Perry Capital LLC v. Steven Mnuchin (Reissued)

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued April 15, 2016 Decided February 21, 2017
Reissued July 17, 2017

No. 14-5243

PERRY CAPITAL LLC, FOR AND ON BEHALF OF INVESTMENT
FUNDS FOR WHICH IT ACTS AS INVESTMENT MANAGER,
APPELLANT

v.

STEVEN T. MNUCHIN, IN HIS OFFICIAL CAPACITY AS THE
SECRETARY OF THE DEPARTMENT OF THE TREASURY, ET AL.,
APPELLEES

Consolidated with 14-5254, 14-5260, 14-5262

Appeals from the United States District Court
for the District of Columbia
(No. 1:13-cv-01025)
(No. 1:13-cv-01053)
(No. 1:13-cv-01439)
(No. 1:13-cv-01288)

Theodore B. Olson argued the cause for Perry Capital
LLC, et al. With him on the briefs were Douglas R. Cox,
Matthew D. McGill, Charles J. Cooper, David H. Thompson,
Peter A. Patterson, Brian W. Barnes, Drew W. Marrocco,
 2
Michael H. Barr, Richard M. Zuckerman, Sandra Hauser, and
Janet M. Weiss.

Hamish P.M. Hume argued the cause for American
European Insurance Company, et al. With him on the briefs
were Matthew A. Goldstein, David R. Kaplan, and Geoffrey C.
Jarvis.

Thomas P. Vartanian, Steven G. Bradbury, Robert L.
Ledig, and Robert J. Rhatigan were on the brief for amici
curiae the Independent Community Bankers of America, the
Association of Mortgage Investors, Mr. William M. Isaac, and
Mr. Robert H. Hartheimer in support of appellants.

Thomas F. Cullen, Jr., Michael A. Carvin, James E.
Gauch, Lawrence D. Rosenberg, and Paul V. Lettow were on
the brief for amici curiae Louise Rafter, Josephine and Stephen
Rattien, and Pershing Square Capital Management, L.P. in
support of appellants and reversal.

Jerrold J. Ganzfried and Bruce S. Ross were on the brief
for amici curiae 60 Plus Association, Inc. in support of
reversal.

Eric Grant was on the brief for amicus curiae Jonathan R.
Macey in support of appellants and reversal.

Thomas R. McCarthy was on the brief for amici curiae
Timothy Howard and The Coalition for Mortgage Security in
support of appellants.

Myron T. Steele was on the brief for amicus curiae Center
for Individual Freedom in support of appellants.
 3
Michael H. Krimminger was on the brief for amicus curiae
Investors Unite in support of appellants for reversal.

Howard N. Cayne argued the cause for appellees Federal
Housing Finance Agency, et al. With him on the brief were
Paul D. Clement, D. Zachary Hudson, Michael J. Ciatti,
Graciela Maria Rodriguez, David B. Bergman, Michael A.F.
Johnson, Dirk C. Phillips, and Ian S. Hoffman.

Mark B. Stern, Attorney, U.S. Department of Justice,
argued the cause for appellee Steven T. Mnuchin. With him on
the brief were Benjamin C. Mizer, Principal Deputy Assistant
Attorney General, Beth S. Brinkmann, Deputy Assistant
Attorney General, Alisa B. Klein, Abby C. Wright, and Gerard
Sinzdak, Attorneys.

Dennis M. Kelleher was on the brief for amicus curiae
Better Markets, Inc. in support of appellees and affirmance.

Pierre H. Bergeron was on the brief for amicus curiae
Black Chamber of Commerce in support of neither party.

Colleen J. Boles, Assistant General Counsel, Kathryn R.
Norcross, Senior Counsel, and Jerome A. Madden, Counsel,
were on the brief for amicus curiae The Federal Deposit
Insurance Corporation in support of FHFA and affirmance.

Before: BROWN and MILLETT, Circuit Judges, and
GINSBURG, Senior Circuit Judge.

Opinion for the Court filed by Circuit Judge MILLETT and
Senior Circuit Judge GINSBURG.

Dissenting opinion filed by Circuit Judge BROWN.
 4
MILLETT, Circuit Judge, and GINSBURG, Senior Circuit
Judge: In 2007–2008, the national economy went into a severe
recession due in significant part to a dramatic decline in the
housing market. That downturn pushed two central players in
the United States’ housing mortgage market—the Federal
National Mortgage Association (“Fannie Mae” or “Fannie”)
and the Federal Home Loan Mortgage Corporation (“Freddie
Mac” or “Freddie”)—to the brink of collapse. Congress
concluded that resuscitating Fannie Mae and Freddie Mac was
vital for the Nation’s economic health, and to that end passed
the Housing and Economic Recovery Act of 2008 (“Recovery
Act”), Pub. L. No. 110-289, 122 Stat. 2654 (codified, as
relevant here, in various sections of 12 U.S.C.). Under the
Recovery Act, the Federal Housing Finance Agency (“FHFA”)
became the conservator of Fannie Mae and Freddie Mac.

In an effort to keep Fannie Mae and Freddie Mac afloat,
FHFA promptly concluded on their behalf a stock purchase
agreement with the Treasury Department, under which
Treasury made billions of dollars in emergency capital
available to Fannie Mae and Freddie Mac (collectively, “the
Companies”) in exchange for preferred shares of their stock.
In return, Fannie and Freddie agreed to pay Treasury a
quarterly dividend in the amount of 10% of the total amount of
funds drawn from Treasury. Fannie’s and Freddie’s frequent
inability to make those dividend payments, however, meant
that they often borrowed more cash from Treasury just to pay
the dividends, which in turn increased the dividends that Fannie
and Freddie were obligated to pay in future quarters. In 2012,
FHFA and Treasury adopted the Third Amendment to their
stock purchase agreement, which replaced the fixed 10%
dividend with a formula by which Fannie and Freddie just paid
to Treasury an amount (roughly) equal to their quarterly net
worth, however much or little that may be.
 5
A number of Fannie Mae and Freddie Mac stockholders
filed suit alleging that FHFA’s and Treasury’s alteration of the
dividend formula through the Third Amendment exceeded
their statutory authority under the Recovery Act, and
constituted arbitrary and capricious agency action in violation
of the Administrative Procedure Act, 5 U.S.C. § 706(2)(A).
They also claimed that FHFA, Treasury, and the Companies
committed various common-law torts and breaches of contract
by restructuring the dividend formula.

We hold that the stockholders’ statutory claims are barred
by the Recovery Act’s strict limitation on judicial review. See
12 U.S.C. § 4617(f). We also reject most of the stockholders’
common-law claims. Insofar as we have subject matter
jurisdiction over the stockholders’ common-law claims against
Treasury, and Congress has waived the agency’s immunity
from suit, those claims, too, are barred by the Recovery Act’s
limitation on judicial review. Id. As for the claims against
FHFA and the Companies, some are barred because FHFA
succeeded to all rights, powers, and privileges of the
stockholders under the Recovery Act, id. § 4617(b)(2)(A);
others fail to state a claim upon which relief can be granted.
The remaining claims, which are contract-based claims
regarding liquidation preferences and dividend rights, are
remanded to the district court for further proceedings.

I. Background

A. Statutory Framework

1. The Origins of Fannie Mae and Freddie Mac

Created by federal statute in 1938, Fannie Mae originated
as a government-owned entity designed to “provide stability in
the secondary market for residential mortgages,” to “increas[e]
the liquidity of mortgage investments,” and to “promote access
 6
to mortgage credit throughout the Nation.” 12 U.S.C. § 1716;
see id. § 1717. To accomplish those goals, Fannie Mae (i)
purchases mortgage loans from commercial banks, which frees
up those lenders to make additional loans, (ii) finances those
purchases by packaging the mortgage loans into mortgage-
backed securities, and (iii) then sells those securities to
investors. In 1968, Congress made Fannie Mae a publicly
traded, stockholder-owned corporation. See Housing and
Urban Development Act, Pub. L. No. 90-448, § 801, 82 Stat.
476, 536 (1968) (codified at 12 U.S.C. § 1716b).

Congress created Freddie Mac in 1970 to “increase the
availability of mortgage credit for the financing of urgently
needed housing.” Federal Home Loan Mortgage Corporation
Act, Pub. L. No. 91-351, preamble, 84 Stat. 450 (1970). Much
like Fannie Mae, Freddie Mac buys mortgage loans from a
broad variety of lenders, bundles them together into mortgage-
backed securities, and then sells those mortgage-backed
securities to investors. In 1989, Freddie Mac became a publicly
traded, stockholder-owned corporation. See Financial
Institutions Reform, Recovery, and Enforcement Act of 1989,
Pub. L. No. 101-73, § 731, 103 Stat. 183, 429–436.

Fannie Mae and Freddie Mac became major players in the
United States’ housing market. Indeed, in the lead up to 2008,
Fannie Mae’s and Freddie Mac’s mortgage portfolios had a
combined value of $5 trillion and accounted for nearly half of
the United States mortgage market. But in 2008, the United
States economy fell into a severe recession, in large part due to
a sharp decline in the national housing market. Fannie Mae
and Freddie Mac suffered a precipitous drop in the value of
their mortgage portfolios, pushing the Companies to the brink
of default.
 7
2. The 2008 Housing and Economic Recovery Act

Concerned that a default by Fannie and Freddie would
imperil the already fragile national economy, Congress enacted
the Recovery Act, which established FHFA and authorized it
to undertake extraordinary economic measures to resuscitate
the Companies. To begin with, the Recovery Act denominated
Fannie and Freddie “regulated entit[ies]” subject to the direct
“supervision” of FHFA, 12 U.S.C. § 4511(b)(1), and the
“general regulatory authority” of FHFA’s Director, id.
§ 4511(b)(1), (2). The Recovery Act charged FHFA’s Director
with “oversee[ing] the prudential operations” of Fannie Mae
and Freddie Mac and “ensur[ing] that” they “operate[] in a safe
and sound manner,” “consistent with the public interest.” Id.
§ 4513(a)(1)(A), (B)(i), (B)(v).

The Recovery Act further authorized the Director of
FHFA to appoint FHFA as either conservator or receiver for
Fannie Mae and Freddie Mac “for the purpose of reorganizing,
rehabilitating, or winding up the[ir] affairs.” 12 U.S.C.
§ 4617(a)(2). The Recovery Act invests FHFA as conservator
with broad authority and discretion over the operation of
Fannie Mae and Freddie Mac. For example, upon appointment
as conservator, FHFA “shall * * * immediately succeed
to * * * all rights, titles, powers, and privileges of the regulated
entity, and of any stockholder, officer, or director of such
regulated entity with respect to the regulated entity and the
assets of the regulated entity.” Id. § 4617(b)(2)(A). In
addition, FHFA “may * * * take over the assets of and operate
the regulated entity,” and “may * * * preserve and conserve the
assets and property of the regulated entity.” Id.
§ 4617(b)(2)(B)(i), (iv).

The Recovery Act further invests FHFA with expansive
“[g]eneral powers,” explaining that FHFA “may,” among other
 8
things, “take such action as may be * * * necessary to put the
regulated entity in a sound and solvent condition” and
“appropriate to carry on the business of the regulated entity and
preserve and conserve [its] assets and property[.]” 12 U.S.C.
§ 4617(b)(2), (2)(D). FHFA’s powers also include the
discretion to “transfer or sell any asset or liability of the
regulated entity in default * * * without any approval,
assignment, or consent,” id. § 4617(b)(2)(G), and to “disaffirm
or repudiate [certain] contract[s] or lease[s],” id. § 4617(d)(1).
See also id. § 4617(b)(2)(H) (power to pay the regulated
entity’s obligations); id. § 4617(b)(2)(I) (investing the
conservator with subpoena power).

Consistent with Congress’s mandate that FHFA’s Director
protect the “public interest,” 12 U.S.C. § 4513(a)(1)(B)(v), the
Recovery Act invested FHFA as conservator with the authority
to exercise its statutory authority and any “necessary”
“incidental powers” in the manner that “the Agency [FHFA]
determines is in the best interests of the regulated entity or the
Agency.” Id. § 4617(b)(2)(J) (emphasis added).

The Recovery Act separately granted the Treasury
Department “temporary” authority to “purchase any
obligations and other securities issued by” Fannie and Freddie.
12 U.S.C. §§ 1455(l)(1)(A), 1719. That provision made it
possible for Treasury to buy large amounts of Fannie and
Freddie stock, and thereby infuse them with massive amounts
of capital to ensure their continued liquidity and stability.

Continuing Congress’s concern for protecting the public
interest, however, the Recovery Act conditioned such
purchases on Treasury’s specific determination that the terms
of the purchase would “protect the taxpayer,” 12 U.S.C.
§ 1719(g)(1)(B)(iii), and to that end specifically authorized
“limitations on the payment of dividends,” id.
 9
§ 1719(g)(1)(C)(vi). A sunset provision terminated Treasury’s
authority to purchase such securities after December 31, 2009.
Id. § 1719(g)(4). After that, Treasury was authorized only “to
hold, exercise any rights received in connection with, or sell,
any obligations or securities purchased.” Id. § 1719(g)(2)(D).

Lastly, the Recovery Act sharply limits judicial review of
FHFA’s conservatorship activities, directing that “no court
may take any action to restrain or affect the exercise of powers
or functions of the Agency as a conservator.” 12 U.S.C.
§ 4617(f).

B. Factual Background

On September 6, 2008, FHFA’s Director placed both
Fannie Mae and Freddie Mac into conservatorship. The next
day, Treasury entered into Senior Preferred Stock Purchase
Agreements (“Stock Agreements”) with Fannie and Freddie,
under which Treasury committed to promptly invest billions of
dollars in Fannie and Freddie to keep them from defaulting.
Fannie and Freddie had been “unable to access [private] capital
markets” to shore up their financial condition, “and the only
way they could [raise capital] was with Treasury support.”
Oversight Hearing to Examine Recent Treasury and FHFA
Actions Regarding the Housing GSEs Before the H. Comm. on
Fin. Servs., 110th Cong. 12 (2008) (Statement of James B.
Lockhart III, Director, FHFA).

In exchange for that extraordinary capital infusion,
Treasury received one million senior preferred shares in each
company. Those shares entitled Treasury to: (i) a $1 billion
senior liquidation preference—a priority right above all other
stockholders, whether preferred or otherwise, to receive
distributions from assets if the entities were dissolved; (ii) a
dollar-for-dollar increase in that liquidation preference each
time Fannie and Freddie drew upon Treasury’s funding
 10
commitment; (iii) quarterly dividends that the Companies
could either pay at a rate of 10% of Treasury’s liquidation
preference or a commitment to increase the liquidation
preference by 12%; (iv) warrants allowing Treasury to
purchase up to 79.9% of Fannie’s and Freddie’s common stock;
and (v) the possibility of periodic commitment fees over and
above any dividends. 1

The Stock Agreements also included a variety of
covenants. Of most relevance here, the Stock Agreements
included a flat prohibition on Fannie and Freddie “declar[ing]
or pay[ing] any dividend (preferred or otherwise) or mak[ing]
any other distribution (by reduction of capital or otherwise),
whether in cash, property, securities or a combination thereof”
without Treasury’s advance consent (unless the dividend or
distribution was for Treasury’s Senior Preferred Stock or
warrants). J.A. 2451.

The Stock Agreements initially capped Treasury’s
commitment to invest capital at $100 billion per company. It
quickly became clear, however, that Fannie and Freddie were
in a deeper financial quagmire than first anticipated. So their
survival would require even greater capital infusions by
Treasury, as sufficient private investors were still nowhere to
be found. Consequently, FHFA and Treasury adopted the First
Amendment to the Stock Agreements in May 2009, under
which Treasury agreed to double the funding commitment to
$200 billion for each company.

Seven months later, in a Second Amendment to the Stock
Agreements, FHFA and Treasury again agreed to raise the cap,
this time to an adjustable figure determined in part by the

1
Thus far, Treasury has not asked Fannie and Freddie to pay any
commitment fees.
 11
amount of Fannie’s and Freddie’s quarterly cumulative losses
between 2010 and 2012. As of June 30, 2012, Fannie and
Freddie together had drawn $187.5 billion from Treasury’s
funding commitment.

Through the first quarter of 2012, Fannie and Freddie
repeatedly struggled to generate enough capital to pay the 10%
dividend they owed to Treasury under the amended Stock
Agreements. 2 FHFA and Treasury stated publicly that they
worried about perpetuating the “circular practice of the
Treasury advancing funds to [Fannie and Freddie] simply to
pay dividends back to Treasury,” and thereby increasing their
debt loads in the process. 3

Accordingly, FHFA and Treasury adopted the Third
Amendment to the Stock Agreements on August 17, 2012. The
Third Amendment to the Stock Agreements replaced the
previous quarterly 10% dividend formula with a requirement
that Fannie and Freddie pay as dividends only the amount, if
any, by which their net worth for the quarter exceeded a capital
buffer of $3 billion, with that buffer decreasing annually down
to zero by 2018. In simple terms, the Third Amendment
requires Fannie and Freddie to pay quarterly to Treasury a
dividend equal to their net worth—however much or little that
might be. Through that new dividend formula, Fannie and
Freddie would never again incur more debt just to make their
quarterly dividend payments, thereby precluding any dividend-

2
Neither company drew upon Treasury’s commitment in the second
quarter of 2012 though.
3
Press Release, United States Dep’t of the Treasury, Treasury
Department Announces Further Steps to Expedite Wind Down of
Fannie Mae and Freddie Mac (August 17, 2012),
https://www.treasury.gov/press-center/press-releases/Pages/tg 1684.
aspx (“Treasury Press Release”).
 12
driven downward debt spiral. But neither would Fannie or
Freddie be able to accrue capital in good quarters.

Under the Third Amendment, Fannie Mae and Freddie
Mac together paid Treasury $130 billion in dividends in 2013,
and another $40 billion in 2014. The next year, however,
Fannie’s and Freddie’s quarterly net worth was far lower:
Fannie paid Treasury $10.3 billion and Freddie paid Treasury
$5.5 billion. See FANNIE MAE, FORM 10-K FOR THE FISCAL
YEAR ENDED DECEMBER 31, 2015 (Feb. 19, 2016); FREDDIE
MAC, FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31,
2015 (Feb. 18, 2016). By comparison, without the Third
Amendment, Fannie and Freddie together would have had to
pay Treasury $19 billion in 2015 or else draw once again on
Treasury’s commitment of funds and thereby increase
Treasury’s liquidation preference. In the first quarter of 2016,
Fannie paid Treasury $2.9 billion and Freddie paid Treasury no
dividend at all. See FANNIE MAE, FORM 10-Q FOR THE
QUARTERLY PERIOD ENDED MARCH 31, 2016 (May 5, 2016);
FREDDIE MAC, FORM 10-Q FOR THE QUARTERLY PERIOD
ENDED MARCH 31, 2016 (May 3, 2016).

Under the Third Amendment, and FHFA’s
conservatorship, Fannie and Freddie have continued their
operations for more than four years. During that time, Fannie
and Freddie, among other things, collectively purchased at least
11 million mortgages on single-family owner-occupied
properties, and Fannie issued over $1.5 trillion in single-family
mortgage-backed securities. 4

4
See FANNIE MAE, FORM 10-K FOR THE FISCAL YEAR ENDED
DECEMBER 31, 2015 (Feb. 19, 2016); FREDDIE MAC, ANNUAL
HOUSING ACTIVITIES REPORT FOR 2015, at 1 (March 15, 2016);
FANNIE MAE, 2015 ANNUAL HOUSING ACTIVITIES REPORT AND
ANNUAL MORTGAGE REPORT, tbl. 1A (March 14, 2016); FANNIE
 13
C. Procedural History

In 2013, a number of Fannie Mae and Freddie Mac
stockholders filed suit challenging the Third Amendment.
Different groups of plaintiffs have pressed different claims.
First, various hedge funds, mutual funds, and insurance
companies (collectively, “institutional stockholders”) argued
that (i) FHFA’s and Treasury’s adoption of the Third
Amendment exceeded their authority under the Recovery Act,
and (ii) FHFA and Treasury each engaged in arbitrary and
capricious conduct, in violation of the Administrative
Procedure Act (“APA”). The institutional stockholders
requested declaratory and injunctive relief, but no damages. 5

Second, a class of stockholders (“class plaintiffs”) and a
few of the institutional stockholders alleged that, in adopting
the Third Amendment, FHFA and the Companies breached the
terms governing dividends, liquidation preferences, and voting
rights in the stock certificates for Freddie’s Common Stock and

MAE, 2014 ANNUAL HOUSING ACTIVITIES REPORT AND ANNUAL
MORTGAGE REPORT, tbl. 1A (March 13, 2015); FREDDIE MAC,
ANNUAL HOUSING ACTIVITIES REPORT FOR 2014, at 1 (March 11,
2015); FANNIE MAE, 2013 ANNUAL HOUSING ACTIVITIES REPORT
AND ANNUAL MORTGAGE REPORT, tbl. 1A (March 13, 2014);
FREDDIE MAC, ANNUAL HOUSING ACTIVITIES REPORT FOR 2013, at
1 (March 12, 2014).
5
One of the institutional stockholders—Arrowood—does not
identify the claims for which it seeks damages in its prayer for relief.
However, looking at the description of each claim, Arrowood alleges
that it sustained damages only in its breach of contract and breach of
implied covenant claims. For the Recovery Act and APA claims,
Arrowood alleges only that it is entitled to relief “under 5 U.S.C.
§§ 702, 706(2)(C),” J.A. 208, provisions of the APA that do not
authorize money damages.
 14
for both Fannie’s and Freddie’s Preferred Stock. They further
alleged that those defendants breached the implied covenants
of good faith and fair dealing in those certificates. The class
plaintiffs also alleged that FHFA and Treasury breached state-
law fiduciary duties owed by a corporation’s management and
controlling shareholder, respectively. Some of the institutional
stockholders asserted similar claims against FHFA. The class
plaintiffs asked the court to declare their lawsuit a “proper
derivative action,” J.A. 277, and to award damages as well as
injunctive and declaratory relief.

