Court Opinion

ID: 4374402
Source: CourtListenerOpinion
Date Created: 2019-03-06 18:00:57.781843+00
Date Added: 2024-06-11T14:49:32.202275
License: Public Domain

UNITED S'I`ATES DISTRICT COURT
FOR THE DlSTRlCT OF COLUMBIA

 

 

)
JOSHUA J. ANGEL, )
)
Plaintiff, )
)

v. ) Case No. 1:18-cv-01142
)
FEDERAL HOME LOAN )
MORTGAGE CORPORATION, et al., )
)
Defendants. )
)

MEMORANBUM OPINION

 

losian .l. Angel_, a holder of preferred stock in both the Federal National l\/Iortgage
Association (“P`annie l\»ilae") and the Federal Honte Loan i\/fortgage Coiporation (“Freddie Mac"`
and together with Fannie Mae the "Companies")` brings the present action as a pro ne ii€igant.
l\/Ir. Angel asserts causes of action for breach of contract1 breach of the implied covenant of good
faith and fair dealing and tortious interference against the Companies and their respective
individual directors as of August 17, 2012. along with the Pederal Housing Finance Agency
("FHFA"'), as a nominal defendant.] Sec generain Compl.q ECF No. l. All defendants moved
jointly to dismiss the Cotnplaint in its entirety. Mot. Dismiss. ECF No. 1 I. Because Mr. Angel"s
claims are time-barred_, their motion Will be GRANTED. Add'itionally, in evaluating defendants"
motion._ the Court considered Mr. Angei’s arguments in his proposed sarreply attached to his

l\/lotion for Leave to Filc Surreply Briet`. Pl.`s Proposed Surreply._ ECF No. 21-§. Accordingly,

 

l The claim for tortious interference Was originally styled in the complaint as a claim for “Aiding and Abetting in
l'-`ederal Gevernment’s Implicit Guaranty Evasion and Payinent Avoidance.” See Compi. 1§1§ 123-25, ECF No. 1.
But in his opposition, Mr. Angel repeatedly refers to this claim as one for tortious interference See, e.g., Opp. Mnt.
Dismiss 16, ECF No. 17. Because a “document fiied pro se is to be liberally construed," Er':'ckson v. Pardz:s, 551
U.S. 89, 94 (2007), the Coni“£ will treat the claim as such.

that motion §ECF No. 2}] will be GRANTEI), and the Co'urt directs the Clerl\' to place the

proposed surrepl}r on the docket

I. BACKGROUND

Not much in the Way of background is required to resolve the present motion2 Duri.ng the
Great Recession of 2008, Congress passed the l-lousing and Econornic Recovery Act ol` 2008
t“HERA"), creating the FHFA as regulator oi`the Cotnpanies. Cotnpl. ‘l 36_ ECF No. l. Pnrsnan.t
to the authority given under HERA. Fannie Mae and Freddie l\/lac vvere placed into conservatorship
with the l~`l-IFA taking over control of the Conipanies as conservator ]ci.

This case is one in a multitude of actions brought by shareholders ol"the Companies seeking
recovery for damages incurred in connection With an agreement between the FHFA, as conservator
for the Coinpanies, and the Treasur}-' De_partinent on Augast 17, 2012. ld. °‘§ l: see erisa Fairhofme
ands. ]nc. r. Fed. Hons. Fin. Agencjr. No. l:lS-cv~1053 (RCLl; Arrowooa' hm’em. Co.. No. l:13-
cit-1439 (RC`L); fn re Fcnmr`e Mne/Freddie Mac Senr.`or Preferred Sfock Purcfmse Agreernenf Class
Acf'ion Lfrigs., No. l:l_°)~mc-l?.SS (D.D.C. Feb. l, 2018). Pursuant to that agreement_the third
amendment of the September 6, 2008 senior preferred stock purchase agreement (the "Third
Amendment")--each company Would pay Treasury a quarterly dividend equal to 100% of each
company`s net worth that exceeded a capital buffer of 33 billion, with that buffer decreasing
annually down to zero by 2013. Id. jl‘it 62»64.

