[00:00:01] Speaker 02: Case number 16-5070 at L. Caroline Herron, appellant, versus Fannie Mae at L. Ms. [00:00:07] Speaker 02: Barnaby for the appellant, Mr. Johnson for appellee FHFA, and Mr. Caston for appellee Fannie Mae at L. [00:00:53] Speaker 03: May it please the court, I'm Lynn Bernabe representing Ms. [00:00:58] Speaker 03: Heron, the FLI. [00:01:00] Speaker 03: I reserve two minutes for rebuttal. [00:01:03] Speaker 03: This case is about a whistleblower at Fannie Mae who disclosed to Treasury the massive problems in the administration's signature foreclosure program, resulting in the waste of millions of dollars of taxpayer funds. [00:01:15] Speaker 03: There are four key errors I wanted to address. [00:01:19] Speaker 03: First, if this panel decides that Fannie Mae is a private actor [00:01:23] Speaker 03: then the errors are as follows. [00:01:27] Speaker 03: In deciding the wrongful discharge claim, the district court erred in finding key facts [00:01:32] Speaker 03: in the appellee's favor. [00:01:36] Speaker 03: The court found that Ms. [00:01:37] Speaker 03: Herron made no disclosures to Treasury, that her disclosures were not significant, and that it was Treasury, not Fannie Mae, that blocked Ms. [00:01:44] Speaker 03: Herron's move to Treasury. [00:01:46] Speaker 03: All those are against the weight of the evidence, and the district court made findings of material facts in dispute. [00:01:54] Speaker 03: Second, based on the district court's decisions on these disputed facts, it made another erroneous finding that since Ms. [00:02:03] Speaker 03: Herron, the court found, made no disclosures to Treasury, there was no close fit between her reports or criticisms and the clear public policies in the Emergency Economic Stabilization Act. [00:02:16] Speaker 03: 3, the district court area. [00:02:18] Speaker 01: What disclosure did she make? [00:02:20] Speaker 01: Use the word criticism and the word disclosure. [00:02:25] Speaker 01: What is the disclosure you say the judge did not find? [00:02:30] Speaker 03: The disclosure she made to Treasury as admitted by defendants in an internal report of Fannie Mae was that the trial modifications that were based on stated income were [00:02:43] Speaker 03: were not converting to permanent modifications, and that that would jeopardize the success of the program, and that that would lead to a waste of public funds. [00:02:53] Speaker 03: Those were what she said to Treasury, what she said internally, and that's what stopped her. [00:02:57] Speaker 01: Is that a factual matter that was there to fore undisclosed? [00:03:04] Speaker 01: Is that a factual matter that was there before undisclosed? [00:03:08] Speaker 03: It was before the district court. [00:03:10] Speaker 01: No, no, no. [00:03:11] Speaker 01: We're back at the time of the commission of the alleged torts here. [00:03:15] Speaker 01: I'm trying to find out precisely what facts were previously undisclosed at this LA's whistleblower disclosed. [00:03:23] Speaker 03: Oh, well, what was undisclosed that she disclosed to Treasury was that the magnitude of the problem of the failure of the trial modifications not to convert. [00:03:35] Speaker 03: In fact, Fannie Mae, which was primarily responsible, had the most personnel and ran the program for Treasury as a fiduciary to Treasury, was continuously pushing trial modifications based on stated income. [00:03:48] Speaker 03: What wasn't disclosed to Treasury by the administrator of the program was that these were failing, and they were failing at very high rates. [00:03:56] Speaker 03: And she said to Treasury, I'm finding from my talks with servicers these are failing at the rate of 50%. [00:04:04] Speaker 03: In fact, the actual rate at which they failed in retrospect was 90%. [00:04:09] Speaker 03: Fannie Mae was telling Treasury this is a good route, let's get more of these, let's keep pushing, because they were pushing free numbers through their bonuses, not for trial modifications that would succeed. [00:04:22] Speaker 03: There's ample evidence in [00:04:25] Speaker 03: outside of Ms. [00:04:27] Speaker 03: Herron's deposition testimony that the district court ignored, that she made disclosures to Treasury. [00:04:32] Speaker 03: If you look at the Brownwich Report, that's joint appendix 1134, this was Fannie Mae's outside lawyer's investigation into Ms. [00:04:41] Speaker 03: Herron's allegations, Mr. Schopenhauer told Fannie Mae's outside attorneys [00:04:48] Speaker 03: and adopted in his deposition the following statement. [00:04:52] Speaker 03: He acknowledged that during the conversation with Ms. [00:04:54] Speaker 03: Herron on her December 18th, he asked Ms. [00:04:57] Speaker 03: Herron, quote, not to be mean to Fannie Mae after she moved to Treasury. [00:05:03] Speaker 03: He acknowledged, and this