Robinson v. Federal Housing Finance Agency et al
MEMORANDUM OPINION & ORDER: 1. Dfts' motions to dismiss (DE 22 ; DE 23 ) are GRANTED; and 2. This matter is DISMISSED and STRICKEN from active docket. Signed by Judge Karen K. Caldwell on 9/9/2016. (RCB)cc: COR
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF KENTUCKY
ARNETIA JOYCE ROBINSON,
CIVIL ACTION NO. 7:15-cv-109-KKC
MEMORANDUM OPINION & ORDER
THE FEDERAL HOUSING FINANCE
AGENCY, et al.,
*** *** ***
This matter is before the Court on the Federal Housing Finance Agency (“FHFA”)
and the Department of the Treasury’s (“Treasury”) motions to dismiss. (DE 22; DE 23.)
Plaintiff, Arnetia Robinson, is a private individual who claims her investments in Fannie
Mae and Freddie Mac (“Companies”) were materially damaged when FHFA and Treasury
entered into a 2012 amendment (“Third Amendment”) to existing Preferred Stock Purchase
Agreements (“PSPAs”). The plaintiff seeks declaratory and injunctive relief that would
prevent enforcement of portions of the Third Amendment.
The Companies, Fannie Mae and Freddie Mac, are government-sponsored
enterprises born from statutory charters issued by Congress.
The Companies insure
trillions of dollars of mortgages and provide liquidity to the residential mortgage market.
The Companies previously operated for profit, their debt and equity securities being
privately owned and publicly traded. The shareholders in the companies include many
individuals and organizations, including Plaintiff.
During the economic downturn of 2008, the Companies were seen as extreme
liabilities as major players in the distressed housing market. In response to this perceived
volatility, the United States Congress enacted the Housing and Economic Recovery Act
(“HERA”) on July 30, 2008. HERA granted FHFA the power to place the Companies in
conservatorship or receivership. FHFA as conservator or receiver was empowered to
“immediately succeed to—(i) all rights, titles, powers, and privileges of the [Company], and
of any stockholder, officer or director of such [Company] with respect to the [Company] and
the assets of the [Company].” 12 U.S.C. § 4617 (b)(2)(A)(i). Plaintiff contends that as
conservator HERA charges FHFA to rehabilitate the Companies so as to put the Companies
back into a solvent condition while preserving their assets. Plaintiff also alleges that only
as receiver does HERA give FHFA the authority to liquidate the Companies’ assets.
On September 6, 2008—despite public statements made by Treasury and FHFA
assuring investors that the companies were in sound financial state—FHFA exercised their
rights to conservatorship. Plaintiff claims that at that time, neither Company was
experiencing a liquidity crisis, nor did they suffer from a short-term fall in operating
revenue. The Companies had access to separate credit facilities at the Federal Reserve and
the Treasury. The Companies also held hundreds of billions of dollars in unencumbered
assets that could potentially be pledged as collateral.
HERA also granted Treasury temporary authority to invest in the Companies’ stock
until December of 2009. Soon after the Companies were placed in conservatorship,
Treasury exercised that temporary statutory authority by entering into PSPAs with FHFA
in its role as conservator of the Companies. Under these PSPAs, Treasury committed to
purchase a newly created class of Senior Preferred Stock (“Government Stock”). In return
for this commitment, Treasury received one billion dollars of Government Stock in each
Company and warrants to acquire 79.9% of the common stock of the Companies. These
stocks entitled the treasury to dividends at an annualized rate of 10% cash or 12% in-kind.
The agreement gave FHFA discretion to determine whether to pay cash or in-kind
dividends. In-kind were to be paid by increasing the liquidation preference of the
outstanding Government Stock. Therefore, Plaintiff claims, there was never any threat that
the Companies would become insolvent by virtue of paying cash dividends.
