Editor: David Reiss
Brooklyn Law School

January 2, 2014

Reiss on Cases To Watch In 2014

By David Reiss

Law360 quoted me in Real Estate Cases To Watch In 2014. The story reads in part,

The real estate market’s recovery from the financial crisis of the past few years has created a host of new issues — from contract disputes to eminent domain litigation — for government lenders, developers and investors to litigate in 2014.

Real estate finance attorneys are paying close attention to an expected rise in judicial scrutiny of banks’ ownership of loans, while also closely watching the multitude of cases that have been brought against the U.S. government and its handling of profits made by Fannie Mae and Freddie Mac.

At the same time, development attorneys are tuned in to how an increase in construction in gateway cities might soon lead to more litigation over land use and eminent domain.

Here are some of the most important cases and trends real estate attorneys are watching closely:

Challenges to Allocation of Fannie and Freddie Profits

A collection of cases making their way through the Washington, D.C., federal court and the Court of Federal Claims challenge the government’s taking of all of the profits from Fannie Mae and Freddie Mac and directing them toward the U.S. Department of the Treasury.

Two of the most-watched cases were brought by hedge funds Perry Capital LLC and Fairholme Capital Management LLC, the latter of which has since offered to purchase the government-sponsored entities’ insurance businesses.

Perry Capital accused the Treasury in July of illegally speeding up the GSEs’ liquidation, entitling the government to all of their mounting profits and essentially “extinguishing” privately held securities, according to the complaint filed in Washington federal court.

Fairholme made a similar claim in the Court of Federal Claims two days later, alleging that the government had acted unconstitutionally when it altered its bailout deal for the GSEs to keep the companies’ profits for itself.

“The universe of cases impacting the current operation of Fannie and Freddie is very important from a policy perspective, and it’s also an interesting battle between hedge funds and the government,” said David Reiss, a professor at Brooklyn Law School.

There will likely be a flurry of motions to dismiss and requests for summary judgment on all sides in these cases 2014, but from the perspective of a real estate attorney, the policy implications will be more interesting than the precedential value of any decisions, he said.

A hearing on defendants’ dispositive motions and plaintiffs’ cross motions has been set for June 23 in the Washington cases.

Perry Capital is represented by Theodore B. Olson, Janet Weiss, Douglas Cox, Matthew McGill, Nikesh Jindal and Derek Lyons of Gibson Dunn. The case is Perry Capital LLC v. Lew et al., case number 1:13-cv-01025, in the U.S. District Court for the District of Columbia.

Fairholme is represented by Charles J. Cooper, Vincent J. Colatriano, David H. Thompson and Peter A. Patterson of Cooper & Kirk PLLC. That case is Fairholme Funds Inc. v. U.S., case number 1:13-cv-00465, in the U.S. Court of Federal Claims.

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