is a quote, having developing concerns that Ms. [00:05:07] Speaker 03: Herron had criticized Fannie Mae to Treasury. [00:05:10] Speaker 03: And he admitted that these concerns about Ms. [00:05:12] Speaker 03: Herron's criticisms of Fannie Mae may have affected his views about Ms. [00:05:18] Speaker 03: Herron's proposed transition to Treasury. [00:05:22] Speaker 03: Ms. [00:05:22] Speaker 03: Brown, another of Ms. [00:05:24] Speaker 03: Herron's supervisors, who blocked her move, also told Fannie Mae investigators that she was concerned when Ms. [00:05:30] Speaker 03: Herron told her, quote, Treasury wants to take a more active and high-touch role with servicers. [00:05:36] Speaker 03: And Mr. Schupenhaar responded to this email by saying he was very concerned about Ms. [00:05:41] Speaker 03: Herron because I think she trashes to Treasury. [00:05:44] Speaker 03: What did she say to Treasury in response to your question, Judge Santel? [00:05:49] Speaker 03: Mr. Schuppenhauer also told the Brownwich investigators about Ms. [00:05:53] Speaker 03: Herron's disclosures. [00:05:54] Speaker 03: He said, Ms. [00:05:55] Speaker 03: Herron had criticized the trial modification conversion campaign in early December 2009 on the grounds that the campaign would not have been necessary if HAMP had required verified trial modifications from the outset. [00:06:07] Speaker 03: This joint appendix 1134. [00:06:10] Speaker 03: So it's clear from the record, in fact from the mouths of the individual defendants, that Ms. [00:06:17] Speaker 03: Herron made disclosures to Treasury about significant problems in the program that jeopardized the program. [00:06:26] Speaker 03: There's also evidence contrary to the district court's finding of fact that these problems that she reported [00:06:35] Speaker 03: were significant and alarmed Fannie Mae's executives who were trying to suppress the problems. [00:06:42] Speaker 03: For example, the evidence shows that Ms. [00:06:45] Speaker 03: Herron reported in her memo, which she also reported to Treasury, that a half million or more of the million homeowners involved, enlisted in these trial modifications would fail, which implicitly meant the program was a gross waste of funds. [00:07:01] Speaker 03: She also told them that the, [00:07:04] Speaker 03: contrary to what was required in ESA that this meant, if these trial modifications failed, it meant that the homeowners would not be able, many of them, to enroll in other modification programs and they would lose their home. [00:07:22] Speaker 03: Now, there's no evidence that anyone else from Fannie Mae advocated the Treasury to stop the trial modifications. [00:07:29] Speaker 03: In fact, Ms. [00:07:30] Speaker 03: Brown never advocated. [00:07:31] Speaker 03: She reported something that was said in the meeting. [00:07:35] Speaker 03: She didn't advocate as the appealing state. [00:07:40] Speaker 03: Mr. Edwards never talked to Treasury. [00:07:42] Speaker 03: He was the executive vice president of Fannie Mae. [00:07:48] Speaker 03: And there was a report that went over from Fannie Mae. [00:07:52] Speaker 03: But again, it was buried in a general report of the program. [00:07:57] Speaker 03: And no one except Ms. [00:07:58] Speaker 03: Herron forcibly argued to Treasury, you have to stop the trial and modification program because it's leading to a growth rate defunct. [00:08:06] Speaker 03: There's also ample evidence that it was Fannie Mae and not Treasury that blocked Ms. [00:08:12] Speaker 03: Herron's move to Treasury. [00:08:13] Speaker 03: In fact, Eric Schopenhauer testified to that in the portion of the Bromwich Report that he adopted in his deposition. [00:08:22] Speaker 03: There is also uncontradicted, we believe, uncontradicted testimony from the Treasury officials that they stopped looking at these ethics issues. [00:08:31] Speaker 03: They stopped considering her move to Treasury [00:08:35] Speaker 03: after Fannie Mae told them this would not proceed. [00:08:38] Speaker 03: First of all, there's emails, definitive emails between Eric Schupenhauer and Ms. [00:08:45] Speaker 03: Giardini saying, we do not want this transfer to go on. [00:08:50] Speaker 03: We do not want it to proceed. [00:08:52] Speaker 03: This was on December 21st. [00:08:54] Speaker 03: in the midst of what you all may remember was one of the worst snow storms in Washington's history. [00:08:59] Speaker 03: And Ms. [00:09:00] Speaker 03: Jardini responded, got it. [00:09:02] Speaker 03: The next day, just to underline his point, Mr. Schopenhauer told Ms. [00:09:06] Speaker 03: Jardini, to be clear, I don't want it to go forward. [00:09:10] Speaker 03: Ms. [00:09:10] Speaker 03: Giardini then wrote an email saying, and I think this is interpreted as a cover story, she, quote, hoped to persuade Treasury that