The Government Stocks diluted, but did not wholly eliminate, the economic interests
of the private shareholders. Shortly after the imposition of the conservatorship, the Director
of the FHFA James Lockhart accordingly assured Congress that the Companies’
shareholders are still in place . . . common shareholders have an economic interest in the
companies.” During the conservatorship, due to allegedly pessimistic assumptions about
potential future losses, the Companies significantly wrote down the value of their assets.
This forced the Companies to incur non-cash accounting losses in the form of loan loss
provisions. In June 2012, these losses forced the Companies to issue $161 billion in
Government Stock to make up for the balance-sheet deficits. The Companies also issued an
additional $26 billion of Government Stock so that the Companies could pay cash dividends
to the Treasury (although the Companies were not required to pay cash, as stated above).
Because of these transactions, the dividends owed on the Government Stock were
artificially and permanently inflated.
As a result of these transactions, the Treasury amassed a total of $189 billion in
Government Stock. Based on the Companies’ performances in the second quarter of 2012,
there still seemed to be value in private shares. The Companies were paying 10%
annualized cash dividends on the Government Stock without drawing additional capital
from Treasury. Based on the improving housing market and higher quality of the newer
loans backed by the Companies, Plaintiff contends that the Companies had returned to
Plaintiff also alleges that Treasury and FHFA knew of this apparent return to
profitability. The Companies would soon be reversing many of the non-cash accounting
losses that were incurred previously and both Treasury and FHFA had specific knowledge
of this forthcoming balance sheet improvement.
After the Companies had announced their successful second quarter earnings, the
Treasury and FHFA agreed to the PSPA’s Third Amendment on August 17, 2012. The
Third Amendment replaced the previous dividend formula with a requirement that the
Companies pay as dividends the amount by which their net worth for the quarter exceeds a
capital buffer of $3 billion. This buffer will gradually decrease over time by $600 million per
year, being entirely eliminated in 2018. Put simply, the Third Amendment requires the
Companies to pay a quarterly dividend equal to the entire net worth of each Company,
minus a small reserve that will eventually shrink to zero (the “Net Worth Sweep”).
Finally, Plaintiff alleges that the Companies via FHFA agreed to the Third
Amendment at the insistence and under the direction and supervision of the Treasury.
Plaintiff believes that the Third Amendment was a Treasury initiative that and reflected
the culmination of a long-term plan to seize and nationalize the Companies.
Based on the foregoing facts, Plaintiff makes three claims for relief. First, that
FHFA exceeded its conservatorship authority under HERA in violation of the APA. (DE 17
at 62–64.) Second, that Treasury exceeded its temporary statutory authority to purchase
the Companies’ securities in violation of the APA. (DE 17 at 64–66.) And finally, that
Treasury further violated the APA through arbitrary and capricious conduct. (DE 17 at 66–
Consequently, Plaintiff requests (1) a declaration that the Net Worth Sweep violates
HERA and that Treasury acted arbitrarily and capriciously; (2) an injunction requiring
Treasury to return all payments received through the Net Worth Sweep or recharacterizing
these payments as a pay down and redemption of Treasury’s liquidation preference and
Government Stock; (3) vacatur of the Net Worth Sweep portions of the Third Amendment;
(4) an injunction preventing FHFA or Treasury from further enforcing the Net Worth
Sweep; and (5) an injunction barring FHFA from acting under the direction of Treasury in
its role as conservator of the Companies. Both FHFA and Treasury have independently
moved for dismissal of Plaintiff’s claims. (DE 22; DE 23.)
A. Standard of Review
A court may dismiss a complaint pursuant to Federal Rule of Civil Procedure
12(b)(6) if the plaintiff fails to provide “enough facts to state a claim to relief that is
plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). The court must
construe the complaint in the light most favorable to the plaintiff and accept all factual
allegations as true, but the factual allegations must “raise a right to relief above the
speculative level.” Id. at 555. The complaint must “contain either direct or inferential
allegations respecting all material elements necessary for recovery under a viable legal
theory.” D’Ambrosio v. Marino, 747 F.3d 378, 383 (6th Cir. 2014) (internal quotation marks
omitted). Failure to include plausible factual allegations for all material elements necessary
for recovery warrants dismissal. Id.
