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Collins v. Mnuchin

United States Court of Appeals, Fifth Circuit

September 6, 2019


          Appeal from the United States District Court for the Southern District of Texas


         The bicentennial of the United States Constitution in 1987 celebrated our Founding generation's ingenious system of separated powers: legislative, executive, and judicial. The Constitution inaugurated a revolutionary design. Madisonian architecture infused with Newtonian genius-three separate branches locked in synchronous orbit by competing interests. "Ambition . . . made to counteract ambition," explained Madison, making clear that this law of constitutional motion, using friction to combat faction, was a feature, not a bug.[1] Our Constitution's most essential attribute, the separation of powers, presumes conflict, which, counterintuitively, produces equilibrium as the branches behave not as willing partners but as wary rivals. And our Constitution's paramount aim, preserving individual liberty, presumes that branches will behave neither centripetally (seizing other branches' powers) nor centrifugally (ceding their own), but jealously (defending their assigned powers against encroachment). No mere tinkerers, the Framers upended things. Three rival branches deriving power from three unrivaled words-"We the People"- inscribed on the parchment in supersize script. In an era of kings and sultans, nothing was more audacious than the Preamble's first three words, a script-flipping declaration that ultimate sovereignty resides not in the government but in the governed.

         The Constitution's 200th birthday coincided with a centennial, the 100th birthday of the federal administrative state.[2] Congress's passage in 1887 of the Interstate Commerce Act, making railroads the first industry subject to federal regulation, and the Act's creation of the nation's first federal regulatory body, the Interstate Commerce Commission, profoundly altered the Framers' tripartite structure. The ICC was an amalgam of all three powers, blending functions of all three branches. The administrative state has sprouted since then. But this iron truth endures: Even the most well-intentioned bureaucrats, no less than presidents, legislators, and judges, are bound by constitutional principles. An agency is restrained by the four corners of its enabling statute and "literally has no power to act . . . unless and until Congress confers power upon it."[3] And Congress, when creating agencies, is itself constrained-at all times-by the separation of powers.

         * * *

         The plaintiffs (the Shareholders) own shares in Fannie Mae and Freddie Mac. In 2008 Fannie and Freddie's new regulator, the Federal Housing Finance Agency, placed them in conservatorship. FHFA secured financing from the Treasury to keep Fannie and Freddie afloat. That relationship continued, and in 2012 FHFA and Treasury adopted a Third Amendment to their financing agreements. Under the Third Amendment, Fannie and Freddie give Treasury nearly all their net worth each quarter as a dividend.

         The Shareholders have two principal objections to this arrangement:

         First, the Third Amendment exceeded FHFA's statutory powers. FHFA's enabling statute gives it general powers to use as either conservator or receiver. The statute grants other, more directed powers to FHFA as conservator or receiver respectively. As conservator, the agency may take actions "(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."[4]These enumerated conservator powers don't vanish in the glare of the more general ones. Congress created FHFA amid a dire financial calamity, but expedience does not license omnipotence. The Shareholders plausibly allege that the Third Amendment exceeded FHFA's conservator powers by transferring Fannie and Freddie's future value to a single shareholder, Treasury. In Parts I-VI of this opinion, a majority of the en banc court holds that this claim survives dismissal under Federal Rule of Civil Procedure 12(b)(6).

         Second, the Shareholders argue that FHFA lacked authority to adopt the Third Amendment because its Director was not removable by the President. We adhere to the panel's reasoning and conclusion that FHFA's design, an independent agency with a single Director removable only "for cause," violates the separation of powers.[5] In Parts VII-VIII of this opinion, a majority of the en banc court holds that the Director's "for cause" removal protection is unconstitutional.

         The remaining question is what remedy the Shareholders are entitled to. A different majority of the en banc court holds that prospective relief is the proper remedy. In Judge Haynes's opinion, [6] a majority holds that the Shareholders can only obtain a declaration that the FHFA's structure is unconstitutional.

         We REVERSE the judgment dismissing Count I and REMAND that claim for further proceedings. We AFFIRM the judgment dismissing Counts II and III. The court REVERSES the judgment as to Count IV and REMANDS that claim for entry of judgment that the "for cause" removal limitation in 12 U.S.C. § 4512(b)(2) is unconstitutional.


         During last decade's housing-market crisis, Congress passed and President George W. Bush signed the Housing and Economic Recovery Act of 2008 (HERA).[7] The statute created FHFA as an independent agency to oversee the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac). Fannie and Freddie are government-sponsored entities (GSEs) that also have private shareholders, including the plaintiffs in this case. Some background on FHFA and the GSEs is useful.[8]


         Congress created Fannie Mae in 1938.[9] Its purposes include "provid[ing] stability in the secondary market for residential mortgages," "increasing the liquidity of mortgage investments," and "promot[ing] access to mortgage credit throughout the Nation."[10] Congress created Freddie Mac in 1970 to "increase the availability of mortgage credit for the financing of urgently needed housing."[11] Among other activities, Fannie and Freddie purchase mortgages originated by private banks, bundle the mortgages into income-producing securities, and sell the securities to investors.

         In 2007, mortgage delinquencies and defaults sparked a bank liquidity crisis that kindled a recession. At the time, Fannie and Freddie controlled combined mortgage portfolios of approximately $5 trillion-nearly half the United States mortgage market. They suffered multi-billion dollar losses. Indeed, the GSEs lost more in 2008 ($108 billion) than they had earned in the previous thirty-seven years combined ($95 billion).[12] But they remained solvent because they had taken a relatively conservative mortgage-investing approach. They continued to support the United States home-mortgage system as distressed banks failed.

         In 2008, the President signed HERA into law to protect the national economy from further losses. HERA established FHFA as an "independent agency of the Federal Government" and classified Fannie and Freddie as "regulated entit[ies]" under FHFA.[13]


         A single Director leads FHFA.[14] He is "appointed by the President, by and with the advice and consent of the Senate."[15] The Director serves a term of five years, "unless removed before the end of such term for cause by the President."[16] The Director designates three Deputy Directors.[17] In case of a vacancy in the Director office, "the President shall designate [one of the Deputy Directors] to serve as acting Director until the return of the Director, or the appointment of a successor."[18]

         Other features strengthen FHFA's independence. It runs on annual assessments collected from the GSEs, not public or appropriated money.[19] It is "advise[d]" by the Federal Housing Finance Oversight Board: the Secretary of the Treasury, the Secretary of Housing and Urban Development, the Chairman of the Securities and Exchange Commission, and the FHFA Director.[20] But the Board's power is Lilliputian. It "may not exercise any executive authority, and the Director may not delegate to the Board any of the functions, powers, or duties of the Director."[21]

         FHFA regulates normal GSE operations. The Director must issue regulations, guidelines, or orders necessary to oversee the GSEs and ensure their sound operations.[22] FHFA also has enforcement authority. The Director may bring charges against a GSE for unsound practices or violating the law.[23]He may issue cease-and-desist orders, require the GSE to remedy any violations, and impose penalties.[24]


         FHFA is not just a regulator. Under 12 U.S.C. § 4617 it may serve as conservator or receiver for the GSEs. FHFA has discretion to appoint itself conservator or receiver in some cases, and receivership is mandatory in other critical insolvency situations.[25] Conservatorship and receivership are mutually exclusive: Appointing FHFA as receiver "shall immediately terminate any conservatorship established for the regulated entity under this chapter."[26]


         Section 4617 next provides FHFA's general powers as conservator or receiver. In either role, FHFA is a successor to the GSE:

The Agency shall, as conservator or receiver, and by operation of law, immediately succeed to-
(i) all rights, titles, powers, and privileges of the regulated entity, and of any stockholder, officer, or director of such regulated entity with respect to the regulated entity and the assets of the regulated entity . . . .[27]

Similarly, FHFA in either role may operate the GSE:

The Agency may, as conservator or receiver-
(i) take over the assets of and operate the regulated entity 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 the regulated entity;
(iii) perform all functions of the regulated entity in the name of the regulated entity which are consistent with the appointment as conservator or receiver;
(iv) preserve and conserve the assets and property of the regulated entity; and
(v) provide by contract for assistance in fulfilling any function, activity, action, or duty of the Agency as conservator or receiver.[28]

         And FHFA in either role may exercise incidental powers to carry out those enumerated:

Incidental powers
The Agency may, as conservator or receiver-
(i) exercise all powers and authorities specifically granted to conservators or receivers, respectively, under this section, and such incidental powers as shall be necessary to carry out such powers; and
(ii) take any action authorized by this section, which the Agency determines is in the best interests of the regulated entity or the Agency.[29]

         FHFA in either role may also order a shareholder, director, or officer to perform any function.[30] And in either role it may transfer or sell any GSE asset or liability without consent.[31] FHFA in either role also benefits from an anti-injunction provision:

Except as provided in this section or at the request of the Director, no court may take any action to restrain or affect the exercise of powers or functions of the Agency as a conservator or a receiver.[32]


         Other powers depend on capacity. Section 4617 grants some powers to FHFA as conservator only:

Powers as conservator
The Agency may, as conservator, take such action as may be-
(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.[33]

         It grants other powers to FHFA as receiver only:

Additional powers as receiver
In any case in which the Agency is acting as receiver, the Agency shall place the regulated entity in liquidation and proceed to realize upon the assets of the regulated entity in such manner as the Agency deems appropriate . . . .[34]

         Receivership, then, grants a power and duty to liquidate the GSE. Unsurprisingly, § 4617 next provides a regime for the receiver's orderly processing of creditor claims.