On l\/lay 21, 2018, over five and a half _vears after the Companies entered into the Tltird
Amendrnent. l\/lr. Angel filed suit before this Court. in Count l of the Complaint, Mr. Angel claims

that by entering into the ’I`hird Amendnient, "tlie Det`endants breached the Companies[’]

 

3 For further background, see this Court’s opinion in a related case-Fairholme Fzmds, I)1c. v. Fed. Hous. Agency,
No` i:lB-cv-IOSB (RCL), 2018 WL 4680197, at "‘1~4 (D.D.C. Sept. 28, 20!8).

2

obligations to Plaintiff to receive dividends on his .lunior Preferred shares.” jd. § 108. ln Count
ll, l\fh‘. Angel claims that by entering into the Third Amendment “and operating in compliance
\vith its terms[.] the Defendants effectively deprived Plaintifl" of any possibility of ever again
receiving dividends, and thus breached the implied covenant of good faith and fair dealing inherent
in the Certificates of Designation for the Fannie l\/lae [] and Freddie l\/Iac junior Pref`erred stocl<."
]d. §§ l20, Lastly, l\/lr. Angel asserts tortious interference by defendants \vith the "'Governmer.it
Guarantee" of “‘full and timely payment ofdeclared dividends to .l`unioi' Preferred Shareholders."
Opp. Mot. Dismiss 32, ECF No. l7.

Defendants move to dismiss the Complaint in its entirety because infer minn i\/lr. Angel’s
claims are time~barred. l\»’lerno. Supp. Mot. Dismiss lO-l?., ECF ll-l. ln Mr. Angelis surreply,
he concedes his cause of action for tortious interference and “seeks to dismiss this claim."’ Pl.`s
Proposed Snrreply 8, ECF No. Zl-l. 'l`hc Couit obliges That claim vv'ill be dismissed and the

Court considers only the claims for breach of contract and breach of the implied covenant

rr. LEGAL sTANDARD

To survive a motion to dismiss pursuant to F-ederal Rule of Civil Procedure li(b)(d), "‘a
complaint must contain sufficient factual rnatter. accepted as true to ‘State a claim to relief that is
plausible on its face."" As/icrofi' v. [qha/. 556 U.S. 662, 678 (2009) (quoting Be!l Arl. Corp. v.
Tn.'omb]y, 550 U.S. 544., 570 t2007)). Defendants may raise a statute oflimitations defense in a
motion to dismiss "\vhen the facts that give rise to the defense are clear from the face of the

complaint."' See sz`f!thaynfe v. Dz`srricl ofColzm)bz`cn 155 F._`)d 575, 578 (D.C. Cir. l998).

III. DISCUSSION

A. Mr. Angel failed to file this suit within the limitations period.

D.)

l\"lr. Angel asserts only state law causes of action-breach of contract and breach of the
implied covenant Although chartered under federal laws the Conipanies enacted bylaws in which
they each elected to follow a chosen state`s law. Fui`rholme Ftrncin 20l 8 WL 4680l97. at *?,.
Freddie l\»‘lac chose ‘v’irginia lau-z while Fannie Mae selected the law of the State ofDela\varc. fd.
Accordingly. Mr. Angel alleges his causes of action against Preddie Mac and its directors under
Virginia Law and his causes of action against .Fannie Mae and its directors under Delaware law,
._ ne Compl. §§ lOl, llf;’>. ECF No. l. And it is those states` respective statutes of limitations that
apply. See Byer.s' i=_ Br.ir/eson. 7l 3 F.2d 856, 859 n.¢l.

ln Virginia, the statute of limitations for breach of a contract “which is in vt-'riting and signed
by the party to be charged thereby`" is five years.3 Va. Code § 8.0]W246{2). For claims for breach
of the implied covenant, a three~year statute of limitations applies Co!'r`n!hiun ilfo."fg. Corp. v.
Chor'cePoim Precz`sfc)n rla'uk/g, N-o. l:O?~cv-SB.’Z (.TCC), 2008 WL 2776991, t‘_`) {E.D, Va. .luly l-’i.
2003); .s'ee also ch-'borrr Gafe Oi»i')iers` A.s‘.s"n. ]r.'c. r. Bcrg, 348 S.E.?.d 252, 257 (`Va. 1986)
( holding that the three-year limitation of Va. Code § 8.01-246(4) applies to unwritten terms in
contracts).

in Delaware. a three-year statute oflin.ii.tations applies both to claims for breach of contract
and claims for breach of the implied covenant 10 Del. Code § 8106; Fi`/’ce r. Ruger, 754 A.3d 254`
260 (Del. Ch. 1999) tbreach ofcontract); Coniie/I_i»' i=. Smre Fcrrin Mw. A.uto. ]ns. Co., l35 A.Bd

1271. 1275 (Del. 2016) (implied covenant).