B. Court Authority
1. Claims against FHFA
Through HERA, Congress explicitly limited court authority to grant equitable relief
upon challenges to FHFA action, 12 U.S.C. § 4617(f) provides that: “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.” “Courts interpreting the scope of [§] 4617(f) have relied on decisions
addressing the nearly identical jurisdictional bar applicable to the Federal Deposit
Insurance Corporation (‘FDIC’) conservatorships contained in 12 U.S.C. § 1821(j).” Natural
Res. Def. Council, Inc. v. FHFA, 815 F. Supp. 2d 630, 641 (S.D.N.Y. 2011), aff'd sub nom.
Town of Babylon v. FHFA, 699 F.3d 221 (2d Cir. 2012). These provisions have been
construed to “effect a sweeping ouster of courts’ power to grant equitable remedies.”
Freeman v. FDIC, 56 F.3d 1394, 1299 (D.C. Cir. 1995). Because Plaintiff’s complaint seeks
only equitable remedies, such relief is barred and the claims against FHFA must be
dismissed unless Plaintiff has properly alleged that “FHFA act[ed] beyond the scope of its
conservator power.”1 Cnty. of Sonoma v. FHFA, 710 F.3d 987, 992 (9th Cir. 2013); see also
Leon Cnty., Fla. v. FHFA, 700 F.3d 1273, 1278 (11th Cir. 2012) (“ ‘[I]f the FHFA were to act
beyond statutory or constitutional bounds in a manner that adversely impacted the rights
of others, § 4617(f) would not bar judicial oversight or review of its actions.’ ”) (quoting In re
Freddie Mac Derivative Litig., 643 F. Supp. 2d 790, 799 (E.D. Va. 2009)).
The Court recognizes that FHFA might also be subject to suit if Treasury exceeded its statutory authority in
executing the Third Amendment. See Perry Capital LLC v. Lew, 70 F. Supp. 3d 208, 223 (D.D.C. 2014) (“[I]f
FHFA, as a conservator or receiver, signs a contract with another government entity that is acting beyond the
scope of its HERA powers, then FHFA is functionally complicit in its counterparty's misconduct, and such
unlawful actions may be imputed to FHFA.”). However, as discussed below, the Court finds that Treasury did
not exceed its authority under HERA.
2. Claims against Treasury
The same analysis applies to Plaintiff’s claims against the Treasury. Section 4617(f)
not only bars equitable relief that would restrain the FHFA directly, but also equitable
relief that would “affect the exercise of powers or functions of [FHFA] as a conservator.” 12
U.S.C. § 4617(f). Plaintiff’s prayer for relief seeks a declaration that the Net Worth Sweep
was invalid, and various injunctions that would prevent FHFA or Treasury from complying
with its terms and, in effect, rescind the that portion of the Third Amendment. If Plaintiff is
“allowed to attack the validity of [the Third Amendment] by suing the [Treasury], such
actions would certainly restrain or affect [FHFA’s] powers.” Dittmer Prop., L.P. v. FDIC,
708 F.3d 1011, 1017 (8th Cir. 2013). As Judge Lamberth aptly stated:
A plaintiff is not entitled to use the technical wording of her
complaint—i.e., bringing a claim against a counterparty when
the contract in question is intertwined with FHFA's
responsibilities as a conservator—as an end-run around HERA.
Therefore, § 4617(f) applies generally to litigation concerning a
contract signed by FHFA pursuant to its powers as a
Perry Capital LLC v. Lew, 70 F. Supp. 3d 208, 222 (D.D.C. 2014). Thus, Plaintiff’s claims
against the Treasury must also be dismissed, unless Plaintiff has properly alleged that
FHFA or Treasury acted beyond the scope of their powers under HERA.2
B. The Third Amendment and Treasury’s Statutory Authority
The sole issue3 in this case that is unique to the Treasury is whether it exceeded its
authority under HERA’s temporary authorization for the purchase of the Companies’
If FHFA exceeded its statutory authority in entering the Third Amendment, Treasury would not be protected
by Section 4617(f). See supra n.1.