         It is extensive. As receiver FHFA must publish and mail notice to creditors to present their claims.[35] It generally must allow or disallow a claim within 180 days of filing.[36] It must expedite certain secured claims with potential for irreparable injury.[37] It may also make rules for allowing and disallowing claims.[38] And it must allow proven claims.[39] Creditors may alternatively pursue their claims in U.S. district court.[40] The receivership scheme qualifies the succession provision by carving out surviving shareholder and creditor rights:

[T]he appointment of the Agency as receiver . . . and its succession, by operation of law, to the rights, titles, powers, and privileges described in subsection (b)(2)(A) shall terminate all rights and claims that the stockholders and creditors of the regulated entity may have against the assets or charter . . . except for their right to payment, resolution, or other satisfaction of their claims, as permitted under subsections (b)(9), (c), and (e).[41]

         In short, FHFA as receiver must divide the GSEs' assets between creditors and shareholders according to law.


         Congress also amended the GSEs' charters by giving Treasury temporary authority to purchase their securities.[42] In connection with any purchase, it required Treasury to make an "[e]mergency determination" that the purchase would "(i) provide stability to the financial markets; (ii) prevent disruptions in the availability of mortgage finance; and (iii) protect the taxpayer."[43] Congress also prescribed six mandatory considerations for exercising the authority, "[t]o protect the taxpayers."[44] The temporary purchase authority terminated on December 31, 2009, except for Treasury's rights under purchases already made.[45]


         In September 2008, FHFA appointed itself a conservator for the GSEs. The next day, Treasury and the GSEs entered Preferred Stock Purchase Agreements. Treasury made a capital commitment, capped at $100 billion per GSE, to keep them from defaulting. In return, Treasury received one million senior preferred shares in each GSE. These shares entitled Treasury to:

• a $1 billion senior liquidation preference;
• a dollar-for-dollar increase in that preference each time a GSE drew on the capital commitment;
• quarterly dividends of either an amount equal to 10% of the liquidation preference, or a 12% increase in the liquidation preference itself;
• warrants allowing Treasury to purchase up to 79.9% of common stock;
• and periodic commitment fees.

         The Agreements also prohibited the GSEs from declaring a dividend or making any other distribution without Treasury's consent.

         Treasury and FHFA later amended the Agreements. In May 2009 they adopted the First Amendment: Treasury agreed to double its funding commitment to $200 billion per GSE. In December 2009 they adopted the Second Amendment: Treasury agreed to an increased, adjustable commitment to account for the GSEs' losses. As of August 2012, the GSEs had drawn approximately $187 billion from Treasury's funding commitment. But they lacked the cash to pay 10% dividends. So in August 2012 FHFA and Treasury adopted the Third Amendment to the Agreements.

         The Third Amendment replaced the quarterly 10% dividend with variable dividends equal to the GSEs' entire net worth except a capital reserve. The Shareholders call this arrangement the "net worth sweep." The capital reserve buffer started at $3 billion. It decreased annually until it reached zero in 2018. This arrangement was a double-edged sword. The GSEs no longer struggled to make dividend payments, but they would also no longer accrue capital. Treasury also suspended the periodic commitment fees. Treasury announced that the Third Amendment would "expedite the wind down of Fannie Mae and Freddie Mac" and ensure that the GSEs "will be wound down and will not be allowed to retain profits, rebuild capital, and return to the market in their prior form."[46] A federal official commented privately that the Third Amendment was designed to prevent Fannie and Freddie from recapitalizing.[47]

         The net worth sweep transferred a fortune from Fannie and Freddie to Treasury. When this suit was filed, the GSEs had paid $195 billion in dividends under the net worth sweep. Under the Agreements more broadly, Treasury had disbursed $187 billion and recouped $250 billion, thanks largely to the net worth sweep.


         The Shareholders sued FHFA, its Director, Treasury, and its Secretary (the Agencies). They assert four causes of action, three statutory and one constitutional:

• In Count I, they allege the Administrative Procedure Act (APA), 5 U.S.C. § 706(2)(C), (D), affords relief because FHFA exceeded its statutory conservator authority under 12 U.S.C. § 4617(b)(2)(D).
• In Count II, they allege the APA, 5 U.S.C. § 706(2)(C), (D), affords relief because Treasury exceeded its securities-purchase authority under 12 U.S.C. §§ 1455(l), 1719(g). Specifically, they allege that Treasury purchased securities after the sunset period, failed to make the required "[e]mergency determination[s]," and disregarded statutory "[c]onsiderations."
• In Count III, they allege the APA, 5 U.S.C. § 706(2)(A), affords relief because Treasury's adoption of the net worth sweep was arbitrary and capricious.
• In Count IV, they allege FHFA violates Article II, §§ 1 and 3 of the Constitution because, among other things, it is headed by a single Director removable only for cause.

         The Shareholders seek a declaration that the net worth sweep violates HERA and is arbitrary and capricious; a declaration that FHFA's structure violates the separation of powers; an injunction against Treasury to return net-worth-sweep dividends (or treat them as paying down the liquidation preference); vacatur of the net worth sweep; and an injunction against further implementation of the net worth sweep.

         The Agencies each moved to dismiss all claims under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). And the Shareholders and FHFA both moved for summary judgment on Count IV, the constitutional claim. The district court granted the Agencies' motions to dismiss Counts I-III based on the anti-injunction provision. And it granted summary judgment to FHFA on the merits of Count IV. The Shareholders appealed.

         A panel of this court affirmed as to the statutory claims and reversed as to the constitutional claim.[48] We then granted rehearing en banc, vacating the panel decision.[49] Before rehearing en banc, both FHFA and Treasury admitted the merits of Count IV: FHFA's structure violates the separation of powers. But, several months after rehearing en banc, FHFA reversed its position again. It now contends that FHFA's structure is constitutional. Treasury stands by its contrary position. And FHFA and Treasury maintain that for a number of other reasons the Shareholders are not entitled to relief on Count IV.


         The rules governing jurisdiction and our standard of review are familiar.


         The district court had jurisdiction under 28 U.S.C. § 1331. We have jurisdiction under 28 U.S.C. § 1291.

         Standard of review.

         "We review de novo a district court's rulings on a motion to dismiss and a motion for summary judgment, applying the same standard as the district court."[50] "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'"[51] "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged."[52] Summary judgment is proper if "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law."[53] We may consider a fact undisputed "[i]f a party . . . fails to properly address another party's assertion of fact."[54]


         We begin with Counts I-III, the Shareholders' statutory claims. Before reaching the merits, we must decide whether they are justiciable under HERA's anti-injunction provision and succession provision.


         HERA's anti-injunction provision limits court action against FHFA's conservator or receiver powers:

Except as provided in this section or at the request of the Director, no court may take any action to restrain or affect the exercise of powers or functions of the Agency as a conservator or a receiver.[55]

         To interpret this provision, we consult its plain meaning and its past judicial interpretations (including in predecessor statutes).

         The Supreme Court instructs that plain meaning comes first: "Statutory construction must begin with the language employed by Congress and the assumption that the ordinary meaning of that language accurately expresses the legislative purpose."[56] Under the anti-injunction provision's plain meaning, we may not grant any relief that interferes with-"restrain[s] or affect[s]"- FHFA's conservator powers. Logically, then, we may still grant relief against action taken outside those powers. The anti-injunction provision deflects claims about how the conservator used its powers, not claims it exceeded the powers granted. It distinguishes improperly exercising a power (not restrainable) from exercising one that was never authorized (restrainable).

         Past judicial interpretations confirm this view. Congress borrowed much of HERA's text from the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA).[57] FIRREA authorizes the Federal Deposit Insurance Corporation (FDIC) to act as conservator or receiver for distressed banks.[58] FIRREA's vintage conservator and receiver scheme, including the anti-injunction provision, is materially similar to HERA's.[59] So is one of FIRREA's own predecessors, the Financial Institutions Supervisory Act of 1966 (FISA), which governed conservatorship and receivership by the Federal Savings and Loan Insurance Corporation (FSLIC).[60] If FIRREA is HERA's parent, FISA is a grandparent.

