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Perry Capital LLC v. Mnuchin

United States Court of Appeals, District of Columbia Circuit

February 21, 2017

Perry Capital LLC, for and on behalf of investment funds for which it acts as investment manager, Appellant
v.
Steven T. Mnuchin, in his official capacity as the Secretary of the Department of the Treasury, et al., Appellees

          Argued April 15, 2016

         Appeals from the United States District Court for the District of Columbia Nos. 1:13-cv-01025, 1:13-cv-01053, 1:13-cv-01439, 1:13-cv-01288

          Theodore B. Olson argued the cause for Perry Capital LLC, et al. With him on the briefs were Douglas R. Cox, Matthew D. McGill, Charles J. Cooper, David H. Thompson, Peter A. Patterson, Brian W. Barnes, Drew W. Marrocco, Michael H. Barr, Richard M. Zuckerman, Sandra Hauser, and Janet M. Weiss.

          Hamish P.M. Hume argued the cause for American European Insurance Company, et al. With him on the briefs were Matthew A. Goldstein, David R. Kaplan, and Geoffrey C. Jarvis.

          Thomas P. Vartanian, Steven G. Bradbury, Robert L. Ledig, and Robert J. Rhatigan were on the brief for amici curiae the Independent Community Bankers of America, the Association of Mortgage Investors, Mr. William M. Isaac, and Mr. Robert H. Hartheimer in support of appellants.

          Thomas F. Cullen, Jr., Michael A. Carvin, James E. Gauch, Lawrence D. Rosenberg, and Paul V. Lettow were on the brief for amici curiae Louise Rafter, Josephine and Stephen Rattien, and Pershing Square Capital Management, L.P. in support of appellants and reversal.

          Jerrold J. Ganzfried and Bruce S. Ross were on the brief for amici curiae 60 Plus Association, Inc. in support of reversal.

          Eric Grant was on the brief for amicus curiae Jonathan R. Macey in support of appellants and reversal.

          Thomas R. McCarthy was on the brief for amici curiae Timothy Howard and The Coalition for Mortgage Security in support of appellants.

          Myron T. Steele was on the brief for amicus curiae Center for Individual Freedom in support of appellants.

          Michael H. Krimminger was on the brief for amicus curiae Investors Unite in support of appellants for reversal.

          Howard N. Cayne argued the cause for appellees Federal Housing Finance Agency, et al. With him on the brief were Paul D. Clement, D. Zachary Hudson, Michael J. Ciatti, Graciela Maria Rodriguez, David B. Bergman, Michael A.F. Johnson, Dirk C. Phillips, and Ian S. Hoffman.

          Mark B. Stern, Attorney, U.S. Department of Justice, argued the cause for appellee Steven T. Mnuchin. With him on the brief were Benjamin C. Mizer, Principal Deputy Assistant Attorney General, Beth S. Brinkmann, Deputy Assistant Attorney General, Alisa B. Klein, Abby C. Wright, and Gerard Sinzdak, Attorneys.

          Dennis M. Kelleher was on the brief for amicus curiae Better Markets, Inc. in support of appellees and affirmance.

          Pierre H. Bergeron was on the brief for amicus curiae Black Chamber of Commerce in support of neither party.

          Before: Brown and Millett, Circuit Judges, and Ginsburg, Senior Circuit Judge.

          OPINION

          Millett, Circuit Judge, and Ginsburg, Senior Circuit Judge

          In 2007-2008, the national economy went into a severe recession due in significant part to a dramatic decline in the housing market. That downturn pushed two central players in the United States' housing mortgage market-the Federal National Mortgage Association ("Fannie Mae" or "Fannie") and the Federal Home Loan Mortgage Corporation ("Freddie Mac" or "Freddie")-to the brink of collapse. Congress concluded that resuscitating Fannie Mae and Freddie Mac was vital for the Nation's economic health, and to that end passed the Housing and Economic Recovery Act of 2008 ("Recovery Act"), Pub. L. No. 110-289, 122 Stat. 2654 (codified, as relevant here, in various sections of 12 U.S.C.). Under the Recovery Act, the Federal Housing Finance Agency ("FHFA") became the conservator of Fannie Mae and Freddie Mac.

         In an effort to keep Fannie Mae and Freddie Mac afloat, FHFA promptly concluded on their behalf a stock purchase agreement with the Treasury Department, under which Treasury made billions of dollars in emergency capital available to Fannie Mae and Freddie Mac (collectively, "the Companies") in exchange for preferred shares of their stock. In return, Fannie and Freddie agreed to pay Treasury a quarterly dividend in the amount of 10% of the total amount of funds drawn from Treasury. Fannie's and Freddie's frequent inability to make those dividend payments, however, meant that they often borrowed more cash from Treasury just to pay the dividends, which in turn increased the dividends that Fannie and Freddie were obligated to pay in future quarters. In 2012, FHFA and Treasury adopted the Third Amendment to their stock purchase agreement, which replaced the fixed 10% dividend with a formula by which Fannie and Freddie just paid to Treasury an amount (roughly) equal to their quarterly net worth, however much or little that may be.

         A number of Fannie Mae and Freddie Mac stockholders filed suit alleging that FHFA's and Treasury's alteration of the dividend formula through the Third Amendment exceeded their statutory authority under the Recovery Act, and constituted arbitrary and capricious agency action in violation of the Administrative Procedure Act, 5 U.S.C. § 706(2)(A). They also claimed that FHFA, Treasury, and the Companies committed various common-law torts and breaches of contract by restructuring the dividend formula.

