Case 1:13-cv-00465-MMS Document 7 Filed 08/09/13 Page 1 of 7

IN THE UNITED STATES COURT OF FEDERAL CLAIMS

FAIRHOLME FUNDS, INC., et al.
Plaintiffs,

v.

THE UNITED STATES,

Defendant.

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No. 13-465C
(Judge Sweeney)

DEFENDANTS MOTION TO STAY OR, IN THE

ALTERNATIVE, MOTION FOR AN ENGLARGMENT OF TIME
Defendant, the United States, respectfully requests that the Court stay all proceedings in
the above-captioned case pending the resolution of related actions in the United States District
Court for the District of Columbia. Defendant proposes to submit a status report every 90 days
while district court proceedings continue. Alternatively, or in addition, the Court should stay
proceedings in this case pending final appellate action in Brandt v. United States, No. 12-5050
(Fed. Cir.), and pending resolution of Washington Federal v. United States, No. 13-385C (Fed.
Cl.). Alternatively, if the Court does not grant a stay of proceedings for any of these three
reasons, we respectfully request a 91-day enlargement of time, to and including Monday,
December 9, 2013, to respond to the complaint. Government counsel has discussed this motion
with counsel for plaintiffs, Fairholme Funds, Inc., et al., who indicated that plaintiffs intend to
oppose the motion for a stay and the alternative motion for a 91-day enlargement of time, but
that they do not oppose a 59-day enlargement of time to November 7, 2013.
Since June 2013, five complaints have been filed in this Court alleging that the Third
Amendment to Senior Preferred Stock Purchase Agreements between the Government and two
Government-sponsored enterprises, the Federal National Mortgage Association (Fannie Mae)

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and the Federal Home Loan Mortgage Corporation (Freddie Mac), effected an uncompensated
taking under the Fifth Amendment to the United States Constitution:
Washington Federal v. United States, No. 13-385C (Fed. Cl.); 1
Fairholme Funds, Inc. v. United States, No. 13-465C (Fed. Cl.);
Cacciapelle v. United States, No. 13-466C (Fed. Cl.);
American European Ins. Co. v. United States, No. 13-496C (Fed. Cl.); and
Dennis v. United States, No. 13-542C (Fed. Cl.).
In July and August 2013, several complaints challenging the same transaction were filed
in the United States District Court for the District of Columbia. Three of the district court
complaints allege violations of the Administrative Procedure Act (APA), 5 U.S.C. 551-559,
701-706:
Perry Capital, LLC v. Lew, No. 13-1025 (D.D.C.);
Fairholme Funds, Inc. v. FHFA, No. 13-1035 (D.D.C.); and
Liao v. Lew, No. 13-1094 (D.D.C.).
Others allege breach of contract. 2 Although not all of the cases pending in these two courts share
the same named plaintiffs or counsel, the operative facts underlying all of the complaints are
largely the same, and, as demonstrated below, the orderly course of justice would be promoted if
this case is stayed.

Washington Federals complaint also claims that other Government actions, including the
placement of Fannie Mae and Freddie Mac in conservatorship, constituted a taking or illegal
exaction. Compl. 170, Washington Federal v. United States, No. 13-385C (Fed. Cl. June 10,
2013).
2

The district court complaints alleging breach of contract are: Cacciapelle v. Fed. Natl
Mortgage Assoc., No. 13-1149 (D.D.C.); American European Ins. Co. v. Fed. Natl Mortgage
Assoc., No. 13-1169 (D.D.C.); and Dennis v. FHFA, No. 13-1208 (D.D.C.).
2

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ARGUMENT
The Courts power to stay proceedings is incidental to the power inherent in
every court to control the disposition of the causes on its docket with economy of time
and effort for itself, for counsel, and for litigants. Landis v. N. Am. Co., 299 U.S. 248,
254 (1936); Coast Fed. Bank, FSB v. United States, 49 Fed. Cl. 11, 15 (2001) (court has broad
discretion to stay proceedings). In deciding whether to stay proceedings, courts consider the

most orderly course of justice and the interests of the parties, weighing any competing interests.
UnionBanCal Corp. & Subsidiaries v. United States, 93 Fed. Cl. 166, 167 (2010). The orderly
course of justice and judicial economy is served when granting a stay simplifies the issues,
proof, and questions of law which could be expected to result from a stay. Id. (quoting CMAX,
Inc. v. Hall, 300 F.2d 265, 268 (9th Cir.1962)).
I.