         The Supreme Court tells us that those provisions' judicial interpretations guide our analysis of HERA. "[W]here, as here, Congress adopts a new law incorporating sections of a prior law, Congress normally can be presumed to have had knowledge of the interpretation given to the incorporated law, at least insofar as it affects the new statute."[61] "And when 'judicial interpretations have settled the meaning of an existing statutory provision, repetition of the same language in a new statute indicates, as a general matter, the intent to incorporate its judicial interpretations as well.'"[62]

         The Supreme Court interpreted FISA's anti-injunction provision in Coit.[63] It held the provision did not strip federal jurisdiction over claims in a FSLIC receivership.[64] Rather, it "simply prohibit[ed] courts from restraining or affecting . . . those receivership 'powers and functions' that have been granted by other statutory sources."[65] So the anti-injunction provision didn't affect whether a particular power existed in the first place.[66]

         We have applied Coit to FIRREA's anti-injunction provision. In Onion we held that the provision prevented a federal court from stopping a conservator's foreclosure and sale.[67] In Ward, relying on Onion, we held that the anti-injunction provision stopped a federal court from rescinding a receiver's sale.[68] We elaborated that there is a "difference between the exercise of a function or power that is clearly outside the statutory authority of the RTC on the one hand, and improperly or even unlawfully exercising a function or power that is clearly authorized by statute on the other."[69]

         Ward is the anti-injunction provision's strongest expression. We declined to review even whether the receiver breached its express statutory duty to maximize the property's value.[70] But we did so based on the understanding that, even if the receiver sold the property for inadequate value, it had "improperly or unlawfully exercised an authorized power or function," not "engage[d] in an activity outside its statutory powers."[71] Ward's facts are different from this case. In Ward, selling low instead of high was an improper use of the receiver's power to liquidate assets. But here, FHFA as conservator essentially liquidated assets without ever being appointed receiver. Improperly exercising a power is not restrainable, but exercising one beyond statutory authority is.

         Other circuits follow the same interpretation. Even our sister courts that rejected claims like Counts I-III acknowledge the same rule: "Section 4617(f) will not protect the Agency if it acts either ultra vires or in some third capacity" besides conservator or receiver.[72] So have circuits deciding unrelated cases against FHFA. To quote the Ninth Circuit, "the anti-judicial review provision is inapplicable when FHFA acts beyond the scope of its conservator power."[73]And the Eleventh Circuit holds that "[t]he FHFA cannot evade judicial scrutiny by merely labeling its actions with a conservator stamp."[74]

         The provision's plain meaning, FIRREA precedent, and HERA precedent show that we may grant relief if FHFA exceeded its statutory powers. The Agencies primarily contend that the Third Amendment falls within the conservatorship powers, 12 U.S.C. § 4617(b)(2). As we explain below, that is incorrect, at least at the pleading stage. But first, we address the Agencies' arguments from disconnected provisions.

         The Agencies suggest Treasury's temporary purchase authority authorized the Third Amendment.[75] Congress authorized Treasury to "purchase any obligations and other securities issued by the [GSEs] . . . on such terms and conditions . . . and in such amounts as the Secretary may determine."[76] It also authorized Treasury "at any time[] [to] exercise any rights received in connection with such purchases."[77]

         But these provisions cannot sustain the Agencies' argument. "Congress . . . does not alter the fundamental details of a regulatory scheme in vague terms or ancillary provisions-it does not, one might say, hide elephants in mouseholes."[78] Authorizing Treasury to enter an open-ended category of transactions does not override the elaborate powers scheme in FHFA's enabling statute.[79]

         The Agencies also contend that Congress ratified the Third Amendment in the Consolidated Appropriations Act of 2016.[80] This act restricted Treasury from disposing of certain shares, specifically including its rights under the Third Amendment, until 2018.[81] The statute's most favorable reading for Treasury is that, in directing Treasury to retain its Third Amendment interest, Congress recognized or enacted that interest's lawfulness.[82]

         The Appropriations Act does not support that reading. In directing Treasury to retain preferred shares, it speaks to future conduct, not past action. The Supreme Court has "recognized congressional acquiescence to administrative interpretations of a statute in some situations, [but] ha[s] done so with extreme care."[83] Treasury faces "a difficult task in overcoming the plain text and import of [HERA]" with a later enactment.[84] Here, the Appropriations Act only established a going-forward requirement to maintain the status quo. That is not enough to show that the Agencies' past actions accorded with HERA. The Agencies' conservatorship theory looms large over markets and federal conservatorships, so we presume Congress did not stealthily ratify it in an appropriations rider-hiding an elephant in a mousehole.[85]

         It follows that whether the anti-injunction provision bars relief on Counts I-III depends entirely on whether the net worth sweep exceeded FHFA's statutory conservatorship powers.[86]


         The Agencies next invoke HERA's succession provision as a defense. When appointed conservator, FHFA succeeds to certain shareholder rights:

The Agency shall, as conservator or receiver, and by operation of law, immediately succeed to . . . all rights, titles, powers, and privileges of the regulated entity, and of any stockholder, officer, or director of such regulated entity with respect to the regulated entity and the assets of the regulated entity . . . .[87]

         The Agencies say that FHFA succeeded to the Shareholders' right to bring derivative suits, and Counts I-III are derivative. Generally speaking, "[t]he derivative form of action permits an individual shareholder to bring 'suit to enforce a corporate cause of action against officers, directors, and third parties, '" whereas a direct cause of action belongs to the shareholder himself.[88]

         Other circuits have held that FHFA succeeded to derivative claims but not direct.[89] They have textual support: The succession provision transfers shareholders' rights "with respect to the regulated entity and [its] assets."[90]Simultaneously, under a separate provision, shareholders and creditors retain "their right to payment, resolution, or other satisfaction of their claims" in the receivership claim-processing scheme.[91] This means some claims survive the succession provision. And it makes sense to define those claims as direct ones. The ordinary meaning of claims "with respect to" a GSE and its assets does not include a shareholder's personal claims. And FIRREA decisions took a similar view.[92]

         To decide whether Counts I-III are direct or derivative, we begin with the cause of action. Counts I-III assert rights under the APA. Under 5 U.S.C. § 702, "[a] person suffering legal wrong . . . or adversely affected or aggrieved by agency action within the meaning of a relevant statute is entitled to judicial review." And under 5 U.S.C. § 706, "[t]he reviewing court shall . . . hold unlawful and set aside agency action" that is arbitrary and capricious, exceeds statutory authority, or is otherwise unlawful.

         The APA cause of action is broad. The "Administrative Procedure Act . . . embodies the basic presumption of judicial review to one 'suffering legal wrong because of agency action, or adversely affected or aggrieved by agency action within the meaning of a relevant statute.'"[93] "[J]udicial review of a final agency action by an aggrieved person will not be cut off unless there is persuasive reason to believe that such was the purpose of Congress."[94] An APA claim must be justiciable under Article III, but otherwise who may sue is in Congress's hands.[95] Congress has granted an APA claim to any party that alleges "the challenged action had caused them 'injury in fact,' and . . . the alleged injury was to an interest 'arguably within the zone of interests to be protected or regulated' by the statutes that the agencies were claimed to have violated."[96]

         "Whether a plaintiff comes within the zone of interests . . . requires us to determine, using traditional tools of statutory interpretation, whether a legislatively conferred cause of action encompasses a particular plaintiff's claim."[97] The Supreme Court once considered the zone of interests a matter of "prudential standing," but now calls it one of statutory interpretation.[98] The Court "ha[s] said, in the APA context that the test is not 'especially demanding.'"[99] It has "conspicuously included the word 'arguably' in the test to indicate that the benefit of any doubt goes to the plaintiff."[100] "[T]he test 'forecloses suit only when a plaintiff's interests are so marginally related to or inconsistent with the purposes implicit in the statute that it cannot reasonably be assumed that' Congress authorized that plaintiff to sue."[101] The zone of interests "is to be determined not by reference to the overall purpose of the Act in question . . . but by reference to the particular provision of law upon which the plaintiff relies."[102]

         Count I, to the extent it has merit, is a direct claim. The Shareholders suffered injury in fact-they were excluded from the GSEs' profits. And they are within the zone of interests HERA protects. Count I alleges that FHFA violated 12 U.S.C. § 4617(b)(2)(D)-the grant of conservator powers. The Shareholders' economic value is "arguably within the zone of interests" for this provision.[103] It is axiomatic that shareholders are the residual claimants of a firm's value.[104] They are among the first beneficiaries of the "sound and solvent condition" that a conservator is empowered to pursue.[105] And they ordinarily have a claim on the "assets and property" that a conservator is empowered to "preserve and conserve."[106] For example, in James Madison, the D.C. Circuit held a bank shareholder could challenge the FDIC's appointment as the bank's receiver under FIRREA.[107]

         Plus, HERA elsewhere states that the succession provision does not extinguish the Shareholders' right to pursue their claims in receivership.[108]This matters because Count I essentially alleges that an improper conservatorship preempted rights that could have been redeemed in receivership.[109] Because the Shareholders are within the zone of interests protected by HERA's enumeration of conservator powers, they have a direct claim.

         And the prudential shareholder-standing rule does not change this analysis. The rule is "a strand of the standing doctrine that prohibits litigants from suing to enforce the rights of third parties."[110] But for APA claims, "Congress itself has pared back traditional prudential limitations."[111] The APA does not abolish the shareholder-standing doctrine. But it limits it in some cases. James Madison is one example, because the court held it had jurisdiction to review the shareholder's APA action against appointment of a receiver.[112] The Supreme Court decisions City of Miami and Lexmark also support this point: For very broad statutory rights like the APA, an injury in fact and inclusion in the zone of interests can add up to a right of action, even if prudential standing limits would have blocked it.[113] That is the case here.

