Investors Assert Constitutional Claim Against U.S. Government

In a matter with significant constitutional implications, we have filed actions against the U.S. government in federal district court and the U.S. Court of Federal Claims on behalf of shareholders of Fannie Mae and Freddie Mac. Fannie Mae and Freddie Mac have been under government conservatorship since 2008, and both cases challenge the government’s August 2012 decision to impose a “net worth sweep,” whereby all of the companies’ net income is paid to the government each quarter. In the Federal Claims action, our clients allege that the net worth sweep constitutes a “taking” under the Fifth Amendment, and that they are entitled to just compensation for the loss of their economic rights.  In the district court case, our clients allege that the net worth sweep violates their common law rights and entitles them to damages. Both cases are pending.  While the Court of Federal Claims recently dismissed our action holding that shareholders’ claims were exclusively derivative, rather than direct, Kessler Topaz is appealing that holding to the Court of Appeals for the Federal Circuit.  Further, after achieving an appellate victory in the D.C. Circuit Court of Appeals, which remanded the district court case, we filed a Second Amended Complaint in district court.  The defendants again moved to dismiss, and Kessler Topaz prevailed in arguing that the plaintiffs' second amended complaint adequately stated claims for breach of the implied covenant of good faith and fair dealing. The district court case is now in discovery and proceeding towards trial.