Freddie Mac 2015 Annual Report Download - page 325

Financial Statements Notes to the Consolidated Financial Statements | Note 15
Freddie Mac 2015 Form 10-K 323
and asserts claims for antitrust violations, breach of contract, tortious interference with contract and fraud.
Freddie Mac filed an amended complaint in July 2013, and a second amended complaint in October
2014. The defendants have moved to dismiss the second amended complaint; Freddie Mac has opposed
this motion. In August 2015, the Court dismissed the portion of our claim related to antitrust violations and
fraud and we filed a motion for reconsideration.
LITIGATION CONCERNING THE PURCHASE AGREEMENT
Since July 2013, a number of lawsuits have been filed against us concerning the August 2012
amendment to the Purchase Agreement, which created the net worth sweep dividend provisions of the
senior preferred stock. The plaintiffs in the lawsuits allege that they are holders of common stock and/or
junior preferred stock issued by Freddie Mac and Fannie Mae. (For purposes of this discussion, junior
preferred stock refers to the various series of preferred stock of Freddie Mac and Fannie Mae other than
the senior preferred stock issued to Treasury.) It is possible that similar lawsuits will be filed in the future.
The lawsuits against us are described below.
Litigation in the U.S. District Court for the District of Columbia
In re Fannie Mae/Freddie Mac Senior Preferred Stock Purchase Agreement Class Action Litigations. This
case is the result of the consolidation of three putative class action lawsuits: Cacciapelle and Bareiss vs.
Federal National Mortgage Association, Federal Home Loan Mortgage Corporation and FHFA, filed on
July 29, 2013; American European Insurance Company vs. Federal National Mortgage Association,
Federal Home Loan Mortgage Corporation and FHFA, filed on July 30, 2013; and Marneu Holdings, Co.
vs. FHFA, Treasury, Federal National Mortgage Association and Federal Home Loan Mortgage
Corporation, filed on September 18, 2013. (The Marneu case was also filed as a shareholder derivative
lawsuit.) A consolidated amended complaint was filed in December 2013. In the consolidated amended
complaint, plaintiffs allege, among other items, that the August 2012 amendment to the Purchase
Agreement breached Freddie Mac's and Fannie Mae's respective contracts with the holders of junior
preferred stock and common stock and the covenant of good faith and fair dealing inherent in such
contracts. Plaintiffs sought unspecified damages, equitable and injunctive relief, and costs and expenses,
including attorney and expert fees.
The Cacciapelle and American European Insurance Company lawsuits were filed purportedly on behalf of
a class of purchasers of junior preferred stock issued by Freddie Mac or Fannie Mae who held stock prior
to, and as of, August 17, 2012. The Marneu lawsuit was filed purportedly on behalf of a class of
purchasers of junior preferred stock and purchasers of common stock issued by Freddie Mac or Fannie
Mae over a not-yet-defined period of time.
Arrowood Indemnity Company vs. Federal National Mortgage Association, Federal Home Loan Mortgage
Corporation, FHFA and Treasury. This case was filed on September 20, 2013. The allegations and
demands made by plaintiffs in this case were generally similar to those made by the plaintiffs in the In re
Fannie Mae/Freddie Mac Senior Preferred Stock Purchase Agreement Class Action Litigations case
described above. Plaintiffs in the Arrowood lawsuit also requested that, if injunctive relief were not
granted, the Arrowood plaintiffs be awarded damages against the defendants in an amount to be
determined including, but not limited to, the aggregate par value of their junior preferred stock, the total of
which they stated to be approximately $42 million.