Town of Babylon v. FEDERAL HOUSING FINANCE AGENCY
790 F. Supp. 2d 47
E.D.N.Y2011Background
- Babylon sues FHFA, OCC, Fannie Mae, Freddie Mac and related parties alleging violations of APA, NEPA, the Tenth Amendment, and state tort claims tied to Babylon's PACE program (LIGH).
- Babylon's Long Island Green Homes Program uses a first-priority lien to finance energy improvements; typical projects cost under $9,000 with monthly payments under $92 and no documented defaults.
- FHFA has been conservator of Fannie Mae and Freddie Mac since 2008, with broad duties to preserve assets and maintain safe and sound operations.
- FHFA issued statements (Feb 2011 letter; Jul 2010 statement) regarding first-priority PACE liens and directed conservator actions; OCC issued a Jul 6, 2010 supervisory bulletin about PACE risks; Freddie Mac and Fannie Mae issued related guidance.
- OCC issued the Jul 6, 2010 bulletin and Freddie Mac/Fannie Mae issued industry letters restricting purchase/refinancing of mortgages tied to high-priority PACE liens; OCC advised risk mitigation but took no mandatory action.
- Defendants move to dismiss under Rule 12(b)(1)/(6); FHFA argues court lacks jurisdiction as conservator; OCC argues lack of standing and non-finality of agency action; plaintiff seeks declaratory relief and vacatur.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether FHFA's conservator actions are reviewable | Babylon asserts court review under APA/jurisdictional channels. | FHFA argues 12 U.S.C. § 4617 bars review of conservator actions. | Barred; court lacks jurisdiction to review FHFA as conservator. |
| Whether Babylon has standing to challenge OCC | Babylon has injury from PACE liens and agency statements affecting program viability. | OCC claims lack of redressability and no injury caused by the July 6 bulletin alone. | Standing dismissed for lack of redressability against OCC. |
| Whether OCC's July 6 Bulletin constitutes final agency action under the APA | Bulletin affects lending decisions and should be reviewable. | Bulletin is a general policy statement, not a final rule subject to notice-and-comment. | Bulletin not final agency action; not subject to APA challenge at this stage. |
| Whether NEPA, APA, or Tenth Amendment claims survive given other dispositive rulings | Claims should proceed on merits. | Jurisdictional bars and lack of final action defeat these claims. | Claims dismissed in light of jurisdictional bars and lack of final action. |
| Whether Fannie Mae/Freddie Mac as private entities negate claims against them. | GSE status irrelevant to plaintiff’s claims. | GSEs' private status defeats government action claims. | Claims against Fannie Mae/Freddie Mac dismissed on this basis. |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (plausibility pleading standard for Dismissal)
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (plausibility requirement to survive motion to dismiss)
- Lujan v. Defenders of Wildlife, 504 U.S. 555 (U.S. 1992) (standing elements: injury, causation, redressability)
- Connecticut v. American Electric Power Co., Inc., 582 F.3d 309 (2d Cir. 2009) (standing pleading guidance in environmental context)
- Freeman v. F.D.I.C., 56 F.3d 1394 (D.C. Cir. 1995) (broad reading of conservator/receiver jurisdictional bar)