Ms. [00:09:20] Speaker 03: Herron's move was a bad idea for everyone, including Treasury, without appearing to kill the proposal. [00:09:28] Speaker 03: The evidence from Treasury officials, again, is uncontradicted that they stopped working on this problem. [00:09:34] Speaker 03: This is Lori Adams, the compliance officer for Treasury. [00:09:37] Speaker 03: They stopped working on the 10 questions once Fannie Mae said it wouldn't go forward. [00:09:42] Speaker 03: And Ms. [00:09:42] Speaker 03: Gertz from Treasury also said, it wasn't us who stopped the transfer or the positioning. [00:09:49] Speaker 03: We wanted it. [00:09:51] Speaker 03: We wanted it to continue. [00:09:53] Speaker 03: And therefore, if one sets aside the erroneous factual findings that the court made or the disputed issues and material fact that the court decided in the defendant's favor, you get to whether there's a close fit between her disclosures to Treasury, that is, that the [00:10:12] Speaker 03: that the trial modifications were not converting in significant amounts and whether that would, in her mind, there was a waste of government funds because it was a waste to put this money into trial modifications when these core closures would not be prevented. [00:10:31] Speaker 03: And both sections 5201 and 5213 of ESA satisfy or show the close fit. [00:10:39] Speaker 03: In 5201 of ESA, there's a statement that the purpose of this legislation is, in two A, to protect home values, in two B, to preserve home ownership and promote jobs and economic growth, C, to maximize overall returns to the taxpayer, [00:10:59] Speaker 03: 5213 of ESA. [00:11:01] Speaker 03: This is Joint Appendix 0370 and Joint Appendix 0131. [00:11:06] Speaker 03: It shows that the purpose of ESA is to protect the interests of taxpayers by maximizing overall returns and minimizing the impact on the national debt. [00:11:17] Speaker 03: And three, the need to help families keep their homes. [00:11:21] Speaker 03: So the whole purpose of ESA, and going back to this period in our history, 2008, was to take [00:11:29] Speaker 03: enormous government funds to dig out the housing industry. [00:11:33] Speaker 03: And Fannie Mae was the agent of Treasury to do that through this foreclosure program. [00:11:40] Speaker 03: And the cost of that was that Congress wanted to make sure that if there was this enormous infusion of funds into entities such as Fannie Mae, that they were used effectively. [00:11:50] Speaker 03: They weren't wasted. [00:11:52] Speaker 04: But the public policy exception here, because she's an at-will employee. [00:11:57] Speaker 04: And so that public policy exception is always characterized as quite narrow. [00:12:04] Speaker 04: And so before we even get to the close fit, don't we have to decide whether ESA is the kind of statute that would even give rise to this exception? [00:12:16] Speaker 03: Yes, Your Honor, you do. [00:12:17] Speaker 03: And we think in this case, the district court did find [00:12:20] Speaker 03: that there was a clear public policy. [00:12:23] Speaker 03: If you read, and I think this is the best way to do it, is look at the statute itself and there are clear public policies that it was to [00:12:34] Speaker 03: save homeownership to the extent possible and to save taxpayers money because of the enormous infusion of funds. [00:12:40] Speaker 04: And that's true. [00:12:42] Speaker 04: That's a general public policy. [00:12:43] Speaker 04: But don't we have to have something in the statute or the regulation that really prohibits the conduct that the whistleblower is focusing on? [00:12:54] Speaker 03: Yes. [00:12:55] Speaker 03: But if you look at the close fit, which is, and I think it's easy, easy. [00:13:00] Speaker 03: It's it's you're able to do that if you look at the memo she wrote because the memo she wrote [00:13:05] Speaker 03: is states what her disclosures were. [00:13:08] Speaker 03: And the memo she wrote states very clearly, these trial modifications will not convert. [00:13:14] Speaker 03: If they don't convert in the amounts that we're seeing now, the 50% or more, that means that there'll be a great waste of public funds. [00:13:23] Speaker 03: It means people will lose their homes because their credit is hurt, and 50% of these people will never convert, and then there's also [00:13:31] Speaker 03: These are very expensive modifications, and if they fail, then they're going to waste public funds. [00:13:39] Speaker 03: So exactly the two policies set forth in the statute were things that she said were being violated. [00:13:45] Speaker 03: They weren't saving people's homes through the way Fannie Mae was implementing the program. [00:13:49] Speaker 03: and they weren't saving or using efficiently taxpayer money. [00:13:53] Speaker 03: So we think this is about as close to fit