 

3 'l`here is some dispute over whether the contracts here--Mr. Angei’s certificates of designation-are signed,
written contracts For the purpose of this order, the Court takes Mr. Angel’s representations that the contracts are in
fact written and signed as true. See Opp. Mot. Dismiss 21 n.19, ECF No. 17.

4

in both Deiaware and Virginia. the statute of limitations for contract claims begins to run
from the date of the alleged breach. Va. Code § 8.0]»~230; AHsItr!e Irr.s'. Cr). v. S])inelh.', 443 A.Ed
1286. 1292 (Del. 1982).

l-lere, even under the most generous reading of Mr. Angel`s complaint the claims for
breach ot" contract and breach of the iinptied covenant each accrued at the time of the enactment
of the Third Amendment--over iive years ago and outside the limitations period for any cause of
action. For the breach of contract claim Mr. Angels states the Third Amendment “triggered a
dividend payment breach because it eliminated the Companies` ability to build capital, and in so
doing effectively nullilied. and eliminated the Board’s exercise of its contractual dividend
declaration functions,"‘; Coi.npl. j 79, ECF No. l. Regarding the implied covenant, l\/Ir. Angel
alleges that defendants "breaclied each C`ompany`s implied covenant of good faith and fair
dealing" through their “near mindiess adoption ratitication, and performance of the `l`hird
Atnendment." ]d. 1 8].

B. Mr. Angel may not rely on an exception or other equitable doctrine to toll the
Statute of limitations

Because the Third Amendment Was enacted over five and a half years ago and outside each
State"s limitations periods for contract Ciaims, the Court must grant defendants5 motion. unless an

exception applies or the statute ot`limitations has been toiled.

]. The doctrine cf equitable estoppel does nor roll the statute of limitations fn
this case

First, l\/Ir. Angei argues that equitable estoppel tolled his limitations periods because he

was “`lulled into inaction by Dei`endants` assurances that they Wonid honor their obiigations.” Opp.

 

4 In Mr. Angei’s opposition, he claimed that his breach of contract claim was actually a claim for anticipatory
breach Opp. Mot. Disrniss 17, 23, ECF No. 17. Mr. Angel has abandoned that position stating that the
"anticipatory breach caused by the Third Amendment" is moot and clarifying that he seeks relief for “an actuai
breach" that “has occurred and continues to occur". See Pi."s Proposed Stirreply 3q ECF No. 21-1.

5

Mot. Disiniss 7, BCF No. 17. But this doctrine is not available to Mr. Angel under either Virginia
or Delaware law. fn Virginia, equitable tolling appfies in a narrow set of circumstances where a
defendant engages in fraud to conceal a plaintiffs injury or to induce the plaintiff to refrain from
filing suit. Boykins Ncii'roii’ Fcibrics Corp. v. Weidon Roofing and Siieel Meicii, [nc., 266 S.E.Zd
887, 890 (Va. 1980). Deiaware’s version is slightly broaden encompassing situations absent fraud
but applying only “where the facts underlying a claim are so hidden that a reasonable plaintiff
could not timely discover them.” Weiss v. Swaiison, 948 A.Zd 433, 451 (Del. Ch. 2008) (citation
oinitted).

