Here's the latest in a case and issue we've been following. Check out this recently-filed cert petition, involving the federal takeover of Fannie Mae and Freddie Mac in the mortgage crisis in the late 'aughts. Which allowed them to keep going, but is alleged to have iced out their private shareholders.
The Court of Federal Claims and the Federal Circuit rejected a takings claim by the private shareholders, concluding that they don't possess standing. Their claims are derivative, not direct, because Freddie and Fannie should be the plaintiffs.
Here's the Question Presented:
Fannie Mae and Freddie Mac are “for-profit corporations owned by private shareholders” and “dominate the secondary mortgage market.” Collins v. Yellen, 141 S. Ct. 1761, 1770, 1785 (2021). In 2008, Congress passed a statute that led to the Federal Housing Finance Agency’s becoming the companies’ conservator and the U.S. Department of Treasury’s becoming a shareholder (sole holder of senior preferred, as well as warrants to purchase nearly 80% of common at a nominal price) and providing substantial investment. In 2012, private shares remained outstanding, carrying dividend rights and liquidation preferences. That year, Treasury and the FHFA decided that, henceforth, the companies each quarter “would transfer nearly all of [their] net worth” to Treasury. Id. at 1770. They continued as profitable going concerns with a government “backstop,” but this net-worth sweep “left nothing for their private shareholders.” Id. at 1777, 1779; see id. at 1774, 1778. In Collins, the Court held the private shareholders’ APA challenge barred by statute. With their rights in their shares wiped out, Petitioners sued for a taking. The Court of Federal Claims held that their claims for compensation for themselves were actually derivative, mere “overpayment” claims that belonged to the government-controlled companies. The Federal Circuit affirmed.
The question presented is: If the United States causes a company to transfer to the United States for the public benefit private shareholders’ rights incident to their ownership of shares in the company, do the private shareholders have a direct, personal interest in a cause of action challenging that taking?
There's not a lot of takings stuff in the petition, which is more focused on who was injured and who can sue. But there's enough takings there to pique our interest.
Stay tuned, or follow along on the Court's docket.
Petition for a Writ of Certiorari, Owl Creek Asia I, L.P. v. United States, No. 22-97 (U.S. Aug. 2, 2022)
