Court Opinion

ID: 4464318
Source: CourtListenerOpinion
Date Created: 2019-12-13 21:02:03.800923+00
Date Added: 2024-06-11T15:02:49.030418
License: Public Domain

In the United States Court of Federal Claims
                                          No. 13-465C
                              (Filed Under Seal: December 6, 2019)
                         (Reissued for Publication: December 13, 2019)

*************************************
FAIRHOLME FUNDS, INC. et al.,       *
                                                      Motion to Dismiss; RCFC 12(b)(1); RCFC
                                    *
                                                      12(b)(6); Jurisdiction; Standing; Derivative
            Plaintiffs,             *
                                                      Claim; Direct Claims; Instrumentalities;
                                    *
                                                      Coercion; Agent; Collateral Estoppel; Issue
v.                                  *
                                                      Preclusion; Conservators; Conflict of
                                    *
                                                      Interest; Third-Party Beneficiaries; Stock;
THE UNITED STATES,                  *
                                                      Shareholders; Fannie; Freddie; FHFA
                                    *
            Defendant.              *
*************************************

Charles J. Cooper, Washington, DC, for plaintiffs.

Kenneth M. Dintzer, United States Department of Justice, Washington, DC, for defendant.

                                    OPINION AND ORDER

SWEENEY, Chief Judge

        Plaintiffs in this case challenge the actions of the United States during the
conservatorships of the Federal National Mortgage Association (“Fannie”) and the Federal Home
Loan Mortgage Corporation (“Freddie”). Specifically, plaintiffs take issue with the conservator
for Fannie and Freddie (collectively, the “Enterprises”) amending a funding agreement between
the Enterprises and the United States Department of the Treasury (“Treasury”). Based on the
revisions to that agreement, plaintiffs seek the return of money illegally exacted, damages for
breach of contract and breach of fiduciary duty, and compensation for a taking pursuant to the
Fifth Amendment to the United States Constitution (“Constitution”). Defendant moves to
dismiss plaintiffs’ complaint, arguing that the court lacks subject-matter jurisdiction over
plaintiffs’ claims, plaintiffs lack standing to pursue certain claims, and plaintiffs fail to state a
claim upon which relief may be granted. For the reasons stated below, the court grants in part
and denies in part defendant’s motion to dismiss.

          The court initially issued this Opinion and Order under seal with instructions for the
parties to propose any redactions. The parties informed the court that no redactions were
necessary to the Opinion and Order.
                                      I. BACKGROUND

  A. The Enterprises are private companies that are under the control of a conservator.

           1. The Enterprises operated independently before the financial crisis.

        Congress created the Enterprises to help the housing market; the Enterprises purchase and
guarantee mortgages originated by private banks before bundling those mortgages into securities
that are sold to investors. 2d Am. Compl. ¶ 36. Congress chartered Fannie in 1938 and
established Freddie in 1980. Id. ¶ 37. Both Enterprises were initially part of the federal
government before Congress reorganized them into for-profit companies owned by private
shareholders. Id. Freddie is organized under Virginia law, and Fannie is organized under
Delaware law. Id. ¶¶ 33-34. The Enterprises, consistent with the applicable state laws, issued
their own common and preferred stock. Id. ¶ 38. Common shareholders obtained the right to
receive dividends, collect any residual value, and vote on various corporate matters. Id. ¶ 42.
Those owning preferred stock acquired the right to receive dividends and a liquidation
preference. Id. ¶ 41.

        The Enterprises, up until the financial crisis in the late 2000s, were consistently
profitable; Fannie had not reported a full-year loss since 1985, and Freddie had not reported such
a loss since becoming privately owned. Id. ¶ 43. Although the Enterprises recorded losses in
2007 and the first two quarters of 2008, the Enterprises continued to generate sufficient cash to
pay their debts and retained sufficient capital to operate. Id. ¶ 44. Otherwise stated, the
Enterprises were not in financial distress or otherwise at risk of insolvency. Id. ¶¶ 45, 64.

 2. Congress created the Federal Housing Finance Agency to regulate the Enterprises and
          authorized the agency to serve as a conservator for each Enterprise.

        In the midst of the financial crisis during the summer of 2008, Congress enacted the
Housing and Economic Recovery Act of 2008 (“HERA”), Pub. L. No. 110-289, 122 Stat. 2654
(codified as amended in scattered sections of 12 U.S.C.). In that statute, Congress created the
Federal Housing Finance Agency (“FHFA”) and provided it with supervisory and regulatory
authority over the Enterprises. See 12 U.S.C. § 4511(a)-(b) (2018).1 Congress further
authorized the FHFA Director to, in limited circumstances, appoint the FHFA as the conservator
(“FHFA-C”) for each Enterprise to reorganize, rehabilitate, or wind up its affairs.2 Id.
§ 4617(a)(2). Specifically, the Director is authorized to appoint a conservator if, among other
things, an Enterprise consents, is undercapitalized, or lacks sufficient assets to pay its

       1
        Congress has not amended the relevant portions of HERA since enacting the law in
2008. The court, therefore, refers to the most recent version of the United States Code.
       2
         To avoid any ambiguity, the court reiterates that it is using “FHFA” to refer to the
agency acting in its regulatory role and “FHFA-C” when discussing the agency acting as a
conservator.

                                                -2-
obligations. Id. § 4617(a)(3).3 The conservator, once appointed, functions independently; it is
not “subject to the direction or supervision of any other agency of the United States or any State
in the exercise of [its] rights, powers, and privileges . . . .” Id. § 4617(a)(7).

         Congress also delineated the scope of the FHFA-C’s powers in HERA. See generally id.
§ 4617. As soon as it is appointed, the FHFA-C “immediately succeed[s] to . . . all rights, titles,
powers, and privileges of the [Enterprise], and of any stockholder, officer, or director of such
[Enterprise] with respect to the [Enterprise] and the assets of the [Enterprise] . . . .” Id.
§ 4617(b)(2)(A). Congress also conferred the conservator with the power to “[o]perate the
[Enterprise].” Id. § 4617(b)(2)(B). Pursuant to that power, the conservator “may,” among other
things, “perform all functions of the [Enterprise],” “preserve and conserve the assets and
property of the [Enterprise],” and “provide by contract for assistance in fulfilling any
function . . . of the [conservator].” Id. The conservator “may” also “take such action as may be
. . . necessary to put the [Enterprise] in a sound and solvent condition; . . . and appropriate to
carry on the business of the [Enterprise] and preserve and conserve the assets and property of the
[Enterprise].” Id. § 4617(b)(2)(D). Rounding out the panoply of powers, Congress also
provided that the conservator “may . . . exercise . . . such incidental powers as shall be necessary
to carry out [its enumerated powers]” and “take any action authorized by [12 U.S.C. § 4617(b)],
which [it] determines is in the best interest of the [Enterprise] or the [FHFA].” Id.
§ 4617(b)(2)(J). By describing the FHFA-C’s role primarily in terms of what powers it “may”
exercise, see generally id. § 4617, Congress provided the FHFA-C with significant discretion on
when or how it uses its powers, see United States v. Rodgers, 461 U.S. 677, 706 (1983) (“The
word ‘may,’ when used in a statute, usually implies some degree of discretion.”). Simply stated,
the FHFA has “extraordinarily broad flexibility to carry out its role as conservator.” Perry
Capital LLC v. Mnuchin, 864 F.3d 591, 606 (D.C. Cir. 2017) (“Perry II”), cert. denied, 138 S.
Ct. 978 (2018).

     3. Congress authorized Treasury to purchase securities issued by the Enterprises.

        At the same time that it established the FHFA, Congress authorized the Treasury
Secretary to buy securities issued by the Enterprises in limited circumstances. 12 U.S.C.
§§ 1455(l) (Freddie), 1719(g) (Fannie). Congress included a sunset clause on this power; the
Secretary could not purchase securities after December 31, 2009. Id. §§ 1455(l)(4), 1719(g)(4).
Until that date, the Secretary was permitted to purchase the securities if he determined that doing
so was necessary to provide stability to the financial markets, prevent disruptions in the
availability of mortgage finance, and protect taxpayers. Id. §§ 1455(l)(1)(B), 1719(g)(1)(B). As
part of his obligation to protect taxpayers, the Secretary could only purchase securities after
considering:

       (i) The need for preferences or priorities regarding payments to the Government.

       (ii) Limits on maturity or disposition of obligations or securities to be purchased.

       3
        Congress enticed the Enterprises to consent to a conservatorship by insulating their
board members from any liability to shareholders or creditors for agreeing in good faith to the
FHFA’s appointment of a conservator. 12 U.S.C. § 4617(a)(6).

                                                -3-
       (iii) The [Enterprise’s] plan for the orderly resumption of private market funding
       or capital market access.

       (iv) The probability of the [Enterprise] fulfilling the terms of any such obligation
       or other security, including repayment.

       (v) The need to maintain the [Enterprise’s] status as a private shareholder-owned
       company.

       (vi) Restrictions on the use of [Enterprise] resources, including limitations on the
       payment of dividends and executive compensation and any such other terms and
       conditions as appropriate for those purposes.

Id. §§ 1455(l)(1)(C), 1719(g)(1)(C).

                 4. The FHFA became the conservator for each Enterprise.

        After Congress enacted HERA, Treasury “urg[ed]” the FHFA to place each Enterprise
into conservatorship. 2d Am. Compl. ¶ 4. The FHFA and Treasury subsequently sought to
persuade each Enterprise’s board of directors to consent to conservatorship. Id. ¶ 64. The FHFA
and Treasury told each Enterprise’s board that the FHFA would seize the Enterprises if the board
did not consent to the conservatorship. Id. Around the same time, the FHFA made an offer to
each board: consent to a conservatorship in exchange for the FHFA-C aiming to preserve and
conserve the Enterprises’ assets, attempting to restore the Enterprises to sound and solvent
condition, and terminating the conservatorships when those goals were achieved. Id. ¶ 260.
Each Enterprise’s board accepted that offer and consented to a conservatorship on September 6,
2008, with an understanding that the FHFA-C would operate in the aforementioned limited
ways. Id. ¶¶ 64, 67; see also id. ¶¶ 259-63 (discussing the purported offer and acceptance). The
FHFA, soon thereafter, issued statements echoing each board’s understanding. Id. ¶¶ 66, 261.

         The conservatorships became effective on September 6, 2008, upon each Enterprise’s
board’s consent. See id. ¶¶ 64 (discussing the timing of the Enterprises’ consent), 259 (alleging
that, prior to becoming conservator, the FHFA had not made any of the findings under 12 U.S.C.
§ 4617(a)(3) that would permit conservatorships without the Enterprises’ consent); see also 12
U.S.C. § 4617(a)(3)(I) (permitting the FHFA Director to appoint a conservator when “[t]he
[Enterprise], by resolution of its board of directors or its shareholders or members, consents to
the appointment”).

     5. The FHFA-C contracted with Treasury to obtain funding for the Enterprises.

      On September 7, 2008, the FHFA-C entered into a Preferred Stock Purchase Agreement
(“PSPA”) with Treasury for each Enterprise. 2d Am. Compl. ¶ 68. Treasury entered into the
agreements pursuant to its authority under HERA to buy the Enterprises’ securities. Id. ¶ 69.
The PSPA for each Enterprise is materially identical. Id. ¶ 72. Under the PSPAs, Treasury
committed to provide up to $100 billion to each Enterprise to ensure that the Enterprises

                                                -4-
maintained a positive net worth. Id. If an Enterprise’s liabilities exceeded its assets, then the
Enterprise could draw on Treasury’s funding commitment in an amount equal to the difference
between the Enterprise’s liabilities and assets. Id.

        In return for Treasury’s funding commitment, the Enterprises surrendered stock,
dividends, commitment fees, and control. First, with respect to the stock, Treasury acquired one-
million shares of preferred stock in each Enterprise and warrants to purchase 79.9% of their
respective common stock at a nominal price. Id. ¶ 73. Treasury’s preferred stock had an initial
liquidation preference of $1 billion, but the amount increased dollar-for-dollar when an
Enterprise drew on Treasury’s funding commitment. Id. ¶ 74. In the event of a liquidation,
Treasury was entitled to recover the full liquidation value of its shares before any other
shareholder would receive compensation. Id. Second, Treasury bargained for the right to a
quarterly cash dividend equal to 10% of its liquidation preference. Id. ¶ 76. An Enterprise that
decided against paying a cash dividend in a specific quarter could make an in-kind payment: the
value of the dividend would be added to the liquidation preference, and the dividend rate would
increase to 12%. Id. Those in-kind payments, however, did not count as a draw from Treasury’s
funding commitment. Id. ¶ 80. Third, Treasury received the right to a quarterly commitment fee
from each Enterprise, but Treasury could waive the fee each year. Id. ¶ 81. If Treasury did not
waive the fee, the Enterprise could elect to pay the amount in cash or make an in-kind payment
by increasing the liquidation preference. Id. Fourth, Treasury obtained de facto control over
various aspects of each Enterprise; the Enterprises needed to obtain Treasury’s consent before
awarding dividends, issuing stock, transferring assets, incurring certain types of debt, and
making certain organizational changes. Id. ¶ 82.

       The FHFA-C and Treasury amended each Enterprise’s PSPA on May 6, 2009, to increase
Treasury’s funding commitment to each Enterprise from $100 billion to $200 billion. Id. ¶ 84.
On December 24, 2009, the FHFA-C and Treasury executed another amendment to the PSPAs;
they abolished the specific dollar cap and replaced it with a formula to allow Treasury’s total
commitment to each Enterprise to exceed $200 billion. Id.

            6. The Enterprises’ finances improved during their conservatorships.

        In the early stages of the conservatorships, each Enterprise’s net worth decreased as it
reported losses. The bulk of the losses resulted from the FHFA-C writing down the value of
deferred tax assets and designating large loan loss reserves.4 Id. ¶ 85. Notwithstanding those on-
paper losses, the Enterprises’ cash receipts consistently exceeded their expenses; they maintained
net operating revenue in excess of their net operating expenses from the onset of the
conservatorships under the PSPAs and through the first two amendments to the agreements. Id.
¶ 91.

       4
           A loan loss reserve is an entry on a company’s balance sheet that reduces its net worth
to reflect anticipated losses on mortgages that it owns. 2d Am. Compl. ¶ 87. A deferred tax
asset is an asset that may be used to offset future tax liability. Id. ¶ 86. A company must write
down the value of that deferred asset if it is unlikely to be used to offset future taxable profits.
Id. This write down occurs, for example, if a company predicts it will not be profitable in the
future. Id.

                                                 -5-
        By 2012, the Enterprises’ financial outlooks were promising. In addition to an
improvement in the housing market, the Enterprises began generating consistent profits and
anticipated losing less money on their newer mortgages. Id. ¶¶ 92, 94-95. They were positioned
to further improve their financial condition by settling lawsuits brought by each Enterprise, id.
¶ 109, and revising their valuations of (1) deferred tax assets because of growing profits and
(2) loan loss reserves because losses were less than expected, id. ¶¶ 98-99. The FHFA-C and
Treasury were aware of those forthcoming changes and the Enterprises’ improving outlooks. Id.
¶¶ 94-104. In August 2012, Treasury noted that the Enterprises would post “[r]ecord earnings,”
id. ¶ 98 (alteration in original) (quoting Treasury document), and Treasury received projections
reflecting that the Enterprises would have positive comprehensive income between 2012 and
2022, id. ¶ 101. The FHFA-C had similar information; in July 2012, it circulated, within the
FHFA, comparable projections and meeting minutes in which Fannie’s treasurer was reported as
stating that that the next eight years were likely to be “the golden years of [the Enterprises’]
earnings.” Id. ¶ 103 (quoting the minutes). Otherwise stated, the FHFA-C and Treasury knew,
by early August 2012, that the Enterprises were poised to generate profits in excess of their
respective dividend obligations to Treasury. Id. ¶ 97.

           7. Treasury and the FHFA-C agreed to a third amendment to the PSPAs.

         At an unspecified time prior to August 2012, the Treasury and the FHFA-C began
considering a third amendment to each PSPA. Treasury was the driving force behind the
initiative to amend the PSPAs’ terms. Id. ¶ 147. Indeed, an FHFA official reported in early
August 2012 that Treasury was making a “renewed push” to implement a new amendment. Id.
¶ 146 (quoting the FHFA official). The FHFA-C learned of the proposed changes before the
Enterprises; Treasury informed the Enterprises that the new terms were forthcoming and
announced the changes to the Enterprises at a subsequent meeting. Id. ¶ 147. Treasury officials
who were involved with the process do not recall Treasury making any backup or contingency
plans in the event that the FHFA-C rejected the proposed terms. Id. The FHFA-C accepted the
changes without advocating for different terms. Id.

        Treasury and the FHFA-C decided to announce the changed terms in mid-August 2012
because, according to Treasury, the Enterprises would be reporting earnings exceeding their
dividend obligation at the beginning of that month. Id. ¶ 133. On August 17, 2012, Treasury
and the FHFA-C executed the third amendment to each PSPA (“PSPA Amendment”). Id. ¶ 112.
A key component of the amended PSPAs is the requirement—referred to as the “Net Worth
Sweep”—that each Enterprise pay Treasury a quarterly dividend equal to 100% of each
Enterprise’s net worth (except for a small capital reserve amount) rather than a dividend based
on a set percentage of the liquidation preference.5 Id. ¶ 113. Additionally, under the amended
PSPAs, the Enterprises are not obligated to pay a periodic commitment fee. Id. ¶ 115.

       5
          The capital reserve for each Enterprise started at $3 billion and was set to decrease to
$0 by January 2018, but the Enterprises and Treasury agreed in December 2017 to reset the
capital reserve amount to $3 billion in the first quarter of 2018. 2d Am. Compl. ¶ 105.

                                                -6-
             a. Treasury wanted to ensure that it benefited from the new terms.

        With the PSPAs, Treasury sought to secure a more beneficial arrangement for itself, as a
representative for taxpayers. During the lead-up to the PSPA Amendments, a Treasury official
acknowledged in a December 2010 memorandum to the Treasury Secretary that the government
was “committ[ed] to ensur[ing] existing common equity holders will not have access to any
positive earnings from the [Enterprises] in the future.” Id. ¶ 118 (quoting the memorandum). In
another Treasury document, an official noted that the amended PSPAs would put the taxpayer
“in a better position” because, rather than having “Treasury’s upside . . . capped at the 10%
dividend, now the taxpayer will be the beneficiary of any future earnings produced by the
[Enterprises].” Id. ¶ 130 (quoting the document); accord id. ¶ 133 (quoting a Treasury official as
stating that the Net Worth Sweep would place the taxpayers “in a better position”). Treasury
recognized its goal of obtaining all of the Enterprises’ profits by executing the PSPA
Amendments; when the changes were announced, it noted that “every dollar of earnings that [the
Enterprises] generate will be used to benefit taxpayers.” Id. ¶ 118 (quoting a Treasury press
release).

                  b. The FHFA-C agreed to changes that benefit Treasury.

         For its part, the FHFA-C was operating under the belief that Treasury would benefit from
the PSPA Amendments. An internal Treasury communication indicates that Treasury anticipated
that its receipts under the PSPA Amendments would “‘exceed the amount that would have been
paid if the 10% [dividend] was still in effect’ and that the changes would lead to ‘a better
outcome’ for Treasury.” Id. ¶ 130 (quoting the communication). Moreover, Mel Watts—a
former FHFA Director—confirmed that he was concerned with how decisions affect the
taxpayers. Id. ¶ 119. During an interview conducted while he was Director, he stated that he
does not “‘lay awake at night worrying what’s fair to the shareholders’ but rather focuses on
‘what is responsible for the taxpayers.’” Id. (quoting the interview).

c. Treasury and the FHFA understood that the PSPA Amendments would not facilitate the
                         Enterprises exiting conservatorship.

