Collins v. Yellen
Wikipedia · Justia (with opinion) · Docket · oyez.org
Argued on Dec 9, 2020.Decided on Jun 23, 2021.
Petitioner: Patrick J. Collins, et al..Respondent: Janet L. Yellen, Secretary of the Treasury, et al..
Advocates: Hashim M. Mooppan (on behalf of the federal parties)
Aaron L. Nielson (Court-appointed amicus curiae)
David H. Thompson (on behalf of the petitioners in 19-422 and the respondents in 19-563)
Facts of the case (from oyez.org)
Fannie Mae and Freddie Mac are government-sponsored enterprises (GSEs) that purchase mortgages, buy and sell mortgage-backed securities, and guarantee many of the mortgages in the United States. In 2005 and 2006, as the housing market was reaching its peak, Fannie and Freddie over-invested in risky mortgages in an attempt to compete with large investment banks and mortgage lenders. In the aftermath of the 2008 housing crisis, during which Fannie and Freddie required billions of dollars in federal bailouts, Congress created the Federal Housing Finance Agency (FHFA), an independent agency to oversee the two GSEs. FHFA was to be led by a single director who could be fired by the President “for cause.”
Upon its creation, FHFA placed Fannie and Freddie in a conservatorship with itself as the conservator and negotiated agreements with the Department of Treasury. Under the agreements, the Treasury would invest billions of dollars in the GSEs in return for compensation consisting in part of fixed dividends. For several years, the GSEs’ dividend obligations exceeded their total earnings, requiring them to draw even more money from the Treasury. FHFA and Treasury negotiated and came up with the “Third Amendment,” which replaced the fixed dividend with a variable quarterly dividend equal to the GSEs’ net worth minus a specified capital reserve.
Collins and others are shareholders in Fannie and Freddie. They filed a lawsuit challenging the actions of FHFA, claiming the agency had destroyed the value of their ownership interests. The shareholders argued that FHFA had exceeded its authority under two federal statutes and that the structure of FHFA violated the constitutional principle of separation of powers. The district court dismissed the statutory claims and granted the government’s motion for summary judgment on the constitutional claim. A panel of the U.S. Court of Appeals for the Fifth Circuit affirmed the dismissal of the statutory claims but reversed the judgment as to the constitutional claim, finding that the structure of FHFA was unconstitutional but the remedy was to invalidate the provision addressing removal of FHFA’s director. In a deeply divided opinion, the Fifth Circuit, rehearing the case en banc, affirmed as to one statutory claim, reversed as to the other statutory claim, held that FHFA’s structure violated the Constitution, and held that the appropriate remedy was to declare unconstitutional the removal provision, not to invalidate the Third Amendment.

Question
1. Did the shareholders of Fannie Mae and Freddie Mac properly bring a claim under the Housing and Economic Recovery Act of 2008?
2. Does the Federal Housing Finance Agency’s (FHFA) structure violate the separation of powers?
3. If FHFA’s structure violates the separation of powers, what is the proper remedy for a final agency action that FHFA took when it was unconstitutionally structured?

Conclusion
1. Because the FHFA did not exceed its authority under the Recovery Act as a conservator of Fannie Mae and Freddie Mac, the anti-injunction provisions of the Recovery Act bar the statutory claim brought by shareholders of those entities.
2. The structure of the Housing and Economic Recovery Act of 2008, which restricts the President’s power to remove the Federal Housing Finance Agency (FHFA) Director, violates the separation of powers.
3. It is unnecessary to set aside the entire Third Amendment, but the case is remanded for the lower court to determine the proper remedy based on the harms suffered.
Justice Samue