The Court Should Stay This Case Pending Resolution Of The District Court APA
Actions
It is a common practice to stay suits filed in this Court while companion district court

actions proceed, particularly if the district court is likely to reach conclusions that will affect the
resolution of the Court of Federal Claims case. United States v. Tohono O'Odham Nation, 131 S.
Ct. 1723, 1739-40 (2011) (Ginsburg, J., dissenting); see Pennsylvania R.R. v. United States, 363
U.S. 202, 206 (1960); Brighton Vill. Associates v. United States, 52 F.3d 1056, 1060 (Fed. Cir.
1995); Creppel v. United States, 41 F.3d 627, 633 (Fed. Cir. 1994) (the Court of Federal Claims
may stay a takings action pending completion of a related action in a district court); Aulston v.
United States, 823 F.2d 510, 514 (Fed. Cir. 1987). Indeed, the Supreme Court has, in one case,
concluded that the Court of Claims was under a duty to stay its proceedings pending [district
court] review. Pennsylvania R.R., 363 U.S. at 206.

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The plaintiffs in all of the cases pending before this Court and the district court are
present and former shareholders of Fannie Mae and Freddie Mac. Some of the plaintiffs have
filed actions in both courts. The shareholders in the five takings cases now pending before this
Court seek a monetary remedy in the form of just compensation. Simultaneously, district court
shareholder suits challenge the statutory and regulatory validity of the alleged Government
actions that form the basis for the takings claims.
The Federal Circuit has held that a plaintiff in a takings action cannot assert that the
government conduct was unauthorized, since conduct by a government official who is acting
ultra vires cannot effect a governmental taking for public purposes within the meaning of the
Fifth Amendment. Del-Rio Drilling Programs, Inc. v. United States, 146 F.3d 1358, 1365 (Fed.
Cir. 1998). Thus, should the district court actions succeed in challenging validity, the district
courts conclusions may affect the resolution of the cases pending in this Court. See id.; see also
Bailey v. United States, 78 Fed. Cl. 239, 254 (Fed. Cl. 2007) (invalidity may well reduce the
damages owed by the government in the case of a temporary taking instead of a permanent
one). The Federal Circuit has recognized that a challenge to the validity of a regulatory
imposition should precede litigation of a takings claim. Loveladies Harbor, Inc. v. United States,
27 F.3d 1545, 1555 (Fed. Cir. 1994) (en banc) (In a takings case . . . if the validity of the
regulatory imposition is to be challenged, it makes sense to pursue the validity question first so
as to determine the necessity for prosecuting the takings claim.).
Judicial economy will be promoted here if the district court is permitted to resolve the
statutory authorization issues before this Court takes up the plaintiffs takings claims.
Regardless of the outcome of the district court litigation, it is likely to yield holdings regarding
the statutory validity of Government actions that will aid this Court in evaluating the pending

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takings claims, as well as the illegal exaction claim raised by Washington Federal, in this Court.
Imposition of a stay will both reduce the possibility of inconsistent decisions and avoid the
substantial costs to all parties associated with litigation of numerous cases arising from the same
set of operative facts in two different courts simultaneously. Thus, the cases pending before this
court should be stayed until the district court resolves the statutory validity issues.
II.

