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#FannieGate, $fmcc, $fnma, Fannie Mae, FHFA, Freddie Mac, HERA, Treasury
Piszel’s US Court of Appeals for the Federal Circuit Decision Leads the Charge.
While Piszel loss his case in the US Court of Appeals for the Federal Circuit, the court provided a clear and pointed decision for Mr. Hume to submit in a letter to the US Court of Appeals for the District of Columbia Circuit.
For clarification purposes, the United States Court of Appeals for the Federal Circuit is the appeals court to the United States of Federal Claims and the United States Court of Appeals for the D.C. Circuit is appeals court for the United States District Court for the District of Columbia.
A contract is a contract whether it is a stock certificate or an employment contract
Important Summary and Roadmap Clues
I-A
The government argues, and the Claims Court found, that Mr. Piszel lacked a cognizable Fifth Amendment property interest. We disagree.
In evaluating whether governmental action constitutes a taking for Fifth Amendment purposes, the court must determine “whether the claimant has identified a cognizable Fifth Amendment property interest that is asserted to be the subject of the taking.” Acceptance Ins. Cos., Inc. v. United States, 583 F.3d 849, 854 (Fed. Cir. 2009). When a claimant lacks such a property interest, nothing has been taken, and thus the claimant cannot maintain a takings claim. See Am. Pelagic Fishing Co., L.P. v. United States, 379 F.3d 1363, 1372 (Fed. Cir. 2004).
In general, “[v]alid contracts are property, whether the obligor be a private individual, a municipality, a state, or the United States.” Lynch v. United States, 292 U.S. 571, 579 (1934); see U.S. Tr. Co. of N.Y. v. New Jersey, 431 U.S. 1, 19 n.16 (1977) (“Contract rights are a form of property and as such may be taken for a public purpose provided that just compensation is paid.”); A & D Auto Sales, Inc. v. United States, 748 F.3d 1142, 1152 (Fed. Cir. 2014); see also United States v. Petty Motor Co., 327 U.S. 372, 380–81 (1946) (holding that plaintiff was entitled to compensation for government’s taking of option to renew a lease). Mr. Piszel’s employment contract with Freddie Mac is no exception.
In short, “there is ample precedent for acknowledging a property interest in contract rights under the Fifth Amendment.” Cienega Gardens v. United States, 331 F.3d 1319, 1329 (Fed. Cir. 2003). In Cienega Gardens, we rejected the government’s position that “enforceable rights sufficient to support a taking claim against the United States cannot arise in an area voluntarily entered into and one which, from the start, is subject to pervasive Government control.” Id. at 1330 (quoting government brief) (internal quotation marks omitted); see also A & D, 748 F.3d at 1152–53 (finding that a property interest in contract rights existed despite being subject to bankrupt- cy law). We therefore conclude that Mr. Piszel had a cognizable Fifth Amendment property interest in his contract rights.
I-B
The government argues that Mr. Piszel should be barred from pursuing a takings claim because he failed to pursue a breach of contract claim against Freddie Mac. Mr. Piszel argues that there is no requirement to pursue a breach of contract claim against a private party before bringing a takings claim. We disagree with the government that Mr. Piszel’s failure to pursue a contract remedy is an absolute bar to his bringing a takings claim against the government.
The Supreme Court has held that a claimant must exhaust administrative or judicial remedies against the relevant government entity in order for his regulatory takings claim to be ripe. See, e.g., Williamson Cty. Reg’l Planning Comm’n v. Hamilton Bank of Johnson City, 473 U.S. 172, 186–87 (1985); see also, e.g., Palazzolo v. Rhode Island, 533 U.S. 606, 618–19 (2001); Suitum v. Tahoe Reg’l Planning Agency, 520 U.S. 725, 735 (1997); Mac- Donald, Sommer & Frates v. Yolo Cty., 477 U.S. 340, 348 (1986). The Court has explained that to demonstrate a regulatory taking, a party “must establish that the regulation has in substance ‘taken’ his property—that is, that the regulation ‘goes too far.’” MacDonald, 477 U.S. at 348 (citations omitted). But “[a] court cannot determine whether a regulation has gone ‘too far’ unless it knows how far the regulation goes.” Id. This is because “resolution of [this] question depends, in significant part, upon an analysis of the effect [of the regulation] on the value of [the] property and investment-backed profit expectation. That effect cannot be measured until a final decision is made as to how the regulations will be applied.” Id. at 349 (quoting Williamson, 473 U.S. at 200). As to the second prong of a takings claim, a failure to provide “just compensation,” “a court cannot determine whether a municipality has failed to provide ‘just compensation’ until it knows what, if any, compensation the responsible administrative body intends to provide.” MacDonald, 477 U.S. at 350.
