999 F.3d 751
1st Cir.2021Background
- Fannie Mae and Freddie Mac are federally chartered, privately organized GSEs that buy and sell residential mortgages.
- In September 2008 FHFA was appointed conservator for both GSEs under HERA and succeeded to their "rights, titles, powers, and privileges."
- Plaintiffs executed mortgages later assigned to Fannie Mae; after defaults, servicers conducted nonjudicial foreclosure sales under Rhode Island power-of-sale law.
- Plaintiffs sued Fannie Mae and FHFA alleging the nonjudicial foreclosures violated their Fifth Amendment procedural due process rights, claiming FHFA and Fannie Mae were government actors.
- The district court dismissed, holding FHFA, acting as conservator, "stepped into the shoes" of the private GSEs and was not a government actor; the First Circuit affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether FHFA, acting as conservator, is a state actor for Fifth Amendment claims | FHFA is a federal agency; its actions as conservator are government action subject to due process | FHFA succeeded to the GSEs' private contractual rights under HERA and acted in the GSEs' private capacity | FHFA, in its conservatorship capacity, stepped into the GSEs' shoes and did not act as the government; no state-action liability |
| Whether Fannie Mae/Freddie Mac are government actors under Lebron after conservatorship | Conservatorship gives FHFA (and thus the GSEs) effectively permanent government control → Lebron's "permanent authority" prong satisfied | Conservatorship is temporary and aimed at rehabilitation; government has not retained permanent appointive authority over the GSEs | Conservatorship is inherently temporary; Lebron's permanent-authority requirement is not met and the GSEs are not governmental |
| Whether FDIC v. Meyer requires treating conservator/receiver agencies as government actors | Meyer shows an agency acting as receiver/conservator can be treated as the government | Meyer addressed jurisdictional waiver ("sue-and-be-sued") and did not decide whether conservator acts are governmental; O'Melveny and later cases control | Meyer is a jurisdictional decision about waiver; it does not compel treating FHFA as a government actor for merits purposes |
| Whether "practical reality" or other state-action tests (entwinement, coercion, joint participation) override Lebron | The practical degree of government control makes the GSEs governmental despite statutory temporariness | Lebron's permanent-authority test governs; American Railroads did not eliminate that requirement; other tests unnecessary once conservator acts are private | Practical-control arguments fail; Lebron's permanent-authority inquiry controls and FHFA acted in a private capacity |
Key Cases Cited
- Lebron v. Nat'l R.R. Passenger Corp., 513 U.S. 374 (1995) (three-part test for when a chartered corporation is a government actor)
- O'Melveny & Myers v. FDIC, 512 U.S. 79 (1994) (receiver/conservator "steps into the shoes" of failed institution)
- FDIC v. Meyer, 510 U.S. 471 (1994) ("sue-and-be-sued" waiver and limits on Bivens claims; jurisdictional holding)
- Atherton v. FDIC, 519 U.S. 213 (1997) (agency acting as receiver is not necessarily the federal government)
- Dep't of Transportation v. Ass'n of Am. R.R.s, 575 U.S. 43 (2015) ("practical reality" of control relevant in different context but does not displace Lebron's permanent-authority requirement)
- Herron v. Fed. Nat'l Mortg. Ass'n, 861 F.3d 160 (D.C. Cir. 2017) (FHFA as conservator stepped into Fannie Mae's private shoes)
- Meridian Invs., Inc. v. Fed'l Home Loan Mortg. Corp., 855 F.3d 573 (4th Cir. 2017) (conservator role renders FHFA a private actor when exercising GSEs' rights)
- Collins v. Mnuchin, 938 F.3d 553 (5th Cir. 2019) (analysis recognizing context-specific inquiry whether conservator/receiver acts as government)