The district court granted FHFA’s and Treasury’s motions
to dismiss both complaints for failure to state a claim under
Federal Rule of Civil Procedure 12(b)(6). See Perry Capital
LLC v. Lew, 70 F. Supp. 3d 208, 246 (D.D.C. 2014).
Specifically, the court dismissed the Recovery Act and APA
claims as barred by the Recovery Act’s express limitation on
judicial review, 12 U.S.C. § 4617(f). The court dismissed the
APA claims against Treasury on the same statutory ground,
reasoning that Treasury’s “interdependent, contractual conduct
is directly connected to FHFA’s activities as a conservator.”
Id. at 222. The district court explained that “enjoining Treasury
from partaking in the Third Amendment would restrain
FHFA’s uncontested authority to determine how to conserve
the viability of [Fannie and Freddie].” Id. at 222–223.

Turning to the class plaintiffs’ claims for breach of
fiduciary duty, the court dismissed those as barred by FHFA’s
statutory succession to all rights and interests held by Fannie’s
and Freddie’s stockholders, 12 U.S.C. § 4617(b)(2)(A). The
court then dismissed the breach of contract and breach of the
implied covenant of good faith and fair dealing claims based
on liquidation preferences as not ripe because Fannie and
Freddie had not been liquidated. Finally, the district court
 15
dismissed the dividend-rights claims, reasoning that no such
rights exist. 6

II. Jurisdiction

Before delving into the merits, we pause to assure
ourselves of our jurisdiction, as is our duty. See Steel Co. v.
Citizens for a Better Environment, 523 U.S. 83, 94 (1998) (“On
every writ of error or appeal, the first and fundamental question
is that of jurisdiction[.]”) (citation omitted). A provision of the
Recovery Act deprives courts of jurisdiction “to affect, by
injunction or otherwise, the issuance or effectiveness of any
classification or action of the Director under this
subchapter * * * or to review, modify, suspend, terminate, or
set aside such classification or action.” 12 U.S.C. § 4623(d).

That language does not strip this court of jurisdiction to
hear this case. By its terms, Section 4623(d) applies only to
“any classification or action of the Director.” 12 U.S.C.
§ 4623(d). Thus, Section 4623(d) prohibits review of the
Director’s establishment of “risk-based capital
requirements * * * to ensure that the enterprises operate in a
safe and sound manner, maintaining sufficient capital and
reserves to support the risks that arise in the operations and
management of the enterprises.” Id. § 4611(a)(1). In
particular, Section 4614 requires “the Director” to “classify”
Fannie and Freddie as “adequately capitalized,”

6
The class plaintiffs had also alleged that the failure of FHFA and
Treasury to provide just compensation for taking private property
violated the Takings Clause of the Fifth Amendment. The district
court dismissed that challenge for failure to state a legally cognizable
claim, Fed. R. Civ. P. 12(b)(6), and the class plaintiffs have not
challenged that ruling on appeal.
 16
“undercapitalized,” “significantly undercapitalized,” or
“critically undercapitalized.” Id. § 4614(a). Classification as
undercapitalized or significantly undercapitalized in turn
subjects Fannie and Freddie to a host of supervisory actions by
“the Director.” See id. §§ 4615–4616. It is those capital-
classification decisions that Section 4623(d) insulates from
judicial review.

The Third Amendment was not a “classification or action
of the Director” of FHFA. Rather, it was an action taken by
FHFA acting as Fannie’s and Freddie’s conservator. Judicial
review of the actions of the agency as conservator is addressed
by Section 4617(f), not by Section 4623(d)’s particular focus
on the Director’s own actions. Compare 12 U.S.C. § 4617(f)
(referencing “powers or functions of the Agency”) (emphasis
added), with id. § 4623(d) (referencing “any classification or
action of the Director”) (emphasis added).

FHFA argues that the Director’s decision in 2008 to
suspend capital classifications of Fannie Mae and Freddie Mac
during the conservatorship could be a “classification or action
of the Director.” FHFA Suppl. Br. at 6–8 (quoting 12 U.S.C.
§ 4623(d)). Perhaps. But those are not the actions that the
institutional stockholders and the class plaintiffs challenge.
Instead, they challenge FHFA’s decision as conservator to
agree to changes in the Stock Agreement and to how Fannie
and Freddie will compensate Treasury for its extensive past and
promised future infusions of needed capital. Those actions do
not fall within Section 4623(d)’s jurisdictional bar for Director-
specific actions.
 17
III. Statutory Challenges to the Third Amendment

Turning to the merits, we address first the institutional
stockholders’ claims that FHFA’s and Treasury’s adoption of
the Third Amendment violated both the Recovery Act and the
APA. Both of those statutory claims founder on the Recovery
Act’s far-reaching limitation on judicial review. Congress was
explicit in Section 4617(f) that “no court” can take “any action”
that would “restrain or affect” FHFA’s exercise of its “powers
or functions * * * as a conservator or a receiver.” 12 U.S.C.
§ 4617(f). We take that law at its word, and affirm dismissal
of the institutional stockholders’ claims for injunctive and
declaratory relief designed to unravel FHFA’s adoption of the
Third Amendment.

A. Section 4617(f) Bars the Challenges to
FHFA Based on the Recovery Act

1. Section 4617(f)’s Textual Barrier to Plaintiffs’
Claims for Relief

The institutional stockholders’ complaints ask the district
court to declare the Third Amendment invalid, to vacate the
Third Amendment, and to enjoin FHFA from implementing it.
Those prayers for relief fall squarely within Section 4617(f)’s
plain textual compass. The institutional stockholders seek to
“restrain [and] affect” FHFA’s “exercise of powers” “as a
conservator” in amending the terms of Fannie’s and Freddie’s
contractual funding agreement with Treasury to guarantee the
Companies’ continued access to taxpayer-financed capital
without risk of incurring new debt just to pay dividends to
Treasury. Such management of Fannie’s and Freddie’s assets,
debt load, and contractual dividend obligations during their
ongoing business operation sits at the core of FHFA’s
conservatorship function.
 18
This court has interpreted a nearly identical statutory
limitation on judicial review to prohibit claims for declaratory,
injunctive, and other forms of equitable relief as long as the
agency is acting within its statutory conservatorship authority.
The Financial Institutions Reform, Recovery, and Enforcement
Act of 1989 (“FIRREA”), Pub. L. No. 101-73, 103 Stat. 183,
governs the Federal Deposit Insurance Corporation (“FDIC”)
when it serves as a conservator or receiver for troubled
financial institutions. Section 1821(j) of that Act prohibits
courts from “tak[ing] any action * * * to restrain or affect the
exercise of powers or functions of [the FDIC] as a conservator
or a receiver.” 12 U.S.C. § 1821(j).

In multiple decisions, we have held that Section 1821(j)
shields from a court’s declaratory and other equitable powers a
broad swath of the FDIC’s conduct as conservator or receiver
when exercising its statutory authority. To start with, in
National Trust for Historic Preservation in the United States v.
FDIC (National Trust I), 995 F.2d 238 (D.C. Cir. 1993) (per
curiam), aff’d in relevant part, 21 F.3d 469 (D.C. Cir. 1994),
we held that Section 1821(j) “bars the [plaintiff’s] suit for
injunctive relief” seeking to halt the sale of a building as
violating the National Historic Preservation Act, 16 U.S.C.
§ 470 et seq. (repealed December 19, 2014). See 995 F.2d at
239. We explained that, because “the powers and functions the
FDIC is exercising are, by statute, deemed to be those of a
receiver,” an injunction against the sale “would surely ‘restrain
or affect’ the FDIC’s exercise of those powers or functions.”
Id. Given Section 1821(j)’s “strong language,” we continued,
it would be “[im]possible * * * to interpret the FDIC’s
‘powers’ and ‘authorities’ to include the limitation that those
powers be subject to—and hence enjoinable for non-
compliance with—any and all other federal laws.” Id. at 240.
Indeed, “given the breadth of the statutory language,” Section
1821(j) “would appear to bar a court from acting”
 19
notwithstanding a “parade of possible violations of existing
laws.” National Trust for Historic Preservation in the United
States v. FDIC (National Trust II), 21 F.3d 469, 472 (D.C. Cir.
1994) (per curiam) (Wald, J., joined by Silberman, J.,
concurring).

Again in Freeman v. FDIC, 56 F.3d 1394 (D.C. Cir. 1995),
this court rejected the plaintiffs’ attempt to enjoin the FDIC, as
receiver of a bank, from foreclosing on their home, id. at 1396.
We acknowledged that Section 1821(j)’s stringent limitation
on judicial review “may appear drastic,” but that “it fully
accords with the intent of Congress at the time it enacted
FIRREA in the midst of the savings and loan insolvency crisis
to enable the FDIC” to act “expeditiously” in its role as
conservator or receiver. Id. at 1398. Given those exigent
financial circumstances, “Section 1821(j) does indeed effect a
sweeping ouster of courts’ power to grant equitable
remedies[.]” Id. at 1399; see also MBIA Ins. Corp. v. FDIC,
708 F.3d 234, 247 (D.C. Cir. 2013) (In Section 1821(j),
“Congress placed ‘drastic’ restrictions on a court’s ability to
institute equitable remedies[.]”) (quoting Freeman, 56 F.3d at
1398).

The rationale of those decisions applies with equal force
to Section 4617(f)’s indistinguishable operative language. The
plain statutory text draws a sharp line in the sand against
litigative interference—through judicial injunctions,
declaratory judgments, or other equitable relief—with FHFA’s
statutorily permitted actions as conservator or receiver. And,
as with FIRREA, Congress adopted Section 4617(f) to protect
FHFA as it addressed a critical aspect of one of the greatest
financial crises in the Nation’s modern history.
 20
2. FHFA’s Actions Fall Within its Statutory
Authority

The institutional stockholders cite language in National
Trust I, which states that FIRREA’s—and by analogy the
Recovery Act’s—prohibition on injunctive and declaratory
relief would not apply if the agency “has acted or proposes to
act beyond, or contrary to, its statutorily prescribed,
constitutionally permitted, powers or functions,” National
Trust I, 995 F.2d at 240. They then argue that FHFA’s adoption
of the Third Amendment was out of bounds because, in their
view, the Recovery Act “requires FHFA as conservator to act
independently to conserve and preserve the Companies’ assets,
to put the Companies in a sound and solvent condition, and to
rehabilitate them.” Institutional Pls. Br. at 26 (emphasis
added). As the institutional stockholders see it, by committing
Fannie’s and Freddie’s quarterly net worth—if any—to
Treasury in exchange for continued access to Treasury’s
taxpayer-funded financial lifelines, FHFA acted like a de facto
receiver functionally liquidating Fannie’s and Freddie’s
businesses. And FHFA did so, they add, without following the
procedural preconditions that the Recovery Act imposes on a
receivership, such as publishing notice and providing an
alternative dispute resolution process to resolve liquidation
claims, see 12 U.S.C. § 4617(b)(3)(B)(i), (b)(7)(A)(i). 7

That exception to the bar on judicial review has no
application here because adoption of the Third Amendment
falls within FHFA’s statutory conservatorship powers, for four
reasons.

7
The institutional stockholders do not argue that FHFA or Treasury
transgressed constitutional bounds in any respect.
 21
(i) The Recovery Act endows FHFA with extraordinarily
broad flexibility to carry out its role as conservator. Upon
appointment as conservator, FHFA “immediately succeed[ed]
to * * * all rights, titles, powers, and privileges” not only of
Fannie Mae and Freddie Mac, but also “of any stockholder,
officer, or director of such regulated entit[ies] with respect to
the regulated entit[ies] and the assets of the regulated
entit[ies.]” 12 U.S.C. § 4617(b)(2)(A)(i). In addition, among
FHFA’s many “[g]eneral powers” is its authority to “[o]perate
the regulated entity,” pursuant to which FHFA “may, as
conservator or receiver * * * take over the assets of and
operate * * * and conduct all business of the regulated
entity; * * * collect all obligations and money due the
regulated entity; * * * perform all functions of the regulated
entity * * * ; preserve and conserve the assets and property of
the regulated entity; and * * * provide by contract for
assistance in fulfilling any function, activity, action, or duty of
the Agency as conservator or receiver.” Id. § 4617(b)(2),
(2)(B) (emphasis added). The Recovery Act further provides
that FHFA “may, as conservator, take such action as may
be * * * necessary to put the regulated entity in a sound and
solvent condition; and * * * appropriate to carry on the
business of the regulated entity and preserve and conserve the
assets and property of the regulated entity.” Id.
§ 4617(b)(2)(D) (emphasis added). FHFA also “may disaffirm
or repudiate [certain] contract[s] or lease[s].” Id. § 4617(d)(1)
(emphasis added); see also id. § 4617(b)(2)(G) (providing that
FHFA “may, as conservator or receiver, transfer or sell any
asset or liability of the regulated entity in default” without
consent) (emphasis added).

Accordingly, time and again, the Act outlines what FHFA
as conservator “may” do and what actions it “may” take. The
statute is thus framed in terms of expansive grants of
permissive, discretionary authority for FHFA to exercise as the
 22
“Agency determines is in the best interests of the regulated
entity or the Agency.” 12 U.S.C. § 4617(b)(2)(J). “It should
go without saying that ‘may means may.’” United States Sugar
Corp. v. EPA, 830 F.3d 579, 608 (D.C. Cir. 2016) (quoting
McCreary v. Offner, 172 F.3d 76, 83 (D.C. Cir. 1999)). And
“may” is, of course, “permissive rather than obligatory.”
Baptist Memorial Hosp. v. Sebelius, 603 F.3d 57, 63 (D.C. Cir.
2010).

Entirely absent from the Recovery Act’s text is any
mandate, command, or directive to build up capital for the
financial benefit of the Companies’ stockholders. That is
noteworthy because, when Congress wanted to compel FHFA
to take specific measures as conservator or receiver, it switched
to language of command, employing “shall” rather than “may.”
Compare 12 U.S.C. § 4617(b)(2)(B) (listing actions that FHFA
“may” take “as conservator or receiver” to “[o]perate the
regulated entity”), and id. § 4617(b)(2)(D) (specifying actions
that FHFA “may, as conservator” take), with id.
§ 4617(b)(2)(E) (specifying actions that FHFA “shall” take
when “acting as receiver”), and id. § 4617(b)(14)(A)
(specifying that FHFA as conservator or receiver
“shall * * * maintain a full accounting”). “[W]hen a statute
uses both ‘may’ and ‘shall,’ the normal inference is that each is
used in its usual sense—the one act being permissive, the other
mandatory.” Sierra Club v. Jackson, 648 F.3d 848, 856 (D.C.
Cir. 2011) (internal quotation marks and citation omitted).

In short, the most natural reading of the Recovery Act is
that it permits FHFA, but does not compel it in any judicially
enforceable sense, to preserve and conserve Fannie’s and
Freddie’s assets and to return the Companies to private
operation. And, more to the point, the Act imposes no precise
order in which FHFA must exercise its multi-faceted
conservatorship powers.
 23
FHFA’s execution of the Third Amendment falls squarely
within its statutory authority to “[o]perate the [Companies],”
12 U.S.C. § 4617(b)(2)(B); to “reorganiz[e]” their affairs, id.
§ 4617(a)(2); and to “take such action as may
be * * * appropriate to carry on the[ir] business,” id.
§ 4617(b)(2)(D)(ii). Renegotiating dividend agreements,
managing heavy debt and other financial obligations, and
ensuring ongoing access to vital yet hard-to-come-by capital
are quintessential conservatorship tasks designed to keep the
Companies operational. The institutional stockholders no
doubt disagree about the necessity and fiscal wisdom of the
Third Amendment. But Congress could not have been clearer
about leaving those hard operational calls to FHFA’s
managerial judgment.

That, indeed, is why Congress provided that, in exercising
its statutory authority, FHFA “may” “take any
action * * * which the Agency determines is in the best
interests of the regulated entity or the Agency.” 12 U.S.C.
§ 4617(b)(2)(J) (emphasis added). Notably, while FIRREA
explicitly permits FDIC to factor the best interests of depositors
into its conservatorship judgments, id. § 1821(d)(2)(J)(ii), the
Recovery Act refers only to the best interests of FHFA and the
Companies—and not those of the Companies’ shareholders or
creditors. Congress, consistent with its concern to protect the
public interest, thus made a deliberate choice in the Recovery
Act to permit FHFA to act in its own best governmental
interests, which may include the taxpaying public’s interest.

The dissenting opinion (at 8) views Sections
4617(b)(2)(D) and (E) as “mark[ing] the bounds of FHFA’s
conservator or receiver powers.” Not so. As a plain textual
matter, the Recovery Act expressly provides FHFA many
“[g]eneral powers” “as conservator or receiver,” 12 U.S.C.
§ 4617(b)(2), that are not delineated in Section 4617(b)(2)(D)
 24
or (E). See id. § 4617(b)(2)(A) (assuming “all rights, titles,
powers, and privileges of the regulated entity, and of any
stockholder, officer, or director of such regulated entity with
respect to the regulated entity and the assets of the regulated
entity”); id. § 4617(b)(2)(B) (power to “[o]perate the regulated
entity”); id. § 4617(b)(2)(C) (power to “provide for the
exercise of any function by any stockholder, director, or officer
of any regulated entity”); id. § 4617(b)(2)(G) (power to
“transfer or sell any asset or liability of the regulated entity in
default”); id. § 4617(b)(2)(H) (power to “pay [certain] valid
obligations of the regulated entity”); id. § 4617(b)(2)(I) (power
to issue subpoenas and take testimony under oath). See also id.
§ 4617(d)(1) (granting FHFA as the conservator or receiver the
power to “repudiate [certain] contract[s] or lease[s]”).

The institutional stockholders also argue that, because
Section 4617(b)(2)(D) describes FHFA’s “[p]owers as
conservator” by providing that FHFA “may * * * take such
action as may be” “necessary to put the [Companies] in a sound
and solvent condition” and “appropriate to * * * preserve and
conserve [their] assets,” FHFA may act only when those two
conditions are satisfied. Institutional Pls. Reply Br. at 13. In
their view, FHFA “does not have other powers as conservator.”
Id.

The short answer is that the Recovery Act says nothing
like that. It contains no such language of precondition or
mandate. Indeed, if that is what Congress meant, it would have
said FHFA “may only” act as necessary or appropriate to those
tasks. Not only is that language missing from the Recovery
Act, but Congress did not even say that FHFA “should”—let
alone, “should first”—preserve and conserve assets or “should”
first put the Companies in a sound and solvent condition. Nor
did it articulate FHFA’s power directly in terms of asset
preservation or sound and solvent company operations. What
 25
the statute says is that FHFA “may * * * take such action as
may be” “necessary to put the [Companies] in a sound and
solvent condition” and “may be” “appropriate to * * * preserve
or conserve [the Companies’] assets.” 12 U.S.C.
§ 4617(b)(2)(D) (emphases added). So at most, the Recovery
Act empowers FHFA to “take such action” as may be necessary
or appropriate to fulfill several goals. That is how Congress
wrote the law, and that is the law we must apply. See Barnhart
v. Sigmon Coal Co., 534 U.S. 438, 461–462 (2002) (“[C]ourts
must presume that a legislature says in a statute what it means
and means in a statute what it says there.”) (quoting
Connecticut Nat’l Bank v. Germain, 503 U.S. 249, 253–254
(1992)); Klayman v. Zuckerberg, 753 F.3d 1354, 1358 (D.C.
Cir. 2014) (“[I]t is this court’s obligation to enforce statutes as
Congress wrote them.”). 8

(ii) Even if the Recovery Act did impose a primary duty to
preserve and conserve assets, nothing in the Recovery Act says
that FHFA must do that in a manner that returns them to their
prior private, capital-accumulating, and dividend-paying
condition for all stockholders. See Institutional Pls. Br. at 44.
Tellingly, the institutional stockholders and dissenting opinion
accept that the original Stock Agreements and the First and
Second Amendments fit comfortably within FHFA’s statutory
authority as conservator. See Dissenting Op. at 21
(acknowledging that FHFA “manage[d] the Companies within

8
The dissenting opinion suggests that Congress’s use of permissive
“may” terminology is “a simple concession to the practical reality
that a conservator may not always succeed in rehabilitating its ward.”
Dissenting Op. at 9 n.1. Not so. Even with the hypothesized addition
of mandatory terms to the statute, the Act would at most command
FHFA to take actions “necessary to put the [Companies] in a sound
and solvent condition” and “appropriate to * * * preserve and
conserve [their] assets.” 12 U.S.C. § 4617(b)(2)(D). FHFA’s
compliance thus would turn on its actions, not on their outcome.
 26
the conservator role” until “the tide turned * * * with the Third
Amendment”). But the Stock Agreements and First and
Second Amendments themselves both obligated the
Companies to pay large dividends to Treasury and prohibited
them, without Treasury’s approval, from “declar[ing] or
pay[ing] any dividend (preferred or otherwise) or mak[ing] any
other distribution (by reduction of capital or otherwise),
whether in cash, property, securities or a combination thereof.”
E.g., J.A. 2451; cf. 12 U.S.C. § 1719(g)(1)(C)(vi) (“To protect
the taxpayers, the Secretary of the Treasury shall take into
consideration,” inter alia, “[r]estrictions on the use of
corporation resources, including limitations on the payment of
dividends[.]”).

That means that FHFA’s ability as conservator to give
Treasury (and, by extension, the taxpayers) a preferential right
to dividends, to the effective exclusion of other stockholders,
was already put in place by the unchallenged and thus
presumptively proper Stock Agreements and Amendments that
predated the Third Amendment. The Third Amendment just
locked in an exclusive allocation of dividends to Treasury that
was already made possible by—and had been in practice
under—the previous agreements, in exchange for continuing
the Companies’ unprecedented access to guaranteed capital.

The institutional stockholders point to Section 4617(a)(2)
as a purported source of FHFA’s mandatory duty to return the
Companies to their old financial ways. But that Section
provides only that FHFA’s Director has the power to appoint
FHFA as “conservator or receiver for the purpose of
reorganizing, rehabilitating, or winding up the affairs of a
regulated entity.” 12 U.S.C. § 4617(a)(2). It is then the multi-
paged remaining portion of Section 4617 that details at
substantial length FHFA’s many “[g]eneral powers” as
conservator or receiver. Id. § 4617(b)(2).
 27
Furthermore, that explicit power to “reorganiz[e]”
supports FHFA’s action because the Third Amendment
reorganized the Companies’ financial operations in a manner
that ensures that quarterly dividend obligations are met without
drawing upon Treasury’s commitment and thereby increasing
Treasury’s liquidation preference. FHFA’s textual authority to
reorganize and rehabilitate the Companies, in other words,
forecloses any argument that the Recovery Act made the status
quo ante a statutorily compelled end game.