Here, the Tliird Ainendment was public tile day it was announced lt is the details of the
Third Anrendment that forni the basis of Mr. Angel’s claims to relief. The intricacies of the
transaction were not hidden. And while plaintiff claims to have been “lulled into inaction"’ by
defendants’ assurances, the Court finds no facts supporting this conclusory statement anywhere in
the complaint Plaintiff "‘has the burden of pleading facts that would support a finding of equitable
estoppel.” Neoi v. Stiykei' Corp., No. 1:1 1-cv-62(AJT/TRJ), 2011 WL 841509, at *3 (E.D. Va.
Mar. 8, 2011); See also in re Deon Witrer P ’siiip Lifig., No. Civ. A. 14816, 1998 WL 442456, at f
6 (Del. Ch. .luly 17, 1998) (“[P]iaintiffs bear the burden of pleading specific facts to demonstrate
that the statute of limitations was, in fact, toiled.”). I-le has fallen well short of that burden here

and inay not rely on equitable estoppel to toH the statute of limitations

2. T/ie continuing violation doctrine does not oppiy.
Next, l\/Ir. Angei argues that the continuing violation doctrine extends the limitations
period. Opp. l\/lot. Dismiss 27, ECF No. 17. Speciflcally, Mr. Angel claims that defendants

continue to breach tlie contracts and implied covenant each quarter they fail to declare a dividend

and that "‘[w}here the wrongdoing is ongoing and continuous the statute of limitations has not yet
expired." ]d.

ln cases where the effects of an alleged breach spans an extended period of time, Virginia
“courts have distinguished between acts that constitute a ‘single contin[uous] breach` and those
that constitute a ‘series of separate breaches."’ Fii.lor Fen'. Sois.. LLC i.'_ PAE Appiied Tecii.s'. 728
i~`. App’x 200, 202 (¢ith Cir. 2018) (quotingAiJI. P/iys'icoi Tiiera])y Ass `n r. Fed 'ii ofS/ole Bds. Qf
Pin=sicai Theropy, 628 S.E.Zd 928, 929 (Va. 2006)}. When "the wrongful act is of a permanent
natnre” and “produces all the damage which can ever result from it," that act is a single continuous
breach and the statute of limitations begins to run at the time of the wrongqu act Hompfon Rcis.
Sciniioiion Disi. i‘. itiDoi?iie/’i, 360 S.E.?,d 841. 843 (Va. 1987) (internai citation and quotation
marks oinitted). '“Conversely._ when wrongful acts are not continuous but occur oniy at intervais,
each occurrence inflicts anew injury and gives rise to a new and separate cause of action” with its
own limitations period. id. “Virginia law makes clear that ‘the running of the statute is not
postponed by the fact that the actual or substantial damages do not occur untii a later date."` Fiuor,
728 Fed. App`x at 203 (quoting Coiio'iii i=. ii"ise Rombier. Inc., 168 S.E.Zd 257, 260 (‘Ja. 1969)).

liere, the alleged original sin-the Third Amendment_produces all the damage that l\/lr.
Angei claims Unless timber action is taken by the FHFA as conservator. 100% of the net worth
of each company will flow to Treasury each quarter pursuant to the Third Amendment, “ina[king]
it impossible for the holders of each Company`s Junior Preferred to realize value from their
contractual dividend entitlement riglits." See Compl. ii 81. Mr. Angel`s attempts to segment out
the defendants alieged conduct are unpersuasive lt is true that each quarter the Third Aniendment
operates to deprive Mr. Angei of the possibility of a dividend v But this is simply the continued ill

effects of a single wrong In an action for wrongful termination,, the statute of limitations does not

reset at the end of each pay period that a plaintiff would have received a paycheclc The “statute
is not postponed by the fact that the actual or substantial damages"' continue to occur at the end of
each successive qualter. Caiia’ili. l68 S.E.Zd at 260. Under Virginia law. this is a single
continuous breach and i\"lr. Angel may not extend the limitations period with the continuing
violation doctrine

ln Delaware. the analysis is simpler, and l\/ir. Angel does not fare any better. “[W]bere suit
can be brought immediately and complete and adequate relief is available a cause of action cannot
be tolled as a continuing violation." Kerns v. Daices. l\lo. Civ.A.i999-S, 2004 WL 766529~ at *"4
(Dei. Ch. Apr. 2._ 2004) (citing Kaitn v. Sealioard C`orp.. 625 A.2d 269, 271 (Del. Ch. 1993)). Here.
Mr. Angel could have brought the suit the Companies and Treasury announced the deal.
Aiternati\-'ely; he could have waited nearly a full 12 quarters to better asses the impact ofthe Third
Amendment. linder Delaware law, the continuing violation doctrine does not toll the statute of
limitations in this case.