Plaintiff briefly argues that Treasury violated the APA by ignoring alleged fiduciary duties to minority
shareholders. (DE 32 at 68–69.) Despite Plaintiff’s citations to case law concerning circumstances where “[t]he
law is well established that the Government in its dealing with Indian tribal property acts in a fiduciary
capacity,” and state fiduciary duty law, there is no basis for applying such duties here. Cobell v. Norton, 240
securities. 12 U.S.C. § 1719(g). HERA included a sunset provision that foreclosed the
Treasury’s right to purchase securities in the Companies after December 31, 2009. 12
U.S.C. § 1719(g)(4). However, Treasury retained authority to “exercise any rights received
in connection” with earlier securities purchases. 12 U.S.C. § 1719(g)(2)(D). Nonetheless,
Plaintiff contends that the Third Amendment constituted a “purchase” of securities in
violation of the sunset provision. The Court disagrees.
Plaintiff argues that because Treasury transferred its fixed dividend obligation in
exchange for the Companies’ equity value was thus a “purchase” prohibited by HERA. (DE
32 at 66.) This construction of the Third Amendment is belied by the reality of the
transaction, the net worth sweep represented a new formula of dividend compensation for a
$200 billion-plus investment Treasury had already made. This argument, like most of
Plaintiff’s contentions, was previously addressed by the Perry Capital Court, this Court
agrees with Judge Lamberth’s conclusions:
Notwithstanding plaintiffs' contentions regarding the
“fundamental change doctrine,” Treasury's own tax
regulations, or otherwise, the present fact pattern strikes the
Court as straightforward, at least in the context of the
applicability of § 1719(g)'s sunset provision. Without providing
an additional funding commitment or receiving new securities
from the GSEs as consideration for its Third Amendment to the
already existing PSPAs, Treasury cannot be said to have
purchased new securities under § 1719(g)(1)(a). Treasury may
have amended the compensation structure of its investment in
a way that plaintiffs find troubling, but doing so did not violate
the purchase authority sunset provision. § 1719(g)(4).
Perry Capital LLC v. Lew, 70 F. Supp. 3d 208, 224 (D.D.C. 2014).
F.3d 1081, 1098 (D.C. Cir. 2001) (quoting Lincoln v. Vigil, 508 U.S. 182, 194 (1993). Clearly there is no “well
established” federal precedent applying such duties in this context. Likewise, there is no evidence of
Congressional intent to graft state fiduciary duties onto the Treasury’s responsibilities under HERA. See
Hancock v. Train, 426 U.S. 167, 179 (1976) (“[W]here Congress does not affirmatively declare its
instrumentalities or property subject to regulation, the federal function must be left free of regulation.”).
Finally, Congress explicitly permitted Treasury to consider the “need for preferences or priorities regarding
payments to the Government,” an interest clearly at odds with traditional notions of dominant shareholder’s
fiduciary duties to minority shareholders. 12 U.S.C. § 1719(g)(1)(C)(i).
