Freddie Mac 2014 Annual Report Download - page 240

235 Freddie Mac
things, that the defendants fraudulently and collusively depressed LIBOR, a benchmark interest rate indexed to trillions of
dollars of financial products, and asserts claims for antitrust violations, breach of contract, tortious interference with contract
and fraud. Freddie Mac filed an amended complaint on July 22, 2013, and a second amended complaint on October 6, 2014.
The defendants have moved to dismiss the second amended complaint; Freddie Mac has opposed this motion.
Litigation Concerning the Purchase Agreement
Since July 2013, a number of lawsuits have been filed against us concerning the August 2012 amendment to the Purchase
Agreement, which created the net worth sweep dividend provisions of the senior preferred stock. The plaintiffs in the lawsuits
allege that they are holders of common stock and/or junior preferred stock issued by Freddie Mac and Fannie Mae. (For
purposes of this discussion, junior preferred stock refers to the various series of preferred stock of Freddie Mac and Fannie Mae
other than the senior preferred stock issued to Treasury.) It is possible that similar lawsuits will be filed in the future. The
lawsuits against us are described below.
Litigation in the U.S. District Court for the District of Columbia
In re Fannie Mae/Freddie Mac Senior Preferred Stock Purchase Agreement Class Action Litigations. This case is the
result of the consolidation of three putative class action lawsuits: Cacciapelle and Bareiss vs. Federal National Mortgage
Association, Federal Home Loan Mortgage Corporation and FHFA, filed on July 29, 2013; American European Insurance
Company vs. Federal National Mortgage Association, Federal Home Loan Mortgage Corporation and FHFA, filed on July 30,
2013; and Marneu Holdings, Co. vs. FHFA, Treasury, Federal National Mortgage Association and Federal Home Loan
Mortgage Corporation, filed on September 18, 2013. (The Marneu case was also filed as a shareholder derivative lawsuit.) A
consolidated amended complaint was filed on December 3, 2013. In the consolidated amended complaint, plaintiffs allege,
among other items, that the August 2012 amendment to the Purchase Agreement breached Freddie Mac's and Fannie Mae's
respective contracts with the holders of junior preferred stock and common stock and the covenant of good faith and fair
dealing inherent in such contracts. Plaintiffs sought unspecified damages, equitable and injunctive relief, and costs and
expenses, including attorney and expert fees.
The Cacciapelle and American European Insurance Company lawsuits were filed purportedly on behalf of a class of
purchasers of junior preferred stock issued by Freddie Mac or Fannie Mae who held stock prior to, and as of, August 17, 2012.
The Marneu lawsuit was filed purportedly on behalf of a class of purchasers of junior preferred stock and purchasers of
common stock issued by Freddie Mac or Fannie Mae over a not-yet-defined period of time.
Arrowood Indemnity Company vs. Federal National Mortgage Association, Federal Home Loan Mortgage Corporation,
FHFA and Treasury. This case was filed on September 20, 2013. The allegations and demands made by plaintiffs in this case
were generally similar to those made by the plaintiffs in the In re Fannie Mae/Freddie Mac Senior Preferred Stock Purchase
Agreement Class Action Litigations case described above. Plaintiffs in the Arrowood lawsuit also requested that, if injunctive
relief were not granted, the Arrowood plaintiffs be awarded damages against the defendants in an amount to be determined
including, but not limited to, the aggregate par value of their junior preferred stock, the total of which they stated to be
$42,297,500.
American European Insurance Company, Cacciapalle and Miller vs. Treasury and FHFA. This case was filed as a
shareholder derivative lawsuit, purportedly on behalf of Freddie Mac as a “nominal” defendant, on July 30, 2014. The
complaint alleged that, through the August 2012 amendment to the Purchase Agreement, Treasury and FHFA breached their
respective fiduciary duties to Freddie Mac, causing Freddie Mac to suffer damages. The plaintiffs asked that Freddie Mac be
awarded compensatory damages and disgorgement, as well as attorneys’ fees, costs and other expenses.
FHFA, joined by Freddie Mac and Fannie Mae, moved to dismiss the In re Fannie Mae/Freddie Mac Senior Preferred
Stock Purchase Agreement Class Action Litigations case and the other related cases on January 17, 2014. Treasury filed a
motion to dismiss the same day. On September 30, 2014, the District Court granted the motions and dismissed the plaintiffs’
claims. On October 15, 2014, plaintiffs in the In re Fannie Mae/Freddie Mac Senior Preferred Stock Purchase Agreement Class
Action Litigations case filed a notice of appeal of the District Court’s decision. The scope of this appeal includes the American
European Insurance Company shareholder derivative lawsuit. On October 9, 2014, Arrowood filed a notice of appeal of the
District Court’s decision.
Litigation in the U.S. Court of Federal Claims
Reid and Fisher vs. the United States of America and Federal Home Loan Mortgage Corporation. This case was filed as
a derivative lawsuit, purportedly on behalf of Freddie Mac as a “nominal” defendant, on February 26, 2014. The complaint
alleges, among other items, that the net worth sweep dividend provisions of the senior preferred stock constitute an unlawful
taking of private property for public use without just compensation. The plaintiffs ask that Freddie Mac be awarded just
compensation for the U.S. government’s alleged taking of its property, attorneys’ fees, costs and other expenses.
Rafter, Rattien and Pershing Square Capital Management vs. the United States of America, Federal National Mortgage
Association and Federal Home Loan Mortgage Corporation. This case was filed as a shareholder derivative lawsuit,
purportedly on behalf of Freddie Mac as a “nominal” defendant, on August 14, 2014. The complaint alleges that: (a) the net
worth sweep dividend provisions of the senior preferred stock constitute an unlawful taking of private property for public use
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