United States Court of Appeals, District of Columbia Circuit
Perry Capital LLC, for and on behalf of investment funds for which it acts as investment manager, Appellant
Steven T. Mnuchin, in his official capacity as the Secretary of the Department of the Treasury, et al., Appellees
April 15, 2016
from the United States District Court for the District of
Columbia Nos. 1:13-cv-01025, 1:13-cv-01053, 1:13-cv-01439,
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.
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.
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.
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
Grant was on the brief for amicus curiae Jonathan R. Macey in
support of appellants and reversal.
R. McCarthy was on the brief for amici curiae Timothy Howard
and The Coalition for Mortgage Security in support of
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.
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.
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,
M. Kelleher was on the brief for amicus curiae Better
Markets, Inc. in support of appellees and affirmance.
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.
Millett, Circuit Judge, and Ginsburg, Senior Circuit Judge
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.
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.
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.
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.
The Origins of Fannie Mae and Freddie Mac
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. §
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.
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.
The 2008 Housing and Economic Recovery Act
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).
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).
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
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).
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.
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).
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.
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).
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
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.
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.
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
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. 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
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.
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).
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
C. Procedural History
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
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.
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.
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.
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.
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
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).
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
III. Statutory Challenges to the Third
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
Section 4617(f) Bars the Challenges to FHFA Based on the
Section 4617(f)'s Textual Barrier to Plaintiffs'
Claims for Relief
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
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).
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).
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).
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
2. FHFA's Actions Fall Within its Statutory
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),
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
(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
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).
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).
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
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
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.
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
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
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.").
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[.]").
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.
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. §
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.
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
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
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.
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.
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 ...