         We hold that the stockholders' statutory claims are barred by the Recovery Act's strict limitation on judicial review. See 12 U.S.C. § 4617(f). We also reject most of the stockholders' common-law claims. Insofar as we have subject matter jurisdiction over the stockholders' common-law claims against Treasury, and Congress has waived the agency's immunity from suit, those claims, too, are barred by the Recovery Act's limitation on judicial review. Id. As for the claims against FHFA and the Companies, some are barred because FHFA succeeded to all rights, powers, and privileges of the stockholders under the Recovery Act, id. § 4617(b)(2)(A); others fail to state a claim upon which relief can be granted. The remaining claims, which are contract-based claims regarding liquidation preferences and dividend rights, are remanded to the district court for further proceedings.

         I. Background

         A. Statutory Framework

         1. The Origins of Fannie Mae and Freddie Mac

         Created by federal statute in 1938, Fannie Mae originated as a government-owned entity designed to "provide stability in the secondary market for residential mortgages, " to "increas[e] the liquidity of mortgage investments, " and to "promote access to mortgage credit throughout the Nation." 12 U.S.C. § 1716; see id. § 1717. To accomplish those goals, Fannie Mae (i) purchases mortgage loans from commercial banks, which frees up those lenders to make additional loans, (ii) finances those purchases by packaging the mortgage loans into mortgage-backed securities, and (iii) then sells those securities to investors. In 1968, Congress made Fannie Mae a publicly traded, stockholder-owned corporation. See Housing and Urban Development Act, Pub. L. No. 90-448, § 801, 82 Stat. 476, 536 (1968) (codified at 12 U.S.C. § 1716b).

         Congress created Freddie Mac in 1970 to "increase the availability of mortgage credit for the financing of urgently needed housing." Federal Home Loan Mortgage Corporation Act, Pub. L. No. 91-351, preamble, 84 Stat. 450 (1970). Much like Fannie Mae, Freddie Mac buys mortgage loans from a broad variety of lenders, bundles them together into mortgage-backed securities, and then sells those mortgage-backed securities to investors. In 1989, Freddie Mac became a publicly traded, stockholder-owned corporation. See Financial Institutions Reform, Recovery, and Enforcement Act of 1989, Pub. L. No. 101-73, § 731, 103 Stat. 183, 429-436.

         Fannie Mae and Freddie Mac became major players in the United States' housing market. Indeed, in the lead up to 2008, Fannie Mae's and Freddie Mac's mortgage portfolios had a combined value of $5 trillion and accounted for nearly half of the United States mortgage market. But in 2008, the United States economy fell into a severe recession, in large part due to a sharp decline in the national housing market. Fannie Mae and Freddie Mac suffered a precipitous drop in the value of their mortgage portfolios, pushing the Companies to the brink of default.

         2. The 2008 Housing and Economic Recovery Act

         Concerned that a default by Fannie and Freddie would imperil the already fragile national economy, Congress enacted the Recovery Act, which established FHFA and authorized it to undertake extraordinary economic measures to resuscitate the Companies. To begin with, the Recovery Act denominated Fannie and Freddie "regulated entit[ies]" subject to the direct "supervision" of FHFA, 12 U.S.C. § 4511(b)(1), and the "general regulatory authority" of FHFA's Director, id. § 4511(b)(1), (2). The Recovery Act charged FHFA's Director with "oversee[ing] the prudential operations" of Fannie Mae and Freddie Mac and "ensur[ing] that" they "operate[] in a safe and sound manner, " "consistent with the public interest." Id. § 4513(a)(1)(A), (B)(i), (B)(v).

         The Recovery Act further authorized the Director of FHFA to appoint FHFA as either conservator or receiver for Fannie Mae and Freddie Mac "for the purpose of reorganizing, rehabilitating, or winding up the[ir] affairs." 12 U.S.C. § 4617(a)(2). The Recovery Act invests FHFA as conservator with broad authority and discretion over the operation of Fannie Mae and Freddie Mac. For example, upon appointment as conservator, FHFA "shall * * * immediately succeed to * * * all rights, titles, powers, and privileges of the regulated entity, and of any stockholder, officer, or director of such regulated entity with respect to the regulated entity and the assets of the regulated entity." Id. § 4617(b)(2)(A). In addition, FHFA "may * * * take over the assets of and operate the regulated entity, " and "may * * * preserve and conserve the assets and property of the regulated entity." Id. § 4617(b)(2)(B)(i), (iv).

         The Recovery Act further invests FHFA with expansive "[g]eneral powers, " explaining that FHFA "may, " among other things, "take such action as may be * * * necessary to put the regulated entity in a sound and solvent condition" and "appropriate to carry on the business of the regulated entity and preserve and conserve [its] assets and property[.]" 12 U.S.C. § 4617(b)(2), (2)(D). FHFA's powers also include the discretion to "transfer or sell any asset or liability of the regulated entity in default * * * without any approval, assignment, or consent, " id. § 4617(b)(2)(G), and to "disaffirm or repudiate [certain] contract[s] or lease[s], " id. § 4617(d)(1). See also id. § 4617(b)(2)(H) (power to pay the regulated entity's obligations); id. § 4617(b)(2)(I) (investing the conservator with subpoena power).

         Consistent with Congress's mandate that FHFA's Director protect the "public interest, " 12 U.S.C. § 4513(a)(1)(B)(v), the Recovery Act invested FHFA as conservator with the authority to exercise its statutory authority and any "necessary" "incidental powers" in the manner that "the Agency [FHFA] determines is in the best interests of the regulated entity or the Agency." Id. § 4617(b)(2)(J) (emphasis added).

