This is a complete and total win for Berkowitz and FAIRX and Fannie Mae / Federal National Mortgage Association (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) shareholders. I said last week I thought they should win and the reasoning here allows for a wide ranging discovery that will reach the upper management of both the Treasury (Geithner) and FHFA (DeMarco).
Remember and I have said this all along. The current head of both Treasury and FHFA have no skin in this suit. The gov’t has been paid back. They have nothing to gain from discovery that will unearth details of not only what happened but why.
The current heads have two choices, either throw the previous guys under the bus as they had nothing to do with those decisions or avoid discovery by just agreeing they have been paid back and call it quits. Without the net worth sweep existing, there is no suit.
Discovery will attempt to find:
1. will enable plaintiffs to confirm that such evidence exists with regard to profitability and additionally answer the question as to when, and how, the Fannie Mae / Federal National Mortgage Association (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) conservatorship will end
2. The question to be answered is a fact-intense inquiry that will include consideration of whether the FHFA acted at the direct behest of the Treasury. If, as plaintiffs allege, the FHFA was an agent and arm of the Treasury, then this court possesses jurisdiction over plaintiffs’ complaint. The evidence needed by plaintiffs to respond to defendant’s jurisdictional allegations is within the hands of defendant, and otherwise not publicly available.
3. Specifically, plaintiffs have shown that document and deposition discovery will disclose evidence relevant to the disputed factual issues about Fannie Mae / Federal National Mortgage Association (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC)’s solvency and the reasonableness of expectations about their future profitability, as well as provide answers related to why the government allowed the preexisting capital structure and stockholders to remain in place, and whether this decision was based on the partial expectation that Fannie Mae and Freddie would be profitable again in the future. This evidence is in the possession of defendant only
Like I said…….this is gonna get good
Fannie Mae / Federal National Mortgage Association (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) court document
On December 9, 2013, defendant filed a motion to dismiss plaintiffs’ complaint pursuant to RCFC 12(b)(1) and 12(b)(6) (“motion to dismiss”). In response, plaintiffs, on December 20, 2013, filed a motion for continuance to permit discovery pursuant to RCFC 56(d) (“motion for discovery”). In their motion, plaintiffs argue that defendant’s dismissal motion challenges many of the allegations of their complaint and, in light of this, they are entitled to discovery. For the reasons set forth below, the court grants plaintiffs’ motion for discovery.
Plaintiffs articulate three reasons for granting their motion for discovery. First, plaintiffs allege that discovery is needed to refute defendant’s argument that plaintiffs’ claims are not ripe. Second, plaintiffs allege that discovery is needed to develop facts to refute defendant’s argument that this court lacks jurisdiction over the complaint. Third, plaintiffs allege that discovery is needed to respond to defendant’s factual assertions relevant to defendant’s argument that plaintiffs failed to state a claim for a regulatory taking. In opposition, defendant argues that plaintiffs have not articulated a valid basis for the court to permit discovery at this early stage of the litigation; thus, the motion for discovery must be denied. Thereafter, plaintiffs filed their reply.
Plaintiffs are holders of non-cumulative preferred stock issued by the Federal National Mortgage Association (“Fannie”) and the Federal Home Loan Mortgage Corporation (“Freddie”). Compl. ¶ 1. In 2008, Fannie Mae and Freddie owned and guaranteed trillions of dollars
Case 1:13-cv-00465-MMS Document 32 Filed 02/26/14 Page 2 of 4
of assets, primarily mortgages and mortgage-backed securities. Id. ¶ 2. During the financial crisis of 2008, both Fannie Mae and Freddie faced a steep reduction in the book value of their assets and lost the public’s confidence. Id. ¶ 4. In response, Congress enacted the Housing and Economic Recovery Act of 2008 (“HERA”). Id. Shortly thereafter, the Federal Housing Finance Administration (“FHFA”) placed Fannie Mae and Freddie into conservatorship pursuant to the HERA. Id. ¶ 6. The United States Department of the Treasury (“Treasury”) exercised its authority under the HERA to provide Fannie Mae and Freddie with capital by entering into agreements with the FHFA. Id.
Discovery to Aid in Establishing Jurisdiction
The Tucker Act confers jurisdiction upon the United States Court of Federal Claims to render judgment on any claim against the United States founded upon a contract. 28 U.S.C.
§ 1491(a)(1) (2012). Under section 2501, a claim accrues “as soon as all events have occurred that are necessary to enable the plaintiff to bring suit, i.e., when ‘all events have occurred to fix the Government’s alleged liability, entitling the claimant to demand payment and sue here for his money.” Martinez v. United States, 333 F.3d 1295, 1303 (Fed. Cir. 2003) (en banc) (quoting Nager Elec. Co. v. United States, 368 F.2d 847, 851 (Ct. Cl. 1966)). The burden of establishing the court’s subject matter jurisdiction resides with the party seeking to invoke it. See McNutt v. Gen. Motors Acceptance Corp. of Ind., 298 U.S. 178, 189 (1936); see also Reynolds v. Army & Air Force Exch. Serv., 846 F.2d 746, 748 (Fed. Cir. 1988) (providing that jurisdiction must be established by a preponderance of the evidence).
Additionally, when deciding a motion to dismiss for lack of subject matter jurisdiction under RCFC 12(b)(1), the court usually assumes all factual allegations in the complaint are true and draws all reasonable inferences in the plaintiffs’ favor. E. Trans-Waste of Md., Inc. v. United States, 27 Fed. Cl. 146, 147-48 (1992). However, a plaintiff cannot rely solely upon allegations in the complaint if the defendant or the court questions jurisdiction. Instead, the plaintiff must bring forth relevant, adequate proof to establish jurisdiction. See McNutt, 298 U.S. at 189. The court may examine relevant evidence in order to decide any factual disputes when ruling upon a motion to dismiss for lack of subject matter jurisdiction. See Moyer v. United States, 190 F.3d 1314, 1318 (Fed. Cir. 1999); accord Rocovich v. United States, 933 F.2d 991, 993 (Fed. Cir. 1991) (noting that the court “may find it necessary to inquire into jurisdictional facts that are disputed”); Reed Island-MLC, Inc. v. United States, 67 Fed. Cl. 27, 32 (2005) (recognizing that the court may address matters outside the pleadings when ruling upon an RCFC 12(b)(1) motion). Moreover, it is “well established that when a motion to dismiss challenges a jurisdictional fact alleged in a complaint, a court may allow discovery in order to resolve the factual dispute.” Samish Indian Nation v. United States, No. 02-1383L, 2006 WL 5629542, at *4 (Fed. Cl. July 21, 2006). Thus, motions for discovery to meet a challenge to the court’s jurisdiction should be granted to effectuate justice. Indeed, in the summary judgment context, motions filed under RCFC 56(d) “are generally favored and are liberally granted.”
Clear Creek Cmty. Servs. Dist. v. United States, 100