Fairholme Funds, Inc. v. United States , 681 F. App'x 945 ( 2017 )

NOTE: This disposition is nonprecedential.
United States Court of Appeals
for the Federal Circuit
______________________
FAIRHOLME FUNDS, INC., THE FAIRHOLME
FUND, ACADIA INSURANCE COMPANY, ADMIRAL
INDEMNITY COMPANY, ADMIRAL INSURANCE
COMPANY, BERKLEY INSURANCE COMPANY,
BERKLEY REGIONAL INSURANCE COMPANY,
CAROLINA CASUALTY INSURANCE COMPANY,
CONTINENTAL WESTERN INSURANCE
COMPANY, MIDWEST EMPLOYERS CASUALTY
INSURANCE COMPANY, NAUTILUS INSURANCE
COMPANY, PREFERRED EMPLOYERS
INSURANCE COMPANY,
Plaintiffs-Appellees
v.
UNITED STATES,
Defendant-Appellee
v.
MICHAEL SAMMONS,
Movant-Appellant
______________________
2017-1015
______________________
Appeal from the United States Court of Federal
Claims in No. 1:13-cv-00465-MMS, Judge Margaret M.
Sweeney.
2 FAIRHOLME FUNDS, INC. v. US
______________________
Decided: March 14, 2017
______________________
CHARLES J. COOPER, Cooper & Kirk, PLLC, Washing-
ton, DC, for plaintiffs-appellees. Also represented by
BRIAN W. BARNES, HOWARD C. NIELSON, JR., PETER A.
PATTERSON, DAVID THOMPSON.
KENNETH DINTZER, Commercial Litigation Branch,
Civil Division, United States Department of Justice,
Washington, DC, for defendant-appellee. Also represented
by BENJAMIN C. MIZER, ROBERT E. KIRSCHMAN, JR.
MICHAEL SAMMONS, San Antonio, TX, pro se.
______________________
Before LOURIE, O’MALLEY, and TARANTO, Circuit
Judges.
PER CURIAM.
In 2013, preferred-stock shareholders of the Federal
National Mortgage Association (Fannie Mae) and Federal
Home Loan Mortgage Corporation (Freddie Mac) sued the
United States in the Court of Federal Claims, alleging
that certain actions taken by the United States involving
the two entities constituted takings without just compen-
sation in violation of the Fifth Amendment. More than
three years later, Michael Sammons moved to intervene
in the shareholders’ action, as of right, for the limited
purpose of arguing that the Court of Federal Claims lacks
jurisdiction over the plaintiffs’ Fifth Amendment claim.
The Court of Federal Claims denied Mr. Sammons’s
motion, determining, among other things, that he can
protect his interest through his independent litigation
FAIRHOLME FUNDS, INC. v. US 3
and that the motion was untimely. Finding no error in
those determinations, we affirm.
I
We have described much of the background of this ap-
peal in our recent non-precedential decision in In re
United States, No. 2017-1122, 2017 WL 406243 (Fed. Cir.
Jan. 30, 2017). In July 2008, Congress created the Feder-
al Housing Finance Agency (FHFA) and authorized it to
place Fannie Mae and Freddie Mac into conservatorship.
See 12 U.S.C. §§ 4617(b)(2)(A), 4617(b)(2)(B)(i). Congress
also authorized the Department of the Treasury to pur-
chase obligations and securities issued by Fannie Mae
and Freddie Mac. See 12 U.S.C. § 1445(1)(1)(A). In
September 2008, FHFA placed Fannie Mae and Freddie
Mac into conservatorship, and FHFA, as conservator,
entered into certain agreements with Treasury. Under
the agreements, Treasury committed to provide up to
$100 billion to each of Fannie Mae and Freddie Mac, and
in return, Treasury received $1 billion in senior preferred
stock from each company, a 10% dividend on the amount
that was invested, and a warrant to purchase 79.9% of the
companies’ common stock. In 2012, FHFA and Treasury
amended the purchase agreements to replace Treasury’s
10% dividend entitlement with an entitlement to 100% of
Fannie Mae and Freddie Mac’s profits.
In 2013, Fairholme Funds, Inc., and other owners of
Fannie Mae and Freddie Mac preferred stock sued the
United States in the Court of Federal Claims, alleging
that the 2012 amendment of the purchase agreements
constituted a Fifth Amendment taking of private property
without just compensation. See Complaint, Fairholme
Funds, Inc. v. United States, No. 13-465C (Fed. Cl. July 9,
2013), ECF No. 1. Since then, the government has moved
to dismiss the action for lack of subject-matter jurisdiction
and failure to state a claim. Motion to Dismiss, Fair-
holme Funds, No. 13-465C (Fed. Cl. Dec. 9, 2013), ECF
4 FAIRHOLME FUNDS, INC. v. US
No. 20. The parties have conducted discovery related to
the court’s jurisdiction and the merits of the case. See In
re United States, No. 2017-1122.
