Perry Capital LLC v. Lew, 70 F. Supp. 3d 208

Background

In 2008 FHFA placed Fannie Mae and Freddie Mac (the GSEs) into conservatorship; Treasury entered Senior Preferred Stock Purchase Agreements (PSPAs) providing funding in exchange for senior preferred shares and contractual rights.
The PSPAs originally required quarterly cash dividends equal to 10% of Treasury’s liquidation preference; later amendments expanded funding caps and altered compensation terms.
On August 17, 2012, Treasury and FHFA executed the Third Amendment (the “net worth sweep”), replacing the prior dividend formula with a rule directing nearly all quarterly net worth/profits to Treasury.
Multiple plaintiffs (class investors and three sets of individual plaintiffs: Perry, Fairholme, Arrowood) sued FHFA and Treasury alleging APA violations, breach of contract, breach of implied covenant, fiduciary duty, and a Takings Clause violation, seeking equitable and monetary relief.
Defendants moved to dismiss (or for summary judgment). The court dismissed plaintiffs’ equitable claims under HERA § 4617(f) and dismissed remaining contract, derivative, ripeness, and takings claims on jurisdictional and merits-based grounds, granting defendants’ motions and denying plaintiffs’ cross-motion.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether HERA § 4617(f) bars equitable relief and APA arbitrary-and-capricious review	Plaintiffs argued FHFA/Treasury acted beyond authority and APA review should apply	Defendants argued § 4617(f) precludes courts from restraining FHFA’s conservator functions, barring equitable APA review	Court: § 4617(f) bars non-monetary APA § 706(2)(A) claims and equitable relief tied to FHFA’s conservatorship actions
Whether § 4617(f) extends to claims against Treasury (contract counterparty)	Plaintiffs: § 4617(f) governs FHFA only; Treasury not covered	Defendants: enjoining Treasury would restrain FHFA’s conservatorship functions; Treasury’s conduct is intertwined	Court: § 4617(f) applies to disputes about contracts FHFA signed and can extend to Treasury where relief would restrain FHFA
Whether the Third Amendment constituted an unauthorized post-2009 purchase of new securities in violation of 12 U.S.C. § 1719(g)	Plaintiffs: Third Amendment was effectively a purchase/new investment beyond Treasury’s sunset authority	Defendants: Third Amendment merely changed dividend formula for existing investment; no new funding or shares were exchanged	Court: Treasury did not purchase new securities under the Third Amendment; amendment altered compensation but did not violate the sunset purchase prohibition
Whether shareholder derivative claims or fiduciary-duty claims are permitted given HERA § 4617(b)(2)(A)(i)	Plaintiffs: FHFA conflicted with interests and thus shareholders should be allowed derivative suits	Defendants: HERA transfers shareholders’ derivative rights to FHFA, barring derivative suits; no conflict justifying exception	Court: HERA’s plain text bars shareholder derivative suits; no recognized Colorado/First Hartford exception applies; even assuming exception, no manifest FHFA–Treasury conflict shown
Ripeness of liquidation-preference and dividend claims for monetary relief	Plaintiffs: Third Amendment injured liquidation and dividend rights now; monetary relief appropriate	Defendants: Liquidation preference only payable on liquidation; dividend payments discretionary and subject to board/Treasury consent; claims are unripe and derivative	Court: Liquidation-preference claims unripe (contingent on liquidation); dividend claims fail because plaintiffs have no contractual right to mandatory dividends (board/Treasury discretion)
Takings Clause challenge	Plaintiffs: Net worth sweep effectively took dividend and liquidation rights without compensation	Defendants: Shareholders lack cognizable property interests due to regulatory regime and conservatorship; Penn Central analysis disfavors a taking	Court: Dismissed takings claims — plaintiffs lack protected property interest (no right to exclude; discretionary dividends; conservatorship background), and Penn Central factors weigh against finding a regulatory taking

Key Cases Cited

Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375 (jurisdictional rules governing federal courts)
Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (plausibility standard for Rule 12(b)(6))
Freeman v. FDIC, 56 F.3d 1394 (D.C. Cir.) (FIRREA §1821(j) broadly ousts courts from granting equitable relief against conservator/receiver)
Nat’l Trust for Historic Pres. v. FDIC, 21 F.3d 469 (D.C. Cir.) (interpretation of FIRREA limits on review)
Kellmer v. Raines, 674 F.3d 848 (D.C. Cir.) (HERA transfers shareholders’ derivative rights to conservator)
Lingle v. Chevron U.S.A. Inc., 544 U.S. 528 (regulatory takings framework clarification)
Lucas v. S. Carolina Coastal Council, 505 U.S. 1003 (per se taking where regulation eliminates all economically beneficial use)
Penn Central Transp. Co. v. New York City, 438 U.S. 104 (ad hoc regulatory takings balancing factors)
Heckler v. Chaney, 470 U.S. 821 (presumption against judicial review of certain agency actions under APA)
Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419 (physical occupation per se taking)
Kelo v. City of New London, 545 U.S. 469 (deference to legislative/public-purpose determinations)