        Treasury was aware that the new terms of the PSPAs were not conducive to the
Enterprises exiting conservatorship. When announcing the PSPA Amendments, Treasury openly
acknowledged that the new terms would “expedite the wind down of Fannie Mae and Freddie
Mac.” Id. ¶ 134 (quoting a Treasury press release). Treasury further explained that the new deal
would ensure that the Enterprises “will be wound down and will not be allowed to retain profits,
rebuild capital, and return to the market in their prior form.” Id.; accord id. ¶ 114 (explaining
that Treasury noted that, “[b]y taking all of their profits going forward, we are making clear that
[the Enterprises] will not ever be allowed to return to profitable entities”). Indeed, a White
House official sent a message to a Treasury official on the day the deal was announced noting
that “we’ve closed off [the] possibility that [the Enterprises] ever[] go (pretend) private again.”
Id. ¶ 138 (alterations in original) (quoting the message); accord id. (noting in a separate message
that a quotation “in Bloomberg” was “exactly right on substance and intent” when describing the
deal as depriving the Enterprises of the capital they needed to go private).

                                                -7-
        The FHFA shared a similar sentiment. The FHFA’s former Acting Director, Edward
DeMarco, testified before the United States Senate that the PSPA Amendments “reinforce the
notion that the [Enterprises] will not be building capital as a potential step to regaining their
former corporate status.” Id. ¶ 135 (quoting the testimony). He also stated that he had no
intention of returning the Enterprises to private control under their existing charters, while
another FHFA official testified that the agency’s objective “was not for Fannie and Freddie . . .
to emerge from conservatorship.” Id. ¶ 136 (quoting the testimony). Indeed, the FHFA
explained in its 2012 report to Congress that the agency had begun “prioritizing [its] actions to
move the housing industry to a new state, one without Fannie and Freddie . . . .” Id. ¶ 135
(quoting the report). Consistent with those actions, the FHFA acknowledged that it would
continue to serve as conservator until “Congress determines the future of Fannie Mae and
Freddie Mac and the housing finance market.” Id. ¶ 136 (quoting an FHFA statement).

 d. Treasury has benefited from the PSPA Amendments at the expense of the Enterprises
                                and other shareholders.

        There are four significant effects that flowed from the PSPA Amendments. First,
plaintiffs lost their economic interests in the Enterprises because, under the new terms, private
shareholders can never receive dividends or liquidation distributions. Id. ¶ 117; see also id.
(alleging that, in the event of liquidation, private shareholders will receive nothing because an
Enterprise will never have enough money to pay Treasury’s dividend and liquidation
preferences). Second, Treasury acquired plaintiffs’ economic interests in the Enterprises because
Treasury now “has the right to all residual profits, and it hence owns all the equity.” Id. ¶ 120.
Third, Treasury reaped a windfall of $124 billion in comparison to what it would have received
absent changes to the PSPAs. Id. ¶ 123; see id. ¶¶ 122-23 (alleging that the Enterprises paid
Treasury $223.7 billion under the PSPA Amendments but would have only paid Treasury $95.5
billion under the previous terms). Fourth, the Enterprises can never be rehabilitated to a sound
and solvent condition because, by transferring their profits to Treasury, they will perpetually
operate on the brink of insolvency. Id. ¶ 125.

           8. Treasury and the FHFA are committed to ending the conservatorships.

        On March 27, 2019, President Donald J. Trump issued a memorandum in which he
directed the Treasury Secretary to develop, “as soon as practicable,” a plan for “[e]nding the
conservatorships of the [Enterprises] upon the completion of specified reforms . . . .”6

       6
          The court takes judicial notice of the presidential memorandum because it is a
government record published in a reliable source, the Federal Register. See Murakami v. United
States, 46 Fed. Cl. 731, 739 (2000) (noting that the court may take judicial notice of government
documents), aff’d, 398 F.3d 1342, 1354-55 (Fed. Cir. 2005); see also Democracy Forward
Found. v. White House Office of Am. Innovation, 356 F. Supp. 3d 61, 62 n.2 (D.D.C. 2019)
(“[J]udicial notice may be taken of government documents available from reliable sources, such
as this 2017 Presidential Memorandum.”). See generally Fed. R. Evid. 201 (discussing judicial
notice). Although a motion to dismiss is normally limited to the allegations in a complaint, the
court may consider facts derived from sources subject to judicial notice without converting the
                                                -8-
Memorandum on Federal Housing Finance Reform, 84 Fed. Reg. 12,479, 12,479 (Mar. 27,
2019). The President explained that the plan must include proposals for “[s]etting the conditions
necessary for the termination of the conservatorships” and outlined some of those conditions. Id.
at 12,480. Subsequently, Treasury issued a plan in which it advocated for “begin[ning] the
process of ending the [Enterprises’] conservatorships.”7 U.S. Dep’t of the Treasury, Housing
Reform Plan Pursuant to the Presidential Memorandum Issued March 27, 2019, at 3 (2019),
https://home.treasury.gov/system/files/136/Treasury-Housing-Finance-Reform-Plan.pdf
[https://perma.cc/RGH8-N385]; accord id. at 26 (“It is, after 11 years, time to bring the
conservatorships to an end.”). As part of the plan to end the conservatorships, Treasury proposed
that it and the FHFA consider revising the Net Worth Sweep to allow the Enterprises to retain
more of their earnings. Id. at 26-27.

        The FHFA shares Treasury’s goals with respect to the conservatorships. Mark Calabria,
the current FHFA Director, testified during his confirmation hearing that he wanted to end the
conservatorships.8 165 Cong. Rec. S2246 (daily ed. Apr. 4, 2019) (statement of Sen. Crapo)
(summarizing testimony). See generally Nominations of Bimal Patel, Todd M. Harper, Rodney
Hood, and Mark Anthony Calabria: Hearing Before the S. Comm. on Banking, Hous., and
Urban Affairs, 116th Cong. 10-40, 74-75, 148-85 (2019) [hereinafter Calabria Testimony]
(documenting Mr. Calabria’s testimony, statement, and responses to written questions during and
after his confirmation hearing). He also stated that, as FHFA Director, he would seek to increase
the amount of capital that each Enterprise retains. Calabria Testimony, supra, at 150; see also id.
at 25 (“I support the idea of having significantly more capital at the [Enterprises].”).

                    B. Plaintiffs own or owned Fannie and Freddie stock.

        There are three categories of plaintiffs in this case. The first category consists of Andrew
Barrett, an individual who has continually owned common stock of both Fannie and Freddie
since September 2008. 2d Am. Compl. ¶ 31. The second category consists of Fairholme Funds,
Inc.—on behalf of its series, The Fairholme Fund—and The Fairholme Fund, a series of
Fairholme Funds, Inc., which owns preferred stock in both Enterprises. Id. ¶ 19. The third
category consists of W.R. Berkley Corporation (“Berkley”) and ten other plaintiffs that Berkley
directly or indirectly owns: Acadia Insurance Company, Admiral Indemnity Company, Admiral
Insurance Company, Berkley Insurance Company, Berkley Regional Insurance Company,
Carolina Casualty Insurance Company, Continental Western Insurance Company, Midwest
Employers Casualty Insurance Company, Nautilus Insurance Company, and Preferred
Employers Insurance Company (collectively, with Berkley, “Berkley Companies”). Id. ¶ 20.
One of the Berkley Companies, Berkley Insurance Company, has owned preferred stock in

motion into one for summary judgment. Sebastian v. United States, 185 F.3d 1368, 1374 (Fed.
Cir. 1999).
       7
         The court takes judicial notice of Treasury’s reform plan because it is a government
record available from a reliable source, Treasury’s website. See supra note 6.
       8
         The court takes judicial notice of the relevant testimony because the statements are
recorded in government documents. See supra note 6.

                                                -9-
Fannie since 2005 and Freddie since 2009. Id. ¶ 40. The other Berkley Companies acquired
preferred stock in both Enterprises before and after August 2012, and many of those shares were
later transferred to Berkley Insurance Company.9 Id.

                                II. PROCEDURAL HISTORY

       Plaintiffs filed their complaint on July 9, 2013.10 Defendant moved to dismiss the
complaint on December 9, 2013. Eleven days later, plaintiffs moved to stay briefing on
defendant’s motion and requested permission to conduct fact discovery for the purpose of
responding to defendant’s motion. On February 26, 2014, the court granted plaintiffs’ motion,
and the parties spent the next four years engaged in discovery.

        While discovery was ongoing, Michael Sammons filed a motion to intervene in this case.
In his motion, Mr. Sammons alleged that he owned Fannie and Freddie preferred stock and
sought to intervene for the limited purpose of challenging this court’s jurisdiction. He argued
that only a court established under Article III of the Constitution can hear Fifth Amendment
takings claims and therefore, the United States Court of Federal Claims (“Court of Federal
Claims”), as a court established under Article I of the Constitution, is constitutionally barred
from entertaining the takings claims at issue in this case. Mr. Sammons further argued that the
principle of sovereign immunity does not apply to claims asserted under the Takings Clause of
the Fifth Amendment. The court denied Mr. Sammons’s motion, and he appealed to the United
States Court of Appeals for the Federal Circuit (“Federal Circuit”). On appeal, the Federal
Circuit affirmed the denial of Mr. Sammons’s motion to intervene based on his failure to satisfy
the requirements of Rule 24(a) of the Rules of the United States Court of Federal Claims
(“RCFC”). See Fairholme Funds, Inc. v. United States, 681 F. App’x 945, 948-49 (Fed. Cir.
2017) (per curiam). The Federal Circuit, however, did not address Mr. Sammons’s argument
that the Court of Federal Claims, as an Article I court, is precluded from adjudicating claims
arising under the Takings Clause. See id. at 949. Rather, it directed this court to address the
argument. See id. at 949-50 (“That argument, to the extent it is a jurisdictional one, must be
addressed by the Court of Federal Claims . . . even if Mr. Sammons is not a party and even if no
party makes the argument he makes.”).

        Following the Federal Circuit’s decision and the completion of discovery related to
defendant’s motion to dismiss, plaintiffs filed an amended complaint on March 3, 2018, and a
second amended complaint on August 3, 2018. In their most recent complaint, plaintiffs plead
twelve claims: four direct claims in their individual capacities and eight derivative claims on
behalf of the Enterprises. With respect to the direct claims, which are brought by all plaintiffs,
plaintiffs first assert that the Net Worth Sweep constitutes a Fifth Amendment taking (count I) of
their economic interests in their stock. Plaintiffs next assert that the Net Worth Sweep

       9
         With the exception of Berkley Insurance Company, it is unclear whether each (or just
some) of the Berkley Companies owned stock in the Enterprises before August 2012. See 2d
Am. Compl. ¶ 40.
       10
         At that time, Mr. Barrett was not a plaintiff. He was added as a plaintiff in the first
amended complaint, which was filed on March 3, 2018.

                                               -10-
constitutes an illegal exaction (count IV) of those same economic interests because the (1) FHFA
was operating unconstitutionally and (2) FHFA-C and Treasury exceeded their statutory and
regulatory authority when they approved the PSPA Amendments. Plaintiffs also plead a breach-
of-fiduciary-duty claim (“fiduciary duty claim”) (count VII) premised on the Net Worth Sweep
being unfair; constituting waste, self dealing, gross overreach, and gross abuse of discretion; and
failing to further a valid business purpose or reflect a good faith business judgment.
Additionally, plaintiffs assert a breach-of-implied-contract claim (count X) based on a purported
agreement by which the Enterprises consented to the conservatorship in exchange for the FHFA
agreeing to preserve the Enterprises’ assets with the goal of making them safe and solvent.
Specifically, plaintiffs assert that each dividend payment under the Net Worth Sweep constitutes
a breach because it depletes the Enterprises’ assets in a manner that undermines the goals of
conservatorship. Finally, Mr. Barrett asserts substantively the same claims as derivative claims
on behalf Fannie (counts II, V, VIII, XI) and Freddie (counts III, VI, IX, XII).

         On October 1, 2018, defendant moved to dismiss—in a single, omnibus motion—the
claims in this case and eleven related cases before the undersigned.11 The plaintiffs in each of
the twelve cases filed a response brief on their respective dockets; some of the plaintiffs relied on
a joint brief, while others filed a joint brief and a supplemental response brief. Defendant filed
its omnibus reply brief in each of the cases on May 6, 2019. At the court’s request, defendant
filed a statement in which it identified which claims were the subject of each argument in its
motion to dismiss (“notice of arguments”). The parties have fully briefed defendant’s motion,
and the court held a single oral argument on November 19, 2019, involving the plaintiffs from
each of the twelve cases that defendant moved to dismiss. The plaintiffs in those cases
collaborated during argument; each plaintiff argued some of the issues. Thus, the court infers
that the plaintiffs in this case have adopted the favorable arguments made by the plaintiffs in the
related cases to the extent that such arguments are relevant.12 Defendant’s motion to dismiss is
now ripe for adjudication.

                                 III. STANDARD OF REVIEW

        In ruling on a motion to dismiss a complaint pursuant to RCFC 12(b)(1) and RCFC
12(b)(6), the court generally assumes that the allegations in the complaint are true and construes
those allegations in the plaintiff’s favor. Trusted Integration, Inc. v. United States, 659 F.3d
11
          The eleven related cases are Washington Federal v. United States, No. 13-385C;
Cacciapalle v. United States, No. 13-466C; Fisher v. United States, No. 13-608C; Arrowood
Indemnity Company v. United States, No. 13-698C; Reid v. United States, No. 14-152C; Rafter
v. United States, No. 14-740C; Owl Creek Asia I, L.P. v. United States, No. 18-281C; Akanthos
Opportunity Master Fund, L.P. v. United States, No. 18-369C; Appaloosa Investment Limited
Partnership I v. United States, No. 18-370C; CSS, LLC v. United States, No. 18-371C; and
Mason Capital L.P. v. United States, No. 18-529C.
       12
           Given that the plaintiffs in this case are arguing that they alleged both direct and
derivative claims, the court does not infer that they adopted the Reid and Fisher plaintiffs’
argument that “the shareholder claims asserted in connection with the [PSPA Amendments] are
properly asserted as derivative claims.” Reid Supp’l Mem. in Opp’n to Def.’s Omnibus Mot. to
Dismiss 2; accord Fisher Supp’l Mem. in Opp’n to Def.’s Omnibus Mot. to Dismiss 2.
                                                -11-
1159, 1163 (Fed. Cir. 2011). With respect to RCFC 12(b)(1), the plaintiff bears the burden of
proving, by a preponderance of the evidence, that the court possesses subject-matter
jurisdiction. Id. The allegations in the complaint must include “the facts essential to show
jurisdiction.” McNutt v. Gen. Motors Acceptance Corp., 298 U.S. 178, 189 (1936). And, if such
jurisdictional facts are challenged in a motion to dismiss, the plaintiff “must support them by
competent proof.” Id.; accord Land v. Dollar, 330 U.S. 731, 735 & n.4 (1947) (“[W]hen a
question of the District Court’s jurisdiction is raised, . . . the court may inquire by affidavits or
otherwise, into the facts as they exist.” (citations omitted)). If the court finds that it lacks
subject-matter jurisdiction, it must, pursuant to RCFC 12(h)(3), dismiss the complaint.

        A claim that survives a jurisdictional challenge remains subject to dismissal under RCFC
12(b)(6) if it does not provide a basis for the court to grant relief. Lindsay v. United States, 295
F.3d 1252, 1257 (Fed. Cir. 2002) (“A motion to dismiss . . . for failure to state a claim upon
which relief can be granted is appropriate when the facts asserted by the claimant do not entitle
him to a legal remedy.”). To survive a motion to dismiss under RCFC 12(b)(6), a plaintiff must
include in the complaint “enough facts to state a claim to relief that is plausible on its face.” Bell
Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). Indeed, “[t]he issue is not whether a plaintiff
will ultimately prevail but whether the claimant is entitled to offer evidence to support the
claims.” Scheuer v. Rhodes, 416 U.S. 232, 236 (1974), overruled on other grounds by Harlow v.
Fitzgerald, 457 U.S. 800, 814-19 (1982).

                          IV. SUBJECT-MATTER JURISDICTION

        The court begins with jurisdiction because it is a “threshold matter.” Steel Co. v. Citizens
for a Better Env’t, 523 U.S. 83, 94-95 (1998). Subject-matter jurisdiction cannot be waived or
forfeited because it “involves a court’s power to hear a case.” Arbaugh v. Y & H Corp., 546
U.S. 500, 514 (2006) (quoting United States v. Cotton, 535 U.S. 625, 630 (2002)). “Without
jurisdiction the court cannot proceed at all in any cause. Jurisdiction is power to declare the law,
and when it ceases to exist, the only function remaining to the court is that of announcing the fact
and dismissing the cause.” Ex parte McCardle, 74 U.S. (7 Wall) 506, 514 (1868). Therefore, it
is “an inflexible matter that must be considered before proceeding to evaluate the merits of a
case.” Matthews v. United States, 72 Fed. Cl. 274, 278 (2006); accord K-Con Bldg. Sys., Inc. v.
United States, 778 F.3d 1000, 1004-05 (Fed. Cir. 2015). Either party, or the court sua sponte,
may challenge the court’s subject-matter jurisdiction at any time. Arbaugh, 546 U.S. at 506; see
also Jeun v. United States, 128 Fed. Cl. 203, 209-10 (2016) (collecting cases).

        The ability of the Court of Federal Claims to entertain suits against the United States is
limited. “The United States, as sovereign, is immune from suit save as it consents to be sued.”
United States v. Sherwood, 312 U.S. 584, 586 (1941). The waiver of immunity “may not be
inferred, but must be unequivocally expressed.” United States v. White Mountain Apache Tribe,
537 U.S. 465, 472 (2003). Any such waiver must be narrowly construed. Smith v. Orr, 855 F.2d
1544, 1552 (Fed. Cir. 1988). The Tucker Act, the principal statute governing the jurisdiction of
this court, waives sovereign immunity for claims against the United States, not sounding in tort,
that are founded upon the Constitution, a federal statute or regulation, or an express or implied
contract with the United States. 28 U.S.C. § 1491(a)(1) (2018); White Mountain, 537 U.S. at
472. However, the Tucker Act is merely a jurisdictional statute and “does not create any

                                                 -12-
substantive right enforceable against the United States for money damages.” United States v.
Testan, 424 U.S. 392, 298 (1976). Instead, the substantive right must appear in another source of
law, such as a “money-mandating constitutional provision, statute or regulation that has been
violated, or an express or implied contract with the United States.” Loveladies Harbor, Inc. v.
United States, 27 F.3d 1545, 1554 (Fed. Cir. 1994) (en banc).

        Defendant challenges the court’s jurisdiction to entertain plaintiffs’ claims on a number
of bases. Specifically, defendant argues that 28 U.S.C. § 1500 bars plaintiffs’ claims, plaintiffs
have not asserted claims against the United States, and that the court lacks jurisdiction over the
subject matter of certain claims. The court addresses each of these contentions and Mr.
Sammons’s argument that the court lacks jurisdiction over Fifth Amendment takings claims.

 A. Plaintiffs are not barred by 28 U.S.C. § 1500 from litigating their claims in this court.

       The court first addresses defendant’s argument that the court lacks jurisdiction to
consider plaintiffs’ claims because plaintiffs initiated lawsuits in other courts after filing their
complaint in this court. Specifically, defendant asserts that the claims are barred by 28 U.S.C.
§ 1500, which provides:

       The United States Court of Federal Claims shall not have jurisdiction of any claim
       for or in respect to which the plaintiff or his assignee has pending in any other
       court any suit or process against the United States or any person who, at the time
       when the cause of action alleged in such suit or process arose, was, in respect
       thereto, acting or professing to act, directly or indirectly under the authority of the
       United States.

