Wash. Fed. v. United States

26 F.4th 1253

WASHINGTON FEDERAL, Michael McCredy Baker, City of Austin Police Retirement System, on behalf of themselves and all others similarly situated, Plaintiffs-Appellants

v.UNITED STATES, Defendant-Appellee

2020-2190

United States Court of Appeals, Federal Circuit.

Filed: February 22, 2022

Decided: February 22, 2022

Kevin Green, Hagens Berman Sobol Shapiro LLP, San Diego, CA, argued for plaintiffs-appellants. Also represented by Steve Berman, Seattle, WA; Robert M. Roseman, Spector Roseman & Kodroff, P.C., Philadelphia, PA.

Mark B. Stern, Civil Division, Appellate Staff, United States Department of Justice, Washington, DC, argued for defendant-appellee. Also represented by Brian M. Boynton, Kyle T. Edwards, Gerard Sinzdak, Abby Christine.

Before Lourie, Prost, and O'Malley, Circuit Judges.

O'Malley, Circuit Judge.

This is a companion to appeals in eight other matters:

Fairholme Funds, Inc. v. United States , Nos. 20-1912, -1914, Owl Creek Asia I, L.P. v. United States , No. 20-1934, Mason Capital L.P. v. United States , No. 20-1936, Akanthos Opportunity Fund, L.P. v. United States , No. 20-1938, Appaloosa Investment Ltd. Partnership I v. United States , No. 20-1954, CSS, LLC v. United States , No. 20-1955, Arrowood Indemnity Co. v. United States , No. 20-2020, and Cacciapalle v. United States , No. 20-2037.¹ In those cases (collectively, the Fairholme appeals), certain shareholders of the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation (collectively, the Enterprises or Companies) challenged actions taken by the Federal Housing Finance Agency (FHFA) after it placed the Enterprises under conservatorship. Those shareholders alleged that a "net worth sweep" under an amendment to the FHFA's preferred stock purchase agreements (PSPAs) with the Department of Treasury (Treasury) constituted, inter alia , a direct taking or illegal exaction of their share value. We affirmed decisions of the United States Court of Federal Claims (Claims Court) dismissing those claims for lack of standing.² Fairholme Funds, Inc. v. United States , Nos. 20-1912, -1914, -1934, -1936, -1938, -1954, -1955, -2020, -2037, 26 F.4th 1274, 1282 (Fed. Cir. Feb. 22, 2022).

Here, Washington Federal, Michael McCredy Baker, and the City of Austin Police Retirement System (collectively, the Washington Federal Plaintiffs) also alleged direct takings and illegal exaction claims. We separated this appeal from the Fairholme appeals because the claims here primarily were predicated on the imposition of the conservatorships over the Enterprises, rather than on actions the FHFA later took in its capacity as conservator. Specifically, the Washington Federal Plaintiffs alleged that the FHFA lacked the statutory authority to impose the conservatorships.³ The Washington Federal Plaintiffs now appeal the Claims Court's final judgment dismissing their claims for lack of standing. Wash. Fed. v. United States , 149 Fed. Cl. 281 (2020). We affirm.

I. BACKGROUND

We presume familiarity with the background set forth in our Fairholme Funds decision and recite only those facts necessary to address the issues raised in this appeal.

Congress created the Enterprises to, inter alia , provide liquidity to the mortgage market. See Collins v. Yellen , ––– U.S. ––––, 141 S. Ct. 1761, 1770–71, 210 L.Ed.2d 432 (2021) ; 12 U.S.C. § 1716(4). The Enterprises do so by purchasing mortgages, pooling them into mortgage-backed securities, and selling them to investors. Collins , 141 S. Ct. at 1771. As a result, the Enterprises relieve mortgage lenders of the risk of default and free up their capital to make additional loans. Id.

The Enterprises operate under congressional charters as for-profit corporations owned by private shareholders. Id. at 1770–71. They have long benefited from a perception that the federal government would honor their obligations should they experience financial difficulties. Perry Cap. LLC v. Lew ("Perry I "), 70 F. Supp. 3d 208, 215 (D.D.C. 2014) ; Dep't of Treasury & Dep't of Hous. & Urb. Dev., Reforming America's Housing Finance Market: A Report to Congress 8 (2011) ("Treasury & HUD Report") ("[The Enterprises] benefited from ... a widely perceived government guarantee—the commonly held assumption that large losses would be backstopped by the taxpayer."). This perception and other government benefits allowed the Enterprises to purchase mortgages and mortgage-backed securities at cheaper rates than would otherwise prevail in the private market. See Perry I , 70 F. Supp. 3d at 215 ; Treasury & HUD Report at 8; J.A. 94 (¶ 15).