         The Recovery Act separately granted the Treasury Department "temporary" authority to "purchase any obligations and other securities issued by" Fannie and Freddie. 12 U.S.C. §§ 1455(l)(1)(A), 1719. That provision made it possible for Treasury to buy large amounts of Fannie and Freddie stock, and thereby infuse them with massive amounts of capital to ensure their continued liquidity and stability.

         Continuing Congress's concern for protecting the public interest, however, the Recovery Act conditioned such purchases on Treasury's specific determination that the terms of the purchase would "protect the taxpayer, " 12 U.S.C. § 1719(g)(1)(B)(iii), and to that end specifically authorized "limitations on the payment of dividends, " id. § 1719(g)(1)(C)(vi). A sunset provision terminated Treasury's authority to purchase such securities after December 31, 2009. Id. § 1719(g)(4). After that, Treasury was authorized only "to hold, exercise any rights received in connection with, or sell, any obligations or securities purchased." Id. § 1719(g)(2)(D).

         Lastly, the Recovery Act sharply limits judicial review of FHFA's conservatorship activities, directing that "no court may take any action to restrain or affect the exercise of powers or functions of the Agency as a conservator." 12 U.S.C. § 4617(f).

         B. Factual Background

         On September 6, 2008, FHFA's Director placed both Fannie Mae and Freddie Mac into conservatorship. The next day, Treasury entered into Senior Preferred Stock Purchase Agreements ("Stock Agreements") with Fannie and Freddie, under which Treasury committed to promptly invest billions of dollars in Fannie and Freddie to keep them from defaulting. Fannie and Freddie had been "unable to access [private] capital markets" to shore up their financial condition, "and the only way they could [raise capital] was with Treasury support." Oversight Hearing to Examine Recent Treasury and FHFA Actions Regarding the Housing GSEs Before the H. Comm. on Fin. Servs., 110th Cong. 12 (2008) (Statement of James B. Lockhart III, Director, FHFA).

         In exchange for that extraordinary capital infusion, Treasury received one million senior preferred shares in each company. Those shares entitled Treasury to: (i) a $1 billion senior liquidation preference-a priority right above all other stockholders, whether preferred or otherwise, to receive distributions from assets if the entities were dissolved; (ii) a dollar-for-dollar increase in that liquidation preference each time Fannie and Freddie drew upon Treasury's funding commitment; (iii) quarterly dividends that the Companies could either pay at a rate of 10% of Treasury's liquidation preference or a commitment to increase the liquidation preference by 12%; (iv) warrants allowing Treasury to purchase up to 79.9% of Fannie's and Freddie's common stock; and (v) the possibility of periodic commitment fees over and above any dividends.[1]

         The Stock Agreements also included a variety of covenants. Of most relevance here, the Stock Agreements included a flat prohibition on Fannie and Freddie "declar[ing] or pay[ing] any dividend (preferred or otherwise) or mak[ing] any other distribution (by reduction of capital or otherwise), whether in cash, property, securities or a combination thereof" without Treasury's advance consent (unless the dividend or distribution was for Treasury's Senior Preferred Stock or warrants). J.A. 2451.

         The Stock Agreements initially capped Treasury's commitment to invest capital at $100 billion per company. It quickly became clear, however, that Fannie and Freddie were in a deeper financial quagmire than first anticipated. So their survival would require even greater capital infusions by Treasury, as sufficient private investors were still nowhere to be found. Consequently, FHFA and Treasury adopted the First Amendment to the Stock Agreements in May 2009, under which Treasury agreed to double the funding commitment to $200 billion for each company.

         Seven months later, in a Second Amendment to the Stock Agreements, FHFA and Treasury again agreed to raise the cap, this time to an adjustable figure determined in part by the amount of Fannie's and Freddie's quarterly cumulative losses between 2010 and 2012. As of June 30, 2012, Fannie and Freddie together had drawn $187.5 billion from Treasury's funding commitment.

          Through the first quarter of 2012, Fannie and Freddie repeatedly struggled to generate enough capital to pay the 10% dividend they owed to Treasury under the amended Stock Agreements.[2] FHFA and Treasury stated publicly that they worried about perpetuating the "circular practice of the Treasury advancing funds to [Fannie and Freddie] simply to pay dividends back to Treasury, " and thereby increasing their debt loads in the process.[3]

         Accordingly, FHFA and Treasury adopted the Third Amendment to the Stock Agreements on August 17, 2012. The Third Amendment to the Stock Agreements replaced the previous quarterly 10% dividend formula with a requirement that Fannie and Freddie pay as dividends only the amount, if any, by which their net worth for the quarter exceeded a capital buffer of $3 billion, with that buffer decreasing annually down to zero by 2018. In simple terms, the Third Amendment requires Fannie and Freddie to pay quarterly to Treasury a dividend equal to their net worth-however much or little that might be. Through that new dividend formula, Fannie and Freddie would never again incur more debt just to make their quarterly dividend payments, thereby precluding any dividend-driven downward debt spiral. But neither would Fannie or Freddie be able to accrue capital in good quarters.

