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tv   Collins v. Mnuchin Consolidated Oral Argument  CSPAN  January 9, 2021 6:16am-8:00am EST

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director the honorable chief justice and associate justice. all persons having business before the honorable the supreme court of the united states where the court is now sitting. the united states in this honorable court. we will hear arguments this morning in case number 19422 acting as the conservator of fannie and freddie renegotiated the financial obligations to the
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treasury replacing the multibillion-dollar dividend to the obligation they were themselves from the capital commitment. the shareholders statutory constitutional challenges to the third amendment where there were three key defenses. first both claims are brought by the recovery act with the authority to decide whether shareholders bring derivative suits on behalf of the enterprises. the type of shareholder alleged the corporation's assets have been unlawfully dissipated to a particular shareholder is plainly rather than direct. they haven't had a single case to the contrary. the claim is marked by the recovery act and injunction clause which prevents the courts from restraining exercises of the conservator's powers.
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the conservator acted well within its authority citing the negotiation of the financial obligation may have been appropriate to preserve the commitment. the shareholders cannot second-guessed the wisdom or the motives behind the judgment and the third the constitutional had unrestricted power to supervise both of the officials amendment. thus while the restriction on the power to remove the fhfa directory is invalid it had no effect on the third amendment. i welcome the court's question. >> you say that the common stockholders claims can't survive because the derivative claims the corporation and succession clause. but it seems to me that they are a little different according to
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the claims anyway the stock value was completely wiped out in a unique way compared to the other holders of interest in the enterprises. in other words if it was directed at them as distinct from the corporation as a whole it isn't derivative and shouldn't be barred. what is your answer to that? >> all of whom recognize when they are dissipated it is claimed where they are a shareholder. it seems it has a unique claim
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that can't be characterized as a claim of the corporation. >> well, your honor there's no reason to differentiate between the corporate assets pursuant to the dividend payment and pursuant to the side transaction in the case we cited in the reply each involved certain shareholders being treated better than others and it shouldn't make a purpose for the derivative claim whether it occurs pursuant to the side transaction or the dividend payment. >> may be they are being treated differently but when you are completely wiped out, the corporation doesn't have any particular interest in the balance and the shareholders that are left out in the cold. >> i think the harm is in the first instance the corporation, the corporate asset.
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the corporation does have an injury and one way of making the point i think the shareholder would have the same objection if fannie and freddie entered into a contract where they bought a commemorative coin from the treasury department and paid them for all of the net worth and perpetuity. that would be exactly like the claim where you had a side transaction to a shareholder for the disadvantage of all the other shareholders and it comes because of a side transaction or pursuant to an amendment of the dividend obligations. >> justice thomas. >> thank you, mr. chief justice. counsel, would you perhaps give us another example what the direct would look like and the derivative?
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>> direct claims are claims where the injury to the shareholder is a turn on the harm to the corporation, so for example if the shareholders are injured in the right to vote that doesn't implicate it is a direct shareholder claim. the cases that have recognized the direct suits and to be in the context whether it's a delusion for example of the voting power that's what the delaware supreme court laid out in its el paso case. what if you had, and i know the agreement doesn't say this rightly but an agreement that simply transferred the dividends from existing shareholders, say
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to treasury, i think it is rather awed that your shareholders dividends get jeopardized and depleted and the right to vote on the corporate matters is a direct link so what would you say to that? >> it's not a question of explicit versus implicit. they are acting directly on the shareholders contractor will dividends. one way of thinking about it is the difference between the size of the pie and the share of the pie. the claim is it's been dissipated. that is the size of the pie and harm to the corporation and its what has been changed as the share of the pie.
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the direct action on the shareholders rights and dividends transferred to another shareholder but importantly that isn't what's going on here. it might be the affect you have the harm to the corporate asset it doesn't matter why it's been anticipated whether it is by theft or conflict of interest or side transaction in the first instance. >> justice breyer. >> i think that in reading this, you could trying to simplify as much as possible we bought into
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this corporation as well as having a public side. that's what they did. if you look at the net worth to the treasury it is nationalizing the company. whatever the conservator's and receivers do but when they nationalize the company our share so what do you say? >> the enterprises financial obligation is it fair to characterize it who do you think the treasury is, it's the government of the united states.
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cannot can i view this as natiol information. it had $20 billion a year dividends that were already owed to the federal government $20 billion a year. what the conservator did is say that goes to the agreement. we think it's a very reasonable thing to do. >> the point is the anti-injunction clause doesn't expose the business judgment to redistribute. they say nationalization is in the kind of thing the receivers do and therefore you could examine it and when you do, you will see how unreasonable it is.
