Argument analysis: Justices dubious about federal jurisdiction for suits involving Fannie Mae
on Nov 9, 2016 at 9:33 am
Lightfoot v Cendant Mortgage Corp. takes the justices back to one of their core responsibilities, assessing the boundaries of the jurisdictional power of the lower federal courts. Specifically, the case asks whether the presence of Fannie Mae (the Federal National Mortgage Association) as a party to a lawsuit is itself sufficient to create federal jurisdiction over the suit. More broadly, the case is the latest in an extended line of decisions (dating back to the days of Chief Justice John Marshall) about federally-chartered entities. The earliest cases involved entities like the Bank of the United States; the most recent one is a 1992 decision, American National Red Cross v. S.G. and A.E., holding that federal jurisdiction extends to all cases involving the Red Cross. (I should mention that I argued Red Cross on behalf of the United States, which participated in support of the Red Cross.)
The question in these cases always is whether the language of the particular charter evinces an intent to extend federal jurisdiction over all cases involving the entity in question. It is fair to say that the last few cases have suggested that it is enough to create federal jurisdiction if the charter refers explicitly to a power to sue and be sued in “federal” courts. The charter at issue here seems to satisfy that test, because it authorizes Fannie Mae to sue and be sued “in any court of competent jurisdiction, State or Federal.”
The bench was, by its normal standards, remarkably quiescent, with several of the justices contributing little or nothing of substance to the argument. That is not to say that the justices came to the bench with a consensus that obviated any need for further discussion. On the contrary, the argument presented a series of discordant themes, making it difficult to draw a conclusion about the likely rationale or outcome.
Perhaps the most pervasive theme was the idea that the court’s existing precedents (especially the recent Red Cross decision) tilt strongly in favor of federal jurisdiction. For example, early in the presentation of Joshua Rosenkranz on behalf Monique Lightfoot, the plaintiff suing Fannie Mae, Justice Ruth Bader Ginsburg read a passage from the opinion in Red Cross that, in her view, “seems to say if you authorize suit in federal court, that’s it. Specifically mentioning federal court suffices to confer federal jurisdiction.” Similarly, Justice Stephen Breyer expressed the view that the existing cases, as a whole, establish “something of a rule here” and that because “it’s jurisdiction … we shouldn’t get things too mixed up.” Breyer seemed particularly reluctant to overturn a doctrine first articulated by “John Marshall, … who is not, say, Justice X.”
But the same justices who thought Red Cross counseled a ruling in favor of Fannie Mae seemed just as sure that the emphasis of that case on any mention of the word “federal” does not make a great deal of sense when applied to a statute that seems to limit Fannie Mae’s grant of capacity to courts that independently are “of competent jurisdiction.” So, in an interchange with Rosenkranz, Breyer conceded that “I would think you’re right, if I were doing this afresh.” For him, the question, as he put it to Rosenkranz, was “whether to look into it deeply in this particular case where you’re going to end up with a result that seems to be different than the other cases, or to say, well, forget it. It was all decided. Keep to the precedent.” More bluntly, Ginsburg told Brian Brooks, who appeared on behalf of Fannie Mae, that his position boils down to an argument that the words “‘of competent jurisdiction’ don’t mean anything.”
A third theme embraced one of Rosenkranz’s strongest points: the difference between the charters for Freddie Mac (the Federal Home Loan Mortgage Corporation) and Fannie Mae. Justices Ginsburg and Sonia Sotomayor in particular found the difference in language between those two charters telling. Ginsburg commented to Brooks that “[w]hat Congress did with Freddie Mac …. is very clear. It means it can come into federal court to sue. It means it can remove if it’s sued in state court.” This, compared to the ambiguous language of Fannie Mae’s charter, suggested to Ginsburg that Congress did not intend to extend federal jurisdiction over all of Fannie Mae’s activities. Sotomayor’s reaction to the interchange was pointed, asking Brooks: “So why didn’t they do that for Fannie Mae?”
One final point, made repeatedly by Chief Justice John Roberts, probably comes closest to capturing the sentiment of the bench as a whole. Addressing Brooks, he commented that “[y]our friend on the other side scares me when he says there are 60,000 cases that are going to be added to the Federal docket.” Roberts went on to comment that the “federal courts … are courts of limited jurisdiction. And to get into them you have to carry, I think, a significant burden to establish their right to be there. Now, I think you have to do more than win 51/49, given a presumption against federal jurisdiction.”
With little seeming to move any of the justices to support Fannie Mae, the existing cases are unlikely to pose much of an obstacle to the disparate concerns expressed in the argument. Notwithstanding the frank tone of Justice Breyer’s ruminations of yesterday morning, I won’t be surprised in a few months to read an opinion for the court asserting that the plain language of this statute differs so much from the language at issue in the prior cases as to render them largely irrelevant.