         Under the Third Amendment, Fannie Mae and Freddie Mac together paid Treasury $130 billion in dividends in 2013, and another $40 billion in 2014. The next year, however, Fannie's and Freddie's quarterly net worth was far lower: Fannie paid Treasury $10.3 billion and Freddie paid Treasury $5.5 billion. See Fannie Mae, Form 10-K for the Fiscal Year Ended December 31, 2015 (Feb. 19, 2016); Freddie Mac, Form 10-K for the Fiscal Year Ended December 31, 2015 (Feb. 18, 2016). By comparison, without the Third Amendment, Fannie and Freddie together would have had to pay Treasury $19 billion in 2015 or else draw once again on Treasury's commitment of funds and thereby increase Treasury's liquidation preference. In the first quarter of 2016, Fannie paid Treasury $2.9 billion and Freddie paid Treasury no dividend at all. See Fannie Mae, Form 10-Q for the Quarterly Period Ended March 31, 2016 (May 5, 2016); Freddie Mac, Form 10-Q for the Quarterly Period Ended March 31, 2016 (May 3, 2016).

         Under the Third Amendment, and FHFA's conservatorship, Fannie and Freddie have continued their operations for more than four years. During that time, Fannie and Freddie, among other things, collectively purchased at least 11 million mortgages on single-family owner-occupied properties, and Fannie issued over $1.5 trillion in single-family mortgage-backed securities.[4]

          C. Procedural History

         In 2013, a number of Fannie Mae and Freddie Mac stockholders filed suit challenging the Third Amendment. Different groups of plaintiffs have pressed different claims. First, various hedge funds, mutual funds, and insurance companies (collectively, "institutional stockholders") argued that (i) FHFA's and Treasury's adoption of the Third Amendment exceeded their authority under the Recovery Act, and (ii) FHFA and Treasury each engaged in arbitrary and capricious conduct, in violation of the Administrative Procedure Act ("APA"). The institutional stockholders requested declaratory and injunctive relief, but no damages.[5]

         Second, a class of stockholders ("class plaintiffs") and a few of the institutional stockholders alleged that, in adopting the Third Amendment, FHFA and the Companies breached the terms governing dividends, liquidation preferences, and voting rights in the stock certificates for Freddie's Common Stock and for both Fannie's and Freddie's Preferred Stock. They further alleged that those defendants breached the implied covenants of good faith and fair dealing in those certificates. The class plaintiffs also alleged that FHFA and Treasury breached state-law fiduciary duties owed by a corporation's management and controlling shareholder, respectively. Some of the institutional stockholders asserted similar claims against FHFA. The class plaintiffs asked the court to declare their lawsuit a "proper derivative action, " J.A. 277, and to award damages as well as injunctive and declaratory relief.

         The district court granted FHFA's and Treasury's motions to dismiss both complaints for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). See Perry Capital LLC v. Lew, 70 F.Supp.3d 208, 246 (D.D.C. 2014). Specifically, the court dismissed the Recovery Act and APA claims as barred by the Recovery Act's express limitation on judicial review, 12 U.S.C. § 4617(f). The court dismissed the APA claims against Treasury on the same statutory ground, reasoning that Treasury's "interdependent, contractual conduct is directly connected to FHFA's activities as a conservator." Id. at 222. The district court explained that "enjoining Treasury from partaking in the Third Amendment would restrain FHFA's uncontested authority to determine how to conserve the viability of [Fannie and Freddie]." Id. at 222-223.

         Turning to the class plaintiffs' claims for breach of fiduciary duty, the court dismissed those as barred by FHFA's statutory succession to all rights and interests held by Fannie's and Freddie's stockholders, 12 U.S.C. § 4617(b)(2)(A). The court then dismissed the breach of contract and breach of the implied covenant of good faith and fair dealing claims based on liquidation preferences as not ripe because Fannie and Freddie had not been liquidated. Finally, the district court dismissed the dividend-rights claims, reasoning that no such rights exist.[6]

          II. Jurisdiction

         Before delving into the merits, we pause to assure ourselves of our jurisdiction, as is our duty. See Steel Co. v. Citizens for a Better Environment, 523 U.S. 83, 94 (1998) ("On every writ of error or appeal, the first and fundamental question is that of jurisdiction[.]") (citation omitted). A provision of the Recovery Act deprives courts of jurisdiction "to affect, by injunction or otherwise, the issuance or effectiveness of any classification or action of the Director under this subchapter * * * or to review, modify, suspend, terminate, or set aside such classification or action." 12 U.S.C. § 4623(d).

         That language does not strip this court of jurisdiction to hear this case. By its terms, Section 4623(d) applies only to "any classification or action of the Director." 12 U.S.C. § 4623(d). Thus, Section 4623(d) prohibits review of the Director's establishment of "risk-based capital requirements * * * to ensure that the enterprises operate in a safe and sound manner, maintaining sufficient capital and reserves to support the risks that arise in the operations and management of the enterprises." Id. § 4611(a)(1). In particular, Section 4614 requires "the Director" to "classify" Fannie and Freddie as "adequately capitalized, " "undercapitalized, " "significantly undercapitalized, " or "critically undercapitalized." Id. § 4614(a). Classification as undercapitalized or significantly undercapitalized in turn subjects Fannie and Freddie to a host of supervisory actions by "the Director." See id. §§ 4615-4616. It is those capital- classification decisions that Section 4623(d) insulates from judicial review.

         The Third Amendment was not a "classification or action of the Director" of FHFA. Rather, it was an action taken by FHFA acting as Fannie's and Freddie's conservator. Judicial review of the actions of the agency as conservator is addressed by Section 4617(f), not by Section 4623(d)'s particular focus on the Director's own actions. Compare 12 U.S.C. § 4617(f) (referencing "powers or functions of the Agency") (emphasis added), with id. § 4623(d) (referencing "any classification or action of the Director") (emphasis added).