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>> what the enterprise did is renegotiated financial obligations. that is what they did and whatever label they want to put on it, what the actual power that was exercised here is a renegotiation of the financial obligations. that's what conservators do day in and day out. in terms of the renegotiation they are fairly unique but that is because the enterprises were in a fairly unique mission. both were owed $20 billion to adhere to the federal government so when they switched that to ensure there was no risk and a trillion dollars of capital committed to these enterprises it's a heartland whether it was
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a bad deal or they did it for bad motives at the end of the day they renegotiated financial obligations. >> i agree with you about the remove ability of an acting director and also the only relevant action is one taken by the acting director if we have any reason to address the question whether the restriction on the confirmed director is unconstitutional. >> yes, your honor the court of appeals did issue a declaratory judgment that prospectively the removal restriction should be set aside and petitioners here that is the first question presented to a firm tha affirm a
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correct holding but we do think that there is no basis both because the acting director if it is irrelevant it could be vacated on that basis without reaching the merits of the question. but let me ask you this what is your response to the argument on the other side pursuant to the amendment we have to consider the status of the confirmed directors. >> i don't think they've challenged any action and i don't know what those actions would be. if it requires the dividends the only thing is whether they would pay under the third amendment in
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cash that wouldn't do them any good but other than that i don't know what it would be that they are referring to. >> if we were to reach the issue of the remove ability and agree with you on that question what basis do you have distinguishing between the release that you said is appropriate in this case and that which was provided in the appointments clause cases. >> the most significant difference is the fact that in this case it was a party to the action being challenged. it was from the presidential supervision and unlike in all of
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the cases you mentioned, here the treasury secretary is removed by the president's right-hand man srighthand man se president didn't pass over this agreement and that's why if it means anything it means you can't set aside an agreement on the theory the president didn't have enough control over it. >> i just want to make sure that i get the gist of the argument. for no rational reason they sold
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all of their assets in exchange for one dollar to itself there's no review of a decision by the fa sage as conservator that they give shareholders the right, the challenge and their action. >> we think the anti-injunction clause would bar the claim that actions were taken that have no objection to preserve and concern assets. we think even that claim would be barred by the clause because it would still be a derivative suit but if the court disagrees or doesn't know enough, we are
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not arguing the clause means there's no review with anything the conservator does. we are just saying when the conservator takes actions, it may be appropriate and necessary and there's no second guessing. i think that's an important point. >> let me stop you there. if the company is still in existence but owned by the fha, there is no claim as my colleagues have commented but it is the shareholders who've been kicked out for no business reasons. i don't see how that is a derivative suit. >> it's because the shareholders harm all they have lost -- >> it isn't losing its profit. the corporations actually made
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money by not paying dividends to the shareholders but it's the shareholders and not the company that's being deprived. .. >> i see vast differences between the fa in the cfpb. the f ffa most notable power and the reason were here today is a complete certain government affiliated companies under conservatorship conservatorships are never thought of as my experience as executive power
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roots been an adjunct to the judicial power this is not a wide reaching power that affects many entities, it is one company at a time essentially unlike the cfpb, why can't we say this is an exception. >> briefly counsel. >> whether the executive power and the authority to decide whether fannie and freddie into conservatorship the decision that affects the mortgage market in the home equity of every homeowner in this country is questionably executive power. >> thank you counsel, justice kagan, justice kagan. >> can i take you back to your answers to justice alito using
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the only final action that's being challenged as a third amendment, i am going to repeat this question to you because i was not quite sure i got your answer, if that is the case and the only final action challenged here, what basis would we have to do anything more than issue a judgment about the validity of the amendment. >> i don't think you have a quite right, the plaintiff's of the fh a was unconstitutional in the fifth circuit granted them at relief and there is granted that include that question. we do think it would be appropriate for this court to confirm that that asset is correct. >> i know they asked for it but usually if you bring them a
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challenge you have the point to the final agency action that you think is wrong in some sense and here the third amendment was done by the acting director if you are right about that, does not raise the removal issues. so what does raise the removal issues? >> it's just like free enterprise they're entitled to bring a prospective suit saying the ongoing regulatory power of the agency over them even after the concrete final agency action they can see relief against that because of course the fha say has a regulator has a authority to say, the shareholders here have an ability to say that that decision should be made only by a regulator that is constitutionally structured. >> you say that is true even if they are not pointed to any particular actions in the period
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when there was a confirmed director. >> it's a prospective suit, their point every regulatory fha makes going forward including most obviously most supportively in the conservatorship or receivership even though it was done, the point is you have a regulator in a regulated entity or shareholders regulated entity can bring a claim to say that that regulator is unconstitutionally structured as a matter. >> you are right. >> justice gorsuch. >> i'm a little confused declared to a judgment with respect to future actions it seems i could be appropriate to hang on the wall but not much else, the plaintiffs here have sought declaratory judgment and
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further remedies retroactive remedies that might do them some good and that's the third amendment, and little confused why we wouldn't proceed to hold the third amendment was void from the beginning of the appointment cause problem, that's pretty much as you will recall where we vacated the decision, why wouldn't we do the same here? >> their claim the third amendment was unconstitutionally for supervision, that is wrong on the merits because the third amendment was signed by the treasury secretary. >> the mayor's determination then? >> with respect. >> as i understand it we don't do harmless error instructional constitutional cases typically and if we did isn't rather
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speculative to say what would've happened if we had a different director subject to presidential oversight in the political process when congress insulated this person and theory from that process, isn't that a degree of speculation. >> i don't think it speculative at all because this is not a decision by fha director it was signed by the treasury secreta secretary. >> i understand that point but congress decided to put this person separate from the political process for a reason. and it might be to insulate from the blowback, i don't know, you don't know and none of us know. isn't that the whole point and what we do return to my fundamental questions, why isn't this void where we have the federal vacancies reform act and action taken by somebody who is without power is void not just