In addition, the Recovery Act openly recognizes that
sometimes conservatorship will involve managing the
regulated entity in the lead up to the appointment of a
liquidating receiver. See 12 U.S.C. § 4617(a)(4)(D) (providing
that appointment of FHFA as a receiver automatically
terminates a conservatorship under the Act). The authority
accorded FHFA as a conservator to reorganize or rehabilitate
the affairs of a regulated entity thus must include taking
measures to prepare a company for a variety of financial
scenarios, including possible liquidation. Contrary to the
dissenting opinion (at 11), that does not make FHFA a “hybrid”
conservator-receiver. It makes FHFA a fully armed
conservator empowered to address all potential aspects of the
Companies’ financial condition and operations at all stages
when confronting a threatened business collapse of truly
unprecedented magnitude and with national economic
repercussions.

The institutional stockholders nonetheless argue that,
rather than adopt the Third Amendment’s dividend allocation,
FHFA could instead have adopted a payment-in-kind dividend
option that would have increased Treasury’s liquidation
preference by 12% in return for avoiding a 10% dividend
payment. Perhaps. But the Recovery Act does not compel that
choice over the variable dividend to Treasury put in place by
 28
the Third Amendment. Either way, Section 4617(f) flatly
forbids declaratory and injunctive relief aimed at
superintending to that degree FHFA’s conservatorship or
receivership judgments. 9

The dissenting opinion claims that the Third Amendment’s
prevention of capital accumulation went too far because it
constitutes a “de facto receiver[ship]” or “de facto liquidation,”
and thus could not possibly constitute a permissible
“conservator” measure. See Dissenting Op. at 10, 17, 25. That
position presumes the existence of a rigid boundary between
the conservator and receiver roles that even the dissenting
opinion seems to admit may not exist. See Dissenting Op. at 7
(acknowledging that “the line between a conservator and a
receiver may not be completely impermeable”). Wherever that
line may be, it is not crossed just because an agreement that
ensures continued access to vital capital diverts all dividends to
the lender, who had singlehandedly saved the Companies from
collapse, even if the dividend payments under that agreement
may at times be greater than the dividend payments under
9
The institutional stockholders also contend that FHFA’s adoption
of the Third Amendment violated Section 4617(a)(7), which
provides that FHFA “shall not be subject to the direction or
supervision of any other agency.” 12 U.S.C. § 4617(a)(7). The
institutional stockholders pleaded, however, only that “on
information and belief, FHFA agreed to the [Third
Amendment] * * * at the insistence and under the direction and
supervision of Treasury.” J.A. 122, ¶ 70. On a motion to dismiss for
failure to state a claim, we are not required to credit a bald legal
conclusion that is devoid of factual allegations and that simply
parrots the terms of the statute. See Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009) (“A pleading that offers labels and conclusions or a
formulaic recitation of the elements of a cause of action will not do.
Nor does a complaint suffice if it tenders naked assertions devoid of
further factual enhancement.”) (citations, internal quotation marks,
and alterations omitted).
 29
previous agreements. The proof that no de facto liquidation
occurred is in the pudding: non-capital-accumulating entities
that continue to operate long-term, purchasing more than 11
million mortgages and issuing more than $1.5 trillion in single-
family mortgage-backed securities over four years, are not the
same thing as liquidating entities.

The argument also overlooks that the Third Amendment’s
redirection of dividends to Treasury came in exchange for a
promise of continued access to necessary capital free of the
preexisting risk of accumulating more debt simply to pay
dividends to Treasury. Now, after more than eight years of
conservatorship—four of which have been under the Third
Amendment—Fannie and Freddie have gone from a state of
near-collapse to fluctuating levels of profitability. FHFA thus
has “carr[ied] on the business of” Fannie and Freddie, 12
U.S.C. § 4617(b)(2)(D)(ii), in that they remain fully
operational entities with combined operating assets of $5
trillion, see Treasury Resp. Br. at 35. While the dissenting
opinion worries that the Companies have “no hope of survival
past 2018,” Dissenting Op. at 27, the Third Amendment allows
the Companies after 2018 to draw upon Treasury’s remaining
funding commitment if needed to remedy any negative net
worth. 10

(iii) The institutional stockholders argue that the Third
Amendment violated FHFA’s “fiduciary and statutory
obligations to * * * rehabilitate [the Companies] to normal

10
The dissenting opinion comments that the dividend payments
under the Third Amendment did not go towards paying off what the
Companies borrowed from Treasury. See Dissenting Op. at 21, 23.
Yet the Stock Agreements and the First and Second Amendments,
which the dissenting opinion acknowledges were lawful, id. at 21,
similarly did not provide for the Companies’ dividends to pay down
Treasury’s liquidation preference.
 30
business operations,” Institutional Pls. Br. at 34, because the
Amendment was as a factual matter not needed to prevent
further indebtedness, and was instead intended to secure a
windfall for Treasury (and indirectly taxpayers) at the expense
of the stockholders. They likewise contend that FHFA’s
motivation for adopting the Third Amendment all along has
been to liquidate the Companies. They rest those arguments on
factual allegations that FHFA and Treasury knew Fannie and
Freddie had just turned an economic corner, and had
experienced substantial increases in their net worth. In that
regard, the institutional stockholders cite evidence that FHFA
and Treasury were aware before they adopted the Third
Amendment that Fannie and Freddie might each experience a
substantial one-time increase in net worth in 2013 and 2014 due
to the realization of certain deferred tax assets. They also point
to presentations Fannie Mae made to FHFA and Treasury in
July and August before the Third Amendment was executed,
predicting that Fannie Mae and Freddie Mac would need only
small draws from Treasury’s commitment (totaling less than $9
billion) to pay Treasury its dividend through the year 2022. In
the institutional stockholders’ view, FHFA’s alleged
knowledge that rosier days were dawning shows that FHFA
had no legitimate conservatorship reason to adopt the Third
Amendment rather than to pursue measures that would allow
the Companies to accumulate capital and return to the
dividend-paying status quo ante.

To be clear, though, the institutional stockholders argue
that the Third Amendment would be just as flawed in their view
even if Fannie and Freddie had made no profits, were badly
hemorrhaging money in 2013 and 2014, and thus were in dire
need of the Third Amendment’s promise of continued access
to capital, free from dividend obligations that would have
increased still further Treasury’s liquidation preference. See
Oral Arg. Tr. 22–24 (Q: “[D]oes the argument that they were
 31
not acting as a proper conservator depend on the fact that they
were in fact profitable? A: “[N]o, it doesn’t.”). 11

Treasury argues, by contrast, that FHFA was taking a
broader and longer-term view of the Companies’ financial
condition. In almost every quarter before the Third
Amendment was adopted, Fannie and Freddie had been unable
to make their dividend payments to Treasury without taking on
more debt to Treasury. In SEC filings, Fannie and Freddie
themselves predicted that they would be unable to pay the 10%
dividend over the long term. See, e.g., J.A. 1983 (Fannie Mae
statement that it “do[es] not expect to generate net income or
comprehensive income in excess of [its] annual dividend
obligation to Treasury over the long term[,]” so its “dividend
obligation to Treasury will increasingly drive [its] future draws
under the senior [Stock Agreement]”); id. at 2160 (similar for
Freddie Mac). Other market participants shared that view. See,
e.g., id. at 655 (Moody’s report).

According to Treasury, the Third Amendment put a
structural end to “the circular practice of the Treasury
advancing funds to [Fannie and Freddie] simply to pay
dividends back to Treasury.” Treasury Press Release, supra.
Said another way, the Third Amendment changed the dividend
formula to require Fannie and Freddie to pay whatever
dividend they could afford—however little, however much—
to prevent them from ever again having to fruitlessly borrow

11
After the large dividends in 2013 and 2014, Fannie and Freddie
made a far smaller dividend payment—a combined $15.8 billion—
in 2015. In the first quarter of 2016, Freddie Mac had a
comprehensive loss of $200 million and paid no dividend at all. See
FREDDIE MAC, FORM 10-Q FOR THE QUARTERLY PERIOD ENDED
MARCH 31, 2016 (May 3, 2016). That loss was due to market forces
such as interest-rate volatility and widening spreads between interest
rates and benchmark rates. Id. at 1–2.
 32
from Treasury to pay Treasury. If Fannie and Freddie made
profits, Treasury would reap the rewards; if they suffered
losses, Treasury would have to forgo payment entirely.

The problem with the institutional stockholders’ argument
is that the factual question of whether FHFA adopted the Third
Amendment to arrest a “debt spiral” or whether it was intended
to be a step in furthering the Companies’ return to “normal
business operations” is not dispositive of FHFA’s authority to
adopt the Third Amendment. Nothing in the Recovery Act
confines FHFA’s conservatorship judgments to those measures
that are driven by financial necessity. And for purposes of
applying Section 4617(f)’s strict limitation on judicial relief,
allegations of motive are neither here nor there, as the
dissenting opinion agrees (at 20). The stockholders cite
nothing—nor can we find anything—in the Recovery Act that
hinges FHFA’s exercise of its conservatorship discretion on
particular motivations. See Leon County, Fla. v. FHFA, 816 F.
Supp. 2d 1205, 1208 (N.D. Fla. 2011) (“Congress barred
judicial review of the conservator’s actions without making an
exception for actions said to be taken from an improper
motive.”).

Likewise, the duty that the Recovery Act imposes on
FHFA to comply with receivership procedural protections
textually turns on FHFA actually liquidating the Companies.
See, e.g., 12 U.S.C. § 4617(b)(3)(B) (“The receiver, in any case
involving the liquidation or winding up of the affairs of [Fannie
or Freddie], shall * * * promptly publish a notice to the
creditors of the regulated entity to present their claims, together
with proof, to the receiver[.]”). Undertaking permissible
conservatorship measures even with a receivership mind would
not be out of statutory bounds.
 33
The institutional stockholders’ burden instead is to show
that FHFA’s actions were frolicking outside of statutory limits
as a matter of law. What matters then is the substantive
measures that FHFA took, and nothing in the Recovery Act
mandated that FHFA take steps to return Fannie Mae and
Freddie Mac at the first sign of financial improvement to the
old economic model that got them into so much trouble in the
first place. Nor did anything in the Recovery Act forbid FHFA
from adopting measures that took a more comprehensive, wait-
and-see view of the Companies’ long-term financial condition,
or simply kept the Companies’ heads above water while FHFA
observed their economic performance over time and through
ever-changing market conditions. See, e.g., supra note 11. 12

(iv) The institutional stockholders cite state-law and
historical sources to suggest that FHFA was not acting as a
common-law conservator normally would when it adopted the
Third Amendment. See Institutional Pls. Br. at 29–33. The
problem for the plaintiffs is that arguments about the contours
of common-law conservatorship do nothing to show that FHFA
exceeded statutory bounds, which is what National Trust I
referenced. Under the Recovery Act, FHFA as conservator
may “take any action authorized by this section, which the
Agency determines is in the best interests of the regulated
entity or the Agency.” 12 U.S.C. § 4617(b)(2)(J)(ii) (emphasis
added). That explicit statutory authority to take

12
We grant the plaintiffs’ various motions to supplement the record
with evidence of what FHFA and Treasury officials knew about the
Companies’ predicted financial performance and when. That
evidence does not affect our analysis, and we see no need to remand
the claims for the district court to consider a fuller administrative
record because the Recovery Act simply does not impose upon
FHFA the precise duties that the institutional plaintiffs’ factual
arguments suppose.
 34
conservatorship actions in the conservator’s own interest,
which here includes the public and governmental interests,
directly undermines the dissenting opinion’s supposition that
Congress intended FHFA to be nothing more than a common-
law conservator. See Dissenting Op. at 16 (asserting that, in
the common-law probate context, a conservator is generally
“forbid[den] * * * from acting for the benefit of the
conservator himself or a third party”).

On top of that, Congress in the Recovery Act gave FHFA
the ability to obtain from Treasury capital infusions of
unprecedented proportions, as long as the deal FHFA struck
with Treasury “protect[ed] the taxpayer” and “provide[d]
stability to the financial markets.” 12 U.S.C. §§ 1455,
1719(g)(1)(B)(i), (iii). That $200 billion-plus lifeline is what
saved the Companies—none of the institutional stockholders
were willing to infuse that kind of capital during desperate
economic times—and bears no resemblance to the type of
conservatorship measures that a private common-law
conservator would be able to undertake. Indeed, the dissenting
opinion acknowledges that FHFA “operating as a conservator
may act in its own interests to protect both the Companies and
the taxpayers from whom [FHFA] was ultimately forced to
borrow[.]” Dissenting Op. at 19. To paraphrase the dissenting
opinion (at 27), Congress made clear in the Recovery Act that
FHFA is not your grandparents’ conservator. For good reason.

The dissenting opinion asserts that our reading of Section
4617(b)(2)(J)(ii) effectively “forecloses any opportunity for
meaningful judicial review of FHFA’s actions,” Dissenting Op.
at 18, and decries the abandonment of the “rule of law,” see id.
at 2. That is quite surprising to hear. As the balance of our
opinion makes clear—much of which the dissenting opinion
joins—the Recovery Act only limits judicial remedies (banning
injunctive, declaratory, and other equitable relief) after a court
 35
determines that the actions taken fall within the scope of
statutory authority. The Act does not prevent either
constitutional claims (none are raised here) or judicial review
through cognizable actions for damages like breach of contract.

The dissenting opinion also argues that the court’s holding
is inconsistent with Congress’s provision of judicial review for
FHFA’s actions in Section 4617(a)(5). Dissenting Op. at 18.
But Section 4617(a)(5) permits judicial review only at the
behest of a regulated entity itself and even then only of the
Director’s decision to appoint FHFA as a conservator or
receiver. 13 That narrow focus of the provision is underscored
by the requirement that the lawsuit must be promptly filed
within thirty days of the appointment decision (a deadline that
none of the plaintiffs here met). We thus beg to differ with the
dissenting opinion’s claim (at 18, 22) that Section 4617(a)(5)
provides more intrusive judicial review for actions FHFA takes
when acting as a receiver, many of which would presumably
occur outside of that thirty-day filing window. Cf. James
Madison Ltd. by Hecht v. Ludwig, 82 F.3d 1085, 1092–1094
13
Section 4617(a)(5) provides in full:

(A) In general
If the Agency is appointed conservator or receiver under this
section, the regulated entity may, within 30 days of such
appointment, bring an action in the United States district
court for the judicial district in which the home office of such
regulated entity is located, or in the United States District
Court for the District of Columbia, for an order requiring the
Agency to remove itself as conservator or receiver.
(B) Review
Upon the filing of an action under subparagraph (A), the
court shall, upon the merits, dismiss such action or direct the
Agency to remove itself as such conservator or receiver.

12 U.S.C. § 4617(a)(5).
 36
(D.C. Cir. 1996) (distinguishing between provisions in
FIRREA for judicial review of the appointment of FDIC as
conservator or receiver and those governing judicial review of
the FDIC’s exercise of its powers as conservator or receiver).
Nothing in our reading of Section 4617(b)(2)(J)(ii), which
governs what decisions a properly appointed conservator or
receiver makes, undermines the sharply cabined opportunity
for early-stage judicial review of the appointment decision
itself.

* * * * *

In short, for all of their arguments that FHFA has exceeded
the bounds of conservatorship, the institutional stockholders
have no textual hook on which to hang their hats. Indeed, they
do not dispute that FHFA had the authority as conservator to
enter the Companies into the Stock Agreements with Treasury
to raise vitally needed capital, to agree to pay dividends to
Treasury on the stocks sold as part of that capital-raising
bargain, to foreclose dividend payments to private stockholders
in that process, cf. 12 U.S.C. § 1719(g)(1)(C)(vi), or to amend
the terms of the Stock Agreements. The dissenting opinion
even admits that FHFA’s actions prior to the Third
Amendment—which include the debt-inducing dividends paid
under the First and Second Amendments as well as the original
Stock Agreements—were “within the conservator role.” See
Dissenting Op. at 21.

What the institutional stockholders and dissenting opinion
take issue with, then, is the allocated amount of dividends that
FHFA negotiated to pay its financial-lifeline stockholder—
Treasury—to the exclusion of other stockholders, and that
decision’s feared impact on business operations in the future.
But Section 4617(f) prohibits us from wielding our equitable
relief to second-guess either the dividend-allocating terms that
 37
FHFA negotiated on behalf of the Companies, or FHFA’s
business judgment that the Third Amendment better balances
the interests of all parties involved, including the taxpaying
public, than earlier approaches had. See County of Sonoma v.
FHFA, 710 F.3d 987, 993 (9th Cir. 2013) (“[I]t is not our place
to substitute our judgment for FHFA’s[.]”). Because the Third
Amendment falls within FHFA’s broad conservatorship
authority under the Recovery Act, we must enforce Section
4617(f)’s explicit prohibition on the equitable relief that the
institutional stockholders seek.

B. Section 4617(f) Bars the Challenges to FHFA’s
Compliance with the APA

The institutional stockholders also claim that FHFA’s
adoption of the Third Amendment amounted to arbitrary and
capricious agency action in violation of the APA. That
argument cannot surmount Section 4617(f)’s barrier to
equitable relief—the only form of relief statutorily authorized
for an APA violation. See 5 U.S.C. § 702 (allowing “action in
a court * * * seeking relief other than money damages”); Cohen
v. United States, 650 F.3d 717, 723 (D.C. Cir. 2011) (en banc).
Indeed, Section 4617(f)’s strict limitation on judicial review
would be an empty promise if it evaporated upon the assertion
that FHFA’s actions ran afoul of some other statute.

We accordingly “do not think it possible, in light of the
strong language of” Section 4617(f) to read the Recovery Act’s
grant of “‘powers’ and ‘authorities’ to include the limitation
that those powers be subject to—and hence enjoinable for non-
compliance with—any and all other federal laws.” See
National Trust I, 995 F.2d at 240. Just as we cannot second-
guess FHFA’s conservatorship decisions under the Recovery
Act, we cannot quarterback those actions under the APA either.
 38
C. Section 4617(f) Bars the Challenges to Treasury’s
Compliance with the Recovery Act and the APA

Lastly, the institutional stockholders argue that
declaratory and injunctive relief should be available against
Treasury because its own actions in signing on to the Third
Amendment both violated the Recovery Act and were arbitrary
and capricious in violation of the APA. Those claims fall
within Section 4617(f)’s sweep as well.

To be sure, Section 4617(f) most explicitly bars judicial
relief against FHFA, and not Treasury. But Section 4617(f)
also forecloses judicial relief that would “affect” the exercise
of FHFA’s “powers or functions” as conservator or receiver.
12 U.S.C. § 4617(f). An action “can ‘affect’ the exercise of
powers by an agency without being aimed directly at [that
agency].” Hindes v. FDIC, 137 F.3d 148, 160 (3d Cir. 1998);
see also Telematics Int’l, Inc. v. NEMLC Leasing Corp., 967
F.2d 703, 707 (1st Cir. 1992) (Enjoining a third party “would
have the same effect, from the FDIC’s perspective, as directly
enjoining the FDIC[.]”).

In this case, the effect of any injunction or declaratory
judgment aimed at Treasury’s adoption of the Third
Amendment would have just as direct and immediate an effect
as if the injunction operated directly on FHFA. After all, it
takes (at least) two to contract, and the Companies, under
FHFA’s conservatorship, are just as much parties to the Third
Amendment as Treasury. One side of the agreement cannot
exist without the other.

Accordingly, Section 4617(f)’s prohibition on relief that
“affect[s]” FHFA applies here because the requested
injunction’s operation would have exactly the same force and
effect as enjoining FHFA directly. See Dittmer Properties,
 39
L.P. v. FDIC, 708 F.3d 1011, 1017 (8th Cir. 2013) (“Dittmer’s
request for injunctive relief is barred by § 1821(j), even though
the FDIC is no longer the holder of the note, because the relief
requested—a declaration that the note is void as to Dittmer—
affects the FDIC’s ability to function as receiver in th[is]
case.”). 14

The institutional stockholders argue that this case is
different because they claim Treasury “violated a provision of
federal law unrelated to the conduct of a receivership.”
Institutional Pls. Reply Br. at 25. But Section 4617(f)’s plain
language focuses on the “[e]ffect” of “any action” on FHFA’s
exercise of its powers; the cause of that effect is textually
irrelevant. What matters here is that the institutional
stockholders’ claims against Treasury are integrally and
inextricably interwoven with FHFA’s conduct as conservator.
Specifically, the complaint alleges that Treasury violated a
provision of the Recovery Act—the very same law that governs
FHFA’s conservatorship activities—and that the Recovery Act
prevented Treasury from entering into the Third Amendment
with the Companies, operating at the direction of FHFA as
conservator. Such a holding would just be another way of
declaring that the Recovery Act barred FHFA from entering the
Companies into the Third Amendment with Treasury.
Treasury’s action thus cannot be enjoined without
simultaneously unraveling FHFA’s own exercise of its powers
and functions.