as you can get in terms of what she was doing. [00:13:59] Speaker 03: With respect to the tortious interference with contract claim, did Carolyn Herron have an expectancy we also think the court made erroneous [00:14:09] Speaker 03: decided, disputed issues of material fact. [00:14:13] Speaker 03: The weight of the evidence is that she had an expectancy in continued contract employment with Treasury. [00:14:19] Speaker 03: Treasury wanted her. [00:14:19] Speaker 03: The job was there. [00:14:20] Speaker 03: They were pushing to get her. [00:14:22] Speaker 03: Secondly, the weight of the evidence is that others in Fannie Mae wanted her to work for them. [00:14:28] Speaker 03: That's Mr. McGee, who had a job for her that Fannie Mae lawyers said, well, there's a situation with Carolyn. [00:14:34] Speaker 03: You can't take her. [00:14:35] Speaker 03: Fannie Mae and the judge accepted that there was a contract review for contract every four month, six month basis and that that review was going to come up in March. [00:14:49] Speaker 03: Fannie Mae's 30B6 representative testified, and this is on [00:14:54] Speaker 03: the contractors were extended on a routine basis for years. [00:14:59] Speaker 03: Some nearly served three years on a contract. [00:15:03] Speaker 03: And so just because the contract was coming up for review, as long as there were work to do, people were routinely extended. [00:15:11] Speaker 03: Same thing with the issue of the [00:15:14] Speaker 03: Ms. [00:15:16] Speaker 03: Brown testified to the same thing, that contracts were automatically reviewed as long as there were work to do and the contract was fine. [00:15:25] Speaker 03: In terms of the other perspective expectancies, there was Rich McGee who had a job for Ms. [00:15:32] Speaker 03: Herron that he was told he couldn't give her, and as I said, Treasury wanted her as well. [00:15:38] Speaker 03: I'd like to address, in short, the state actor versus private actor. [00:15:44] Speaker 03: The district court aired when it looked at the question, and this is what, that FHFA did not have permanent control over Fannie Mae. [00:15:53] Speaker 03: It said on June Appendix 195 through June 6, the critical issue is whether the government through FHFA permanently controls Fannie Mae. [00:16:02] Speaker 03: The court concludes that it does not. [00:16:04] Speaker 03: In reaching this, the court looked at the wrong issue. [00:16:07] Speaker 03: The proper issue is whether the federal government controls Fannie Mae, not FHFA. [00:16:13] Speaker 03: And that's what the Supreme Court set out in both LeBron and in the Department of Transportation case. [00:16:19] Speaker 03: They set out a list of factors. [00:16:22] Speaker 03: is to be looked at. [00:16:23] Speaker 03: And as this court knows from dealing with the Perry Capital case, the government is going to determine Fannie Mae's future, not FHFA. [00:16:32] Speaker 03: That's stated in a number of points in the joint stipulation. [00:16:36] Speaker 03: It's clear at this point and stated in multiple government documents that Fannie Mae is not going to be allowed to be recapitalized. [00:16:44] Speaker 03: So it cannot, there's a sweep of its profits, and it is not going to be allowed to become private ever again. [00:16:52] Speaker 03: and Treasury directed Fannie Mae to reduce its portfolio. [00:16:55] Speaker 03: The government decides the compensation from the CEO. [00:16:59] Speaker 03: The government decides that Fannie Mae is completely dependent on financial support through the guarantees of its loans. [00:17:06] Speaker 00: Has any other case, any other court held that Fannie Mae is a government actor for these purposes? [00:17:12] Speaker 03: Not on constitutional claims, but I do believe that if you look at then Judge Gorsuch's decision in the Ackerman case, that speaks to the situation here. [00:17:26] Speaker 03: That was the case, if the court recalls, in the Tenth Circuit, where the court ruled that the Center for Missing and Exploited Children [00:17:36] Speaker 03: was transformed into a government entity with constitutional responsibilities. [00:17:42] Speaker 03: That's what we think we have here. [00:17:44] Speaker 03: That it was a formerly private entity that transformed into a government entity. [00:17:50] Speaker 03: And it's sort of the history of Fannie Mae. [00:17:53] Speaker 03: It was originally federally chartered as a government entity. [00:17:57] Speaker 03: In 1938, it changed to a private entity by 1968 when the government decided it wanted it to be private for various policy reasons. [00:18:06] Speaker 03: And after the conservatorship, it transformed back into a government entity. [00:18:11] Speaker 03: We also looked at if the court decides the issue is permanency, [00:18:15] Speaker 03: You look at permanency. [00:18:17] Speaker 