Louisiana Municipal Police ERS v. Richard Syron
Filing
UNPUBLISHED PER CURIAM OPINION filed. Originating case number: 1:08-cv-00773-LMB-TCB Copies to all parties and the district court/agency. [998583604].. [09-1973]
Appeal: 09-1973
Document: 81
Date Filed: 05/05/2011
Page: 1 of 8
UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 09-1973
LOUISIANA MUNICIPAL POLICE EMPLOYEES RETIREMENT SYSTEM,
derivatively and on behalf of Federal Home Loan Mortgage
Corporation; R.S. BASSMAN, derivatively on behalf of
Freddie Mac aka Federal Home Loan Mortgage Corporation and
its shareholders,
Plaintiffs - Appellants,
and
ADAMS FAMILY TRUST, derivatively on behalf of nominal
defendant Federal Home Loan Mortgage Corporation; ELNA
ADAMS, Trustee, derivatively on behalf of nominal defendant
Federal Home Loan Mortgage Corporation; KEVIN TASHJIAN,
derivatively on behalf of nominal defendant Federal Home
Loan Mortgage Corporation,
Plaintiffs,
v.
FEDERAL HOUSING FINANCE AGENCY,
Plaintiff - Appellee,
and
RICHARD F. SYRON; PATRICIA COOK; ANTHONY PISZEL; EUGENE M.
MCQUADE; STEPHEN A ROSS; SHAUN F. O’MALLEY; FEDERAL HOME
LOAN MORTGAGE CORPORATION; PRICEWATERHOUSE COOPERS, LLP;
FREDDIE MAC, nominal defendant also known as Federal Home
Loan Mortgage Corporation; ROBERT R. GLAUBER; BARBARA T.
ALEXANDER; MARTIN F. BAUMANN; WILLIAM M. LEWIS, JR.;
JEFFREY M. PEEK; GEOFFREY T. BOISI; RONALD F. POE; MIKE
PERLMAN; KIRK S. DIE; JAMES R. EGAN; PAUL G. GEORGE;
MICHAEL MAY; HOLLIS S. MCLOUGHLIN; PAUL E. MULLINGS; ANURAG
SAKSENA; JERRY WEISS; RALPH F. BOYD, JR.; JOSEPH A.
SMIALWOSKI; ROBERT Y. TSIEN; ROBERT E. BOSTROM; MICHELLE
Appeal: 09-1973
Document: 81
Date Filed: 05/05/2011
Page: 2 of 8
ENGLER; THOMAS S. JOHNSON; NICHOLAS P. RETSINAS; JEROME P.
KENNEY,
Defendants - Appellees.
Appeal from the United States District Court for the Eastern
District of Virginia, at Alexandria.
Leonie M. Brinkema,
District Judge. (1:08-cv-00773-LMB-TCB)
Argued:
January 28, 2011
Before TRAXLER,
Judges.
Chief
Decided:
Judge,
and
MOTZ
and
May 5, 2011
KEENAN,
Circuit
Affirmed by unpublished per curiam opinion.
ARGUED: Matthew Evan Miller, CUNEO, GILBERT & LADUCA, LLP,
Washington, D.C., for Appellants.
Howard N. Cayne, ARNOLD &
PORTER, LLP, Washington, D.C., for Appellees.
ON BRIEF:
Jonathan W. Cuneo, CUNEO, GILBERT & LADUCA, LLP, Washington,
D.C.; Steven E. Fineman, Daniel P. Chiplock, LIEFF, CABRASER,
HEIMANN & BERNSTEIN, LLP, New York, New York; Richard D.
Greenfield, Marguerite R. Goodman, GREENFIELD & GOODMAN, LLC,
New York, New York, for Appellant R. S. Bassman; Kevin Oufnac,
Lewis S. Kahn, Albert M. Myers, KAHN, SWICK & FOTI, LLC, New
Orleans,
Louisiana,
Mark
Hanna,
MURPHY
ANDERSON
PLLC,
Washington, D.C., for Appellant Louisiana Municipal Police
Employees Retirement System. David B. Bergman, Ian S. Hoffman,
Christopher A. Jaros, ARNOLD & PORTER, LLP, Washington, D.C.;
Stephen E. Hart, FEDERAL HOUSING FINANCE AGENCY, Washington,
D.C., for Appellee Federal Housing Finance Agency.