14
See also Kuriakose v. Federal Home Loan Mortgage Corp., 674
F. Supp. 2d 483, 494 (S.D.N.Y. 2009) (“By moving to declare
unenforceable the non-participation clause in Freddie Mac severance
agreements, in essence Plaintiffs are seeking an order which restrains
the FHFA from enforcing this contractual provision in the
future. * * * [The Recovery Act] clearly provides that this Court
does not have the jurisdiction to interfere with such authority.”).
 40
In so holding, we have no occasion to decide whether or
how Section 4617(f) might apply to “an order against a third
party [that] would be of little consequence to [FHFA’s] overall
functioning as receiver” or conservator, Hindes, 137 F.3d at
161, or to third-party activities that are by their nature less
interwoven with FHFA’s judgments as conservator or receiver.
It is enough that, in this case, the direct and unavoidable effect
of invalidating Treasury’s contract with the Companies would
be to void the contract with Treasury that FHFA concluded on
the Companies’ behalf. That would be a “dramatic and
fundamental” incursion on FHFA’s exercise of its
conservatorship authority. Id. 15

IV. The Class Plaintiffs’ Claims

The class plaintiffs appeal the dismissal of their claims
against Treasury, the FHFA, and the Companies (as nominal
defendants) for breach of fiduciary duty, 16 and against the
FHFA and the Companies for breach of contract and for breach

15
None of the cases that plaintiffs cite has anything to do with third-
party claims that would directly restrain or affect the actions of a
conservator. See, e.g., Ecco Plains, LLC v. United States, 728 F.3d
1190, 1202 n.17 (10th Cir. 2013) (stating that Section 1821(j) does
not apply to a claim for money damages); National Trust II, 995 F.2d
at 241 (characterizing Section 1821(j) as “[t]he prohibition against
restraining the FDIC” in a case that only sought to restrain the FDIC
itself).
16
The class plaintiffs named the Companies as nominal defendants
to their derivative claims on behalf of the Companies for breach of
fiduciary duty because “the corporation in a shareholder derivative
suit should be aligned as a defendant when the corporation is under
the control of officers who are the target of the derivative suit.” Knop
v. Mackall, 645 F.3d 381, 382 (D.C. Cir. 2011).
 41
of the implied covenant of good faith and fair dealing. 17 Two
groups of institutional shareholders – namely, the Arrowood
plaintiffs and the Fairholme plaintiffs – likewise asserted
common-law claims (in addition to their APA claims) in
district court. Because they neither made their arguments for
breach of contract and breach of the implied covenant of good
faith and fair dealing in their opening brief nor incorporated
those arguments by reference to the class plaintiffs’ brief, they
did not properly preserve their appeal against the dismissal of
those claims. In view, however, of the unusual circumstances
presented by the separate briefing for the consolidated cases
that we required in this case, we shall exercise our discretion
under Federal Rule of Appellate Procedure 2 to permit appeal
of the order dismissing those claims as if their arguments had
been properly preserved. Therefore, subsequent references to
the class plaintiffs are also applicable to the Arrowood and
Fairholme plaintiffs insofar as they concern claims for breach
of contract and breach of the implied covenant of good faith
and fair dealing.

The Fairholme plaintiffs also forfeited their claim for
breach of fiduciary duty against the FHFA by failing to raise in
their opening brief the district court’s alternative holding that
the “claim is derivative . . . and, therefore, barred under
§ 4617(b)(2)(A)(i),” Perry Capital LLC, 70 F. Supp. 3d at 229
n.24. See Jankovic v. Int’l Crisis Grp., 494 F.3d 1080, 1086
(D.C. Cir. 2007). We see no reason to relieve them of the
consequences of this forfeiture.

17
The FHFA and the Companies submitted a joint brief. When
describing their arguments on appeal, therefore, we will refer to them
collectively as the FHFA.
 42
A. The Claims Against Treasury

The class plaintiffs alleged that by executing the Third
Amendment Treasury violated fiduciary duties to the
Companies and their shareholders that are imposed by state
corporate law because it is a controlling shareholder in the
Companies. We have subject matter jurisdiction over the class
plaintiffs’ claims for breach of fiduciary duty against Treasury
because “all civil actions to which [Freddie Mac] is a party
shall be deemed to arise under the laws of the United States,
and the district courts of the United States shall have original
jurisdiction of all such actions.” 12 U.S.C. § 1452(f); see also
Lackey v. Wells Fargo Bank, N.A., 747 F.3d 1033, 1035 n.2
(8th Cir. 2014) (“Because Freddie Mac is a party to this case,
the district court had original jurisdiction pursuant to 12 U.S.C.
§ 1452(f)”). 18

Whether sovereign immunity shields Treasury from suit is
a trickier question because the class plaintiffs forfeited any

18
We previously have interpreted a so-called “Deemer Clause” to
provide jurisdiction under 28 U.S.C. § 1331, Auction Co. of Am. v.
FDIC, 132 F.3d 746, 751 (D.C. Cir. 1997), clarified on denial of
reh’g, 141 F.3d 1198 (1998), but have also held a Deemer Clause
instead grants jurisdiction “directly” under Article III, § 2 of the
Constitution, A.I. Trade Fin., Inc. v. Petra Int’l Banking Corp., 62
F.3d 1454, 1460 (D.C. Cir. 1995). Although we need not decide
which is the correct approach, we must assure ourselves the Congress
has “not expand[ed] the jurisdiction of the federal courts beyond the
bounds established by the Constitution.” Verlinden B.V. v. Cent.
Bank of Nigeria, 461 U.S. 480, 491 (1983). For federally chartered
organizations such as Freddie Mac, the Congress may grant federal
jurisdiction “so long as the legislature does more than merely confer
a new jurisdiction,” but also “ensure[s] the proper administration of
some federal law (although the disputed issues in any specific case
 43
argument under the Federal Tort Claims Act, 28 U.S.C.
§ 1346(b), by failing to respond to Treasury’s contention that
the FTCA is inapplicable. Cf. NetworkIP, LLC v. FCC, 548
F.3d 116, 120 (D.C. Cir. 2008) (“[A]rguments in favor of
subject matter jurisdiction can be waived by inattention or
deliberate choice”). The class plaintiffs argue the APA
provides an alternate waiver of sovereign immunity for their
claims for breach of fiduciary duty against Treasury. Under 5
U.S.C. § 702,

An action in a court of the United States seeking
relief other than money damages and stating a
claim that an agency or an officer or employee

may be confined to matters of state law).” A.I. Trade, 62 F.3d at
1461-62 (internal quotation marks and brackets omitted).

Whether the Deemer Clause is constitutional depends upon the
substantive law anchoring that grant of federal jurisdiction today, not
just the legislation extant when the clause was enacted, viz., the
Emergency Home Finance Act of 1970, Pub. L. No. 91-351,
§ 303(e)(2), 84 Stat. 450, 453. Federal law today governs the
composition and election of Freddie Mac’s board of directors, 12
U.S.C. § 1452(a)(2), limits its capital distributions, § 1452(b), sets
forth in detail both the powers of and limitations upon Freddie Mac
with respect to its purchase and disposition of mortgages, §§ 1452(c),
1454(a), exempts the company from certain taxes, § 1452(e), and
provides for conservatorship or receivership by the FHFA, § 4617.
Cf. A.I. Trade, 62 F.3d at 1463. An issue of federal law may well
arise in a suit involving Freddie Mac and “the potential application
of that law provides a sufficient predicate for the exercise of the
federal judicial power.” Id. at 1462. The Congress may, “by
bringing all such disputes within the unifying jurisdiction of the
federal courts,” avoid or ameliorate the potential for “diverse
interpretations of those substantive provisions” that may prove
“vexing to the very commerce” the provisions were undoubtedly
“enacted to promote.” Id. at 1463.
 44
thereof acted or failed to act in an official
capacity or under color of legal authority shall
not be dismissed nor relief therein be denied on
the ground that it is against the United States
....

We agree with the class plaintiffs with respect to their pleas for
declaratory relief against Treasury for several reasons.

First, the class plaintiffs sought “relief other than money
damages,” to which the waiver of § 702 is limited, by
requesting a declaration that Treasury breached its fiduciary
duties. Bowen v. Massachusetts, 487 U.S. 879, 893 (1988)
(holding declaratory relief is not “money damages”). 19
Therefore, § 702 waives immunity for the class plaintiffs’
claims for breach of fiduciary duty insofar as they seek
declaratory relief.

Second, § 702 waives Treasury’s immunity for the claims
for breach of fiduciary duty because they are not founded upon
a contract. The waiver in § 702 does not apply “if any other

19
Contrary to the class plaintiffs’ assertions, however, their request
for “[s]uch other and further relief as the Court may deem just and
proper” does not qualify as non-monetary relief. J.A. 279 ¶ 12. Such
boilerplate requests – which refer to the proviso of Federal Rule of
Civil Procedure 54(c) that a “final judgment should grant the relief
to which each party is entitled, even if the party has not demanded
that relief in its pleadings” – “come[] into play only after the court
determines it has jurisdiction.” See Hedgepeth ex rel. Hedgepeth v.
Wash. Metro. Area Transit Auth., 386 F.3d 1148, 1152 n.2 (D.C. Cir.
2004) (Roberts, J.). The class plaintiffs do not argue that their
request for “disgorgement,” J.A. 278 ¶ 5, is not “money damages.”
Nor do they invoke the request for rescission of the Third
Amendment that appears outside of the prayer for relief in their
complaint.
 45
statute that grants consent to suit expressly or impliedly forbids
the relief which is sought.” See also Albrecht v. Comm. on
Emp. Benefits, 357 F.3d 62, 67-68 (D.C. Cir. 2004). We have
interpreted the Tucker Act, 28 U.S.C. § 1491(a)(1), which
waives sovereign immunity for some claims “founded . . .
upon” a contract and brought in the U.S. Court of Federal
Claims, to “impliedly forbid[]” contract claims against the
Government from being brought in district court under the
waiver in the APA. Albrecht, 357 F.3d at 67-68. Treasury on
appeal does not dispute the class plaintiffs’ characterization of
their claims as not contractual, though the agency argued in
district court that the claims were in essence a contract action
because it “assumed [any fiduciary duties] in entering into the
[Stock Agreements]” with Fannie Mae and Freddie Mac.
Treasury Defs. Mem. in Support of Mot. To Dismiss or for
Summ. J., Doc. No. 19-1, at 44 In re Fannie Mae/Freddie Mac
Senior Preferred Stock Purchase Agreement Class Action
Litigs., 1:13-mc-01288 (Jan. 17, 2014). That Treasury has not
briefed the issue on appeal does not, however, relieve us of our
obligation to assure ourselves we have jurisdiction, see Steel
Co., 523 U.S. at 94; this obligation extends to sovereign
immunity because it is “jurisdictional in nature,” FDIC v.
Meyer, 510 U.S. 471, 475 (1994), and may not be waived by
an agency’s conduct of a lawsuit, Dep’t of the Army v. FLRA,
56 F.3d 273, 275 (D.C. Cir. 1995).

In order to determine whether an action is in “its essence”
contractual, we examine “the source of the rights upon which
the plaintiff bases its claims” and “the type of relief sought (or
appropriate).” Megapulse, Inc. v. Lewis, 672 F.2d 959, 968
(D.C. Cir. 1982); see also Albrecht, 357 F.3d at 68-69. The
class plaintiffs claim that, because it is the controlling
shareholder, Treasury owes the Companies and their
shareholders “fiduciary duties of due care, good faith, loyalty,
and candor.” J.A. 275 ¶ 177; see also Derivative Compl., Doc.
 46
No. 39, at 27 ¶ 74 In re Fannie Mae/Freddie Mac, 1:13-mc-
01288 (July 30, 2014). These claims against Treasury are not
“a disguised contract action,” Megapulse, Inc., 672 F.2d at 968,
because they do not seek to enforce any duty imposed upon
Treasury by the Stock Agreements – the only relevant contracts
to which Treasury is a party. Although any fiduciary duty
allegedly owed by Treasury as a controlling shareholder in the
Companies arose from its purchase of shares pursuant to the
Stock Agreements, we do not think that “any case requiring
some reference to . . . a contract is necessarily on the contract
and therefore directly within the Tucker Act.” Id. at 967-68.
The class plaintiffs do not contend Treasury breached the terms
of the Stock Agreements nor otherwise invoke them except to
establish that Treasury is a controlling shareholder.

The relief the class plaintiffs seek does not further
illuminate whether their claims are essentially contractual. In
Megapulse, we held the action was not founded upon a contract
in part because the plaintiffs sought no specific performance of
the contract and no damages, 672 F.2d at 969, presumably
because specific performance is an explicitly contractual
remedy and because “damages are a prototypical contract
remedy,” A & S Council Oil Co. v. Lader, 56 F.3d 234, 240
(D.C. Cir. 1995). Here, the class plaintiffs seek a declaration
that Treasury breached its fiduciary duties and an award of
“compensatory damages” in favor of the Companies. These
forms of relief are not specific to actions that sound in contract,
cf. Spectrum Leasing Corp. v. United States, 764 F.2d 891,
894-95 (D.C. Cir. 1985) (concluding a claim was essentially
contractual in part because the relief sought amounted to “the
classic contractual remedy of specific performance”), and any
relief would not be determined by reference to the terms of the
contract, cf. Albrecht, 357 F.3d at 69 (concluding a claim was
essentially contractual in part because a contract would
 47
“determine whether the relief sought . . . is available”). 20 The
plaintiffs also seek rescission with respect to their claim
regarding Fannie Mae. This plea does not render the claim
essentially contractual even though rescission is typically a
remedy for breach of contract because there is no question that
any breach of contract claim would concern the Purchase
Agreement and the class plaintiffs seek rescission of only the
Third Amendment. In sum, the Tucker Act does not “impliedly
forbid[]” us from awarding relief against Treasury based on the
waiver of immunity in § 702 because the class plaintiffs’
claims are not founded upon a contract.

Third, Treasury’s argument that § 702 does not waive its
immunity from suit for state law claims is foreclosed by our
precedent. We have “repeatedly” and “expressly” held in the
broadest terms that “the APA’s waiver of sovereign immunity
applies to any suit whether under the APA or not.” Trudeau v.
FTC, 456 F.3d 178, 186 (D.C. Cir. 2006) (internal quotation
marks omitted). Furthermore, we concluded in United States
Information Agency v. Krc, 989 F.2d 1211 (D.C. Cir. 1993),
that § 702 waived sovereign immunity for a (presumably) state
tort claim against the Government because the FTCA did not

20
The class plaintiffs also request “disgorgement” in favor of the
Companies, but they do not explain further what measure of relief
they seek and on appeal they appear to characterize the plea as one
for damages. We do not take the class plaintiffs to seek more than
restitution of the dividends paid to Treasury pursuant to the Third
Amendment and in excess of the 10% dividend, because they have
not alleged that Treasury has otherwise profited from its execution
of the Third Amendment. Restitution of the benefits conferred by a
plaintiff is not specific to claims for breach of contract, 1 DAN B.
DOBBS, LAW OF REMEDIES § 4.1(1), pp. 552-53 (2d ed. 1993), so the
plea for disgorgement does not alter our analysis.
 48
“impliedly forbid” the non-monetary relief the plaintiff sought.
Id. at 1216 (citing § 702).

Fourth, the class plaintiffs forthrightly point out that we
have held “the waiver of sovereign immunity under § 702 is
limited by the ‘adequate remedy’ bar of § 704,” Nat’l Wrestling
Coaches Ass’n v. Dep’t of Educ., 366 F.3d 930, 947 (D.C. Cir.
2004) (quoting 5 U.S.C. § 704); see also Transohio Sav. Bank
v. Dir., OTS, 967 F.2d 598, 607 (D.C. Cir. 1992), and go on to
argue we should look to more recent authority that contradicts
those holdings, see Trudeau, 456 F.3d at 187-89. Again, that
Treasury has no response to this point does not relieve us of our
duty to ascertain whether Treasury’s immunity has been
waived. We agree with the class plaintiffs that the holdings in
National Wrestling and Transohio Savings are no longer good
law.

Section 704 provides that “final agency action for which
there is no other adequate remedy in a court [is] subject to
judicial review.” 5 U.S.C. § 704. In Cohen v. United States,
650 F.3d 717 (D.C. Cir. 2011) (en banc), after first concluding
that immunity from suit was waived by § 702 with nary a
mention of the adequate remedy bar of § 704, id. at 722-31, we
held that whether there is an “other adequate remedy” for the
purpose of § 704 determines whether a litigant states “a valid
cause of action” under the APA. Id. at 731. We did not
expressly speak to whether the adequate remedy bar limits
immunity, but it strains credulity to think the choice to address
the adequate remedy bar not as a condition of immunity, but
instead as a requirement for a cause of action, was not
deliberate in that case.

A further reason for this reading of Cohen is that we there
cited approvingly, id. at 723, our prior holding in Trudeau, 456
F.3d 178, that the requirement of final agency action in § 704
 49
is not a condition of the waiver of immunity in § 702, but
instead limits the cause of action created by the APA, id. at
187-89. The holding of Trudeau and its endorsement in Cohen
clearly override National Wrestling and Transohio Savings:
We see no textual or logical basis for construing § 704 – which
limits judicial review to “final agency action for which there is
no other adequate remedy” – to condition a waiver of sovereign
immunity on the absence of an adequate remedy but not on the
presence of final agency action. In Trudeau we concluded the
finality requirement does not bear upon the waiver of immunity
in § 702 because the waiver “is not limited to APA cases – and
hence . . . it applies regardless of whether the elements of an
APA cause of action [under § 704] are satisfied.” Id. at 187.
This reasoning applies equally to the adequate remedy bar. See
Viet. Veterans of Am. v. Shinseki, 599 F.3d 654, 661 (D.C. Cir.
2010) (relying in part upon our holding that the finality
requirement no longer limits a court’s subject matter
jurisdiction to reach the same conclusion for the adequate
remedy bar and referring to them collectively as the “the APA’s
reviewability provisions”).

Furthermore, in a departure from prior cases, we have
several times recognized that the finality requirement and
adequate remedy bar of § 704 determine whether there is a
cause of action under the APA, not whether there is federal
subject matter jurisdiction. Cent. for Auto Safety v. Nat’l
Highway Traffic Safety Admin., 452 F.3d 798, 805-06 (D.C.
Cir. 2006); Trudeau, 456 F.3d at 183-85; Shinseki, 599 F.3d at
661; Cohen, 650 F.3d at 731 & n.10. Reading § 704 to limit
only the cause of action that may be brought under the APA
and not the grant of immunity in § 702 is in line with our new
understanding of § 704 as narrowly focused upon the
requirements for the APA cause of action. We therefore hold
that § 702 waives Treasury’s immunity regardless whether
there is another adequate remedy under § 704 because the
 50
absence of such a remedy is instead an element of the cause of
action created by the APA.

In sum, pursuant to 12 U.S.C. § 1452(f) and 28 U.S.C.
§ 1291, we have subject matter jurisdiction over the class
plaintiffs’ claims against Treasury for breach of fiduciary duty,
and the Congress waived the agency’s immunity from suit for
these claims, insofar as they are for declaratory relief, in the
APA, 5 U.S.C. § 702. We nonetheless affirm the district
court’s dismissal of the claims for a declaratory judgment. As
discussed in greater detail above, supra at 37-40, 12 U.S.C.
§ 4617(f) bars us from awarding equitable relief against
Treasury with respect to the Third Amendment because doing
so would impermissibly “restrain or affect the exercise of
powers or functions of the [FHFA] as a conservator.”

B. The Claims Against the FHFA and the Companies

The class plaintiffs sued the FHFA (and the Companies, as
nominal defendants) for breach of fiduciary duties imposed on
a corporation’s management under state law. They also alleged
claims against the FHFA and the Companies for breach of
contract and breach of the implied covenant of good faith and
fair dealing. We have subject matter jurisdiction over the class
plaintiffs’ claims under 12 U.S.C. § 1452(f). As mentioned
above, our obligation to assure ourselves we have jurisdiction,
see Steel Co., 523 U.S. at 94, extends to sovereign immunity
because it is jurisdictional, Meyer, 510 U.S. at 475. “A waiver
. . . must be unequivocally expressed in statutory text,” Lane v.
Pena, 518 U.S. 187, 192 (1996), so the Government may not
waive immunity merely by its conduct in a lawsuit, Dep’t of
the Army, 56 F.3d at 275. We therefore disregard FHFA’s
point that the agency, “in its capacity as Conservator, has not
asserted sovereign immunity with respect to [its] execution of
the Third Amendment.” FHFA July 2016 Supp. Br. at 4.
 51
Assuming the FHFA has sovereign immunity when it acts
on behalf of the Companies as conservator, cf. Auction Co. of
Am. v. FDIC, 141 F.3d 1198, 1201-02 (D.C. Cir. 1998)
(holding a suit against the FDIC was a suit against the United
States for purposes of jurisdiction and sovereign immunity
where the FDIC “did not act as receiver for any particular
depository”), the Congress has waived the agency’s immunity
by consenting to suit. The Congress has granted Freddie Mac
“power . . . to sue and be sued . . . in any State, Federal, or other
court,” 12 U.S.C. § 1452(c)(7), and has granted Fannie Mae the
same “power . . . to sue and to be sued . . . in any court of
competent jurisdiction, State or Federal,” id. § 1723a(a). The
FHFA “by operation of law[] immediately succeed[ed] to . . .
all . . . powers” of the Companies upon its appointment as
conservator – including the Companies’ power to sue and be
sued – under the so-called Succession Clause of the Recovery
Act. Id. § 4617(b)(2)(A)(i). Such a statutory grant of power to
“sue and be sued” constitutes an “unequivocally expressed”
waiver of sovereign immunity. United States v. Nordic Vill.
Inc., 503 U.S. 30, 33-34 (1992); see also Meyer, 510 U.S. at
475. 21

By providing for the FHFA to succeed to the Companies’
power to sue and be sued, the Congress has given its express
consent that the FHFA is subject to suit in the same way the
Companies would otherwise be when the agency acts on their
behalf as conservator. This understanding is borne out by the
FHFA’s other functions under the Succession Clause, which
further provides that the FHFA succeeds to “all rights, titles,
powers, and privileges of the regulated entity.”

21
We need not reach the question whether the FHFA’s
conservatorship of Fannie Mae and Freddie Mac endows the
Companies with sovereign immunity because their “sue and be sued”
clauses would waive any immunity.
 52
§ 4617(b)(2)(A)(i). The Supreme Court interpreted the nearly
identical provision in FIRREA to “place[] the FDIC in the
shoes of the [entity in receivership], to work out its claims
under state law.” O’Melveny & Myers v. FDIC, 512 U.S. 79,
86-87 (1994) (interpreting 12 U.S.C. § 1821(d)(2)(A)(i)). The
Recovery Act further empowers the FHFA, as conservator, to
“take over the assets of and operate the [Companies] with all
the powers of [their] shareholders, . . . directors, and . . .
officers” and to “perform all functions of the [Companies] in
the name of the [Companies].” 12 U.S.C. § 4617(b)(2)(B)(i),
(iii).

