United States Court of Appeals For the First Circuit

No. 20-1673

NERIS MONTILLA, on behalf of herself and all others so similarly situated; MICHAEL KYRIAKAKIS, on behalf of himself and all others so similarly situated,

Plaintiffs, Appellants,

ROSELIA MONTUFAR, on behalf of herself and all others so similarly situated; RUBEN VELASQUEZ, on behalf of himself and all others so similarly situated,

Plaintiffs,

v.

FEDERAL NATIONAL MORTGAGE ASSOCIATION; FEDERAL HOUSING FINANCE AGENCY,

Defendants, Appellees,

MR. COOPER, f/k/a Nationstar Mortgage, LLC; SETERUS, INC.; C.I.T. BANK, N.A.,

Defendants.

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF RHODE ISLAND

[Hon. William E. Smith, U.S. District Judge]

Before

Lynch and Kayatta, Circuit Judges, and Woodcock,* District Judge.

* Of the District of Maine, sitting by designation. Todd S. Dion for appellants. Michael A.F. Johnson, with whom Dirk C. Phillips and Arnold & Porter Kaye Scholer LLP were on brief, for appellee Federal Housing Finance Authority. Noah A. Levine, with whom Wilmer Cutler Pickering Hale & Dorr LLP, Samuel C. Bodurtha, and Hinshaw & Culbertson LLP were on brief, for appellees Federal Housing Finance Authority and Federal National Mortgage Association. Steven Fischbach for amici curiae Direct Action for Rights and Equality, National Center for Law and Economic Justice, National Housing Law Project, and Virginia Poverty Law Center.

June 8, 2021 LYNCH, Circuit Judge. Plaintiffs-appellants obtained

loans secured by mortgages on their real property in Rhode Island.

These agreements gave their lenders the right to nonjudicially

foreclose on the mortgages. The loans and mortgages were later

sold to the Federal National Mortgage Association ("Fannie Mae")

while the Federal Housing Finance Agency ("FHFA"), a federal

agency, was acting as Fannie Mae's conservator. Appellants

defaulted on their loans, and Fannie Mae, consistent with Rhode

Island law, conducted nonjudicial foreclosure sales of the

mortgaged properties.

Appellants brought suit in federal court alleging that

Fannie Mae and FHFA are government actors and that the nonjudicial

foreclosure sales violated their Fifth Amendment procedural due

process rights. They appeal from the district court's holding

that Fannie Mae and FHFA are not subject to their Fifth Amendment

claims and its order dismissing those claims. See Montilla v.

Fed. Hous. Fin. Agency, No. 18-cv-00632, slip op. at 9-11 (D.R.I.

May 26, 2020), ECF No. 40. We affirm.

I. Facts

A. Fannie Mae, Freddie Mac, and FHFA

Fannie Mae and the Federal Home Loan Mortgage

Corporation ("Freddie Mac") (collectively, the "government-

sponsored enterprises" or "GSEs") are "private, publicly traded

- 3 - corporations . . . created by federal charter to support the

development of the secondary mortgage market." Town of Johnston

v. Fed. Hous. Fin. Agency,

(1st Cir. 2014); see 12

U.S.C. § 1716b; id. § 1452. Among other activities, the GSEs buy

and sell residential mortgages. See

;

§ 1454.1

In July 2008, as the housing market crashed and the value

of the GSEs' loan portfolios declined, Congress established FHFA

through the Housing and Economic Recovery Act of 2008 ("HERA").

See

. HERA gave the director of FHFA the

discretionary authority to appoint FHFA as conservator or receiver

for Fannie Mae or Freddie Mac "for the purpose of reorganizing,

rehabilitating, or winding up the[ir] affairs."

§ 4617(a)(2).

In September 2008, FHFA's director exercised this

authority and placed both entities into conservatorship. As

conservator, FHFA "immediately succeed[ed] to" the "rights,

titles, powers, and privileges" of Fannie Mae, Freddie Mac, and

the entities' shareholders and boards of directors. Id.

§ 4617(b)(2)(A).

