Louisiana Municipal Police Employees Retirement System v. Federal Housing Finance Agency
434 F. App'x 188
| 4th Cir. | 2011Background
- Freddie Mac was created in 1970 to promote homeownership and operate in the secondary mortgage market as a government-sponsored enterprise.
- The Office of Federal Housing Enterprise Oversight (OFHEO) was created in 1992 to regulate Freddie Mac and Fannie Mae.
- The Housing and Economic Recovery Act of 2008 abolished OFHEO and replaced it with the Federal Housing Finance Agency (FHFA), whose director largely retained the same leadership as OFHEO.
- FHFA was empowered to appoint Freddie Mac as conservator or receiver when the enterprise became critically undercapitalized, with broad powers over Freddie Mac’s assets and operations.
- On September 6, 2008, FHFA appointed itself conservator of Freddie Mac and assumed all rights and powers of Freddie Mac’s stockholders, directors, and officers with respect to Freddie Mac.
- Following the appointment, the district court dismissed the derivative actions after substituting FHFA as plaintiff, and the shareholders appealed; the Fourth Circuit affirmed the district court’s substitution and dismissal order.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether FHFA’s conservatorship precludes shareholder derivative actions. | Shareholders contend the Act does not strip derivative rights. | Agency argues the statute transfers all rights of stockholders to FHFA. | Yes; the rights to sue derivatively are transferred to FHFA. |
| Whether 12 U.S.C. § 4617(b)(2)(A)(i) transfers all rights of stockholders to the conservator. | The statute’s language supports preserving shareholder actions. | Statutory text shows broad transfer of rights to conservator. | Yes; grants conservator all rights, titles, powers, and privileges of stockholders. |
| Whether the court should apply precedents from bank receivership law (FDIC) to Freddie Mac. | Pareto and related authorities support shareholder action rights. | FDIC-like transfer framework supports transfer of rights. | Yes; authorities support transfer of shareholder rights to conservator. |
| What is the appropriate standard and scope of review for statutory interpretation here. | Challenge focuses on statutory interpretation of §4617. | Court should apply de novo review. | De novo review applied; statute interpreted accordingly. |
| Whether the district court’s analysis was correct as to rights transfer and dismissal. | Arguments rely on non-transfer of derivative rights. | Statutory construction shows comprehensive transfer. | District court’s reasoning correct; affirmed. |
Key Cases Cited
- In re Freddie Mac Derivative Litig., 643 F. Supp. 2d 790 (E.D. Va. 2009) (district court held conservatorship transfers stockholder rights, including derivative actions)
- Pareto v. FDIC, 139 F.3d 696 (9th Cir. 1998) (Congress transfers to FDIC all stockholder rights to sue when action not forthcoming)
- Chao v. Rivendell Woods, Inc., 415 F.3d 342 (4th Cir. 2005) (final appealable decision on voluntary dismissal under 28 U.S.C. § 1291)
- United States v. Abuagla, 336 F.3d 277 (4th Cir. 2003) (statutory interpretation de novo)