Steve_Berk

i don't disagree with your analysis, but I would give different percentages. 60% remand; 15% reversal; 15% rejecting jurisdiction on other grounds that Lamberth didn't consider, and 10% affirmance. Stated differently, 60% remand; 25% rejection on any jurisdictional grounds (including, but not limited to Lamberth), and 15% reversal.

Taking a close look at what the DE judge said, I think he's told us all we need to know about his view of DE law. Let's unpack what he said more precisely: "it is unclear to the court how an answer to Plaintiff's general question of whether or not DE law permits this type of dividend right for preferred stock does much to aid in answering the more specific question at issue in this case: whether the FHFA, acting as a conservator....can amend the senior preferred stock agreements to pay the treasury a quarterly dividend in the amount of the positive net worth of the two GSEs" So he's saying that the Plaintiff's question about DE law takes a back seat to the more specific question of whether the FHFA as a conservator can amend the stock agreements, etc... And I think he's saying that no matter how you answer the DE question, you still have to answer the more specific question because otherwise you can't resolve the case. Now if the judge believed that the DE law made it illegal to issue the dividend, then why would we need to answer the question, as he presents it about the FHFA act on the APA claim? Either he thinks it's possible that HERA allows them to break the DE law, or he thinks the DE law may not empower an entity to issue a dividend like that, but that doesn't mean another legal authority can't provide a valid legal pathway for the dividend. Notably, he did NOT focus solely on the jurisdictional issue--he's talking substantive law. That means that even if we get a good ruling in the Perry court on jurisdiction, I still think this judge is inclined to avoid ruling for the plaintiffs on DE law alone.

I have not studied the DE case like I have focused on Perry. But based on what I could determine, I believe that this is very bad for the DE case of Hindes/Jacobs. So in that case, in the federal district court of DE, the plaintiffs filed for a petition to certify a question of state law to the Supreme Court of DE. In other words, the district court would say, yes, I acknowledge that there is an important state law issue here that this case could rise and fall on, and we ought to recruit the experts in that area of law to weigh in on it. One of the critical arguments in Hindes/Jacobs is that the NWS provides for a dividend that is illegal under DE law. You'd think that an analysis of that DE law would be dispositive. But this court rejected the petition to certify this question and said "it is unclear to the court how an answer to Palintiff's general question of whether or not DE law permits this type of dividend right for preferred stock does much to aid in answering the more specific question at issue in this case: whether the FHFA, acting as a conservator....can amend the senior preferred stock agreements to pay the treasury a quarterly dividend in the amount of the positive net worth of the two GSEs" So it's not just a rejection of an attempt to engage in this process, but there's a statement by the court that it doesn't even think that answering the DE law question will resolve the case by itself. To make matters worse, the court also says "Additionally, another federal district court granted a motion to dismiss, precluding the plaintiff's claims in that case as a threshold matter, based on the same issues that Defendants present in their motion to dismiss..... While the court has not yet ruled on Defendant's motion to dismiss, it would be a waste of judicial resources to certify plaintiff's question to the DE Supreme Court when it is at least possible that the Defendant's motion will be granted." Frustrating.... Down to Perry and Sweeney.

That's right. And this is why I'm pinning my hopes and dreams on the Perry court. Say what you will about Ginsburg, but the guy really should've been on the Supreme Court--he was just too honest about his marijuana usage, and if it happened today, things would have been totally different. He's hardly going to be afraid to overturn a district court judge or ask for the development of a full record. Say what you will about Brown, but she is clearly unafraid and has a history of being outspoken and has a very distinct judicial philosophy and political viewpoint. This latest opinion is garbage--and we are definitely down, but certainly not out.

Agree with chereca and merkhet. I'm putting myself in the position of a law clerk/judge working on a case. If i'm at the district court level, and there are a number of other cases in different jurisdictions answering the question i have in front of me in the same way, I will probably lean towards adopting that same reasoning, even though I don't have to. I wouldn't do it if the decision didn't make sense and was flawed, but if I'm going to disagree with them, there's a higher bar, and I'm going to really have to deal with those cases--I can't just ignore them. That makes it a lot harder. If i'm at the circuit court level, and I'm still going to take note of what district courts have said, even if they aren't in my circuit. But at that level, I do think that it's reasonable to infer that the time spent and the degree of briefing requested, as well as the intensity of questioning in oral arguments, means that they aren't just going to issue a thoughtless and overly simplistic me-too opinion. I have to believe that they won't just agree with Lamberth's interpretation--otherwise, why did they ask for briefing on 4623 when nobody had even brought it up? Why did they ask for supplemental briefing on jurisdictional issues. Now I do NOT agree that the longer the spend, the more likely we'll win or get a remand--you might just get a really super complicated decision that still rejects the appeal on jurisdictional grounds. The potential impact of this latest KY opinion on the Circuit court is unknown, but the downside is that it influences them somewhat. And it's especially bad if it influences other district courts--as I've mentioned previously, judicial momentum is a real thing. Right now, I'm really hanging my hat on the Perry Court and hoping for a remand at the very least. perry appeals ct already has lamberth's opinion before them. if they are going to vacate and remand, it is because 2/3 disagree with lamberth. this just means they would disagree with caldwell too. i dont know that appeals ct judges take too much lead from district court judges, tho they certainly take cognizance of other appeals circuits