1 Appellants' claims are solely against Fannie Mae. However, because the issues presented in this case overlap significantly with those in Sisti v. Fed. Hous. Fin. Agency,

(D.R.I. 2018), which involved claims against Freddie Mac in addition to claims against Fannie Mae, we discuss both entities together. See Faiella v. Fed. Nat'l Mortg. Ass'n,

(1st Cir. 2019) (describing Freddie Mac and Fannie Mae as "siblings under the skin"). We heard oral argument in this appeal and in Sisti on the same day.

- 4 - HERA also amended the GSEs' charters to allow the

Secretary of the Treasury to "purchase any obligations and other

securities issued by the corporation[s]." Pub. L. No. 110–289,

, 2683 (codified at

(g)(1)(A));

(codified at

(l)(1)(A)). Under this

authority, Treasury entered into agreements to infuse capital into

Fannie Mae and Freddie Mac. In exchange, it received $1 billion

in senior preferred stock in both entities and warrants for the

purchase of common stock that, if exercised, would give Treasury

79.9% of the entities' common stock. Treasury has never exercised

these warrants and owns no common stock in either Fannie Mae or

Freddie Mac.

B. Foreclosures on Appellants' Properties

In 2011, acting as the GSEs' conservator, FHFA

established the Servicing Alignment Initiative ("SAI") to improve

loan servicer performance and to limit the GSEs' financial losses.

Plaintiffs allege that the SAI "directed [the GSEs' loan] servicers

to use non-judicial foreclosure procedures when foreclosing on

residential properties in Rhode Island."

Rhode Island permits nonjudicial foreclosures through a

statutory power of sale when that power is specified in the

mortgage contract. See Bucci v. Lehman Bros. Bank, FSB,

(R.I. 2013);

;

- 5 - § 34-27-4. The GSEs' standard mortgage agreement, which was used

by the plaintiffs in this case, explicitly gives the lender a

statutory power of sale.

Appellant Neris Montilla executed a mortgage in July

2008 on a property in Providence. This mortgage was assigned to

Fannie Mae in April 2015 and serviced by C.I.T. Bank, N.A. ("CIT").

On September 10, 2016, CIT began nonjudicial foreclosure

proceedings under Rhode Island law against Montilla's property.

The mortgage was foreclosed on October 14, 2016. Similarly,

appellant Michael Kyriakakis's mortgage on his property was

assigned to Fannie Mae in May 2016. The loan servicer conducted

a nonjudicial foreclosure sale in December 2017 and recorded a

foreclosure deed in March 2018.

II. Procedural History

Montilla filed a putative class action against Fannie

Mae, FHFA, and CIT on November 19, 2018 in federal district court

in Rhode Island.2 The complaint was amended in December 2018 to

include Kyriakakis's claims. It alleged that FHFA and Fannie Mae

deprived Montilla, Kyriakakis, and others similarly situated of

property without "adequate notice and opportunity for meaningful

hearings" in violation of the Fifth Amendment. The plaintiffs

2 Other plaintiffs and defendants were also named in the suit. They were later dismissed either voluntarily or by stipulation.

- 6 - sought "declaratory relief, injunctive relief, actual, monetary,

punitive and exemplary damages, restitution, an accounting,

attorney's fees and costs, and all other relief as provided by

law."

FHFA and Fannie Mae moved to dismiss the case in February

2019. FHFA argued that it and Fannie Mae are not government actors

for the purposes of the plaintiffs' Fifth Amendment claims. Fannie

Mae joined FHFA's arguments and alternatively argued that, even if

it and FHFA were subject to the Fifth Amendment, the plaintiffs'

claims failed because there was no due process violation.

In May 2020, the district court granted FHFA and Fannie

Mae's motions to dismiss. See Montilla, slip op. at 1. It held

that because FHFA stepped into Fannie Mae's shoes as its

conservator and its ability to foreclose was a "contractual right

inherited from Fannie Mae by virtue of its conservatorship," FHFA

was not acting as the government when it foreclosed on the

plaintiffs' mortgages and was not subject to the plaintiffs' Fifth

Amendment claims. Montilla, slip op. at 9-10. In so holding, the

court disagreed with an earlier Rhode Island district court's

contrary holding in Sisti v. Fed. Hous. Fin. Agency,

(D.R.I. 2018).