,,

_). Mr. Angci ’s membership in classes asserted in various pending class
action cases does noi toll lite statute ofiimiiaiions in this casel

Lastly, Mr. Angel tries to save his claims from the statute of limitations tln‘ough class action
tolling ln support of this argument, l\/lr. Angel relies principally on Ainerican Pipe & Consiracrion
Co. v. Ui‘ah, 414 U.S. 538 (1974). in Ainerican Pipe, the Supreme Couit held that the filing of a
class action “tolls the rumiing of the statute of limitations for all purported members of the class
who make timely motions to intervene after the court has found the suit inappropriate for class
action status." Id. at 552»M53. ln Crown, Cork & Seai v. Parker, the Court clarified that this
equitable tolling rule applied not only to purported members seeking to intervene, but also to
members»-~»like Mr. Angeleho would prefer to bring an individual suit. 462 U.S. 345, 349-51

(1983)_

But here, Virginia and Delaware law provide the relevant limitations periods And so state
law, rather than federal law, determines whether a pending class action tolls the statute of
limitations See Waa.’e v. Danek Mea’., Inc., 182 F.Bd 281, 289 (4th Cir. 1999) (holding that “in
any case in which a state statute of limitations applies . . . the state`s accompanying rule regarding
equitable tolling should also apply"'); see also Carter v. I/Vashr'ngton Metro. A:'ea Transit Auth.,
764 F.2d 854, 855 (D.C. Cir. 1985) (“Under the Eri'e doctrine . . . the relevant state law controls
whether, in a statute-of-limitations case before a federal court on diversity jurisdiction, a pending
[individual action] tolls the statute of limitations."). The Court must therefore look to Virginia and
Delaware iaw to determine Whether class action tolling saves any of l\/lr. Angel’s claims.

fn Casey v. Merck & Co., fric., the Virginia Supreme Couit expressly rejected class action
tolling. 722 S.E.2d 842, 846-(Va. 2012); see also F]ick v. Wyeth LLC, No. 3:12-cv-00012, 2012
WL 4458181, at * 6 (W.D. Va. June 6, 2012); Sanchez v. Lasers/np, Inc., No. 1:12~cv*246, 2012
WL 373 0636, at f 14_15 (E.D. Va. Aug. 27, 2012). Thus, Mr. Angel’s claims against Freddie Mac
and its directors are not tolled.

Delaware courts, on the other hand, have found American Pipe persuasive and recognized
class action tolling See Dubroffv. Wren Hotdz`ngs, LLC, C.A. Nos. 3940-VCN, 6017-VCN, 2011
WL 5137175, at *13 (Del. Ch. Oct. 28, 201 i); B[anco v. Ajl/IVAC Cheni. Corp., C.A. NO. Nl lC-
07~149 JOH, 2012 WL 2194412, at *7 (Del. Super. Aug. 8, 2012)_ But even assuming the claims
meet the requirements of Ainerican P:`pe tolling,5 Mr. Angel’s action against Fannie Mae and its

directors still Was not filed within Deiaware’s three-year limitations period

 

5 'l`he Court is skeptical that Mr. Angel qualifies for class action tolling based on his assertion that the other class
actions, “though based on the same transactions, mostly assert different claims against mostly different defendants
based on different theories." Opp. Mot. Dismiss 2, ECF No. 17. But the Court need not reach that issue.

9

UnderAinei'ican Pipe, "‘tlre commencement afa class action Suspends the applicable Statute
of limitations as to all asserted members of the class who would have been parties had the suit
been permitted to continue."" 414 U.S. at 554 (emphasis added). Mr. Angel claims to be a
purported member of various asserted classes in the consolidated class action pending before this
Court. Sce fn re Fannie Mae/Freda'ie Mac Senior Pi'efei'i'ed Stock Pnrciiase Agreeincnl Class
Action Liiig., No. 1113-mc-01288-RCL. The earliest of those ciass actions_Liao v. Lew, No. 13-
cv-1094-was filed on July 16, 2013, eleven months after the enactment of the Third Amendment
on August 17, 2012. IfAinerican Pipe applies, the statute of limitations would be suspended from
that date.