         FHFA argues that the Director's decision in 2008 to suspend capital classifications of Fannie Mae and Freddie Mac during the conservatorship could be a "classification or action of the Director." FHFA Suppl. Br. at 6-8 (quoting 12 U.S.C. § 4623(d)). Perhaps. But those are not the actions that the institutional stockholders and the class plaintiffs challenge. Instead, they challenge FHFA's decision as conservator to agree to changes in the Stock Agreement and to how Fannie and Freddie will compensate Treasury for its extensive past and promised future infusions of needed capital. Those actions do not fall within Section 4623(d)'s jurisdictional bar for Director-specific actions.

          III. Statutory Challenges to the Third Amendment

         Turning to the merits, we address first the institutional stockholders' claims that FHFA's and Treasury's adoption of the Third Amendment violated both the Recovery Act and the APA. Both of those statutory claims founder on the Recovery Act's far-reaching limitation on judicial review. Congress was explicit in Section 4617(f) that "no court" can take "any action" that would "restrain or affect" FHFA's exercise of its "powers or functions * * * as a conservator or a receiver." 12 U.S.C. § 4617(f). We take that law at its word, and affirm dismissal of the institutional stockholders' claims for injunctive and declaratory relief designed to unravel FHFA's adoption of the Third Amendment.

         A. Section 4617(f) Bars the Challenges to FHFA Based on the Recovery Act

         1. Section 4617(f)'s Textual Barrier to Plaintiffs' Claims for Relief

         The institutional stockholders' complaints ask the district court to declare the Third Amendment invalid, to vacate the Third Amendment, and to enjoin FHFA from implementing it. Those prayers for relief fall squarely within Section 4617(f)'s plain textual compass. The institutional stockholders seek to "restrain [and] affect" FHFA's "exercise of powers" "as a conservator" in amending the terms of Fannie's and Freddie's contractual funding agreement with Treasury to guarantee the Companies' continued access to taxpayer-financed capital without risk of incurring new debt just to pay dividends to Treasury. Such management of Fannie's and Freddie's assets, debt load, and contractual dividend obligations during their ongoing business operation sits at the core of FHFA's conservatorship function.

          This court has interpreted a nearly identical statutory limitation on judicial review to prohibit claims for declaratory, injunctive, and other forms of equitable relief as long as the agency is acting within its statutory conservatorship authority. The Financial Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA"), Pub. L. No. 101-73, 103 Stat. 183, governs the Federal Deposit Insurance Corporation ("FDIC") when it serves as a conservator or receiver for troubled financial institutions. Section 1821(j) of that Act prohibits courts from "tak[ing] any action * * * to restrain or affect the exercise of powers or functions of [the FDIC] as a conservator or a receiver." 12 U.S.C. § 1821(j).

         In multiple decisions, we have held that Section 1821(j) shields from a court's declaratory and other equitable powers a broad swath of the FDIC's conduct as conservator or receiver when exercising its statutory authority. To start with, in National Trust for Historic Preservation in the United States v. FDIC (National Trust I), 995 F.2d 238 (D.C. Cir. 1993) (per curiam), aff'd in relevant part, 21 F.3d 469 (D.C. Cir. 1994), we held that Section 1821(j) "bars the [plaintiff's] suit for injunctive relief" seeking to halt the sale of a building as violating the National Historic Preservation Act, 16 U.S.C. § 470 et seq. (repealed December 19, 2014). See 995 F.2d at 239. We explained that, because "the powers and functions the FDIC is exercising are, by statute, deemed to be those of a receiver, " an injunction against the sale "would surely 'restrain or affect' the FDIC's exercise of those powers or functions." Id. Given Section 1821(j)'s "strong language, " we continued, it would be "[im]possible * * * to interpret the FDIC's 'powers' and 'authorities' to include the limitation that those powers be subject to-and hence enjoinable for non-compliance with-any and all other federal laws." Id. at 240. Indeed, "given the breadth of the statutory language, " Section 1821(j) "would appear to bar a court from acting" notwithstanding a "parade of possible violations of existing laws." National Trust for Historic Preservation in the United States v. FDIC (National Trust II), 21 F.3d 469, 472 (D.C. Cir. 1994) (per curiam) (Wald, J., joined by Silberman, J., concurring).

         Again in Freeman v. FDIC, 56 F.3d 1394 (D.C. Cir. 1995), this court rejected the plaintiffs' attempt to enjoin the FDIC, as receiver of a bank, from foreclosing on their home, id. at 1396. We acknowledged that Section 1821(j)'s stringent limitation on judicial review "may appear drastic, " but that "it fully accords with the intent of Congress at the time it enacted FIRREA in the midst of the savings and loan insolvency crisis to enable the FDIC" to act "expeditiously" in its role as conservator or receiver. Id. at 1398. Given those exigent financial circumstances, "Section 1821(j) does indeed effect a sweeping ouster of courts' power to grant equitable remedies[.]" Id. at 1399; see also MBIA Ins. Corp. v. FDIC, 708 F.3d 234, 247 (D.C. Cir. 2013) (In Section 1821(j), "Congress placed 'drastic' restrictions on a court's ability to institute equitable remedies[.]") (quoting Freeman, 56 F.3d at 1398).

         The rationale of those decisions applies with equal force to Section 4617(f)'s indistinguishable operative language. The plain statutory text draws a sharp line in the sand against litigative interference-through judicial injunctions, declaratory judgments, or other equitable relief-with FHFA's statutorily permitted actions as conservator or receiver. And, as with FIRREA, Congress adopted Section 4617(f) to protect FHFA as it addressed a critical aspect of one of the greatest financial crises in the Nation's modern history.