The court, applying Lebron v. Nat'l R.R. Passenger

Corp.,

(1995), also held that FHFA's conservatorship

- 7 - over Fannie Mae did not make Fannie Mae a government actor for the

purposes of the plaintiffs' constitutional claims because the

government does not exercise sufficient control over Fannie Mae.

See Montilla, slip op. at 6-9; see also Lebron,

-

99 (holding that a corporation is subject to constitutional claims

if, among other things, the government "retains for itself

permanent authority to appoint a majority of the directors of [the]

corporation"). The court again disagreed with Sisti, which had

held that because the "decision to end [FHFA's] conservatorship is

left entirely to the discretion of the government," its control

over the GSEs is "effectively permanent." Sisti,

.

Montilla and Kyriakakis timely appealed. FHFA, Fannie

Mae, and Freddie Mac timely appealed the decision in Sisti which

had reached the contrary result.3 We heard oral argument in these

appeals on May 4, 2021.

III. Analysis

We review an order granting a motion to dismiss de novo.

See Sterling Suffolk Racecourse, LLC v. Wynn Resorts, Ltd.,

(1st Cir. 2021). To avoid dismissal, a plaintiff's

3 The Sisti opinion addressed two separate cases: one brought by Judith Sisti against Freddie Mac and FHFA and another brought by Cynthia Boss against Fannie Mae and FHFA. Sisti and Boss were consolidated for oral argument.

- 8 - complaint must include factual allegations sufficient to state a

plausible claim to relief. See Abdisamad v. City of Lewiston,

(1st Cir. 2020).

A. FHFA, as the GSEs' Conservator, Is Not a Government Actor Subject to Appellants' Due Process Claims

Adopting the district court's reasoning in Sisti,

, appellants argue that because FHFA is a

government agency, any action it takes as conservator, like

directing the GSEs to nonjudicially foreclose on appellants'

mortgages, is government action subjecting it to appellants'

constitutional claims. That analysis is simply wrong and contrary

to law. We hold that, in its role as the GSE's conservator, FHFA

is not a government actor because it has "stepped into the shoes"

of the private GSEs.

First, it is undisputed that FHFA is a federal agency

that sometimes acts as the government.

(a). But

this fact is not dispositive. That a federal agency exercising a

portion of its statutory powers in one role is a government actor

does not as a matter of law mean that it is a government actor for

all purposes or in all exercises of its statutory powers. See

Faiella v. Fed. Nat'l Mortg. Ass'n,

(1st Cir.

2019). We must determine if FHFA acted as the government in its

role as the GSEs' conservator.

- 9 - Under HERA's "succession clause," when FHFA became the

GSEs' conservator, it succeeded to "all rights, titles, powers,

and privileges of the regulated entity, and of any stockholder,

officer, or director of such regulated entity with respect to the

regulated entity and the assets of the regulated entity."

(b)(2)(A). One of these rights was the GSEs' private

contractual right to nonjudicially foreclose on appellants'

mortgages, which FHFA instructed the GSEs' loan servicers to

exercise. Appellants do not allege that FHFA relied on any power

other than the GSEs' contractual rights in carrying out the

nonjudicial foreclosures.

The Supreme Court has interpreted a succession clause in

the Financial Institutions Reform, Recovery, and Enforcement Act

("FIRREA") with nearly identical language4 to the one in HERA to

mean that when a government agency acts as receiver for an entity,

it "'steps into the shoes' of the failed [institution]" and

exercises that entity's rights. O'Melveny & Myers v. FDIC,

(1994). Other circuits have interpreted HERA to mean

4 The language at issue in O'Melveny said that if the FDIC becomes a conservator or receiver of an insured depository institution, it succeeds to "all rights, titles, powers, and privileges of the insured depository institution, and of any stockholder, member, accountholder, depositor, officer, or director of such institution with respect to the institution and the assets of the institution."

(d)(2)(A)(i); see also Perry Cap. LLC v. Mnuchin,

(D.C. Cir. 2017) (describing HERA's language as "nearly identical" to FIRREA's).