         In so holding, we do not say that there is no direct-derivative distinction for APA claims. Nor is it true that any shareholder may obtain review of agency action affecting his holdings. In Thompson v. North American Stainless, LP, the Supreme Court rejected the "absurd" proposition that shareholders could sue under Title VII employment protections.[114] Shareholders are not within Title VII's zone of interests because "the purpose of Title VII is to protect employees from their employers' unlawful actions."[115] But a corporate reorganization statute is a different animal. Shareholders may be within its zone of interests, and here they are.[116]

         Counts II and III, however, are not within the asserted statutes' zone of interests. In Count II the Shareholders allege that Treasury violated 12 U.S.C. §§ 1455(l), 1719(g), which granted it authority to purchase securities in the GSEs. They say the net worth sweep effectively purchased securities after these provisions' 2009 sunset and otherwise exceeded the purchase authority.[117] In Count III they allege that Treasury acted arbitrarily and capriciously under those same sections because it never made the requisite "[e]mergency determination."[118]

         Congress granted this purchase authority to protect markets, consumers, and taxpayers, not GSE stakeholders. The emergency determination asks whether a purchase will stabilize markets, prevent disruptions in mortgage finance, and protect taxpayers.[119] And the statutes' mandatory "[c]onsiderations" are likewise public-oriented: Treasury must consider the GSEs' condition, and any transaction's structure, "[t]o protect the taxpayers."[120] So we agree with the district court, though for a different reason, that Counts II and III must be dismissed.


         We now consider Count I's substantive allegation that the net worth sweep exceeded FHFA's conservator powers. Like any federal agency, FHFA "literally has no power to act . . . unless and until Congress confers power upon it."[121] This principle is enshrined in statute: "The reviewing court shall . . . hold unlawful and set aside agency action, findings, and conclusions found to be . . . in excess of statutory jurisdiction, authority, or limitations . . . ."[122] It is recognized in prominent Supreme Court decisions and implicit in countless others.[123] The warning that "[i]f we are to continue a government of limited powers, these agencies must themselves be regulated" remains as fresh as ever.[124]


         To define FHFA's statutory authority, we "follow the cardinal rule that a statute is to be read as a whole, since the meaning of statutory language, plain or not, depends on context."[125] Emphasis on isolated provisions at the expense of other, more applicable ones is "hyperliteral and contrary to common sense."[126] As Learned Hand explained, "[w]ords are not pebbles in alien juxtaposition; they have only a communal existence."[127] Our analysis proceeds in three parts: HERA's plain meaning, its past judicial interpretations (including FIRREA precedent), and insight from common-law conservatorship.


         Under HERA's plain meaning, FHFA as conservator has limited, enumerated powers. To begin with, conservator and receiver are distinct and mutually exclusive roles. HERA says FHFA may "be appointed as conservator or receiver for the purpose of reorganizing, rehabilitating, or winding up the affairs of a regulated entity."[128] In ordinary use, the word "or" is "almost always disjunctive, that is, the words it connects are to be given separate meanings."[129]So FHFA may not occupy both roles simultaneously. To the same point, "[t]he appointment of the Agency as receiver . . . shall immediately terminate any conservatorship."[130] Similarly, the incidental powers provision authorizes FHFA to "exercise all powers and authorities specifically granted to conservators or receivers, respectively, under this section, and such incidental powers as shall be necessary to carry out such powers."[131] In short, the FHFA Director may appoint the agency as either conservator or receiver, but once he does so, FHFA's powers depend on the role.

         Some powers do overlap. HERA grants general powers to FHFA as either conservator or receiver. In either capacity, FHFA is a successor to the GSE.[132]It succeeds to the GSE's and its stakeholders' "rights, titles, powers, and privileges . . . with respect to the regulated entity and [its] assets."[133] Similarly, FHFA in either capacity has power to operate the GSE.[134] This includes taking over its assets, operating its business, collecting obligations, performing its functions, preserving and conserving its assets and property, and entering contracts.[135] The list goes on: In either role FHFA may transfer assets or liabilities[136]; cause other stakeholders to perform functions[137]; pay obligations[138]; issue subpoenas[139]; and exercise incidental powers.[140]

         But that list has an end. Other powers depend on which role FHFA occupies. The statute enumerates FHFA's separate "[p]owers as conservator":

The Agency may, as conservator, take such action as may be-(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.[141]

         Then it enumerates "[a]dditional powers as receiver":

"In any case in which the Agency is acting as receiver, the Agency shall place the regulated entity in liquidation and proceed to realize upon the assets of the regulated entity in such manner as the Agency deems appropriate, including through the sale of assets . . . ."[142]

         The receiver powers also include organizing a successor enterprise[143] and administering a detailed claim-processing scheme.[144]

         The receiver powers stand in contrast to the conservator powers. As receiver, FHFA gains the power to liquidate the GSE and realize on its assets.[145] It also gains the power to notice, review, and determine creditors' claims.[146] A conservator does not have these powers. If it did, a conservator could liquidate the GSE's assets without following HERA's detailed claim-processing scheme.

         The Agencies contend that the general powers to "operate the regulated entity" and "conduct all [its] business, "[147] or "transfer or sell any asset or liability of the regulated entity in default, "[148] authorize the net worth sweep. But if read so broadly, these provisions would obliterate the receivership claim-processing duties. If a conservator or receiver may enter any transaction as part of "operat[ing]" the GSE and "conduct[ing]" its business, [149] there is no bar to circumventing HERA's creditor and shareholder protections.

         That would raze the receiver's duties to notice and adjudicate claims.[150]It would also be inconsistent with creditors' and shareholders' right to have their claims paid in receivership.[151] So it cannot be a correct reading. "In construing a statute we are obliged to give effect, if possible, to every word Congress used."[152] And "the canon against surplusage is strongest when an interpretation would render superfluous another part of the same statutory scheme."[153]

         Rather than give the general powers their broadest possible meaning, we give them a meaning consistent with the separate conservator and receiver powers. A coherent interpretation of these provisions is not just reasonable, it is mandatory. In RadLAX, the Supreme Court held that when "a general authorization and a more limited, specific authorization exist side-by-side" in the same statute, "the particular enactment must be operative, and the general enactment must be taken to affect only such cases within its general language as are not within the provisions of the particular enactment."[154] In this situation "[t]he general/specific canon . . . avoids not contradiction but the superfluity of a specific provision that is swallowed by the general one."[155]Other Supreme Court authority similarly warns against applying a general provision at the expense of more specific ones.[156]

         Applying this to HERA, § 4617(b)(2)(D) enumerates the conservator's specific powers to "put the regulated entity in a sound and solvent condition," "carry on [its] business," and "preserve and conserve" its assets. The shared conservator-receiver powers are more general and would swallow the rest of the statute if interpreted broadly. So the more "particular enactment must be operative."[157] "[M]ay means may" and "'may' is, of course, 'permissive rather than obligatory.'"[158] But here "may" is a grant of power that enables FHFA to act. FHFA as conservator may not exercise a power beyond the ones granted.[159]

         The incidental-powers provision does not change this. It gives FHFA other powers "necessary to carry out" its enumerated ones.[160] We doubt that Congress "in fashioning this intricate . . . machinery, would thus hang one of the main gears on the tail pipe."[161] Including near-unlimited conservatorship powers in this provision would swallow a large chunk of HERA. And incidental powers are those "necessary to carry out" the powers granted to "conservators or receivers, respectively."[162] This links incidental powers to enumerated ones and recognizes the conservator-receiver distinction. In short, any exercise of an incidental power must serve an enumerated power.[163] Beyond limited powers to "preserve and conserve" the GSEs' assets and property, FHFA would lack any intelligible principle to guide its discretion as conservator. This would permit essentially any action that could be characterized as "reorganizing" the GSEs and would eviscerate many pages of 12 U.S.C. § 4617.

         The best-interests clause is also consistent with this reading. That clause, within the incidental-powers provision, authorizes FHFA to "take any action authorized by this section, which the Agency determines is in the best interests of the regulated entity or the Agency."[164] Permitting the conservator to act in its own interest may appear to depart from the traditional view of a conservator as fiduciary. But the best-interests clause modifies FHFA's authority "as conservator or receiver, "[165] and it only affects actions that are otherwise "authorized by this section."[166] So FHFA may pursue its own interests only within the conservator's enumerated powers. It may not, for example, wind down a GSE and jettison receivership protections all in its own best interests. That would not be "authorized by this section." Instead, this clause is a modest addition to traditional conservatorship powers. It may permit related-party transactions that would otherwise be inconsistent with fiduciary duties.[167]


         FIRREA decisions also demonstrate the conservator's limited, enumerated powers.[168] FIRREA's conservator-powers provision is materially identical to HERA's.[169] In McAllister we interpreted that provision to "state[] explicitly that a conservator only has the power to take actions necessary to restore a financially troubled institution to solvency."[170] We are in good company-the Fourth, Eighth, Ninth, Eleventh, and D.C. Circuits have articulated similar views.[171] Under FIRREA, a conservator has power to steward the bank's assets, not to make every conceivable use of them.