Haven't read it yet, but looks pretty bad. See attached Edit: I've read the opinion. It is pathetic. Just plain pathetic. Laziness in the worst form. A pure echoing of Lamberth's simplistic reasoning--zero nuance or attention to detail. I just can't imagine that the DC Circuit will be satisfied with this type of reasoning, but this definitely shakes me, since it just adds to the momentum of courts making stupid decisions. Kentucky_Fried_Opinion.pdf

i don't remember him saying that. I think he just said the fact that they're taking all these steps means that they're taking this very seriously, which is true and you could tell from oral arguments in Perry. I don't think anyone expects or ever expected a decision like the one we just got in Pagliara, which was frankly just shameful.

i just checked her twitter page and don't see any reference to this article. Did she delete the tweet?

nobody is getting paid off, but the real lesson here is that you can never underestimate the desire a judge has to get something off his/her calendar and to not make any waves. These cases are hard and potentially require gutsy calls and difficult analysis--potentially shaking things up substantially. not every judge wants to do that. Just like Lamberth's. And I can tell you that as someone who has limited knowledge of the law, I felt Lamberth's was embarrassingly awful and cringeworthy. And now this one. Makes me seriously wonder if these judges are getting paid off by the Govt.

no surprise, but counsel for FHFA has sent a letter to the Perry court about the Pagliara decision. Emphasizing that the Pagliara court said that HERA evidences congress's intention to transfer as much power to the conservator as possible and that the court rejected any conflict-of-interest exception to the Conservator’s succession to stockholder rights to bring a derivative suit. pagletter.pdf

i've read over parts of it more carefully now. Not as bad as I originally thought, but still bad, more in a cumulative way. Cites to Perry and also analyzes HERA in a very broad way--doesn't say that HERA altogether prohibits direct suits, but says that the specific rights or inspecting corporate records is one that was transferred to the conservator under HERA. in other words, the court is saying that the plaintiff doesn't even possess the rights that he believes were infringed. It's a broad reading of HERA and requires and the court pretty much says that unless there's a specific exception listed, they aren't going to read it into the statute. Pagliara suit dismissed. Does this impact the Hindes/Jacobs case in Delaware in any way? first, it is the Va. suit. second, it citers approvingly to lamberth's opinion in perry. third, no mention of piszel. not helpful, of course, but not that harmful.

here is the opinion. i've just skimmed over it, but it seems important and potentially problematic Pagliara suit dismissed. Does this impact the Hindes/Jacobs case in Delaware in any way? pagliara.pdf

the prediction that Millet is going to write just bc Ginsburg is senior, etc, is just made up. Senior judges carry a lighter case load but they are otherwise treated no differently than other judges. The person who is writing the opinion will be writing for the majority though. so if millet is dissenting, she won't write the opinion--just the dissent.

I'm in vs anyone who is betting on before labor day. I think a fairer bet would be before or after end of sept

why do you assume trump is better for us? traditionally the republicans hate the GSE's and would favor of getting rid of them entirely. he may have flirted with some investors, but he was also considering corker. Not from a political angle. If Clinton wins, the odds are still pretty good with the legal avenue. If Trump wins, they're significantly better, so even at 3:1, it makes a difference. That's a 25% shot at maybe 80-90% chance of release? And Trump is coming off his worst couple of weeks, who knows what will happen in the next few months? It might all reverse as HRC is still very much hated.

the vast majority of my shares are commons, so if this tanks, you can enjoy my miserable company. BTW, i tend to agree that nobody really knows anything here, and that this is either reflective of momentum/technical trading, or following Berk. Ultimately won't matter when we get real news.

i seriously doubt we'll see anything in August. From a practical standpoint, not only is it the summer, but the judges probably have relatively new law clerks who will need time to catch up on everything. Sure hope so, let's get this decision in the books in August.

thanks for the info--to those of you who don't know, Berkowitz has always been mainly invested in preferreds--he only dipped his toe in the commons. Ackman, on the other hand, is more heavily invested in commons. Not that that gives you any reassurance, but an interesting factoid.

Forgive my ignorance on this, but perhaps merkhet or chezerca or really anyone else can help answer this -- if the NWS is deemed illegal, and Congress either dismantles or merges the two institutions, what happens to the common shares?