c. The Third Amendment and FHFA’s Statutory Authority
Plaintiff contends that FHFA exceeded its statutory authority by entering into the
Third Amendment in five ways. (DE 32 at 30.) First, Plaintiff claims FHFA entered into the
Third Amendment “at the direction and under the supervision of treasury,” in violation of
12 U.S.C. § 4617(a)(7). Second, Plaintiff alleges that FHFA acted as an “anti-conservator”
by using the GSEs as “ATM machines.” Third, Plaintiff avers that the Third Amendment
forces the GSEs to “operate on the edge of insolvency in perpetuity,” in violation of 12
U.S.C. § 4617(b)(2)(D)(i). Fourth, Plaintiff represents that entering into the Third
Amendment was contrary to FHFA’s responsibility to conserve and preserve the GSE’s
assets, in violation of 12 U.S.C. § 4617(b)(2)(D)(ii). Finally, Plaintiff contends that FHFA
failed to satisfy its duty to rehabilitate the GSE’s and return them to private control, in
violation of 12 U.S.C. § 4617(a)(2). Thus, Plaintiff claims that any of these bases permit this
Court grant the equitable relief she seeks, notwithstanding the bar created by 12 U.S.C. §
This Court will address each of Plaintiff’s contentions in turn to determine whether
she has adequately alleged that FHFA exceeded its statutory authority by entering into the
1. 12 U.S.C. § 4617(a)(7)
HERA provides that: “When acting as conservator or receiver, [FHFA] shall not be
subject to the direction or supervision of any other agency.” 12 U.S.C. § 4617(a)(7). Plaintiff
stakes her claim for violation of this provision on the Administrative Procedure Act’s
(“APA”) right of review for individuals “adversely affected or aggrieved by agency action.” 5
U.S.C. § 702. Defendants allege that Plaintiff lacks standing to enforce this provision
because she does not fall within the “zone of interests” protected by this provision. (DE 37
Standing “involves both constitutional limitations on federal-court jurisdiction and
prudential limitations on its exercise.” Warth v. Seldin, 422 U.S. 490, 498 (1975) (citing
Barrows v. Jackson, 346 U.S. 249 (1953)). Defendants’ argument concerns the latter, and
there is no dispute that Plaintiff satisfies the Article III standing requirements. The
prudential standing requirement embodied by the zone of interests doctrine requires that “a
plaintiff's grievance [ ] arguably fall within the zone of interests protected or regulated by
the statutory provision or constitutional guarantee invoked in the suit.” Bennett v. Spear,
520 U.S. 154, 162 (1997) (internal citations omitted). The Supreme Court has stated that
“[w]hether a plaintiff's interest is ‘arguably . . . protected . . . by the statute’ within the
meaning of the zone-of-interests test is to be determined not by reference to the overall
purpose of the Act in question . . . , but by reference to the particular provision of law upon
which the plaintiff relies.” Id. at 175–76 (emphasis added). Thus, the question presented is
whether shareholders interest in the value of their stock arguably falls within the zone of
interests protected by 12 U.S.C. § 4617(a)(7).
Plaintiff contends that she falls within this zone of interests because Section
4617(a)(7) is intended to preserve the integrity of a conservatorship, and because one of the
principal purposes of a conservatorship is to protect the interests of an entity’s
shareholders.4 Whether or not the latter argument is valid, the fact remains that there is no
indication that Section 4617(a)(7) itself seeks to protect the interests of entity’s
shareholders. Indeed, it appears that the clear purpose of the requirement is to provide a
preemption defense for FHFA in its role as conservator. This is the only method by which
Plaintiff also alleges that FHFA owes fiduciary duties to the GSE shareholders, however, as with Treasury,
there is no indication that such fiduciary duties exist. See supra n.3.
this provision has previously been given effect. See e.g., Suero v. Fed. Home Loan Mortg.
Corp., 2015 WL 4919999, at *9 (D. Mass. Aug. 18, 2015). Indeed, the very fact that FHFA
itself has not brought suit to enjoin the Treasury from the alleged coercion it was subjected
to suggest that FHFA was an independent, willing participant in its negotiations with the
Treasury. FHFA’s interest in proceeding independently, if it felt such interest was
jeopardized, is precisely the zone of interests congress sought to protect. Accordingly,
Plaintiff lacks standing to pursue a claim pursuant to Section 4617(a)(7),
Prudential standing requirements are “judicially self-imposed limits on the exercise
of federal jurisdiction.” Allen v. Wright, 468 U.S. 737, 751 (1984). They are “founded in
concern about the proper—and properly limited—role of the courts in a democratic society.”
Warth v. Seldin, 422 U.S. 490, 498 (1975). With HERA, Congress enacted a statutory
scheme that swept away courts’ authority to enjoin FHFA conduct. To find that Section
4617(a)(7) gives Plaintiff standing would be inconsistent with this Courts’ limited role in
our democratic society. “Congress legislates against the background of [ ] prudential
standing doctrine, which applies unless it is expressly negated.” Bennett v. Spear, 520 U.S.