Unpublished opinions are not binding precedent in this circuit.
2
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PER CURIAM:
This appeal arises out of consolidated derivative actions
that
shareholders
Mortgage
and
filed
Corporation
officers. 1
The
breached
their
grossly
mismanaged
behalf
(“Freddie
the
of
Mac”)
shareholders
fiduciary
financial losses.
on
duties,
the
Federal
against
former
allege
that
wasted
company
company,
resulting
Home
the
in
Loan
directors
defendants
assets,
and
significant
Acting as conservator of Freddie Mac pursuant
to federal law, the Federal Housing Finance Agency successfully
moved in the district court to substitute itself as plaintiff in
those actions.
The shareholders appeal this ruling.
We affirm.
I.
In
1970,
Congress
established
Freddie
Mac
to
promote
homeownership by competing with the Federal National Mortgage
Association (“Fannie Mae”) in the secondary residential mortgage
market.
See Fed. Home Loan Mortgage Corp. Act, Pub. L. No. 91-
351, § 301, 84 Stat. 450, 451 (1970) (codified as amended at 12
1
Two of the actions -- Adams Family Trust v. Syron, and
Louisiana Municipal Police Employees Retirement System v. Syron
-- were filed in the Eastern District of Virginia in July and
August 2008, respectively, and consolidated on October 15, 2008.
The third action -- Bassman v. Syron -- was originally filed in
the Southern District of New York in March 2008, ordered
transferred to the Eastern District of Virginia on November 20,
2008, and consolidated with the other two cases on December 12,
2008.
3
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U.S.C. §§ 1451 et seq.); Fed. Nat’l Mortgage Ass’n Charter Act,
ch. 847, § 301, 48 Stat. 1246, 1252 (1934) (codified as amended
at 12 U.S.C. §§ 1716 et seq.).
Although both enterprises are
structured as private corporations, Freddie Mac and Fannie Mae
are
government-sponsored
institutions.
Id.
They
“have
an
affirmative obligation to facilitate the financing of affordable
housing
for
low-
and
moderate-income
families
in
a
manner
consistent with their overall public purposes, while maintaining
a strong financial condition and a reasonable economic return.”
12 U.S.C. § 4501(7).
To provide “more effective Federal regulation” of Freddie
Mac
and
Fannie
Mae,
Congress
created
the
Office
of
Housing Enterprise Oversight (the “Office”) in 1992.
Federal
See Pub.
L. No. 102-550, §§ 1302, 1311, 106 Stat. 3672, 3941-44 (1992);
12 U.S.C. § 4501(2).
annual
reports
to
The Office was responsible for making
Congress
on
“the
financial
safety
and
soundness” of Freddie Mac and Fannie Mae.
Pub. L. No. 102-550,
§§ 1317, 1319B, 106 Stat. at 3949, 3950.
In 2007 and 2008, the
Office conveyed positive reports on the fiscal health of both
enterprises, describing them as “adequately capitalized.”
See
In re Fed. Home Mortgage Corp. Derivative Litig., 643 F. Supp.
2d 790, 792 (E.D. Va. 2009) (“In re Freddie Mac”).
In reality,
however, Freddie Mac was poised to report considerable losses:
$3.1 billion in 2007 and $50.1 billion in 2008.
4
See id.
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In 2008, amid these extensive losses, Congress passed and
President
George
W.
Bush
signed
Recovery Act of 2008 (the “Act”).
and
another
government
entity,
the
Housing
and
Economic
The Act abolished the Office
the
Federal
Housing
Finance
Board, and in their stead created the Federal Housing Finance
Agency (the “Agency”).
See Pub. L. No. 110-289 §§ 1301-1314,
122 Stat. 2654, 2794-99 (2008).
The shareholders allege, and
the Agency does not dispute, that the Agency’s leadership and
staff is “substantially unchanged” from that of the Office.
Appellants’ Br. at 10.
See
Indeed, the Agency’s director, James
Lockhart, is the former director of the Office.
The
Act
grants
the
Agency’s
director
the
authority
to
appoint the Agency as conservator or receiver of Freddie Mac in
the event the enterprise becomes “critically undercapitalized.”
12 U.S.C. § 4617.
Pursuant to this authority, on September 6,
2008, Lockhart appointed the Agency as conservator of Freddie
Mac.
the
See In re Freddie Mac, 643 F. Supp. 2d at 793.
