Friday, September 19, 2014

First court loss today 9/19/2014

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
____________________________________
)
GAIL C. SWEENEY ESTATE MARITAL )
TRUST, derivatively on behalf of )
FEDERAL NATIONAL )
MORTGAGE ASSOCIATION, )
)
Plaintiff, )
)
v. ) Civil Action No. 13-206 (ABJ)
)
UNITED STATES TREASURY )
DEPARTMENT, et al., )
)
Defendants. )
____________________________________)
MEMORANDUM OPINION
Plaintiff Gail C. Sweeney Estate Marital Trust has brought a shareholder derivative
lawsuit on behalf of the Federal National Mortgage Association (“Fannie Mae”) against
defendants Fannie Mae, the United States Department of the Treasury (“Treasury”), Secretary of
the Treasury Jacob J. Lew, the Federal Housing Finance Agency (“FHFA”), and FHFA Director
Melvin L. Watt.1 Am. Compl. [Dkt. # 32]. Plaintiff asserts four counts in the amended
complaint: breach of fiduciary duty, abuse of control, mismanagement, and waste of corporate
assets. Id. ¶¶ 146–63. Plaintiff seeks declaratory and injunctive relief, and attorneys’ fees and
costs. Am. Compl., Prayer for Relief, ¶¶ A–B.
The FHFA is the Conservator of Fannie Mae, id. ¶ 26, and it has moved to substitute
itself as plaintiff in this case, arguing that only the Conservator has standing to pursue claims on
1 The amended complaint names Acting FHFA Director Edward J. Demarco as a
defendant, but pursuant to Federal Rule of Civil Procedure 25(d), the Court has automatically
substituted Director Watt in his stead.2
behalf of Fannie Mae. Renewed Mot. of FHFA as Conservator of Fannie Mae to Substitute for
Shareholder Derivative Pl. & Mem. of P. & A. in Supp. [Dkt. # 37] at 2 (“FHFA Mot.”).
Plaintiff does not disagree that, as a general matter, only the Conservator has standing to sue on
behalf of Fannie Mae. But plaintiff contends that in this case, the Conservator suffers from a
“manifest, disabling and irreconcilable” conflict of interest that prevents it from pursuing Fannie
Mae’s interests, and that plaintiff should therefore be permitted to bring this action. Am. Compl.
¶ 93; Pl.’s Opp. to FHFA Mot. & to Resp. of Defs. U.S. Dep’t of Treasury & Sec’y of Treasury
[Dkt. # 41] at 1 (“Pl.’s Opp.”). The Court finds that there is not a “manifest, disabling and
irreconcilable” conflict of interest in this case and that plaintiff lacks standing to sue on behalf of
Fannie Mae, so it will grant the FHFA’s motion to substitute.
dated today 9/19/2014
basically plaintiff cant sue on behalf of fannie mae. only conservator can do that. 

This is a loss for us on court front, but does not change other cases where plaintiff is not trying to sue on behalf of fannie. FHFA will substitute as plaintiff and then drop case.

1 comment:

  1. Seems like a rookie mistake by P. lawyers. What doesn't kill us makes us stronger.

    ReplyDelete

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