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voidable or modifiable, it is void why wouldn't the same be true here? >> in addition to my point i would say from the other side of the coin this is done by an acting director and also is removable as well. >> put the argument aside in your harmless error argument aside, why wouldn't this be what? >> if you reject all the arguments then i suppose we would probably lose. >> i got it it's a harmless error argument on one hand and i got it, what are the two arguments, after that it is void. >> in addition to our cause, i want to focus. >> i got that, we come to remedies, it's either the acting
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director, it's reportable to the president or harmless air. >> justice kavanaugh. >> thank you chief justice, good morning, you were saying something there, what you continue on. >> i would like to talk about the acting director, i think it's an important point in void some of justice gorsuch's concern about the treasury secretary side. the statute does not provide that the acting director is subject to the clause protection or the confirmed director in this court should not leave the statute, an easy solution that avoids all the concern about structural air and speculation and all the rest is to simply say under the statute the acting director that took this decision on fh fa is removable at will by the president so there's no problem to begin with. >> is that true of all acting
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officials? >> i would have to look at any given statute to tell you the answer your honor. >> is it true, is that your principal your asserting and acting officials that are presumptively removable at will by the president unless a statute with respect to the acting director acting official himself or herself specifically pledged restrictions on the removable remove ability? >> our general position that you should not be from any cause restriction for confirmed official and assumed that that extends to enacting official, you would have to always look at provisions in the acting official and to see if there is a removable restriction for them as a matter of constitutional avoidance and a clear statement requirement and as a matter of simple common sense. congress might have very good reason for why it wouldn't impose a removable restriction
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on enacting official then for confirmed official, mainly the center has confirmed the person congress might well be unwilling to provide that protection instructional constitutional provision and constitutional avoidance, you shouldn't leave the statute to create a problem let alone to decide the multibillion-dollar contract. >> those are good points, i guess the one point that his intention to that congress designated independent agency in the official running it is removable, the agency is no longer independent, all make two points about that your honor, the first is that congress as an independent establishment even when they're concededly not subject to any cause restriction
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at all, the best example if you look at swan versus clinton the agency there was described as independent but earlier duration was removable especially at will by the president, the second point i would make, the fact that the agency independent even if that says something about cause restriction, it's one thing to say the independent, doesn't necessarily mean they're independent when they have an acting director and we know that for the statute itself because if you look at the statute before the first confirmed director there was a transitional period and the head of fha a doing that. was an officer in hud who was not subject to any cause restriction. >> let's say we agree with you that the third amendment was entered into an acting director who is removable by the president, there was no
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constitutional problem with it. there we also agree with you that there was a problem with the director because he was removable only for clause, the confirmed director was administering the third amendment in administering the conservatorship and passing along the earnings into the treasury, would that create a structural problem because even though perhaps the third amendment at his inspection was valid and could be a ministry by the third amendment b unconstitutional executive official with structural errors and that would have to be set aside. >> i don't think so there is not a discretionary decision within the third amendment other than perhaps whether the dividend owner paid in cash or paid at the liquidation preference, neither if the plaintiffs here any good at nothing odd claim
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that they're bringing, starting the third amendment is valid in the money should all be created liquidation preferences their claim in the third amendment -- >> who decides when the third amendment arrangement should come to an end if ever. the treasury viewed as winding down, winding down their assets although characterized not at the receivership and conservatorship, could these firm directors said now that there is no longer does the director have authority in to the amendment? >> just like the second amendment and the first amendment and everything else the agency does, that's why we think are entitled to relief respectively to have the fha director removal as well in the fha director change these agreements -- >> got me ask you, the term director could have stayed in
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the action at some point, why isn't that an entry. >> it's not a problem with the third amendment any different than anyone else, that is a challenge see the agency and a failure to amend the contract, on that theory all of the agreements not just the third amendment, the second amendment the third amendment the original amendment, fannie and freddie would have to lose all money treasury has given them in the capital, that is not the claim. >> let me ask you one last quick question, switching gears, i'm having a hard time understanding why corporate law matters and why it's important of corporate law entity, the shareholders of the injury and you haven't
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contended in the statue and the apa gives a direct cause of action for agency action, why do we care about the derivative of distinction. >> briefly counsel if the apa doesn't then inc. and that's where the 70 year history of the apa they haven't been able to type a single case that would otherwise be a derivative. >> the of a minute to wrap up. >> the third amendment should not be set aside if the role means anything at all they set aside a multimillion dollar project that it was unconstitutionally aided although both of the officials were removable by the president. if the recoveries act means anything at all court set aside the renegotiation of complex financial obligation by second-guessing the conservator statutory budget in the recovery
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clause are at claim, no case in the history of the apa or american corporation law appears to allow shareholder claim direct rather than derivative entry because the corporation asset allegedly were dissipated unlawfully to another shareholder, the should reject the challenges to the third amendment but uphold the determination that the fha directors removal restriction is unconstitutional yet severable. >> thank you counsel. >> mr. chief justice may i appease the court, there is a very easy way to answer the constitutional question in this case the court should hold that the congress said so in a statute and acting director does not have tenure, i agree with this in all respects that one because an acting director is removable at will in this case should be over as the united states explained, plaintiffs do not challenge ongoing action by
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the fhfa rather than the government leaders position is correct, i urged the support to read there is no respect in the complaint here. if the court chooses to tackle the hardest questions they should still reverse. first for the reason the court gave in single law the fhfa does not wheels th significant power because it does not regulate private actors, even the department of justice conceived that conservatorship is not an exercise of the executive power. by itself it's another reason to rehearse, regardless neither party undermines fatal law observation that fhfa is not the same league as the cfpb when it comes to liberty. the court should focus on the actual text of the statute which is the party essentially ignored, neither party disputes the weakest protection and removal of and can easily be read based on policy disagreement with the president,
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the party says that is even unconstitutional but the argument makes a clause and also have far-reaching consequences, their logic the social security administration the special counsel, the federal reserve, the federal service wall be subject to constitutional attack and that is just the beginning, neither party offers coherent line and i welcome the courts questions. >> thank you counsel i would like to get your take on a question in the number of my colleagues have been asking. i agree with you that the acting director is constitutional because removable at will and he enters into the third amendment but the third amendment provides for payments and an ongoing way and including payments under a regular director who is not constitutionally appointed, how does not work, what are the