         The common-law meaning of "conservator" also shows it has limited powers. The Supreme Court recognizes a "settled principle of interpretation that, absent other indication, Congress intends to incorporate the well-settled meaning of the common-law terms it uses."[172] And "absence of contrary direction may be taken as satisfaction with widely accepted definitions, not as a departure from them."[173]

         There is no shortage of authority for traditional conservatorship. Well before HERA, or even FIRREA, the Supreme Court recognized that a conservator has limited powers and must conserve the ward's property.[174] Under the Uniform Probate Code, a "conservator" is a fiduciary held to the same standard of care as a trustee.[175] And according to the Congressional Research Service, "[a] conservator is appointed to operate the institution, conserve its resources, and restore it to viability."[176] Black's Law Dictionary defines "conservator" as "[a] guardian, protector, or preserver . . . the modern equivalent of the common-law guardian," and it defines "managing conservator" as "[a] person appointed by a court to manage the estate or affairs of someone who is legally incapable of doing so."[177]

         Tethering the conservator's powers to traditional principles of insolvency is both sound and indispensable. FHFA's present Director has explained that "[a] market economy depends upon predictable rules to govern competition. These rules must include . . . predictable and fair standards to allocate losses and rehabilitate or liquidate a company when it cannot pay its debts."[178]Considering this need for continuity, HERA's conservator powers must be interpreted in light of both FIRREA decisions and traditional conservatorship.[179] These authorities "reflect a fundamental difference between the missions of a conservator, which seeks to reorganize, and a receiver, which seeks to liquidate."[180]

         Congress built FIRREA, and later HERA, on this common-law understanding. Until recently, FHFA agreed. It told Congress in 2010 that "[t]he purpose of conservatorship is to preserve and conserve each company's assets and property and to put the companies in a sound and solvent condition."[181] In 2011, it had a "statutory mission to restore soundness and solvency to insolvent regulated entities and to preserve and conserve their assets and property."[182] In a 2012 regulation, it said "FHFA's duties as conservator require the conservation and preservation of the Enterprises' assets. . . . [A]ny goal-setting must be closely linked to putting the Enterprises in sound and solvent condition."[183] These contemporary statements align with the traditional understanding of conservatorship.

         Congress did not repudiate common-law conservatorship in FIRREA or HERA. Instead, it consistently authorized the FDIC and then FHFA to put entities in a "sound and solvent condition," "carry on th[eir] business," and "preserve and conserve th[eir] assets and property."[184] Neither HERA's general powers, implied powers, nor right to act in FHFA's own best interest is the kind of "contrary direction" that quells common-law conservatorship.[185] A conservatorship of Fannie Mae or Freddie Mac (here, both) sways an entire industry. Given the potential effect on markets, firms, and consumers, partial suggestions are not enough to show that HERA inverted traditional conservatorship.[186] "Conservator" is an old role's anchor, not a new role's banner.[187]


         Now to apply this understanding of conservator powers to the Third Amendment. We hold the Shareholders stated a plausible claim that the Third Amendment exceeded statutory authority. Transferring substantially all capital to Treasury, without limitation, exceeds FHFA's powers to put the GSEs in a "sound and solvent condition," "carry on the[ir] business," and "preserve and conserve [their] assets and property."[188] We ground this holding in statutory interpretation, not business judgment.

         In adopting the net worth sweep, the Agencies abandoned rehabilitation in favor of "winding down" the GSEs. Treasury announced that the Third Amendment would "expedite the wind down of Fannie Mae and Freddie Mac" and ensure that the GSEs "will be wound down and will not be allowed to retain profits, rebuild capital, and return to the market in their prior form."[189] The FHFA acting Director also said that the Third Amendment "reinforce[d] the notion that the [GSEs] will not be building capital as a potential step to regaining their former corporate status."[190] In a report to Congress, FHFA explained that it was "prioritizing [its] actions to move the housing industry to a new state, one without Fannie Mae and Freddie Mac."[191] For reasons we are about to explain, this "wind down" exceeded the conservator's powers and is the type of transaction reserved for a receiver.

         As a textual matter, the net worth sweep actively undermined pursuit of a "sound and solvent condition," and it did not "preserve and conserve" the GSEs' assets.[192] Treasury has collected $195 billion under the net worth sweep.[193] This alone exceeds the $187 billion it invested.[194] After paying back more than the initial investment, the GSEs remain on the hook for Treasury's entire $189 billion liquidation preference.[195] And under the net worth sweep, Treasury has a right to the GSEs' net worth in perpetuity.[196]

         FHFA had authority, of course, to pay back Treasury for the GSEs' draws on the funding commitment. The funding commitment provided liquidity and took on risk, so Treasury was also entitled to compensation for the cost of financing. But the net worth sweep continues transferring the GSEs' net worth indefinitely, well after Treasury has been repaid and the GSEs returned to sound condition. That kind of liquidation goes beyond the conservator's powers.

         FIRREA precedent confirms that this exceeds statutory conservator powers. In Elmco Properties, the Fourth Circuit held that a creditor was unlawfully deprived of its claim because it never received notice of the receivership.[197] The creditor had notice of a conservatorship. But "the RTC as conservator cannot . . . liquidate a failed bank. Instead, the conservator's function is to restore the bank's solvency and preserve its assets."[198] Dividing up and distributing the institution's property is inconsistent with a conservator's powers, so the creditor in Elmco was not on inquiry notice to pursue its claim.[199] To "wind down" the GSEs' affairs here, FHFA needed to follow HERA's carefully crafted receivership procedures. But FHFA was never appointed receiver, so it lacked authority to bleed the GSEs' profits in perpetuity.

         Finally, based on the Shareholders' allegations, the net worth sweep is inconsistent with conservatorship's common-law meaning. In United States v. Chemical Foundation, the Supreme Court characterized a wartime enemy-property custodian as "a mere conservator" with "the powers of a common-law trustee."[200] And a common-law conservator may not give the ward's assets to a single shareholder, just as a fiduciary or trustee may not do so.[201] Admittedly, HERA modified the common-law meaning in some ways, such as by permitting use of enumerated powers in FHFA's best interest.[202] But in more relevant areas HERA provided no "contrary direction" against the common-law meaning:[203] It did not authorize a conservator to "wind down" the ward's affairs or perpetually drain its earnings. Under traditional principles of insolvency, investors and the market reasonably expect a conservator to "operate, rehabilitate, reorganize, and restore the health of the troubled institution," not summarily take its property.[204] The Third Amendment inverts traditional conservatorship.

         It is worth noting that the facts at this stage are distinguishable from those in some sister-circuit decisions. The Shareholders appeal from a dismissal under Rule 12(b)(6). The complaint alleges facts showing ultra vires action that were not present in some other cases. For example, emails suggest that the Agencies designed the Third Agreement to prevent Fannie and Freddie from recapitalizing. National Economic Council advisor Jim Parrott, who worked with Treasury in developing the net worth sweep, allegedly wrote: "[W]e've closed off [the] possibility that [Fannie and Freddie] ever[] go (pretend) private again."[205] Similarly, when Bloomberg published a comment that "[w]hat the Treasury Department seems to be doing here, and I think it's a really good idea, is to deprive [Fannie and Freddie] of all their capital so that [they can not go private again]," Parrott emailed the source: "Good comment in Bloomberg-you are exactly right on substance and intent."[206] The emails reinforce that the Third Amendment "deprive[d]" the GSEs of their capital, keeping them in a permanent state of suspension, which is not authorized by statutory conservator powers.[207] The pleadings in Jacobs v. Federal Housing Finance Agency[208] and Perry Capital LLC v. Mnuchin[209] appear to lack similar allegations. That factual difference distinguishes them.

         But Saxton v. Federal Housing Finance Agency[210] and Roberts v. Federal Housing Finance Agency[211] had facts similar to the Shareholders' allegations here. So we recognize that our decision conflicts with at least some other circuits. The conflict is whether HERA authorized FHFA to adopt the Third Amendment. We think that, in interpreting HERA's conservatorship and receivership scheme, FHFA's general powers should not render specific ones meaningless. This is especially true because, although HERA qualifies traditional conservatorship, it does not eviscerate it. So traditional principles of insolvency and FIRREA decisions remain relevant. And they counsel against a near-limitless view of FHFA's conservator powers.

         The complaint states a plausible claim that FHFA exceeded its statutory authority. Judge Haynes's dissent suggests that the Shareholders could waive the legal standard for reviewing the grant of a motion to dismiss. But the Supreme Court explained in Iqbal that "[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'"[212] The standard is generally applicable, and we see no exception here. When we reverse the grant of a motion to dismiss, the district court may decide if fact issues require trial or if summary judgment should be granted.[213] The proper remedy is to reverse the motion-to-dismiss denial and remand Count I for further proceedings.