154, 163 (1997). This Court will not hold that Congress implicitly created an end run
around an explicit ouster of court authority by including a provision that provided FHFA an
additional defense to interference from other governmental bodies, i.e., states and federal
2. FHFA did not violate any of its “duties” as conservator
Plaintiff’s next three allegations can be broadly classified as claims that FHFA
violated its “duties” as conservator and, thus, exceeded its statutory authority. This
includes Plaintiff’s claims that FHFA has treated the GSEs as an ATM machines, and that
FHFA violated both subsections of Section 4617(b)(2)(D).
Initially, the Court will note that Plaintiff’s voluminous references to general
conservatorship duties are inapplicable to FHFA in its role as conservator. (DE 32 at 40–
41.) Plaintiff is correct that when Congress enacts a statute using “a well-established term”
the enactment “carries the implication that Congress intended the term to be construed in
accordance with pre-existing regulatory interpretations.” Bragdon v. Abbott, 524 U.S. 624,
631 (1998). However, this generalized canon of statutory interpretation carries little
relevance when Congress further defines a term contrary to any pre-existing conceptions.
HERA’s grant of authority to the FHFA exceeds the normal bounds of a conservatorship
and, thus, this Court must look to the statutory text to determine the scope of FHFA’s
powers and responsibilities.
Plaintiff’s references to various policy statements and internal communications
regarding FHFA’s goals for the GSE’s prior to the Third Amendment are likewise
unavailing. (DE 32 at 41–42.) The Perry Capital Court aptly summarized why such
statements are irrelevant for the present analysis:
The extraordinary breadth of HERA's statutory grant to FHFA
as a conservator or receiver for the GSEs, likely due to the bill's
enactment during an unprecedented crisis in the housing
market . . . coupled with the anti-injunction provision, narrows
the Court's jurisdictional analysis to what the Third
Amendment entails, rather than why FHFA executed the Third
For instance, the Court will examine whether the Third
Amendment actually resulted in a de facto receivership, [ ] not
what FHFA has publicly stated regarding any power it may or
may not have, as conservator, to prepare the GSEs for
liquidation . . . . FHFA's underlying motives or opinions . . . do
not matter for the purposes of § 4617(f). Cf. Leon Cnty., Fla. v.
FHFA, 816 F.Supp.2d 1205, 1208 (N.D. Fla. 2011) aff'd, 700
F.3d 1273 (11th Cir. 2012) (“Congress surely knew, when it
enacted § 4617(f), that challenges to agency action sometimes
assert an improper motive. But Congress barred judicial review
of the conservator's actions without making an exception for
actions said to be taken from an improper motive.”).
Perry Capital LLC v. Lew, 70 F. Supp. 3d 208, 226 (D.D.C. 2014) (emphasis in original).
Turning to the statutory text, Section 4617(b)(2)(D) provides that FHFA “may, as
conservator, take such action as may be (i) necessary to put the regulated entity in a sound
and solvent condition; and (ii) appropriate to . . . preserve and conserve the assets and
property of the regulated entity.” 12 U.S.C. § 4617(b)(2)(D) (emphasis added). Plaintiff
contends that the Third Amendment violates these provisions and, further, that they are
mandatory duties. (DE 32 at 40.) Whether or not the Third Amendment is consistent with
these provisions, Plaintiff’s argument fails for two reasons. First, Congress explicitly used
the permissive term “may” in implementing this regulation. Second, the structure of
Section 4617 further clarifies that these provisions are permissive powers of FHFA not
duties with which they are required to comply.
