Saxton, et al v. Federal Housing Finance Agency, et al

Filing 80

ORDER Denying Transfer (MDL No. 2713). Signed by Sarah S Vance, Chair of Panel on Multidistrict Litigation on 6/2/16. (djs)

Case IAN/1:15-cv-00047 Document 23 Filed 06/02/16 Page 1 of 3

UNITED STATES JUDICIAL PANEL
on
MULTIDISTRICT LITIGATION

IN RE: FEDERAL HOUSING FINANCE AGENCY,
ET AL., PREFERRED STOCK PURCHASE AGREEMENTS
THIRD AMENDMENT LITIGATION

C15-47

MDL No. 2713

ORDER DENYING TRANSFER

Before the Panel:* Defendant Federal Housing Finance Agency (FHFA)—conservator for
Federal Home Loan Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage
Corporation (Freddie Mac)—moves under 28 U.S.C. § 1407 to centralize pretrial proceedings in this
litigation in the District of District of Columbia. This litigation consists of four actions pending in
four districts, as listed on Schedule A. Additionally, the Panel has been notified of four potentially
related actions pending in three districts. Defendants, Jacob Lew, in his official capacity as Secretary
of the Treasury, and the U.S. Department of the Treasury (the Treasury Department), support the
motion. All responding plaintiffs oppose centralization. Plaintiffs in three actions alternatively
suggest centralization in the Eastern District of Kentucky. These plaintiffs, and plaintiffs in the
District of Delaware action also alternatively suggest exclusion of the District of Delaware action.
A preferred stock investor in Fannie Mae and Freddie Mac, who has served a demand letter on the
companies’ boards, argues that his prospective claims are distinguishable from the actions before
the Panel.
On the basis of the papers filed and hearing session held, we conclude that centralization is
not necessary for the convenience of the parties and witnesses or to further the just and efficient
conduct of the litigation. These actions arise from the agreement in August 2012 between FHFA and
the Treasury Department to enter into the third amendment of their preferred stock purchase
agreement. Specifically, most plaintiffs allege that the third amendment constituted a de facto
nationalization of Fannie Mae and Freddie Mac that extinguished the private shareholders’ economic
interests in the companies by replacing a fixed quarterly dividend with a variable dividend equal to
Fannie Mae’s and Freddie Mac’s quarterly earnings, if any, less a small and decreasing capital
reserve.
Plaintiffs opposing centralization argue that there are not sufficient common disputed facts
to warrant centralization, and that discovery will be minimal. Defendants have not persuasively
refuted these arguments. We have held that, “where only a minimal number of actions are involved,
the proponent of centralization bears a heavier burden to demonstrate that centralization is
appropriate.” In re: Lifewatch, Inc., Tel. Consumer Prot. At (TCPA) Litig., __ F. Supp. 3d __, 2015
*

Judge Marjorie O. Rendell, Judge Lewis A. Kaplan, and Judge Catherine D. Perry took no
part in the decision of this matter.

Case IAN/1:15-cv-00047 Document 23 Filed 06/02/16 Page 2 of 3

-2WL 6080848, at *1 (J.P.M.L. Oct. 13, 2015). Defendants have not met that burden here, where just
four actions are pending involving primarily common legal, rather than factual, issues. While FHFA
has notified the Panel of four potentially-related actions, these actions differ in significant ways from
the actions on the motion. Two actions do not name FHFA or the Treasury Department as
defendants, but rather are brought against the auditors of Fannie Mae and Freddie Mac. The other
two actions are “books and records” actions, which plaintiffs argue are expedited proceedings that
will be slowed down by the pace of centralized proceedings. Were there a stronger case for
centralization here—a larger number of cases or a great deal of overlapping discovery—these
differences in a small number of potential tag-along actions might be less significant. But as it
stands, they lend weight to the conclusion that centralization is not appropriate.
Defendants’ arguments supporting centralization focus largely on the threshold jurisdictional
issues that will be present in all actions. In each action, defendants will argue that the Housing
Economic Recovery Act of 2008 bars judicial review of the third amendment, and that plaintiffs lack
standing because FHFA has succeeded to “all rights, titles, powers, and privileges” of shareholders.
See 12 U.S.C. §§ 4617(f), 4617(b)(2)(a)(i), (f). But these are common legal, rather than factual,
questions, and we have held that “[m]erely to avoid two federal courts having to decide the same
issue is, by itself, usually not sufficient to justify Section 1407 centralization.” In re: Medi–Cal
Reimbursement Rate Reduction Litig., 652 F. Supp. 2d 1378, 1378 (J.P.M.L.2009). We also have
held though that litigation involving common legal questions is appropriate for centralization when
it will eliminate duplicative discovery and prevent inconsistent pretrial rulings, including with
respect to identification of an underlying administrative record. See In re: Polar Bear Endangered
Species Act Listing and § 4(d) Rule Litig., 588 F. Supp. 2d 1376, 1377 (J.P.M.L. 2008). That is not
the case here. Whether these actions will share disputes regarding the sufficiency of the
administrative record is purely hypothetical. Moreover, several plaintiffs already have been provided
with relevant discovery in a similar action pending in the Court of Federal Claims, making further
discovery in these actions potentially unnecessary.
IT IS THEREFORE ORDERED that the motion for centralization of these actions is denied.

PANEL ON MULTIDISTRICT LITIGATION

__________________________________________
Sarah S. Vance
Chair
Charles R. Breyer
R. David Proctor

Ellen Segal Huvelle

Case IAN/1:15-cv-00047 Document 23 Filed 06/02/16 Page 3 of 3

IN RE: FEDERAL HOUSING FINANCE AGENCY,
ET AL., PREFERRED STOCK PURCHASE AGREEMENTS
THIRD AMENDMENT LITIGATION

MDL No. 2713

SCHEDULE A

District of Delaware
JACOBS, ET AL. v. FEDERAL HOUSING FINANCE AGENCY, ET AL.,
C.A. No. 1:15-00708
Northern District of Illinois
ROBERTS, ET AL. v. FEDERAL HOUSING FINANCE AGENCY, ET AL.,
C.A. No. 1:16-02107
Northern District of Iowa
SAXTON, ET AL. v. FEDERAL HOUSING FINANCE AGENCY, ET AL.,
C.A. No. 1:15-00047
Eastern District of Kentucky
ROBINSON v. FEDERAL HOUSING FINANCE AGENCY, ET AL.,
C.A. No. 7:15-00109