We therefore find no basis for the government’s argument that Mr. Piszel had to pursue a breach of contract claim against Freddie Mac before bringing a takings claim, even though, as described below, the existence of a remedy for breach of contract is highly relevant to the takings analysis in this case.
II-A
The government’s instruction to Freddie Mac did not take anything from Mr. Piszel because, even after the government’s action, Mr. Piszel was left with the right to enforce his contract against Freddie Mac in a breach of contract action. As the government correctly points out, “the only duty a contract imposes is to perform or pay damages.” F.T.C. v. Think Achievement Corp., 312 F.3d 259, 261 (7th Cir. 2002) (citing Oliver Wendell Holmes, Jr., The Common Law 300–02 (1881)). Thus, to effect a taking of a contractual right when performance has been prevented, the government must substantially take away the right to damages in the event of a breach. See Castle v. United States, 301 F.3d 1328, 1342 (Fed. Cir. 2002) (finding that because “the plaintiffs retained the full range of remedies associated with any contractual property right they possessed[,]” the government action “did not constitute a taking of the contract”).
Other similar provisions of HERA indicate that when a conservator prohibits performance of a contract, an action for breach of contract remains. Section 1367(b)(2)(H) of HERA states a general policy that the conservator “shall, to the extent of proceeds realized from the performance of contracts or sale of the assets of a regulated entity, pay all valid obligations of the regulated entity that are due and payable at the time of the appointment” of the conservator. 122 Stat. at 2738 (codified at 12 U.S.C. § 4617(b)(2)(H)). Section 1367(b)(19)(d), like the golden parachute provision, allows the conservator to “disaffirm or repudiate” contracts including “any contract for services between any person and any regulated entity” like employment contracts. 122 Stat. at 2747–48, 2750 (codified at 12 U.S.C. §4617(b)(19)(d)). That section plainly preserves a breach of contract claim, providing that the conservator will be liable for the disaffirmance or repudiation of the contract but limits the liability to “actual direct compensatory damages.”
The statute cannot reasonably be read to preserve a breach claim when the conservator disclaims a contract providing for a payment but to eliminate a breach claim when the identical action is taken pursuant to a regulatory directive. Thus, the surrounding provisions indicate that Congress intended to preserve breach of contract claims, as the parties agree.
II-B
“The Supreme Court . . . has made clear that in the regulatory takings context the loss in value of the adversely affected property interest cannot be considered in isolation.” Cienega Gardens, 503 F.3d at 1280. Rather, the “test for regulatory taking requires [a court] to compare the value that has been taken from the property with the value that remains in the property.” Keystone Bitu- minous Coal Ass’n v. DeBenedictis, 480 U.S. 470, 497 (1987); see also Concrete Pipe, 508 U.S. at 644; Cienega Gardens, 503 F.3d at 1281. The Supreme Court recognized this in the very case that created the regulatory takings framework, explaining that “[i]n deciding whether a particular governmental action has effected a taking, this Court focuses . . . on the character of the action and on the nature and extent of the interference with rights in the parcel as a whole.” Penn Cent., 438 U.S. at 130–31 (emphasis added). This is, of course, because “a regulatory taking does not occur unless there are serious financial consequences” that stem from the government action. Cienega Gardens, 503 F.3d at 1282.
Certainly Freddie Mac operated in a regulated environment where a court may have concluded that Freddie Mac accepted the risk of regulatory action. In a breach action, the courts might have concluded that Freddie Mac bore the risk of regulatory intervention, thus depriving it of an impossibility defense.