Alternatively, Or In Addition, The Court Should Stay This Case Pending Final
Appellate Action In Brandt v. United States, No. 12-5050 (Fed. Cir.)
Alternatively, or in addition to a stay pending resolution of the APA district court cases,

the Court should stay this case pending final appellate action in Brandt v. United States, No. 125050 (Fed. Cir.). In Brandt v. United States, 710 F.3d 1369, 1380 (Fed. Cir. 2013), a panel of
the United States Court of Appeals for the Federal Circuit found that the Court of Federal Claims
erred in dismissing a claim for lack of jurisdiction under 28 U.S.C. 1500. Judge Prost
concurred in the judgment, but only because [the court was] bound to follow the order-of-filing
rule established by Tecon Engineers, Inc., v. United States, 343 F.2d 943 (Ct. Cl. 1965), Brandt,
710 F.3d at 1380 (Prost, J., concurring), which rule provides that this Court is not divested of
jurisdiction under 1500 by later-filed district court actions. In her concurring opinion, Judge
Prost urged, We should take this opportunity to overrule Tecon and finally dispense with the illconceived order-of-filing rule. Brandt, 710 F.3d at 1382 (Prost, J., concurring).
On June 10, 2013, the United States filed a petition for panel and en banc rehearing. At
the Federal Circuits invitation, appellants filed a response to the petition on July 17, 2013. In
four of the five cases filed in this Court and identified above, including this case, the plaintiffs
have filed a companion district court suit. If the Federal Circuit, en banc, grants the petition in
Brandt and overrules Tecons order-of-filing rule, the Court may be without jurisdiction to
entertain this case. Accordingly, staying this case pending final appellate action in Brandt will
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appropriately conserve the resources of the Court and the parties. See, e.g., Hokkanen v. Sec'y of
Health & Human Servs., 94 Fed. Cl. 300, 303 (Fed. Cl. 2010).
III.

Alternatively, Or In Addition, The Court Should Stay This Case Pending Resolution
Of Washington Federal v. United States, No. 13-385C (Fed. Cl.)
Alternatively, or in addition to a stay pending resolution of the APA district court cases

or final appellate action in Brandt, the Court should stay this case pending resolution of
Washington Federal v. United States, No. 13-385C (Fed. Cl.). In resolving Washington Federal,
the Court is likely to reach conclusions that will affect the resolution of this case. Although
consolidation of the cases is not appropriate at this time, it is appropriate to stay this case
pending resolution of Washington Federal, which was the first of these cases to be filed.
IV.

Alternative Motion For An Enlargement of Time

Alternatively, if the Court does not stay this case, defendant, the United States

respectfully requests an enlargement of time of 91 days, to and including Monday, December 9,

2013, to respond to the complaint. This is defendants first request for an extension in this case.
The extension of time is necessary given the complexity of the case, existing obligations of
assigned counsel, and the need to coordinate the Governments response among multiple
agencies and across several related cases.
CONCLUSION
The Court should stay all proceedings in this case. Alternatively, we respectfully request
a 91-day enlargement of time, to and including December 9, 2013, to respond to the complaint.
Respectfully submitted,
STUART F. DELERY
Assistant Attorney General

Case 1:13-cv-00465-MMS Document 7 Filed 08/09/13 Page 7 of 7

s/Jeanne E. Davidson
JEANNE E. DAVIDSON
Director
s/Kenneth M. Dintzer
KENNETH M. DINTZER
Acting Deputy Director
Commercial Litigation Branch
Civil Division
United States Department of Justice
PO Box 480
Ben Franklin Station
Washington, D.C. 20044
(202) 616-0385
(202) 307-0972 fax
KDintzer@CIV.USDOJ.GOV

OF COUNSEL:
ELIZABETH M. HOSFORD
GREGG M. SCHWIND
Senior Trial Counsel
KATY M. BARTELMA
SETH W. GREENE
DANIEL B. VOLK
Trial Attorneys

August 9, 2013

Attorneys for Defendant