Analysis on Order for Additional Briefs
I guess I'll put this here.
Before I start, let me point out that I am about to try to get "in the heads of the judges" by what they've typed here. Therefore, I can not promise that I've come to the same conclusion they have. However, I believe based on the wording of their order, that this is likely to be the reasoning behind it...
First, let me type the order here so I can refer to it:
It is, on the court's own motion ordered that the class plaintiffs and each defendant submit supplemental briefs addressing the following questions:
1. Regarding the class plaintiffs' claim against Treasury for breach of fiduciary duty, is there a grant of subject matter jurisdiction and a waiver of sovereign immunity that is not the Federal Torts Claims Act?
2. Regarding all the class plaintiffs' other claims:
a. Is each defendant subject to suit absent a waiver of sovereign immunity and, if not, is there such a waiver? The answer to this question should include a discussion of whether the FHFA's challenged actions were taken solely in the agency's capacity as conservator for Fannie Mae and Freddie Mac, or whether they were taken in whole or in part in a regulatory capacity.
b. What is the source of subject matter jurisdiction over the claims?
Ok....now that I can refer to that...there are several things to speak to here. I admit I had to brush up on my Federal Torts Claims Act due to this order.
In the United States, the federal government has sovereign immunity and may not be sued unless it has waived its immunity or consented to suit. What this means is that the US Government can NOT be sued unless the US Government allows the suit. This may seem a little backwards, but the idea is that the US Government gave the 6th and 7th Amendment rights to sue in the first place, so it is counter-productive to allow suits against it... also, because the taxpayers pay for suits against the US Government, they don't want to allow tens of thousands of frivolous suits against the Government every year that could potentially bankrupt the country.
So, to be clear, the United States must allow a private party to sue them.
Federal Tort Claims Act
The Federal Torts Claims Act is one waiver that the United States has passed legislatively that allows private parties to sue the US Government for certain types of torts.
Under the Federal Tort Claims Act, the following things are true.
-The United States Government is never liable for punitive damages for tort related claims (Sorry Patswil).
-The United States Government is never liable for pre-judgment interest.
-The United States Government may not be sued for performance related (or failure to perform) suits.
-The United States Government may be sued for torts relating to law enforcement.
-The Statute of Limitations for tort related cases against the US Government is 2 years.
So what does this mean? First, it seems as though the appeals court wavering as to whether the FTCA is a valid waiver for Sovereign Immunity in our case. The are specifically asking about the Fiduciary Duty claims. They are kind of indicating that the FTCA may not work because Fiduciary Duty is a performance related suit. I don't believe there is a statute of limitations issue here, but I'm not inside their heads...so can't be completely sure.
So, to be clear, I believe that the judges want to know if there is another Act that could be used to waive the Sovereign Immunity that exists...as it seems FTCA does not. They have also asked if the Government has waived Immunity voluntarily, which I'm assuming they will say they have not.
I'm not sure exactly what other form of waiver can be brought...but I'm hoping there is one!
Subject Matter Jurisdiction
The second part of this order refers to Subject Matter Jurisdiction. This is the courts ability to hear a specific type of case. Generally speaking, there are two ways in which a federal court can hear a case. The first is complete diversity (all plaintiffs and defendants are from different states) and the second is a federal question (some sort of constitutional law was broken).
It appears as though the court is doubting whether there is SMJ for some (or all) of the claims and wants to hear arguments from each side as to whether the federal court would have the ability to hear the case at all. This will also cover whether the plaintiffs have standing, the whether the case is ripe.
Conservator Vs. Regulatory Entity
This was an interesting little hiccup that may help shareholders.
The judges want to know whether the claims are being accused against a Conservator or against the FHFA as a Government entity.
Sovereign Immunity applies to the FHFA as a Government entity for sure. However, it seems as though the judges are indicating that Sovereign Immunity may not apply to the FHFA in their Conservator capacity. They obviously want to hear arguments to determine whether the FHFA as a regulator or as a Conservator will change the outcome.
I don't necessarily believe that this is a positive or negative step in these cases. The judges are definitely deep diving into whether the plaintiffs can bring the case at all, which seems appropriate since that was the primary ruling in Lamberth's case and they need to see if Lamberth was correct.
I do like that they want to know the impact of a Conservator vs a Regulator as that seems to indicate there is a difference, and I personally believe that the FHFA acted as Conservator which would help shareholders.
I don't like that they have basically flat out stated that the FTCA doesn't apply here, since there are not very many ways to get around Sovereign Immunity...especially when Congress supports the Executive Branch's decision.
We shall see what happens!