On September 16, 2016, Mr. Sammons filed, and on
September 30, 2016, he was authorized to file, a motion to
intervene as of right in the action under Court of Federal
Claims Rule 24(a). He alleged that, like the plaintiffs, he
owns Fannie Mae and Freddie Mac preferred stock. He
stated that the purpose of his intervention was to chal-
lenge the Court of Federal Claims’ jurisdiction to hear the
asserted Fifth Amendment claim. He argued that, be-
cause the Court of Federal Claims is an Article I court,
not an Article III court, it is barred from hearing the
constitutional claim. Although 28 U.S.C. § 1491 authoriz-
es the Court of Federal Claims to hear takings claims, Mr.
Sammons contended that the Constitution prohibits that
result. See Motion to Intervene, Fairholme Funds, No.
13-465C (Fed. Cl. Sept. 16, 2016), ECF No. 337.
The Court of Federal Claims denied intervention on
September 30, 2016. Order, Fairholme Funds, No. 13-
465C (Fed. Cl. Sept. 30, 2016), ECF No. 338 (“Order”).
The court stated the statutory basis for its jurisdiction
over takings claims and cited numerous cases recognizing
that jurisdiction, at least as a statutory matter. But it did
not analyze Mr. Sammons’s constitutional contention,
which invoked Stern v. Marshall, 564 U.S. 462 (2011), and
other decisions, that only an Article III court may hear
takings claims. Order 2–5. The court then concluded that
Mr. Sammons had not met Rule 24(a)’s requirements for
intervention. Among other things, the court reasoned
that Mr. Sammons had failed to establish that the denial
of his motion would impair his ability to protect his own
interests, because he could file his own suit on his takings
claim. Id. at 8. The court also determined that Mr.
Sammons’s motion was untimely. The court explained
that more than three years had passed since Mr. Sam-
mons was aware, or should have been aware, of his rights;
FAIRHOLME FUNDS, INC. v. US 5
that the existing parties would be more prejudiced if the
motion were granted than Mr. Sammons would be preju-
diced if the motion were denied; and that there were no
unusual circumstances favoring the granting of the mo-
tion. Id. at 8–9.
Mr. Sammons appeals. The shareholders and the
government—who neither briefed the issue in the Court of
Federal Claims nor challenged that court’s jurisdiction on
Mr. Sammons’s constitutional grounds, see Order 1–2
n.2—defend the denial of intervention as of right. We
have jurisdiction under 28 U.S.C. § 1295(a)(3).
II
Rule 24(a) provides, in relevant part: “On timely mo-
tion, the court must permit anyone to intervene who . . .
claims an interest relating to the property or transaction
that is the subject of the action, and is so situated that
disposing of the action may as a practical matter impair
or impede the movant’s ability to protect its interest,
unless existing parties adequately represent that inter-
est.” R. Ct. Fed. Cl. 24(a)(2). Under intervention rules
materially identical to the Court of Federal Claims rule,
the denial of a motion to intervene for untimeliness is
reviewed for abuse of discretion. See NAACP v. New
York, 413 U.S. 345, 365 (1973); Belton Indus., Inc. v.
United States, 6 F.3d 756, 760 (Fed. Cir. 1993). In a non-
precedential decision, we have followed the same ap-
proach for the Court of Federal Claims. Doe v. United
States, 44 F. App’x 499, 501 (Fed. Cir. 2002). We have not
decided which standard of review applies to the denial of
a motion to intervene on other grounds. See Wolfsen
Land & Cattle Co. v. Pac. Coast Fed’n of Fisherman’s
Ass’ns, 695 F.3d 1310, 1314 (Fed. Cir. 2012). In this case,
the standard does not affect our decision.
Here, denial of intervention would not “as a practical
matter impair or impede [Mr. Sammons’s] ability to
protect his interest.” R. Ct. Fed. Cl. 24(a)(2). Mr. Sam-
6 FAIRHOLME FUNDS, INC. v. US
mons, if denied intervention, would not be bound as a
party to any result reached in the present case. He is also
free to file his own action asserting his own takings claim
as a basis for his own relief. And in that action, he may
litigate his contention that the Constitution entitles him
to an Article III forum for his takings claim.
Indeed, Mr. Sammons has filed such an action in dis-
trict court, seeking $900,000 in damages. Sammons v.
United States, No. 5:16-cv-1054-FB (W.D. Tex. Oct. 21,
2016), ECF No. 1. In that action, he immediately moved
for a declaration that, despite the $10,000 limit on district
courts’ jurisdiction over such claims, 28 U.S.C.