What if the class plaintiffs’ claims for breach of fiduciary
duty are cognizable under the FTCA, 28 U.S.C. § 1346(b)?
The FTCA does not withdraw the Congress’s waiver of
immunity in this case, for the FTCA provides:

The authority of any federal agency to sue and
be sued in its own name shall not be construed
to authorize suits against such federal agency on
claims which are cognizable under [the FTCA],
and the remedies provided by this title in such
cases shall be exclusive.

28 U.S.C. § 2679(a). The Congress has not, however,
authorized the FHFA to be sued “in its own name” by enacting
a “sue and be sued” clause specifically for the agency. Instead,
the Congress has granted the FHFA the power to be sued just
as the Companies would be absent a conservatorship insofar as
the agency steps into the shoes of the Companies and acts on
their behalf to defend alleged breaches of their obligations.
Because the Companies, pre-conservatorship, were not
affected by the FTCA proviso cited above, neither is the FHFA
when it is sued for an action taken on their behalf – in this case,
 53
the Third Amendment. 22 Nor would the Tucker Act, 28 U.S.C.
§ 1491(a)(1), require the class plaintiffs to file their claims for
breach of contract in the Court of Federal Claims. “If a separate
waiver of sovereign immunity and grant of jurisdiction exist,
district courts may hear cases over which, under the Tucker Act
alone, the Court of Federal Claims would have exclusive
jurisdiction.” Auction Co. of Am. v. FDIC, 132 F.3d 746, 752
n.4 (D.C. Cir. 1997) (suit for breach of contract), clarified on
denial of reh’g, 141 F.3d 1198 (1998).

1. The Succession Clause

The FHFA and the class plaintiffs dispute whether the
common-law claims against the agency are barred by the so-
called Succession Clause, which provides that the FHFA, as
conservator, “succeed[s] to” the stockholders’ rights “with
respect to” the Companies and their assets, 12 U.S.C.

22
It follows that the FTCA does not apply to Fannie Mae or Freddie
Mac either, even though the FHFA, as conservator, exercises
complete control over the Companies. The statute provides that the
remedies set forth in the FTCA “shall be exclusive” despite any “sue
and be sued” clause of a “federal agency,” 28 U.S.C. § 2679(a),
which includes “corporations primarily acting as instrumentalities or
agencies of the United States, but does not include any contractor
with the United States,” id. § 2671. Generally, we determine
whether a defendant is such a corporation that is subject to the FTCA
by examining whether the Federal Government has the power “‘to
control the detailed physical performance of the [corporation].’”
Macharia v. United States, 334 F.3d 61, 68 (D.C. Cir. 2003) (quoting
United States v. Orleans, 425 U.S. 807, 814 (1976)). As we have
just concluded, however, the Recovery Act evinces the Congress’s
intention to “place[]” the FHFA “in the shoes” of the Companies,
O’Melveny & Myers, 512 U.S. at 86-87, which become wards of the
Government. The Companies therefore remain subject to suit as
private corporations for violations of state law just as they were
before the FHFA was appointed conservator.
 54
§ 4617(b)(2)(A)(i). In Kellmer v. Raines, 674 F.3d 848 (D.C.
Cir. 2012), we held the Succession Clause “plainly transfers [to
the FHFA the] shareholders’ ability to bring derivative suits”
on behalf of the Companies, but left open whether it transfers
claims as to which the FHFA would face a manifest conflict of
interest. Id. at 850.

The class plaintiffs argue the Succession Clause should not
be read to bar their derivative claims for breach of fiduciary
duty because the FHFA would face a conflict of interest in
pursuing, on behalf of the Companies, claims against itself.
They also argue the Succession Clause does not apply to their
direct claims for breach of contract and for breach of fiduciary
duty. The FHFA responds that the Succession Clause transfers
to it the right to bring derivative suits without exception, that
all the claims of the class plaintiffs are derivative, and that the
Succession Clause also transfers any direct claims to the
agency.

The district court held the statute bars all the class
plaintiffs’ claims and dismissed them “pursuant to [Federal
Rule of Civil Procedure] 12(b)(1) for lack of standing,” Perry
Capital LLC, 70 F. Supp. 3d at 233, 235 n.39, 239 n.45, but
whether the Succession Clause bars the claims has no bearing
upon standing under Article III of the Constitution of the
United States. See Lujan v. Defs. of Wildlife, 504 U.S. 555,
560-61 (1992). The district court’s error, however, is of no
moment; we simply examine the issue under Rule 12(b)(6).
EEOC v. St. Francis Xavier Parochial Sch., 117 F.3d 621, 624
(D.C. Cir. 1997) (“Although the district court erroneously
dismissed the action pursuant to Rule 12(b)(1), we could
nonetheless affirm the dismissal if dismissal were otherwise
proper based on failure to state a claim under Federal Rule of
Civil Procedure 12(b)(6)”).
 55
We conclude the Succession Clause transfers to the FHFA
without exception the right to bring derivative suits but not
direct suits. The class plaintiffs’ claims for breach of fiduciary
duty are derivative and therefore barred, but their contract-
based claims are direct and may therefore proceed.

a. The Succession Clause bars derivative suits,
but not direct suits

The Recovery Act transfers some of the shareholders’
rights to the FHFA during conservatorship and receivership
and provides that others are retained by the shareholders during
conservatorship but terminated during receivership.
Specifically, the Succession Clause provides that “as
conservator or receiver” the FHFA “shall . . . by operation of
law, immediately succeed to . . . all rights, titles, powers, and
privileges of the regulated entity, and of any stockholder . . .
with respect to the regulated entity and [its] assets.”
§ 4617(b)(2)(A)(i). The Recovery Act further limits
shareholders’ rights during receivership by providing that the
FHFA’s appointment as receiver and consequent succession to
the shareholders’ rights “terminate[s] all rights and claims that
the stockholders . . . of the regulated entity may have against
the assets or charter of the regulated entity or the [FHFA] . . .
except for their right to payment, resolution, or other
satisfaction of their claims” in the administrative claims
process. § 4617(b)(2)(K)(i).

The Recovery Act thereby transfers to the FHFA all claims
a shareholder may bring derivatively on behalf of a Company
whilst claims a shareholder may lodge directly against the
Company are retained by the shareholder in conservatorship
but terminated during receivership. The Act distinguishes
between the transfer of rights “with respect to the regulated
entity and [its] assets” in the Succession Clause and the
 56
termination of rights “against the assets or charter of the
regulated entity” in § 4617(b)(2)(K)(i). Rights “with respect
to” a Company and its assets are only those an investor asserts
derivatively on the Company’s behalf. Cf. Levin v. Miller, 763
F.3d 667, 672 (7th Cir. 2014) (so interpreting the analogous
provision of FIRREA, 12 U.S.C. § 1821(d)(2)(A)(i)). Rights
and claims “against the assets or charter of the regulated entity”
are an investor’s direct claims against and rights to the assets
of the Company once it is placed in receivership in order to be
liquidated, see 12 U.S.C. § 4617(b)(2)(E); that the Recovery
Act terminates such rights and claims in receivership indicates
that shareholders’ direct claims against and rights in the
Companies survive during conservatorship. 23

This reading is borne out by the statutory context. If the
Succession Clause transferred all of the stockholders’ rights to
the FHFA in conservatorship and receivership, as the FHFA
contends, then they would have no rights left to assert during
the administrative claims process should a Company be
liquidated. That result is plainly precluded by
§ 4617(b)(2)(K)(i), which excepts from termination upon the
FHFA’s appointment as receiver a shareholder’s “right to
payment, resolution, or other satisfaction of [his or her]
claims.” Furthermore, we see the logic in permitting the
shareholders to retain their rights to bring suit against a

23
The FHFA argues that “[b]ecause the Conservator already can
pursue derivative claims belonging to the Enterprises, the statutory
phrase ‘rights . . . of any stockholder’ only has meaning if it
encompasses direct claims.” FHFA Br. at 48. This argument is
foreclosed by Kellmer, where we determined the Succession Clause
“plainly transfers [to the FHFA the] shareholders’ ability to bring
derivative suits,” 674 F.3d at 850, and it overlooks that, when the
Companies are in conservatorship, the Succession Clause functions
not only to grant the FHFA powers, but also to take powers from the
shareholders.
 57
Company during conservatorship and terminating those rights
when the Agency institutes an administrative claims process as
required when it becomes a receiver. See 12 U.S.C.
§ 4617(b)(3)-(5). We note that the Federal Circuit recently
held, albeit without considering the Succession Clause, that
Fannie Mae’s former Chief Financial Officer had no takings
claim based on the company’s failure – pursuant to FHFA’s
regulations – to pay severance benefits as mandated by his
employment contract because the CFO “was left with the right
to enforce his contract against Freddie Mac in a breach of
contract action . . . under state contract law.” Piszel v. United
States, 833 F.3d 1366, 1377 (Fed. Cir. 2016).

The class plaintiffs argue that because, as shareholders,
they retain rights in the Companies during a conservatorship,
the Succession Clause should be read to permit them to sue
derivatively to protect those rights when the FHFA has a
conflict of interest. They point to the decisions of two other
circuits interpreting 12 U.S.C. § 1821(d)(2)(A), a nearly
identical provision in FIRREA, to permit such an
exception. See First Hartford Corp. Pension Plan & Tr. v.
United States, 194 F.3d 1279, 1295 (Fed. Cir. 1999); Delta Sav.
Bank v. United States, 265 F.3d 1017, 1022-23 (9th Cir. 2001).
Contrary to the class plaintiffs’ assertions, two circuit court
decisions do not so clearly “settle[] the meaning of [the]
existing statutory provision” in FIRREA that we must conclude
the Congress intended sub silentio to incorporate those rulings
into the Recovery Act. Merrill Lynch v. Dabit, 547 U.S. 71, 85
(2006).

Nor are we convinced by the reasoning of those two cases
that the Succession Clause implicitly excepts derivative suits
where the FHFA would have a conflict of interest. The courts
in those cases thought it would be irrational to transfer to an
agency the right to sue itself derivatively because “the very
 58
object of the derivative suit mechanism is to permit
shareholders to file suit on behalf of a corporation when the
managers or directors of the corporation, perhaps due to a
conflict of interest, are unable or unwilling to do so.” First
Hartford, 194 F.3d at 1295; see also Delta Sav., 265 F.3d at
1022-23 (extending the exception to suits against certain
agencies with which the conservator or receiver has an
“interdependent” relationship and “managerial and operational
overlap”). As the district court in this case noted, however, it
makes little sense to base an exception to the rule against
derivative suits in the Succession Clause “on the purpose of the
‘derivative suit mechanism,’” rather than the plain statutory
text to the contrary. See Perry Capital LLC, 70 F. Supp. 3d at
230-31. We therefore conclude the Succession Clause does not
permit shareholders to bring derivative suits on behalf of the
Companies even where the FHFA will not bring a derivative
suit due to a conflict of interest.

b. The class plaintiffs’ claims for breach of
fiduciary duty are derivative but their
contract-based claims are direct and may
proceed

Having concluded the Succession Clause extends to
derivative, but not direct, claims, it follows that the class
plaintiffs’ claims for breach of fiduciary duty are barred but
their contract-based claims may proceed. The class plaintiffs
contend they asserted both direct and derivative claims for
breach of fiduciary duty, alleging a direct claim against the
FHFA “with respect to . . . Fannie Mae” under Delaware law. 24

24
The district court applied Delaware law to the class plaintiffs’
common-law claims. See Perry Capital LLC, 70 F. Supp. 3d at 235
n.39, 236, 238, 239 n.45. On appeal, all parties agree we should
apply Delaware law to claims regarding Fannie Mae and Virginia
 59

law to those regarding Freddie Mac. The parties have thereby
waived any objection to the district court’s application of Delaware
law to claims regarding Fannie Mae. See A-L Assocs., Inc. v. Jorden,
963 F.2d 1529, 1530 (D.C. Cir. 1992) (applying law “[t]he court
below held, and the parties agree,” was applicable); Patton Boggs
LLP v. Chevron Corp., 683 F.3d 397, 403 (D.C. Cir. 2012);
Jannenga v. Nationwide Life Ins. Co., 288 F.2d 169, 172 (D.C. Cir.
1961); cf. Milanovich v. Costa Crociere, S.p.A., 954 F.2d 763, 766
(D.C. Cir. 1992) (applying U.S. contract principles to determine
whether a contractual choice-of-law provision was valid where the
district court had applied those principles because “both parties here
have assumed that American contract law principles control”).
Accord, e.g., Williams v. BASF Catalysts LLC, 765 F.3d 306, 316 (3d
Cir. 2014) (holding that “parties may waive choice-of-law issues” in
part because “choice-of-law questions do not go to the court’s
jurisdiction”). We have occasionally held a party forfeited any
objection to the district court’s choice of law in part because we
could detect no “error,” Wash. Metro. Area Transit Auth. v.
Georgetown Univ., 347 F.3d 941, 945 (D.C. Cir. 2003); Nello L. Teer
Co. v. Wash. Metro. Area Transit Auth., 921 F.2d 300, 302 n.2 (D.C.
Cir. 1990), or “apparent error” in the district court’s choice, Burke v.
Air Serv Int’l, Inc., 685 F.3d 1102, 1105 (D.C. Cir. 2012). We do
not read these cases to have established a standard for forfeiture or
waiver particular to choice of law, especially considering none
indicated that the absence of an error or “apparent” error was
necessary to the outcome. In this case, we see no reason to deviate
from the district court’s selection of Delaware law for the claims
regarding Fannie Mae.

We need not address whether the district court should have applied
Virginia law to the claims regarding Freddie Mac because, for
purposes of this appeal, Delaware and Virginia law dictate the same
result, see Aref v. Lynch, 833 F.3d 242, 262 (D.C. Cir. 2016) (“We
need not determine which state’s law applies . . . because the result
is the same under all three” potentially applicable laws); Skirlick v.
Fid. & Deposit Co. of Md., 852 F.2d 1376, 1377 (D.C. Cir. 1988)
(same), and the parties have waived any contention that yet another
 60
Class Pls. Br. at 21-22. In order to determine whether these
claims are direct or derivative, we must examine (1) “[w]ho
suffered the alleged harm” and (2) “who would receive the
benefit of the recovery.” Tooley v. Donaldson, Lufkin &
Jenrette, Inc., 845 A.2d 1031, 1035 (Del. 2004); see also
Gentile v. Rossette, 906 A.2d 91, 99-101 (Del. 2006). A suit is
direct if “[t]he stockholder . . . demonstrate[s] that the duty
breached was owed to the stockholder” and that “[t]he
stockholder’s claimed direct injury [is] independent of any
alleged injury to the corporation.” Tooley, 845 A.2d at 1039.

The class plaintiffs did not plead a direct claim for breach
of fiduciary duty because they did not seek relief that would
accrue directly to them. They instead requested a declaration
that, “through the Third Amendment, Defendant[] FHFA ...
breached [its] ... fiduciary dut[y] to Fannie Mae,” and sought
an award of “compensatory damages and disgorgement in
favor of Fannie Mae.” J.A. 278 ¶¶ 4-5. Both forms of relief
would benefit Fannie Mae directly and the shareholders only
derivatively. See Tooley, 845 A.2d at 1035. The class
plaintiffs also asked the district court to declare the Third
Amendment was not “in the best interests of Fannie Mae or its
shareholders, and constituted waste and a gross abuse of
discretion,” J.A. 278 ¶ 3, but a declaration that only partially
resolves a cause of action does not remedy any injury. Cf.
Calderon v. Ashmus, 523 U.S. 740, 746-47 (1998) (holding that
the case or controversy requirement of Article III was not
satisfied where a prisoner sought a declaratory judgment as to

law should displace the district court’s choice. The district court also
cited federal case law in evaluating whether the class plaintiffs had a
contractual right to dividends, Perry Capital LLC, 70 F. Supp. 3d at
237 & n.41, but the cited federal decisions do not displace state
contract law, cf. O’Melveny & Myers, 512 U.S. at 85-89 (rejecting
the argument that federal common law should govern tort claims
lodged by the FDIC).
 61
the validity of a defense a state was likely to raise in his habeas
action). In the introductory portion of their complaint, the class
plaintiffs also sought rescission of the Third Amendment to
remedy the alleged breach of fiduciary duty, but the class
plaintiffs requested this relief only for their derivative claim.
J.A. 215 ¶ 3 (“This is also a derivative action brought by
Plaintiffs on behalf of Fannie Mae, seeking . . . equitable relief,
including rescission, for breach of fiduciary duty”), 226 ¶ 27
(“[T]his action also seeks, derivatively on behalf of Fannie
Mae, an award of . . . equitable relief with respect to such
breach, including rescission of the Third Amendment”).

In any event, the class plaintiffs forfeited in district court
any argument that their claim for breach of fiduciary duty is
direct. In its motion to dismiss, the FHFA contended the class
plaintiffs’ claims for breach of fiduciary duty were derivative,
but the class plaintiffs did not respond by arguing they asserted
a direct claim. Although they occasionally referred to the
FHFA’s fiduciary duties to the shareholders, the class plaintiffs
did not develop any argument that the claims are direct and
instead discussed separately why the Succession Clause does
not bar “Their Direct Contract-Based Claims,” Mem. in Opp’n
to Mot. to Dismiss, Doc. No. 33 at 25 In re Fannie
Mae/Freddie Mac, 1:13-mc-01288 (Mar. 21, 2014)
(hereinafter Class Pls. Opp’n to Mot. to Dismiss), and “Their
Derivative Claims” for breach of fiduciary duty, id. at 32. The
class plaintiffs then characterize their only count of breach of
fiduciary duty as asserting “derivative claims.” Id.

The class plaintiffs ask for a “remand to allow [them] to
pursue their direct fiduciary breach claims regarding the Fannie
Mae Third Amendment.” Class Pls. Br. at 23. At oral
argument they cited DKT Memorial Fund v. Agency for
International Development, 810 F.2d 1236 (D.C. Cir. 1987), in
which this court, “in the interest of justice,” granted counsel’s
 62
motion at oral argument to amend the complaint in order to
correct an inadvertent error and then ruled the claims, as
amended, were not subject to dismissal upon the grounds
asserted by the defendants. Id. at 1239. In this case the class
plaintiffs ask us to grant them leave to amend the complaint to
add a new claim they are not asking us to rule on but instead
want to pursue in district court. We see no reason to oust the
district judge from making that decision in the first instance
when the case returns to district court for further proceedings
on certain of the plaintiffs’ contract-based claims.

The district court also held the class plaintiffs’ contract-
based claims were derivative. Perry Capital LLC, 70 F. Supp.
3d at 235 & n.39, 239 n.45. Contrary to the FHFA’s assertions,
the class plaintiffs sufficiently appealed this ruling. Their
statement of issues on appeal comprises whether the
Succession Clause “bars any of Appellants’ claims in this
action.” Furthermore, that the class plaintiffs’ contract-based
claims are direct is apparent from their extensive discussion of
the FHFA’s alleged breach of their contractual rights and the
harm the alleged breach caused them.

Indeed, the contract-based claims are obviously direct
“because they belong to” the class plaintiffs “and are ones that
only [the class plaintiffs] can assert.” Citigroup Inc. v. AHW
Inv. P’ship, 140 A.3d 1125, 1138 (Del. 2016). These are “not
claims that could plausibly belong to” the Companies because
they assert that the Companies breached contractual duties
owed to the class plaintiffs by virtue of their stock certificates.
Id. We therefore do not subject them to the two-part test set
forth in Tooley, which determines “when a cause of action for
breach of fiduciary duty or to enforce rights belonging to the
corporation itself must be asserted derivatively.” NAF
Holdings, LLC v. Li & Fung (Trading) Ltd., 118 A.3d 175, 176
(Del. 2015). The two-part test is necessary “[b]ecause directors
 63
owe fiduciary duties to the corporation and its stockholders,
[and] there must be some way of determining whether
stockholders can bring a claim for breach of fiduciary duty
directly, or whether a particular fiduciary duty claim must be
brought derivatively.” Citigroup Inc., 140 A.3d at 1139
(footnote omitted). Tooley has no application “when a plaintiff
asserts a claim based on the plaintiff’s own right.” Id. at 1139-
40; El Paso Pipeline GP Co. v. Brinckerhoff, 2016 WL
7380418, at *9 (Del. Dec. 20, 2016) (“[W]hen a plaintiff asserts
a claim based upon the plaintiff's own right . . . Tooley does
not apply”). 25

2. The Class Plaintiffs’ contract-based claims

As a preliminary matter, the class plaintiffs assert the bar
to equitable relief of 12 U.S.C. § 4617(f), discussed above,
does not apply “to equitable claims related to contractual
breaches,” Class Pls. Br. at 34-35, but this argument is forfeit
because it was not raised in district court. Bennett v. Islamic
Republic of Iran, 618 F.3d 19, 22 (D.C. Cir. 2010).
Accordingly, we evaluate the class plaintiffs’ contract-based
claims only insofar as they seek damages. As discussed in

25
The class plaintiffs (the only party to address on the merits whether
the contract-based claims are direct or derivative) cite only Delaware
law in addressing the claims for breach of contract as to both Fannie
Mae and Freddie Mac despite their assumption that Virginia law
governs claims against Freddie Mac. The issue need detain us no
further because we have found no indication Virginia would classify
the breach of contract claims as derivative. Cf. Simmons v. Miller,
261 Va. 561, 573, 544 S.E.2d 666, 674 (2001) (“A derivative action
is an equitable proceeding in which a shareholder asserts, on behalf
of the corporation, a claim that belongs to the corporation rather than
the shareholder . . . . [A]n action for injuries to a corporation cannot
be maintained by a shareholder on an individual basis and must be
brought derivatively.”).
 64
greater detail above, supra at 17-37, an award of equitable
relief against the FHFA with respect to the Third Amendment
would impermissibly “restrain or affect the exercise of powers
or functions of the [FHFA] as a conservator,” § 4617(f), and a
similar award against the Companies would plainly achieve the
same result. The class plaintiffs next challenge the district
court’s dismissal under Rules 12(b)(1) and (6) of their claims
against the FHFA and the Companies for breach of contract and
breach of the implied covenant as to the provisions in the stock
certificates dealing with voting and dividend rights and
liquidation preferences. Upon de novo review, Kim v. United
States, 632 F.3d 713, 715 (D.C. Cir. 2011), we affirm the
dismissal of all claims except for those regarding the
liquidation preferences and the claim for breach of implied
covenant regarding dividend rights.

a. Voting rights

The class plaintiffs contend the Third Amendment violates
their stock certificates that, with some variations not relevant
here, provide that a vote of two thirds of the stockholders is
required “to authoriz[e], effect[] or validat[e] the amendment,
alteration, supplementation or repeal of any of the provisions
of [the] Certificate if such [action] would materially and
adversely affect the . . . terms or conditions of the [stock].” J.A.
251. The class plaintiffs claim they were entitled to vote on the
Third Amendment because it “nullif[ied] their right ever to
receive a dividend or liquidation distribution,” and thereby
“materially and adversely affect[ed]” them. Class Pls. Reply
Br. at 11. The FHFA does not respond to this argument on
appeal, and the district court nowhere addressed it in
dismissing the contract-based claims. We nonetheless affirm
the district court’s dismissal. Although the Third Amendment
makes it impossible for the class plaintiffs to receive dividends
or a liquidation preference, it was not an “alteration,
 65
supplementation or repeal of . . . provisions” in the certificates.
Those provisions guarantee only the right to vote on certain
changes to the certificates, not on any corporate action that
affects the rights guaranteed by the certificates.

b. Dividend rights

The class plaintiffs’ various stock certificates provide
(with irrelevant variations in wording) that stockholders will
“be entitled to receive, ratably, when, as and if declared by the
Board of Directors, in its sole discretion . . . [,] non-cumulative
cash dividends,” J.A. 248, or “shall be entitled to receive,
ratably, dividends . . . when, as and if declared by the Board,”
J.A. 250. According to the class plaintiffs, the certificates
thereby guarantee them a right to dividends, discretionary
though they may be. We agree with the FHFA’s response that
the class plaintiffs have no enforceable right to dividends
because the certificates accord the Companies complete
discretion to declare or withhold dividends.

