U.S. Supreme Court takes up Orrick case against Fannie Mae

June.29.2016

Agreeing to address whether suits against Fannie Mae are automatically subject to federal court jurisdiction, the U.S. Supreme Court today granted Orrick’s petition for certiorari in Lightfoot v. Cendant Mortgage Corp. Underscoring the importance of our jurisdictional arguments, the U.S. Solicitor General’s Office had urged the Supreme Court to take the case and rule in favor of the firm’s clients.

Orrick represents Crystal Monique Lightfoot and her mother, Beverly Hollis-Arrington, in a long-running California lawsuit seeking to prevent government-sponsored mortgage lender Fannie Mae and others from foreclosing on their home. The Orrick team now has the opportunity to convince the Supreme Court that the case belongs in state court, not federal court, which our clients – even when representing themselves earlier in the litigation – argued all along.

The issue has potentially far-reaching implications because thousands of suits are filed against Fannie Mae in federal court, and many other entities are governed by similarly worded jurisdictional provisions.

The Lightfoot case centers on whether the statute governing Fannie Mae automatically confers jurisdiction in the federal courts whenever Fannie Mae is a party, even when the case involves purely state law issues. The statute says Fannie Mae “shall have the power to … sue and to be sued … in any court of competent jurisdiction, State or Federal.”

In a 2014 ruling, a divided Ninth U.S. Circuit Court of Appeals determined that Fannie Mae could always be sued in the federal courts, citing a prior Supreme Court case called Red Cross. But in challenging that ruling in the cert petition, Orrick’s team argued that the Ninth Circuit had misunderstood Red Cross. Orrick’s appellate team, led by partners Josh Rosenkranz and Robert Loeb, look forward to persuading the Supreme Court that our reading of the plain language of the statute is correct.

“The cert grant suggests skepticism of the Ninth Circuit’s standard,” Josh said. “The Ninth Circuit reasoning was that if you hold the statute sideways, put it under certain lighting and squint your eyes a little, then maybe it looks like it confers jurisdiction. But this sue-and-be-sued clause is straightforward. Far from conferring jurisdiction, it refers to courts “of competent jurisdiction,” which means that there must be some outside basis of jurisdictional authority to begin with.”

The case will be briefed over the summer and fall, and will likely be argued in late 2016 or early 2017.

In addition to Josh and Bob, the Orrick team includes counsel Tom Bondy and associate Matthew Bush.