As noted, we asked the parties to address whether recovery for a breach of contract claim would be limited by the sovereign acts doctrine. Both Mr. Piszel and the government take the position that the sovereign acts doctrine would not limit recovery in this case. Gov’t Supp. Br. at 6–7; Piszel Supp. Br. at 12 n.10. We agree. We also agree with the parties that HERA’s limitations on damages for breach of contract claims, 12 U.S.C. §4617(d)(3)(A), would not affect Mr. Piszel’s recovery in a breach of contract action against Freddie Mac. See Gov’t Supp. Br. at 8–9; Piszel Supp. Br. at 12 n.10.
Reference Links:
Mr. Piszel’s United States Court of Appeals for the Federal Circuit Opinion
TH717 
In the Perry case, Peter Chapman writes, “Fairholme delivered a letter (Doc. 1637216) under seal to the D.C. Circuit on Sept 23th advising the Court of additional authorities. Fairholme’s letter presumably discusses Judge Sweeney’s discovery-related Opinion and Order dated Sept. 20, which is also under seal at this time.”
Perry Appeals Court might be on hold until discovery documents are released and delivered. This is pure speculation and hope it is true.
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A filed copy of the government’s petition to the Federal Circuit for a writ of mandamus telling Judge Sweeney to deny Fairholme’s motion to compel is attached to this e-mail message. http://www.glenbradford.com/wp-content/uploads/2016/10/17-104-0002.pdf
Mandamus petitions are generally acted on more quickly than regular appeals. Federal Rule of Appellate Procedure 21(b)(6) directs that a mandamus “proceeding must be given preference over ordinary civil cases.” The Federal Circuit can deny the government’s petition without hearing anything from anybody about it, or the Court can invite parties (including Judge Sweeney) to respond to the petition.
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CBO Analysis Reveals Benefits of GSE Capital Retention
– October 24, 2016
Last week, the non-partisan Congressional Budget Office published an analysis which concluded letting Fannie and Freddie retain some of the earnings and build capital would make it less likely the government sponsored enterprises (GSEs) would need to turn to taxpayers during an economic downturn.
This makes perfect sense and serves as a reminder of the absurdity of the Net Worth Sweep underway since 2012. Treasury says the Sweep was needed to protect taxpayers from exposure to another bailout if the market suffered a major setback. However, with the GSEs’ capital dwindling away, many experts, including Federal Housing Finance Agency Director Mel Watt, have raised the idea that the Sweep itself exposes taxpayers.
At the request of Senate Banking Committee Chairman Richard Shelby (R-AL), the CBO looked at a scenario in which the GSEs could keep $5 billion in earnings annually for ten years. If the GSEs were able to create even a small capital buffer, there would be little more stability in the mortgage market and less of a chance of new draws on Treasury funds. This could reduce the cost of loans and lead to more lending.
The analysis is a little complicated but basically Fannie and Freddie would be a bit more self-reliant but the government would continue to provide a backstop should market downturns lead to losses for the companies. While Fannie and Freddie could keep $5 billion in earnings annually, the government’s commitment to purchase more of Fannie and Freddie senior preferred stock in a market downturn would remain in place. In addition, the GSEs would invest retained profits in Treasury securities and the returns on those bonds would mean more income for the GSEs. At the same time, by continuing to hold the GSEs’ senior preferred stock, the government would continue to have a claim to the GSEs’ net worth ahead of other stockholders.
The CBO figures that taxpayers could be exposed to greater potential losses in the case of another major crisis. This assumes taxpayers’ exposure to the $258 billion line of credit established at the Treasury for the two companies – a credit line the companies neither wanted nor needed. Plus, if Fannie and Freddie keep $100 billion in earnings over ten years instead of having Treasury sweep up the money, then taxpayers would forgo that money too.
The CBO figures that taxpayers could be exposed to greater potential losses in the case of another major crisis. The CBO’s calculations assume the following: One, taxpayers would continue to be exposed to the $258 billion line of credit established at the Treasury for the two companies – a credit line the companies neither wanted nor needed. Two, if Fannie and Freddie keep $100 billion in earnings over ten years instead of having Treasury sweep up the money, then taxpayers would forgo that money too.