         We now turn to Count IV, the Shareholders' constitutional claim. Although the Shareholders could theoretically obtain full relief under Count I alone, they appeal from the dismissal of that count, so the parties have yet to litigate it to judgment. On the constitutional claim, in contrast, both sides moved for summary judgment in the district court. So we consider whether the Shareholders are entitled to some or all of their requested relief on this record alone. We first consider Count IV's justiciability based on standing and the succession provision.[214]


         Federal courts have power to decide "Cases" and "Controversies."[215]"That case-or-controversy requirement is satisfied only where a plaintiff has standing."[216] At its "irreducible constitutional minimum," standing requires plaintiffs to show they suffered "an injury in fact," the injury is "fairly traceable" to the defendant's actions, and the injury will "likely . . . be redressed by a favorable decision."[217] "The party invoking federal jurisdiction bears the burden of establishing these elements."[218] Here, the summary-judgment standard applies to jurisdictional facts.[219]

         The Shareholders suffered injury in fact. The required injury to challenge agency action is minimal: The Supreme Court has "allowed important interests to be vindicated by plaintiffs with no more at stake in the outcome of an action than a fraction of a vote, a $5 fine and costs, and a $1.50 poll tax."[220] The Agencies contend that, by the time of the net worth sweep, the Shareholders had no rights to dividends and their shares were delisted from the New York Stock Exchange. But pumping large profits to Treasury instead of restoring the GSEs' capital structure is an injury in fact.[221]

         The Shareholders' injury is traceable to the removal protection. The Agencies contend that the President's undisputed control over FHFA's counterparty, Treasury, shows that a President-controlled FHFA would have adopted the net worth sweep. But standing does not require proof that an officer would have acted differently in the "counterfactual world" where he was properly authorized.[222] In Free Enterprise Fund, the Supreme Court explained that "the separation of powers does not depend on the views of individual Presidents, nor on whether 'the encroached-upon branch approves the encroachment.'"[223] And in Bowsher v. Synar, the Court said that "[t]he separated powers of our Government cannot be permitted to turn on judicial assessment of whether an officer exercising executive power is" likely to be fired.[224] The Shareholders observe that FHFA's status as an "independent" counterparty could actually have boosted the Third Amendment's political salability. Fortunately, under Synar and Free Enterprise Fund, we need not weigh in on that counterfactual.

         And the relief sought would redress the Shareholders' injury. The Agencies contend that vacating past agency action is improper in a removal case and in this case particularly. But the form of injunctive or declaratory relief is a merits question.[225] The Shareholders seek, among other things, vacatur of the net worth sweep. That would redress their injury.

         The Shareholders have standing.


         The succession provision does not bar Count IV because it does not bar any direct claims.[226] A plaintiff with Article III standing can maintain a direct claim against government action that violates the separation of powers.[227] In Bond v. United States the Supreme Court collected numerous separation-of-powers cases litigated by individuals with an otherwise-justiciable case or controversy.[228] "If the constitutional structure of our Government that protects individual liberty is compromised, individuals who suffer otherwise justiciable injury may object."[229]

         There is a separate reason the succession provision does not bar the Shareholders' constitutional claim. "[W]here Congress intends to preclude judicial review of constitutional claims its intent to do so must be clear."[230] Only a "heightened showing" in the statute may be interpreted to "deny any judicial forum for a colorable constitutional claim."[231] Here, the succession provision does not cross-reference the Administrative Procedure Act's general rule that agency action is reviewable.[232] It does not directly address judicial review at all. This is not the kind of "heightened showing"[233] or "'clear and convincing' evidence"[234] required for Congress to deny review of constitutional claims.


         The Shareholders are entitled to judgment on Count IV.


         HERA's for-cause removal protection infringes Article II. It limits the President's removal power and does not fit within the recognized exception for independent agencies. That exception, established in Humphrey's Executor v. United States, has applied only to multi-member bodies of experts.[235] A single agency director lacks the checks inherent in multilateral decision making and is more difficult for the President to influence.[236] We reinstate Part II B 2 of the panel opinion, which holds that FHFA's structure is unconstitutional.[237]That Part explains that the Director's removal protection, in combination with other FHFA features, is inconsistent with Article II and the separation of powers. It also distinguishes the D.C. Circuit's PHH Corp. decision.[238]

         We disagree with Judge Higginson's attempt to distinguish this removal protection from those the Supreme Court has held unconstitutional. He cites scholarship that HERA's "for cause" removal provision gives less protection than statutes limiting removal to "inefficiency, neglect of duty, or malfeasance in office."[239] Initially, requiring "cause" for removal is well recognized as an independent agency's threshold feature.[240] And in Synar, when the Supreme Court considered a statute permitting Congress to remove an official for "inefficiency," "neglect of duty," or "malfeasance," it held this alternative language is quite broad.[241] True, the removal protection that Free Enterprise Fund held unconstitutional was exceptionally strict.[242] But the Court held that the proper amount of second-level removal protection there was none, not a relaxed amount.[243]

         Judge Higginson also points to uncertainty about whether and how a removal would unfold. But the Court in Synar "reject[ed] [the] argument that consideration of the effect of a removal provision is not 'ripe' until that provision is actually used."[244] In Synar this was because Congress's removal authority gave it effective control over the Comptroller in the status quo.[245]Although here the problem is an absence of control, not its misplacement, the same "ripeness" principle applies.


         The Agencies contend the Shareholders are not entitled to relief for other reasons. They first say that the FHFA acting Director who adopted the Third Amendment was, unlike a normally appointed Director, not insulated from removal. Under 12 U.S.C. § 4512(b)(2), the Director serves for five years "unless removed before the end of such term for cause by the President." That provision does not explicitly address acting Directors. Under 12 U.S.C. § 4512(f), the President chooses any acting Director from among the Deputy Directors. And that provision does not explicitly address removal.

         But HERA unequivocally says what kind of agency it creates: "There is established the Federal Housing Finance Agency, which shall be an independent agency of the Federal Government."[246] In history and Supreme Court precedent, Presidential removal is the "sharp line of cleavage" between independent agencies and executive ones.[247] So we do not read the procedural guidance for choosing an acting Director to override the removal restriction, much less FHFA's central character. Instead, we read these provisions together.[248] The removal restriction applied to the acting Director.

         Judge Costa's contrary authorities are distinguishable. In Swan v. Clinton, the D.C. Circuit held that the President could remove a National Credit Union Administration Board member serving in a "holdover" capacity.[249] But here the FHFA acting Director was not a holdover serving past his term's end. So at least one of Swan's concerns, that "the absence of any term limit in the NCUA holdover clause enables holdover members to continue in office indefinitely," is misplaced.[250] And, while HERA's general removal protection is unequivocal, [251] in Swan "[t]he NCUA statute d[id] not expressly prevent the President from removing NCUA Board members except for good cause."[252] The court simply assumed the statute protected Board Members during their normal terms, then held any such protection did not extend to holdover Members.[253] In short, Swan interprets a different statute and has limited value for generalizing a rule.

         Judge Costa also cites the Office of Legal Counsel opinion Designating an Acting Director of the Bureau of Consumer Financial Protection.[254] That opinion is about filling a vacancy under the CFPB's enabling statute and the Federal Vacancies Reform Act. Its reasoning includes a general rule that statutory removal protection does not extend to anyone temporarily performing an office.[255] But it relies principally on Swan for that proposition, and it doesn't explain why the same rule cuts across different enabling statutes. As a matter of statutory interpretation, HERA's removal restriction applied to the acting Director here.


         Treasury also contends that FHFA in its conservator capacity does not exercise executive power, so violating the separation of powers was harmless here. Treasury cites Beszborn, where we held that the RTC as receiver exercised nongovernmental power in suing on behalf of the institution in receivership.[256] "[T]he suit was purely an action between private individuals."[257] So later criminal prosecution of the same defendants did not violate the Double Jeopardy Clause because the first "punishment," the civil suit, was not sought by a sovereign.[258] Treasury also observes that private parties are sometimes appointed as receivers.[259]

         Whether an agency exercises government power as conservator or receiver "depends on the context of the claim."[260] In Slattery, the Federal Circuit held that the FDIC as receiver acted for the United States when it retained a surplus from the seized bank's assets.[261] "[T]he claims [we]re asserted against the government, seeking return of the monetary surplus obtained for the seized bank."[262] So the bank's former shareholders could maintain their claims against the United States.[263]

         The Third Amendment has more in common with Slattery than with Beszborn, showing that it invoked executive power. In Beszborn, we took care to say the receiver's action on the bank's behalf benefited "all stockholders and creditors of the bank" rather than "the United States Treasury."[264] The Third Amendment reversed this precisely. It transferred the wards' assets to the government, similar to retaining the liquidation surplus in Slattery.[265] FHFA is a federal agency, empowered by a federal statute, enriching the federal government. It adopted the Third Amendment with federal governmental power. And that power was executive in nature. The Agencies do not contend, nor could they, that the Third Amendment was quasi-legislative or quasi-judicial.[266]

         Treasury's remaining arguments do not budge this point. It cites 12 U.S.C. § 191 and 12 C.F.R. § 51.2 as evidence that private parties can be receivers. But every conservator or receiver relies on some public authority, whether court or agency.[267] Even in Treasury's example, "[t]he receiver performs its duties under the direction of the Comptroller."[268] In this case, Congress empowered FHFA as a federal agency.[269] Absent that authority there would be no conservatorship and no Third Amendment. And every federal agency must function within the federal Constitution's checks and balances. As then-Judge Kavanaugh explained in his PHH Corp. dissent, a constitutional agency structure serves "to protect liberty and prevent arbitrary decisionmaking by a single unaccountable Director."[270]

         Finally, Treasury's attempt to distinguish the Third Amendment from governmental power is not, in any event, a standing argument. In the Appointments Clause case Freytag v. Commissioner, the Supreme Court held that whether the official acted as an Officer of the United States in the particular decision challenged was "beside the point" for standing purposes.[271]The Court rejected the Commissioner's argument that the taxpayers lacked standing to complain about the special trial judge's role in other cases.[272] If by statute he performed at least some duties of an Officer of the United States, his appointment must accord with Article II.[273] This case is analogous.[274]

         * * *

         The Constitution bounds Congress's power to create agencies, draw their structure, and grant them authority. Agencies with removal-protected principal officers were a unique, but recognized, blend of legislative, executive, and judicial powers long before the FHFA. Their unique position has also been relatively static, until recently. The removal-protected FHFA Director is a new innovation and falls outside the lines that Humphrey's Executor recognized. Granting both removal protection and full agency leadership to a single FHFA Director stretches the independent-agency pattern beyond what the Constitution allows.