Defendant acknowledges that, under binding precedent, § 1500 is not a bar in this case because
the limitation only applies “when the suit shall have been commenced in the other court before
the claim was filed in [the Court of Federal Claims].” Tecon Eng’rs, Inc. v. United States, 343
F.2d 943, 949 (Ct. Cl. 1965). Nonetheless, defendant asserts that the court should reinterpret
§ 1500 as creating a jurisdictional bar regardless of the timing of the filings. Plaintiffs counter
that the court cannot disregard the binding precedent.

        As defendant acknowledges, its argument is foreclosed by binding precedent: the
jurisdictional limitation in § 1500 does not apply in this case because plaintiffs filed their
complaint in this court before seeking redress in other jurisdictions. See Tecon, 343 F.2d at 949;
see also Res. Invs., Inc. v. United States, 785 F.3d 660, 670 (Fed. Cir. 2015) (noting that Tecon
remains good law in this circuit). Compare Compl. (filed July 9, 2013), with Compl., Fairholme
Funds, Inc. v. Fed. Hous. Fin. Agency, No. 13-1053 (D.D.C. July 10, 2013). Although defendant
urges the court to reconsider the rule set forth in Tecon, the court cannot do so because it is
bound by that precedent. See Coltec Indus., Inc. v. United States, 454 F.3d 1340, 1353 (Fed. Cir.
2006) (“There can be no question that the Court of Federal Claims is required to follow the
precedent of . . . our court, and our predecessor court, the Court of Claims.”). Plaintiffs’ claims,
therefore, are not barred by § 1500.

                                                 -13-
                 B. Plaintiffs have asserted claims against the United States.

        The court next considers whether plaintiffs have asserted claims against the United
States, a necessary element of jurisdiction in the Court of Federal Claims. As set forth in their
second amended complaint, plaintiffs’ Fifth Amendment takings, illegal exaction, and breach-of-
implied-contract claims are premised on actions taken by the FHFA-C and Treasury, while
plaintiffs’ fiduciary duty claims are premised on the FHFA-C’s actions. Defendant argues that
the court lacks jurisdiction to consider any claims premised on the FHFA-C’s or Treasury’s
conduct. In response, plaintiffs contend that they have asserted claims against the government
because (1) Treasury was involved in the challenged conduct, (2) the FHFA-C exercised
nontraditional conservator powers such that its actions must be deemed those of the government,
(3) the FHFA-C was the government’s agent, (4) the FHFA-C was coerced by the government,
and (5) the FHFA-C is a government actor. The court addresses each contention in turn.

 1. The court cannot exercise jurisdiction based on allegations of Treasury’s involvement.

        Plaintiffs initially argue that the court has jurisdiction over their Fifth Amendment
takings and illegal-exaction claims because they have alleged the involvement of Treasury—
indisputably a part of the federal government—in the action underlying these claims, i.e., the Net
Worth Sweep. Defendant counters that Treasury alone could not have implemented the PSPA
Amendments, and Treasury’s role as a counterparty to the voluntary agreement with the
Enterprises is not sufficient to establish jurisdiction over plaintiffs’ takings claims. Defendant
further asserts that the court’s order allowing jurisdictional discovery reflects that plaintiffs’
allegations concerning Treasury alone are insufficient to confer jurisdiction.

         The parties’ dispute on the import of allegations concerning Treasury is ultimately
immaterial in light of the court’s determination, explained below, that the FHFA-C—the other
party involved in the PSPA Amendments—is the United States. Nonetheless, the court notes, as
defendant asserts, that it implicitly acknowledged in its February 26, 2014 discovery order that
the allegations concerning Treasury alone were insufficient to support jurisdiction. In that order,
the court permitted plaintiffs to conduct fact discovery on whether the FHFA-C was “the ‘United
States’ for purposes of the Tucker Act.” Fairholme Funds, Inc. v. United States, 114 Fed. Cl.
718, 721 (2014). The aforementioned discovery would have been unnecessary (and
unwarranted) if, as plaintiffs assert, the court has jurisdiction over plaintiffs’ claims based on
their allegations concerning Treasury.

2. The FHFA-C exercised its statutory conservatorship powers when it approved the PSPA
                           Amendments for each Enterprise.

        Plaintiffs next argue that the FHFA-C must be considered the United States because the
FHFA-C acted beyond its authority when it expropriated the Enterprises’ assets for the
government’s benefit. Defendant counters that, irrespective of the “expropriation” label assigned
by plaintiffs, the FHFA-C’s execution of the PSPA Amendments was consistent with its
statutory authority and purpose.

                                               -14-
        The FHFA-C is the United States for any claims challenging the conservator’s conduct
that exceeded the applicable statutory authority. Cf. Slattery v. United States, 583 F.3d 800,
827-28 (Fed. Cir. 2009) (noting that the Federal Deposit Insurance Company (“FDIC”) as
receiver is the United States for claims premised on allegations that the receiver failed to
distribute funds as required by statute). Thus, resolving the parties’ dispute requires determining
whether the FHFA-C had statutory authority to enter into the PSPA Amendments. The answer
depends on HERA. Under HERA, the FHFA-C has exceptionally broad powers. See Jacobs v.
Fed. Hous. Fin. Agency, 908 F.3d 884, 889 (3d Cir. 2018) (noting that the FHFA-C’s “powers
are many and mostly discretionary”); see also Saxton v. Fed. Hous. Fin. Agency, 901 F.3d 954,
960 (8th Cir. 2018) (Stras, J., concurring) (“Congress came close to handing a blank check to the
FHFA.”). The FHFA-C wields complete control over the Enterprises; it succeeds to the rights
and powers of the Enterprises as well as their shareholders, directors, and officers. 12 U.S.C.
§ 4617(b)(2)(A)(i). The FHFA-C may (but is not required to) use that power to, among other
things, further the FHFA’s interests, carry on the Enterprises’ business, preserve and conserve
the Enterprises’ assets, and place the Enterprises in sound and solvent condition.13 Id.
§ 4617(b)(2)(B), (D), (J) (noting actions that the FHFA-C “may” undertake); see also Roberts v.
Fed. Hous. Fin. Agency, 889 F.3d 397, 403 (7th Cir. 2018) (explaining that Congress’s use of
“may” reflects that the FHFA-C has discretionary authority).

        Congress’s broad grant of power to the FHFA-C colors the analysis of whether the
FHFA-C became the United States by approving the PSPA Amendments. As an initial matter,
plaintiffs’ contention that the FHFA-C exceeded its statutory authority by expropriating the
Enterprises’ assets for the government is unavailing because the FHFA-C is authorized to act in
its own interest without regard for the effects on the Enterprises. Moreover, the FHFA-C’s
approval of the PSPA Amendments is in accordance with its authority to operate the Enterprises
and preserve their assets. As operating businesses, the Enterprises needed to “secure ongoing
access to capital, manage debt loads, control cash flow, and decide whether and how to pay
dividends.” Jacobs, 908 F.3d at 890. The FHFA-C achieved those goals with the PSPA
Amendments, which are, “in essence[,] a renegotiation of an existing lending agreement.” Id.
By agreeing to the PSPA Amendments, the FHFA-C eliminated the risk of the Enterprises
consuming all of their financial lifeline (Treasury’s funding commitment) through cash-dividend
payments or entering a cycle of an ever-increasing liquidation preference.14 Roberts, 889 F.3d at

       13
            The conclusion that the FHFA-C has some discretionary powers is buttressed by the
fact that Congress stated the conservator “may” do certain things but “shall” do others. See
Huston v. United States, 956 F.2d 259, 262 (Fed. Cir. 1992) (“When, within the same statute,
Congress uses both ‘shall’ and ‘may,’ it is differentiating between mandatory and discretionary
tasks.”). Compare 12 U.S.C. § 4617(b)(2)(D) (“The [FHFA] may, as conservator, take such
action as may be . . . necessary to put the regulated entity in sound and solvent condition . . . .”
(emphasis added)), with id. § 4617(b)(14)(A) (“The [FHFA] as conservator or receiver shall
. . . maintain a full accounting of each conservatorship and receivership or other disposition of
a[n Enterprise] in default.” (emphasis added)).
       14
           If, under the terms of the PSPAs before the PSPA Amendments, the Enterprises chose
to make their dividend payment by increasing Treasury’s liquidation preference, the future
dividends would be more expensive because the dividends were a set percentage of the
liquidation preference. Making future dividends more expensive would, in turn, increase the
                                                 -15-
404-05; see also Jacobs, 908 F.3d at 890 (noting that the Enterprises increased their future
obligations and reduced their available funds by drawing funds from Treasury to pay the
dividend); Saxton, 901 F.3d at 962 (Callas, J., concurring) (“Crushing dividend payments could
have led the entities toward insolvency.”). The FHFA-C, with the amendments, also protected
the Enterprises against future financial downturns.15 See Jacobs, 908 F.3d at 890 (“The [PSPA
Amendments] insured the [Enterprises] against downturns and ‘death spirals,’ preventing
unpayable dividends from ratcheting up their debt loads to unsustainable levels.”); see also
Roberts, 889 F.3d at 405 (noting that the Enterprises fared better in some years and worse in
other years under the terms of the PSPA Amendments as compared to the previous agreements).

         In light of the above, the FHFA-C’s execution of the PSPA Amendment for each
Enterprise was a “quintessential conservatorship task[]” that is appropriate under HERA. Perry
II, 864 F.3d at 607. Although “stockholders no doubt disagree about the necessity and fiscal
wisdom of the [PSPA Amendments] . . . , Congress could not have been clearer about leaving
those hard operational calls to the FHFA’s managerial judgment.” Id. In sum, the court joins the
growing consensus that the FHFA-C acted within its statutory authority when it entered into the
PSPA Amendments. See Jacobs, 908 F.3d at 894; Saxton, 901 F.3d at 963; Roberts, 889 F.3d at
403; Robinson v. Fed. Hous. Fin. Agency, 876 F.3d 220, 231 (6th Cir. 2017); Perry II, 864 F.3d
at 606. But see Collins v. Mnuchin, 938 F.3d 553, 582 (5th Cir. 2019) (en banc) (holding, over
the dissent of seven judges, that the plaintiffs stated a plausible claim that the FHFA-C exceeded
its statutory authority). Thus, plaintiffs’ theory that the FHFA-C is the United States because the
FHFA-C exceeded its statutory authority is not persuasive.

            3. The FHFA-C was not coerced into approving the PSPA Amendments.

        Plaintiffs also argue that the FHFA-C is the United States because the FHFA-C was
coerced into approving the PSPA Amendments by Treasury. Plaintiffs assert that Treasury
coerced the FHFA-C into approving the PSPA Amendments because (1) Treasury drove the
amendment process, (2) Treasury did not plan for the possibility that the FHFA-C would reject
the amendments, and (3) the FHFA-C did not propose any alternatives to the amendments. In
the alternative, plaintiffs contend that the FHFA, in its role as regulator, coerced the FHFA-C to
approve the amendments because the two entities were not acting independently. Specifically,
plaintiffs aver that the lines between the FHFA and the FHFA-C were blurred because (1) the
FHFA’s consent was required for any dividend payment and (2) the FHFA-C approved the
amendments to achieve governmental objectives.

likelihood that the Enterprises would again need to rely on increasing Treasury’s liquidation
preference rather than making a cash payment. The end result is a cycle in which the Enterprises
continue to increase Treasury’s liquidation preference.
       15
           Although the FHFA-C anticipated continued profitability for the Enterprises in the near
term, this fact does not undermine the propriety of the PSPA Amendments because ensuring the
continued functioning of a company includes guarding against long-term risks. These long-term
outlooks are especially important given the indefinite nature of the FHFA-C’s role.

                                               -16-
         Defendant counters that the FHFA-C was not coerced by Treasury because the FHFA-C
had a choice of whether to accept or reject the PSPA Amendments. Defendant asserts that there
is no coercion if a party has a choice, regardless of however difficult refusal of a particular
option may be. With respect to Treasury’s involvement, defendant contends that plaintiffs fail to
proffer any allegations that Treasury required the FHFA-C to enter into the agreements against
its will. Defendant further asserts that other courts have declined to conclude that the FHFA-C
felt compelled to follow Treasury based on allegations that Treasury invented the amendment
concept or led the process. Defendant also argues that the FHFA-C was not coerced by the
FHFA in the latter’s role as regulator because there were clear statutory lines delineating the
FHFA’s authority in each role.16

 a. The court has jurisdiction over claims based on actions that resulted from government
                                         coercion.

        The court has jurisdiction over claims premised on the FHFA-C’s actions if Treasury’s
“influence over the” FHFA-C “was coercive rather than merely persuasive.” A & D Auto Sales,
Inc. v. United States, 748 F.3d 1142, 1154 (Fed. Cir. 2014). The line between coercion and
persuasion “is highly fact-specific.” Id. Federal Circuit precedent frames the contours of the
inquiry. In Langenegger v. United States, the plaintiffs pleaded that the United States coerced El
Salvador by threatening to withhold financial and military assistance unless El Salvador passed
legislation expropriating private property. 756 F.2d 1565, 1567 (Fed. Cir. 1985). The Federal
Circuit disagreed with the plaintiffs’ characterization of the threats because “[d]iplomatic
persuasion among allies is a common occurrence, and as a matter of law, cannot be deemed
sufficiently irresistible to warrant a finding of [coercion], however difficult refusal may be as a
practical matter.” Id. at 1572. Similarly, the Federal Circuit concluded in B & G Enterprises,
Ltd. v. United States that California was not coerced into enacting restrictions on smoking,
notwithstanding the federal government conditioning grants on states enacting such limits. 220
F.3d 1318, 1321, 1325 (Fed. Cir. 2000); see also A & D Auto, 748 F.3d at 1155 (explaining that
“coercion was not established” in B & G). The court explained that “it was California’s decision
to create [the] restrictions[;] . . . Congress may have provided the bait, but California decided to
bite.” B & G, 220 F.3d at 1325. In A & D Auto, the Federal Circuit addressed coercion in the
context of the government allegedly conditioning vital financial assistance to bankrupt
automobile companies on those companies terminating some of their franchise agreements. 748
F.3d at 1145. Unable to resolve the issue due to gaps in the record, the court noted in dicta that a
relevant consideration was “whether the government financing was essential to the companies.”
Id.

        A common thread runs through the Federal Circuit’s decisions: the importance of choice.
A nonfederal actor is not coerced when it can choose to go against the wishes of the United
States, even if doing so will cause significant hardships, Langenegger, 756 F.2d at 1567, or result
in a loss of prospective benefits, id.; B & G, 220 F.3d at 1325. But there is no choice, in any
meaningful sense, when there is only one realistic option. A & D Auto, 748 F.3d at 1145 (noting

       16
          Defendant frames its argument as addressing whether the FHFA-C acted as an agent
for the FHFA in its role as regulator, but defendant is responding to plaintiffs’ coercion
argument.

                                                -17-
the importance of considering whether the companies could survive without accepting the
government’s offer); cf. Nevada v. Skinner, 884 F.2d 445, 448 (9th Cir. 1989) (noting that, with
respect to Congress’s spending powers, “the federal government may not, at least in certain
circumstances, condition the receipt of funds in such a way as to leave the state with no practical
alternative but to comply with federal restrictions”). Put differently, the nonfederal actor must
make a voluntary decision, which it cannot do if there is only one realistic option. See BMR
Gold Corp. v. United States, 41 Fed. Cl. 277, 282 (1998) (finding that the “the necessary element
of coerciveness” for a taking was missing because the plaintiff granted the military permission to
cross his land); accord Henn v. Nat’l Geographic Soc., 819 F.2d 824, 826 (7th Cir. 1987) (noting
that hard choices remain voluntary when they are not akin to “Don Corelone’s ‘make him an
offer he can’t refuse’”). In sum, the FHFA-C was not coerced if it voluntarily chose to enter into
the PSPA Amendments.

 b. Plaintiffs have not established that Treasury coerced the FHFA-C into approving the
                                    PSPA Amendments.

        In support of their contention that Treasury coerced the FHFA-C into approving the
PSPA Amendments, plaintiffs allege that Treasury proposed the terms of the amendments, and
the FHFA-C did not make a counteroffer. Those allegations are not enough to establish
coercion. First, given the Enterprises’ improving financial condition and Treasury’s existing
funding commitment, the FHFA-C’s decision to execute the PSPA Amendments was voluntary
because it could reject the deals without imperiling the Enterprises. The facts here, therefore, are
diametrically opposed to the circumstances in A & D Auto that the Federal Circuit suggested
may support coercion because the automobile dealers faced insolvency if they did not accede to
the financing terms. See 748 F.3d at 1145. Second, the FHFA-C’s lack of protestation is
informative. “[T]he very fact that FHFA[-C] itself [did] not br[ing] suit to enjoin the Treasury
from the alleged coercion it was subjected to suggest[s] that FHFA[-C] was an independent,
willing participant in its negotiations with the Treasury.” Robinson v. Fed. Hous. Fin. Agency,
223 F. Supp. 3d 659, 668 (E.D. Ky. 2016), aff’d, 876 F.3d at 220. The court’s conclusion is
bolstered by the fact that another court has held that materially similar allegations to those at
issue here did not “come close to a reasonable inference that [the] FHFA[-C] considered itself
bound to do whatever Treasury ordered.” Perry Capital LLC v. Lew, 70 F. Supp. 3d 208, 226
(D.D.C. 2014) (“Perry I”), aff’d in part, rev’d in part sub nom. 864 F.3d at 591. This court
agrees with the reasoning in Perry I: the PSPA Amendments were executed by sophisticated
parties, and many agreements arise from a party’s proposal being accepted by the other party.
Id.

 c. Plaintiffs have not established that the FHFA coerced the FHFA-C into approving the
                                     PSPA Amendments.

       Plaintiffs also have not alleged facts reflecting that the FHFA coerced the FHFA-C into
agreeing to the PSPA Amendments. As an initial matter, plaintiffs have not alleged that the
FHFA unduly influenced the FHFA-C’s decision-making process with respect to the proposed
agreements. They merely allege that the FHFA did not silo its regulatory and conservator roles.
The lack of a firewall (without more), however, does not indicate that the FHFA deprived the
FHFA-C of meaningful choice. Moreover, plaintiffs’ focus on the FHFA-C allegedly pursuing

                                                -18-
government objectives when it approved the PSPA Amendments is a red herring. The purported
pursuit of government objectives is not germane to the coercion inquiry because it does not
suggest that the FHFA-C lacked any choice in the matter. Even if it was relevant to coercion (or
to some other theory for jurisdiction), plaintiffs would not prevail because Congress permitted
the FHFA-C to act in the interests of the government. See 12 U.S.C. § 4617(b)(2)(J) (allowing
the FHFA-C to “take any action” that “is in the interests of the [Enterprises] or the [FHFA]”).
The mere pursuit of government objectives, therefore, would not reflect a blending of any roles
but rather the FHFA-C using powers afforded to it by Congress.
        In conclusion, plaintiffs have not established that the FHFA-C was coerced into
approving the PSPA Amendments by Treasury or the FHFA.

                            4. The FHFA-C is not Treasury’s agent.

        Plaintiffs further argue that that the FHFA-C’s actions are attributable to the United
States because the FHFA-C is Treasury’s agent. Plaintiffs assert that the FHFA-C is a
government agent because (1) Treasury, by virtue of the PSPAs, had a major role in conservator
decisions; (2) the FHFA-C approved the PSPA Amendments for the taxpayers’ benefit; and
(3) the FHFA-C could not have approved the amendments absent statutory authority. Defendant
counters that plaintiffs have not pleaded an agency relationship because Treasury does not
control the FHFA-C’s operations and is statutorily barred from exercising such control.

