Fannie Mae-No Politics (FNMA)

[obiterdictum]

The USA's response is a motion to dismiss the Fairholme case filed against the United States in the US Court of Federal Claims.

https://docs.google.com/viewer?a=v&pid=forums&srcid=MDUxNDQwNjExMTIwMzQzNjc3NDIBMTE1MzU0ODM3ODc3NzE4NjA1NjEBbjRNcTlvVzV5SHNKATQBAXYy

The US lawyers directs the Court how to proceed in the case and presents four arguments to dismiss the Fairholme case.

1. Review Case According to Legal Precedents
The USA lawyers use legal precedents to direct he Court how it should review the complaint and come to dismiss the Fairholme case based on those precedents.

The lawyers direct the Court to determine if it has subject matter jurisdiction over this case and if not to dismiss the case. Also the Court must dismiss the case if the complaint does not present a plausible claim to relief. And finally the lawyers direct the Court to eliminate any orders that are legally failed and to avoid useless pretrial and trial activity.

2. Then the lawyers go on to argue how:
* the court lacks jurisdiction - dismiss,
* the plaintiffs lack standing to bring file a complaint - dismiss,
* the plaintiffs fail to state a viable takings claim and - dismiss
* the plaintiffs’ claims are not ripe for judicial review - dismiss

* The Court Lacks Jurisdiction Over Plaintiffs’ Complaint
The lawyers argue that the Court has jurisdiction only “to hear cases in which a plaintiff seeks just compensation for a taking under the Fifth Amendment as such a claim is ‘against the United States founded . . . upon the Constitution.’”

They argue that all the decisions done were done by the FHFA standing in the shoes of the GSEs. Being that way, the FHFA is not the United States and in fact the claims are being made against Fannie Mae and Freddie Mac! By the GSEs shareholders suing the conservatorships, the plaintiffs are really suing private corporations for the decisions made by their management! So the lawyers argue that the "plaintiffs have no basis to challenge Treasury’s actions alone. Treasury could not have acted without FHFA, and Treasury’s act of entering into a voluntary agreement with FHFA cannot form the basis of a takings claim.... The Court should dismiss the complaint because courts have ruled that a Government regulatory agency – acting as conservator – is not the United States."

So the Fairholme case cannot be heard in the Court of Federal Claims since it has no jurisdiction over this subject matter and must be dismissed.

In addition to this defense, the US lawyers argue that the Fairholme alleges that the FHFA "exceeded its statutory authority or abused its discretion with respect to dividends" and so the the claim is properly one in tort. The Tucker Act clearly precludes this Court from exercising jurisdiction in this case.

Finally, they argue that the Court has no jurisdiction and should dismiss because of the violation of 28 U.S.C. § 1500 by Fairholme filing two suits with similar complaints one day after another in an improper order in two different courts.

* Plaintiff Shareholders Lack Standing To Bring Suit
US Lawyers argue that according to HERA, the FHFA by law succeeded to all shareholder rights and possesses sole authority to enforce shareholder rights. So the plaintiffs have no standing to file a suit, and therefore, the Court should dismiss plaintiffs’ complaint. They also argue that even if they did have rights and authority, legal precedents and previous decisions by this Court decided that the plaintiffs (shareholders) do not possess standing to directly sue for the diminution of stock value or rights to receive dividends unless they sue derivatively (on behalf of the corporation) and not directly as they are doing here.

So the plaintiffs lack standing and all standing is with the FHFA and so directs the court to dismiss the claim.

* Plaintiffs Fail To State A Viable Takings Claim
The US lawyers then argue that even if the plaintiffs could (1) establish the Court's jurisdiction over the actions taken by the conservator, and (2) establish standing, the Court should dismiss plaintiffs’ complaint for failure to state a takings claim. The US lawyers state that the plaintiffs have not identified a recognizable, physical property interests or regulatory burden hurting that property; and (2) does not show a Government action that amounted to a taking of such property interests.

They also argue that the US Treasury acted in a “proprietary capacity rather than a sovereign capacity.” The US Treasury became a private, commercial market participant when executing the third amendment or investing in the GSEs and was not acting as the US Government. So there was no taking by the US Government as a sovereign entity, its actions were purely commercial and therefore, the plaintiffs claim and the case must be dismissed.

Finally, they argue that there is no taking because the plaintiffs' allegations that the US Government took their dividend and liquidation rights does not apply in the conservatorships under HERA. Under the conservatorships they do not have any legally cognizable or compensable property interests that can be used in a takings claim.

* Plaintiffs’ Claims Are Not Ripe For Judicial Review
In the US lawyers final argument , they say that the plaintiffs' claim is not ripe for judicial review because it is “contingent [upon] future events that may not occur as anticipated, or indeed may not occur at all."

The US lawyers say that the neither the claim of loss of dividend rights nor liquidation preference rights is ripe because "the ultimate effect of the conservatorship and Third Amendment on the Enterprises is unknown, and any loss of dividends allegedly stemming from these actions is purely hypothetical and speculative." and "whether and when Fannie Mae and/or Freddie Mac will emerge from conservatorships is unknown: additional Government action will – eventually – determine when and how the conservatorships end."

So the US lawyers conclude that "at a minimum," the conservatorships must end or the GSEs must go into receivership and then liquidation before the plaintiffs’ claims can ripen. Since those ends are not present at this moment case must be dismissed.

Comments
Many of the arguments for dismissal are related to the legal technical aspects of filing a takings claim. The merits of the Fairholme case are not considered at all. Instead the claims are brutally attacked with the goal of making them without merit and filed in the wrong court in an improper manner. That, of course, is the intention of the US lawyers. They simply want to get the case dismissed on a long list of technicalities backed by legal precedents so that there is no judicial consideration of the claims.

This approach is clearly made to dodge bullets and it will be up to the judge to hear cross motions or not. If that occurs, there will be fireworks.

The US lawyers try hard to paint the US Treasury as a private commercial market participant and the FHFA as being literally Fannie and Freddie. So all that is happening and that has happened is simply relations between commercial enterprises that exist in a law bound protective conservatorship limbo land or perhaps more appropriately, a Wonderland.

I cannot stomach this portrayal given all the talk about the taxpayer burden and paying back the taxpayer and doing right by the taxpayer and obtaining all from the taxpayer. What private commercial enterprises says such things? We will have to see if the US Government disguised in commercial clothing with slick it off with the US Court of Federal Claims judge.