- 10 - that when acting as the GSEs' conservator and exercising their

rights, FHFA steps into the GSEs' shoes. See Herron v. Fed. Nat'l

Mortg. Ass'n,

(D.C. Cir. 2017) (holding that

when FHFA "step[ped] into Fannie Mae's private shoes," it became

a private actor); Meridian Invs., Inc. v. Fed'l Home Loan Mortg.

Corp.,

(4th Cir. 2017) ("[T]hough FHFA is a

federal agency, as conservator it steps into Freddie Mac’s shoes,

shedding its government character and also becoming a private

party."); see also U.S. ex rel. Adams v. Aurora Loan Servs., Inc.,

(9th Cir. 2016) (holding that FHFA's

conservatorship "places [it] in the shoes of Fannie Mae and Freddie

Mac, and gives the FHFA their rights and duties"). We agree that,

after stepping into the GSEs' shoes under HERA and exercising their

private contractual rights to nonjudicially foreclose on

appellants' properties, FHFA did not act as the government.

Appellants, again relying on Sisti, argue that O'Melveny

is inapplicable here because it involved a government agency acting

as receiver, not as a conservator. See Sisti,

. We disagree. O'Melveny was decided based on what the

statute's "language appears to indicate."

. Section

4617(b)(2)(A) says that FHFA succeeds to the GSE's rights when it

acts "as conservator or receiver" (emphasis added). Similarly,

the statute at issue in O'Melveny says that the FDIC succeeds to

- 11 - the rights of failed depository institutions when it acts "as

conservator or receiver."

(d)(2)(A) (emphasis

added). There is no reason O'Melveny's textual logic does not

apply to both conservators and receivers.5

Appellants' final argument is that another Supreme Court

case, FDIC v. Meyer,

(1994), controls this case and

requires a finding in their favor. Neither contention is accurate.

Meyer concerned whether a plaintiff could bring a Bivens claim

against the Federal Savings and Loan Insurance Corporation

("FSLIC"), a federal agency acting as receiver for a failed bank.6

See

; see generally Bivens v. Six Unknown Named

Agents of Fed. Bureau of Narcotics,

(1971). The Court

in Meyer held: (1) that the "sue-and-be-sued" clause in FSLIC's

organic statute waived FSLIC's sovereign immunity; and (2) that a

plaintiff cannot bring a Bivens claim against a federal agency

like FSLIC. Meyer,

. Focusing on the "sue-and-

be-sued" holding, appellants' argument proceeds as follows: (1)

FSLIC was a federal agency acting as receiver; (2) the plaintiff

5 Assuming dubitante there was some basis for contention, O'Melveny was decided on § 1821(d)(2)(A)(i)'s text and not, as appellants argue, on the basis of a receiver's fiduciary duties. There is no basis in O'Melveny to conclude that the fiduciary duties of the FDIC as receiver affected its holding. 6 In Meyer, the FDIC was substituted for FSLIC and made arguments on FSLIC's behalf after FIRREA abolished FSLIC. Id. at 474.

- 12 - brought a constitutional claim against FSLIC for actions it took

as receiver; (3) a federal court could not hear the case if FSLIC

had sovereign immunity; (4) only government actors can have (and

waive) sovereign immunity; (5) Meyer held that FSLIC waived

sovereign immunity through its "sue-and-be-sued" clause; so (6) by

deciding the sovereign immunity issue, the Court must have thought

that FSLIC is a government actor potentially liable for a

constitutional tort when it acts as receiver. Applying that logic

here, they say that FHFA, as a government agency, must be acting

as the government when it acts as the GSEs' conservators. See

Sisti,

.

Appellants misread Meyer. Meyer decided a threshold

jurisdictional question.7 See

(explaining that

sovereign immunity is "jurisdictional in nature"). It held that

FSLIC, through its "sue-and-be-sued" clause, waived any right it

may have had to argue that a federal court does not have the power

to address the merits of the plaintiff's claim.

; see

also Steel Co. v. Citizens for a Better Env't,

, 89

7 Meyer does raise the issue of whether we have subject matter jurisdiction to decide appellants' claims against FHFA. HERA contains no "sue-and-be-sued" clause applicable to FHFA. But because FHFA has "stepped into the shoes" of the GSEs when acting as their conservator, it has also succeeded to their "sue-and-be- sued" clauses, see 12 U.S.C. § 1723a(a) (Fannie Mae); id. § 1452(c)(7) (Freddie Mac), and we have jurisdiction over claims against FHFA based on its actions as conservator.