          2. FHFA's Actions Fall Within its Statutory Authority

         The institutional stockholders cite language in National Trust I, which states that FIRREA's-and by analogy the Recovery Act's-prohibition on injunctive and declaratory relief would not apply if the agency "has acted or proposes to act beyond, or contrary to, its statutorily prescribed, constitutionally permitted, powers or functions, " National Trust I, 995 F.2d at 240. They then argue that FHFA's adoption of the Third Amendment was out of bounds because, in their view, the Recovery Act "requires FHFA as conservator to act independently to conserve and preserve the Companies' assets, to put the Companies in a sound and solvent condition, and to rehabilitate them." Institutional Pls. Br. at 26 (emphasis added). As the institutional stockholders see it, by committing Fannie's and Freddie's quarterly net worth-if any-to Treasury in exchange for continued access to Treasury's taxpayer-funded financial lifelines, FHFA acted like a de facto receiver functionally liquidating Fannie's and Freddie's businesses. And FHFA did so, they add, without following the procedural preconditions that the Recovery Act imposes on a receivership, such as publishing notice and providing an alternative dispute resolution process to resolve liquidation claims, see 12 U.S.C. § 4617(b)(3)(B)(i), (b)(7)(A)(i).[7]

         That exception to the bar on judicial review has no application here because adoption of the Third Amendment falls within FHFA's statutory conservatorship powers, for four reasons.

          (i) The Recovery Act endows FHFA with extraordinarily broad flexibility to carry out its role as conservator. Upon appointment as conservator, FHFA "immediately succeed[ed] to * * * all rights, titles, powers, and privileges" not only of Fannie Mae and Freddie Mac, but also "of any stockholder, officer, or director of such regulated entit[ies] with respect to the regulated entit[ies] and the assets of the regulated entit[ies.]" 12 U.S.C. § 4617(b)(2)(A)(i). In addition, among FHFA's many "[g]eneral powers" is its authority to "[o]perate the regulated entity, " pursuant to which FHFA "may, as conservator or receiver * * * take over the assets of and operate * * * and conduct all business of the regulated entity; * * * collect all obligations and money due the regulated entity; * * * perform all functions of the regulated entity * * *; preserve and conserve the assets and property of the regulated entity; and * * * provide by contract for assistance in fulfilling any function, activity, action, or duty of the Agency as conservator or receiver." Id. § 4617(b)(2), (2)(B) (emphasis added). The Recovery Act further provides that FHFA "may, as conservator, take such action as may be * * * necessary to put the regulated entity in a sound and solvent condition; and * * * appropriate to carry on the business of the regulated entity and preserve and conserve the assets and property of the regulated entity." Id. § 4617(b)(2)(D) (emphasis added). FHFA also "may disaffirm or repudiate [certain] contract[s] or lease[s]." Id. § 4617(d)(1) (emphasis added); see also id. § 4617(b)(2)(G) (providing that FHFA "may, as conservator or receiver, transfer or sell any asset or liability of the regulated entity in default" without consent) (emphasis added).

         Accordingly, time and again, the Act outlines what FHFA as conservator "may" do and what actions it "may" take. The statute is thus framed in terms of expansive grants of permissive, discretionary authority for FHFA to exercise as the "Agency determines is in the best interests of the regulated entity or the Agency." 12 U.S.C. § 4617(b)(2)(J). "It should go without saying that 'may means may.'" United States Sugar Corp. v. EPA, 830 F.3d 579, 608 (D.C. Cir. 2016) (quoting McCreary v. Offner, 172 F.3d 76, 83 (D.C. Cir. 1999)). And "may" is, of course, "permissive rather than obligatory." Baptist Memorial Hosp. v. Sebelius, 603 F.3d 57, 63 (D.C. Cir. 2010).

         Entirely absent from the Recovery Act's text is any mandate, command, or directive to build up capital for the financial benefit of the Companies' stockholders. That is noteworthy because, when Congress wanted to compel FHFA to take specific measures as conservator or receiver, it switched to language of command, employing "shall" rather than "may." Compare 12 U.S.C. § 4617(b)(2)(B) (listing actions that FHFA "may" take "as conservator or receiver" to "[o]perate the regulated entity"), and id. § 4617(b)(2)(D) (specifying actions that FHFA "may, as conservator" take), with id. § 4617(b)(2)(E) (specifying actions that FHFA "shall" take when "acting as receiver"), and id. § 4617(b)(14)(A) (specifying that FHFA as conservator or receiver "shall * * * maintain a full accounting"). "[W]hen a statute uses both 'may' and 'shall, ' the normal inference is that each is used in its usual sense-the one act being permissive, the other mandatory." Sierra Club v. Jackson, 648 F.3d 848, 856 (D.C. Cir. 2011) (internal quotation marks and citation omitted).

         In short, the most natural reading of the Recovery Act is that it permits FHFA, but does not compel it in any judicially enforceable sense, to preserve and conserve Fannie's and Freddie's assets and to return the Companies to private operation. And, more to the point, the Act imposes no precise order in which FHFA must exercise its multi-faceted conservatorship powers.

