Thomas Saxton; Ida Saxton; Bradley Paynter Plaintiffs - Appellants
Federal Housing Finance Agency, in its capacity as Conservator of the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation; Melvin L. Watt, in his official capacity as Director of the Federal Housing Finance Agency; United States Department of the Treasury Defendants - Appellees
Submitted: May 15, 2018
from United States District Court for the Northern District
of Iowa - Cedar Rapids
BENTON, KELLY, and STRAS, Circuit Judges.
shareholders claim that the federal agency Congress created
to serve as conservator of Fannie Mae and Freddie
exceeded its powers and acted arbitrarily and capriciously.
Four of our sister circuits-the Fifth,  Sixth, Seventh,
and D.C. Circuits-have already rejected materially identical
arguments from other shareholders. Today, we join them.
financial crisis of 2008 prompted Congress to take several
actions to fend off economic disaster. One of those measures
propped up Fannie Mae and Freddie Mac. Fannie and Freddie,
which were founded by Congress back in 1938 and 1970, buy
home mortgages from lenders, thereby freeing lenders to make
more loans. See generally 12 U.S.C. § 4501.
Although established by Congress, Fannie and Freddie operate
like private companies: they have shareholders, boards of
directors, and executives appointed by those boards. But
Fannie and Freddie also have something most private
businesses do not: the backing of the United States Treasury.
2008, with the mortgage meltdown at full tilt, Congress
enacted the Housing and Economic Recovery Act (HERA or the
Act). HERA created the Federal Housing Finance Agency (FHFA),
and gave it the power to appoint itself either conservator or
receiver of Fannie or Freddie should either company become
critically undercapitalized. 12 U.S.C. § 4617(a)(2),
(4). The Act includes a provision limiting judicial review:
"Except as provided in this section or at the request of
the Director, no court may take any action to restrain or
affect the exercise of powers or functions of the [FHFA] as a
conservator or a receiver." Id. § 4617(f).
after the Act's passage, FHFA determined that both Fannie
and Freddie were critically undercapitalized and appointed
itself conservator. FHFA then entered an agreement with the
U.S. Department of the Treasury whereby Treasury would
acquire specially-created preferred stock and, in exchange,
would make hundreds of billions of dollars in capital
available to Fannie and Freddie. The idea was that Fannie and
Freddie would exit conservatorship when they reimbursed the
Fannie and Freddie remain under FHFA's conservatorship
today. Since the conservatorship began, FHFA and Treasury
have amended their agreement several times. In the most
recent amendment, FHFA agreed that, each quarter, Fannie and
Freddie would pay to Treasury their entire net worth, minus a
small buffer. This so-called "net worth sweep" is
the basis of this litigation.
owners of Fannie and Freddie common stock sued FHFA and
Treasury, claiming they had exceeded their powers under HERA
and acted arbitrarily and capriciously by agreeing to the net
worth sweep. The shareholders sought only an injunction
setting aside the net worth sweep; they dismissed a claim
seeking money damages. Relying on the D.C. Circuit's
opinion in Perry Capital LLC v. Mnuchin, 864 F.3d
591 (D.C. Cir. 2017), the district court dismissed the
shareholders argue their claims should have survived
dismissal because FHFA and Treasury exceeded their statutory
authority under HERA by agreeing to the net worth sweep. We
review the dismissal of the shareholders' case de novo.
Dunbar v. Wells Fargo Bank, 709 F.3d 1254, 1256 (8th
Cir. 2013); ABF Freight Sys., Inc. v. Int'l Bhd. of
Teamsters, 645 F.3d 954, 958 (8th Cir. 2011).
begin with the shareholders' request for an injunction
against FHFA. Their argument has two parts. First, they
assert that HERA's limitation on judicial review does not
apply when FHFA exceeds its statutory powers under the Act.
Second, they contend that ...