It is worth noting that the budget impact of this arrangement would be roughly $85 billion over ten years using the Administration’s assumption that Fannie and Freddie are private companies, rather than part of the government. This is ironic considering that the Net Worth Sweep, which was engineered by Treasury in 2012, uses these private companies as piggy banks to feed the government’s revenue stream.
For its part, the CBO regards Fannie and Freddie as federal entities and therefore treats transactions in its scenario as intragovernmental transfers that have no net impact on the deficit. Its $10 billion budget cost is based on the estimated market value of the increase in the government’s exposure to losses on the GSEs’ mortgage guarantees and investments.
The scenario the CBO considered was narrowly defined and not a comprehensive reform proposal. However, working within this particular scenario, the CBO’s analysis demonstrates that fully privatizing Fannie and Freddie could be a bad idea for shareholders and disruptive to the mortgage market. The guarantee fees Fannie and Freddie charge when selling the mortgage-backed securities they create are held down somewhat with the implied government backstop. Take the government backstop away and Fannie and Freddie’s value would decrease significantly.
This might explain why there has been no consensus on a plan to dismantle and privatize the GSEs. They play too important a role in preserving market stability and access to homeownership. The financial crisis in 2008 revealed the need to revise aspects of housing finance policy. Had the conservatorship of Fannie and Freddie been run as required by the Housing and Economic Recovery Act and the companies were again sound and solvent, policymakers could have agreed on needed reforms. Instead, the Sweep introduced an unnecessary and destabilizing variable into the mix and lawmakers need to ask CBO if there is a way out of the mess created by the Net Worth Sweep.
The CBO’s analysis simply reinforces the need to get back to basics: Allow the companies to retain their capital, preserve a government role in helping to ensure a liquid and stable housing finance market, and implement reforms needed to avoid a repetition of practices that led up to the financial crisis. And last but not least, stop robbing Fannie and Freddie’s shareholders.
http://investorsunite.org/cbo-analysis-reveals-benefits-gse-capital-retention/
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On October 13, 2006, defendant filed a motion for an enlargement of time to respond to the court’s September 20, 2016 order regarding the payment of plaintiffs’ expenses. Moving pursuant to Rules 6(b) and 6(b)(1) of the Rules of the United States Court of Federal Claims, defendant seeks a thirty-one day extension, up to an including November 14, 2016, to explain why the court should not require defendant to pay plaintiffs’ reasonable expenses incurred in making their motion to compel, including attorney’s fees. According to defendant, good cause exists to grant the enlargement because the government is still in the process of reviewing the court’s order and because it needs time to obtain internal and agency review. Although plaintiffs oppose defendant’s motion on the ground that such additional time is unnecessary, the court will grant defendant’s motion. In addition, plaintiffs shall have until December 21, 2016 to file their response, although plaintiffs may of course file their response at any time prior to that date. The court therefore GRANTS defendant’s motion.
Click to access 13-465-0341.pdf
Click to access 13-465-0342.pdf
Click to access sweeney.pdf
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PHH vs CFPB Oral Argument
[audio src="https://www.cadc.uscourts.gov/recordings/recordings2016.nsf/55416F215CAFB36A85257F93005988C5/$file/15-1177.mp3" /]
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Massachusetts Democratic Sen. Elizabeth Warren, the principal architect of CFPB, said the ruling “will likely be appealed and overturned.” She also played down its significance, saying it would only require “a small technical tweak” to the agency’s structure.
I don’t trust Massachusetts Democratic Sen. Elizabeth Warren.
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Discovery Made Simple In Fannie And Freddie
Richard Epstein
Judge Sweeney’s Opinion Exposes the Government’s Threadbare Privilege Claim
On October 3, 2016, Judge Margaret M. Sweeney filed an exhaustive opinion on the discovery motion brought by Fairholme Funds to compel the United States to release some 56 documents—out of a far larger cache of 11,000 documents—to the plaintiffs. These documents were concerned with the information that the government received from a variety of sources that it used in making its decision on the adoption of the much-publicized Net Worth Sweep (NWS), which as Judge Sweeney noted raised “the dividend due on the government stock rose from 10% [of the par value of such stock] to 100% of all current and future profits.” As I have often argued in writing on behalf of institutional investors, this dramatic extinction of shareholder rights supplies as a matter of first principle all the information that is needed to condemn the NWS as an illegal action. Stonewalling on discovery is not an appropriate response in the face of serious claims of government corruption and misconduct.