- 13 - (1998) (distinguishing between "the absence of a valid . . . cause

of action" and "subject-matter jurisdiction, i.e., the courts'

statutory or constitutional power to adjudicate the case"). Meyer

never addressed the merits of the plaintiff's claim, including the

argument that his claim must fail because FSLIC was not acting as

the government. See id. at 486 n.12 ("[W]e do not reach the merits

of [Meyer's] due process claim."). Indeed, FDIC never made such

an argument to the Supreme Court and the Court had no reason to

reach it.

Properly viewing Meyer's "sue-and-be-sue" holding as

jurisdictional, Meyer did not decide that a federal agency is a

government actor whenever it acts as a receiver or conservator.

Such a categorical reading of Meyer is inconsistent with post-

Meyer Supreme Court cases, including O'Melveny, decided only four

months later, making clear that an agency acting as receiver is

not necessarily the government for all purposes. See O'Melveny,

("[T]he FDIC is not the United States, and even if

it were we would be begging the question to assume that it was

asserting its own rights rather than, as receiver, the rights of

[the failed bank]."); Atherton v. FDIC,

(1997)

("[A]s in O'Melveny, the FDIC is acting only as a receiver of a

failed institution; it is not pursuing the interest of the Federal

Government . . . ." (emphasis added)). It is also inconsistent

- 14 - with post-Meyer case law from other circuits holding that an agency

is not necessarily the government when it acts as a conservator or

receiver. See Collins v. Mnuchin,

(5th Cir.

2019) (en banc), cert. granted,

(2020) ("Whether an

agency exercises government power as conservator or receiver

'depends on the context of the claim.'" (quoting Slattery v. United

States,

(Fed. Cir. 2009), vacated then reinstated

as modified on reh'g en banc,

(Fed. Cir. 2011));

United States v. Heffner,

(9th Cir. 1996) ("The

[federally-owned Resolution Trust Corporation] in its corporate

character as receiver is not the federal sovereign . . . .");

United States v. Ely,

(9th Cir. 1997) ("Meyer

did not purport to determine the status of the FDIC when . . .

taking over a failed bank as receiver . . . ."). Here, FHFA is

not acting as the government in its capacity as the GSEs'

conservator. Appellants' constitutional claims against it fail

for that reason.

B. Fannie Mae and Freddie Mac Are Not Government Actors Subject to Appellants' Due Process Claims

Appellants next argue that Fannie Mae and Freddie Mac

are themselves government actors. In Lebron, the Supreme Court

articulated a three-part test to determine when a private

corporation is a government actor for purposes of certain

constitutional claims against it. It held that if "[1] the

- 15 - Government creates a corporation by special law, [2] for the

furtherance of governmental objectives, and [3] retains for itself

permanent authority to appoint a majority of the directors of that

corporation," then the corporation's actions "are subject to the

constraints of the Constitution." Lebron,

.

The parties do not dispute that the first two prongs of the Lebron

test are satisfied. Appellants also do not dispute that, pre-

conservatorship, the GSEs were private actors not subject to their

claims. See Am. Bankers Mortg. Corp. v. Fed'l Home Loan Mortg.

Corp.,

, 1406 (9th Cir. 1996) (applying Lebron before

FHFA's conservatorship began to hold that "Freddie Mac is not a

government agency subject to the Fifth Amendment's Due Process

Clause"). The issue before us is whether, through FHFA's

conservatorship over the GSEs, the government has "retain[ed] for

itself permanent authority" over Fannie Mae and Freddie Mac.

Lebron,

.

We hold that FHFA's temporary conservatorship over the

GSEs does not constitute permanent authority. FHFA controls the

GSEs for the limited purpose of "reorganizing, rehabilitating, or

winding up the[ir] affairs."