        The United States is subject to claims in this court for the actions of a third party “if [that]
party is acting as the government’s agent . . .” A & D Auto, 748 F.3d at 1154. “An essential
element of agency is the principal’s right to control the agent’s actions.” Hollingsworth v. Perry,
570 U.S. 693, 713 (2013) (quoting Restatement (Third) of Agency § 1.01, cmt. f (Am. Law. Inst.
2005)); accord O’Neill v. Dep’t of Hous. & Urban Dev., 220 F.3d 1354, 1360 (Fed. Cir. 2000)
(acknowledging that the common-law meaning of agency requires, among other things, that the
principal has the right to control the agent’s conduct); see also Preseault v. United States, 100
F.3d 1525, 1537 (Fed. Cir. 1996) (concluding that a state’s actions were attributable to the
United States when the state acted pursuant to the Interstate Commerce Commission’s order);
Hendler v. United States, 952 F.2d 1364, 1378-79 (Fed. Cir. 1991) (attributing a state’s actions
to the United States when the state acted under authority flowing from an Environmental
Protection Agency order). The facts, as alleged, do not reflect that Treasury controlled the
FHFA-C’s actions because Congress explicitly precluded the FHFA-C from being subservient to
another agency, 12 U.S.C. § 4617(a)(7) (providing that the FHFA-C cannot be subject to the
“direction or supervision” of any other agency), and plaintiffs have not alleged facts indicating
that Treasury exercised such control notwithstanding the statutory bar. Although the FHFA-C
was required by the PSPAs to obtain Treasury’s approval for certain actions (e.g., issuing
dividends), the PSPAs did not provide Treasury with the right to unilaterally order amendments.
Moreover, plaintiffs describe an FHFA-C that made decisions independently; Treasury “urg[ed]”
the FHFA to pursue conservatorship and “push[ed]” for the PSPA Amendments. 2d Am. Compl.
¶¶ 4, 146. Simply stated, plaintiffs have not alleged facts establishing that Treasury exercised
the control over the FHFA-C that is necessary for an agency relationship.

                                                 -19-
       5. The FHFA-C is the United States because the FHFA-C retains the FHFA’s
                               governmental character.

        Finally, plaintiffs contend that the FHFA-C is itself a government actor. Defendant
disagrees. First, relying on O’Melveny & Myers v. FDIC, 412 U.S. 79 (1994), defendant argues
that the FHFA-C is not the United States because the FHFA-C stands in the Enterprises’ shoes.
Specifically, defendant asserts that Congress’s decision to have the FHFA-C succeed to the
Enterprises’ rights reflects that Congress intended that the FHFA-C step into the Enterprises’
private shoes and shed its government character. Second, defendant argues that the FHFA-C’s
exercise of nontraditional conservatorship powers is immaterial because Congress can expand
the conservator’s role without transforming it into it into a government actor. Third, defendant
argues that the Enterprises are not government instrumentalities—which means that the FHFA
did not step into the shoes of a government actor when it became the Enterprises’ conservator—
because the government does not retain permanent authority to appoint the Enterprises’ directors.
Defendant contends that the government only has temporary, albeit indefinite, control over the
Enterprises because conservatorships are not permanent.

        In response, plaintiffs dispute the premise of defendant’s argument that, pursuant to
O’Melveny, the FHFA becomes the Enterprises when acting as conservator. Plaintiffs assert that
O’Melveny does not concern whether an entity is the United States or, if the decision can be read
as addressing that issue, is distinguishable because it concerns receivers or is limited to
conservators exercising traditional conservator powers. Second, plaintiffs argue that the FHFA
has not shed its government status, even if it has stepped into the Enterprises’ shoes, when it acts
as conservator. Specifically, plaintiffs assert that the FHFA-C retains the FHFA’s government
status because (1) the FHFA-C has acted beyond the traditional conservator powers and
(2) Congress expressed its intention for that result by precluding the conservator from being
subject to the supervision of “any other agency.” 12 U.S.C. § 4617 (emphasis added). Third,
plaintiffs argue that their claims are against the United States, even if the FHFA-C steps into the
shoes of the Enterprises, because the Enterprises are government instrumentalities.17

       In short, the parties disagree over the government status of the FHFA-C. The FHFA is
indisputably the United States, see 12 U.S.C. § 4511(a) (establishing the FHFA as an
“independent agency of the Federal Government”), and so the only question is whether the
FHFA sheds that status when it acts as conservator. In other jurisdictions, courts have held (with
near unanimity) that the FHFA loses its government status pursuant to O’Melveny. In
O’Melveny, the United States Supreme Court (“Supreme Court”) explained that the FDIC “steps

       17
           The court notes that, with respect to the derivative claims, the parties fail to address a
critical implication of plaintiffs’ government instrumentality argument: there is only one party if
the Enterprises are government instrumentalities. The defendant would be the United States
because the FHFA-C, according to plaintiffs, stepped into the shoes of government
instrumentalities—the Enterprises. The plaintiffs would also be the United States because the
Enterprises are the real plaintiffs for any derivative claims. Simply stated, if the Enterprises are
government instrumentalities, the defendant and derivative plaintiffs would both be the United
States, which could pose justiciability issues. The court, however, does not consider such issues
because it concludes that the Enterprises are not government instrumentalities.

                                                -20-
into [the] shoes” of a private company when acting as receiver and sheds its government
character because the FDIC “succeed[s] to . . . all rights, titles, powers, and privileges of the
[entity in receivership] . . . .” 512 U.S. at 86 (quoting 12 U.S.C. § 1821(d)(2)(A)(i)); see also AG
Route Seven P’ship v. United States, 57 Fed. Cl. 521, 534 (2003) (citing O’Melveny for the
proposition that the FDIC as receiver is a “private party, and not the government per se” because
it “is merely standing in the shoes . . . of the defunct thrift”). The courts drawing from
O’Melveny have concluded that the FHFA steps into the shoes of the Enterprises and sheds its
government character when acting as conservator because Congress provided that the FHFA-C
exercises the same rights with respect to the Enterprises as Congress granted to the FDIC as
receiver. See, e.g., Herron v. Fannie Mae, 861 F.3d 160, 169 (D.C. Cir. 2017); cf. Ameristar Fin.
Servicing Co. v. United States, 75 Fed. Cl. 807, 811 (2007) (concluding, with respect to the
FDIC, that the step-into-the-shoes principle set forth in O’Melveny also applies in the
conservator context).

a. The FHFA-C is not the United States if the FHFA steps into the Enterprises’ shoes when
                                 acting as conservator.

        Plaintiffs initially contend that defendant’s reliance on O’Melveny is a red herring
because, assuming that O’Melveny applies, the FHFA-C is the United States even though it steps
into the Enterprises’ shoes. Specifically, plaintiffs assert that the FHFA-C is the United States
under the facts alleged because (1) the FHFA-C exercises nontraditional conservator powers,
(2) Congress intended that the FHFA-C retain the FHFA’s government status, and (3) the FHFA-
C steps into the shoes of a government instrumentality. The court addresses each assertion in
turn.

        First, the FHFA-C did not become a government actor by exercising powers beyond
those traditionally afforded to a conservator. As a threshold matter, plaintiffs have not alleged
facts reflecting that the FHFA-C used such powers; the execution of the PSPA Amendments was
a “quintessential conservatorship” function. Perry II, 864 F.3d at 607; see also supra Section
IV.B.2 (discussing the FHFA-C’s exercise of its powers). More importantly, however, plaintiffs
would not prevail even if the FHFA-C exercised nontraditional conservatorship powers in
agreeing to the PSPA Amendments. When this argument was pressed in other jurisdictions, it
was rejected:

       It may well be true that FHFA’s actions would not be allowed under traditional
       principles of corporate or conservatorship law, but it does not follow that those
       actions are therefore governmental. Legislatures can expand conservatorship and
       similar powers without transforming conservators into agents of the
       government. Cf. Pegram v. Herdrich, 530 U.S. 211, 225-26 (2000) (explaining
       that the Employee Retirement Income Security Act altered the common law of
       trusts to permit certain actions that would otherwise violate the trustee’s fiduciary
       duties).

Bhatti v. Fed. Hous. Fin. Agency, 332 F. Supp. 3d 1206, 1226 (D. Minn. 2018) (footnote
omitted). The court agrees with that reasoning, and plaintiffs provide no authority that supports
a contrary result. Although plaintiffs state that the United States Court of Appeals for the

                                               -21-
District of Columbia Circuit (“D.C. Circuit”) decision in Waterview Management Co. v. FDIC,
105 F.3d 696 (D.C. Cir. 1997), supports their position, they are mistaken. Waterview is not on
point because the D.C. Circuit did not hold that a conservator is per se the United States when
acting pursuant to a congressional grant of broad powers. Rather, it held that, as a matter of
statutory interpretation, the existence of a receivership did not preempt a prereceivership
contract. Id. at 699-702.

        Second, Congress’s instruction that the FHFA-C is not subject to the supervision of any
other agency does not reflect congressional intent for the FHFA to retain its government status
when acting as conservator even if it steps into the shoes of the Enterprises. Because the court
only reaches this issue by assuming that O’Melveny is instructive, the statutory language
concerning supervision of the FHFA-C does not support a finding of jurisdiction because the
same language is present in the statute that the Supreme Court addressed in O’Melveny. See 512
U.S. at 85-86 (discussing 12 U.S.C. § 1821). Compare 12 U.S.C. § 1821(c)(3)(C) (“When acting
as conservator or receiver . . . , [the FDIC] shall not be subject to the direction or supervision of
any other agency or department of the United States or any State in the exercise of the [FDIC’s]
rights, powers, and privileges.”), with id. § 4617(a)(7) (“When acting as conservator or receiver,
the [FHFA] shall not be subject to the direction or supervision of any other agency of the United
States or any State in the exercise of the rights, powers, and privileges of the [FHFA].”).

        The third argument advanced by plaintiffs—that the FHFA-C is the United States
because it steps into the shoes of a government instrumentality—also is not meritorious. A
government instrumentality’s actions are attributable to the United States for purposes of the
Tucker Act. See Corr v. Metro. Wash. Airports Auth., 702 F.3d 1334, 1336 (Fed. Cir. 2012)
(noting that a claim against a government instrumentality is a claim against the United States for
purposes of the Little Tucker Act, 28 U.S.C. § 1346(a)(2)). The Supreme Court established
in Lebron v. National Railroad Passenger Corp. that a company is a government instrumentality
when (1) it is created by “special law,” (2) it is established “for the furtherance of governmental
objectives,” and (3) the federal government “retains for itself permanent authority to appoint a
majority of the [company’s] directors . . . .” 513 U.S. 374, 400 (1995). After Lebron, the
Supreme Court clarified that, for purposes of the instrumentality test, “the practical reality of
federal control and supervision prevails over Congress’ disclaimer of the [the entity’s]
governmental status.” Dep’t of Transp. v. Ass’n of Am. R.Rs., 135 S. Ct. 1225, 1233 (2015).

        There is no dispute that the Enterprises satisfy the first two prongs of the Lebron test;
Congress created the Enterprises by special law to achieve governmental objectives related to the
housing market. See 12 U.S.C. § 4501; see also Herron, 861 F.3d at 167 (addressing claims
involving Fannie and noting that “[t]his case satisfies the first two Lebron criteria”); Am.
Bankers Mortg. Corp. v. Fed. Home Loan Mortg. Corp., 75 F.3d 1401, 1406-07 (9th Cir. 1996)
(reaching same conclusion for Freddie). The status of the Enterprises, therefore, turns on the
third prong: whether the government retains permanent authority to appoint a majority of the
Enterprises’ directors.

        The Federal Circuit has not addressed the government-control prong with respect to the
Enterprises, but courts in other jurisdictions have done so. Those decisions provide a starting
point for the court. It appears that every court to consider the issue, with the exception of one

                                                -22-
district court, has held that the government does not exercise permanent control over the
Enterprises. Sisti v. Fed. Hous. Fin. Agency, 324 F. Supp. 3d 273, 279 (D.R.I. 2018)
(concluding that the government retains permanent authority to control the Enterprises after
noting that “[t]he non-controlling precedent to date” has reached the opposite conclusion). Most
of the courts that concluded that the government lacks permanent control over the Enterprises
issued their decisions before the Supreme Court in Association of American Railroads
emphasized the importance of evaluating the practical reality over nomenclature, and the other
courts focused on the statutory purpose for the conservatorships rather than the Enterprises’
actual situation. E.g., Herron, 861 F.3d at 169 (relying on the notion that a conservatorship is
fundamentally temporary). In other words, the courts adopting the prevailing view considered
the issue of control without regard for the Supreme Court’s instruction to focus on the practical
reality. The court, therefore, does not find those decisions persuasive.

        The crux of the inquiry, as the Supreme Court mandates, is on the practical reality of the
government’s control over the Enterprises. Ass’n of Am. R.Rs., 135 S. Ct. at 1233. It is of no
import that Congress nominally authorized a facially temporary conservatorship, see 12 U.S.C.
§ 4617(a) (permitting the FHFA to act as conservator to “reorganiz[e]” or “rehabilitat[e]” the
Enterprises), because Congress’s disclaimers are no substitute for the court’s obligation to assess
the government’s actual control, Ass’n of Am. R.Rs., 135 S. Ct. at 1233. The court focuses on
the length of the conservatorship because the FHFA-C wields complete control over the
Enterprises so long as they are in conservatorship. See generally 12 U.S.C. § 4617.

        Plaintiffs allege that the Enterprises will remain undercapitalized—and thus subject to
conservatorship pursuant to 12 U.S.C. § 4617(a)(3)(J)—until the PSPAs, in their current form,
are changed because the Enterprises cannot accumulate any capital under the existing terms of
the PSPAs. Although the PSPAs could be further amended, plaintiffs’ allegations reflect that
Treasury and the FHFA-C will not do so because the purpose of the PSPA Amendments is to
prevent the Enterprises from accumulating the necessary capital to become independent
companies. Plaintiffs, in short, have alleged that the government intended, and has taken steps to
ensure, that the conservatorships never end. Those facts, viewed in isolation, would support a
conclusion that the practical reality is that the Enterprises are under permanent government
control. The court’s inquiry, however, is not limited to plaintiffs’ allegations because it has
taken judicial notice of relevant facts reflecting that the status quo has changed: the Treasury
Secretary and the FHFA Director are now both committed to ending the conservatorships.
Moreover, the idea that the Enterprises are permanently subject to government control because
they can never accumulate the capital needed to exit the conservatorships is undermined by
recent developments. Indeed, Treasury proposed amending the Net Worth Sweep to allow the
Enterprises to retain more capital, and the FHFA Director testified during his confirmation
hearing that, if confirmed, he would seek to increase the amount of capital that the Enterprises
retain. Simply stated, the practical reality is that the Enterprises are not subject to permanent
government control because the relevant parties are working to terminate the conservatorships.18

       18
           Plaintiffs may disagree with the court’s conclusion that events occurring after the
PSPA Amendments are relevant to determining whether the Enterprises were under permanent
government control during the events discussed in plaintiffs’ complaint. Even if the court agreed
that events occurring after the PSPA Amendments are not germane, plaintiffs still would not
                                               -23-
       In sum, the FHFA-C does not become the United States if the FHFA steps into the
Enterprises’ shoes when serving as conservator.

 b. The FHFA-C retains the FHFA’s government character because the FHFA-C does not
                           step into the Enterprises’ shoes.

        The key inquiry, therefore, is whether the FHFA steps into the shoes of the Enterprises
when acting as conservator. Defendant argues that the FHFA-C sheds its government character
and assumes the identity of the Enterprises based on the reasoning in O’Melveny. Defendant’s
reliance on O’Melveny is misplaced. O’Melveny concerns a receiver stepping into the shoes of a
failed bank. 512 U.S. at 86. The roles of a conservator and receiver are meaningfully different.
In a recent decision, the United States District Court for the District of Rhode Island artfully
explained the differences and their import for assessing whether the FHFA-C is the government:

       The O’Melveny Court held that FDIC, when acting as a receiver for a private
       entity, steps into the shoes of that private entity for state law claims. This holding
       makes sense given the purpose of receivership: “to preserve a company’s assets,
       for the benefit of creditors, in the face of bankruptcy.” When FDIC is appointed
       receiver, it must dispose of the received entity’s assets, resolving obligations and
       claims made against the entity. Notably, “[i]n receivership, the receiver owes
       fiduciary duties to the creditors, which the corporation would otherwise owe to
       creditors during a period of insolvency.” It logically follows, then, that the
       receiver steps into the shoes of the private entity, because it assumes the fiduciary
       duties of that entity.

              Conservatorship, in contrast, serves a different function. FHFA has
       described the purpose of conservatorship is “to establish control and oversight of
       a company to put it in a sound and solvent condition.” Conservators, unlike
       receivers, have a fiduciary duty running to the corporation itself.

               This is “critically distinct” from the fiduciary duties owed as a receiver—
       the receiver does indeed “step into the shoes” of the entity by assuming the
       fiduciary duties of the entity, but the conservator does not: it remains distinct, and
       rather owes a duty to the entity. Given the difference in fiduciary duties,
       O’Melveny’s “steps into the shoes” holding makes sense in the context of
       receivership, but not in the context of conservatorship.

prevail because they allege that the conservatorships began as temporary measures. See 2d Am.
Compl. ¶¶ 66 (“FHFA also emphasized that the conservatorship was temporary: ‘Upon the
[FHFA] Director’s determination that the [FHFA-C’s] plan to restore the [Enterprises] to safe
and solvent condition has been completed, the Director will issue an order terminating the
conservatorships’” (quoting FHFA publication)), 110 (noting that, when the conservatorships
were imposed, the FHFA Director “vowed” that the Enterprises would “exit conservatorship”
and “return to normal business operations”). Thus, the Enterprises were not under permanent
government control before the PSPA Amendments.

                                                -24-
Sisti, 324 F. Supp. 3d at 282-83 (citations and footnotes omitted). See generally Brian Taylor
Goldman, The Indefinite Conservatorship of Fannie Mae and Freddie Mac Is State-Action, 17 J.
Bus. & Sec. L. 11, 23-30 (2016). The district court, relying on the above analysis, declined to
treat the FHFA-C as a private actor. Sisti, 324 F. Supp. 3d at 284. This court agrees with the
reasoning and conclusion in Sisti: the FHFA does not shed its government character when acting
as conservator because it does not step into the shoes of the Enterprises. Otherwise stated, the
FHFA-C is the United States because it retains the FHFA’s government character. Plaintiffs’
claims, therefore, are against the United States for purposes of the Tucker Act.

                       C. The court has jurisdiction over takings claims.

        The court next addresses, as instructed by the Federal Circuit, whether the Court of
Federal Claims lacks jurisdiction to entertain takings claims because it is not an Article III
tribunal. See Fairholme Funds, 681 F. App’x at 949-50.