In the United States Court of Federal Claims, the only permissible relief is just compensation for the property taken, plus interest from the time of the taking. In a very real sense, the merits of this case are adequately resolved by one-sentence summary of the consequences of the NWS that Judge Sweeney supplied, wholly without regard to the information that the government received in makings its decision. Unfortunately, under the convoluted structure of modern takings law, one theory of relief requires under the Supreme Court’s 1978 decision in Penn Central Transportation Co. v. City of New York, that proof of a taking requires a showing of “(1) the extent to which the regulation interfered with the reasonableness of plaintiffs’ expectations regarding the Enterprises’ future profitability—the financial health of the Enterprises in 2008 and expectations for their future viability, and (2) the character of the governmental action—why the government entered into the Third Amendment.” On this view, all of the activities inside the government relevant to these issues ordinarily become fair targets of discovery, as means to allow the plaintiffs to show that the government has stumbled badly on both these inquiries.
Accordingly, in the instant litigation, Fairholme then requested the following information:
(1) BlackRock documents, (2) forecasts, (3) risk assessment memoranda, (4) housing finance reform, (5) housing policies, (6) preferred stock purchase agreement (“PSPA”) modifications, (7) government sponsored enterprise (“GSE”) projections, (8) valuation reports, and (9) potential implications of the terms of the PSPAs; and three individual documents: (1) an FHFA presentation on deferred tax assets (“DTA”), (2) the DeLeo e-mail, and (3) estimates for the President’s budget.
In order to resist turning over the documents to the plaintiff’s the government invoked three types of privilege—a presidential communications privilege, a deliberative process privilege and a bank examination privilege. In her thorough opinion, Judge Sweeney addresses each of these privileges separately, and concluded that the government could not successfully claim any one of these privileges with respect to any of these document classes. But, in fact the overall evaluation of this particular matter is far easier than this approach suggests, once a few simple principles are kept in mind.
The first principle is that privileges are the exception and not the rule. As Judge Sweeney rightly pointed out, “no generalized interest in confidentiality,” is allowed, for if it were the privilege would eviscerate the entire discovery process. Accordingly, all these privileges are generally construed narrowly for the simple reason that it is not possible to run a fair trial if the plaintiffs are not allowed to gain access to relevant material in the possession of the defendant. None of these cases is the privilege absolute, like it is in the case of the attorney-client privilege. In each case, the Government needs to go through a series of hoops in order to establish its privilege.
The general rationale for allowing privileges is to make it possible for key parties to deliberate over matters of great national importance, without having their views second-guessed and misinterpreted after the fact. One standard formulation of the rule provides that the privilege applies to all “documents reflecting advisory opinions, recommendations and deliberations comprising part of a process by which governmental decisions and policies are formulated.”
A quick look at the above list of demanded documents makes it clear, however, that none of Fairholme’s requests asked the government to turn over anything that involves the give-and-take of various public officials in formulating the policy. Whatever the officials said among themselves remains private. But what Fairholme did demand was to see the documents that were supplied to the government as the basis for their deliberation. It is only through access to these documents that it is possible to see whether the government in fact had any materials that supported its aggressive defense of the NWS sweep, which of course has been stated publicly many times.
In principle, this simple point should have been enough to deny the privilege without further ado. The argument was not lost on Judge Sweeney, who repeatedly concluded that “Defendant Has Not Shown That the Documents Are Deliberative but, for the Purpose of Providing an Alternative Analysis, the Court Will Proceed as if Defendant Has Made Such a Showing.” The finding is all too kind to the government because in each case it is not possible for the government to show that this deliberative element was present.
http://www.forbes.com/sites/richardepstein/2016/10/06/discovery-made-simple-in-fannie-and-freddie/#7fcce4b03637
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Michael Sammons, 15706 Seekers Street, San Antonio, TX 78255 – (210) 858-6199 – michaelsammons@yahoo.com
.
