JTimothyHoward
The general view is that a loss by plaintiffs in the Perry Capital case–which asserted that FHFA violated the Administrative Procedures Act in the way it implemented the conservatorship provision of the Housing and Economic Recovery Act of 2008–strengthens plaintiffs’ claims in their case before Judge Sweeney in the Federal Court of Claims, which asserts a regulatory taking. That is, if the government CAN legally appropriate all of Fannie and Freddie’s profits in perpetuity while claiming to be “conserving” them, that action constitutes a regulatory taking for which shareholders (both preferred and common) must be compensated.
The Supreme Court’s denial of cert in the Perry Capital APA case also leaves alive several other courses of legal relief currently being pursued, including the breach of contract and breach of fiduciary duty claims remanded to the Lamberth court, the Jacobs-Hindes action in the State Court of Delaware (claiming that the net worth sweep is a violation of Delaware corporate law, and thus is void ab initio), and the actions in Collins, Bhatti and Rop, which raise issues related to the constitutionality of the FHFA director (independent of the executive branch) and the appointments clause (FHFA director DeMarch was not properly appointed to his position, and thus not empowered to agree to the net worth sweep).
Of these, Jacobs-Hindes, Collins, Bhatti and Rop all challenge the legality of net worth sweep (under different theories of the law from Perry Capital), and if successful would (or should) result in the net worth sweep being unwound. The Sweeney case and the Perry Capital remands, on the other hand, would leave the net worth sweep intact but award shareholders damages, in amount to be determined by the court.
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