When the housing bubble burst in 2008, the Enterprises experienced significant losses and found themselves owning an "immense inventory of defaulted and overvalued subprime mortgages." DeKalb Cnty. v. Fed. Hous. Fin. Agency , 741 F.3d 795, 798 (7th Cir. 2013) ; see Collins , 141 S. Ct. at 1771. Though the Enterprises remained solvent, many feared the Enterprises would eventually default and "throw the housing market into a tailspin." Collins , 141 S. Ct. at 1771.

To address that concern, Congress enacted the Housing and Economic Recovery Act of 2008 (HERA) giving the FHFA discretion to appoint itself as conservator or receiver over the Enterprises. 12 U.S.C. § 4617. HERA constrained the FHFA's discretion by providing twelve grounds on which the agency may appoint itself as conservator or receiver. Id. § 4617(a)(2)–(3). These grounds include the consent of the Enterprises, by resolution of their boards of directors or their shareholders or members. Id. § 4617(a)(3)(I).

HERA provides for limited judicial review of the FHFA's decision to appoint itself as conservator or receiver over the Enterprises:

If the Agency is appointed conservator or receiver under this section, the [Enterprise] may, within 30 days of such appointment, bring an action in the United States district court for the judicial district in which the home office of such [Enterprise] is located, or in the United States District Court for the District of Columbia, for an order requiring the Agency to remove itself as conservator or receiver.

Id. § 4617(a)(5)(A). The court in which the action is brought "shall, upon the merits, dismiss such action or direct the Agency to remove itself as such conservator or receiver." Id. § 4617(a)(5)(B).

On September 6, 2008, the FHFA's Director placed the Enterprises under conservatorship with the consent of the Enterprises' boards of directors. See J.A. 90 (¶ 7). Thereafter, the Director negotiated PSPAs with Treasury. See J.A. 112–13 (¶ 68). In August 2012, the FHFA and Treasury amended the PSPAs to require the Enterprises to pay Treasury quarterly dividend payments equal to their entire net worth minus a small capital reserve amount, i.e., the "net worth sweep." See J.A. 116 (¶ 76); J.A. 162 (¶ 204).

In June 2013, the Washington Federal Plaintiffs filed a class action against the government before the Claims Court. They later amended their complaint so that it contained only one count: a Fifth Amendment takings claim and/or an illegal exaction claim.⁴ The operative complaint broadly alleges that, in imposing the conservatorships over the Enterprises, the government "destroyed the rights and value of the property interests tied to the common and preferred stock of the Companies" held by the Washington Federal Plaintiffs. J.A. 166 (¶ 218).

The complaint centers around the Washington Federal Plaintiffs' allegation that the government "improperly impos[ed] the ... conservatorships over the Companies under false pretenses with no valid statutory basis." J.A. 166–67 (¶ 222(b)). According to the Washington Federal Plaintiffs, the FHFA obtained the consent of the Enterprises' boards of directors through "misrepresentation and duress," as well as by immunizing the directors from liability for consenting to a conservatorship. J.A. 121–22 (¶¶ 87, 89) (citing 12 U.S.C. § 4617(a)(6) ). The complaint asserts that, as a result of the FHFA's unlawful appointment as conservator, the FHFA "terminated all shareholder meetings and all shareholder voting rights," ordered the Enterprises "to cease paying dividends on their preferred and common stock," and ordered the Enterprises "to delist their common and preferred shares from the New York Stock Exchange." E.g. , J.A. 161–62 (¶¶ 202–03). The Washington Federal Plaintiffs also alleged that the net worth sweep constituted a taking or illegal exaction. J.A. 153 (¶ 185). After the Supreme Court confirmed in Collins that the FHFA had statutory authority to enter into the amendment to the PSPAs effectuating the net worth sweep, 141 S. Ct. at 1777, the Washington Federal Plaintiffs abandoned that aspect of their claims.⁵ Appellants' Suppl. Resp. Br. on Collins at 1.

The government moved to dismiss the claims in every case before the Claims Court in a single, omnibus motion. Wash. Fed. , 149 Fed. Cl. at 289. The Claims Court ultimately granted the government's motion, dismissing the Washington Federal Plaintiffs' operative complaint for lack of standing. Id. at 297.

Two of the Claims Court's holdings are relevant to this appeal. First, the court rejected the government's argument that, because HERA's 30-day limitations period bars the Washington Federal Plaintiffs' claims, the court lacks subject matter jurisdiction over the case. Id. at 291–92. The court explained that the applicable statute of limitations is not HERA's 30-day period under 12 U.S.C. § 4617(a)(5), but the general 6-year period under 28 U.S.C. § 2501 for claims over which the Claims Court has jurisdiction. Id. Because the Washington Federal Plaintiffs filed suit within six years of the imposition of conservatorships over the Enterprises, the Claims Court found their claims timely. Id. at 292.

Second, the Claims Court held that the Washington Federal Plaintiffs lacked standing to litigate their direct takings and illegal exaction claims because the claims are substantively derivative. See id. at 296. The court found that...