By seeking to attack Judge Sweeney Federal Claims Court’s jurisdiction, Mr. Sammons unwittingly aligns himself with the defendant, the United States in the Fairholmes litigation challenging Federal Claims Court jurisdiction, albeit on other grounds. Moreover, if Mr. Sammons elects to limit his damages claim against the United States to an amount that does not exceed $10,000, he may file suit in federal district court.
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Mr. Sammons is a clown. Sounds like a loser who can’t seem to get his act together. Total waste of Judge Sweeney’s time.
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Recent Updates from the Investors Unite Blog
TOMORROW: Investors Unite Legal Call
Wednesday, October 5th, 2016
On Thursday, October 6 at 10:30 am EDT, Investors Unite Executive Director Tim Pagliara will host a teleconference to discuss the state of affairs of the many pending legal cases related to GSE shareholders, including the recent unsealing of Judge Margaret Sweeney’s order denying claims of privilege over documents that the government has sought to withhold from the public.
Pagliara will be joined by Cooper & Kirk Partner David Thompson, who represents plaintiffs in Sweeney’s court, and University of Virginia Law Professor Saikrishna Bangalore Prakash, author of a white paper, The Government’s Seizure of Private Property Behind a Veil of Secrecy, which discusses the misuse of executive privilege in this litigation.
To join the teleconference, please RSVP to media@investorsunite.org.
WHO: Tim Pagliara, Investors Unite Executive Director and CapWealth Advisors Chairman and CEO
David Thompson, Partner, Cooper & Kirk
Saikrishna Bangalore Prakash James Monroe Distinguished Professor of Law and Horace W. Goldsmith Research Professor at the University of Virginia School of Law
WHAT: Investors Unite Call on Judge Sweeney’s Opinion
WHEN: Thursday, October 6th, 10:30 am EDT
DIAL IN: 800‑895‑0198; Conference ID: Investors
RSVP: Please RSVP to media@investorsunite.org
About Investors Unite: Formed by Tennessee investor and CapWealth Advisors Chairman and CEO, Tim Pagliara, Investors Unite (investorsunite.org) is a coalition of over 1,400 private investors from all walks of life, committed to the preservation of shareholder rights for all invested in Fannie Mae and Freddie Mac. The coalition works to educate shareholders and lawmakers on the importance of adopting GSE reform that fully respects the legal rights of Fannie Mae and Freddie Mac shareholders and offers full restitution on investments.
https://investorsunite.org/tomorrow-investors-unite-legal-call/
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Six key legal issues to look for in Perry:
(1) Whether FHFA exceeded its statutory authority by failing to preserve & conserve assets
(2) Whether FHFA was acting under the direction/supervision of Treasury
(3) Whether Treasury exceeded its authority by exceeding the sunset provision
(4) Whether there was a breach of contract on the dividend stopper
(5) Whether there was a breach of the implied covenant of good faith and dealing
(6) Whether there was a breach of fiduciary duty
What are the possible damages for breach of contract?
(1) Expectancy, put the non-breaching party in the same place it would have been without a breach
(2) Reliance, out of pocket costs with some subtraction
(3) Restitution, the benefits received by the breaching party minus benefits received from non-breaching party (like dividends)
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Recorded Conference Call.
http://investorsunite.org/iu-audio-cleanup/
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Dear Investor,
Earlier this week, we received a favorable ruling from Judge Margaret Sweeney in the U.S. Court of Federal Claims granting our motion to compel the United States to produce dozens of documents that had been withheld due to assertions of deliberative process privilege, bank examiner privilege, and presidential communications privilege. In our Motion to Compel, we asserted that the Government has used “haphazard, inconsistent, and in at least some cases plainly unwarranted” privilege assertions to “shield over eleven thousand responsive documents from discovery.”
While the court’s Opinion and Order is currently under seal, we anticipate that it will be made public (in part or in whole) in the near future.
In the interim, we have informed the U.S. Court of Appeals for the District of Columbia of Judge Sweeney’s ruling so it has the benefit of this additional information while evaluating our appeal in Perry Capital LLC v. Lew.