03: You have to look at permanency as of the time that the decision is being made. [00:18:21] Speaker 03: The district court made the decision in 2012. [00:18:23] Speaker 03: There was ample evidence, in fact overwhelming evidence, that the federal government had total control of the payment. [00:18:30] Speaker 03: Now it's even more clear with the sweep of its profits, its direction to... [00:18:38] Speaker 03: eliminate its portfolio. [00:18:42] Speaker 03: There's a third possibility. [00:18:43] Speaker 03: The court, and as Judge Kavanaugh pointed out, there hasn't been a court that has decided this particular issue. [00:18:50] Speaker 03: There's a third possibility, and that's set forth in the case of Alley v. Resolution Trust, where by then Judge Ginsburg, who was on this court, [00:19:01] Speaker 03: She said that or the court said that the Fannie Mae or any entity can be public for some reasons and private for other reasons. [00:19:12] Speaker 03: In this case, you have the rather unique situation that Fannie Mae, when Carolyn Heron was working for Fannie Mae, was running a government program. [00:19:21] Speaker 03: It was a very unique situation that it was essentially the alter ego of Treasury in running a federal program, making homes affordable. [00:19:29] Speaker 03: And in running that program, it took certain actions and fired Ms. [00:19:34] Speaker 03: Herron. [00:19:35] Speaker 03: It was not, in fact, its duties in a private capacity with its private portfolio. [00:19:43] Speaker 03: It was totally separate from what it was doing under this program. [00:19:48] Speaker 03: Thank you. [00:19:50] Speaker 03: I see that all around the time, and I apologize. [00:19:59] Speaker 05: Thank you, Your Honors. [00:20:00] Speaker 05: May it please the Court, I'm Michael Johnson, representing the Federal Housing Finance Agency. [00:20:04] Speaker 05: I'm here to address only one issue, the government actor issue. [00:20:07] Speaker 05: The Court should affirm the dismissal of Bivens' claim because Fannie Mae is not, and was not, a government actor for purposes of constitutional claims. [00:20:16] Speaker 05: I want to make two basic points. [00:20:19] Speaker 05: First, my friend Miss Bernabe is asking this Court to split. [00:20:22] Speaker 05: It's asking this Court to split with not one other circuit, but with three. [00:20:26] Speaker 05: The Fourth, Sixth, and Ninth Circuits have all held, applying the law on Ms. [00:20:30] Speaker 05: Bernabe sites, the LeBron case, that Fannie Mae, or the very similarly situated Freddie Mac, is not a government actor for constitutional purposes. [00:20:41] Speaker 05: No court, no federal court, has held that it is. [00:20:45] Speaker 05: And Ms. [00:20:45] Speaker 05: Heron, the second point I want to make is that Ms. [00:20:48] Speaker 05: Heron mixes and matches two different strands of government actor law. [00:20:52] Speaker 05: There's a legal structure analysis under LeBron. [00:20:56] Speaker 05: where a court will analyze whether a particular entity is part of the government for all purposes, that is, in everything it does. [00:21:05] Speaker 05: It can be deemed part of the government. [00:21:08] Speaker 05: That's Lebron. [00:21:09] Speaker 05: Separately, we have the Brentwood type analysis. [00:21:13] Speaker 05: It's a fair attribution analysis. [00:21:15] Speaker 05: Can the complained of act here, the termination of Ms. [00:21:21] Speaker 05: Herron, be fairly attributed to the federal government? [00:21:24] Speaker 05: In this case, [00:21:26] Speaker 05: Ms. [00:21:26] Speaker 05: Herron's arguments fail on both. [00:21:28] Speaker 05: Under LeBron, as reiterated in the DOT of the American Railroad Association case, the issue is whether the government has permanent control, permanent structural control as a matter of law. [00:21:43] Speaker 05: The Supreme Court looked at the statute that established Amtrak, said, yes, government created the corporation. [00:21:51] Speaker 05: Check. [00:21:52] Speaker 05: Yes. [00:21:53] Speaker 05: Government controls its operation because it has the ability to appoint a controlling majority of the board of directors. [00:22:00] Speaker 05: Yes. [00:22:00] Speaker 05: Is that control permanent? [00:22:02] Speaker 05: Ram track, yes. [00:22:03] Speaker 05: But when we look at LeBron and see how it analyzed that permanence issue, we see that whatever control the government has over Fannie Mae now is not permanent. [00:22:14] Speaker 05: LeBron includes two examples. [00:22:15] Speaker 05: First, it says, where the government acquires ownership of a corporation's stock, that is temporary, not permanent. [00:22:24] Speaker 05: And that's because it's not as a matter of law. [00:22:27] Speaker 05: Yes, it's controlled, but it's not [00:22:30] Speaker 05: legal, structural