                 1. The judges on this court do not exercise Article III power.

        Article III, § 1, of the Constitution states that “[t]he judicial Power of the United States,
shall be vested in one supreme Court, and in such inferior Courts as the Congress may from time
to time ordain and establish.” Article III judges “hold their Offices during good Behaviour” and
receive compensation “for their Services, . . . which shall not be diminished during their
Continuance in Office.” U.S. Const. art. III, § 1; see also Ortiz v. United States, 138 S. Ct. 2165,
2176 (2018) (noting that the United States Court of Appeals for the Armed Forces is not an
Article III court because, among other reasons, “its members lack the tenure and salary
protections that are the hallmarks of the Article III judiciary” (citing 10 U.S.C. § 942 (2018));
Wellness Int’l Network, Ltd. v. Sharif, 135 S. Ct. 1932, 1938 (2015) (observing that “bankruptcy
and magistrate judges . . . do not enjoy the protections of Article III,” namely, “life tenure and
pay that cannot be diminished”). It is well settled that Congress cannot confer the Article III
judicial power on non-Article III courts. See Oil States Energy Servs., LLC v. Greene’s Energy
Grp., LLC, 138 S. Ct. 1365, 1372-73 (2018); Stern v. Marshall, 564 U.S. 462, 484 (2011); see
also Stern, 564 U.S. at 484 (“[I]n general, Congress may not ‘withdraw from judicial cognizance
any matter which, from its nature, is the subject of a suit at the common law, or in equity, or
admiralty.’” 564 U.S. at 484 (quoting Murray’s Lessee v. Hoboken Land & Improvement Co.,
59 U.S. 272, 284 (1855))).

        Congress expressly established the Court of Federal Claims “under article I of the
Constitution of the United States.” 28 U.S.C. § 171(a). And, although judges of the Court of
Federal Claims enjoy the salary protections of Article III judges, see id. § 172(b) (“Each judge
shall receive a salary at the rate of pay, and in the same manner, as judges of the district courts of
the United States.”), they do not enjoy the life tenure of Article III judges, see id. §§ 172(a)
(“Each judge . . . shall be appointed for a term of fifteen years.”), 176 (allowing for the removal
from office by the Federal Circuit). Consequently, the court’s judges do not exercise Article III
judicial power.

                                                 -25-
               2. Court of Federal Claims judges can adjudicate public rights.

         Although Court of Federal Claims judges cannot adjudicate the same panoply of issues as
Article III judges, the judges on this court may adjudicate a category of cases involving what the
Supreme Court has denominated “public rights.” See Oil States, 138 S. Ct. at 1373. “When
determining whether a proceeding involves an exercise of Article III judicial power, [the
Supreme Court’s] precedents have distinguished between ‘public rights’ and ‘private rights.’
Those precedents have given Congress significant latitude to assign adjudication of public rights
to entities other than Article III courts.” Id.; accord N. Pipeline Constr. Co. v. Marathon Pipe
Line Co., 458 U.S. 50, 67-68 (1982) (plurality opinion) (“[T]his Court has upheld the
constitutionality of legislative courts and administrative agencies created by Congress to
adjudicate cases involving ‘public rights.’”).

        While the Supreme Court “has not ‘definitively explained’ the distinction between public
and private rights,” Oil States, 138 S. Ct. at 1373 (quoting N. Pipeline, 458 U.S. at 69), “and its
precedents applying the public-rights doctrine have ‘not been entirely consistent,’” id. (quoting
Stern, 564 U.S. at 488), public rights include, at a minimum, those “matters ‘which arise between
the Government and persons subject to its authority in connection with the performance of the
constitutional functions of the executive or legislative departments,’” id. (quoting Crowell v.
Benson, 285 U.S. 22, 50 (1932)). “In other words, the public-rights doctrine applies to matters
‘arising between the government and others, which from their nature do not require judicial
determination and yet are susceptible of it.’” Id. (quoting Crowell, 285 U.S. at 50).

        In addition, if an action cannot be brought absent the government’s waiver of sovereign
immunity, then the case involves a public right. See Stern, 564 U.S. at 489 (“The challenge in
Murray’s Lessee . . . fell within the ‘public rights’ category of cases, because it could only be
brought if the Federal Government chose to allow it by waiving sovereign immunity.”). In other
words, “Congress may set the terms of adjudicating a suit when the suit could not otherwise
proceed at all.” Id.; see N. Pipeline, 458 U.S. at 67 (explaining that the rationale for the public
rights exception stems in part from “the traditional principle of sovereign immunity, which
recognizes that the Government may attach conditions to its consent to be sued”).

  3. The right to compensation for a taking is a public right subject to adjudication in the
                                 Court of Federal Claims.

        The right to just compensation enshrined in the Takings Clause of the Fifth Amendment
is a public right for three reasons. The court addresses each reason in turn.

        The first reason a takings claim concerns a public right relates to the parties involved. A
takings claim is an allegation, by a private party, that the government is liable to it for just
compensation. In other words, a takings claim necessarily “arise[s] between the Government
and persons subject to its authority.” Oil States, 138 S. Ct. at 1373 (quoting Crowell, 285 U.S. at
50). To this court’s knowledge, the Supreme Court has never held that such a dispute between
private persons and the United States must be heard in an Article III court. Instead, it has
implied that such disputes fall squarely within the public rights exception. See Stern, 564 U.S. at
490 (noting that it has “rejected the limitation of the public rights exception to actions involving

                                                -26-
the Government as a party”); see also N. Pipeline, 458 U.S. at 70 (“[C]ontroversies [between the
government and others] may be removed from Art. III courts and delegated to legislative courts
or administrative agencies for their determination.”).

        The second reason a takings claim concerns a public right relates to the nature of the
alleged liability—namely, just compensation. The Takings Clause requires that the government
pay “just compensation” for “private property” that is “taken for public use.” U.S. Const.
amend. V. When the federal government takes private property for public use, the payment of
just compensation is authorized by Congress in its exercise of its Article I power to pay the
United States’ debts. See Ex parte Bakelite Corp., 279 U.S. 438, 452 (1929) (“[E]xamining and
determin[ing] claims for money against the United States . . . is a function [that] belongs
primarily to Congress as an incident of its power to pay the debts of the United States.”); see also
U.S. Const. art. I, § 8, cl. 1 (“The Congress shall have Power . . . to pay the Debts . . . of the
United States . . . .”). Only Article III courts may exercise the judicial power, but Congress may
exercise its Article I powers “through judicial as well as non-judicial agencies.” Sherwood, 312
U.S. at 587. Therefore, takings claims “arise between the Government and persons subject to its
authority in connection with the performance of the constitutional functions of the . . . legislative
department[],” Crowell, 285 U.S. at 50, i.e., the payment of a debt with money from the United
States treasury. Accord Brott v. United States, 858 F.3d 425, 435 (6th Cir. 2017) (holding that
plaintiffs pursuing takings claims are not constitutionally entitled to have those claims
adjudicated in an Article III forum, and providing that compensation “claims are made by private
individuals against the government in connection with the performance of a historical and
constitutional function of the legislative branch, namely, the control and payment of money from
the treasury”), cert. denied, 138 S. Ct. 1324 (2018).

        The third reason a takings claim concerns a public right relates to the nature of the
defendant. “It is axiomatic that the United States may not be sued without its consent and that
the existence of consent is a prerequisite for jurisdiction.” United States v. Mitchell, 463 U.S.
206, 212 (1983). In other words, the United States must waive its sovereign immunity for suits
against it to proceed. Id.

        “[T]he Fifth Amendment does not provide a self-executing waiver of sovereign
immunity” for takings claims. Sammons v. United States, 860 F.3d 296, 300 (5th Cir. 2017);
accord Brott v. United States, No. 1:15-CV-38, 2016 WL 5922412, at *4 (W.D. Mich. Mar. 28,
2016) (“Plaintiffs’ argument that the Fifth Amendment’s guarantee of just compensation is ‘self-
executing’ and not dependent on a congressional waiver of sovereign immunity is contrary to
long-standing clear precedent, by which this Court is bound.”), aff’d, 858 F.3d at 425. Indeed,
the self-executing character of the Takings Clause relates to the right it provides, not the means
to enforce that right:19

       19
          Mr. Sammons relied on footnote nine in First English Evangelical Lutheran Church of
Glendale v. County of Los Angeles, 482 U.S. 304 (1987), to argue that the principle of sovereign
immunity is inapplicable to claims brought under the “self-executing” Takings Clause. The
Supreme Court’s comments in this footnote, however, merely reinforce the understanding that
the Takings Clause is self-executing in providing a right to a remedy. See id. at 316 n.9 (“[I]t is
                                                -27-
       The suits [on appeal] were based on the right to recover just compensation for
       property taken by the United States for public use in the exercise of its power of
       eminent domain. That right was guaranteed by the Constitution. The fact that
       condemnation proceedings were not instituted and that the right was asserted in
       suits by the owners did not change the essential nature of the claim. The form of
       the remedy did not qualify the right. It rested upon the Fifth Amendment.
       Statutory recognition was not necessary. A promise to pay was not necessary.
       Such a promise was implied because of the duty to pay imposed by the
       amendment. The suits were thus founded upon the Constitution of the United
       States.

Jacobs v. United States, 290 U.S. 13, 16 (1933); accord First English, 482 U.S. 315 (“[A]
landowner is entitled to bring an action in inverse condemnation as a result of “the self-executing
character of the constitutional provision with respect to compensation . . . .” (quoting United
States v. Clarke, 445 U.S. 253, 257 (1980))). In other words, the Takings Clause is self-
executing in providing a remedy, but is not self-executing in providing a means to enforce that
remedy. See Lynch v. United States, 292 U.S. 571, 581 (1934) (“The sovereign’s immunity
from suit exists whatever the character of the proceeding or the source of the right sought to be
enforced. It applies alike to causes of action arising under acts of Congress, and to those arising
from some violation of rights conferred upon the citizen by the Constitution. The character of
the cause of action . . . may be important in determining (as under the Tucker Act (24 Stat. 505))
whether consent to sue was given. Otherwise it is of no significance.” (citations omitted)); see
also Webster v. Doe, 486 U.S. 592, 613 (1988) (Scalia, J., dissenting) (“The doctrine of
sovereign immunity . . . is a monument to the principle that some constitutional claims can go
unheard. No one would suggest that, if Congress had not passed the Tucker Act, . . . courts
would be able to order disbursements from the Treasury to pay for property taken under lawful
authority (and subsequently destroyed) without just compensation.”).

           The Tucker Act provides a means to enforce the remedy set forth in the Takings Clause.20
See 28 U.S.C. § 1491(a)(1). As noted above, the Tucker Act allows plaintiffs to bring monetary
claims against the United States founded upon the Constitution, including Fifth Amendment
takings claims. See id. (“The United States Court of Federal Claims shall have jurisdiction to
render judgment upon any claim against the United States founded . . . upon the Constitution
. . . .”); Knick v. Twp. of Scott, 139 S. Ct. 2162, 2170 (2019) (“We have held that ‘[i]f there is a
taking, the claim is “founded upon the Constitution” and within the jurisdiction of the Court of
Claims to hear and determine.’” (quoting United States v. Causby, 328 U.S. 256, 267 (1946))).

the Constitution that dictates the remedy for interference with property rights amounting to a
taking.” (emphasis added)).
       20
           The remedy can also be enforced under the Little Tucker Act, which provides federal
district courts with jurisdiction concurrent with that of the Court of Federal Claims for claims not
exceeding $10,000, 28 U.S.C. § 1346(a)(2), and the Indian Tucker Act, which provides the Court
of Federal Claims with jurisdiction to adjudicate claims brought by American Indian tribes,
bands, or groups, id. § 1505. Neither statute is applicable in this case.

                                               -28-
This allowance constitutes a waiver of sovereign immunity. See Mitchell, 463 U.S. at 212
(“[B]y giving the Court of Claims jurisdiction over specified types of claims against the United
States, the Tucker Act constitutes a waiver of sovereign immunity with respect to those
claims.”). In short, because this waiver of sovereign immunity over takings claims is necessary
for suits against the United States to proceed, such claims implicate public rights that can be
adjudicated in a non-Article III forum.

        This conclusion is confirmed by historical practice. Prior to 1855, persons seeking to
enforce claims for money damages against the United States were not able to obtain judicial
redress. See United States v. Bormes, 568 U.S. 6, 12 (2012) (describing “[t]he Tucker Act’s
jurisdictional grant[] and accompanying immunity waiver” as a “missing ingredient for an action
against the United States for the breach of monetary obligations not otherwise judicially
enforceable”). Instead, “claimants routinely petitioned Congress for private bills to recover
money owed.” Id. at 11. If the Fifth Amendment waives sovereign immunity, those claimants
could have instead proceeded in Article III courts, even in the absence of any statutory
authorization. Mr. Sammons did not identify, and the court has not located, any example of such
a case being filed between 1791 and 1855.

        In sum, a takings claim implicates a public right because such a claim consists of a
dispute between a private party and the United States, involves Congress’s obligation to pay a
debt, and requires the waiver of sovereign immunity. Accordingly, the Court of Federal Claims
constitutionally can adjudicate claims under the Takings Clause.21

            D. The court lacks jurisdiction over plaintiffs’ claim that sounds in tort.

                    1. Plaintiffs’ direct fiduciary duty claim sounds in tort.

        Turning back to the parties’ contentions, defendant argues that the court lacks jurisdiction
over plaintiffs’ direct fiduciary duty claims because the United States does not owe to each
Enterprise’s shareholders a fiduciary duty that is grounded in a statute or contract.22 Defendant
asserts that such a fiduciary duty cannot be based on (1) HERA because, pursuant to the statute,
the FHFA-C is only required to act in the government’s and the Enterprises’ best interests; or
(2) the PSPAs because plaintiffs are not parties to those contracts. Plaintiffs counter that their

       21
           Mr. Sammons did not argue that plaintiffs are entitled to a jury trial but, for the sake of
completeness, the court notes that the Supreme Court has held that “when Congress properly
assigns a matter to adjudication in a non-Article III tribunal, ‘the Seventh Amendment poses no
independent bar to the adjudication of that action by a nonjury factfinder.’” Oil States, 138 S.
Ct. at 1379 (quoting Granfinanciera, S.A. v. Nordberg, 492 U.S. 33, 53-54 (1989)). Therefore,
the rejection of Mr. Sammons’s Article III challenge would also resolve a Seventh Amendment
challenge. See id.
       22
           In its notice of arguments, defendant explains that it is arguing in its motion to dismiss
for the dismissal of plaintiffs’ direct and derivative fiduciary duty claims. After reviewing the
motion, it is apparent that defendant only presented argument concerning the direct claim. The
court, therefore, reserves judgment on whether it has jurisdiction over the derivative claims.

                                                -29-
claim is based on a fiduciary duty rooted in both HERA and the PSPAs. As to HERA, plaintiffs
assert that Congress made the FHFA-C a fiduciary by authorizing it to control the Enterprises,
entrusting it with duties that are at the core of what it means to be a fiduciary, and using
terminology—“conservator”—associated with a fiduciary. Additionally, plaintiffs contend that
recognizing that Treasury owes a fiduciary duty to shareholders is the only way to give meaning
to Congress’s mandate in HERA that Treasury protect taxpayers by considering, before
purchasing securities, the need to maintain the Enterprises as privately owned entities. With
respect to the PSPAs, plaintiffs argue that Treasury owes a fiduciary duty to the shareholders
because it acquired control rights under the contract.23

        The court, pursuant to the Tucker Act, lacks jurisdiction over tort claims. 28 U.S.C.
§ 1491(a)(1). A breach of fiduciary duty is generally classified as a tort. Newby v. United
States, 57 Fed. Cl. 382, 294 (2003). A fiduciary duty claim, however, does not sound in tort for
purposes of the Tucker Act when the fiduciary relationship is founded on a money-mandating
statute or a contractual provision between the claimant and United States. See Hopi Tribe v.
United States, 782 F.3d 662, 667 (Fed. Cir. 2015) (statute); Cleveland Chair Co. v. United States,
557 F.2d 244, 246 (Ct. Cl. 1977) (contract); see also 28 U.S.C. § 1491(a)(1) (providing
jurisdiction over claims “founded upon . . . any Act of Congress . . . or contract with the United
States”).

        The initial issue is whether HERA establishes a fiduciary relationship between the
FHFA-C and the Enterprises’ shareholders. The court begins with the language of the statute.
Hughes Aircraft Co. v. Jacobson, 525 U.S. 432, 438 (1999). “If Congress has expressed its
intention by clear statutory language, that intention controls and must be given effect.” Rosete v.
Office of Pers. Mgmt., 48 F.3d 514, 517 (Fed. Cir. 1995); accord Conn. Nat’l Bank v. Germain,
503 U.S. 249, 253-54 (1992) (“[C]ourts must presume that a legislature says in a statute what it
means and means in a statute what it says there.”). Congress provided in HERA that the FHFA-
C is only required to act in the interests of itself or the Enterprises. 12 U.S.C. § 4617(b)(2)(J).
That statement reflects a clear intent: the FHFA-C does not owe a fiduciary duty to shareholders
because the conservator is not required to consider shareholders’ interests.24 See id.; see also
Collins, 938 F.3d at 580 (noting that HERA “may permit” the FHFA-C to pursue actions that are
“inconsistent with fiduciary duties”). The plain language controls, and therefore the court does

       23
         Plaintiffs’ contention that Treasury owes them a fiduciary duty does not appear in the
second amended complaint.
       24
          The court’s interpretation of HERA’s plain language is buttressed by the fact that
Congress seemingly made a deliberate decision to exclude shareholder interests from the FHFA-
C’s considerations. Congress modeled HERA on the Financial Institutions Reform, Recovery,
and Enforcement Act (“FIRREA”). Jacobs, 908 F.3d at 893. Under FIRREA, Congress
permitted the FDIC as conservator to consider the best interests of a bank, its depositors, or the
FDIC. 12 U.S.C. § 1821(d)(2)(J)(ii). Although Congress permitted the FDIC to take into
consideration the interests of its depositors, Congress omitted the analogue of depositors—
shareholders—from the list of germane interests that the conservator can consider when acting
pursuant to HERA. Compare id. (FIRREA), with 12 U.S.C. 4617(b)(2)(J) (HERA). The
omission is telling.

                                               -30-
not consider the peripheral considerations urged by plaintiffs such as the implications of the
word “conservator,” the FHFA-C’s control over the Enterprises, or the FHFA-C’s other powers.
In sum, plaintiffs cannot establish jurisdiction for their direct fiduciary duty claim by relying on
HERA.

        The next issue is whether Treasury owes a fiduciary duty to shareholders because it
purchased securities pursuant to HERA.25 Plaintiffs contend that Treasury assumed such a duty
when it agreed to the PSPAs because of the determinations that Congress required the Treasury
Secretary to make prior to buying the securities. Before purchasing securities pursuant to
HERA, the Secretary is required to determine that the purchase is necessary to protect taxpayers
and evaluate various considerations in connection with protecting the taxpayers. 12 U.S.C.
§§ 1455(l)(1)(B)-(C), 1719(g)(1)(B)-(C). One of those considerations is the need to maintain the
Enterprises as privately owned companies. Id. §§ 1455(l)(1)(C), 1719(g)(1)(C). At no point,
however, did Congress direct (or even suggest) that the Secretary must protect the shareholders.
The court declines to stretch the statutory language to support a fiduciary relationship based on
any incidental benefit shareholders may derive from the Secretary considering the need to keep
the Enterprises privately owned in the context of protecting taxpayers. Simply stated, Treasury
did not assume any fiduciary obligations to the Enterprises’ shareholders by virtue of HERA.

