Herron v. Fannie Mae

• Decision Date: 30 April 2012
• Docket Number: Civil Action No. 10–943(RMC).
• Citation: 857 F.Supp.2d 87
• Parties: Caroline HERRON, Plaintiff, v. FANNIE MAE, et al., Defendants.
• Court: U.S. District Court — District of Columbia

857 F.Supp.2d 87

Caroline HERRON, Plaintiff,

v.FANNIE MAE, et al., Defendants.

Civil Action No. 10–943(RMC).

United States District Court,

District of Columbia.

April 30, 2012.

Alan Robert Kabat, David M. Wachtel, Lynne A. Bernabei, Bernabei & Wachtel, PLLC, Washington, DC, for Plaintiff.

Damien G. Stewart, Fannie Mae, Ira T. Kasdan, Joseph Dale Wilson, III, Brooke Michelle Ringel, Elizabeth C. Johnson, Kelley Drye & Warren, LLP, Washington, DC, for Defendants.

Howard N. Cayne, Asim Varma, Michael A.F. Johnson, Arnold & Porter LLP, Washington, DC, Stephen E. Hart, Federal Housing Finance Agency, Washington, DC, for Intervenor–Defendant Federal Housing Finance Agency.

MEMORANDUM OPINION

ROSEMARY M. COLLYER, District Judge.

This suit arises from the termination of a consulting contract between Caroline Herron and Fannie Mae. Ms. Herron worked for Fannie Mae as an employee and then as a contractor until she was terminated in January 2010. She alleges that she was terminated due to her complaints that Fannie Mae (1) acted improperly in its role assisting the U.S. Department of the Treasury (“Treasury”) with home loan modifications, (2) wasted public funds, and (3) violated its contract with Treasury. Compl. [Dkt. 1] ¶ 1. Ms. Herron pleads in the alternative. If Fannie Mae is considered a private employer, Ms. Herron brings claims of wrongful discharge, tortious interference, and civil conspiracy under D.C. law. If Fannie Mae is a government actor, Ms. Herron asserts a First Amendment claim under Bivens.¹ Defendants and Intervenor, the Federal Housing Finance Agency (“FHFA”), move to dismiss the Bivens claim on the ground that Defendants are not federal actors and thus Bivens is inapplicable. Because Fannie Mae is a private entity and the appointment of FHFA as conservator of Fannie Mae did not transform Fannie Mae into a public agency, the motions to dismiss the Bivens claim will be granted.

I. FACTS

A. Ms. Herron's History with Fannie Mae

Ms. Herron was employed at Fannie Mae from 2000–2007. At the end of her time there, she was a vice president. She held a leadership role on many projects and earned high performance ratings. In 2007, Fannie Mae downsized, and Ms. Herron accepted a buyout. She left the company on good terms. After FHFA placed Fannie Mae into conservatorship in 2008, an outside vendor hired Ms. Herron to provide consulting services to Fannie Mae. Ms. Herron's rapport with Fannie Mae deteriorated, and the consulting relationship was ended. Ms. Herron contends that Fannie Mae wrongfully terminated her as a consultant and that thereafter she was “blackballed” from Fannie Mae and the industry.

As a result, she filed this suit against Fannie Mae and the following Fannie Mae employees: Eric Schuppenhauer, Senior Vice President of Credit Initiatives; Nancy Jardini, Vice President of Compliance; Alanna Scott Brown, Ms. Herron's supervisor; and John Does One through Four, unnamed Fannie Mae officials. Her Complaint asserts three counts under local law as well as a Bivens claim under federal law as follows:

Count I—wrongful discharge against Fannie Mae;

Count II—civil conspiracy to terminate employment and impede future employment against all Defendants;

Count III—tortious interference with prospective contractual relations against all Defendants; and

Count IV—First Amendment action under Bivens against individual defendants Schuppenhauer, Jardini, Brown, and John Does.

See Compl. [Dkt. 1]. Because Fannie Mae is a party to this suit, this Court has jurisdiction. See12 U.S.C. § 1723a(a) (Fannie Mae has the power to sue and be sued in any court of competent jurisdiction, state or federal).

B. Background of Fannie Mae

Fannie Mae purchases residential mortgages thereby providing lenders with capital to fund additional mortgage loans. Also known as the Federal National Mortgage Association or “FNMA,” Fannie Mae was created in 1968 when Congress partitioned the Federal National Mortgage Association into two entities: (1) the Government National Mortgage Association (“Ginnie Mae”), which remained in the government, and (2) Fannie Mae, a private corporation. Stipulation ² [Dkt. 49] (“Stip.”) ¶ 2 (citing the Housing and Urban Development Act of 1968, Pub.L. No. 90–448, 82 Stat. 476 (1948), codified in part at 12 U.S.C. § 1716b). The statute that created Fannie Mae provided:

The purpose of this title includes the partition of the Federal National Mortgage Association as heretofore existing into two separate and distinct corporations.... One of such corporations, to be know as the Federal National Mortgage Association, will be a Government-sponsored private corporation, will retain the assets and liabilities of the previously existing corporation accounted for under section 1719 of this title, and will continue to operate the secondary market operations authorized by such section 1719.