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consequences for tickly for the payments to take place under the jurisdiction under the unconstitutionally appointed director. >> i agree, the third amendment is not ongoing agency action, it's a discrete thing that is a contract and that's a decision of the majority of the fifth circuit, that's a discrete thing being challenge, there is not ongoing discussion that might affect the interest of the plaintiff effect contract and the contract is what govern. >> there were contracts before the third amendment and they were significantly altered but my question is what about complaining stockholders sent a letter to the director the confirmed one and said we want you to get out of this agreement because it's unfair to us and the director said no that would be action by the regular director and which seem to me could be challenge a bull given
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the unconstitutionality. >> to appoint, nothing like that is in the complaint, there is no complain about the theory it's all hypothetical but beyond that this is not ordinary agency action where you could file a petition for rulemaking or something like that it is a contract and the parties are renegotiating but it takes two to tango and is not just the decision of the fhfa. >> thank you counsel, justice thomas. >> thank you mr. chief justice, counsel usually when you have an agency action it's an enforcement action or something that affects a particular party, here you're talking about a major change in the nad in which the plaintiffs are invested, i
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know you want to keep us at the initial stage of amendments or the third amendment as just a spirit noted what about the administration, is still affects them and what about the future administration with the continuing effect. this is unlike other agency actions, how do you address that? >> i would point the courts to the actual complaint, on 117 the relevant count and there is no ongoing. so all of this is hypothetical but again this is a contract and with a contract it might be unhappier with it but to conservator who is not the executive power and fhfa as regulator cannot undo a contract it takes a decision from the fhfa and the treasury department. >> so the fact that it was
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enough for an acting director to do this and insulate this from the challenge. >> with respect i don't think it's the side relying on a fluke, the idea that the provision had anything to do with the third amendment is entirely implausible and that's why none of the other complaints that raises another court because it did not have anything to do with it. >> thank you. >> justice breyer. >> thank you as you probably know in the structural cases like peekaboo and the others i dissented very well, what is your advice to me should i in a sense throw in the towel, should
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i stick to my prior dissent, should i say this is different because in particular interested in the cause. >> this is different because the thing that is being challenged leaving aside the acting point is an active conservator and that is the executive power, the department of justice which is the most vigorous defender of presidential power on earth can see this is not executive power. that is one way to distinguish the entire issue, this does not raise any of the issues in this case. >> is not part of the article three judiciary. >> no it's part of the legislature. >> what is that leave, it leads article two. >> no, the court has not been clear if it's private power or nonsovereign power, my gut says
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its nonsovereign power because it's an agency doing it but a private person can do it in the government can do it to and that does not take executive power to get there, no different than ordering books that the court does that does not make it a judicial power, it's something that government can do. >> thank you. >> justice alito. >> we have said many times the structural provision of the constitution like the appointment because and rules about the removal of executive officers are ultimately important because they affect ordinary people in they affect liberty as you just mentioned. they affect democratic accountability. the argument about your position here includes the proposition that the way in which the agency carries out
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its responsibility as conservator has a profound effect on the housing market and therefore a profound affect on people. what is your answer to that? >> what type of power conservatorship is and the logic falls into place. conservatorship is not executive power. i come to the courts -- surely even more consequential than this, banking was not understood as executive power being a conservator for a government insurer outside article 2 even though at a significant effect on the economy. >> thank you.
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>> counsel, as director of executive appointment they presumably have executive decision-making but it seems to be your scientists say we should not be looking at the agency as an executive agency but we shouldn't see whether the power they are wielding an individual situations is executive. am i getting your argument correct? >> mostly correct. you could look at the type of power for a broader range of things that we are talking about the agency as a regulator. >> one of my colleagues asked me if the f h a is not an executive agency what is it? put aside the conservator part of it. is it or is it not an executive agency? >> yes the fh fsa is an executive agency in that it has a regulatory function. >> if it is an executive agency
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then i think we have to look at the constitutionality of its structure and if we have to do that, how do we get to a subdivision of whether an individual act was executive or not? difficulty separating of the concept. >> if we're looking at the power as regulator, they exist but congresses essentially given the fh fsa a recipe book, this is what you are supposed to do. it is almost binary to control exercise of this power because it doesn't have the sort of expression the cf vp did. >> that is the point i was raising earlier but i still see that is a different argument so if the shareholders, if the
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shareholders had argued that directors for cause removal is a structural error that has to do with justice alito's question and justice gorsuch chaps earlier questioning of the government. if they are correct do we have discretion against joining the third act? how do we go from a structural error to a harmless error. what do we consider to do that, in which situations are we permitted to do that. >> it would be the case when talking about conservatorship. if we are talking a discrete act that they have challenged and that act did not require any executive power whatsoever it is hard for me to see how you get to the question of is it harmless error or constitutional violation of the threshold. >> you just said if the fh f a is not a very important agency, i don't think it has all the
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powers the majority and the distant refer to. not much those opinions agreed on but this seems to be one of them, that the fh f a makes rules, conducts enforcement actions, has subpoena power, even the decent, there's a crucial role in over pc in the mortgage market in which millions of americans annually rely so how can you say that? >> my answer, i understand all of that and going with the majority the majority says it is not a loss of power but your point is well taken, the way you reconcile the dissent and the majority is the decent is
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saying look how much effect it has in the real world and the majority is saying look at how much power it actually exercises. the difference between this agency and the cfpb is the cfpb has vast discretion whereas if you go through the statute here it is true but it is only in a limited way. congress essentially said his the instruction manual, go forth and do it and for something like that, if the agency doesn't do it correctly the president can say that is cars, the easiest april cars there is. you are supposed to have a report, i don't have a report, get out the door. >> you are suggesting there's a difference with saying inefficiency, neglect or malfeasance but where is that? once again the majority said we don't want to portion the language that way and the dissent is still that these were essentially determinist