control. [00:22:34] Speaker 05: And here, what we've got is a conservatorship. [00:22:36] Speaker 05: Conservatorship, as all courts have held so far, look at the question, inherently temporary. [00:22:42] Speaker 05: So the control is not permanent. [00:22:45] Speaker 05: Nor is the control a conservator or, most similar, probably even more controlling federal entity as a receiver, nor is that considered governmental control. [00:22:56] Speaker 05: Because conservators and receivers step into the private shoes of the entity in conservatorship or receivership. [00:23:03] Speaker 05: And we can see that not only in the 4th, 6th, and 9th Circuit cases addressing Fannie Mae and Freddie Mac, but in the 5th Circuit case addressing an RTC receivership in the Besborn case. [00:23:14] Speaker 05: In that case, the receiver extracted a civil judgment that included punitive damages. [00:23:21] Speaker 05: And then the government brought criminal charges against the same people for the same conduct. [00:23:28] Speaker 05: And those defendants said, hey, wait a minute. [00:23:29] Speaker 05: Wait a minute. [00:23:30] Speaker 05: I've already been punished by the government. [00:23:33] Speaker 05: The Double Jeopardy Clause precludes these criminal charges. [00:23:37] Speaker 05: And the Fifth Circuit said no. [00:23:38] Speaker 05: Receiver, not the government. [00:23:41] Speaker 05: Now, why is that so important here? [00:23:44] Speaker 05: My friend Ms. [00:23:44] Speaker 05: Barnaby says, well, the government may have indefinite control over Fannie Mae. [00:23:50] Speaker 05: We don't know when the conservatorship is going to end or how it's going to end. [00:23:54] Speaker 05: And I agree with that. [00:23:56] Speaker 05: But that's not dispositive, because in the case of a receivership, like the Besborn case, we know exactly how a receivership is going to end. [00:24:05] Speaker 05: The government will control the receivership until it's gone. [00:24:10] Speaker 05: The entire rest of the life of that entity is under the control of the federal receivership, and that is not enough to convert it into a federal actor. [00:24:21] Speaker 05: So even if we knew [00:24:24] Speaker 05: that the conservatorship would last 10 years, 20 years, 50 years. [00:24:30] Speaker 05: It's no different from receiverships, which by the way, on average, last about nine years. [00:24:36] Speaker 05: So this is not something far outside of the mainstream. [00:24:40] Speaker 05: That's not enough to make it a government act. [00:24:44] Speaker 05: Ms. [00:24:45] Speaker 05: Vurnabey looks at the Brentwood line of cases. [00:24:49] Speaker 05: What's the problem with that? [00:24:51] Speaker 05: The problem is what she wants to attribute to the government. [00:24:56] Speaker 05: The acts she wants to attribute to the government can't be fairly attributed to Treasury, which is her argument, because they were adverse to Treasury's interests. [00:25:07] Speaker 05: Look at what she said to the court in her argument. [00:25:10] Speaker 05: Treasury wanted Herron. [00:25:14] Speaker 05: Treasury wanted Heron, and she alleges Fannie Mae thwarted it. [00:25:21] Speaker 05: And that's throughout her brief, Your Honors, throughout her brief. [00:25:24] Speaker 05: Thwarted, pages 10 and 11. [00:25:26] Speaker 05: Impeded, page 12. [00:25:28] Speaker 05: Fannie Mae engaged in a charade, page 18. [00:25:31] Speaker 05: Deception against Treasury, page 16 and 19. [00:25:34] Speaker 05: Put obstacles in the way of Treasury's desires, page 19. [00:25:39] Speaker 05: Page four of her reply brief, Fannie Mae misled Treasury. [00:25:44] Speaker 05: fairly attribute to Treasury acts that are undermining rather than advancing Treasury's policy. [00:25:52] Speaker 05: And we know that from the Brentwood case itself, because when it's discussing the Polk County decision, it says state action doctrine does not convert opponents into virtual agents. [00:26:07] Speaker 05: And that's a case where a public defender, although being paid by the government, was not deemed a government actor because it was actively opposing the government in the case. [00:26:18] Speaker 05: That's Ms. [00:26:19] Speaker 05: Herron's allegation here, that Fannie Mae was interfering and impeding Treasury's attempts to advance its policies. [00:26:27] Speaker 05: And that simply cannot be fairly imputed to Treasury. [00:26:33] Speaker 05: Court should affirm the dismissal of Bivens' claim because Fannie Mae is not a government actor under Edo LeBron or Brentwood. [00:26:40] Speaker 05: I'd be happy to answer questions, otherwise I'll yield the imbalance of my time to Mr. Casta. [00:26:58] Speaker 06: Good morning, Your Honors. [00:26:59] Speaker 06: Ira Kasdan on behalf of Appellee Fannie Mae and the individual appellees. [00:27:05] Speaker 