27 F.4th 1068
5th Cir.2022Background:
- Shareholder plaintiffs (Collins and others) challenged FHFA actions stemming from the "Third Amendment"/Net Worth Sweep between FHFA and Treasury, alleging injury from FHFA’s structure and actions.
- The FHFA Director was removable only "for cause" under 12 U.S.C., raising a separation-of-powers challenge to the removal restriction.
- The Fifth Circuit (en banc) previously held the "for-cause" removal provision unconstitutional and addressed the Net Worth Sweep; the Supreme Court granted review.
- In Collins v. Yellen, the Supreme Court held the removal restriction unconstitutional but ruled the Third Amendment itself bore no constitutional defect at inception and that directors who implemented it were properly appointed; it left open the possibility of retrospective relief and remanded the case for further proceedings.
- On remand, the Fifth Circuit (per curiam) sent the case back to the district court for proceedings consistent with the Supreme Court’s opinion rather than resolving the retrospective-harm question itself.
- A dissent (Haynes, J.) argued the Fifth Circuit should decide the harm/relief issue now and issue declaratory relief finding the removal provision unconstitutional.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Constitutionality of FHFA Director "for-cause" removal | "For-cause" removal unconstitutionally limits Presidential control | Removal restriction valid or not outcome doesn't void actions | Supreme Court: removal provision unconstitutional |
| Validity of the Third Amendment (Net Worth Sweep) | Amendment harmed shareholders and was infirm | Third Amendment valid at inception; Treasury counterparty under Presidential control | Supreme Court: Third Amendment not constitutionally infirm at inception |
| Legitimacy of FHFA directors who implemented the Amendment | Directors' constrained removability tainted their acts | Senate-confirmed directors were properly appointed despite removal limits | Supreme Court: directors properly appointed; their actions not automatically void |
| Entitlement to retrospective relief for shareholders | Shareholders may be entitled to relief for harms caused by unconstitutional removal limit | Executive supervision via Treasury and other facts may negate compensable harm; actions not void | Supreme Court: remanded for lower courts to resolve harm; Fifth Circuit remands to district court; dissent urges immediate resolution |
Key Cases Cited
- Collins v. Yellen, 141 S. Ct. 1761 (2021) (held FHFA Director removal restriction unconstitutional; Third Amendment and post-appointment actions not automatically void; remanded for harm analysis)
- Collins v. Mnuchin, 938 F.3d 553 (5th Cir. 2019) (en banc) (Fifth Circuit’s prior decision finding removal restriction unconstitutional and discussing Presidential ability to stop the Net Worth Sweep)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (articulates pleading plausibility standard)