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restrictions? >> the easiest way to look at this is these are companion agency and congress uses one language in dodd-frank and the other in the recovery act, ordinarily you assume they mean different things, all the reasons dean manning explains in his article, ken burnett explains in his article, the ordinary meeting, least constitutional avoidance allows that type of removal. >> just to score such? justice course which -- neil gorsuch. >> the third amendment is an option. i would like to highlight several difficulties with that and the first is the assumption the acting director is answerable to the president while the director is not. the director of points a deputy director, not the president. it appears those deputy
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directors would be insulated from the president and when the director steps aside he names the acting director or rather gives a pool of 3 of his deputies and the president chooses which of those three but the director appointed all three of them. i'm not sure in what sense where we get the inference or how we generate that the president has removal power over this acting director, that is one. 2 is let's assume that's the case, so what? the plaintiffs who challenged actions during this whole. go including after it. go in which the acting director disappeared and we now have a director. you say that doesn't matter because the amendment is the thing that was adopted by the acting director but the
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challenging of his director's actions is void because he is unanswerable to the president so why wouldn't we at least be able to provide relief avoiding the director's actions once we had a senate confirmed director in 2014? >> that is a lot to answer. i will do my best to adjust to the acting point the promise of the other side's argument is the vacancies act doesn't apply. i don't see the basis for that, that's not consistent with it. but even beyond that, because assuming the president can only pick among those three, it is nothing whether the president can remove them. ordinarily the power to designate includes the power to end designated here the statute does nothing whatsoever to prevent the ordinary operation. after the so what i would appoint the court to 117, the
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actual complaint. there is in this ongoing theory that we are challenging future actions. we are challenging -- you can make an argument the third amendment should be under or something but that's not even pleaded in the eightieth agency in action are merely defending something that was unconstitutional when done becomes unconditional becomes a limiting precedent. >> anything you want to say in response to new corsets? >> i would like to talk about the acting point. what arguments the other side makes is the president could use the acting to try to get away from ever having senate confirmation and there's two reasons why that isn't so. one is congress has many tools
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to stop presidential shenanigans like that but there is a cause to this ahead of an agency is supposed to be a senate confirmed officer with temporary senate confirmed offices hitting an agency but the firm backstop against that kind of chicanery. >> in your opening you mentioned agency structure was unconstitutional and so too would be the social security administration, the office of special counsel which are headed by single directors and the solicitor general agrees on that but you went on to name all-time member agencies in the federal and civil service. my understanding of the principles that would be applicable here would be a single director, in agencies
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that are not historically rooted and that is what we would be applying here. >> in my brief i make the point what do you do with the chair of the federal reserve separately confirmed and has his or her statutory duties, that is not controlled by a multimember entity. he or she has her own duties under law. i have a theory for why that is unconstitutional. i don't think that power is significant. i also think there should be early removal protection but why would that be constitutional? how could that be constitutional? the civil service, we are not coming to recognize an exception of real policymaking powers but in that case all a plaintiff has to do is throw on a challenge to somebody who is a member of the civil service
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and say that person is an inferior officer involving comes crashing down. >> i would have come away thinking there were two exceptions to this role as executor, seems to be going back to the questions justice sodamayor and kagan were present you want it seems you are arguing for third ground which is let me take a look at what is the executive official really doing? looks like the power. could use seo little about that? >> significant is not my word. that is the part used numerous times. i look to single law to see what it means and i think it
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explained that significant captures the accountability concerns that are plenary goals. the court focuses on two things, whether they are regulated and whether there is a substantial policy position. we talked about the point that the court said the shf a does not litigate private actors but we are not talking about the same power but congress has tightly articulated what this agency can do like an instruction manual and with the for cause role in affected makes it easy to control this thing or the fox doesn't stop with the president, the president has ability to control this type of agency. >> thank you. >> a minute to wrap up, mister nielsen. >> thank you. i would like to refer to the point justice cavanagh made about where does this end?
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the court is going to have to answer some very hard questions, including what is the constitutional basis for any of this? why didn't the logic of that go to the civil service? the take care clause? if so how did a provision that allows removal for insubordination prevent the president from executing the law? likewise, just how relaxed is standing in these cases and more than that how far is the court willing to go without constitutional text for guidance? these are all hard questions that have significance far beyond appeal. thankfully the court doesn't answer any of them because and acting director doesn't have tenure to begin with. >> thank you, mister thompson? >> may it please court, that leaves fannie and freddie with no reasonable prospect of
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becoming adequately capitalized. the company's best case scenario is to operate with so little capital that under section 46783 f hfa could place them into receivership at any time. f hfa abandoned its conservatorship mission but imposed a sweep of the claim that only hfa may sue hfa for nationalizing fannie and freddie. is contrary to this court's decision in american power, decades of precedent and the strong presumption favoring judicial review of agency action. congress enacted the apa to make judicial review widely available to anyone within the meaning of relevant statute and shareholders are grieved by the network sweep but even under ordinary principles our claims may proceed because they are direct, there are two injuries caused by the network sweep. one suffered by the companies
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which cannot rebuild capital if returned to sound condition and another offered by private shareholders removed from the company's capital structures. consider a hypothetical third amendment requiring companies to pay their networks to blanket rather than treasury. that would have injured the company no less than the real third amendment but would not have revisited an injury on plaintiffs. they would needlessly dissipate the assets of the company they are charged with rehabilitating and shf a's sweeping claims to unlimited discretion powerfully illustrates the framers wisdom in refusing to invest executive authority in an unaccountable fourth branch of government. >> thank you, counsel. you are playing what you describe as the nationalization, the enterprise, the common shareholders or your clients were left out in the cold and
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their holdings rendered worthless. when i checked this morning, fannie mae was trading at $2.69, freddie mac at $2.56 and your shares are not worthless, they are worth something and presumably largely based on judgments about what the future holds so doesn't that render your nationalization rhetoric just that, rhetoric? >> know, your honor in the sense that there is no scenario under the third amendment in which we will be able to recover any economic value. it is true there is value in the shares but that is attributable to two factors, number one this lawsuit and number 2, that there is ongoing political discussion about what to do with these companies and maybe one day in the future the government will abandon them but right now it is in effect and the companies the been nationalized.