I loved the sarcasm in the intro--thought it was very funny. Just not sure about quoting Ginsburg to advance a proposition, almost holding him to a viewpoint that he might have been more playfully proposing for rhetorical purposes. Judges can be touchy, so I viewed that as at least slightly risky. And to answer rros--the downside (which I don't want to characterize as significant) is that Ginsburg might be annoyed and think it presumptuous. I just remember as a former litigator almost treating the judges in a god-like fashion and avoiding any mere possibility of offending them... in all likelihood it won't matter.

Thanks for posting that Merkhet. I had actually been spending some time trying to understand 4623(d) -- tried to find any regulations or legislative history, read the California court decision cited to in plaintiff's original supplemental briefs (overstated by the plaintiffs IMO) and had been reading the supplemental briefs from both sides. This is one case where I'm glad not to be the law clerk/judge. I think it's very tough to figure out the applicability of that provision to the APA claims, but the plaintiff's arguments strike me as more persuasive. I'm not at all confident, but it seems like the FHFA is reaching to characterize the actions of the director as a reclassification of capital requirements--inextricably linked to the NWS-- and also overreaches to say that plaintiff's essentially argue that there must be some minimal level of capital, so they are asking for a different capital requirement. I am more persuaded by the argument that this provision is intended to govern the actions of the Director as a regulator and not conservator. And I think the best argument is made in the most recent filing that the invalidation of the NWS doesn't even require any change in the suspension of capital classifications. They're saying that it's wrong to conflate those two things, and that the purpose of the suspension of capital classification was to give the FHFA more flexibility with respect to payments made to the Treasury. Also, notably, nice bit of trash talking in the intro: "FHFA has grown so enamored of the argument that 12 U.S.C. § 4623(d) bars this action, an argument that FHFA did not assert before this Court’s prompting the day of argument, that FHFA devotes most of its supplemental brief to the issue even though the Court’s June 21, 2016 briefing order did not raise it." But I would not have been on board with their quoting Ginsburg's 'stake through the heart' comment... Not horrible, but slightly uncomfortable.

https://www.washingtonpost.com/news/post-politics/wp/2016/07/06/corker-withdraws-as-potential-trump-running-mate/?postshare=6391467824023204&tid=ss_tw Corker will not be Trump's VP candidate.... He says that it's an overly political position and that's just not him.... hmm

Reading through Comey's statement, I think that he's interpreting 'gross negligence' the way that it's usually interpreted--it's typically read to be similar to intentional misconduct or just a hair short of it. Similar to reckless indifference -- in order to reach that level of negligence, the person really has to have almost no regard for the law or their conduct's impact. Comey goes out of his way to say that Clinton didn't engage in intentional misconduct but was extremely careless, which is not a legal term but just a regular description. To me, extremely careless sounds more like negligence but not gross negligence, but that's the thing about terminology that is used colloquially--it's hard to match up with terms that have legal meaning, because different people are going to interpret them in different ways. I'm not too worried about what this means for the GSE litigation. Prosecutorial discretion is exercised all the time in a way where authorities do not prosecute people who may very well be guilty of illegalities because of a lack of evidence--those people who aren't prosecuted may still be sharply criticized by the police or authorities, but prosecution may still not make sense--here, Comey says there's insufficient evidence for prosecution. I'd like to know from Comey what is the difference between "extremely careless" and "gross negligence". When top officials rewrite law like Comey just did, it provides clearance for other to do the same. This is the biggest risk to the GSE investment thesis. what i was getting at onyx1. my only hope re GSE thesis is that we have seen it already with lamberth, and lightening wont strike twice

I'm sure Ackman would have accepted the invitation, but I'm also thinking that Corker in reality has zero interest in talking to him one-on-one

Don't get me wrong, I think that the order is ridiculous in some respects--questioning for jurisdictional purposes whether the fhfa was acting as a conservator or regulator? What? How is that even a thing? I'm looking forward to seeing how the FHFA tries to thread that needle. Although I'm not going to try to speculate too much, one thing that I'm very confident of is that the court doesn't think that this is an easy case to dismiss on jurisdictional grounds alone. Unclear. They could just be more thorough than Lamberth. My best guess is that they think the common law claim has merit, but they're uncertain about the jurisdictional aspects. if you recall fhfa put all of its money on the claim that the Ps gave up all of their shareholder rights under HERA. didnt argue that Ps couldnt sue fhfa, as the govt, as a matter of subject matter jurisdiction (meaning authorization to sue under statutory or constitutional law). so this indicates to me that the court is being very careful and covering all bases under which govt could win, if the arguments are available to them. this argument simply wasnt availed by fhfa because the no shareholder rights might permit fhfa to win in fed ct, and we're not the govt might permit them to win in court of claims agreed. but remember, these issues should have been raised by govt. in its briefing. while govt hasnt exactly covered itself in glory in their briefs, the fact that these issues remain outstanding indicates a weakness on the part of the govt's case, as opposed to the P's case, imo