“Once the statute of limitations has been tolled, it remains tolled for all members of the
putative class until class certification is denied At that point, class members may choose to file
their own suits otto intervene as plaintiffs in the pending action.” Crown, Cork & Seal, 462 U.S.
at 354. in other Words, “once class certification is denied, the limitations clocl< immediately starts
ticl875 F.3d 859, 845 (7th Cir. 2017)
(collecting cases) (emphasis in original). Tolling does not continue through the pendency of
reconsideration or through appeal, even if the decision is ultimately reversed See, e.g.,
Giovannielio v. ALM Media, LI,C, 726 F.3d 106, 117 (2d Cir. 2013); Sione Container Corp. v.
U.S., 229 F.3d 1345, 1355 (Fed. Cir. 2000);Ar1nsn'ong v. Martin Marietta Corp., 138 F.3d 1374,
1380-84 (11th Cir. 1998).

On September 30, 2014, this Court dismissed all the class action claims in the consolidated
action and terminated the case. Perry Capital LLC v. Lew, 70 F. Supp. 3d 208 (D.D.C. 2014).
Over twenty-eight months later, on February 21, 2017, the D.C. Circuit revived some of the class

action claims. Perry Capitai LLC v. rl/Innciiin, 864 F.3d 591 (D.C. Cir. 2017).

10

Although the Court did not deny class certification before dismissing the consolidated case,
the Seventh Circuit_the only appeals court to address the issue-has held that the same rules
apply to dismissals with prejudice. See Coilins, 875 F.3d at 845 (“An uncertified class*action suit
is decidedly not a class action once all class claims have been dismissed The statute of limitations
immediately resumes."'); see also fn re C opper Antin'ust Lit'ig., 436 F.3d 782, 793 (7th Cir‘. 2006).
ln Coliins, the panel followed the lead of Supreme Court in Ainerican Pipe and Crown, Cork &
Seai and Weighed judicial efficiency against the policy concerns underlying statutes of limitations
875 P.3d at 846. Although acknowledging that “without tolling, individual class members would
have to file suit in order to protect their claims from becoming time-barred,” the panel ultimately
found that “continuing to toll the limitations period beyond the dismissal of a noncertified class
claim Would encroach more severely on the interests underlying statutes of limitations, the purpose
of which is ‘to protect defendants against stale or unduly delayed claims.”’ Ia’. (quoting Credit
Snisse Secs. (USA) LLC v. Siinrnonds, 566 U.S. 2..1, 227 (2012).

Tlie Court agrees, especially here. Mr. Angel’s claims are primarily against defendants not
party to the consolidated case-the directors of the Companies. Furthermore, he asserts that two
of the three causes of action from his complaint are markedly different from those found in the
consolidated case. Pl.`s Proposed Surreply 3, ECF No. 21-1 (arguing that his breach of contract
claim “diverge[s] markedly in terms of defendants theories of liability. and the relief sought")',
Pl`s Opp. l5` ECF 17 (stat'ing that his claim for tortious interference was not asserted in the other
class actions). l\/lr. Angel can hardly claim to have been taking the “wait and see" approach
contemplated in Azncrican Pipe and Crown, Cork & Seal. Rather._ l\/ir. Angel’s argument for class
action tolling appears more like an attempt to play a get~out-ofpjail-fi'ee card allowing him to assert

his unique, five-year-old claims against mostly separate defendants

ll

When the Court adds the initial eleven months between the Third Amendment and the
filing of Lt`ao v. Lew, plus the over twenty-eight months between the Court’s dismissal and the
Circuit’s decision, Mr. Angel’s complaint falls outside of the three-year (thirty-six month) statute
of limitations for claims in Delaware. Thus, even if class action tolling applies, Mr. Angel’s claims

against Fannie l\/Iae and its directors must be dismissed

lV. CONCLUSION

Mr. Angel filed the present action over five~and-a-half years after the enactment of the
Third Amendment_the event on which he bases his claims for breach of contract and breach of
the implied covenant Because this is outside of the limitations periods under both Virginia and
Delaware law, l\/Ir. Angel’s claims are time~barred. The Court will GRANT defendants’ Motion

to Dismiss. A separate order will issue.

DATEZ g a // _
/ f c.. ;£,'.¢WCC
R yce C. Lamberth
United States District ludg€

12