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>> putting aside the lawsuit answer, the future does seem to me to suggest there is still value in your shares. it may be a gamble in the future but has value in itself and on the other side we can't lose sight of the fact that this was a lifeline thrown to you, your client, that has to be worth something too. >> respectfully i don't choose sides of the law from burke. in terms of priceline i would point out the network expose that line to maximum vulnerability because companies never built up capital to absorb losses so there are $124 billion capital in between losses and the line of
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commitment. the networks we have took away the ability to rebuild capital and has exposed that lifeline to maximum vulnerability. >> do you make a claim going forward about payments even if you accept the validity of what the acting director did? >> we do under 12 cfr 1237.12 and be, not a penny can be paid to the treasury without the approval of the director and since 2014 there has been it senate confirmed director with removal objection and ja 118 asking all those future payments be enjoined. >> your theories even if an acting director approved the instrument under which payments are going to be made that when those payments are made if there is an unconstitutional director that they are invalid? >> we are challenging regulatory action of the senate confirmed directors in
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approving these dividends and there are 4512 f which handcuffs the president and even if there is an acting director the president can't put the person he wants in there, he has to pick one of the three deputy directors who were in turn picked by the prior director. >> justice thomas. >> thank you, mister chief justice. the government and amicus point out your complaint only notes or focuses on the adoption of amendment 3, the third amendment. i admit that obviously your prayer for relief as you just noted, would you spend a few minutes on that as to how we
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continue implementation of the amendment and future implementation of the amendment when you only complain of the adoption of the amendment? >> thank you, we do complain about the adoption but we note throughout the complaint the overpayments being made, we calculated those overpayments to be $124 billion at each one of those overpayments was implementation of network sweep so that theme runs throughout our complain. we also complain about how over time for commitment itself is been exposed to vulnerability and so the implementation issues are important so that is why on 118 we ask for an injunction in the future, so there aren't any more dividend payments to treasury at the expense of a private shareholders. >> would this have affected
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your separation of powers argument if the president together with the director, future or subsequent director and secretary of the treasury fully endorsed amendment 3, interested in writing if absence if all three ratified what has been done with this amendment? would it change your complaint at all? >> if it was done after the fact it would be unconstitutional was one of the things that is pernicious about the structures it reduced the president in the real world to the controller in chief, one of my other side said that takes two to tango. it was not a reflection of what the president wanted but what the president was able to negotiate. in your hypothetical if they were altered have done that
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simultaneously on day one that might have changed things but if we were creating a world in which there was no for clause removal protection we have to go back to the beginning of the agency, at least to the beginning of the obama administration and see how they were different in 2012 at the time of the sweep. the administration had fights with mister dimarco. we put this in our brief on page 72 to call for him to be fired and the administration said we don't have the authority to fire him. >> how do we unscramble the egg, put the parties in the position they were in prior to that? >> our preferred remedy we articulated to the fifth circuit court of appeals is overpayments measured against the dividends that were being paid that anything above that
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be treated as a paydown of principal and liquidation preference and if you do the math governments can pay back in toto plus 10% interest, $29.5 billion left over, the fifth circuit court of appeals asked the parties to address three questions, to give government 100 pages and said, quote, in practical terms what would setting aside the net worth affect other functions of the fhs and in response to our preferred remedy the government and f h f a said precisely nothing. they did not object, have no practical concerns. >> this is really like a nationalization, they gave it to the treasury and our shares are near worthless. why not take the claim?
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>> we brought a taking claim but that doesn't absolve this court under the apa of addressing a challenge to the lawfulness of the agency action. >> i didn't say it did. just thinking of the claim. seems like it is taking the claim. why should we stretch out of recognition or tried to draw lines on the question of derivative actions? the derivative action of the conservator. it so goes so far the company is really hurt and the shareholders are destroyed are we taking this claim, but as long as there is a colorable defense forget it. apply ordinary derivatives law. >> two points. number one, principles of constitutional avoidance with
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counsel in favor, the congress having authorized nationalization, no reason to think congress would have wanted to secretary. with a big tab for taking verdict in the court a claims but if the court were to apply traditional measures of derivative direct we say we win, we would point to the allegheny -- >> you have a special company which your shoulders but into with knowledge and that is the company that is more of a public aspect than ordinary and both parts are relevant so even if this is at the border of derivative actions shouldn't we interpret the derivative actions, why not, to encompass what goes on here with the colorable argument that they did it for the benefit of the corporation. >> constitutional avoidance, we don't think the court should depart from its precedent to create a massive take and liability. >> if i have time for one more question.
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on your apa claim, my cousin joe who i love dearly, i give him a piece of land and assigned to him though i retain ownership all rights to bring any lawsuits, i have no rights in respect to that land, i gave them all to joe and if bill comes along and cuts the tree illegally it is joe who can sue, not me, right and as long as that is so, why is the apa any different. suppose it is the forest service that does something to that land. i signed my rights to joe, joe can bring an apa claim but i gave mine away. if that is right how is this any different? >> because here it would be joe suing joe because they would have to soothe themselves and it is a succession clause, not a termination clause. congress knew how to terminate
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lands, they terminated the claims of receivership and they didn't do that here with the conservatorship. >> i'm thinking of the anti-injunction clause or i'm thinking of both clauses. joe can't sue because i assigned to joe -- i can't sue because i gave those rights to joe. is the apa any different? >> it is different if we look at the language of the statute. it doesn't say all rights go. it says all with respect to the regulated entity and its assets and that is understood not to include direct language. only the derivative claims and not the derivative claims that would be terminated.
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>> let me give you this hypothetical situation. the director is appointed and upon appointment the director and the president have the joint news conference, i know the statute says your removable me for cause, that is unconstitutional. under the constitution i can remove you it will and i will proceed on the basis of the director says i agree and i will conduct myself on that understanding and i will verify every single morning the you still want me an office and donors a matter of when want me to leave. would've followed everything done thereafter by the director is floyd? >> i would think that would obviously mitigate the concerns over the president being the
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controller in chief without sufficient control of the agency. there would be a residual concern the director might change his mind and then has this legal protection so there might be some issues about accountability and liberty but would be a less problematic situations than we have here. >> we have to answer that question to determine whether it follows that the identification of an unconstitutional restriction on removal necessarily means a structural defect, everything done by that officer is floyd. >> we do think this qualifies under weaver for being a structural error. number one, their interests beyond the outcome that is produced, there's the interest in accountability and also it is hard to measure the effects. that is why this court presumably in free enterprise should pay -- you don't have to create above world, they are not well-suited to psychoanalyze coordinated
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branches of government and what they would do in a hypothetical world. it is hard to measure the effects. it was a negotiation between a republican appointee and the obama administration and they had bitter disputes throughout the three years mister dimarco was there. >> sometimes we have to do things with our heart. suppose this can't be distinguished from the head of the social security administration we were to overrule some members of the court have suggested, do you think it would follow everything ever done by a social security administrator or everything done by the fcc or multimember commissions was void, they would all be wiped off the books? >> the court left open the
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question that if it is a lower-level employee who made the determination the social security administration whether that would have to be avoided but certainly our position is everything done by the principal officers of those agencies would be void. there would be the statute of limitations in article 3 that would limit what would have to be thrown out and in canning this court evaluated those activities. >> do you think if a provision of a massive statute is held to be unconstitutional a person who is not in any way affected by that provision is entitled to relief? >> if they have suffered article 3 injury at the hands of that person and it is a separation of powers case i do think it should be void given the broad prophylactic protections that separation of powers protect.