        Finally, the court turns to whether Treasury owed a fiduciary duty to the Enterprises’
other shareholders because it acquired control rights by agreeing to the PSPAs. Plaintiffs’
argument is premised on the state-law principle (which they term “general corporate law”) that a
controlling shareholder owes a fiduciary duty to the minority shareholders. The court is not
convinced. First, plaintiffs’ allegation of a fiduciary relationship is not founded on a contract
within the meaning of the Tucker Act. Plaintiffs are not attempting to enforce any duty imposed
on Treasury that is specified in the PSPAs. They invoke the contracts solely to establish that
Treasury is a controlling shareholder and rely on that conclusion to argue that it has a fiduciary
duty based on state law. The contract, otherwise stated, is one step removed from the purported
genesis of the fiduciary duty—the application of state-law principles. That gap is too much in
light of the court’s obligation to narrowly construe the Tucker Act’s waiver of sovereign
immunity. See Smith, 855 F.2d at 1552 (noting that the Tucker Act is narrowly construed); see
also Perry II, 864 F.3d at 619-20 (rejecting the legal theory that the Enterprises’ shareholders’
need to reference the PSPAs for their fiduciary duty claim was enough to conclude that the claim
was rooted in a contract for purposes of the Tucker Act).

       25
           The gravamen of plaintiffs’ direct fiduciary duty claim is that the FHFA-C owed a
fiduciary duty to plaintiffs. See 2d Am. Compl. ¶¶ 223-33. Indeed, plaintiffs state in their
complaint that the “FHFA violated its fiduciary duty,” id. ¶¶ 233, and make no similar allegation
with regard to Treasury. Although plaintiffs have not alleged that their direct fiduciary duty
claim is premised on Treasury’s actions, the court nonetheless considers the parties’ arguments
on whether such a claim would be within the court’s jurisdiction for two reasons. First, the
parties have fully briefed the issue without noting the discrepancy between plaintiffs’ arguments
and the allegations in their complaint. Second, the court’s resolution of the issue is immaterial to
the ultimate outcome because, as discussed below, plaintiffs lack standing to pursue their direct
claims.

                                                -31-
        Second, plaintiffs fail to demonstrate the applicability of the state-law principles
underlying their theory for why Treasury assumed fiduciary duties. Federal law governs the
obligations Treasury incurred by entering into the PSPAs. See Boyle v. United Techs. Corp.,
487 U.S. 500, 519 (1988) (“The proposition that federal common law continues to govern the
‘obligations to and rights of the United States under its contracts’ is nearly as old as Erie [v.
Tompkins, 304 U.S. 64 (1938),] itself.”). Although courts may shape federal law by drawing
from state-law principles, plaintiffs do not explain why doing so is appropriate in this instance.

        Third, plaintiffs do not prevail even if their fiduciary duty claim could be founded on a
contract and federal common law incorporates the state-law principles regarding controlling
shareholders’ fiduciary obligations. Under Delaware and Virginia law, a controlling shareholder
owes a fiduciary duty to the minority shareholders. See Ivanhoe Partners v. Newmont Min.
Corp., 535 A.2d 1334, 1344 (Del. 1987); Parsch v. Massey, 79 Va. Cir. 446 (2009); see also
Quadrant Structured Prod. Co. v. Vertin, 102 A.3d 155, 183 (Del. Ch. 2014) (acknowledging that
those “who effectively control a corporation” owe a fiduciary duty to others).26 To have the
requisite level of control, the controlling shareholder must (1) be able to exercise a majority of
the corporation’s voting power or (2) direct the corporation without owning a majority of stock.
Kahn v. Lynch Commc’n Sys., 638 A.2d 1110, 1113 (Del. 1994). The latter, effective exercise
of control, “is not an easy test to satisfy; the individual or group must be, “as a practical
matter, . . . no differently situated than if they had majority voting control.” In re PNB Holding
Co. S’holders Litig., No. CIV.A. 28-N, 2006 WL 2403999, at *9 (Del. Ch. Aug. 18, 2006).
Plaintiffs have not established that Treasury meets either control test. First, plaintiffs do not
allege that Treasury owns any of the Enterprises’ voting stock. Treasury purchased preferred
stock and acquired the right to buy common (i.e., voting) stock, but there is no indication that
Treasury exercised its warrants or otherwise acquired common stock.27 Second, plaintiffs do not
demonstrate that Treasury exercised effective control over the Enterprises. Although Treasury
acquired the right to preclude the Enterprises from taking certain actions, Treasury did not
control the Enterprises because it could not direct any action—it could only respond to certain
requests made by the Enterprises. As a practical matter, therefore, Treasury is situated
differently than if it had majority voting power.

        In sum, plaintiffs’ direct fiduciary duty claim is a tort claim because plaintiffs have not
established that the FHFA-C or Treasury owed shareholders a fiduciary duty based on a statute

       26
          The court refers to Delaware and Virginia law because Fannie is a Delaware
corporation, and Freddie is a Virginia corporation. When evaluating Virginia law, the court also
looks to Delaware state court decisions because Virginia courts do so to resolve unsettled issues
in the Commonwealth. E.g., U.S. Inspect Inc. v. McGreevy, No. 160966, 2000 WL 33232337, at
*4 (Va. Cir. Ct. Nov. 27, 2000).
       27
            Even if Treasury had exercised its option to buy a majority of the voting stock, it
would not be a controlling shareholder because the FHFA-C succeeded to all of the shareholders’
rights. See 12 U.S.C. § 4617(b)(2)(A) (noting that the FHFA-C, by operation of law, succeeds to
all rights and powers of any Enterprise shareholder). Treasury, therefore, would have no voting
power.

                                                -32-
or contract. The court, therefore, dismisses count VII—breach of fiduciary duty—because it
lacks jurisdiction over tort claims.

             2. Plaintiffs’ takings and illegal-exaction claims do not sound in tort.

        Defendant also argues that plaintiffs’ Fifth Amendment takings and illegal-exaction
claims sound in tort because they are premised on purported misconduct by the FHFA-C.
Plaintiffs counter that they have pleaded the predicates for takings and illegal-exaction claims,
which means that it is irrelevant whether they also alleged facts that are germane to tortious
actions.

         When a party pleads the predicates for a takings claim or illegal-exaction claim, the court
possesses jurisdiction to entertain such claims. See Hansen v. United States, 65 Fed. Cl. 76, 80-
81 (2005) (“[S]o long as there is some material evidence in the record that establishes the
predicates for a [claim covered by the Tucker Act,] . . . a plaintiff succeeds in demonstrating
subject matter jurisdiction in this court . . . .”). Those claims, at a basic level, are contentions
that the government expropriated private property lawfully (takings) or unlawfully (illegal
exaction). See Orient Overseas Container Line (UK) Ltd. v. United States, 48 Fed. Cl. 284, 289
(2000) (“Takings claims arise because of a deprivation of property that is authorized by law.
Illegal exactions arise when the government requires payment in violation of the Constitution, a
statute, or a regulation.” (citation omitted)). If a party alleges the necessary predicates for these
claims, the court is not deprived of jurisdiction even if the complaint contains allegations that
could support a tort claim. See El-Shifa Pharm. Indus. Co. v. United States, 378 F.3d 1346, 1353
(Fed. Cir. 2004) (“That the complaint suggests the United States may have acted tortiously
towards the appellants does not remove it from the jurisdiction of the Court of Federal Claims.”);
Rith Energy, Inc. v. United States, 247 F.3d 1355, 1365 (Fed. Cir. 2001) (explaining that this
court has jurisdiction over a takings claim “even if the government’s action was subject to legal
challenge on some other ground”). Here, plaintiffs plead the predicates for takings and illegal-
exaction claims by alleging, in essence, that they were forced to give their property to the
government because of lawful or unlawful government conduct. Therefore, it is of no import to
the court’s jurisdiction whether plaintiffs have alleged facts that would also support a tort claim.

    E. The court lacks jurisdiction over plaintiffs’ direct implied-in-fact-contract claim
          because plaintiffs are not third-party beneficiaries of such a contract.

        Defendant argues next that the court lacks jurisdiction to entertain plaintiffs’ direct
implied-in-fact-contract claim because plaintiffs are not third-party beneficiaries of such a
contract.28 Specifically, defendant asserts that plaintiffs have not established that they are
intended beneficiaries independent of their status as shareholders and that any benefit that is
related to their status as shareholders is insufficient for jurisdiction. Plaintiffs counter that they

        28
            In its notice of arguments, defendant explains that it is arguing in its motion to dismiss
that plaintiffs’ direct and derivative contract claims should be dismissed. But, after a review of
that motion, it is apparent that defendant limited its argument to plaintiffs’ direct contract claim,
count X. The court, therefore, only considers that issue and reserves judgment on whether it has
jurisdiction over the derivative contract claims.

                                                  -33-
are intended third-party beneficiaries of implied contracts, between the FHFA and each
Enterprise’s board, in which the boards consented to the conservatorships in exchange for the
FHFA-C operating the Enterprises as a fiduciary and returning them to sound condition.
Specifically, plaintiffs assert that the intent to benefit the shareholders is evident from (1) the
boards’ consent to the conservatorships because shareholders would benefit from a conservator
focused on returning the Enterprises to a better condition, and (2) the government acknowledging
that the Enterprises’ stock would remain outstanding while the Enterprises were in
conservatorship.

        The court’s jurisdiction over contract claims is limited by the Tucker Act. Ransom v.
United States, 900 F.2d 242, 244 (Fed. Cir. 1990). Of particular import here, ordinarily, a
plaintiff must be in privity of contract with the United States to invoke this court’s jurisdiction
over a contract claim against the government. Fid. & Guar. Ins. Underwriters, Inc. v. United
States, 805 F.3d 1082, 1087 (Fed. Cir. 2015). But privity is not required if “the plaintiff can
demonstrate that it was an intended third-party beneficiary under the contract.” Pac. Gas & Elec.
Co. v. United States, 838 F.3d 1341, 1361 (Fed. Cir. 2016).

        “Third party beneficiary status is an ‘exceptional privilege.’” Glass v. United States, 258
F.3d 1349, 1354 (Fed. Cir. 2001) (quoting German All. Ins. Co. v. Home Water Supply Co., 226
U.S. 220, 230 (1912)). The conditions for attaining such status are “stringent.” Anderson v.
United States, 344 F.3d 1343, 1352 (Fed. Cir. 2003). “[S]hareholders seeking status to sue as
third-party beneficiaries of an allegedly breached contract must ‘demonstrate that the contract
not only reflects the express or implied intention to benefit the party, but that it reflects an
intention to benefit the party directly.’” Castle v. United States, 301 F.3d 1328, 1338 (Fed. Cir.
2002) (quoting Glass, 258 F.3d at 1354). Specifically, “the contract must express the intent of
the promissor to benefit the shareholder personally, independently of his or her status as
shareholder.” Glass, 258 F.3d at 1353-54. As a practical matter, the shareholder does not
personally benefit independent of its status as a shareholder when the contractual promises
pertain only to the treatment of the company. See FDIC v. United States, 342 F.3d 1313, 1320
(Fed. Cir. 2003) (noting that the broken promises concerned the treatment of the company such
that the plaintiffs did not benefit independent of their status as shareholders); accord Maher v.
United States, 314 F.3d 600, 605 (Fed. Cir. 2002) (concluding that the plaintiffs were not third-
party beneficiaries when they failed to “establish[] that the government took on any obligations
in the merger agreement for [the plaintiffs’] personal benefit, or even that the merger agreement
contains any provisions pertaining to [the plaintiffs] personally”).

         As plaintiffs are not parties to the alleged implied contracts between the FHFA and the
Enterprises, the relevant issue is whether plaintiffs are third-party beneficiaries of those
agreements. They are not. First, it is of no import that the Enterprises, as plaintiffs argue,
purportedly agreed to the conservatorships because that would serve the interests of
shareholders. Indeed, “every action of a corporation is supposed to benefit its shareholders,” but
the “law has not viewed this general benefit as making every shareholder a third-party
beneficiary.” Suess v. United States, 33 Fed. Cl. 89, 94 (1995). Second, plaintiffs’ allegations
reflect that they only benefit from the alleged implied contracts by virtue of their shareholder
status. The relevant promises concerned how the FHFA-C would operate the Enterprises; the
crux of the purported agreements was the FHFA-C promising to operate the Enterprises as a

                                               -34-
fiduciary to preserve their assets and return them to sound condition. Because the promises in
the alleged implied contracts were directed at the Enterprises, plaintiffs cannot be third-party
beneficiaries of the alleged contract. See FDIC, 342 F.3d at 1320. Third, plaintiffs have not
demonstrated that the FHFA intended that plaintiffs benefit independently of their status as
shareholders even if they did so benefit. Plaintiffs rely on the FHFA’s statements that private
stock would remain outstanding and shareholders would continue to hold an economic interests
in their stock. Those factual statements, however, do not reflect that the FHFA intended to
confer any specific benefit on plaintiffs independent of their role as shareholders. Because
plaintiffs have not alleged facts reflecting that the FHFA intended to confer a personal benefit on
them, they are not third-party beneficiaries. See Glass, 258 F.3d at 1353-54. In sum, the court
lacks jurisdiction to entertain plaintiffs’ direct implied-contract claim because plaintiffs are
neither parties to a contact with the government nor third-party beneficiaries of any such
agreement. Therefore, the court dismisses count X.

                                          V. STANDING

         In addition to asserting that the court lacks subject-matter jurisdiction to entertain
plaintiffs’ claims, defendant challenges plaintiffs’ standing to pursue their claims. A plaintiff
bears the burden of demonstrating that it has standing for each claim. Starr Int’l Co. v. United
States, 856 F.3d 953, 964 (Fed. Cir. 2017). It must establish, among other things, that it is
“assert[ing its] own legal rights and interests, and cannot rest [its] claim[s] to relief on the legal
rights or interests of third parties.” Kowalski v. Tesmer, 543 U.S. 125, 129 (2004). Further, the
label assigned to a claim is irrelevant; it is the substance of the allegations that control. See
Allen v. Wright, 468 U.S. 737, 752 (1984) (“[T]he standing inquiry requires careful examination
of a complaint’s allegations to ascertain whether the particular plaintiff is entitled to an
adjudication of the particular claim asserted.”), abrogated on other grounds by Lexmark Int’l,
Inc. v. Static Control Components, Inc., 572 U.S. 118 (2014). Thus, in a suit brought by
shareholders, it is the substance of the allegations and not the label assigned to the allegations—
i.e., direct or derivative—that matters. See Starr, 856 F.3d at 966-67; see also In re Sunrise Sec.
Litig., 916 F.2d 874, 882 (3d Cir. 1990) (“Whether a claim is [direct] or derivative is determined
from the body of the complaint rather than from the label employed by the parties.”). A
shareholder lacks standing to litigate nominally direct claims that are substantively derivative in
nature because its personal request for relief would be based on the rights of the company. See
Starr, 856 F.3d at 966-67; see also Weir v. Stagg, No. 09-21745-CIV, 2011 WL 13174531, at *9
(S.D. Fla. Feb. 7, 2011) (“Shareholders do not have standing to bring a direct action for injuries
suffered by a corporation, but rather, must bring a derivative action.”). A shareholder, therefore,
must establish that the claims it labeled as direct are substantively direct in nature—i.e.,
premised on its injuries rather than the corporation’s injuries—to have standing to litigate those
claims. See Starr, 856 F.3d at 966-67.

         The parties disagree on whether plaintiffs have standing to litigate any of their claims.
Defendant argues that plaintiffs who purchased stock after the PSPA Amendments lack standing
to litigate their Fifth Amendment takings claims, all plaintiffs lack standing to litigate what they
assert as direct claims because the underlying rights belong to the Enterprises, and Mr. Barrett
lacks standing for his derivative claims because the right to bring such claims was transferred to
the FHFA-C. The court addresses each argument in turn.

                                                 -35-
  A. Plaintiffs who purchased stock after the PSPA Amendments lack standing to litigate
                                their direct takings claim.

        Defendant first argues that plaintiffs who did not own stock in the Enterprises at the time
of the PSPA Amendments lack standing to pursue direct or derivative takings claims.29 Plaintiffs
counter that the court does not need to resolve the standing issue now because a case can proceed
if one of the claimants has standing, and some of the plaintiffs indisputably have standing by
virtue of buying stock before the execution of the PSPA Amendments. Plaintiffs also argue that
they all have standing regardless of when they bought the shares. Relying on Bailey v. United
States, 78 Fed. Cl. 239 (2007), plaintiffs contend that postamendment purchasers have standing
because the government effectuated a permanent regulatory taking that it can transform into a
temporary taking by changing the terms of the PSPAs. Plaintiffs also assert that they have
standing regardless of the stock purchase date because each payment under the PSPA
Amendments constitutes a new taking. In its reply, defendant asserts that the court should
address standing now to conserve judicial resources, read Bailey as limited to regulatory takings
of real property, and conclude that the only potential taking occurred on the date of the PSPA
Amendments.

        As an initial matter, it is appropriate to address at this time whether plaintiffs who
purchased stock after the PSPA Amendments have standing even if those who purchased stock
before the PSPA Amendments have standing. Although courts occasionally reserve judgment on
standing issues when at least one claimant has standing, they only do so when each plaintiff is
seeking the same relief. See, e.g., Rumsfeld v. Forum for Acad. & Institutional Rights, Inc., 547
U.S. 47, 52 & n.2 (2006) (seeking invalidation of a statute); Bowsher v. Synar, 478 U.S. 714,
721 (1986) (same); Doe v. Bolton, 410 U.S. 179, 189 (1973) (same); Bachelder v. Am. W.
Airlines, Inc., 259 F.3d 1112, 1118 n. 1 (9th Cir. 2001) (holding that the question of a husband’s
standing to sue based on his community property interest was irrelevant because his wife
“unquestionably has standing to sue, and [his] presence as a plaintiff has no effect on the relief
available”). Otherwise stated, the existence of one party with standing is sufficient when the
standing of the other parties has no effect on the merits of the claims. See Ry. Labor Executives’
Ass’n v. United States, 987 F.2d 806, 810 (D.C. Cir. 1993) (“[T]he Supreme Court has

       29
           Defendant also purports to argue that plaintiffs lack standing to pursue illegal-exaction
and breach-of-contract claims if they did not own stock in the Enterprises at the time of the
PSPA Amendments. But defendant presents no argument with respect to the illegal-exaction
claims and fails to substantively develop an argument as to the breach-of-contract claims.
Indeed, defendant merely asserts with respect to the contract claim that a plaintiff cannot bring
such a claim until it is a party to a contract. This single sentence in defendant’s motion to
dismiss, coupled with its failure to address the issue in its reply, is not enough to form a
substantive argument given that plaintiffs allege that they are parties to a contract. Simply
stated, defendant fails to develop any argument as to why plaintiffs who acquired stock after the
PSPA Amendments lack standing to pursue illegal-exaction or breach-of-contract claims. The
court, therefore, declines to consider the nominal arguments. See SmithKline Beecham Corp. v.
Apotex Corp., 439 F.3d 1312, 1320 & n.9 (Fed. Cir. 2006) (noting that the court has discretion
on whether to consider undeveloped arguments).

                                                -36-
repeatedly held that if one party has standing in an action, a court need not reach the issue of the
standing of other parties when it makes no difference to the merits of the case.”). Here, a
determination of standing affects the merits of plaintiffs’ claims because each plaintiff is seeking
its own monetary relief, and a plaintiff is not entitled to such relief if it lacks standing.
Therefore, the court will address the standing dispute.

         The court begins with the derivative takings claims. A derivative claim, as noted above,
is a claim that is brought on behalf of the corporation. It is of no import, therefore, when a
shareholder asserting a derivative claim bought the stock so long as the real party in interest—the
corporation—had a property interest at the time of the alleged taking. Thus, in this case, so long
as the Enterprises had a property interest in their net worth on the date of the PSPA Amendments
(and there is no suggestion they did not), then any shareholder could have standing to pursue a
derivative claim. Moreover, plaintiffs have alleged that Mr. Barrett—the plaintiff asserting the
derivative claims—owned stock at the time of the alleged taking.

