Perry Capital LLC v. Steven Mnuchin, 848 F.3d 1072

Background

In 2008 FHFA placed Fannie Mae and Freddie Mac into conservatorship and Treasury entered Senior Preferred Stock Purchase Agreements providing large capital infusions in exchange for preferred shares, liquidation preference, dividends, and warrants.
The Stock Agreements initially imposed a 10% quarterly dividend to Treasury and restricted other distributions; successive amendments increased Treasury’s funding commitment.
Because Fannie and Freddie repeatedly could not pay the 10% dividend without drawing additional Treasury funds (creating a "debt‑spiral"), FHFA and Treasury executed a Third Amendment (Aug. 17, 2012) that replaced the fixed 10% coupon with a formula that effectively swept nearly all quarterly net worth to Treasury (the “Net Worth Sweep”).
Multiple shareholder groups sued, asserting (a) statutory claims under the Recovery Act and APA challenging the Third Amendment as beyond FHFA/Treasury authority and arbitrary and capricious, and (b) state-law common‑law claims for breach of contract, breach of the implied covenant, and breach of fiduciary duty.
The district court dismissed most claims; the D.C. Circuit affirmed that § 4617(f) bars equitable review of FHFA conservatorship actions and largely rejected plaintiff common‑law claims, but remanded certain contract‑based damages claims (liquidation preferences and implied‑covenant/dividend‑rights claims) for further proceedings.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether 12 U.S.C. § 4617(f) bars judicial review (declaratory/injunctive or APA equitable relief) of FHFA’s adoption of the Third Amendment	Plaintiffs: Third Amendment exceeded FHFA’s statutory conservator authority and was arbitrary and capricious under the APA	FHFA/Treasury: § 4617(f) forbids any court action that would restrain or affect FHFA’s exercise of conservator powers; the Third Amendment is a conservatorship function	Held: § 4617(f) bars plaintiffs’ requests for equitable relief and APA claims seeking non‑monetary relief against FHFA (affirmed)
Whether § 4617(f) also bars equitable relief against Treasury for entering the Third Amendment	Plaintiffs: Treasury acted beyond its statutory authority and violated the APA; Treasury can be enjoined	Treasury: injunctive relief against Treasury would effectively restrain FHFA’s conservatorship and thus is barred	Held: § 4617(f) bars equitable relief against Treasury when such relief would ‘‘affect’’ FHFA’s exercise of conservator powers (affirmed)
Whether FHFA’s Succession Clause (12 U.S.C. § 4617(b)(2)(A)) strips shareholders of their ability to bring derivative or direct state‑law claims	Plaintiffs: Succession Clause should not bar shareholder derivative suits where FHFA has a conflict of interest and should not strip direct contract claims	FHFA: Succession Clause transfers shareholders’ rights to FHFA (including derivative claims) and thus bars such suits	Held: Succession Clause bars derivative claims (plaintiffs’ fiduciary‑duty claims are derivative and dismissed); it does not bar shareholders’ direct contract claims (those survive)
Whether class plaintiffs’ contract‑based claims (voting, dividend, liquidation preferences; implied covenant) are ripe and cognizable	Plaintiffs: Third Amendment anticipatorily repudiated contractual rights (liquidation preference/dividends) and breached implied covenant; claims are ripe and seek damages	FHFA/Treasury: claims unripe because liquidation has not occurred; equitable relief barred by § 4617(f); dividend rights are discretionary	Held: Voting claim dismissed; plaintiffs have no enforceable contractual right to mandatory dividends but remand granted for damages claims alleging anticipatory breach of liquidation preferences and remand of implied‑covenant claim re: dividend rights for district‑court fact development; equitable relief remains barred

Key Cases Cited

National Trust for Historic Pres. v. FDIC, 995 F.2d 238 (D.C. Cir. 1993) (FIRREA anti‑injunction clause limits courts from restraining conservator/receiver powers; courts may review acts beyond statutory authority)
National Trust for Historic Pres. v. FDIC, 21 F.3d 469 (D.C. Cir. 1994) (continuing discussion of FIRREA review limits)
Freeman v. FDIC, 56 F.3d 1394 (D.C. Cir. 1995) (FIRREA ousts courts' equitable power where agency acts within conservator/receiver authority)
MBIA Ins. Corp. v. FDIC, 708 F.3d 234 (D.C. Cir. 2013) (section barring equitable relief is "drastic"; courts defer to conservator judgments)
Steel Co. v. Citizens for a Better Environment, 523 U.S. 83 (U.S. 1998) (jurisdiction is threshold issue)
Barnhart v. Sigmon Coal Co., 534 U.S. 438 (U.S. 2002) (statutory text must be given its ordinary meaning)
O'Melveny & Myers v. FDIC, 512 U.S. 79 (U.S. 1994) (succession clause puts agency "in the shoes" of failed entity for state‑law claims)
Kellmer v. Raines, 674 F.3d 848 (D.C. Cir. 2012) (Succession Clause transfers shareholders’ derivative‑suit rights to FHFA)
Cohen v. United States, 650 F.3d 717 (D.C. Cir. 2011) (APA §702 waiver and relationship to remedies; damages vs. equitable relief)
Trudeau v. FTC, 456 F.3d 178 (D.C. Cir. 2006) (APA §702 waiver of sovereign immunity applies broadly)
Franconia Associates v. United States, 536 U.S. 129 (U.S. 2002) (anticipatory breach doctrine permits damages before performance date)