06: I'll begin with the wrongful termination argument that Ms. [00:27:09] Speaker 06: Burnaby addressed first. [00:27:11] Speaker 06: And Judge Round, you're absolutely right. [00:27:13] Speaker 06: You don't have to get to the close fit issue at this stage in this case at all. [00:27:18] Speaker 06: This is the one place that we believe that Judge Collier made a mistake. [00:27:22] Speaker 06: And that is in finding that there was a public policy exception to the appellee doctrine here. [00:27:28] Speaker 06: And that is because, as Judge Brown, you mentioned, any public policy has to be a narrow one. [00:27:35] Speaker 06: And the Court of Appeals and DC has made it perfectly clear that such public policy has to be officially established in the statute, it has to be clearly reflected, it has to be firmly anchored in the statute. [00:27:47] Speaker 06: Again, as Judge Brown has made clear, usually, in all these cases, the common denominator is that there is prohibitory language in the statute. [00:27:56] Speaker 06: That's when the legislature is telling you that there's a public policy. [00:28:00] Speaker 06: Here, ESA contains no prohibitory language. [00:28:03] Speaker 06: There's no allegation that Fannie Mae violated any prohibitions in ESA. [00:28:09] Speaker 06: And as a consequence, ESA is not a whistleblower statute. [00:28:13] Speaker 06: It says nothing about gross waste or gross mismanagement. [00:28:16] Speaker 06: Judge Collier only talked about goals in ESA, but goals are insufficient. [00:28:22] Speaker 06: Again, it has to be something that is firmly established in the statute. [00:28:26] Speaker 06: It's not present over here. [00:28:27] Speaker 06: The Rossella Court in DC Court of Appeals said that courts have to refrain from defining nebulous concepts of public policy. [00:28:36] Speaker 06: And courts are not to evaluate actions where the public policy exception simply tends to be injurious to the public or against the public good. [00:28:43] Speaker 06: That's the best that can be said over here. [00:28:45] Speaker 06: As a consequence, Your Honors can affirm by simply saying that there is no public policy exception to begin with. [00:28:52] Speaker 06: But even if, Your Honor, we're to look at the facts in this case, Judge Collier certainly was right on point in saying that there's no close fit between the alleged protected activities and the alleged public policy in this case. [00:29:08] Speaker 06: The only written document [00:29:11] Speaker 06: upon which Ms. [00:29:12] Speaker 06: Burnaby relies with respect to her wrongful termination issue is an email. [00:29:20] Speaker 06: An email that was written by Ms. [00:29:21] Speaker 06: Herron in November of 2009, internally to Fannie Mae, [00:29:27] Speaker 06: There's nothing in the record that that email went to Treasury. [00:29:31] Speaker 06: There's no CC on it to Treasury. [00:29:34] Speaker 06: In fact, Ms. [00:29:35] Speaker 06: Herron herself contradicted herself in testimony. [00:29:39] Speaker 06: When she was asked whether or not this ever went to Treasury, she said, well, I thought so, but I see that there's no CC. [00:29:46] Speaker 06: Later on, she decided, oh, yes, I remember I sent it. [00:29:49] Speaker 06: But the fact of the matter is that Ms. [00:29:51] Speaker 06: Caldwell and Ms. [00:29:51] Speaker 06: Gertz and everybody else at Treasury [00:29:54] Speaker 06: never received it, and that's what they testified to. [00:29:57] Speaker 06: There's nothing in the record whatsoever that would corroborate these claims of wrongful, of mismanagement and waste of public policy, of public funds. [00:30:11] Speaker 06: And again, as [00:30:14] Speaker 06: I believe you were saying. [00:30:16] Speaker 06: There are no disclosures over here. [00:30:18] Speaker 06: There has to be a disclosure. [00:30:19] Speaker 06: If there's no disclosure, then there's no close fit. [00:30:22] Speaker 06: And there's no reason that this court can find that there was any disclosure because it's clear from the record that Ms. [00:30:29] Speaker 06: Brown [00:30:29] Speaker 06: who is Ms. [00:30:31] Speaker 06: Herron's superior, back in June of 2009, told Treasury about the problems with stated trial modifications as found in the Joint Appendix at 721. [00:30:40] Speaker 06: The New York Times reported the problem, and if the New York Times knew about the problem, and certainly everybody else knew about it, that's in the record at Joint Appendix 869. [00:30:52] Speaker 06: And if you look at Ms. [00:30:54] Speaker 06: Herron's email, [00:30:55] Speaker 06: Again, it says nothing about mismanagement or waste of public funds. [00:31:00] Speaker 06: There's nothing that was disclosed there. [00:31:02] Speaker 06: And indeed, Ms. [00:31:03] Speaker 06: Brown, her superior, responded immediately to that