Kind Regards,
Investor Relations
Fairholme
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Judge Sweeney Again Insists the Government Produce Documents
– September 20, 2016
Yet again, U.S. Court of Federal Claims Judge Margaret Sweeney’s response to the government’s plea to keep its machinations on the Net Worth Sweep under lock and key is a principled “No!”
Judge Sweeney today granted Fairholme Funds’ motion to compel the government to produce some 50 documents that government lawyers wanted withheld under the guise of executive privilege. It appears that Judge Sweeney, after reviewing documents herself, rejected the government’s claims of privilege on all of them and granted in full the motion to compel the government to hand the over to plaintiff’s lawyers.
For now, the documents will remain under the “protective order.” This means only the plaintiff’s lawyers can actually see them. But these documents will certainly provide lawyers with new insights into what the government was thinking when it devised the plan to confiscate Fannie and Freddie’s revenues. Eventually, the documents will be the subject of legal briefs and unsealed.
Judge Sweeney has consistently rejected the government’s sweeping and aggressive efforts to keep its deliberations a secret. Back in April, she unsealed seven documents sought by plaintiffs, Perry Capital, Inc. In May, she decided it was time to take the lid off 53 documents in a case brought by Fairholme Funds. A trove of unsealed documents is posted at FannieFreddiesecrets.org. Many revealed damaging evidence just as oral arguments were getting under way in an appeal of Judge Royce Lamberth’s dismissal of Perry’s suit. The Appeals Court decision is expected soon.
In her April ruling, Sweeney signaled skepticism bordering on annoyance with the government’s penchant for secrecy. She scoffed at the notion that the disclosure of the information in the documents that go back several years could harm financial markets today. The only “harm” that could result would be criticism of an agency, institution, and decision-makers. “The court will not condone the misuse of a protective order as a shield to insulate public officials from criticism in the way they execute their public duties,” she declared.
She amplified this, writing, “Thus, avoidance of “second-guessing” an agency’s decisions several years after the fact, as described by Mr. Watt, is, with the passage of time no longer a legitimate basis to maintain documents under a protective order.” This excerpt from that ruling appears to continue to inform her judgement:
Moreover, there can be no serious dispute that it is extremely rare for a document filed under seal in a civil case to remain so for all time. There is no suggestion that the documents subject to the protective order are classified as relating to national security. Nor do these documents contain trade secrets or proprietary information. However, even cases in which trade secrets and proprietary information are filed under seal and subject to a protective order, it is not unusual that after the passage of time, that same information is eventually unsealed because the protective order has outlived its usefulness. Indeed, because the government does not argue that information that it requests remain protected concerns matters involving national security, trade secrets, or proprietary information, or that specific privileges attach to any of the seven documents, it is clear that there is no longer a need to maintain the protected designation for them.
In the course of the many shareholder lawsuits brought against the government as a result of the Net Worth Sweep, roughly 12,000 documents have been hidden by invocation of some form of executive privilege and about 63,000 because of invocation of the protective order. This is unprecedented.
As Judge Sweeney continues to crack the government’s wall of secrecy, it appears her patience is wearing thin. Last spring, she chided the government for its contradictory position. She wrote, “The court notes that from the inception of this litigation, the government has consistently maintained that the court lacks jurisdiction over this case because the United States had no control over the enterprises. Taking the government at its word, it is surprising that defendant is concerned with the unsealing of government officials’ deposition testimony.”
In today’s ruling, she called on the government to explain why it should not have to pay Fairholme’s legal fees for this motion. This suggests that she found the government’s arguments particularly meritless. In essence, she wants to know why shareholders are bearing the cost of fighting for access to documents that should have been accessible in the first place.
Indeed, the Sweep has been costly for shareholders. Enough is enough.
http://investorsunite.org/judge-sweeney-insists-government-produce-documents/
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This Is The Song That Never Ends – GSE Edition
Summary
We now have four lawsuits working on the thesis that the facts don’t matter and a conservator can nationalize a company without paying for it.
All of these four lawsuits rely on one which is fully briefed up for appeal, and the appeals looking so ripe that even John Carney says remand, remand, remand!