The class plaintiffs argue they nonetheless have a
contractual right to discretionary dividends because Delaware
and Virginia limit directors’ discretion to withhold dividends.
This limit upon a board’s discretion stems from its fiduciary
duties to shareholders, not from the terms of their stock
certificates. See Gabelli & Co. v. Liggett Grp. Inc., 479 A.2d
276, 280 (Del. 1984) (Dividends may not be withheld as a
result of “fraud or gross abuse of discretion”); Penn v.
Pemberton & Penn, Inc., 189 Va. 649, 658, 53 S.E.2d 823, 828
(Va. 1949) (Failure to declare dividends is actionable if it “is
so arbitrary, or so unreasonable, as to amount to a breach of
trust”). Such fiduciary duties have no bearing upon whether
the terms of the contracts imposed a duty to declare dividends,
as the class plaintiffs alleged.
 66
Lastly, the class plaintiffs advance a convoluted argument
that the Third Amendment violated their rights to receive
mandatory dividends (1) for their preferred stock before any
distributions on common stock, and (2) for their common stock
“ratably,” along with other holders of such stock. Before the
Third Amendment, the class plaintiffs assert, Treasury could
have received a dividend exceeding the 10% coupon on its
liquidation preference only by exercising its option to purchase
up to 79.9% of the Companies’ common stock, and the
payment of any dividend on that common stock would have
required distributions to the class plaintiffs as well. To the
class plaintiffs, it follows that their right to mandatory
dividends was breached by the provision of the Third
Amendment for dividends to be paid to Treasury that could
(and at times did) exceed the 10% coupon. This argument fails
because the plaintiffs have not shown their certificates
guarantee that more senior shareholders will not exhaust the
funds available for distribution as dividends. The class
plaintiffs contend the Third Amendment “was a fiduciary
breach, and hence cannot be relied on as the basis for nullifying
the mandatory priority and ratability rights,” Class Pls. Br. at
39, but this argument goes to their claims for breach of
fiduciary duty, addressed above.

The class plaintiffs next challenge the district court’s
dismissal of their claim that the implied covenant prohibited
the FHFA from depriving them of the opportunity to receive
dividends. The class plaintiffs argue the district court wrongly
concluded the FHFA did not breach the implied covenant
because it acted within its statutory authority. See Perry
Capital LLC, 70 F. Supp. 3d at 238-39. The FHFA contends
the plaintiffs “try to impose fiduciary and other duties on the
Conservator to always act in the best interests of shareholders,
when [the Recovery Act] instead authorizes the Conservator to
‘[act] in the best interests of the [Companies] or the Agency,’”
 67
FHFA Br. at 18 (citing § 4617(b)(2)(J)(ii)) (second alteration
in original), and that “the Conservator’s discretion to declare
dividends, unlike that of a corporate board, is without
limitation,” id. at 56 n.21. Insofar as the FHFA argues (and the
district court held) that the Recovery Act preempts state law
imposing an implied covenant, this approach is foreclosed by
the plain text of the Recovery Act and by our precedent.

Virginia and Delaware law imposing an implied covenant
of good faith and fair dealing is not “an obstacle to the
accomplishment and execution of the full purposes and
objectives of Congress,” Hillman v. Maretta, 133 S. Ct. 1943,
1949-50 (2013), and is therefore not preempted by the
Recovery Act. The Recovery Act provides that the FHFA, as
conservator, “may disaffirm or repudiate any contract” the
Companies executed before the conservatorship “the
performance of which the conservator . . . determines to be
burdensome,” 12 U.S.C. § 4617(d)(1), “within a reasonable
period following” the agency’s appointment as conservator, id.
§ 4617(d)(2). That the Recovery Act permits the FHFA in
some circumstances to repudiate contracts the Companies
concluded before the conservatorship indicates that the
Companies’ contractual obligations otherwise remain in force.
Cf. Waterview Mgmt. Co. v. FDIC, 105 F.3d 696, 700-01 (D.C.
Cir. 1997) (so interpreting a nearly identical provision in
FIRREA, 12 U.S.C. § 1821(e)). Furthermore, by providing for
the FHFA to succeed to “all rights, titles, powers, and
privileges of the [Companies],” 12 U.S.C. § 4617(b)(2)(A)(i),
the Recovery Act places the FHFA “‘in the shoes’” of the
Companies and “does not permit [the agency] to increase the
value of the [contract] in its hands by simply ‘preempting’ out
of existence pre-receivership contractual obligations.”
Waterview Mgmt. Co., 105 F.3d at 701 (quoting O’Melveny &
Myers, 512 U.S. at 87, in reaching the same conclusion for the
Succession Clause of FIRREA, 12 U.S.C. § 1821(d)(2)(A)(i)).
 68
The class plaintiffs next challenge the district court’s
conclusion that they failed to state a claim for breach of the
implied covenant, which they contend required the Companies
– and, therefore, their conservator – to act reasonably and not
to deprive them of the fruits of their bargain, namely the
opportunity to receive dividends. The FHFA urges us to affirm
the district court’s determination that the class plaintiffs’ lack
of an enforceable contractual right to dividends foreclosed the
claim that the implied covenant instead provided such a right.
See Perry Capital LLC, 70 F. Supp. 3d at 238.

Under Delaware law, “[e]xpress contractual provisions
always supersede the implied covenant,” Gerber v. Enter.
Prod. Holdings, LLC, 67 A.3d 400, 419 (Del. 2013), overruled
on other grounds by Winshall v. Viacom Int’l Inc., 76 A.3d 808,
815 n.13 (Del. 2013), and “one generally cannot base a claim
for breach of the implied covenant on conduct authorized by
the terms of the agreement,” Dunlap v. State Farm Fire & Cas.
Co., 878 A.2d 434, 441 (Del. 2005). Here, however, the stock
certificates upon which the class plaintiffs rely provide for
dividends “if declared by the Board of Directors, in its sole
discretion.” J.A. 248. A party to a contract providing for such
discretion violates the implied covenant if it “act[s] arbitrarily
or unreasonably.” Nemec v. Shrader, 991 A.2d 1120, 1126
(Del. 2010); see also Gerber, 67 A.3d at 419 (“When
exercising a discretionary right, a party to the contract must
exercise its discretion reasonably” (emphasis omitted)).
Virginia law similarly provides “where discretion is lodged in
one of two parties to a contract . . . such discretion must, of
course, be exercised in good faith.” Historic Green Springs,
Inc. v. Brandy Farm, Ltd., 32 Va. Cir. 98, at *3 (Va. Cir. 1993)
(alteration in original); see also Va. Vermiculite, Ltd. v. W.R.
Grace & Co.- Conn., 156 F.3d 535, 542 (4th Cir. 1998).
 69
We remand this claim, insofar as it seeks damages, for the
district court to evaluate it under the correct legal standard,
namely, whether the Third Amendment violated the reasonable
expectations of the parties. We note that the class plaintiffs
specifically allege that some class members purchased their
shares before the Recovery Act was enacted in July 2008 and
the FHFA was appointed conservator the following September,
while others purchased their shares later, but the class plaintiffs
define their class action to include more broadly “all persons
and entities who held shares . . . and who were damaged
thereby,” J.A. 262-63. The district court may need to redefine
or subdivide the class depending upon what that court
determines were the various plaintiffs’ reasonable
expectations. If the district court determines the enactment of
the Recovery Act and the FHFA’s appointment as conservator
affected these expectations, then it should consider, inter alia,
(1) Section 4617(b)(2)(J)(ii) (authorizing the FHFA to act “in
the best interests of the [Companies] or the Agency”), (2)
Provision 5.1 of the Stock Agreements, J.A. 2451, 2465
(permitting the Companies to declare dividends and make other
distributions only with Treasury’s consent), and (3) pertinent
statements by the FHFA, e.g., J.A. 217 ¶ 8, referencing
Statement of FHFA Director James B. Lockhart at News
Conference Announcing Conservatorship of Fannie Mae and
Freddie Mac (Sept. 7, 2008) (The “FHFA has placed Fannie
Mae and Freddie Mac into conservatorship. [Conservatorship]
is a statutory process designed to stabilize a troubled institution
with the objective of returning the entities to normal business
operations. FHFA will act as the conservator to operate the
Enterprises until they are stabilized.”).

The district court also held the class plaintiffs “fail to plead
claims of breach of the implied covenant against the
[Companies]” because they allege only that the FHFA’s actions
were arbitrary and unreasonable. Perry Capital LLC, 70 F.
 70
Supp. 3d at 239. This is a distinction without a difference
because the action they challenge – the FHFA’s adoption of the
Third Amendment – was taken on behalf of the Companies.
The Companies and the FHFA are thus identically situated for
purposes of this claim.

c. Liquidation preferences

The class plaintiffs also allege the FHFA, by adopting the
Third Amendment, breached the guarantees in their stock
certificates and in the implied covenant to a share of the
Companies’ assets upon liquidation because it ensured there
would be no assets to distribute. The FHFA urges us to affirm
the district court’s dismissal of these claims as unripe. See
Perry Capital LLC, 70 F. Supp. 3d at 234-35.

“The ripeness doctrine generally deals with when a federal
court can or should decide a case,” Am. Petrol. Inst. v. EPA,
683 F.3d 382, 386 (D.C. Cir. 2012), and has both constitutional
and prudential facets. Ripeness “shares the constitutional
requirement of standing that an injury in fact be certainly
impending.” Nat’l Treasury Emps. Union v. United States, 101
F.3d 1423, 1427 (D.C. Cir. 1996). We decide whether to defer
resolving a case for prudential reasons by “evaluat[ing] (1) the
fitness of the issues for judicial decision and (2) the hardship to
the parties of withholding court consideration.” Nat’l Park
Hosp. Ass’n v. Dep’t of Interior, 538 U.S. 803, 808 (2003); see
Am. Petrol., 683 F.3d at 386.

These claims satisfy the constitutional requirement
because the class plaintiffs allege not only that the Third
Amendment poses a “certainly impending” injury, Nat’l
Treasury, 101 F.3d at 1427, but that it immediately harmed
them by diminishing the value of their shares. Cf. State Nat’l
Bank v. Lew, 795 F.3d 48, 56 (D.C. Cir. 2015) (holding unripe
 71
a claim seeking recovery for a present loss in share-price in part
because the plaintiffs failed to allege “their current investments
are worth less now, or have been otherwise adversely affected
now”). The class plaintiffs allege the Third Amendment, by
depriving them of their right to share in the Companies’ assets
when and if they are liquidated, immediately diminished the
value of their shares. The case or controversy requirement of
Article III of the U.S. Constitution is therefore met.

The FHFA (like the district court) says the claims are not
prudentially ripe because there can be no breach of any
contractual obligation to distribute assets until the Companies
are required to perform, namely, upon liquidation. Not so.
Under the doctrine of anticipatory breach, “a voluntary
affirmative act which renders the obligor unable . . . to
perform” is a repudiation, RESTATEMENT (SECOND) OF
CONTRACTS § 250(b), that “ripens into a breach prior to the
time for performance . . . if the promisee elects to treat it as
such” by, for instance, suing for damages, Franconia Assocs.
v. United States, 536 U.S. 129, 143 (2002) (internal quotation
marks omitted); RESTATEMENT (SECOND) OF CONTRACTS
§§ 253(1), 256 cmt. c. Accord Lenders Fin. Corp. v. Talton,
249 Va. 182, 189, 455 S.E.2d 232, 236 (Va. 1995); W. Willow-
Bay Court, LLC v. Robino-Bay Court Plaza, LLC, C.A. No.
2742-VCN, 2009 WL 458779, at *5 & n.37 (Del. Ch. Feb. 23,
2009). An anticipatory breach satisfies prudential ripeness and
therefore enables the promisee to seek damages immediately
upon repudiation, Sys. Council EM-3 v. AT&T Corp., 159 F.3d
1376, 1383 (D.C. Cir. 1998) (“[I]f a performing party
unequivocally signifies its intent to breach a contract, the other
party may seek damages immediately under the doctrine of
anticipatory repudiation”). In other words, anticipatory breach
is “a doctrine of accelerated ripeness” because it “gives the
plaintiff the option to have the law treat the promise to breach
[or the act rendering performance impossible] as a breach
 72
itself.” Homeland Training Ctr., LLC v. Summit Point Auto.
Research Ctr., 594 F.3d 285, 294 (4th Cir. 2010) (citing
Franconia Assocs., 536 U.S. at 143).

The class plaintiffs’ claims for breach of contract with
respect to liquidation preferences are better understood as
claims for anticipatory breach, so there is no prudential reason
to defer their resolution. 26 Nor do we see any prudential
obstacle to adjudicating the class plaintiffs’ claim that
repudiating the guarantee of liquidation preferences constitutes
a breach of the implied covenant. Our holding that the
claims are ripe sheds no light on the merit of those claims and,
contrary to the assertions in the dissenting opinion (at 17), has
no bearing upon the scope of the FHFA's statutory authority as

26
Although the class plaintiffs do not describe the Third Amendment
as “an anticipatory repudiation” until their reply brief, Class Pls.
Reply Br. at 13, they have emphasized throughout this litigation that
it “nullified – and thereby breached – the contractual rights to a
liquidation distribution” by rendering performance impossible.
Class Pls. Br. at 40-41; see also, e.g., J.A. 223 ¶ 22 (alleging the
Third Amendment “effectively eliminated the property and
contractual rights of Plaintiffs and the Classes to receive their
liquidation preference upon the dissolution, liquidation or winding
up of Fannie Mae and Freddie Mac”); Class Pls. Opp’n to Mot. to
Dismiss at 37 (“[T]he Third Amendment has made it impossible for
[the Companies] ever to have . . . assets available for distribution to
stockholders other than Treasury” and thereby “eliminated Plaintiffs’
present . . . liquidation rights in breach of the Certificates” (internal
quotation marks omitted)). The class plaintiffs allege they “paid
valuable consideration in exchange for these contractual rights,”
which rights “had substantial market value . . . that [was] swiftly
dissipated in the wake of the Third Amendment,” J.A. 224 ¶ 23,
causing the class plaintiffs to “suffer[] damages,” e.g., J.A. 269
¶ 144.
 73
conservator under the Recovery Act. Whether the class
plaintiffs stated claims for breach of contract and breach of the
implied covenant is best addressed by the district court in the
first instance. 27 That court’s earlier conclusion in the negative
was made for “largely the same reasons” that it had held the
claims unripe, Perry Capital LLC, 70 F. Supp. 3d at 236, and
so must be reconsidered in light of our reversal of the court’s
holding on ripeness.

V. Conclusion

We affirm the judgment of the district court denying the
institutional plaintiffs’ claims against the FHFA and Treasury
alleging arbitrary and capricious conduct and conduct in excess
of their statutory authority because those claims are barred
by 12 U.S.C. § 4617(f). With respect to the class plaintiffs’
claims and those of the Arrowood and Fairholme plaintiffs, we
affirm the judgment of the district court except for the claims
alleging breach of contract and breach of the implied covenant
of good faith and fair dealing regarding liquidation preferences
and the claim for breach of the implied covenant with respect

27
We remand the contract-based claims only insofar as they seek
damages because the pleas for equitable relief are barred by 12
U.S.C. § 4617(f). “Because ripeness is a justiciability doctrine that
is drawn both from Article III limitations on judicial power and from
prudential reasons for refusing to exercise jurisdiction, we consider
it first.” La. Pub. Serv. Comm’n v. FERC, 522 F.3d 378, 397 (D.C.
Cir. 2008) (internal quotation marks and brackets omitted); see also
In re Aiken Cty., 645 F.3d 428, 434 (D.C. Cir. 2011) (“The ripeness
doctrine, even in its prudential aspect, is a threshold inquiry that does
not involve adjudication on the merits”). We therefore first
determined the claims are ripe, supra at 70-73, and only then
concluded the requests for equitable relief are barred by § 4617(f).
 74
to dividend rights, which claims we remand to the district court
for further proceedings consistent with this opinion.

So ordered.
BROWN, Circuit Judge, dissenting in part:

One critic has called it “wrecking-ball benevolence,”
James Bovard, Editorial, Nothing Down: The Bush
Administration’s Wrecking-Ball Benevolence, BARRON’S,
Aug. 23, 2004, http://tinyurl.com/Barrons-Bovard; while
another, dismissing the compassionate rhetoric, dubs it “crony
capitalism,” Gerald P. O’Driscoll, Jr., Commentary,
Fannie/Freddie Bailout Baloney, CATO INST.,
http://tinyurl.com/Cato-O-Driscoll (last visited Feb. 13,
2017). But whether the road was paved with good intentions
or greased by greed and indifference, affordable housing
turned out to be the path to perdition for the U.S. mortgage
market. And, because of the dominance of two so-called
Government Sponsored Entities (“GSE”s)—the Federal
National Mortgage Association (“Fannie Mae” or “Fannie”)
and the Federal Home Loan Mortgage Corporation (“Freddie
Mac” or “Freddie,” collectively with Fannie Mae, the
“Companies”)—the trouble that began in the subprime
mortgage market metastasized until it began to affect most
debt markets, both domestic and international.

By 2008, the melt-down had become a crisis. A decade
earlier, government policies and regulations encouraging
greater home ownership pushed banks to underwrite
mortgages to allow low-income borrowers with poor credit
history to purchase homes they could not afford. Banks then
used these risky mortgages to underwrite highly-profitable
mortgage-backed securities—bundled mortgages—which
hedge funds and other investors later bought and sold, further
stoking demand for ever-riskier mortgages at ever-higher
interest rates. Despite repeated warnings from regulators and
economists, the GSEs’ eagerness to buy these loans meant
lenders had a strong incentive to make risky loans and then
pass the risk off to Fannie and Freddie. By 2007, Fannie and
Freddie had acquired roughly a trillion dollars’ worth of
subprime and nontraditional mortgages—approximately 40
 2
percent of the value of all mortgages purchased. And since
more risk meant more profit and the GSEs knew they could
count on the federal government to cover their losses, their
appetite for riskier mortgages was entirely rational.

The housing boom generated tremendous profit for
Fannie and Freddie. But then the bubble burst. Individuals
began to default on their loans, wrecking neighborhoods,
wiping out the equity of prudent homeowners, and threatening
the stability of banks and those who held or guaranteed
mortgage-backed assets. In March 2008, Bear Sterns
collapsed, requiring government funds to finance a takeover
by J.P. Morgan Chase. In July, the Federal Deposit Insurance
Corporation (the “FDIC”) seized IndyMac. But Bear Sterns
and IndyMac—huge companies, to be sure—paled in
comparison to Fannie and Freddie, which together backed $5
trillion in outstanding mortgages, or nearly half of the $12
trillion U.S. mortgage market. In late-July 2008, Congress
passed and President Bush signed the Housing and Economic
Recovery Act of 2008, authorizing a new government agency,
the Federal Housing Finance Agency (“FHFA” or the
“Agency”), to serve as conservator or receiver for Fannie and
Freddie if certain conditions were met; Fannie and Freddie
were placed into FHFA conservatorship the following month.
Only weeks thereafter, Lehman Brothers failed, the
government bailed out A.I.G., Washington Mutual declared
bankruptcy, and Wells Fargo obtained government assistance
for its buy-out of Wachovia.

There is no question that FHFA was created to confront a
serious problem for U.S. financial markets. The Court
apparently concludes a crisis of this magnitude justifies
extraordinary actions by Congress. Perhaps it might. But
even in a time of exigency, a nation governed by the rule of
law cannot transfer broad and unreviewable power to a
 3
government entity to do whatsoever it wishes with the assets
of these Companies. Moreover, to remain within
constitutional parameters, even a less-sweeping delegation of
authority would require an explicit and comprehensive
framework. See Whitman v. Am. Trucking Ass’ns, Inc., 531
U.S. 457, 468 (2001) (“Congress . . . does not alter the
fundamental details of a regulatory scheme in vague terms or
ancillary provisions—it does not, one might say, hide
elephants in mouseholes.”) Here, Congress did not endow
FHFA with unlimited authority to pursue its own ends; rather,
it seized upon the statutory text that had governed the FDIC
for decades and adapted it ever so slightly to confront the new
challenge posed by Fannie and Freddie.

