Patrick Collins v. Steven Mnuchin, Secretar
896 F.3d 640
5th Cir.2018Background
- In 2008 Congress created the Federal Housing Finance Agency (FHFA) under HERA to oversee Fannie Mae and Freddie Mac and authorized FHFA to serve as conservator or receiver for those GSEs.
- Treasury entered into Preferred Stock Purchase Agreements (PSPAs) in 2008–09 to inject capital; in 2012 FHFA (as conservator) and Treasury adopted the Third Amendment replacing a fixed 10% dividend with a “net worth sweep” requiring the GSEs to pay Treasury quarterly dividends equal to excess net worth (after modest reserves).
- The net worth sweep transferred many billions from Fannie/Freddie to Treasury and effectively prevented the GSEs from rebuilding capital; shareholders sued claiming statutory and constitutional violations.
- Shareholders alleged FHFA exceeded its conservator authority under HERA and that Treasury acted unlawfully under the APA; they also challenged FHFA’s structure as violating Article II because its single Director is removable only for cause and the agency is insulated from presidential control.
- The district court dismissed the statutory claims as barred by HERA’s anti‑injunction/judicial‑review bar and upheld FHFA’s structure; on appeal the Fifth Circuit affirmed dismissal of statutory claims but held FHFA’s structure violated the separation of powers and severed the for‑cause removal protection.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether HERA bars judicial review of APA/statutory challenges to the Third Amendment/net‑worth sweep | Shareholders: FHFA exceeded conservator authority; therefore §4617(f) anti‑injunction bar doesn’t preclude review | Agencies: §4617(f) forbids courts from restraining or affecting FHFA as conservator; FHFA acted within its statutory authority | Court: Affirmed dismissal—claims barred by §4617(f) because FHFA acted within its statutory authority |
| Whether FHFA exceeded its statutory conservator powers by adopting the net‑worth sweep | Shareholders: conservator duty is to “preserve and conserve” and rehabilitate; the sweep drained capital and effectively wound up the GSEs beyond conservator powers | Agencies: HERA grants broad, discretionary conservatorship and incidental powers, so the sweep was within FHFA’s managerial judgment | Court: Did not decide on merits because statutory claims were barred; other circuits had rejected shareholder statutory claims |
| Article II/separation‑of‑powers challenge to FHFA’s structure (single Director removable only for cause; funding outside appropriations; advisory board only) | Shareholders: cumulative insulation (for‑cause removal, single head, non‑appropriated funding, weak oversight board) prevents meaningful presidential control and violates Take Care Clause | Agencies: independence is constitutional; removal protection and structure are consistent with precedent and necessary for regulatory independence | Court: Reversed district court — FHFA is unconstitutionally insulated; struck down the for‑cause removal protection (severed from HERA) and left remainder of statute intact |
| Article III standing to pursue structural constitutional claim | Shareholders: they suffered direct economic injury from transfer of shareholder rights and have relaxed standing for structural separation‑of‑powers claims | Agencies: alleged injury is not fairly traceable to removal provision and relief (severance) would not redress harm | Court: Plaintiffs have Article III standing; injury traceable and redressable (declaratory/severance relief meaningful) |
Key Cases Cited
- Free Enterprise Fund v. Pub. Co. Accounting Oversight Bd., 561 U.S. 477 (2010) (two layers of for‑cause removal and related insulation can violate Article II)
- Morrison v. Olson, 487 U.S. 654 (1988) (some removal protections and independence are permissible where Executive retains adequate controls)
- Humphrey’s Executor v. United States, 295 U.S. 602 (1935) (independent multi‑member commission removal restriction upheld for quasi‑legislative/judicial agencies)
- Bowsher v. Synar, 478 U.S. 714 (1986) (structural separation and accountability; plaintiff standing where statutory scheme deprived benefits)
- Myers v. United States, 272 U.S. 52 (1926) (limitations on presidential removal power that vest removal control in Senate invalid)
- Franchise Tax Bd. of Cal. v. Alcan Aluminium Ltd., 493 U.S. 331 (1990) (shareholder standing principles; parents suing on subsidiary’s tax injury)
- Perry Capital, L.L.C. v. Mnuchin, 864 F.3d 591 (D.C. Cir. 2017) (upheld FHFA conservator actions and held statutory claims barred; relevant circuit precedent)