        The court next turns to plaintiffs’ direct takings claim. Assuming that plaintiffs have
properly asserted a direct takings claim, the issue is whether those plaintiffs who acquired stock
after the date of the alleged taking have standing to pursue a takings claim. Plaintiffs
acknowledge that a claimant must ordinarily own the property at the time of a taking to have
standing. They assert, however, that the court should follow the conclusion in Bailey that a
different standard applies in the context of a regulatory taking. Plaintiffs’ reliance on Bailey, a
decision issued by another judge on this court, is ill-considered. The Federal Circuit, when
presented, post-Bailey, with an alleged regulatory taking, explained that “[i]t is axiomatic that
only persons with a valid property interest at the time of the taking are entitled to compensation.”
Reoforce, Inc. v. United States, 853 F.3d 1249, 1263 (Fed. Cir. 2017) (quoting Wyatt v. United
States, 271 F.3d 1090, 1096 (Fed. Cir. 2001)); accord id. (“[P]recedent requires that the property
owner prove its ownership at the time of the alleged taking . . . .”); Wyatt, 271 F.3d at 1096
(addressing regulatory takings). It follows that a “plaintiff [who] own[s] no shares of the subject
stock on the date of taking . . . maintains no standing to sue.” Maniere v. United States, 31 Fed.
Cl. 410, 421 (1994); cf. Reoforce, 853 F.3d at 1263 (concluding that the plaintiff had standing
for a takings claim despite relinquishing property owned on the date of the purported taking
before filing the lawsuit). Applying that principle, the court concludes that any plaintiff who did
not own stock at the time of the alleged taking lacks standing to assert a direct takings claim.30

        Having concluded that plaintiffs only have standing to pursue a direct takings claim if
they owned stock at the time of the purported taking, the next issue is determining when the
taking occurred. Plaintiffs contend that a new takings claim accrues with each payment under
the PSPA Amendments, and defendant counters that a takings claim accrued only when the

       30
           Plaintiffs’ approach would provide them with a windfall: They would acquire the
stock at a price that reflects a discount for the property taken by the government and then obtain
compensation from the government for the diminishment in value of their stock. That result is
incompatible with the notion of just compensation that underlies the Fifth Amendment’s Takings
Clause.

                                                -37-
FHFA-C agreed to the PSPA Amendments.31 The court agrees with defendant. There is only
one taking when a “single governmental action causes a series of deleterious effects, even though
those effects may extend long after the initial governmental [action].”32 Boling v. United States,
220 F.3d 1365, 1373 (Fed. Cir. 2000). Here, there is one event that caused all of plaintiffs’
purported losses: the execution of the PSPA Amendments. It is of no import to the accrual of
plaintiffs’ direct takings claim that, based on the PSPA Amendments, the Enterprises make
regular payments to Treasury because those payments are just the consequences of the PSPA
Amendments. Simply stated, plaintiffs’ direct takings claim accrued on the date of the PSPA
Amendments—August 17, 2012—and new claims do not accrue for each payment under those
agreements.

        In sum, Mr. Barrett’s standing to litigate his derivative taking claim is not affected by
when he first purchased stock in the Enterprises, and plaintiffs who did not own stock in the
Enterprises on August 17, 2012, lack standing to litigate their direct takings claim. The parties,
however, have not provided the court with sufficient information for it to determine which
plaintiffs did not own stock in the Enterprises as of that date. Ordinarily, the court would seek
additional information from the parties to resolve that issue. But the court does not do so here
because, for the reasons stated below, each plaintiff’s direct takings claim is subject to dismissal
for another reason.

B. Plaintiffs lack standing to litigate their nominally direct claims because those claims are
                              substantively derivative in nature.

        Defendant further argues that plaintiffs lack standing to litigate the claims they styled as
direct claims because, notwithstanding the labels, the claims are actually derivative in nature.
Defendant contends that plaintiffs’ “direct” claims are actually derivative because, to prevail,
plaintiffs would need to establish an injury to the Enterprises and any relief would accrue to the
Enterprises. Plaintiffs counter that they assert direct claims because the government (1) targeted
private shareholders and (2) discriminated against them by rearranging the Enterprises’ capital
structure to plaintiffs’ detriment, which renders the claims for such conduct both direct and
derivative under the dual-nature exception.33 Defendant replies that the Federal Circuit rejected

       31
           Although plaintiffs argue in response to defendant’s motion to dismiss that each
payment under the PSPA Amendments constitutes a taking, their allegations in the second
amended complaint reflect a theory of taking premised on the execution of the PSPA
Amendments. See 2d Am. Compl. ¶¶ 166-74. Nonetheless, the court considers their argument
for standing as if they did allege that each payment constitutes a taking.
       32
           For example, in Fallini v. United States, landowners asserted a taking based on a
statute that required them to allow wild horses to drink water that was kept on their property. 56
F.3d 1378, 1383 (Fed. Cir. 1995). The landowners argued that each drink taken by a horse on
their property amounted to a new taking. Id. The Federal Circuit disagreed; it held that the
takings claim accrued once, when the relevant statute was enacted. Id.
       33
          Plaintiffs also assert that their claims must be construed as direct claims to vindicate
important federal policies if shareholders cannot assert derivative claims because of HERA. The
                                                -38-
the notion that a plaintiff states a direct claim by alleging it was targeted by the challenged
action. Defendant also contends that the dual-nature exception is not applicable because
Treasury was not a controlling shareholder, the Enterprises did not issue new shares, and the
PSPA Amendments did not involve the reallocation of power.

        Plaintiffs do not satisfy their burden of establishing standing for the claims that they are
pursuing on their own behalf (their “direct” claims). Neither theory they advance for why those
claims are substantively direct, rather than derivative, is persuasive. First, it is of no import
whether the government targeted shareholders with the PSPA Amendments. See Starr, 856 F.3d
at 973 (noting that plaintiffs did not “sufficiently explain why the Government’s subjective
motivations are relevant to the inquiry into direct standing”). The direct-versus-derivative
inquiry “turns on the plaintiff’s injury, not the defendant’s motive.” Pagan v. Calderon, 448 F.3d
16, 30 (1st Cir. 2006). Second, plaintiffs have not asserted claims that qualify as both direct and
derivative based on the dual-nature exception. The Federal Circuit explained that, pursuant to
this exception, shareholder claims may be both direct and derivative “when a ‘reduction in [the]
economic value and voting power affected the minority stockholders uniquely . . . .” Starr, 856
F.3d at 968 (quoting Gentile v. Rossette, 906 A.2d 91, 99 (Del. 2006)). Specifically, shareholder
claims are both direct and derivative if

         “(1) a stockholder having majority or effective control causes the corporation to
         issue ‘excessive’ shares of its stock in exchange for assets of the controlling
         stockholder that have a lesser value,” and “(2) the exchange causes an increase in
         the percentage of the outstanding shares owned by the controlling stockholder,
         and a corresponding decrease in the share percentage owned by the public
         (minority) shareholders.”

Id. (quoting Gentile, 906 A.2d at 100). The exception does not apply here because Treasury was
not a controlling shareholder at the time the PSPA Amendments were executed,34 the PSPA
Amendments did not involve the issuance of new shares, and shareholder voting power was not
reallocated under the PSPA Amendments. It is not enough, contrary to plaintiffs’ contention,
that the government allegedly exacted economic value from the other shareholders by
rearranging the corporate structure. See El Paso Pipeline GP Co. v. Brinckerhoff, 152 A.3d
1248, 1264 (Del. 2016) (applying Gentile and holding a plaintiff does not state a direct claim
under the dual-nature exception by pleading the “extraction of solely economic value from the
minority by a controlling stockholder”). Because plaintiffs have not established that their
“direct” claims are substantively direct in nature, they cannot demonstrate that they have
standing to litigate those claims.

       Plaintiffs fare no better if the court moves beyond their arguments for why their “direct”
claims are substantively direct in nature. Federal law governs whether plaintiffs’ claims are

court does not consider this argument because, as explained below, plaintiffs can assert
derivative claims.
         34
              Treasury is not a controlling shareholder for the reasons set forth in Section IV.D.1,
supra.

                                                   -39-
direct or derivative. See Starr, 856 F.3d at 965. But, as the parties acknowledge, federal law in
this area is informed by Delaware law. Id.; see also Kamen v. Kemper Fin. Servs., Inc., 500 U.S.
90, 97 (1991) (noting the “presumption that state law should be incorporated into federal
common law”). Under Delaware law, the test for whether a shareholder’s claim is derivative or
direct depends on the answers to two questions: “(1) who suffered the alleged harm (the
corporation or the suing stockholders, individually); and (2) who would receive the benefit of
any recovery or other remedy (the corporation or the stockholders, individually)?” Tooley v.
Donaldson, Lufkin & Jenrette, Inc., 845 A.2d 1031, 1033 (Del. 2004) (en banc). “Normally,
claims of corporate overpayment are . . . regarded as derivative [because] . . . the corporation is
both the party that suffers the injury (a reduction in its assets or their value) as well as the party
to whom the remedy (a restoration of the improperly reduced value) would flow.” Gentile, 906
A.2d at 99, discussed in Starr, 856 F.3d at 965. Such claims are derivative even “though the
overpayment may diminish the value of the corporation’s stock or deplete corporate assets that
might otherwise be used to benefit the stockholders, such as through a dividend.” Protas v.
Cavanagh, No. CIV.A. 6555-VCG, 2012 WL 1580969, at *6 (Del. Ch. May 4, 2012); see also
Hometown Fin. Inc. v. United States, 56 Fed. Cl. 477, 486 (2003) (“[C]ourts have consistently
held that shareholders lack standing to bring cases on their own behalf where their losses from
the alleged injury to the corporation amount to nothing more than a diminution in stock value or
a loss of dividends.”).

         In their complaint, plaintiffs focus on the expropriation of the Enterprises’ assets via
compulsory payments of all profits. The gravamen of each claim is the same: The government,
via the PSPA Amendments, compelled the Enterprises to overpay Treasury. Regardless of
plaintiffs’ label (direct or derivative) or theory (taking, illegal exaction, breach of fiduciary duty,
or breach of implied contract) for their claims, the claims are substantively derivative in nature
because they are premised on allegations of overpayment.35 See Gentile, 906 A.2d at 99; see
also Roberts, 889 F.3d at 409 (explaining that the plaintiffs asserted “classic derivative claims”
when they alleged that “the [PSPA Amendments] illegally dissipated corporate assets by
transferring them to Treasury”). Plaintiffs cannot transform their substantively derivative claims
into direct claims by merely alleging that, as a result of overpayments, they were deprived of
their stockholder rights to receive dividends or liquidation payments. The claims remain
derivative because plaintiffs’ purported “harms are ‘merely the unavoidable result . . . of the
reduction in the value of the entire corporate entity.’” Protas, 2012 WL 1580969, at *6 (quoting

       35
           Plaintiffs would remain unsuccessful if their allegations of waste and mismanagement
(styled as self dealing, overreach, or abuse of discretion) were construed to be indicative of some
action other than overpayment. Any claims premised on waste and mismanagement are
derivative in nature. Kramer v. W. Pac. Indus., Inc., 546 A.2d 348, 353 (Del. 1988) (noting that
“mismanagement resulting in corporate waste, if proven represents a direct wrong to the
corporation . . . [that] is entirely derivative in nature”). Plaintiffs’ claims are also derivative in
nature to the extent that they are premised on (1) a purported reduction in share price as a
consequence of the Enterprises losing assets or (2) the FHFA-C acting unfairly by agreeing to
transfer profits pursuant to the PSPA Amendments. See Hometown, 56 Fed. Cl. at 486 (stock
prices); In re Straight Path Commc’ns Inc. Consol. S’holder Litig., No. CV 2017-0486-SG, 2017
WL 5565264, at *4 (Del. Ch. Nov. 20, 2017) (“Sale of corporate assets to a controller for an
unfair price states perhaps the quintessential derivative claim . . . .”).

                                                 -40-
Gentile, 906 A.2d at 99); see also Agostino v. Hicks, 845 A.2d 1110, 1122 (Del. Ch. 2004)
(“[T]he inquiry should focus on whether an injury is suffered by the shareholder that is not
dependent on a prior injury to the corporation.”). Because plaintiffs’ claims are derivative in
nature, plaintiffs lack standing to pursue those claims on their own behalf.

        In sum, plaintiffs have not established that they have standing to litigate the claims they
label as direct because they do not, and cannot, demonstrate that those claims are substantively
direct claims. Therefore, the court dismisses plaintiffs’ nominally direct claims on standing
grounds to the extent that it has subject-matter jurisdiction over those claims.36

                   C. Mr. Barrett has standing to litigate derivative claims.

         1. Mr. Barrett is not collaterally estopped from litigating whether he has standing
                                 to litigate derivative claims.

         Defendant also argues that Mr. Barrett, the lone plaintiff asserting derivative claims, is
collaterally estopped from litigating whether shareholders have standing to bring derivative
claims because shareholders of each Enterprise previously litigated and lost that issue in
Perry I.37 Plaintiffs disagree. First, plaintiffs assert that the issue here is different than the issue
in Perry I because Mr. Barrett is asserting constitutional claims (which were not pleaded in Perry
I), and the district court was not bound by this jurisdiction’s binding precedent. Second,
plaintiffs contend that Mr. Barrett lacks privity with the Perry I plaintiffs because the district
court concluded those litigants lacked capacity to sue on behalf of the Enterprises. Third,
plaintiffs assert that two exceptions to collateral estoppel apply: The standing issue is a matter of
general interest that has not been resolved by the Supreme Court, and there is no preclusion if the
prior decision conflicts with binding precedent.

        A party can be collaterally estopped from litigating “an issue if an identical issue was
actually litigated and necessarily decided in a prior case where the interests of the party to be
precluded were fully represented.” Simmons v. Small Bus. Admin., 475 F.3d 1372, 1374 (Fed.
Cir. 2007); see also In re Freeman, 30 F.3d 1459, 1467 (Fed. Cir. 1994) (acknowledging that a
court may decline to apply issue preclusion when doing so would be unfair). “The party
asserting issue preclusion bears the burden to establish each of these elements.” Jones v. United
States, 846 F.3d 1343, 1361 (Fed. Cir. 2017). As germane to the instant case, a shareholder’s
interests are fully represented by another shareholder litigating a derivative suit on behalf of the
corporation because the corporation is the real party in interest. See, e.g., Arduini v. Hart, 774
F.3d 622, 634 (9th Cir. 2014) (“Shareholders bringing derivative suits are in privity for the
purposes of issue preclusion.”). A shareholder’s interests, however, are not fully represented by

        36
           As explained above, the court lacks jurisdiction over plaintiffs’ self-styled direct
claims for breach of fiduciary duty and breach of implied contract. See supra Sections IV.D.1
(fiduciary duty), IV.E (contract).
        37
            The court uses “collateral estoppel” and “issue preclusion” to refer to the same
principle. See Jet, Inc. v. Sewage Aeration Sys., 223 F.3d 1360, 1366 (Fed. Cir. 2000) (noting
that the terms are used interchangeably).

                                                 -41-
the litigant in the earlier case if that litigant lacked capacity to sue on the corporation’s behalf.38
See 7C Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1840 (3d. ed.
2019) (“[A]ny dismissal or judgment that is not on the merits but that relates to the
representative’s capacity to bring the suit . . . will not bar other stockholders from bringing a
derivative action.”); see also Sonus Networks, 499 F.3d at 64 (allowing preclusion “[i]f the
shareholder can sue on the corporation’s behalf”).

        In Perry I, shareholders of both Enterprises asserted derivative, nonconstitutional claims
on behalf of the Enterprises. 70 F. Supp. 3d at 229. The district court explained that Congress,
via HERA, transferred shareholders’ rights to bring derivative suits to the FHFA-C and an
exception to the bar on shareholders bringing such suits would contravene the plain language of
the statute. Id. at 230-32. Therefore, the district court concluded that the Perry I plaintiffs
lacked capacity to pursue derivative claims on behalf of the Enterprises and dismissed those
claims. Id. at 233.

        Defendant is correct that Mr. Barrett is attempting to litigate the same issue that was
actually litigated and necessarily decided in Perry I. First, the issue here is the same as the one
presented in Perry I: whether, in light of HERA, shareholders of an Enterprise can litigate a
derivative a claim on an Enterprise’s behalf. It is of no import that Perry I concerned
nonconstitutional claims, while Mr. Barrett asserts both constitutional and nonconstitutional
claims. See Taylor v. Sturgell, 553 U.S. 880, 892 (2008) (noting that preclusion applies “even if
the issue recurs in the context of a different claim”). Plaintiffs fare no better by arguing that the
issue is different because the district court was not bound by the same precedent that applies in
this court. This exception, if accepted, would swallow the rule by limiting preclusion to courts
within the same circuit. Such a limitation runs contrary to the goals of collateral estoppel:
“protect[ing parties] from the expense and vexation attending multiple lawsuits, conserving
judicial resources, and foster[ing] reliance on judicial action by minimizing the possibility of
inconsistent decisions.” Montana v. United States, 440 U.S. 147, 153-54 (1979). Second, the
issue here was actually decided in Perry I. See 70 F. Supp. 3d at 230-33. Third, the resolution of
a shareholder’s capacity to sue was a necessary part of that decision because defendant had
moved to dismiss for lack of standing. Id. at 219.

        Although defendant has established the first three elements of issue preclusion, it has not
established the fourth element: whether Mr. Barrett’s interests were adequately represented in
the prior case.39 As noted above, shareholders’ interests are adequately represented by other

        38
            Defendant challenges this framing of the law by relying on decisions in which courts
addressed the preclusive effect of dismissals in derivative suits for litigants’ failure to satisfy the
requirement for demand futility. See, e.g., In re Sonus Networks, Inc, S’holder Derivative Litig.,
499 F.3d 47, 64 (1st Cir. 2007). But those decisions involved litigants who, notwithstanding
their failure to comply with the specific procedural requirements, had the capacity to sue. See
generally id. at 47-71. In contrast, the district court in Perry I concluded that the shareholders in
that case lacked the capacity to bring the derivative claims they asserted. 70 F. Supp. 3d at 233.
        39
           The court’s conclusion is buttressed by the fact that, following Perry I, other courts
have adjudicated derivative claims brought by Fannie and Freddie shareholders without relying
on issue preclusion. See, e.g., Saxton v. Fed. Hous. Fin. Agency, 245 F. Supp. 3d 1063, 1075
                                                 -42-
shareholders litigating a derivative claim when the litigating shareholders can and do sue on
behalf of the company. Such litigation did not occur in Perry I; the district court concluded that
the shareholders lacked capacity to litigate derivative claims on behalf of the Enterprises.
Because the Perry I plaintiffs lacked capacity to represent the Enterprises, the decision affecting
those litigants has no bearing on the Enterprises or the rights of the other shareholders who were
not parties to that suit. Therefore, Mr. Barrett is not collaterally estopped from litigating
standing in this case by the decision in Perry I.40

2. Mr. Barrett has standing to litigate derivative claims because the FHFA-C has a conflict
                                         of interest.

         Independent of any issue preclusion, defendant argues that Mr. Barrett lacks standing to
litigate derivative claims because Congress transferred to the FHFA-C the right to bring
derivative claims on behalf of the Enterprises. Defendant asserts that Congress stripped the
shareholders of the right to bring derivative suits by including in HERA a succession clause—a
provision stating that the FHFA-C succeeds to all shareholder rights with respect to the
Enterprises. Defendant further contends that the court should not recognize an exception to that
rule when the FHFA-C has a conflict of interest because an exception is not supported by
HERA’s language and would frustrate Congress’s intent to insulate the conservator from judicial
scrutiny by allowing shareholders to challenge the FHFA-C’s decisions. Defendant avers that
the Federal Circuit’s decision in First Hartford Corp. Pension Plan & Trust v. United States, 194
F.3d 1279, 1282 (Fed. Cir. 1999), which recognized a conflict-of-interest exception in a similar
statute, is inapplicable because the Federal Circuit limited its ruling to receiverships and claims
that predated the receivership.