          FHFA's execution of the Third Amendment falls squarely within its statutory authority to "[o]perate the [Companies], " 12 U.S.C. § 4617(b)(2)(B); to "reorganiz[e]" their affairs, id. § 4617(a)(2); and to "take such action as may be * * * appropriate to carry on the[ir] business, " id. § 4617(b)(2)(D)(ii). Renegotiating dividend agreements, managing heavy debt and other financial obligations, and ensuring ongoing access to vital yet hard-to-come-by capital are quintessential conservatorship tasks designed to keep the Companies operational. The institutional stockholders no doubt disagree about the necessity and fiscal wisdom of the Third Amendment. But Congress could not have been clearer about leaving those hard operational calls to FHFA's managerial judgment.

         That, indeed, is why Congress provided that, in exercising its statutory authority, FHFA "may" "take any action * * * which the Agency determines is in the best interests of the regulated entity or the Agency." 12 U.S.C. § 4617(b)(2)(J) (emphasis added). Notably, while FIRREA explicitly permits FDIC to factor the best interests of depositors into its conservatorship judgments, id. § 1821(d)(2)(J)(ii), the Recovery Act refers only to the best interests of FHFA and the Companies-and not those of the Companies' shareholders or creditors. Congress, consistent with its concern to protect the public interest, thus made a deliberate choice in the Recovery Act to permit FHFA to act in its own best governmental interests, which may include the taxpaying public's interest.

         The dissenting opinion (at 8) views Sections 4617(b)(2)(D) and (E) as "mark[ing] the bounds of FHFA's conservator or receiver powers." Not so. As a plain textual matter, the Recovery Act expressly provides FHFA many "[g]eneral powers" "as conservator or receiver, " 12 U.S.C. § 4617(b)(2), that are not delineated in Section 4617(b)(2)(D) or (E). See id. § 4617(b)(2)(A) (assuming "all rights, titles, powers, and privileges of the regulated entity, and of any stockholder, officer, or director of such regulated entity with respect to the regulated entity and the assets of the regulated entity"); id. § 4617(b)(2)(B) (power to "[o]perate the regulated entity"); id. § 4617(b)(2)(C) (power to "provide for the exercise of any function by any stockholder, director, or officer of any regulated entity"); id. § 4617(b)(2)(G) (power to "transfer or sell any asset or liability of the regulated entity in default"); id. § 4617(b)(2)(H) (power to "pay [certain] valid obligations of the regulated entity"); id. § 4617(b)(2)(I) (power to issue subpoenas and take testimony under oath). See also id. § 4617(d)(1) (granting FHFA as the conservator or receiver the power to "repudiate [certain] contract[s] or lease[s]").

         The institutional stockholders also argue that, because Section 4617(b)(2)(D) describes FHFA's "[p]owers as conservator" by providing that FHFA "may * * * take such action as may be" "necessary to put the [Companies] in a sound and solvent condition" and "appropriate to * * * preserve and conserve [their] assets, " FHFA may act only when those two conditions are satisfied. Institutional Pls. Reply Br. at 13. In their view, FHFA "does not have other powers as conservator." Id.

         The short answer is that the Recovery Act says nothing like that. It contains no such language of precondition or mandate. Indeed, if that is what Congress meant, it would have said FHFA "may only" act as necessary or appropriate to those tasks. Not only is that language missing from the Recovery Act, but Congress did not even say that FHFA "should"-let alone, "should first"-preserve and conserve assets or "should" first put the Companies in a sound and solvent condition. Nor did it articulate FHFA's power directly in terms of asset preservation or sound and solvent company operations. What the statute says is that FHFA "may * * * take such action as may be" "necessary to put the [Companies] in a sound and solvent condition" and "may be" "appropriate to * * * preserve or conserve [the Companies'] assets." 12 U.S.C. § 4617(b)(2)(D) (emphases added). So at most, the Recovery Act empowers FHFA to "take such action" as may be necessary or appropriate to fulfill several goals. That is how Congress wrote the law, and that is the law we must apply. See Barnhart v. Sigmon Coal Co., 534 U.S. 438, 461-462 (2002) ("[C]ourts must presume that a legislature says in a statute what it means and means in a statute what it says there.") (quoting Connecticut Nat'l Bank v. Germain, 503 U.S. 249, 253-254 (1992)); Klayman v. Zuckerberg, 753 F.3d 1354, 1358 (D.C. Cir. 2014) ("[I]t is this court's obligation to enforce statutes as Congress wrote them.").[8]

         (ii) Even if the Recovery Act did impose a primary duty to preserve and conserve assets, nothing in the Recovery Act says that FHFA must do that in a manner that returns them to their prior private, capital-accumulating, and dividend-paying condition for all stockholders. See Institutional Pls. Br. at 44. Tellingly, the institutional stockholders and dissenting opinion accept that the original Stock Agreements and the First and Second Amendments fit comfortably within FHFA's statutory authority as conservator. See Dissenting Op. at 21 (acknowledging that FHFA "manage[d] the Companies within the conservator role" until "the tide turned * * * with the Third Amendment"). But the Stock Agreements and First and Second Amendments themselves both obligated the Companies to pay large dividends to Treasury and prohibited them, without Treasury's approval, from "declar[ing] or pay[ing] any dividend (preferred or otherwise) or mak[ing] any other distribution (by reduction of capital or otherwise), whether in cash, property, securities or a combination thereof." E.g., J.A. 2451; cf. 12 U.S.C. § 1719(g)(1)(C)(vi) ("To protect the taxpayers, the Secretary of the Treasury shall take into consideration, " inter alia, "[r]estrictions on the use of corporation resources, including limitations on the payment of dividends[.]").

