Saxton v. Federal Housing Finance Agency, 245 F. Supp. 3d 1063

Background

In 2008 FHFA placed Fannie Mae and Freddie Mac (the GSEs) into conservatorship and FHFA and Treasury entered Preferred Stock Purchase Agreements (PSPAs) under which Treasury committed funding in exchange for Government Stock, warrants, and dividend rights.
The PSPAs were amended twice in 2009 and a Third Amendment (Aug. 17, 2012) implemented a “Net Worth Sweep”: quarterly dividends equal to the GSEs’ net worth and elimination of the periodic commitment fee.
Plaintiffs (longtime common and preferred stockholders) allege the Third Amendment expropriated private shareholder value, was driven by Treasury’s improper influence over FHFA, and was arbitrary and capricious under the APA; they seek injunctive/declaratory relief and return of dividends.
Defendants (FHFA and Treasury) moved to dismiss under Rules 12(b)(1) and 12(b)(6), arguing issue preclusion, HERA’s anti-injunction provision (§ 4617(f)), HERA’s succession clause (§ 4617(b)(2)(A)), and other defenses; plaintiffs conceded dismissal of state-law damages claims.
The court found plaintiffs’ claims are derivative (brought on behalf of the GSEs), not barred by issue preclusion, but dismissed Counts I–III because HERA § 4617(f) bars judicial relief affecting FHFA’s conservatorship actions and § 4617(b)(2)(A) vests derivative rights in FHFA.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Are plaintiffs’ claims direct or derivative?	Plaintiffs: APA allows direct review as "persons" injured by agency action.	Defendants: Claims attack corporate injury and relief would inure to GSEs, so derivative.	Held: Claims are derivative under Delaware law (Tooley test).
Does issue preclusion (Perry Capital) bar suit?	Plaintiffs: They were not parties or in privity with Perry Capital plaintiffs.	Defendants: Prior Perry Capital rulings should bind similar shareholder claims.	Held: No preclusion—plaintiffs were not adequately represented in Perry Capital.
Does HERA § 4617(f) bar APA claims seeking to undo the Third Amendment?	Plaintiffs: FHFA exceeded its statutory authority; § 4617(f) doesn't bar suits alleging ultra vires action; claims against Treasury are not covered.	Defendants: § 4617(f) broadly precludes any court action that would restrain or affect FHFA’s exercise of conservator powers; it extends to relief targeting Treasury that would have the same practical effect.	Held: § 4617(f) bars the claims against FHFA and Treasury because undoing the Third Amendment would restrain/affect FHFA’s conservatorship functions.
Does HERA § 4617(b)(2)(A) (succession clause) permit shareholders to pursue derivative claims?	Plaintiffs: A conflict-of-interest exception should allow shareholders to sue when FHFA will not vindicate shareholders’ interests (due to FHFA conflict).	Defendants: Succession clause vests all rights in FHFA; shareholders’ derivative rights are extinguished and reserved to FHFA.	Held: Succession clause is unambiguous; FHFA succeeded to shareholders’ derivative rights and plaintiffs are barred from bringing derivative suits.

Key Cases Cited

Ashcroft v. Iqbal, 556 U.S. 662 (Rule 12(b)(6) plausibility standard)
Bell Atl. Corp. v. Twombly, 550 U.S. 544 (pleading standard for plausible claim)
Tooley v. Donaldson, Lufkin & Jenrette, Inc., 845 A.2d 1031 (Del. 2004) (test for direct v. derivative shareholder claims)
Perry Capital LLC v. Mnuchin, 848 F.3d 1072 (D.C. Cir.) (upholding FHFA’s adoption of Third Amendment under conservatorship powers and applying § 4617(f))
Dittmer Props., L.P. v. FDIC, 708 F.3d 1011 (8th Cir.) (interpretation of FIRREA anti-injunction provision and test for whether relief would ‘restrain or affect’ conservator/receiver)
Taylor v. Sturgell, 553 U.S. 880 (preclusion rules for nonparties and adequate representation)