Plaintiff contends that while permissive language often implies some degree of
discretion, thatassumption can be “defeated by . . . obvious inferences from the structure
and purpose of the statute.” (DE 32 at 42 (citing United States v. Rogers, 461 U.S. 677, 706
(1983)).) Plaintiff suggests that a permissive reading of Section 4617(b)(2)(D) is inconsistent
with the “limited delegation of authority from Congress” embodied by HERA. Further,
Plaintiff attempts to apply some form of expressio unius est exclusio alterius to suggest that
Congress’s delineation of FHFA’s powers as conservator in Section 4617(b)(2)(D) represents
an exclusive statement of the FHFA’s possible authority as conservator. These contentions
There is no indication from either the structure or purpose of HERA that the use of
“may” in Section 4617(b)(2)(D) was not intended to grant discretion. Section 4617(b) is
entitled “Powers and duties of the Agency as conservator or receiver.” The provisions at
issue fall under the sub-heading “(D) Powers as conservator.” Thus, the structure of Section
4617 implies that these are permissive powers rather than mandatory duties of FHFA.
Likewise, the suggestion that Congress envisioned only a limited delegation of authority to
FHFA is belied by the powers HERA actually grants FHFA. Courts have variously
characterized these types of powers as “exceptionally broad” and “extraordinary.” MBIA
Ins. Corp. v. FDIC, 708 F.3d 234, 236 (D.C. Cir. 2013); In re Landmark Land Co. of Okla.,
Inc., 973 F.2d 283, 288 (4th Cir. 1992).
Finally, Section 4617(b)(2)(D) obviously does not set out the exclusive powers of
FHFA as conservator. For instance, Section 4617(b)(2)(J) provides for “[i]ncidental powers,”
which FHFA may exercise “as conservator.” See also 12 U.S.C. § 4617(b)(2)(G) (FHFA “may,
as conservator or receiver, transfer or sell any asset or liability of the regulated entity”).
Section 4617(b)(2)(D) does not create a mandatory duty, and FHFA’s alleged failure to
exercise its permissive power under that section does not remove Plaintiff’s claims from the
ambit of Section 4617(f)’s bar on equitable relief.
3. 12 U.S.C. § 4617(a)(2)
Finally, Plaintiff contends that FHFA has violated its duty to rehabilitate the GSEs
pursuant to 12 U.S.C. § 4617(a)(2). FHFA responds that Section 4617(a)(2) also grants it
the authority to “wind down” the GSEs as a conservator. (DE 37 at 22–24.) Whether or not
this is the case, a point that Plaintiff hotly contests, FHFA is undoubtedly authorized to
wind down the GSEs as a receiver. Plaintiff has offered no argument why FHFA is unable
to convert its current conservatorship into a receivership and, in fact, HERA clearly
envisions the possibility of just such a conversion. See 12 U.S.C. § 4617(a)(4)(D) (“The
conservatorship[.]”); see also 12 U.S.C. § 4617(a)(2) (“[FHFA] may, at the discretion of the
Director, be appointed conservator or receiver.” (emphasis added)). Thus, even if FHFA’s
actions could be construed as evidencing an intent to “wind down” the GSEs, “[t]here surely
can be a fluid progression from conservatorship to receivership without violating HERA,
and that progression could very well involve a conservator that acknowledges an ultimate
goal of liquidation.” Perry Capital LLC v. Lew, 70 F. Supp. 3d 208, 246 (D.D.C. 2014).
In short, this Court finds that so long as FHFA “is exercise[ing] judgment under one
of its enumerated powers” such as “disposing of assets . . . when acting as its conservator . .
. [,] a quintessential statutory power of FHFA” this court may not enjoin that act “merely
because someone alleges” that it is “improperly or even unlawfully exercising a function or
power that is clearly authorized by statute.” Ward v. Resolution Trust Corp., 996 F.2d 99,
103 (5th Cir. 1993); see also 12 U.S.C. § 4617(b)(2)(G) (“[FHFA] may, as conservator or
receiver, transfer or sell any asset . . . of the regulated entity . . . and may do so without any
approval, assignment, or consent with respect to such transfer or sale.”).
Accordingly, IT IS ORDERED as follows:
1. Defendants’ motions to dismiss (DE 22; DE 23) are GRANTED; and
2. This matter is DISMISSED and STRICKEN from the active docket.
Dated September 9, 2016.
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