Whether or not companies make cash or not should determine whether or not the government can take them over and shut them down, especially ones that help everyone like FnF.
http://seekingalpha.com/article/4005522-song-never-ends-gse-edition
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Got Robinson’s case in Kentucky tossed out today. What next? Does this spell doom or do we still have a chance to win? If only we can bring a case to trial, we have the Govt. cornered. The big question is: Can we get a judge to see things our way to help us move forward in our fight and stop getting our cases tossed out by judges who don’t have the stomach to confront the Govt.?
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Naked shorts going into frankly decline 7.44% today ,I personally don’t remember any date before naked shorts so low.
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All volume is way down. The old avg vol was north of 5M shares/d.. now it’s trickled down to <3M. It gives them less room to work – and less of an impact when they do. I think most speculators are out and most others have picked a position (in or out) to wait for news from the courts.
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100% Of The GSEs For Zero Consideration Is Great For Tax Collectors
Summary
The third amendment net worth sweep by definition makes the periodic commitment fee worth $0 since the government is taking it all anyway.
I think that this gets remanded even though I think that it should get outright reversed, judges are human beings.
Plaintiffs have direct claims.
Saxton case motion to dismiss has been fully briefed since August 1, 2016 thereby making the Saxton case in Iowa a leading case in my book.
http://seekingalpha.com/article/4002690-100-percent-gses-zero-consideration-great-tax-collectors
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thank you
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In Pagliara vs Freddie Mac
The court held that HERA “divested” Freddie Mac stockholders of the right to inspect books and records, Pagliara at 15, by transferring to FHFA as Conservator “all rights, titles, powers, and privileges … of any stockholder of Freddie Mac.” Pagliara at 14 (internal quotations omitted). The Court concluded that “HERA’s plain language evidences Congress’s intent to transfer as much power as possible to the FHFA when acting as Freddie Mac’s conservator.” Pagliara at 24.
Doesn’t this meet the definition of the Taking Clause?
The Court also rejected the argument that there is a conflict-of-interest exception to the Conservator’s succession to stockholder rights to bring a derivative suit. Pagliara at 29 n.20.
This opinion demonstrated his poor judgement or lack of understanding of the conflict of interest exception.
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I would like to say that Tim P losing his lawsuit also proves that Shareholders rights (which are an asset) were taken for no payment which proves there was a “taking”. This proves that HERA is unconstitutional. I believe shareholders need a class-action lawsuit against HERA. With all the lawsuits why is there no lawsuit fighting HERA?
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Edwards v. Deloitte:
• Defendant Deloitte & Touche LLP’s response to Plaintiffs’ Motion to Remand is due on or before September 14, 2016.
• Plaintiffs’ Motion to Remand reply is due on or before October 12, 2016
• No other extensions of time will be given on the Motion to Remand absent extraordinary circumstances.
• The Defendant’s answer to the Complaint is due within thirty days of the Court’s order on the Motion to Substitute. (If the Motion to Substitute is Granted, defendant will surely file a Motion to Dismiss)
• The parties must meet-and-confer within 21 days of Court’s order on the Motion to Substitute.
• The Court notes that it cannot rule on the Motion to Substitute until the Court’s Subject Matter Jurisdiction has been resolved.
My guess is that the Motion to Remand is Granted because this is a state court case. Even if the Motion to Remand is Denied, the Motion to Substitute should be Denied because this is a direct claim.
Am I correct?
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So, a determination of the breach of contract complaint must come first, if only to assess extent of government action? And, if no remedy, a takings complaint may still be possible?
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The opinion finds no basis for the government’s argument that Mr. Piszel had to pursue a breach of contract claim against Freddie Mac before bringing a takings claim, even though, the existence of a remedy for breach of contract is highly relevant to the takings analysis.
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So, would the Piszel opinion set the precedent more directly for the Fairholme case since it’s related to the Federal Claims court?
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I wouldn’t necessarily characterize it as “more directly”. It set precedent to most if not all cases.
One huge breadcrumb is what Mr Hume stated in Perry’s oral argument, they can’t have it both ways. Follow the link to Mr. Hume’s recent letter for the other huge breadcrumb.
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Thanks for posting!
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