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>> thank you. >> i want to follow up a little bit on justice alito's question. it does seem counterintuitive perhaps illogical to say assuming you are right that the f hfa director must be removable at will, why you should get anything more than a declaratory judgment to that effect? first, the argument is this decision was entered into by two entities under complete control of the president. there is no dispute that the treasury, treasurer is removable at will. we know what the president would have wanted because he had an agency he fully,
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unequivocally control by the agreement and secondly we have an acting director which almost logically means he could be removable. second no president has ever tried to remove the director, acting or otherwise so given those circumstances i am not sure how this agreement or how the at will termination affected you. why you are entitled to an unwinding of an agreement that was entered into, assuming we will against you that had a
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reasonable business reason for being entered into. >> respectfully we don't know what the president wanted. we know the president was willing to sign this deal otherwise the secretary of the treasury wouldn't of signed it but as my friends on the other side said it took two to tango, this was a negotiation with a republican appointee with whom relationships are gotten so bad that on page 72 we point out there were open calls for him to be fired and the administration cities and acting director and we can't fire him, presumably because 4511 a says it shall be an independent agency of the federal government and under this interpretation that the acting director can be fired it would toggle back from being a radically independent agency to a radically dependent agency. my friend on the other side points to the swan case but that was the ncua and there were three board members and the fact that one of them became dependent didn't transform the agency radically, when you have a single director and say the acting director can
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be fired at will then you just radically transformed the nature of it. in addition even if i'm wrong about that, under 4512 f the president's hands are handcuffed in terms of who he can designate and we challenge the actions of the regulator. for all those reasons we are entitled to relief. >> you argue about the shareholders injury being derivative so i think you are taking the position that anyone holding a share in a company can challenge any agency action that affects the company's stock price. that would seem to be a sea
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change in how administrative law challenges are litigated. >> this is a concern the american power dissent articulated and 75 hours later it hasn't come to fruition and i think it is because of cases like the postal service with a monopoly on international air routes, employees came forward when that monopoly was lost and said that's unheard of economically in the court said they are not within the sound of interest but it is highly protective of shareholders rights. we see the rehabilitation of the conservator and receivership where there is a priority scheme how the money can be distributed and we see that in 4617 be 11 he which requires the conservator to maximize the value of asset sales that protects shareholders more than anyone because they are at the bottom. >> justice kagan. >> mister thompson, to justice alito's question about the social security administration,
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scary sounding numbers, led by a single commissioner since 1994 and ever since then has rendered 650,000 decisions every year, 17 million decisions which you told justice alito there is some exception for lower-level employees. even if they do let's assume which i think is probably true that all of those decisions are rendered pursuant to guidance and rules the ss a commissioner has been forced. are we going to avoid all of those decisions? >> there is the statute of limitations and article 3 limitations. there is also the fact the s s a a is different from the f hfa. we don't think it makes a constitutional difference but it is limited jurisdiction, not running multi-trillion dollar companies so to the extent the
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court wants to try to preserve the social security administration it could potentially try to do that. we don't think it should. we agree that it is unconstitutional and its actions in the statute of limitations should be void. >> isn't it a little bit odd? than of us really think any of those decisions would be different if there was a different level of presidential supervision, do we? >> i think that was right, it was precisely because it wasn't thought it would be different that a new alj was assigned on remand. >> that's a different question, a pointless question, we could come back to that but are you really making a good faith argument that if there were at will removal of social security administration that these 17 million decisions would come out differently or any of them
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would? >> i understand, highly likely they would not the same was true with stern and marshall, unlikely the bankruptcy judge at article 3 protection would have come out a different way on that state law counterclaim and yet still relief was provided and likewise it was unlikely if the president had been able to fire the head of the cfpb that the subpoena for that laufer would have come out any differently. >> in a case like this where we are trying to figure out the proper remedy it is kind of equitable question, isn't it and we are trying to figure out what position you would have been in absence of constitutional violation. wise and that the right question. >> footnote 12 of free enterprise last term rejected that, plaintiffs don't have to
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re-create above for world, we had to go back to 2009 and see what would have happened if director watt had been there the entire time, with the president have preferred to keep the money, spend it on affordable housing rather than send it all to the republican-controlled house of representatives and treasury. >> does that mean we have to do a great deal more than invalidate the third amendment and everything that followed from the? why shouldn't we go back to the first or the second? >> we focused on the third amendment because that is the feature of this that rearranged the capital structure but as we made clear to the circuit court of appeals we are content with all of these arrangements which we say in the complaint we are a concrete life preserver, getting a credit card with a double digit interest rate that you can't repay the debt on, you can't pay the money back. we would be content with it being thrown out.
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>> neil gorsuch. >> your remedial act is a big one and hard for us to follow. i want to follow a couple aspects of it that are particularly important. the first is that once we had a new director in 2014 we heard suggestions that you haven't complained about actions taken after 2014 in your complaint and the only complaint has to do with the entry into the third amendment which took place under a prior director. i would like to understand your thoughts about that first, and second, whether a new constitution only correct director that we ordain today could ratify the actions of an unconstitutional arrangement previously. why would it have to be void? >> on the first question we do
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complain about the implementation. we are complaining about each and every one of the decisions by the director. everyone of these dividend payments declared quarterly, none of them can be paid to the treasury under 12 cfr, 1237.12 and be unless the director blesses those so we complained in the complaint that but for each and every one of those payments there would be $124 billion of extra capital at the companies. the implication of that deletion in our complaint is we are not satisfied that any of these payments were made. as for the court's second question with respect to ratification we don't believe this could be ratified in large part because the government is coming in and trying to justify this by saying there was a death spiral, we didn't know the companies would do so well. now we know they are driving in terms of their profitability as
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the money is siphoned off to treasury but we don't believe they could be ratified now. >> i guess i don't understand the latter answer. a lot of facts in there but wasn't legally, constitutionally, would prohibit the ratification? >> when the underlying rationale the government has proffered is eight years later been totally exposed to have no validity, we don't see how the government could time travel back -- >> i am asking why not? the federal vacancy reform act says that can't be done when it's terms apply but why couldn't we as an equitable remedial dodge do that here? >> the plain language of the
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apa which says the unlawful action shall be set aside, with account taken for the rule of presidential -- prejudicial error but earlier today, we set it is not harmless error. >> that really wasn't my question. if you have any further thoughts white couldn't be ratified let me pose you one last question, the argument that of course the president could have fired the acting director because the vacancy act would normally apply and that would permit them to do so. >> the vacancy act did not apply because it had been 210 days since the senate had rejected the nominee that president obama had sent up and the fdr he had no application at the time of the sweep. >> any reason we shouldn't assume the president could? >> one reason would be weiner.