(a)(2); see also

§ 4617(b)(2)(D)(i) (authorizing FHFA, as conservator, to take

actions "necessary to put the regulated entity in a sound and

solvent condition"). The statutory language confirms, as other

- 16 - courts have held, that a conservatorship has "an inherently

temporary purpose." Herron,

(quoting Rubin v.

Fed. Nat'l Mortg. Ass'n,

(6th Cir. 2014));

see also Kerpen v. Metro. Wash. Airports Auth.,

(4th Cir. 2018) ("Temporary control -- as when the federal

government steps in as a conservator -- is not sufficient [under

Lebron]."); Sprauve v. W. Indian Co. Ltd.,

, 233 n.8

(3d Cir. 2015) (noting that control is temporary "where the

Government is acting as a conservator"). Given the

conservatorship's limited purpose, Congress is not required to

assign a definite endpoint to FHFA's conservatorship to make the

government's control temporary. See Herron,

.

Similarly, appellants' argument that the conservatorship has

"continued to exist well past its intended purpose" fails. The

housing and mortgage financial markets are highly complex, as are

the various indicators of their financial health, so the fact that

FHFA has maintained the conservatorship for almost thirteen years

does not mean that the government's control is permanent.

Appellants have failed to plead a plausible claim, particularly in

light of indications that the government is working to eventually

bring the conservatorship to an end.8

8 In their briefing to us, appellants called our attention to news articles discussing amendments to certain agreements

- 17 - The fact that Treasury owns senior preferred stock in

the GSEs and warrants that, if exercised, would give it 79.9% of

the GSEs' common stock does not change the analysis. Lebron says

that "a private corporation whose stock comes into federal

ownership" can still be "in the temporary control of the

Government."

. Here, neither HERA nor Treasury's

agreements with the GSEs require the government to permanently

retain its interest in them.

governing FHFA's conservatorship. See Kelsey Ramirez, FHFA: GSEs Can’t Exit Conservatorship on Retained Earnings, HousingWire (January 15, 2021), https://www.housingwire.com/articles/fhfa- gses-cant-exit-conservatorship-on-retained-earnings/; Joe Light, Trump Clears Fannie-Freddie Capital Boost, Leaves Fates to Biden, Bloomberg (January 14, 2021), https://www.bloomberg.com/news/ articles/2021-01-14/trump-clears-fannie-freddie-capital-boost- leaves-fates-to-biden. We take judicial notice of the fact that, on January 14, 2021, Treasury and FHFA amended Treasury's Preferred Stock Purchase Agreements with Fannie Mae and Freddie Mac. The amendments added language saying that "Treasury . . . [has] begun work to establish a timeline and process to terminate the conservatorship and raise capital" and that "Treasury . . . endeavor[s] to transmit a proposal that details this work to both Houses of Congress on or prior to September 30, 2021." See Letter Agreement between Treasury and Fannie Mae (Jan. 14, 2021), https://home.treasury.gov/system/files/136/Executed-Letter- Agreement-for-Fannie-Mae.pdf; Letter Agreement between Treasury and Freddie Mac (Jan. 14, 2021), https://home.treasury.gov/system/files/136/Executed-Letter- Agreement-for-Freddie%20Mac.pdf; see also Fed. R. Evid. 201 (permitting a court to take judicial notice of an adjudicative fact sua sponte "at any stage of the proceeding"); Butler v. Balolia,

(1st Cir. 2013) (stating that, when reviewing an order granting a motion to dismiss for failure to state a claim, this court may consider "facts susceptible to judicial notice" (quoting Haley v. City of Bos.,

(1st Cir. 2011))).

- 18 - Appellants' main argument is that FHFA's conservatorship

over the GSEs is temporary in name but permanent in practice. They

say that we should focus on the practical reality of the

government's control over the GSEs because the "permanent

authority" prong of the Lebron test was qualified by the Supreme

Court's decision in Department of Transportation v. Association of

American Railroads,

(2015).

Both Lebron and American Railroads involved whether the

National Railroad Passenger Corporation (commonly known as Amtrak)

is a government entity for certain purposes. Lebron held that

Amtrak "is part of the Government for purposes of the First

Amendment."

. American Railroads held that Amtrak

"acted as a governmental entity for purposes of the Constitution's

separation of powers provisions."