email, and here's what she wrote. [00:31:07] Speaker 06: This is in the appendix at 723. [00:31:09] Speaker 06: This is great. [00:31:10] Speaker 06: The good news here is nothing new to report. [00:31:13] Speaker 06: So based on the law, based on the facts, there's no lawful termination case here at all. [00:31:20] Speaker 06: With respect to tortious interference, again, she has no case. [00:31:26] Speaker 06: And the reason for that is the McManus case in the D.C. [00:31:30] Speaker 06: Court of Appeals, which she doesn't even address. [00:31:33] Speaker 06: Ms. [00:31:33] Speaker 06: Burnaby does not address in her papers to this court, and as Judge Connolly found, was conceded below. [00:31:41] Speaker 06: It's indisputable that Ms. [00:31:43] Speaker 06: Herrod was an at-will contractor, and as a consequence, under the McManus case, she has no claim for tortious interference to remain a feinty-maid, at-will contractor, even though she wanted to be physically located or embedded at Treasury. [00:31:58] Speaker 06: The Court of Appeals was expressed, as it says, this court never has held an employee can maintain a suit for interference with prospective advantages where expectancy was based on an admiral relationship and we do not do so now. [00:32:13] Speaker 06: That ends the case with respect to tortious interference. [00:32:16] Speaker 06: With regards to tortious interference, [00:32:18] Speaker 06: with her desire to get a non-hemp job within Fannie Mae. [00:32:23] Speaker 06: Again, she would still remain an at-will contractor at Fannie Mae, and as a consequence under McManus, there is no valid business expectancy. [00:32:32] Speaker 06: In fact, the record is very clear. [00:32:34] Speaker 06: She didn't even get an interview. [00:32:35] Speaker 06: There was no assurances whatsoever, let alone any job offer. [00:32:40] Speaker 06: So again, she has no claim. [00:32:41] Speaker 06: With respect to her interference claim within the mortgage finance industry, again, the indisputable fact is that there was no job offer. [00:32:50] Speaker 06: There were no assurances whatsoever. [00:32:51] Speaker 06: The only instance that she talked about was with respect to the Collingwood Group. [00:32:56] Speaker 06: Mr. Rood, who is the owner of Collingwood, was very explicit in his testimony and say, [00:33:01] Speaker 06: There was no job offer, there was no expectancy there whatsoever. [00:33:06] Speaker 06: I would just add one last point, and that's with regard to the Bivens issue. [00:33:10] Speaker 06: We joined with FHFA in urging this court to find, as Judge Collier did, that Fannie Bay is not a governmental actor. [00:33:17] Speaker 06: But if even assume an arguing though that that were to be the case, still there is no difference claim that would lie. [00:33:23] Speaker 06: And that's because Ms. [00:33:25] Speaker 06: Herring had alternative state remedies which she availed herself to. [00:33:30] Speaker 06: And those are the cautious interference claims and the wrongful termination claims that she made. [00:33:34] Speaker 06: Of course, if the court has any questions, I'd be happy to address them. [00:33:41] Speaker 04: Thank you. [00:33:42] Speaker 04: Thank you very much. [00:33:44] Speaker 04: Ms. [00:33:46] Speaker 04: Burnaby, you didn't have any time remaining. [00:33:48] Speaker 04: We'll give you one moment of rebuttal time. [00:33:53] Speaker 03: I'd like to address Fannie Mae's claim that there were no disclosures if you're [00:34:00] Speaker 03: If the panel looks at the Brown Witch Report, it would be clear there were disclosures to treasuring, and the individual defendants acknowledged that. [00:34:07] Speaker 03: Whether they were important or not, that is a disputed issue of material fact. [00:34:13] Speaker 03: Fannie Mae was the administrator for the program, and as the administrator told treasuring what was important and what was not, it was essentially the alter ego of treasuring. [00:34:22] Speaker 03: for this program. [00:34:24] Speaker 03: It was called a fiduciary under its contract. [00:34:26] Speaker 03: And as to the last point of intentional interference with contractual relations, this is not an intentional interference with contract claim, which we believe the court mistook it for. [00:34:41] Speaker 03: It's an intentional interference with advantageous perspective business relations, advantageous contractual relations. [00:34:47] Speaker 03: That's in the future. [00:34:48] Speaker 03: That is available to persons even in an at-will position who have the distinct possibility of future employment, which Ms. [00:34:58] Speaker 03: Sharon had both with the Treasury and with Mr. McGee. [00:35:01] Speaker 03: Thank you. [00:35:02] Speaker 03: All right. [00:35:02] Speaker 03: Thank you. [00:35:03] Speaker 03: Case will be submitted.