12 U.S.C. § 1716b. Fannie Mae was empowered to purchase, sell, and service mortgages. 12 U.S.C. § 1717(b). Fannie Mae was privately controlled by a Board of Directors, the majority of whom were elected annually by the shareholders. See12 U.S.C. § 1718(a) (establishing common stock with the right to vote for directors, and preferred stock on terms and conditions as prescribed by such directors); id. § 1723(b) (stating that Fannie Mae shall have a board of directors persons who are elected annually by common stockholders); see also Northrip v. Fed. Nat'l Mortg. Ass'n, 527 F.2d 23, 30 (6th Cir.1975) (Fannie Mae had 15 board members; 5 were appointed by the President and 10 were elected annually by common shareholders).

Fannie Mae competed with other financial institutions in the mortgage industry. Historically, Fannie Mae's competitors included Freddie Mac, Ginnie Mae, financial institutions, securities dealers, insurance companies, and many others. Stip. ¶ 95 (citing Fannie Mae, Form 10–K for 2009 at 4344 (Feb. 26, 2010)).

Pre-conservatorship, Fannie Mae's securities were not guaranteed by the federal government. Stip. ¶ 16 (citing 12 U.S.C. § 4503). Such securities were required to contain an express disclaimer, that they were not guaranteed by the United States and that they did not constitute a debt of the United States. See12 U.S.C. § 1719(b), (d), (e). Further, Congress specifically required Fannie Mae to act as a private entity in the hiring and compensation of its employees. See12 U.S.C. § 1723a(d)(2).

In 2008, Congress empowered the FHFA to act as conservator or receiver for Fannie Mae for the purpose of reorganizing, rehabilitating or winding up Fannie Mae's affairs. Stip. ¶ 34 (citing 12 U.S.C. § 4617(a)(1), (2), part of the Housing and Economic Recovery Act of 2008 (“HERA”), 12 U.S.C. § 4501 et seq.). On September 6, 2008, FHFA placed Fannie Mae into conservatorship. James Lockhart, FHFA's Director at the time, issued a statement noting:

FHFA has placed Fannie Mae and Freddie Mac ³ into conservatorship. That 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.

Stip. ¶ 46 (quoting Statement of FHFA Director Lockhart (Sept. 7, 2008)).

As conservator of Fannie Mae, FHFA has statutory authority as “(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.” Stip. ¶ 51 (quoting 12 U.S.C. § 4617(b)(2)(D)). Further, as conservator, FHFA is empowered to “(i) take over assets of and operation of [Fannie Mae] 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 [Fannie Mae]; (iii) perform all functions of [Fannie Mae] in the name of [Fannie Mae] which are consistent with the appointment as conservator or receiver; (iv) preserve and conserve the assets and property of [Fannie Mae]; and (v) provide by contract for assistance in fulfilling any function, activity, action or duty of the Agency as conservator.” Stip. ¶ 52 (quoting 12 U.S.C. § 4617(b)(2)(B)). FHFA as conservator reconstituted Fannie Mae's Board of Directors, who now serve on behalf of FHFA. Stip. ¶ 63 (citing Fannie Mae, Form 8–K filed with the SEC at 2 (Dec. 24, 2008)); Stip. ¶¶ 75 & 78 (citing Statement of FHFA Director Before the House Financial Services Comm. Subcomm. on Capital Markets, Insurance and Government Sponsored Enterprises, “The Present Condition and Future Status of Fannie Mae and Freddie Mac” at 7–9 (June 3, 2009) (stating that FHFA appointed new CEOs, nonexecutive chairmen, and boards of directors to Fannie Mae and Freddie Mac)).

The conservatorship of Fannie Mae has no specified termination date. Stip. ¶ 67 (citing Fannie Mae, Form 8–K filed with the SEC at 2 (Dec. 24, 2008)); see also Stip. ¶ 156 (citing OMB, Fiscal Year 2012; Analytical Perspectives, Budget of the U.S. Government at 373 (Feb. 14, 2011) (stating that the budget reflects Fannie Mae as a non-budgetary entity in keeping with its temporary status in conservatorship)). FHFA issued a Fact Sheet regarding the conservatorship of Fannie Mae that indicated:

Upon the [FHFA] Director's determination that the Conservator's plan to restore [Fannie Mae] to a safe and solvent condition has been completed successfully, the Director will issue an order terminating the conservatorship. At present, there is no exact time frame that can be given as to when this conservatorship may end.

Stip. ¶ 38 (quoting FHFA Fact Sheet: Questions and Answers on Conservatorship at 2 (Sept. 7, 2008)).

At the onset of the conservatorship, Fannie Mae (acting through the conservator) entered into a Senior Preferred Stock Purchase Agreement (“Stock Agreement”). Under the Stock Agreement, Treasury committed to provide funding from time to time,...