          HAYNES, Circuit Judge, joined by STEWART, Chief Judge, and DENNIS, OWEN, SOUTHWICK, GRAVES, HIGGINSON, COSTA, and DUNCAN, Circuit Judges.

         Some of us[1] agree with the conclusion reached in Section VIII.A-C of the majority en banc opinion that the FHFA is unconstitutionally structured, and some of us[2] conclude otherwise, but we all agree that, given the holding of the majority of the en banc court reversing the district court on this point and finding the FHFA to be unconstitutionally structured, it is necessary to reach the question of what remedy is appropriate for the structure found to be unconstitutional by the majority. We now turn to the remedy question.

         When addressing the partial unconstitutionality of a statute such as this one, we seek to honor Congress's intent while fixing the problematic aspects of the statute. Thus, in this case, the appropriate-and most judicially conservative-remedy is to sever the "for cause" restriction on removal of the FHFA director from the statute. See 12 U.S.C. § 4512(b)(2).

         The remedial analysis here is informed by that in Free Enterprise Fund. We start from the "normal rule that partial, rather than facial, invalidation is the required course." Brockett v. Spokane Arcades, Inc., 472 U.S. 491, 504 (1985); Free Enter. Fund v. Pub. Co. Accounting Oversight Bd., 561 U.S. 477, 508 (2010) ("'Generally speaking, when confronting a constitutional flaw in a statute, we try to limit the solution to the problem,' severing any 'problematic portions while leaving the remainder intact.'" (quoting Ayotte v. Planned Parenthood of N. New Eng., 546 U.S. 320, 328-29 (2006))). Just as in Free Enterprise Fund, if we declare the "for cause" removal restriction unconstitutional, then the executive officer will immediately be subject to sufficient Presidential oversight. 561 U.S. at 509. Finally, nothing in the statutory scheme suggests that Congress would prefer a complete unwind of actions taken by the FHFA to an FHFA director removable at will. Thus, severance of the "for cause" restriction remedies the Shareholders' injury as found by the majority of this court of being overseen by an unconstitutionally structured agency.

         Here it is also "true that the language providing for good-cause removal is only one of a number of statutory provisions that, working together, produce a constitutional violation." Id. But, as the Supreme Court recognized, we should not roam further to invalidate other provisions or modify the statute's requirements. The other options would be far more invasive and "editorial." Id. at 510. Instead, we pursue a path that respects the legislative decisions made by the Congress that passed HERA and the legislative power of the current Congress to amend the statute without unwarranted disruption.

         The Shareholders ask that we also invalidate the Net Worth Sweep, claiming the remedy must resolve the injury. Assuming arguendo that an injury in the form of an unconstitutionally structured agency exists, [3] the Shareholders may not pick and choose among remedies based on their preferences. The Shareholders' complaint requested that a court invalidate only the Net Worth Sweep. They never requested a declaratory judgment about the PSPAs as a whole or even the Third Amendment. That is because the rest of the deal is a pretty good one for them: who would not want a virtually unlimited line of credit from the Treasury? Yet the Shareholders' constitutional theory is that everything the FHFA has done since its inception is void because it was an unconstitutionally structured agency.[4] They never explain why if all acts were void (or voidable), they are entitled to pick and choose a single provision to invalidate. That is inconsistent with the usual course of remedies. See Fed. Ins. Co. v. Singing River Health Sys., 850 F.3d 187, 198 n.5 (5th Cir. 2017) (noting that accepting the premise that a party to an invalid contract could pick which parts to enforce would lead to an "absurd result"); Restatement (Second) of Contracts § 383 (Am. Law. Inst. 1981) ("A party who has the power of avoidance must ordinarily avoid the entire contract, including any part that has already been performed. He cannot disaffirm part of the contract that is particularly disadvantageous to himself while affirming a more advantageous part . . . .").

         Generally, there are at least two classes of cases where the appropriate remedy is to invalidate an action taken by an unconstitutional agency or officer. First, the Supreme Court has invalidated actions by actors who were granted power inconsistent with their role in the constitutional program. For example, the Shareholders' marquee case for their theory is Bowsher v. Synar, 478 U.S. 714 (1986). There, Congress delegated executive authority to a congressional officer. Id. at 732-34. But "Congress [could not] grant to an officer under its control what it [did] not possess." Id. at 726. The Supreme Court declared unconstitutional the statutory power that impermissibly empowered the congressional officer to exercise executive authority. Id. at 734-36.[5] Because the officer never should have had the authority in the first place, courts would naturally invalidate exercises of the authority. Id.; cf. Nguyen v. United States, 539 U.S. 69, 71 (2003) (vacating and remanding a case where an officer appointed under Article IV exercised Article III judicial authority). The Supreme Court has also invalidated exercises of authority that steal constitutionally specified power from other branches. See Clinton, 524 U.S. 417; INS v. Chadha, 462 U.S. 919 (1983).

         Second, the Court has invalidated actions taken by individuals who were not properly appointed under the Constitution. It has thus vacated and remanded adjudications by officers who were not appointed by the appropriate official, see Lucia v. SEC, 138 S.Ct. 2044, 2055 (2018), or who skipped Senate confirmation through misuse of the Recess Appointments Clause, see NLRB v. Noel Canning, 573 U.S. 513 (2014).

         A common thread runs through these two categories. In each, officers were vested with authority that was never properly theirs to exercise. Such separation-of-powers violations are, as the D.C. Circuit put it, "void ab initio." Noel Canning v. NLRB, 705 F.3d 490, 493 (D.C. Cir. 2013), aff'd but criticized, 573 U.S. 513.

         Restrictions on removal are different. In such cases the conclusion is that the officers are duly appointed by the appropriate officials and exercise authority that is properly theirs. The problem identified by the majority decision in this case is that, once appointed, they are too distant from presidential oversight to satisfy the Constitution's requirements.

         Perhaps in some instances such an officer's actions should be invalidated. The theory would be that a new President would want to remove the incumbent officer to instill his own selection, or maybe that an independent officer would act differently than if that officer were removable at will. We have found no cases from either our court or the Supreme Court accepting that theory.

         But even if that theory is right, it does not apply here for two reasons. First, the action at issue is the adoption of the Net Worth Sweep, and the President had adequate oversight of that action. The entire PSPAs, including the Third Amendment's Net Worth Sweep, were created between the FHFA and Treasury. During the process, the Treasury was overseen by the Secretary of the Treasury, who was subject to at will removal by the President. The President, thus, had plenary authority to stop the adoption of the Net Worth Sweep. This is thus a unique situation where we need not speculate about whether appropriate presidential oversight would have stopped the Net Worth Sweep. We know that the President, acting through the Secretary of the Treasury, could have stopped it but did not.[6]

         Second, we can take judicial notice of this reality: subsequent Presidents have picked their own FHFA directors, allaying concerns that the removal restriction prevented them from installing someone who would carry out their policy vision. After the adoption of the Net Worth Sweep, President Obama selected a Director who was confirmed by the Senate. Once confirmed, that director authorized filings in this court that supported and defended the Net Worth Sweep. He never questioned its propriety. President Trump later selected an acting Director under the Vacancies Reform Act. He never questioned the propriety of the Net Worth Sweep and reaffirmed the previous administration's position. President Trump has since selected a new director. He has not filed anything in this court or made any judicially noticeable statement opposing the Net Worth Sweep. The Net Worth Sweep has thus transcended political affiliations and traversed presidential administrations- even when an issue like the constitutionality of the structure of the FHFA has divided different directors. Were these Presidents concerned about invalidating the Net Worth Sweep, they could have picked different Directors who would carry out that vision, either in action or in litigation. These subsequent picks' affirmation of the Net Worth Sweep demonstrates without question that invalidating the Net Worth Sweep would actually erode executive authority rather than reaffirm it. See Lucia, 138 S.Ct. at 2055.

         Our decision not to invalidate the Net Worth Sweep is thus grounded in our respect for the Constitution and our co-equal branches of government. Undoing the Net Worth Sweep, as suggested by the dissenting opinion, would wipe out an action approved or ratified by two different Presidents' directors under the guise of respecting the presidency; how does that make sense? Here, the Constitution commits executive authority to the President. The President had full oversight of the adoption of the Net Worth Sweep, and each President since has appointed FHFA Directors who have affirmed it. We should not invalidate those Presidents' executive actions by invoking their need to exercise executive authority.

