Fairholme Filing Regarding Recent Kentucky Case Decision
Last Friday, Judge Karen K. Caldwell of the U.S. District Court for the Eastern District of Kentucky entered an opinion dismissing a lawsuit brought by an individual shareholder challenging the Net Worth Sweep (Robinson v. FHFA, No. 15-109, E.D. Ky. Sept. 9, 2016).
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Judge Caldwell was referred this case on July 11, 2016, and her opinion borrows heavily from Judge Royce Lamberth’s 2014 decision in Perry Capital LLC v. Lew, 70 F. Supp. 3d 208 (D.D.C. 2014). She issued her decision without the benefit of any oral argument or further briefings.
We found Judge Caldwell’s decision to be flawed and entirely unpersuasive, and believe that it is unlikely to influence the ruling on the lawfulness of the Net Worth Sweep in our case pending before the U.S. Court of Appeals for the D.C. Circuit.
Our counsel in the D.C. Circuit appellate case filed a notice with the Clerk of the appellate court regarding Judge Caldwell’s opinion. The notice succinctly indicates that an implication of Judge Caldwell’s reasoning is that there are no meaningful limits on what a federal conservator may do with the assets of a financial institution under its care and that “[t]o accept this reasoning is to allow not only FHFA but all federal conservators to plunder the assets of financial institutions whose assets they are required to preserve and conserve. No federal conservator has ever been permitted to enrich itself or a sister federal agency at the expense of the company for which it is responsible, and Congress did not authorize FHFA to become the first when it enacted HERA.”