Enforceability of Certain Agreements Between the Department of the Treasury and Government-Sponsored Enterprises ( 2008 )

Enforceability of Certain Agreements Between
the Department of the Treasury and
Government-Sponsored Enterprises
The Amended and Restated Senior Preferred Stock Purchase Agreements between the United States
Department of the Treasury and the Federal National Mortgage Association and the Federal Home
Loan Mortgage Corporation, according to their terms, would create rights enforceable through
actions brought in the United States Court of Federal Claims in accordance with the ordinary rules
and procedures governing litigation in that Court.
September 26, 2008
LETTER OPINION FOR THE SECRETARY OF THE TREASURY
I am writing with regard to the Amended and Restated Senior Preferred Stock
Purchase Agreements (“the Agreements”) between the United States Department
of the Treasury (“Treasury”), and the Federal National Mortgage Association and
the Federal Home Loan Mortgage Corporation, respectively (collectively the
“Government-Sponsored Enterprises” or “GSEs”). You have asked for our view
whether the Agreements create enforceable rights against Treasury for certain
holders of debt securities and beneficiaries of Mortgage Guarantee Obligations
issued by the GSEs (collectively “the Holders”). ∗
Under the Agreements, following a payment default by a GSE with respect to
any Holders, and in the event Treasury fails to perform its obligations to either of
the GSEs in respect of any draw on the Commitments, those Holders may file
claims in the United States Court of Federal Claims for relief requiring Treasury to
pay the relevant GSE a specified amount (called “the Demand Amount”) in the
form of liquidated damages. After consultation with the Civil Division of the
Department of Justice, we conclude that the United States Court of Federal Claims
generally would have jurisdiction under the Tucker Act to entertain claims brought
by the Holders for liquidated damages, payable to a GSE, according to the terms
of the Agreements, if Treasury failed to perform its obligation under the Agree-
ments to fund the Commitment in the event of a payment default by the GSE to
the Holders. The general jurisdictional provision of the Tucker Act, section
1491(a)(1) of title 28 of the United States Code, authorizes the Court of Federal
Claims “to render judgment upon any claim against the United States founded” on,
among other bases, “any express . . . contract with the United States, or for
liquidated . . . damages in cases not sounding in tort.” A Holder’s claim against
Treasury for liquidated damages, payable to a GSE, under the Agreements falls
within the general scope of section 1491(a)(1). It is established that the Court of
Federal Claims has jurisdiction under section 1491(a)(1) to hear a breach of
∗
Any capitalized terms used but not defined in this letter opinion have the meanings set forth in the
Agreements.
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Opinions of the Office of Legal Counsel in Volume 32
contract claim brought by a properly authorized party for payment of damages
owed to a corporation. See First Hartford Corp. Pension Plan & Trust v. United
States, 194 F.3d 1279, 1293–94 (Fed. Cir. 1999). Accordingly, the Court of
Federal Claims generally would have jurisdiction under this provision of the
Tucker Act to hear such claims by Holders. Because the Tucker Act constitutes
express statutory consent to the award of monetary relief against the United States,
the sovereign immunity of the United States would not be a bar to any such claim.
See United States v. Mitchell, 463 U.S. 206, 212 (1983) (“[T]he Tucker Act
constitutes a waiver of sovereign immunity.”); Adair v. United States, 497 F.3d
1244, 1250 (Fed. Cir. 2007) (Tucker Act “waives the government’s sovereign
immunity for these claims”).
We therefore conclude that the Agreements, according to their terms, would
create rights enforceable through actions brought in the Court of Federal Claims in
accordance with the ordinary rules and procedures governing litigation in that
Court.
STEVEN G. BRADBURY
Principal Deputy Assistant Attorney General
Office of Legal Counsel
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