         One final point: any remedy that invalidates the Net Worth Sweep without a judgment that fixes the constitutional problems would be particularly perverse. The FHFA could not ratify any previous actions or even continue operating because it would still suffer the same separation-of-powers defects we have identified here-just without an explicit declaration fixing the issue. We would invalidate an entire agency without any precedent directing us to do so. Similarly, there is no virtue in declaring the agency action unlawful then punting the form that judgment should take back to the district court. The only judgment the Shareholders are entitled to is the one the Supreme Court has given in similar removal-restriction cases, which is a declaration removing the "for cause" provision found unconstitutional by a majority of this court. Sending the case back for further litigation would cast one of the most financially consequential agencies into chaos. It would also further muddy our precedent on the appropriate remedy in removal-restriction cases.

         In summary, the Shareholders' ongoing injury, if indeed there is one, [7] is remedied by a declaration that the "for cause" restriction is declared removed. We go no further. We will not let the Shareholders pick and choose parts of the PSPAs to invalidate when the President had adequate oversight over their adoption and particularly when two different presidents have selected agency heads who have supported the Net Worth Sweep. The appropriate remedy is the one that fixes the Shareholders' purported injury. That is exactly what our declaratory judgment does. Consequently, we decline to invalidate the Net Worth Sweep or PSPAs.[8] Instead, we conclude, given that the majority of the court has found the FHFA unconstitutionally structured, that the appropriate remedy for that finding is to declare the "for cause" provision severed.

          STUART KYLE DUNCAN, Circuit Judge, joined by OWEN, Circuit Judge, concurring:

         While I join all of Judge Willett's superb majority opinion, I do not join his separate opinion that concludes the proper remedy for the separation-of-powers violation here is to vacate the Third Amendment. To the contrary, the proper remedy-as Judge Haynes cogently explains in her separate majority opinion-is to sever the for-cause removal provision from the challenged statute. See Free Enter. Fund v. Pub. Co. Accounting Oversight Bd., 561 U.S. 477, 508 (2010) ("PCAOB") ("'Generally speaking, when confronting a constitutional flaw in a statute, we try to limit the solution to the problem,' severing any 'problematic portions while leaving the remainder intact.'") (quoting Ayotte v. Planned Parenthood of N. New Eng., 546 U.S. 320, 328-29 (2006)). I write separately to explain why I think the Supreme Court's precedents compel that narrower remedy.

         To justify vacating the Third Amendment, Judge Willett asserts that "the action of an unconstitutionally-insulated officer . . . must be set aside." Willett Dissent at 1. I can find no support for that categorical proposition. Judge Willett relies principally on Bowsher v. Synar, 478 U.S. 714 (1986), but Bowsher is off-point. Bowsher involved a challenge-not to an executive-branch official "insulated" from presidential oversight-but to the Comptroller General, essentially a legislative officer, removable by Congress, who was purporting to exercise executive power. See 478 U.S. at 728 (noting Comptroller General was removable by joint resolution "at any time" so that the officer "should be brought under the sole control of Congress") (quotes omitted); id. at 730 (noting "Congress has consistently viewed the Comptroller General as an officer of the Legislative Branch"). This Article I creature, Bowsher unsurprisingly told us, "may not be entrusted with executive powers." Id. at 732. And, in any event, Bowsher concluded that the "issue of remedy" for the separation-of-powers violation was "a thicket we need not enter," because Congress had provided a "fallback" provision should the act be invalidated. Id. at 734, 735; see also id. at 718-19 (describing "fallback" process). Thus, I do not read Bowsher as providing much, if any, guidance as to the remedy for an unconstitutionally insulated agency.

         Putting Bowsher aside, more recent Supreme Court authority confirms my view that severance is the proper remedy for the separation-of-powers violation before us. In PCAOB, the petitioners argued that the agency's "freedom from Presidential oversight and control rendered it and all power and authority exercised by it in violation of the Constitution." 561 U.S. at 508 (quotes omitted). But the Court "reject[ed] such a broad holding" and deployed the narrower remedy of severing the unconstitutional culprit-there, the second layer of for-cause removal. Id. at 509-10. Moreover, for remedial purposes PCAOB contrasted an unconstitutionally insulated officer with an unconstitutionally appointed officer: The Court pointedly "[p]ut[ ] to one side petitioners' Appointments Clause challenges," id. at 508, which it addressed (and rejected) in another part of its opinion. Id. at 510-13. When the Court did later find an Appointments Clause violation in Lucia, its remedy was to vacate the prior actions of the invalidly appointed officers. See Lucia v. S.E.C., 138 S.Ct. 2044, 2055 (2018) (concluding "the 'appropriate' remedy for an adjudication tainted with an appointments violation is a new 'hearing before a properly appointed' official") (quoting Ryder v. United States, 515 U.S. 177, 183 (1995)). That is the kind of backward-looking remedy-vacating the Third Amendment-Judge Willett would apply here, but the Supreme Court's cases do not support applying it to fix an unconstitutionally insulated agency head.

         Instead, as PCAOB indicates, the cure for that malady is narrower. Stripping away the FHFA Director's unconstitutional insulation is the "minimalist remedy" that "maintain[s] presidential control while leaving in place the regulatory functions of an agency." Neomi Rao, Removal: Necessary and Sufficient for Presidential Control, 65 Ala.L.Rev. 1205, 1261 (2014) (discussing PCAOB). Consequently, to remedy the separation-of-powers violation presented here, I would sever the for-cause removal provision, rendering the agency properly responsive to the President's "general administrative control of those executing the laws." Myers v. United States, 272 U.S. 52, 164 (1926).

          ANDREW S. OLDHAM and JAMES C. HO, Circuit Judges, concurring in part and dissenting in part:

         We join Judge Willett's opinion.[1] We write separately in response to the suggestion that there is no constitutional problem because this case does not involve the Public Company Accounting Oversight Board ("PCAOB"), the Comptroller General, or the Postmaster General. Post, at 97-107 (Higginson, J.). Our learned colleague suggests that: (I) the Constitution's original public meaning offers little guidance on the scope of the removal power; (II) the Supreme Court's precedents don't help the shareholders here; and (III) even if they did, we have the "judicial" power to rewrite Congress's law. With greatest respect, that's all wrong.


         The Constitution vests in the President the power to remove executive officers. Any intimation to the contrary must be rejected.


         Traditionally, the executive power allowed the head of state to appoint and remove his ministers, as well as his judges, at will. See 1 William Blackstone, Commentaries *260 [hereinafter Blackstone's Commentaries] (describing English efforts to "remove all judicial power out of the hands of the king's privy council"); id. at *261-63 (explaining that "the king is . . . the fountain of honour, of office, and of privilege," that the king holds "the prerogative of erecting and disposing of offices," and that "the king . . . is the best and only judge, in what capacities, with what privileges, and under what distinctions, his people are the best qualified to serve, and to act under him"); 2 Thomas Rutherforth, Institutes of Natural Law 60 (1756) (noting that officers "are the agents of the executive power; and consequently the appointment of them belongs to this power"). The American colonies chafed at the corrupting effects of this unbridled power. See, e.g., Declaration of Independence para. 11 (1776) ("[The King] has made Judges dependent on his Will alone, for the tenure of their offices, and the amount and payment of their salaries"); Declaration of Rights and Grievances para. 4 (1774) (condemning as "impolitic, unjust, and cruel, as well as unconstitutional" the Massachusetts Government Act, 14 Geo. 3 c. 45, which empowered the King's representative to appoint and remove-at will-the Province's officers and judges).

         In response, some early State constitutions limited the executive power to appoint judges and officers. See, e.g., SC Const. of Mar. 26, 1776 art. XXII (assigning to the legislature the power to choose "the commissioners of the treasury, the secretary of the colony, register of mesne conveyances, attorney-general, and powder receiver"); Va. Const. of 1776 paras. 35, 36 (requiring legislative approval for the governor's judicial appointments). Others limited the removal power, and granted civil and judicial officers freedom from executive interference "during good behavior."[2] N.Y. Const. of 1777, art. XXIV. See also Md. Const. of 1776 art. XL (granting "good behaviour" tenure to the attorney-general); id. art. XLVIII (permitting the governor to remove only those "civil officer[s] who ha[ve] not a commission during good behavior"); Mass. Const. of 1780 pt. 2, ch. III, art. 1 (providing that "[a]ll judicial officers . . . shall hold their offices during good behavior," but allowing the governor to remove them "with consent of the council . . . upon address of both houses of the legislature").

         When the Framers drafted the federal Constitution, they had the same options before them. Ultimately, they chose to give Article III judges "good Behaviour" protection from presidential interference, see U.S. Const. art. III, § 1, cl. 2, and mandated Senate approval for appointments of superior officers, see U.S. Const. art. II, § 2, cl. 2. The Constitution therefore took away the traditional executive power to remove judges and to appoint officers unilaterally. But the Framers chose not to grant "good behavior" tenure to officers, as some States had done. By that omission, the Framers kept for the President the executive's traditional at-will removal power over superior officers.[3] See Steven Calabresi & Saikrishna Prakash, The President's Power to Execute the Laws, 104 Yale L.J. 541, 597 (1994).


         What the text and structure of the Constitution provide, the historical practice confirms. ...

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