BVA’s expert trial testimony played a key role in the affirmation of an $812 million judgment against the Federal Housing Finance Agency (FHFA) by the U.S. Court of Appeals for the D.C. Circuit.  The long-running litigation on behalf of shareholders of Fannie Mae and Freddie Mac challenged the FHFA’s 2012 adoption of the “Net Worth Sweep.” Shareholders alleged that the change violated the implied covenant of good faith and fair dealing and significantly diminished the value of their shares.

Following a 2023 trial, a jury found in favor of the shareholders and awarded $612.4 million in damages. The district court subsequently entered a final judgment of $812 million, including prejudgment interest. BVA’s Dr. Joseph Mason provided expert testimony on the economic harm caused by the Net Worth Sweep, pointing to the approximately $1.6 billion decline in the value of Fannie Mae and Freddie Mac common and junior preferred shares on the day the Net Worth Sweep was announced.

On appeal, the FHFA challenged whether the plaintiffs had sufficiently demonstrated that the Net Worth Sweep caused the decline in share value. In affirming the judgment, the D.C. Circuit specifically discussed Dr. Mason’s testimony, noting his conclusion that the Net Worth Sweep was the “overriding effect” of the Third Amendment and that he had no reason to believe another factor caused the significant decline in stock prices on the date of the announcement. The court further noted that Dr. Mason’s analysis was informed by extensive review and analysis of evidence in the case. Together with testimony from other witnesses, the court found that the evidence provided “an ample basis for the jury to find that the Net Worth Sweep caused the drop in the value of Fannie and Freddie.” The D.C. Circuit ultimately rejected the FHFA’s challenges and affirmed the district court’s judgment, preserving the significant trial victory for shareholders.