Perhaps this was a bad idea. The perils of massive GSEs
had been indisputably demonstrated. Congress could have
faced up to the mess forthrightly. Had both Companies been
placed into immediate receivership, the machinations that led
to this litigation might have been avoided. See Thomas H.
Stanton, The Failure of Fannie Mae and Freddie Mac and the
Future of Government Support for the Housing Finance
System, 14–15 (Brooklyn L. Sch., Conference Draft, Mar. 27,
2009), http://tinyurl.com/Stanton-Conference (arguing Fannie
and Freddie could have been converted into wholly owned
government corporations with limited lifespans in order to
stabilize the mortgage market). But the question before the
Court is not whether the good guys have stumbled upon a
solution. There are no good guys. The question is whether
the government has violated the legal limits imposed on its
own authority.

Regardless of whether Congress had many options or
very few, it chose a well-understood and clearly-defined
statutory framework—one that drew upon the common law to
clearly delineate the outer boundaries of the Agency’s
 4
conservator or, alternatively, receiver powers. FHFA pole
vaulted over those boundaries, disregarding the plain text of
its authorizing statute and engaging in ultra vires conduct.
Even now, FHFA continues to insist its authority is entirely
without limit and argues for a complete ouster of federal
courts’ power to grant injunctive relief to redress any action it
takes while purporting to serve in the conservator role. See
FHFA Br. 21. While I agree with much of the Court’s
reasoning, I cannot conclude the anti-injunction provision
protects FHFA’s actions here or, more generally, endorses
FHFA’s stunningly broad view of its own power. Plaintiffs—
not all innocent and ill-informed investors, to be sure—are
betting the rule of law will prevail. In this country, everyone
is entitled to win that bet. Therefore, I respectfully dissent
from the portion of the Court’s opinion rejecting the
Institutional and Class Plaintiffs’ claims as barred by the anti-
injunction provision and all resulting legal conclusions.

I.

The Housing and Economic Recovery Act of 2008
(“HERA” or the “Act”), Pub. L. No. 110-289, 122 Stat. 2654
(codified at 12 U.S.C. § 4511, et seq.), established a new
financial regulator, FHFA, and endowed it with the authority
to act as conservator or receiver for Fannie and Freddie. The
Act also temporarily expanded the United States Treasury’s
(“Treasury”) authority to extend credit to Fannie and Freddie
as well as purchase stock or debt from the Companies. My
disagreement with the Court turns entirely on its interpretation
of HERA’s text.

Pursuant to HERA, FHFA may supervise and, if needed,
operate Fannie and Freddie in a “safe and sound manner,”
“consistent with the public interest,” while “foster[ing] liquid,
efficient, competitive, and resilient national housing finance
 5
markets.” 12 U.S.C. § 4513(a)(1)(B). The statute further
authorizes the FHFA Director to “appoint [FHFA] as
conservator or receiver” for Fannie and Freddie “for the
purpose of reorganizing, rehabilitating, or winding up [their]
affairs.” Id. § 4617(a)(1), (2) (emphasis added). In order to
ensure FHFA would be able to act quickly to prevent the
effects of the subprime mortgage crisis from cascading further
through the United States and global economies, HERA also
provided “no court may take any action to restrain or affect
the exercise of powers or functions of [FHFA] as a
conservator or a receiver.” Id. § 4617(f) (emphasis added).

By its plain terms, HERA’s broad anti-injunction
provision bars equitable relief against FHFA only when the
Agency acts within its statutory authority—i.e. when it
performs its “powers or functions.” See New York v. FERC,
535 U.S. 1, 18 (2002) (“[A]n agency literally has no power to
act . . . unless and until Congress confers power upon it.”).
Accordingly, having been appointed as “conservator” for the
Companies, FHFA was obligated to behave in a manner
consistent with the conservator role as it is defined in HERA
or risk intervention by courts. Indeed, this conclusion is
consistent with judicial interpretations of HERA’s sister
statute and, more broadly, with the common law.

A.

FHFA’s general authorization to act appears in HERA’s
“[d]iscretionary appointment” provision, which states, “The
Agency may, at the discretion of the Director, be appointed
conservator or receiver” for Fannie and Freddie. 12 U.S.C.
§ 4617(a)(2) (emphasis added). The disjunctive “or” clearly
indicates FHFA may choose to behave either as a conservator
or as a receiver, but it may not do both simultaneously. See
also id. § 4617(a)(4)(D) (“The appointment of the Agency as
 6
receiver of a regulated entity under this section shall
immediately terminate any conservatorship established for the
regulated entity under this chapter.”). The Agency chose the
first option, publicly announcing it had placed Fannie and
Freddie into conservatorship on September 6, 2008 after a
series of unsuccessful efforts to capitalize the Companies.
They remain in FHFA conservatorship today. Accordingly,
we must determine the statutory boundaries of power, if any,
placed on FHFA when it functions as a conservator and
determine whether FHFA stepped out of bounds.

The Court emphasizes Subsection 4617(b)(2)(B)’s
general overview of the Agency’s purview:

The Agency may, as conservator or receiver—
(i) take over the assets of and operate the
regulated entity with all the powers of the
shareholders, the directors, and the officers of
the regulated entity and conduct all business of
the regulated entity;
(ii) collect all obligations and money due the
regulated entity;
(iii) perform all functions of the regulated entity
in the name of the regulated entity which are
consistent with the appointment as conservator
or receiver;
(iv) preserve and conserve the assets and
property of the regulated entity; and
(v) provide by contract for assistance in
fulfilling any function, activity, action, or duty
of the Agency as conservator or receiver.

Id. § 4617(b)(2)(B). From this text, the Court intuits a general
statutory mission to behave as a “conservator” in virtually all
corporate actions, presumably transitioning to a “receiver”
 7
only at the moment of liquidation. Op. 27 (“[HERA] openly
recognizes that sometimes conservatorship will involve
managing the regulated entity in the lead up to the
appointment of a liquidating receiver.”); 32 (“[T]he duty that
[HERA] imposes on FHFA to comply with receivership
procedural protections textually turns on FHFA actually
liquidating the Companies.”). In essence, the Court’s position
holds that because there was a financial crisis and only
Treasury offered to serve as White Knight, both FHFA and
Treasury may take any action they wish, apart from formal
liquidation, without judicial oversight. This analysis is
dangerously far-reaching. See generally 2 James Wilson, Of
the Natural Rights of Individuals, in THE WORKS OF JAMES
WILSON 587 (1967) (warning it is not “part of natural liberty
. . . to do mischief to anyone” and suggesting such a
nonexistent right can hardly be given to the state to impose by
fiat). While the line between a conservator and a receiver
may not be completely impermeable, the roles’ heartlands are
discrete, well-anchored, and authorize essentially distinct and
specific conduct.

For clarification of the general mission statement
appearing in Subsection (B), the reader need only continue to
read through Subsection 4617(b)(2). See Kellmer v. Raines,
674 F.3d 848, 850 (D.C. Cir. 2012) (“[T]o resolve this
[statutory interpretation of HERA] issue, we need only heed
Professor Frankfurter’s timeless advice: ‘(1) Read the statute;
(2) read the statute; (3) read the statute!’” (quoting Henry J.
Friendly, Mr. Justice Frankfurter and the Reading of Statutes,
in BENCHMARKS 196, 202 (1967))).

A mere two subsections later, HERA helpfully lists the
specific “powers” that FHFA possesses once appointed
conservator:
 8
The Agency may, as conservator, take such action as
may be—
(i) necessary to put the regulated entity in a
sound and solvent condition; and
(ii) appropriate to carry on the business of the
regulated entity and preserve and conserve the
assets and property of the regulated entity.

12 U.S.C. § 4617(b)(2)(D) (emphasis added). The next
subsection defines FHFA’s “[a]dditional powers as receiver:”

In any case in which the Agency is acting as
receiver, the Agency shall place the regulated entity
in liquidation and proceed to realize upon the assets
of the regulated entity in such manner as the Agency
deems appropriate, including through the sale of
assets, the transfer of assets to a limited-life
regulated entity[,] . . . or the exercise of any other
rights or privileges granted to the Agency under this
paragraph.

Id. § 4617(b)(2)(E) (emphasis added). Apparently, when the
Court asserts “for all of their arguments that FHFA has
exceeded the bounds of conservatorship, the institutional
stockholders have no textual hook on which to hang their
hats,” Op. 36, it refers solely to the limited confines of
Subsection 4617(b)(2)(B).

Plainly the text of Subsections 4617(b)(2)(D) and
(b)(2)(E) mark the bounds of FHFA’s conservator or receiver
powers, respectively, if and when the Agency chooses to
exercise them in a manner consistent with its general
authority to “operate the regulated entity” appearing in
 9
Subsection 4617(b)(2)(B). 1 Of course, this is not to say
FHFA may take action if and only if the preconditions listed
in the statute are met. Indeed, in provisions following the
specific articulation of powers contained in Subsections (D)
and (E), and thus drafted in contemplation of the distinctions
articulated in those earlier subsections, the statute lists certain
powers that may be exercised by FHFA as either a
“conservator or receiver.” 12 U.S.C. § 4617(b)(2)(G) (power
to “transfer or sell any asset or liability of the regulated entity
in default” without prior approval by the regulated entity); id.
§ 4617(b)(2)(H) (power to “pay [certain] valid obligations of

1
The Court makes much of the statute’s statement that a
conservator “may” take action to operate the company in a sound
and solvent condition and preserve and conserve its assets while a
receiver “shall” liquidate the company. It concludes the statute
permits, but does not compel in any judicially enforceable sense,
FHFA to preserve and conserve Fannie’s and Freddie’s assets
however it sees fit. See Op. 21–25. I disagree. Rather, read in the
context of the larger statute—especially the specifically defined
powers of a conservator and receiver set forth in Subsections
4617(b)(2)(D) and (b)(2)(E)—Congress’s decision to use
permissive language with respect to a conservator’s duties is best
understood as a simple concession to the practical reality that a
conservator may not always succeed in rehabilitating its ward. The
statute wisely acknowledges that it is “not in the power of any man
to command success” and does not convert failure into a legal
wrong. See Letter from George Washington to Benedict Arnold
(Dec. 5, 1775), in 3 THE WRITINGS OF GEORGE WASHINGTON, 192
(Jared Sparks, ed., 1834). Of course, this does not mean the
Agency may affirmatively sabotage the Companies’ recovery by
confiscating their assets quarterly to ensure they cannot pay off
their crippling indebtedness. There is a vast difference between
recognizing that flexibility is necessary to permit a conservator to
address evolving circumstances and authorizing a conservator to
undermine the interests and destroy the assets of its ward without
meaningful limit.
 10
the regulated entity”). Indeed, each of these powers is
entirely consistent with either the Subsection (D) conservator
role or the Subsection (E) receiver role, and they do not
override the distinctions between them. Congress cannot be
expected to specifically address an entire universe of possible
actions in its enacted text—assigning each to a “conservator,”
a “receiver,” or both. See, e.g., id. § 4617(b)(2)(C) (joint
conservator/receiver power to “provide for the exercise of any
function by any stockholder, director, or officer of any
regulated entity”). But if a power is enumerated as that of a
“receiver” (or fairly read to be a “receiver” power), FHFA
cannot exercise that power while calling itself a
“conservator.” The statute confirms as much: the Agency “as
conservator or receiver” may “exercise all powers and
authorities specifically granted to conservators or receivers,
respectively, under [Section 4617], and such incidental
powers as shall be necessary to carry out such powers.” Id.
§ 4617(J)(i) (emphasis added).

A conservator endeavors to “put the regulated entity in a
sound and solvent condition” by “reorganizing [and]
rehabilitating” it, and a receiver takes steps towards
“liquidat[ing]” the regulated entity by “winding up [its]
affairs.” 12 U.S.C. § 4617(a)(2), (b)(2)(D)–(E). 2 In short,
FHFA may choose whether it intends to serve as a
conservator or receiver; once the choice is made, however, its
“hard operational calls” consistent with its “managerial
judgment” are statutorily confined to acts within its chosen
2
The Director’s discretion to appoint FHFA as “‘conservator or receiver
for the purpose of reorganizing, rehabilitating, or winding up the affairs of
a regulated entity’” does not suggest slippage between the roles. See
FHFA Br. 41 (quoting 12 U.S.C. § 4617(a)(2)). Between the conservator
and receiver roles, FHFA surely has the power to accomplish each of the
enumerated functions; nonetheless, a conservator can no more “wind[] up”
a company than a receiver can “rehabilitat[e]” it. See 12 U.S.C.
§ 4617(b)(3)(B) (using “liquidation” and “winding up” as synonyms).
 11
role. See Op. 23. There is no such thing as a hybrid
conservator-receiver capable of governing the Companies in
any manner it chooses up to the very moment of liquidation.
See Op. 55–56 (noting HERA “terminates [shareholders]
rights and claims” in receivership and acknowledging
shareholders’ direct claims against and rights in the
Companies survive during conservatorship). 3

Moreover, it is the proper role of courts to determine
whether FHFA’s challenged actions fell within its statutorily-
defined conservator role. In County of Sonoma v. FHFA, for
example, when our sister circuit undertook this inquiry, it
observed, “If the [relevant] directive falls within FHFA’s
conservator powers, it is insulated from review and this case
must be dismissed,” but “[c]onversely, the anti-judicial
review provision is inapplicable when FHFA acts beyond the
scope of its conservator power.” 710 F.3d 987, 992 (9th Cir.
2013); see also Leon Cty. v. FHFA, 700 F.3d 1273, 1278
(11th Cir. 2012) (“FHFA cannot evade judicial scrutiny by
merely labeling its actions with a conservator stamp.”). Here,
the Court abdicates this crucial responsibility, blessing FHFA
with unreviewable discretion over any action—short of
formal liquidation—it takes towards its wards.

B.

But HERA does not exist in an interpretive vacuum.
Congress imported the powers and limitations FHFA enjoys

3
HERA’s provision for judicial review over a claim promptly filed
“within 30 days” of the Director’s decision to appoint a conservator or
receiver further indicates Congress contemplated continuity of the
conservator or receiver role during the period the conservatorship or
receivership endured. 12 U.S.C. § 4617(a)(5). Here, therefore, in
transitioning sub silencio from the conservator to receiver role, FHFA has
escaped the statute’s contemplated, though admittedly brief, period for
judicial review following the transition.
 12
in its “conservator” and “receiver” roles, as well as the
insulation from judicial review that accompanies them,
directly from the Financial Institutions Reform, Recovery,
and Enforcement Act of 1989 (“FIRREA”), Pub. L. No. 101-
73, 103 Stat. 183, which governs the FDIC. See Mark A.
Calabria, The Resolution of Systemically Important Financial
Institutions: Lessons from Fannie and Freddie 10 (Cato Inst.,
Working Paper No. 25, 2015), http://tinyurl.com/Cato-
Working-Paper (“In crafting the conservator and receivership
provisions . . . the Committee staff . . . quite literally ‘marked
up’ Sections 11 and 13 of the [Federal Deposit Insurance Act
(“FDIA”), FIRREA’s predecessor statute] . . . . The
presumption was that FDIA powers would apply to a GSE
resolution, unless there was a compelling reason otherwise.”).
Our interpretation of conservator powers and the judiciary’s
role in policing their boundaries under HERA is, therefore,
guided by congressional intent expressed in FIRREA and the
case law interpreting it. See Lorillard v. Pons, 434 U.S. 575,
580–81 (1978) (noting when “Congress adopts a new law
incorporating sections of a prior law, Congress normally can
be presumed to have had knowledge of the interpretation
given to the incorporated law” and to have “adopte[d] that
interpretation”); Motion Picture Ass’n of Am., Inc. v. FCC,
309 F.3d 796, 801 (D.C. Cir. 2002) (“Statutory provisions in
pari materia normally are construed together to discern their
meaning.”); see also Felix Frankfurter, Some Reflections on
the Reading of Statutes, 47 COLUM. L. REV. 527, 537 (1947)
[hereinafter Reading of Statutes] (“[I]f a word is obviously
transplanted from another legal source, whether the common
law or other legislation, it brings the old soil with it.”).

In language later copied word-for-word into HERA,
FIRREA lists the FDIC’s powers “as conservator or receiver,”
12 U.S.C. § 1821(d)(2)(A)–(B), and it later lists the FDIC’s
“[p]owers as conservator” alone, id. § 1821(d)(2)(D). Save
 13
for references to a “regulated entity” in place of a “depository
institution,” the conservator powers delineated in the two
statutes are identical. In fact, FIRREA’s text demonstrates
the Legislature’s clear intent to create a textual distinction
between conservator and receiver powers:

The FDIC is authorized to act as conservator or
receiver for insured banks and insured savings
associations that are chartered under Federal or State
law. The title also distinguishes between the powers
of a conservator and receiver, making clear that a
conservator operates or disposes of an institution as
a going concern while a receiver has the power to
liquidate and wind up the affairs of an institution.

H.R. REP. NO. 101-209, at 398 (1989) (Conf. Rep.) (emphasis
added). Courts have respected this delineation, noting
“Congress did not use the phrase ‘conservator or receiver’
loosely.” 1185 Ave. of Americas Assocs. v. RTC, 22 F.3d 494,
497 (2d Cir. 1994) (“Throughout FIRREA, Congress used
‘conservator or receiver’ where it granted rights to both
conservators and receivers, and it used ‘conservator’ or
‘receiver’ individually where it granted rights to the [agency]
in only one capacity.”).

FIRREA had assigned to “conservators” responsibility
for taking “such action as may be . . . necessary to put the
insured depository institution in a sound and solvent
condition; and . . . appropriate to carry on the business of the
institution and preserve and conserve [its] assets,” 12 U.S.C.
§ 1821(d)(2)(D), and it imposed upon them a “fiduciary duty
to minimize the institution’s losses,” 12 U.S.C. § 1831f(d)(3).
“Receivers,” on the other hand, “place the insured depository
institution in liquidation and proceed to realize upon the
assets of the institution.” Id. § 1821(d)(2)(E). The proper
 14
interpretation of the text is unmistakable: “a conservator may
operate and dispose of a bank as a going concern, while a
receiver has the power to liquidate and wind up the affairs of
an institution.” James Madison Ltd. ex rel. Hecht v. Ludwig,
82 F.3d 1085, 1090 (D.C. Cir. 1996); see also, e.g., Del E.
Webb McQueen Dev. Corp. v. RTC, 69 F.3d 355, 361 (9th
Cir. 1995) (“The RTC [a government agency similar to the
FDIC], as conservator, operates an institution with the hope
that it might someday be rehabilitated. The RTC, as receiver,
liquidates an institution and distributes its proceeds to
creditors according to the priority rules set out in the
regulations.”); RTC v. United Tr. Fund, Inc., 57 F.3d 1025,
1033 (11th Cir. 1995) (“The conservator’s mission is to
conserve assets[,] which often involves continuing an ongoing
business. The receiver’s mission is to shut a business down
and sell off its assets. A receiver and conservator consider
different interests when making . . . strategic decision[s].”).
The two roles simply do not overlap, and any conservator
who “winds up the affairs of an institution” rather than
operate it “as a going concern”—within the context of a
formal liquidation or not—does so outside its authority as
conservator under the statute.

Of course, parameters for the “conservator” and
“receiver” roles are not the only things HERA lifted directly
from FIRREA. The anti-injunction clause at issue here came
too. Section 1821(j) of FIRREA provided, “[N]o court may
take any action, except at the request of the Board of
Directors by regulation or order, to restrain or affect the
exercise of powers or functions of the [FDIC] as a conservator
or a receiver.” 12 U.S.C. § 1821(j). Another near-perfect fit.

Indeed, National Trust for Historic Preservation in the
United States v. FDIC emphasized that, while FIRREA’s anti-
injunction clause prevented review of the FDIC’s actions
 15
where it had “exercise[d the] powers or functions” granted to
it as “conservator or receiver,” the Court retained the ability
to decide claims alleging the agency “ha[d] acted or
propose[d] to act beyond, or contrary to, its statutorily
prescribed, constitutionally permitted, powers or functions.”
21 F.3d 469, 472 (D.C. Cir. 1994) (Wald, J., concurring); see
also Freeman v. FDIC, 56 F.3d 1394, 1398 (D.C. Cir. 1995)
(“‘[Section] 1821(j) does indeed bar courts from restraining or
affecting the exercise of powers or functions of the FDIC as a
conservator or a receiver . . . unless it has acted or proposed to
act beyond, or contrary to, its statutorily prescribed,
constitutionally permitted, powers or functions.’” (quoting
Nat’l Tr. for Historic Pres., 21 F.3d at 472 (Wald, J.,
concurring))). Insulating all actions within the conservator
role is an entirely different proposition from exempting
actions outside that role, and this Circuit’s precedent leaves
no doubt that a thorough analysis is required to determine
where on the continuum an agency stands before applying
FIRREA’s—or HERA’s—anti-injunction clause to bar a
plaintiff’s claims.

C.

When Congress lifted HERA’s conservatorship standards
verbatim from FIRREA, it also incorporated the long history
of fiduciary conservatorships at common law baked into that
statute. Indeed, “[i]t is a familiar maxim that a statutory term
is generally presumed to have its common-law meaning.”
Evans v. United States, 504 U.S. 255, 259 (1992); see
Morissette v. United States, 342 U.S. 246, 263 (1952)
(“[W]here Congress borrows terms of art in which are
accumulated the legal tradition and meaning of centuries of
practice, it presumably knows and adopts the cluster of ideas
that were attached to each borrowed word in the body of
learning from which it was taken and the meaning its use will
 16
convey to the judicial mind unless otherwise instructed. In
such case, absence of contrary direction may be taken as
satisfaction with widely accepted definitions, not as a
departure from them.”); see generally Roger J. Traynor,
Statutes Revolving in Common-Law Orbits, 17 CATH. U. L.
REV. 401 (1968) (discussing the interaction between statutes
and judicial decisions across a number of fields, including
commercial law). As Justice Frankfurter colorfully put it,
“[I]f a word is obviously transplanted from another legal
source, whether the common law or other legislation, it brings
the old soil with it.” Reading of Statutes, supra, at 537.

