GSE Shareholders Look to Iowa Federal Court to Vacate DC Judge’s Dismissal
An Iowa-based GSE shareholder hoping to keep alive a lawsuit against the government this week asked a federal court in the state to give “no weight” to a ruling earlier this month by a Washington, DC, federal judge who dismissed litigation by other GSE shareholders, including Perry Capital and Fairhome Funds.
Continental Western Insurance Co. filed papers in U.S. District Court for the Southern District of Iowa Central Division arguing that Judge Royce Lamberth was “simply wrong” in his interpretation of the Housing and Economic Development Act of 2008 and his HERA-based rationale to shut down shareholders’ suits in DC.
An investor in GSE stock, Continental’s counsel in the case is Cooper & Kirk, the same law firm that represents Fairholme, a large hedge fund that bought up GSE stock last year.
“In enacting HERA, Congress did not depart sharply from the settled principles governing conservatorships under all prior federal laws and inexplicably grant FHFA carte blanche over the assets of an institution that the agency places in conservatorship,” according to Continental’s brief. “Rather, it granted FHFA the familiar, defining power of all conservators to ‘preserve and conserve’ the financial institution’s assets in order to restore it to a ‘sound and solvent’ financial condition.”
Continental contends that the “net-worth sweep” initiated by the Treasury Department and the Federal Housing Finance Agency in 2012 violates HERA, as well as the FHFA’s contractual and fiduciary duties. The plaintiff argues that the Iowa court “has both the jurisdiction and the responsibly to vacate” Judge Lamberth’s ruling.
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