§ 1346(a)(2)(a)(2), the Constitution entitles him to an
Article III forum. ECF No. 3 (Oct. 21, 2016). The gov-
ernment opposed Mr. Sammons’s motion and also moved
to dismiss, ECF No. 15 (Jan. 9, 2017); Mr. Sammons
replied and responded, ECF No. 16 (Jan. 9, 2017); ECF
No. 21 (Jan. 18, 2017); and the government replied, ECF
No. 29 (Feb. 1, 2017). 1 A Magistrate Judge has now
issued a report and recommendation, which rejects Mr.
Sammons’s argument based on Stern v. Marshall and
other authorities discussing Article I courts and concludes
that the case should be dismissed for lack of jurisdiction
under Federal Rule of Civil Procedure 12(b)(1). ECF No.
30 (Feb. 7, 2017). Mr. Sammons has filed an objection
with the district court pursuant to Federal Rule of Civil
Procedure 72, ECF No. 31 (Feb. 7, 2017); and the govern-
1 Mr. Sammons furnished to the Magistrate Judge
a lengthy law review article addressing the issue he
raised regarding an entitlement to an Article III court for
a takings claim. See Michael P. Goodman, Taking Back
Takings Claims: Why Congress Giving Just Compensation
Jurisdiction to the Court of Federal Claims Is Unconstitu-
tional, 60 Vill. L. Rev. 83 (2015). He has supplied a pre-
publication version of that article to this court as well.
FAIRHOLME FUNDS, INC. v. US 7
ment has responded, ECF No. 32 (Feb. 17, 2017). It
appears that, after Mr. Sammons replies, the issue will be
ripe for decision.
We agree with the Court of Federal Claims that Mr.
Sammons has not shown why denial of intervention in the
present matter would impair or impede his ability to
protect his interest in the property or transaction that is
the subject of this case. Order 8. From all that appears,
he may fully litigate, in the Texas case, his claim of enti-
tlement to an Article III forum for his takings claim. He
may litigate his takings claim in that case if he prevails
on his argument that he is entitled to keep his case there.
And if he does not prevail on that argument, he may have
his takings claim adjudicated in the Court of Federal
Claims, whether by filing his own action there or by
including himself within what he has asserted is at least
one class action in that court covering his claim. See R.
Ct. Fed. Cl. 23(c)(2)(B)(v).
We also see no reversible error in the Court of Federal
Claims’ determination that Mr. Sammons’s intervention
motion was not “timely,” as required by Rule 24. In
deciding whether a motion is timely, a court may consider
(1) “the length of time during which the would-be interve-
nor[] actually knew or reasonably should have known of
[his] rights,” (2) “whether the prejudice to the rights of
existing parties by allowing intervention outweighs the
prejudice to the would-be intervenor[] by denying inter-
vention,” and (3) the “existence of unusual circumstances
militating either for or against a determination that the
application is timely.” Doe, 44 F. App’x at 501; Belton, 6
F.3d at 762. The Court of Federal Claims properly con-
sidered those factors.
The court found that Mr. Sammons had filed his mo-
tion to intervene more than three years after the share-
holders filed their complaint—the time at which Mr.
Sammons was or should have been aware of the right to
8 FAIRHOLME FUNDS, INC. v. US
relief that he now claims. Order 8–9. As just explained,
the court found, too, that Mr. Sammons would not be
prejudiced by denying intervention in this case. Id. at 8.
The court further found that, because of the passage of
time, the action had progressed “too far down the discov-
ery track to be disrupted by a motion for intervention.”
Id. at 9. Although no answer has been filed in this case,
discovery has proceeded, the docket has expanded to more
than 350 entries, and the parties’ privilege disputes have
spilled over into this court. See In re United States, No.
2017-1122. Finally, the court concluded that there were
no unusual circumstances that would affect the determi-
nation of untimeliness. Order 9. We see no legal error or
other abuse of discretion in that analysis. 2
We therefore find no reversible error in the denial of
intervention in this case. We do not here address Mr.
Sammons’s constitutional argument against the jurisdic-
tion of the Court of Federal Claims. See Defenders of
Wildlife v. Perciasepe, 714 F.3d 1317, 1327–29 (D.C. Cir.
2013) (upon denying intervention, refusing to address
challenge to trial court’s subject matter jurisdiction).
That argument, to the extent it is a jurisdictional one,
must be addressed by the Court of Federal Claims and (if
there is an appeal) by this court even if Mr. Sammons is
not a party and even if no party makes the argument he
makes.
2 Mr. Sammons moved to intervene only as of right
under Rule 24(a), and the Court of Federal Claims accord-
ingly did not separately address whether he qualified for
permissive intervention under Rule 24(b). No Rule 24(b)
issue is before us. But because Mr. Sammons now in-
vokes Rule 24(b), we note that untimeliness, which the
Court of Federal Claims has found, bars permissive
intervention as well as intervention as of right. See R. Ct.
Fed. Cl. 24(b)(1), (3).
FAIRHOLME FUNDS, INC. v. US 9
CONCLUSION
For the foregoing reasons, we affirm the order of the
Court of Federal Claims denying intervention.
AFFIRMED