We have an obvious transplant here. At common law,
“conservators” were appointed to protect the legal interests of
those unable to protect themselves. In the probate context, for
example, a conservator was bound to act as the fiduciary of
his ward. See In re Kosmadakes, 444 F.2d 999, 1004 (D.C.
Cir. 1971). This duty forbade the conservator—whether
overseeing a human or corporate person—from acting for the
benefit of the conservator himself or a third party. See RTC v.
CedarMinn Bldg. Ltd. P’ship, 956 F.2d 1446, 1453–54 (8th
Cir. 1992) (observing “[a]t least as early as the 1930s, it was
recognized that the purpose of a conservator was to maintain
the institution as an ongoing concern,” and holding “the
distinction in duties between [RTC] conservators and
receivers” is thus not “more theoretical than real”). 4

Consequently, today’s Black’s Law Dictionary defines a
“conservator” as a “guardian, protector, or preserver,” while a
“receiver” is a “disinterested person appointed . . . for the
protection or collection of property that is the subject of

4
While the execution of multiple contracts with Treasury “bears no
resemblance to the type of conservatorship measures that a private
common-law conservator would be able to undertake,” Op. 34, that is a
distinction in degree, not in kind.
 17
diverse claims (for example, because it belongs to a bankrupt
[entity] or is otherwise being litigated).” BLACK’S LAW
DICTIONARY 370, 1460 (10th ed. 2014). These “[w]ords that
have acquired a specialized meaning in the legal context must
be accorded their legal meaning.” Buckhannon Bd. & Care
Home, Inc. v. W.V. Dep’t of Health & Human Res., 532 U.S.
598, 615 (2001) (Scalia, J., concurring). 5 They comprise the
common law vocabulary that Congress chose to employ in
FIRREA and, later, in HERA to authorize the FDIC and
FHFA to serve as “conservators” in order to “preserve and
conserve [an institution’s] assets” and operate that institution
in a “sound and solvent” manner. 12 U.S.C. § 1821(d)(2)(D).

The word “conservator,” therefore, is not an infinitely
malleable term that may be stretched and contorted to
encompass FHFA’s conduct here and insulate Plaintiffs’ APA
claims from judicial review. Indeed, the Court implicitly
acknowledges this fact in permitting the Class Plaintiffs to
mount a claim for anticipatory breach of the promises in their
shareholder agreements. See Op. 71–73. A proper reading of
the statute prevents FHFA from exceeding the bounds of the
conservator role and behaving as a de facto receiver.

The Court suggests FHFA’s incidental power to, “as
conservator or receiver[,] . . . take any action authorized by
[Section 4617], which the Agency determines is in the best

5
These legal definitions are reflected in the terms’ ordinary meaning. For
example, the Oxford English Dictionary defines a “conservator” as “[a]n
officer appointed to conserve or manage something; a keeper,
administrator, trustee of some organization, interest, right, or resource.” 3
OXFORD ENGLISH DICTIONARY 766 (2d ed. 1989). In contrast, it defines a
“receiver” as “[a]n official appointed by a government . . . to receive . . .
monies due; a collector.” 13 OXFORD ENGLISH DICTIONARY 317–18 (2d
ed. 1989). Regardless of the terms’ audience, therefore, a “conservator”
protects and preserves assets for an entity while a “receiver” operates as a
collection agent for creditors.
 18
interests of the regulated entity or the Agency” in 12 U.S.C.
§ 4617(b)(2)(J)(ii) erases any outer limit to FHFA’s statutory
powers despite the common law definition of “conservator”
and, therefore, forecloses any opportunity for meaningful
judicial review of FHFA’s actions in conducting its so-called
conservatorship at the time of the Third Amendment. See Op.
33–34. Of course, the Court’s reading of Subsection
4617(b)(2)(J)(ii) directly contradicts the immediately-
preceding subsection’s authorization of FHFA “as conservator
or receiver” to “exercise all powers and authorities
specifically granted to conservators or receivers,
respectively.” 12 U.S.C. § 4617(b)(2)(J)(i) (emphasis added).
It also upends Subsection 4617(a)(5)’s provision of judicial
review for actions FHFA may take in certain facets of its
receiver role. But even if that were not the case, Supreme
Court precedent requires an affirmative act by Congress—an
explicit “instruct[ion]” that review should proceed in a
“contrary” manner—to authorize departure from a common
law definition. Morissette, 342 U.S. at 263. And given the
potential for disruption in the financial markets discussed in
Part III infra, one would expect Congress to express itself
explicitly in this matter. See FDA v. Brown & Williamson
Tobacco Corp., 529 U.S. 120, 160 (2000) (“[W]e are
confident that Congress could not have intended to delegate a
decision of such economic and political significance to an
agency in so cryptic a fashion.”). Congress offered no such
statement here.

Rather, the more appropriate reading of the relevant text
merely permits FHFA to engage in self-dealing transactions,
an authorization otherwise inconsistent with the conservator
role. See Gov’t of Rwanda v. Johnson, 409 F.3d 368, 373
(D.C. Cir. 2005) (discussing “the age-old principle applicable
to fiduciary relationships that, unless there is a full disclosure
by the agent, trustee, or attorney of his activity and interest in
 19
the transaction to the party he represents and the obtaining of
the consent of the party represented, the party serving in the
fiduciary capacity cannot receive any profit or emolument
from the transaction”); see also 7 COLLIER ON BANKRUPTCY
¶ 1108.09 (16th ed.) (noting a trustee’s duty of loyalty in
bankruptcy law requires a “single-minded devotion to the
interests of those on whose behalf the trustee acts”). FHFA
operating as a conservator may act in its own interests to
protect both the Companies and the taxpayers from whom the
Agency was ultimately forced to borrow, but FHFA is not
empowered to jettison every duty a conservator owes its ward,
and it is certainly not entitled to disregard the statute’s own
clearly defined limits on conservator power.

In fact, FIRREA contains a nearly identical self-dealing
provision, which provides, “The [FDIC] may, as conservator
or receiver . . . take any action authorized by this chapter,
which the [FDIC] determines is in the best interests of the
depository institution, its depositors, or the [FDIC].” 12
U.S.C. § 1821(d)(2)(J)(ii). This authorization has not given
courts pause in interpreting FIRREA to require the FDIC to
behave within its statutory role. See Nat’l Tr. for Historic
Pres., 21 F.3d at 472 (Wald, J., concurring) (“[Section]
1821(j) does indeed bar courts from restraining or affecting
the exercise of powers or functions of the FDIC as a
conservator or a receiver, unless it has acted or proposes to act
beyond, or contrary to, its statutorily prescribed,
constitutionally permitted, powers or functions.”); see also
Sharpe v. FDIC, 126 F.3d 1147, 1155 (9th Cir. 1997)
(holding the statutory bar on judicial review of the FDIC’s
actions taken as a conservator or receiver “does not bar
injunctive relief when the FDIC has acted beyond, or contrary
 20
to, its statutorily prescribed, constitutionally permitted,
powers or functions”). 6

II.

Having determined this Court may enjoin FHFA if it
exceeded its powers as conservator of Fannie and Freddie, I
now examine FHFA’s conduct. It is important to note at the
outset the motives behind any actions taken by FHFA are
irrelevant to this inquiry, as no portion of HERA’s text invites
such an analysis. Rather, I examine whether or not FHFA
acted beyond its authority, looking only to whether its actions
are consistent either with (1) “put[ting] the regulated entity in
a sound and solvent condition” by “reorganizing [and]
rehabilitating” it as a conservator or (2) taking steps towards
“liquidat[ing]” it by “winding up [its] affairs” as a receiver.
12 U.S.C. § 4617(a)(2), (b)(2)(D)–(E).

In September 2008, FHFA placed Fannie and Freddie
into conservatorship; Director James Lockhart explained the
conservatorship as “a statutory process designed to stabilize a
troubled institution with the objective of returning the entities
to normal business operations” and promised FHFA would
“act as the conservator to operate [Fannie and Freddie] until
they are stabilized.” Press Release, Fed. Hous. Fin. Agency,

6
The Court also suggests the authority to act “‘in the best interests of the
regulated entity or the Agency’” is consistent with the Director’s mandate
to protect the “‘public interest.’” Op. 8 (quoting 12 U.S.C.
§ 4513(a)(1)(B)(v)). Of course, the FHFA Director is also bound to
“carr[y] out [FHFA’s] statutory mission only through activities that are
authorized under and consistent with this chapter and the authorizing
statutes.” Id. § 4513(a)(1)(B)(iv). Indeed, this text only confirms what
should have been evident: the availability of meaningful judicial review
cannot bend to exigency, especially since Congress clearly did not believe
the 2008 financial crisis required a more far-reaching statutory
authorization than prior occasions of financial distress had commanded.
 21
Statement of FHFA Director James B. Lockhart at News
Conference Announcing Conservatorship of Fannie Mae and
Freddie Mac (Sept. 7, 2008), http://tinyurl.com/Lockhart-
Statement. FHFA even promised it would “continue to retain
all rights in the [Fannie and Freddie] stock’s financial worth;
as such worth is determined by the market.” JA 2443 (FHFA
Fact Sheet containing “Questions and Answers on
Conservatorship”). And, for a period of time thereafter,
FHFA did in fact manage the Companies within the
conservator role. It even enlisted Treasury to provide cash
infusions that, while costly, preserved at least a portion of the
value of the market-held shares in the corporations.

But the tide turned in August 2012 with the Third
Amendment and its “Net Worth Sweep,” transferring nearly
all of the Companies’ profits into Treasury’s coffers.
Specifically, the Third Amendment replaced Treasury’s right
to a fixed-rate 10 percent dividend with the right to sweep
Fannie and Freddie’s entire quarterly net worth (except for an
initial capital reserve, which initially totaled $3 billion and
will decline to zero by 2018). Additionally, the agreement
provided that, regardless of the amount of money paid to
Treasury as part of this Net Worth Sweep dividend, Fannie
and Freddie would continue to owe Treasury the $187.5
billion it had originally loaned the Companies. It was, to say
the least, a highly unusual transaction. Treasury was no
longer another, admittedly very important, investor entitled to
a preferred share of the Companies’ profits; it had received a
contractual right from FHFA to loot the Companies to the
guaranteed exclusion of all other investors.

In an August 2012 press release summarizing the Third
Amendment’s terms, Treasury took a very different tone from
Lockhart’s 2008 statement: “[W]e are taking the next step
toward responsibly winding down Fannie Mae and Freddie
 22
Mac, while continuing to support the necessary process of
repair and recovery in the housing market.” Press Release,
Dep’t of Treasury, Treasury Department Announces Further
Steps To Expedite Wind Down of Fannie Mae and Freddie
Mac (Aug. 17, 2012), http://tinyurl.com/Treasury-Press-
Release (emphasis added). Treasury further noted the Third
Amendment would achieve the “important objective[]” of
“[a]cting upon the commitment made in the Administration’s
2011 White Paper that the GSEs will be wound down and will
not be allowed to retain profits, rebuild capital, and return to
the market in their prior form.” Id. The Acting FHFA
Director echoed Treasury’s sentiment in April 2013,
explaining to Congress the following year the Net Worth
Sweep would “wind down” Fannie and Freddie and “reinforce
the notion that [they] will not be building capital as a potential
step to regaining their former corporate status.” Statement of
Edward J. DeMarco, Acting Director, FHFA, Before the S.
Comm. on Banking, Hous. & Urban Affairs (Apr. 18, 2013),
http://tinyurl.com/DeMarco-Statement.

The evolution of FHFA’s position from 2008 to 2013 is
remarkable; it had functionally removed itself from the role of
a HERA conservator. FHFA and Treasury even described
their actions using HERA’s exact phrase defining a receiver’s
conduct, yet FHFA still purported to exercise only its power
as a conservator and operated free from HERA’s constraints
on receivers. See 12 U.S.C. § 4617(a)(4)(D), (b)(2)(E),
(b)(3), (c) (establishing liquidation procedures and priority
requirements); id. § 4617(a)(5) (providing for judicial
review).

The shift in policy was borne out in FHFA’s and
Treasury’s actions. Indeed, all parties agree the Net Worth
Sweep had the effect of replacing a fixed-rate dividend with a
quarterly transfer of each company’s net worth above an
 23
initial (and declining) capital reserve of $3 billion. There is
similarly no dispute that Treasury collected a $130 billion
dividend in 2013, $40 billion in 2014, and $15.8 billion in
2015. In fact, during the period from 2008 to 2015, Fannie
and Freddie together paid Treasury $241.2 billion, an amount
well in excess of the $187.5 billion Treasury loaned the
Companies. FHFA’s decision to strip these cash reserves
from Fannie and Freddie, consistently divesting the
Companies of their near-entire net worth, is plainly
antithetical to a conservator’s charge to “preserve and
conserve” the Companies’ assets.

Of course, and as the Court observes, Op. 29–31, Fannie
and Freddie continue to operate at a profit. Indeed, as early as
the second quarter of 2012, the Companies had outearned
Treasury’s 10 percent cash dividend. Nonetheless, the Net
Worth Sweep imposed through the Third Amendment—
which was executed shortly after the second quarter 2012
earnings were released—confiscated all but a small portion of
Fannie’s and Freddie’s profits. The maximum reserve of $3
billion, given the Companies’ enormous size, rendered them
extremely vulnerable to market fluctuations and risked
triggering a need to once again infuse Fannie and Freddie
with taxpayer money. See JA 1983 (2012 SEC filing stating
“there is significant uncertainty in the current market
environment, and any changes in the trends in
macroeconomic factors that [Fannie] currently anticipate[s],
such as home prices and unemployment, may cause [its]
future credit-related expenses or income and credit losses to
vary significantly from [its then-]current expectations”). In
fact, FHFA has since referred to the Companies, even with
their several-billion-dollar cushion, as “effectively balance-
sheet insolvent” and “a textbook illustration of instability.”
Defs. Mot. to Dismiss at 19, Samuels v. FHFA, No. 13-cv-
22399 (S.D. Fla. Dec. 6, 2013), ECF No. 38; see also
 24
generally, Statement of Melvin L. Watt, Director, FHFA,
Statement Before the H. Comm. on Fin. Servs., at 3 (Jan. 27,
2015), http://tinyurl.com/Watt-Statement (“[U]nder the terms
of the [contracts with Treasury], the [Companies] do not have
the ability to build capital internally while they remain in
conservatorship.”). As time went on, and the maximum
reserve decreased, the situation only deteriorated. Given the
task of replicating their successful rise each quarter amid
volatile market conditions, it is surprising the Companies
managed to maintain consistent profitability until 2016, when
Freddie Mac posted a $200 million loss in the first quarter.
See FREDDIE MAC, FORM 10-Q FOR THE QUARTERLY PERIOD
ENDED MARCH 31, 2016, at 7 (May 3, 2016). Under the
circumstances, it strains credulity to argue FHFA was acting
as a conservator to “observe[ Fannie’s and Freddie’s]
economic performance over time” and consider other
regulatory options when it executed the Third Amendment.
Op. 33. FHFA and Treasury are not “studying” the
Companies, they are profiting off of them! 7

Nonetheless, the Court suggests the Third Amendment
was simply a logical extension of the principles articulated in
the prior two agreements. Op. 25–26. This is incorrect; the
Net Worth Sweep fundamentally transformed the relationship
between the Companies and Treasury: a 10 percent dividend
became a sweep of the Companies’ near-entire net worth; an
in-kind dividend option disappeared in favor of cash

7
Similarly, any argument that the Third Amendment was executed to
avoid a downward spiral hardly saves FHFA at this juncture. See, e.g., Op.
31–32. As an initial matter, the contention rests entirely upon an
examination of motives. But see id. 32 (confirming motives are irrelevant
to the legal inquiry). Second, even if one were to consider motives, the
availability of an in-kind dividend and information recently obtained in
this litigation creates, to put it mildly, a dispute of fact regarding the
motivations behind FHFA and Treasury’s decision to execute the Third
Amendment.
 25
payments; the ability to retain capital above and beyond the
required dividend payment evaporated; and, most importantly,
the Companies lost any hope of repaying Treasury’s
liquidation preference and freeing themselves from its debt.
Indeed, the capital depletion accomplished in the Third
Amendment, regardless of motive, is patently incompatible
with any definition of the conservator role. Outside the
litigation context, even FHFA agrees: “As one of the primary
objectives of conservatorship of a regulated entity would be
restoring that regulated entity to a sound and solvent
condition, allowing capital distributions to deplete the entity’s
conservatorship assets would be inconsistent with the
agency’s statutory goals, as they would result in removing
capital at a time when the Conservator is charged with
rehabilitating the regulated entity.” 76 Fed. Reg. 35,724,
35,727 (June 20, 2011). But rendering Fannie and Freddie
mere pass-through entities for huge amounts of money
destined for Treasury does exactly that which FHFA has
deemed impermissible. Even Congress, in debating the
Consolidated Appropriations Act of 2016, H.R. 2029, 114th
Cong. § 702 (2015), acknowledged such action would require
additional congressional authorization. See 161 Cong. Rec.
S8760 (daily ed. Dec. 17, 2015) (statement of Sen. Corker)
(noting the Senate Banking Committee passed a bipartisan bill
to “protect taxpayers from future economic down-turns by
replacing Fannie and Freddie with a privately capitalized
system” that ultimately did not receive a vote by the full
Senate).

Here, FHFA placed the Companies in de facto
liquidation—inconsistent even with “managing the regulated
entit[ies] in the lead up to the appointment of a liquidating
receiver,” as the Court incorrectly, and obliquely, defines the
outer limits of the conservator role, Op. 27—when it entered
into the Third Amendment and captured nearly all of the
 26
Companies’ profits for Treasury. To paraphrase an aphorism
usually attributed to Everett Dirksen, a hundred billion here, a
hundred billion there, and pretty soon you’re talking about
real money. But instead of acknowledging the reality of the
Companies’ situation, the Court hides behind a false
formalism, establishing a dangerous precedent for future acts
of FHFA, the FDIC, and even common law conservators.

III.

Finally, the practical effect of the Court’s ruling is
pernicious. By holding, contrary to the Act’s text, FHFA
need not declare itself as either a conservator or receiver and
then act in a manner consistent with the well-defined powers
associated with its chosen role, the Court has disrupted settled
expectations about financial markets in a manner likely to
negatively affect the nation’s overall financial health.

Congress originally established the FDIC to rebuild
confidence in our nation’s banking system following the
Great Depression, see Banking Act of 1933, Pub. L. No. 73-
66, 48 Stat. 162, and in the years that followed it has
empowered the institution to insure deposits and serve as a
conservator or receiver for failed banks, see Federal Deposit
Insurance Act of 1950, Pub. L. No. 81-979, 64 Stat. 873
(FIRREA’s predecessor statute, which incorporated the
conservator and receiver roles). Consistent with its mission,
the FDIC has provided assistance, up to and including
conservatorship and receivership, for thousands of financial
institutions over numerous periods of economic stress. For
decades, investors relied on the common law’s
conservator/receiver distinction, maintained by the FDIC and
enforced by courts, to evaluate their investments and guide
judicial review.
 27
Congress chose to import this effective statutory scheme
into HERA in an effort to combat our most recent financial
crisis, evidencing its belief that FIRREA’s terms were equal
to the task confronting FHFA. But FHFA’s actions in
implementing the Net Worth Sweep “bear no resemblance to
actions taken in conservatorships or receiverships overseen by
the FDIC.” Amicus Br. for Indep. Comm. Bankers of Am. 6
(reflecting the views of former high-ranking officials of the
FDIC). Yet today the Court holds that, in the context of
HERA—and FIRREA by extension—any action taken by a
regulator claiming to be a conservator (short of officially
liquidating the company) is immunized from meaningful
judicial scrutiny. All this in the context of the Third
Amendment’s Net Worth Sweep, which comes perilously
close to liquidating Fannie and Freddie by ensuring they have
no hope of survival past 2018. The Court’s conservator is not
your grandfather’s, or even your father’s, conservator.
Rather, the Court adopts a dangerous and radical new regime
that introduces great uncertainty into the already-volatile
market for debt and equity in distressed financial institutions.

Now investors in regulated industries must invest
cognizant of the risk that some conservators may abrogate
their property rights entirely in a process that circumvents the
clear procedures of bankruptcy law, FIRREA, and HERA.
Consequently, equity in these corporations will decrease as
investors discount their expected value to account for the
increased uncertainty—indeed if allegations of regulatory
overreach are entirely insulated from judicial review, private
capital may even become sparse. Certainly, capital will
become more expensive, and potentially prohibitively
expensive during times of financial distress, for all regulated
financial institutions.
 28
More ominously, the existence of a predictable rule of
law has made America’s enviable economic progress
possible. See, e.g., TOM BETHELL, THE NOBLEST TRIUMPH:
PROPERTY AND PROSPERITY THROUGH THE AGES 3 (1998)
(“When property is privatized, and the rule of law is
established, in such a way that all including the rulers
themselves are subject to the same law, economies will
prosper and civilization will blossom.”). Private individual
and institutional investors in regulated industries rightly
expect the law will protect their financial rights—either
through an agency interpreting statutory text or a court
reviewing agency action thereafter. They are also entitled to
expect a conservator will act to conserve and preserve the
value of the company in which they have invested, honoring
the capital and investment conventions of governing law. A
rational investor contemplating the terms of HERA would not
conclude Congress had changed these prevailing norms. See
generally Yates v. United States, 135 S. Ct. 1074, 1096 (2015)
(Kagan, J., dissenting) (noting statutory text may be drafted
“to satisfy audiences other than courts”). Today, however, the
Court explains this rational investor was wrong. And its bold
and incorrect statutory interpretation could dramatically affect
investor and public confidence in the fairness and
predictability of the government’s participation in
conservatorship and insolvency proceedings.

When assessing responsibility for the mortgage mess
there is, as economist Tom Sowell notes, plenty of blame to
be shared. Who was at fault? “The borrowers? The lenders?
The government? The financial markets? The answer is yes.
All were responsible and many were irresponsible.” THOMAS
SOWELL, THE HOUSING BOOM AND BUST 28 (2009). But that
does not mean more irresponsibility is the solution.
Conservation is not a synonym for nationalization.
Confiscation may be. But HERA did not authorize either, and
 29
FHFA may not do covertly what Congress did not authorize
explicitly. What might serve in a banana republic will not do
in a constitutional one.

***

FHFA, like the FDIC before it, was given broad powers
to enable it to respond in a perilous time in U.S. financial
history. But with great power comes great responsibility.
Here, those responsibilities and the authority FHFA received
to address them were well-defined, and yet FHFA disregarded
them. In so doing, FHFA abandoned the protection of the
anti-injunction provision, and it should be required to defend
against the Institutional and Class Plaintiffs’ claims.