         That means that FHFA's ability as conservator to give Treasury (and, by extension, the taxpayers) a preferential right to dividends, to the effective exclusion of other stockholders, was already put in place by the unchallenged and thus presumptively proper Stock Agreements and Amendments that predated the Third Amendment. The Third Amendment just locked in an exclusive allocation of dividends to Treasury that was already made possible by-and had been in practice under-the previous agreements, in exchange for continuing the Companies' unprecedented access to guaranteed capital.

         The institutional stockholders point to Section 4617(a)(2) as a purported source of FHFA's mandatory duty to return the Companies to their old financial ways. But that Section provides only that FHFA's Director has the power to appoint FHFA as "conservator or receiver for the purpose of reorganizing, rehabilitating, or winding up the affairs of a regulated entity." 12 U.S.C. § 4617(a)(2). It is then the multi-paged remaining portion of Section 4617 that details at substantial length FHFA's many "[g]eneral powers" as conservator or receiver. Id. § 4617(b)(2).

          Furthermore, that explicit power to "reorganiz[e]" supports FHFA's action because the Third Amendment reorganized the Companies' financial operations in a manner that ensures that quarterly dividend obligations are met without drawing upon Treasury's commitment and thereby increasing Treasury's liquidation preference. FHFA's textual authority to reorganize and rehabilitate the Companies, in other words, forecloses any argument that the Recovery Act made the status quo ante a statutorily compelled end game.

         In addition, the Recovery Act openly recognizes that sometimes conservatorship will involve managing the regulated entity in the lead up to the appointment of a liquidating receiver. See 12 U.S.C. § 4617(a)(4)(D) (providing that appointment of FHFA as a receiver automatically terminates a conservatorship under the Act). The authority accorded FHFA as a conservator to reorganize or rehabilitate the affairs of a regulated entity thus must include taking measures to prepare a company for a variety of financial scenarios, including possible liquidation. Contrary to the dissenting opinion (at 11), that does not make FHFA a "hybrid" conservator-receiver. It makes FHFA a fully armed conservator empowered to address all potential aspects of the Companies' financial condition and operations at all stages when confronting a threatened business collapse of truly unprecedented magnitude and with national economic repercussions.

         The institutional stockholders nonetheless argue that, rather than adopt the Third Amendment's dividend allocation, FHFA could instead have adopted a payment-in-kind dividend option that would have increased Treasury's liquidation preference by 12% in return for avoiding a 10% dividend payment. Perhaps. But the Recovery Act does not compel that choice over the variable dividend to Treasury put in place by the Third Amendment. Either way, Section 4617(f) flatly forbids declaratory and injunctive relief aimed at superintending to that degree FHFA's conservatorship or receivership judgments.[9]

         The dissenting opinion claims that the Third Amendment's prevention of capital accumulation went too far because it constitutes a "de facto receiver[ship]" or "de facto liquidation, " and thus could not possibly constitute a permissible "conservator" measure. See Dissenting Op. at 10, 17, 25. That position presumes the existence of a rigid boundary between the conservator and receiver roles that even the dissenting opinion seems to admit may not exist. See Dissenting Op. at 7 (acknowledging that "the line between a conservator and a receiver may not be completely impermeable"). Wherever that line may be, it is not crossed just because an agreement that ensures continued access to vital capital diverts all dividends to the lender, who had singlehandedly saved the Companies from collapse, even if the dividend payments under that agreement may at times be greater than the dividend payments under previous agreements. The proof that no de facto liquidation occurred is in the pudding: non-capital-accumulating entities that continue to operate long-term, purchasing more than 11 million mortgages and issuing more than $1.5 trillion in single-family mortgage-backed securities over four years, are not the same thing as liquidating entities.

         The argument also overlooks that the Third Amendment's redirection of dividends to Treasury came in exchange for a promise of continued access to necessary capital free of the preexisting risk of accumulating more debt simply to pay dividends to Treasury. Now, after more than eight years of conservatorship-four of which have been under the Third Amendment-Fannie and Freddie have gone from a state of near-collapse to fluctuating levels of profitability. FHFA thus has "carr[ied] on the business of" Fannie and Freddie, 12 U.S.C. § 4617(b)(2)(D)(ii), in that they remain fully operational entities with combined operating assets of $5 trillion, see Treasury Resp. Br. at 35. While the dissenting opinion worries that the Companies have "no hope of survival past 2018, " Dissenting Op. at 27, the Third Amendment allows the Companies after 2018 to draw upon Treasury's remaining funding commitment if needed to remedy any negative net worth.[10]

         (iii) The institutional stockholders argue that the Third Amendment violated FHFA's "fiduciary and statutory obligations to * * * rehabilitate [the Companies] to normal business operations, " Institutional Pls. Br. at 34, because the Amendment was as a factual matter not needed to prevent further indebtedness, and was instead intended to secure a windfall for Treasury (and indirectly taxpayers) at the expense of the stockholders. They likewise contend that FHFA's motivation for adopting the Third Amendment all along has been to liquidate the Companies. They rest those arguments on factual allegations that FHFA and Treasury knew Fannie and Freddie had just turned an economic corner, and had experienced substantial increases in their net worth. In that regard, the institutional stockholders cite evidence that FHFA and Treasury were aware before they adopted the Third Amendment that Fannie and Freddie might each experience a substantial one-time increase in net worth in 2013 and 2014 due to the realization of certain deferred tax assets. They also point to presentations Fannie Mae made to FHFA and Treasury in July and August before the Third Amendment was executed, predicting that Fannie Mae and Freddie Mac would need only small draws from Treasury's commitment (totaling less than $9 billion) to pay Treasury its dividend through ...


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