiffs choose to do.
How good, so good you have all your networth invested into this?
I dont think 5th circuit waits for SCOTUS regardless if they take the CFPB case or not (since one of the claims is not related to the CFPB appropriations claim before SCOTUS). Also the briefing in Collins has already begun. Plaintiffs filed their opening brief a few weeks ago (govt reply is due on April 3). Briefing should be completed by the end of April and expect oral arguments 2-3 months after.
I expect 5th circuit to rule by Q3/Q4 this year.
Yea illegal just like the NWS and the Warrants are illegal /s