Robinson v. Federal Housing Finance Agency
223 F. Supp. 3d 659
E.D. Ky.2016Background
- Fannie Mae and Freddie Mac (the GSEs) were placed in FHFA conservatorship in Sept. 2008 under HERA; Treasury entered into Preferred Stock Purchase Agreements (PSPAs) buying senior preferred stock and warrants.
- Treasury received Government Stock with dividend terms (10% cash or 12% in-kind) and FHFA as conservator retained discretion over cash vs. in-kind dividends.
- In June 2012 the GSEs issued large amounts of Government Stock to cover accounting losses and pay dividends; Treasury held roughly $189 billion in Government Stock.
- After improved Q2 2012 results, FHFA and Treasury executed a Third Amendment (Aug. 17, 2012) imposing the "Net Worth Sweep": GSEs must pay quarterly dividends equal to net worth above a shrinking $3 billion buffer (eventually zero).
- Robinson (shareholder) sued under the APA seeking declaratory and injunctive relief to void or enjoin the Net Worth Sweep, alleging FHFA/Treasury exceeded HERA authority and acted arbitrarily and capriciously; both agencies moved to dismiss.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether §4617(f) bars equitable relief against FHFA for the Third Amendment | Robinson contends FHFA exceeded conservatorship powers so §4617(f) doesn't bar relief | FHFA: §4617(f) broadly bars equitable relief against conservator actions unless FHFA acted beyond its statutory authority | Court: §4617(f) bars equitable relief; dismissal unless plaintiff plausibly pleaded FHFA acted beyond statutorily enumerated powers (plaintiff failed) |
| Whether Treasury exceeded its §1719(g) sunset authority by effectuating the Third Amendment | Robinson: the amendment was a prohibited "purchase" of securities after the 2009 sunset | Treasury: Third Amendment merely changed compensation on existing investment, not a new purchase | Court: Treasury did not purchase new securities; §1719(g) sunset not violated |
| Whether FHFA violated statutory duties ( §§4617(b)(2)(D)(i)-(ii), 4617(a)(2)) by (e.g.) using GSEs as ATMs or preventing rehabilitation | Robinson: Third Amendment conflicted with conservator duties to rehabilitate and preserve assets | FHFA: statutory provisions are permissive ("may"), grant broad discretion, and conservatorship may transition toward receivership | Court: provisions are discretionary; allegations do not show FHFA acted outside its enumerated powers; claims fail |
| Whether Robinson may enforce §4617(a)(7) (FHFA shall not be subject to direction of other agencies) | Robinson: Treasury coerced FHFA; shareholder interests harmed | Defendants: Robinson lacks prudential (zone-of-interests) standing to enforce that provision | Court: Robinson not within zone of interests of §4617(a)(7); lacks prudential standing; claim dismissed |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (pleading standard: plausibility)
- Bennett v. Spear, 520 U.S. 154 (zone-of-interests test for prudential standing)
- D'Ambrosio v. Marino, 747 F.3d 378 (6th Cir.) (pleading requirements)
- County of Sonoma v. FHFA, 710 F.3d 987 (9th Cir.) (limits on judicial relief under §4617(f))
- Leon County v. FHFA, 700 F.3d 1273 (11th Cir.) (judicial review when agency acts beyond statutory bounds)
- Freeman v. FDIC, 56 F.3d 1394 (D.C. Cir.) (broad ouster of equitable remedies for conservator/receiver actions)
- Perry Capital LLC v. Lew, 70 F. Supp. 3d 208 (D.D.C.) (analysis that amendment did not constitute a new §1719 purchase)
- Ward v. Resolution Trust Corp., 996 F.2d 99 (5th Cir.) (courts cannot enjoin statutory conservator acts merely because alleged improper)