. At issue in

American Railroads was whether Congress's directive that Amtrak

"is not a department, agency, or instrumentality of the United

States Government,"

(a)(3), precluded Congress

from giving it joint authority with the Federal Railroad

Administration to issue "metrics and standards" governing

passenger railroad services. American Railroads,

.

The Court found that Lebron provided "necessary instruction" on

whether Congress's "disclaimer of Amtrak's governmental status"

meant that it could not be a federal actor.

. It

- 19 - held that the "practical reality of federal control and supervision

prevail[ed]" over Congress's directive.

.

Appellants read American Railroads's "practical reality"

language to say that the degree of control the government actually

exercises over an entity informs whether its control is permanent.

They argue that because FHFA has all the powers of the GSEs' boards

of directors, see

(b)(2)(A), and has discretion to

determine when the conservatorship will end,

(a)(2), it permanently controls the GSEs. See also Sisti,

("The practical reality here is that the

government effectively controls Fannie Mae and Freddie Mac

permanently.")

This argument fails. American Railroads did not alter

Lebron's requirement that the government retain "permanent

authority" over an entity for it to be governmental. American

Railroads says nothing about Lebron's "permanent authority"

requirement, and the Supreme Court "does not normally overturn, or

so dramatically limit, earlier authority sub silentio." Shalala

v. Ill. Council on Long Term Care, Inc.,

(2000).

Indeed, American Railroads had no reason to address whether the

federal government retained "permanent authority" over Amtrak.

The Court had already held in Lebron that it did. See

; Herron,

("Because the government's

- 20 - permanent control over Amtrak was already established in Lebron,

the Court had no occasion to revisit that question in [American

Railroads].").

Appellants next argue, again relying on Sisti, that

(a)(2), which authorized FHFA's conservatorship "for

the purpose of reorganizing, rehabilitating, or winding up the

affairs [of the GSEs]," should be ignored. They say that, like

the statute at issue in American Railroads, it is a disclaimer of

governmental status entitled to no deference. Sisti,

. We disagree that Section 4617(a)(2) can be properly

read as a disclaimer or that its statutory command can be bypassed.

Section 4617(a)(2) confirms that FHFA's conservatorship has a

temporary purpose. It is directly relevant to whether FHFA

exercises "permanent authority" over the GSEs.

Finally, amici for appellants argue9 that Lebron's three-

part test is not the only relevant precedent. They say that

whether FHFA's conservatorship over the GSEs constitutes federal

government action must be analyzed under a series of other state

action theories, specifically the "coercive power" theory, the

9 Appellants never made this argument, and we ordinarily do not consider arguments not made by the parties. Molina v. INS,

(1st Cir. 1992) ("Normally, we would not consider . . . separate issues [raised by amici] . . . not raised by the parties in the case."). However, Boss and Sisti made similar arguments in their briefs to us.

- 21 - "joint participation" theory, the "entwinement" theory, and the

"government control" theory. See Brentwood Acad. v. Tenn.

Secondary Sch. Athletic Ass'n,

(2001)

(discussing these theories). All of these theories attempt to

determine whether "there is such a 'close nexus between the State

and the challenged action' that seemingly private behavior 'may be

fairly treated as that of the State itself.'"

at 295 (quoting

Jackson v. Metro. Edison Co.,

(1974));

(holding that "state action may be found if, though only if" such

a "close nexus" exists). As the Supreme Court has stated, "a host

of facts . . . bear on the fairness of" attributing private action

to the government. Id. at 296. Here, because we have held that

FHFA10 acted privately and not as the government in its role as the

GSEs' conservator, we do not need to address whether FHFA's private

actions on behalf of the private GSEs constituted state action.

IV. Conclusion

Affirmed.

10 FHFA is the only relevant government entity, as the appellants do not argue that Treasury directed or was involved in any of the alleged constitutional violations at issue in this appeal. See Blum v. Yaretsky,

(1982) (stating that the "close nexus" requirement ensures that "constitutional standards are invoked only when it can be said that the State is responsible for the specific conduct of which the plaintiff complains" (second emphasis added)); Am. Mfrs. Mut. Ins. Co. v. Sullivan,

(1999).

- 22 -