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weiner said you look at the nature of the function of the office that is vested in the officer, some might think weiner wasn't correctly decided as an original matter congress is entitled to registered against the backdrop so the weiner precedent set here's how you can apply it, look to the nature of the function. it is identical to powers of the director, the regulated director in the plain language of 4511 a. >> brett kavanaugh. >> good morning. picking up on the first part of neil gorsuch's question, the solicitor general in the reply brief on the remedies question starts with marbury. since marbury this court has had direct constitutional claims to deny relief with such
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claims as the they facto officer doctrine, ratification, failure to make a timely objection, and cited other cases where they vacated actions, the solicitor general says those cases show the vacatur is permissible not that it is mandatory in every case and the principles i just mentioned can apply. >> they haven't invoked that. they waived that. >> the solicitor general, obviously the older presidents
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since 1946, shall set aside with the rule of presidential error, that it shall set aside. >> switching gears on arguments made by the amicus, distinguishing other precedents. the amicus, significant executive power. your response to that, was that descriptive language or unnecessary condition before we say we move or restriction on an executive officer is unconstitutional, the amicus says the latter. >> we did not extend this court to have a sliding scale which
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required lower courts to go, and we did not understand it to be establishing the standard, there were significant executive authority. >> the for clause language is not the same. >> weiner tells us what the term for clause means and it is rectitude, it is a higher standard, a smaller subset in malfeasance. >> amicus says on a different friend that the implications for other agencies and it is
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holding to single director, and leave them for another day would be an open issue. what is your reaction to amicus's point for multimember agencies. >> we disagree that. the framework, there would be no reason for the court to go back and redo that. >> thank you. >> justice barrett. >> for structural error, let's assume we think the acting director was removable and there is no constitutional problem with the acting director. let's further imagine the acting director is the one in charge, up until 6 months ago, there's a confirmed director.
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and is this void. at some point, constitutionally invalid officer entered the scene. >> if it was an acting director, 4512 f as well, the court concludes there was no structural problem whatsoever at the agency. the last 6 months of payments, this has been many years, but senate confirmed director -- >> i am trying to figure out how much participation matters. we didn't have constant 100% of the time control by a confirmed director.
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the acting director pose a problem not being entered by the acting director, the participation of the confirmed director that inherited the third amendment. >> it affected the implementation that would invalidate the implementation, illegally constitute -- >> the whole thing would invalidate those actions taken by the confirmed director? >> that is a fair point that the director, could be invalidated. the director's actions he took, but not his predecessor was totally permissible.
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>> the constitutionally problematic officer, the acting director - >> it is a big if, if the court concludes there is no problem with 4512 ask, what did the director do, these approvals. >> i want to be certain, are you asking us, you want an injunction to pay back the billions of dollars. >> we are seeking two things, we are seeking prospect of relief, and making any future sweep, any future sweep dividend payments asking to go back and have the overpayments
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over and above the $18 million to be treated as a payout principle, the government pay back. >> for decades federal conservators and receivers execute powers under statutory schemes indistinguishable from the one at issue here but no conservator or receiver, for the exclusive benefit of the federal government. the current director, quote, fair and predictably applied insolvency rules have investors and creditors to judge the risks of investing of the company. there is no basis to judge what would happen if the company failed given the important role in the resolution of financial
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institutions. the performance of this role, for fairness and predictability. we agree. >> rebuttal? hashim mooppan. >> my colleague is not so many presidential insulation on either side with respect to the acting director, rather than to avoid one. the acting director approved by the president, the president had limited options for who could replace them. it's not a problem about presidential removal or the thing they made, that is available. the other side of the transaction, the treasury secretary is removable by the president. maybe it wouldn't have happened because of other things that
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happened earlier but on that theory the agency could never act going forward, even though this court said it is removable at will, it can take no further action going forward. the circumstances would have been different if not subject to removal in the past. it was insulated, and the acting director and the ones in the mandate. if we assume the third amendment is valid, the implementation is challenged. once the third amendment is valid, how the money is paid. as it paid in cash, ja 179.
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dividends, shall be added to the liquidation whether or not the funds are legally available for dividends. in action cabinet secretary entered into a contract that would pay for five years, $1 million a year. one of the last 3 years of payments could be challenged and it is a legal matter under ballot contract, no decision being made in paying money that is legally owed. on the anti-injunction cars, we have a key point i want to make that this wasn't a
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nationalization, the court below recognized and is two judges explained the court shouldn't second-guess that under the anti-injunction clause. >> thank you, council. mister nielsen, this court appointed you to brief and argue the case in support of the position the structure of the federal housing finance agency does not violate separation of powers. you ably discharged the responsibility for which we are grateful. the case is submitted. >> sunday night on q and a, the american conservative magazine senior editor talks about her book boomers. delivered disaster. >> 1-liner about boomers, the generation that sold out but never admit he sold out. it is a great deal of idealism,
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a noble idea, liberating humanity but a great deal of selfishness and narcissism and blindness to the ways their liberation agenda knocks down a lot of functioning institutions that left a lot of people worse off. >> helen andrews and her book boomers sunday night at 8:00 eastern on q and a. the change votes for president of the united states as follows, joseph r biden junior of the state of delaware has received 306 votes. donald j trump of the state of florida has received 232 votes. >> with the vote in the 2020 presidential election counter and confirmed by congress attention turns to the inauguration of the 46 president of the united states. on january 20th,

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