Shareholders of Fannie Mae and Freddie Mac claim to have been harmed by the director of the Federal Housing Finance Agency (FHFA) due to an existing conservatorship and subsequent liquidation, which resulted in the shareholders losing money. The shareholders allege that President Trump could have prevented any harm if he had been able to remove the director of the FHFA. But President Trump had never attempted a removal while he was in office. In fact, it was not until President Trump was out of office that he wrote a private letter expressing his desire to have the director of the FHFA removed. In light of this, the FHFA argued that the shareholders did not meet their pleading burden and moved to dismiss under Fed. R. Civ. Pro. 12(b)(6). Because the shareholders were challenging agency action, they had to show “that the removal restriction transgresses the Constitution’s separation of powers but also that the unconstitutional provision caused (or would cause) them harm.” The district court found that the shareholders did not meet this burden and dismissed the claim.
In Bhatti v. Federal Housing Finance Agency, 97 F.4th 556 (8th Cir. 2024), the court of appeals affirmed the lawsuit’s dismissal. The court began by looking at the harm element required when bringing a claim. It reasoned that the shareholders could prove harm if “the President has made a public statement expressing displeasure with actions taken by a Director and had asserted that he would remove the Director if the statute did not stand in the way.” Collins v. Yellen, 594 U.S. 220, 260 (2021). The court found that the shareholders did not allege this type of harm. While they did refer to President Trump’s 2021 letter, the court did not find this convincing. First, President Trump addressed the letter to an individual senator, and the letter was leaked online. The letter was never intended to be a public assertion. Second, President Trump did not make the statement during his presidency when he would have been barred by the removal restriction. Furthermore, the court mentioned that the letter referred to did not allege it could have prevented the harm done to the shareholders, just that President Trump was displeased with the director of the FHFA. Thus, the shareholders failed to allege any harm, and the court affirmed the dismissal.
By Maycee Redfearn: [email protected]
Edited By Ashley Boyce: [email protected]
Edited By Hayden Mariott: [email protected]