Agency
“succeed[ed]
to
all
rights,
titles,
As such,
powers,
and
privileges of [Freddie Mac], and of any stockholder, officer, or
director of [Freddie Mac] with respect to [Freddie Mac] and the
assets of [Freddie Mac],” and is empowered to “take over the
assets of and operate [Freddie Mac] with all the powers of the
shareholders, the directors, and the officers of [Freddie Mac]
and
conduct
all
business
of
[Freddie
5
Mac].”
12
U.S.C.
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Date Filed: 05/05/2011
§ 4617(b)(2)(A)(i),
(B)(i).
The
Page: 6 of 8
Act
further
provides
that,
except under limited circumstances not at issue here, “no court
may take any action to restrain or affect the exercise of powers
or functions of the [Agency] as a conservator or a receiver.”
Id. § 4617(f).
After
its
successfully
appointment
moved
to
as
substitute
conservator,
itself
as
the
plaintiff
consolidated actions in place of the shareholders.
upon
the
Agency’s
motion,
the
district
court
Agency
in
the
Thereafter,
dismissed
the
actions without prejudice.
II.
The district court, interpreting the Act, concluded that
“the plain meaning of the statute is that all rights previously
held by Freddie Mac’s stockholders, including the right to sue
derivatively, now belong exclusively to the [Agency].”
In re
Freddie Mac, 643 F. Supp. 2d at 795 (emphasis in original).
The
court found support in the Act’s provision explicitly granting
conservators
and
receivers
“all
rights,
titles,
powers,
and
privileges” of “any stockholder,” 12 U.S.C. § 4617(b)(2)(A)(i),
and
the
provision
barring
courts
from
“restrain[ing]
or
affect[ing] the exercise of powers or functions of the [Agency]
as a conservator or receiver,” id. § 4617(f).
See In re Freddie
Mac, 643 F. Supp. 2d at 797 (“This language clearly demonstrates
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Congressional intent to transfer as much control of Freddie Mac
as
possible
to
behalf
of
the
relied
on
case
the
[Agency],
including
corporation.”).
law
any
Further,
interpreting
the
right
the
to
sue
district
Financial
on
court
Institutions
Reform, Recovery, and Enforcement Act of 1989, which has similar
provisions transferring stockholders’ “rights, titles, powers,
and privileges” to federal bank receivers and conservators.
See
12 U.S.C. § 1821(d)(2)(A)(i), (B)(i); see also Pareto v. FDIC,
139 F.3d 696, 700 (9th Cir. 1998) (“Congress has transferred
everything
it
stockholder’s
action
or
could
to
the
right,
power
or
sue
directors
to
FDIC,
and
privilege
or
others
that
to
includes
demand
when
a
corporate
action
is
not
forthcoming.”).
III.
The shareholders appeal the substitution order, contending
that under the Act the appointment of a receiver or conservator
does
not
preclude
a
shareholder’s
derivative
action.
Our
jurisdiction to hear this appeal arises under 28 U.S.C. § 1291.
See Chao v. Rivendell Woods, Inc., 415 F.3d 342, 345 (4th Cir.
2005) (explaining voluntary dismissal of entire action without
prejudice is a final decision appealable under § 1291).
review questions of statutory interpretation de novo.
States v. Abuagla, 336 F.3d 277, 278 (4th Cir. 2003).
7
We
United
Appeal: 09-1973
Document: 81
Having
Date Filed: 05/05/2011
carefully
considered
the
Page: 8 of 8
record,
the
briefs
and
arguments of the parties, and the controlling and persuasive
authorities, we conclude that the district court’s analysis was
correct.
Accordingly, we affirm on the basis of the district
court’s well reasoned opinion.
See In re Freddie Mac, 643 F.
Supp. 2d 790. 2
AFFIRMED
2
The shareholders originally sought immediate review of the
substitution order, noting their appeal before the district
court entered the dismissal order. The Agency moved to dismiss
the appeal, contending this court lacked jurisdiction to review
the merits of the interlocutory order.
Because, during the
pendency of this appeal, the district court entered a final
order dismissing the action, we deny as moot the Agency’s motion
to dismiss the appeal.
See Digital Equip. Corp. v. Desktop
Direct, Inc., 511 U.S. 863, 868 (1994) (describing “general
rule” that “claims of district court error at any stage of the
litigation may be ventilated” upon entry of final judgment).
8
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