         Plaintiffs counter that Mr. Barrett can maintain derivative claims on behalf of the
Enterprises despite the apparent prohibition in HERA. They argue that the court cannot interpret
HERA to preclude Mr. Barrett’s derivative takings and illegal-exaction claims because
eliminating a remedy for constitutional transgressions violates due process. They also argue,
relying on First Hartford, that Mr. Barrett can assert derivative claims because the FHFA-C has a
manifest conflict of interest. Plaintiffs assert that First Hartford is controlling because the
Federal Circuit recognized the conflict exception in the context of a succession clause identical
to the one in HERA. Plaintiffs also contend that First Hartford is not limited to (1) receivers
because the Federal Circuit did not rely on any particular aspect of receivership or
(2) prereceivership claims because the court’s focus was on the receiver’s conflict of interest.

        The initial consideration here—the import of HERA’s succession clause—is matter of
statutory interpretation. As noted above, the court begins with the language of the statute, and if

(N.D. Iowa 2017) (determining whether the plaintiffs had standing after rejecting defendant’s
argument to apply issue preclusion), aff’d, 901 F.3d at 954; cf. Roberts v. Fed. Hous. Fin.
Agency, 243 F. Supp. 3d 950, 957-58 (N.D. Ill. 2017) (addressing the merits of plaintiffs’ claims
despite defendant’s argument that plaintiffs lacked standing), aff’d, 889 F.3d at 397.
       40
           Because defendant did not establish every element of issue preclusion, there is no need
to address plaintiffs’ arguments that an exception to the doctrine is applicable.

                                               -43-
the statutory language is clear, the court’s inquiry is complete. Hughes Aircraft, 525 U.S at 438.
In the succession clause, Congress provided that the FHFA-C “immediately succeed[s] to” every
shareholder’s “rights, titles, powers and privileges . . . with respect to the [Enterprise] and the
assets of the [Enterprise].” 12 U.S.C. § 4617(b)(2)(A). One of the shareholders’ rights with
respect to an Enterprise is the right to bring a derivative suit. See Perry II, 864 F.3d at 624; see
also RCFC 23.1 (limiting derivative suits to shareholders). Therefore, it is apparent that HERA
contains a prohibition on shareholder derivative suits because the right to assert such claims is
transferred to the FHFA-C. Indeed, other courts considering the issue have concluded that there
is such a prohibition. E.g., Kellmer v. Raines, 674 F.3d 848, 850 (D.C. Cir. 2012) (concluding
that Congress “plainly transfer[red] shareholders’ ability to bring derivative suits . . . to FHFA”);
La. Mun. Police Emps. Ret. Sys. v. Fed. Hous. Fin. Agency, 434 F. App’x 188, 191 (4th Cir.
2011) (per curiam) (same). If the court were writing on a blank slate, it would also conclude that
Congress foreclosed shareholders from asserting derivative claims while the Enterprises are in
conservatorship.

        The court, however, is not writing on a blank slate. Rather, it must render a decision in
light of existing precedent—specifically, First Hartford. In First Hartford, the FDIC was serving
as the receiver for Dollar Dry Dock Bank of New York (“Dollar”), and a Dollar shareholder filed
a derivative claim on the bank’s behalf asserting that the FDIC breached a contract with Dollar
before the receivership. 194 F.3d at 1282. A judge on this court dismissed the claim for lack of
standing after explaining that the FDIC was the only entity that could bring derivative claims for
Dollar because, under the relevant statute, the FDIC as receiver succeeded to all shareholder
rights. Id. at 1294. The Federal Circuit disagreed. Id. It acknowledged “that, as a general
proposition, the FDIC’s statutory receivership authority includes the right to control the
prosecution of legal claims on behalf of the [bank] now in its receivership.” Id. at 1295. But the
Federal Circuit, without addressing the statutory language, focused on the purpose of derivative
suits: “permit[ting] shareholders to file suit on behalf of a corporation when the managers or
directors of the corporation, perhaps due a conflict of interest, are unable or unwilling to do so,
despite it being in the best interests of the corporation.” Id. The Federal Circuit reasoned that
the plaintiff had standing because, “most significantly,” of “the conflict of interest faced by the
FDIC in determining whether to bring suit.” Id. Indeed, “the FDIC was asked to decide on
behalf of [Dollar] whether [the FDIC] should sue the federal government based upon a breach of
contract, which if proven was caused by the FDIC itself.” Id. Simply stated, the Federal Circuit
held that a shareholder of a company could bring a derivative claim, notwithstanding a
succession clause, if the company was controlled by an entity with a conflict of interest. Id. at
1283.

         First Hartford is instructive because the Federal Circuit was addressing the same issue
that is present in this case: whether shareholders can assert a derivative claim when there is a
succession clause transferring shareholders’ rights to another entity. See id. at 1294-95. First
Hartford is also informative because Congress, after that case was decided, included in HERA
the same succession clause that was at issue in the Federal Circuit’s decision, compare 12 U.S.C.
§ 1821(d)(2)(A)(i) (1994) (succession clause at issue in First Hartford), with 12 U.S.C.
§ 4617(b)(2)(A)(i) (succession clause promulgated in HERA), and “when judicial interpretations
have settled the meaning of an existing statutory provision, repetition of the same language in a
new statute indicates, as a general matter, Congress’ intent to incorporate such interpretations as

                                                -44-
well,”41 Bragdon v. Abbott, 524 U.S. 624, 626 (1998). But see Perry II, 864 F.3d at 625
(declining to conclude that Congress intended sub silentio to incorporate into HERA the conflict-
of-interest exception recognized by two appellate courts).

        The court is not swayed by defendant’s arguments that First Hartford is distinguishable
because it involved a receiver or claims predating the receivership. The Federal Circuit did not
premise its decision on the unique attributes of receiverships or the timing of the claims; it
concluded that the plaintiffs had standing “only . . . because of the FDIC’s conflict of interest.”
Id. at 1283; accord id. at 1295 (explaining that it held that the plaintiffs had standing based on the
FDIC’s refusal to sue and, “most significantly, upon the conflict of interest faced by the FDIC”).
Defendant fares no better with its argument that First Hartford is not instructive because the
Federal Circuit limited its holding “to the situation . . . in which a government contractor with a
putative claim of breach by a federal agency is being operated by that very same agency.” Id. at
1295. Read in context, the Federal Circuit merely acknowledged that it was “neither infer[ring]
nor express[ing] an opinion” on what other circumstances would involve the necessary conflict
for a shareholder to acquire standing when there is a succession clause. Id. The Federal Circuit
was not stating that the conflict-of-interest exception does not apply in other situations. Indeed,
the court recognized that the exception would apply outside of the circumstance presented in
First Hartford. See id. (“We stress that such standing could only occur in a narrow range of
circumstances.”). The court, therefore, is guided by First Hartford insofar as the necessary
conflict of interest exists.

        The court, having identified the relevant framework, returns its focus to Mr. Barrett’s
derivative claims. Those claims are premised, at least in part, on the FHFA-C’s purported
conduct. Similar to First Hartford, the FHFA-C would need to decide on behalf of the
Enterprises whether it should sue the federal government based on claims, which, if proven, are
rooted in the FHFA-C’s actions. See 194 F.3d at 1295. That decision presents a conflict of
interest for the FHFA-C such that Mr. Barrett has standing to litigate his derivative claims on
behalf of the Enterprises.

                                           VI. MERITS

        In addition to seeking the dismissal of plaintiffs’ claims for lack of subject-matter
jurisdiction and standing, defendant also moves to dismiss plaintiffs’ claims for failure to state a
claim on which relief can be granted. Most of those arguments, however, only concern
plaintiffs’ direct claims. See, e.g., Def.’s Am. Omnibus Mot. to Dismiss 51 (disputing that
shareholders’ economic interest in their stock is a cognizable property right); 55 (contending that
the government did not take shareholders’ rights under their stock certificates); 59 (arguing that
there was no taking because plaintiffs still own the stock at issue); 70 (asserting that the
government did not illegally exact funds because shareholders did not bear any costs that the
government would otherwise be obligated to pay); 72 (disagreeing with plaintiffs’ theory that the

       41
           Before Congress enacted HERA, at least one other appellate court recognized a
conflict-of-interest exception to the limitation on derivative suits resulting from a succession
clause identical to the one that Congress ultimately incorporated into HERA. See Delta Sav.
Bank v. United States, 265 F.3d 1017, 1022-23 (9th Cir. 2001).

                                                -45-
FHFA owed a fiduciary duty to shareholders). But those claims are no longer at issue; the only
claims that remain for adjudication are plaintiffs’ derivative claims. Thus, the court limits its
consideration to defendant’s three contentions concerning plaintiffs’ derivative claims.42

  A. Plaintiffs’ allegations of illegal conduct do not defeat their derivative takings claims.

        Defendant first argues that plaintiffs fail to state plausible takings claims because they
allege that the FHFA-C acted illegally. Specifically, defendant asserts that the claims fail
because unauthorized government conduct cannot effect a taking. Plaintiffs counter that they
merely pleaded in the alternative by alleging that the government is either liable for a taking
(because its actions were lawful) or an illegal exaction (because it acted illegally). Notably,
defendant did not return to this argument in its reply.

        The court is not swayed by defendant’s argument. When the government expropriates
property, a plaintiff can obtain relief under either a takings theory or an illegal-exaction theory.
See Orient Overseas Container Line, 48 Fed. Cl. at 289. Not both. Figueroa v. United States, 57
Fed. Cl. 488, 496 (2003), aff’d, 466 F.3d 1023 (Fed. Cir. 2006). The winning claim depends on
the facts established; a takings claim requires lawful conduct, while an illegal-exaction claim is
premised on unauthorized conduct. Id. Although those claims are mutually exclusive, a plaintiff
can assert both and proceed past the pleading stage because a complaint can contain inconsistent
claims. Id.; accord RCFC 8(d)(3) (“A party may state as many separate claims . . . as it has,
regardless of consistency.”). Having asserted both derivative takings and illegal-exaction claims,
plaintiffs’ allegations of unlawful conduct are insufficient to defeat their derivative takings
claims at this stage.43

       42
            As discussed in Part II, supra, defendant filed an omnibus motion to dismiss the claims
raised by plaintiffs in this case and those raised by other plaintiffs in the related cases. The
plaintiffs in the related cases raised some claims that plaintiffs in this case did not assert in their
complaint. Thus, the court does not address defendant’s arguments concerning those claims that
are only asserted in the related cases.
       43
           The court finds further support for its conclusion in the fact that plaintiffs labeled their
illegal-exaction claims as “alternative” claims in the complaint. Although plaintiffs did not state
in their complaint what the claims are “alternative” to, the “pleading must be construed so as to
do justice.” RCFC 8(e). The court affords justice here by reading the illegal-exaction claims as
an alternative to the takings claims, which appears to be plaintiffs’ intended result given that they
asserted the illegal-exaction claims immediately after the takings claims. Cf. Figueroa, 57 Fed.
Cl. at 496 (construing a takings and illegal-exaction claim as being pleaded in the alternative
even though the plaintiff “did not expressly delineate its taking claim as being advanced ‘in the
alternative’”). That is to say, plaintiffs’ decision to assert both takings claims and illegal-
exaction claims is a textbook example of pleading inconsistent claims—a strategy that is
explicitly contemplated by the court’s rules.

                                                 -46-
B. Plaintiffs’ derivative illegal-exaction claims survive because defendant does not address
   each theory plaintiffs proffer for why the PSPA Amendments were not authorized.

        Next, defendant frames plaintiffs’ illegal-exaction claims as premised on a violation of
HERA and argues that plaintiffs have not alleged any unauthorized conduct because the FHFA-C
and Treasury acted within their authority under HERA when they approved the PSPA
Amendments. Plaintiffs counter that they identified three reasons why the revisions to the
PSPAs were illegal. Specifically, plaintiffs argue that they allege that (1) the FHFA-C and
Treasury exceeded their authority under HERA, (2) the FHFA-C violated its own regulations,
and (3) the FHFA-C’s approval of the PSPA Amendments was unconstitutional because the
FHFA is structured in a manner that violates separation-of-powers principles. Plaintiffs also note
that defendant failed to even address the allegations of unconstitutional conduct. Defendant uses
its reply brief to double down on its argument that the FHFA-C and Treasury acted within their
statutory authority and to add a contention that the FHFA-C did not violate the applicable
regulations. Notably, however, defendant remains silent on the alleged constitutional violation.

         An illegal-exaction claim is a demand for “money that was ‘improperly paid, exacted, or
taken from the claimant in contravention of the Constitution, a statute, or a regulation.’” Norman
v. United States, 429 F.3d 1081, 1095 (Fed. Cir. 2005) (quoting Eastport S.S. Corp. v. United
States, 372 F.2d 1002, 1007 (Ct. Cl. 1967)). Defendant takes aim at a core tenant of such a
claim: the requirement for an unauthorized action. But defendant presses no argument on why
plaintiffs’ allegations that the FHFA is unconstitutionally structured are insufficient to sustain
their illegal-exaction claims. Defendant also does not present any argument recognized by the
court on why the FHFA-C’s purported violation of its own regulations is not sufficient to
establish the necessary illegality for an illegal-exaction claim. Although defendant addresses
that issue in its reply brief, it had already waived the argument by not addressing the purported
regulatory violation in its motion to dismiss. See United States v. Ford Motor Co., 463 F.3d
1267, 1277 (Fed. Cir. 2006) (explaining that “[a]rguments raised for the first time in a reply brief
are not properly before this court”); Ironclad/EEI v. United States, 78 Fed. Cl. 351, 358 (2007)
(noting that “under the law of this circuit, arguments not presented in a party’s principal brief to
the court are typically deemed to have been waived”). Thus, defendant has not met its burden of
establishing that plaintiffs fail to state a plausible illegal-exaction claim for each Enterprise.

C. Plaintiffs’ derivative breach-of-implied-contract claims survive because defendant fails
     to establish that plaintiffs inadequately pleaded mutuality of intent to contract.

        Finally, defendant turns to plaintiffs’ breach-of-implied-contract claims, which are
premised on the FHFA-C purportedly agreeing to operate the Enterprises for the benefit of the
shareholders in exchange for the Enterprises’ boards consenting to conservatorship. A party
alleging an implied-in-fact contract with the government must plead four elements:
“(1) ‘mutuality of intent to contract,’ (2) ‘consideration,’ (3) ‘lack of ambiguity in offer and
acceptance,’ and (4) ‘actual authority’ of the government representative whose conduct is relied
upon to bind the government.” Moda Health Plan, Inc. v. United States, 892 F.3d 1311, 1329
(Fed. Cir. 2018) (quoting Lewis v. United States, 70 F.3d 597, 600 (Fed. Cir. 1995)), cert.

                                               -47-
granted, 139 S. Ct. 2743 (2019). Defendant focuses both of its arguments on the first element,
mutuality of intent to contract.44

        Defendant first argues that plaintiffs fail to adequately allege that the FHFA intended to
contract because the FHFA had authority to place the Enterprises into conservatorship without
their consent. This argument is grounded in the principle that “[a]n agency’s performance of its
regulatory or sovereign functions does not create contractual obligations.” D & N Bank v.
United States, 331 F.3d 1374, 1378-79 (Fed. Cir. 2003). For a contract to exist, “[s]omething
more is necessary” than just the agency exercising its powers. Id. at 1379. Of particular import
here, the FHFA Director could appoint the agency as conservator if the Enterprises consented or
if other conditions were satisfied. 12 U.S.C. § 4617(a)(3). Although the FHFA had the authority
to place the Enterprises into conservatorship without their consent, plaintiffs allege that the
FHFA did not rely on that authority but instead sought to bargain for the Enterprises’ boards’
consent to place the Enterprises into conservatorship.45 This alleged bargaining for consent is
the “something more” that can support the existence of a contract. See Mola Dev. Corp. v.
United States, 516 F.3d 1370, 1378 (Fed. Cir. 2008) (explaining that evidence of negotiations
supports the existence of an agency intending to contract rather than exercising regulatory
powers). That is to say, the fact that the FHFA had statutory authority to impose a
conservatorship without the boards’ consent is of no import at this juncture.

        Defendant also argues that the FHFA’s intent to contract cannot be inferred from
plaintiffs’ allegations that the FHFA encouraged or convinced the Enterprises’ boards to consent.
Defendant’s contention is premised on the principle espoused in Suess v. United States that a
government agency encouraging another entity to act is not enough to establish intent to contract.
535 F.3d 1348, 1364 (Fed. Cir. 2008). Defendant, however, proffers no analysis for why that
principle concerning encouragement should be extended to an agency convincing another to act.
The court, therefore, limits its inquiry to the issue of encouragement. The thrust of plaintiffs’
complaint, however, is not that the FHFA encouraged the boards to consent but rather that the
FHFA bargained for the boards’ consent. The focus on bargaining is important because, as the
Federal Circuit suggested in Suess, an agency negotiating with another entity is evidence of an
intent to contract. See id.; see also Mola, 516 F.3d at 1378. Simply stated, defendant’s

       44
            Defendant nominally presents a third argument for why plaintiffs have not adequately
alleged mutuality of intent. In that argument, between an introductory sentence and a summation
sentence, defendant highlights that Congress insulated directors from liability for consenting to
the conservatorship and recounts plaintiffs’ allegation that the Enterprises’ boards faced a
Hobson’s choice. Defendant, however, proffers no analysis as to why those considerations
reflect that the FHFA and the boards lacked the requisite intent to contract. The court, therefore,
deems waived any contentions defendant intended to raise in its third argument. See SmithKline
Beecham, 439 F.3d at 1320 (declining to consider undeveloped arguments).
       45
            Plaintiffs do not explain why the FHFA decided to seek the Enterprises’ boards’
consent, but the FHFA had a strong incentive to pursue consent because that method was less
likely to lead to litigation concerning the appointment of the conservator. See 12 U.S.C.
§ 4617(a)(5) (permitting an Enterprise to litigate the imposition of a conservatorship).

                                               -48-
contention is unpersuasive because it is not grounded in the relevant allegations. Accordingly,
the court declines to dismiss plaintiffs’ derivative breach-of-implied-contract claims.

                                      VII. CONCLUSION

        For the reasons stated above, the court dismisses plaintiffs’ direct claims: the court lacks
jurisdiction to entertain the direct fiduciary duty and direct implied-in-fact contract claims, and
plaintiffs lack standing to pursue any of their direct claims. Further, the court declines to dismiss
plaintiffs’ derivative claims. The court therefore GRANTS IN PART defendant’s motion to
dismiss with respect to the claims plaintiffs label as direct (counts I, IV, VII, and X), and
DENIES IN PART the motion with respect to the derivative claims (counts II, III, V, VI, VIII,
IX, XI, XII). By no later than Friday, January 10, 2020, the parties shall file a joint status
report proposing further proceedings and, if appropriate, a schedule for such proceedings.

        The court has filed this ruling under seal. The parties shall confer to determine proposed
redactions to which all the parties agree. Then, by no later than Monday, December 16, 2019,
the parties shall file a joint status report indicating their agreement with the proposed
redactions, attaching a copy of those pages of the court’s ruling containing proposed
redactions, with all proposed redactions clearly indicated.

       IT IS SO ORDERED.

                                                       s/ Margaret M. Sweeney
                                                       MARGARET M. SWEENEY
                                                       Chief Judge

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