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Employment Case Against Fannie Mae

We are pleased to report a favorable ruling in an employment case against Fannie Mae. Bernabei & Kabat, PLLC represents Caroline Herron, a senior contract employee who worked at Fannie Mae in the Treasury-funded programs to modify home mortgages. She repeatedly reported, and protested, that Fannie was improperly signing up numerous homeowners for modifications, even though Fannie knew that the homeowners would not qualify for any mortgage (no matter how modified), because Fannie wanted to get incentive payments on its contracts with Treasury, and because Fannie wanted to get other lucrative work from Treasury. She also reported other problems with Fannie’s use of Treasury funds.

Fannie terminated her employment, and interfered with her attempts to work at Treasury. We brought common-law claims for wrongful discharge, civil conspiracy (against several individual defendants), and tortious interference with prospective contractual relations. Since Fannie’s status – it is in a conservatorship – meant that it is like a government entity in many respects, we also brought a First Amendment Bivens retaliation claim on a state actor theory.

Defendants’ motion to dismiss argued, at length, that Fannie was not a state actor, and that we had not pled sufficient facts to survive a motion to dismiss on the common-law claims. Our opposition detailed the numerous ways in which Fannie was a state actor (under the Supreme Court’s Lebron v. Amtrak case), and that the complaint was sufficiently well-pled under Twombly. We also submitted several notices of supplemental authority to reflect subsequent Congressional testimony, Treasury reports, and other governmental reports, which confirmed both Fannie’s current status as a state actor, and that the problems Ms. Herron reported and protested were, in fact, matters of significant public concern.

On February 10, 2011, Judge Collyer denied the defendants’ motion to dismiss:

“The Court finds that the Complaint contains sufficient factual matter, accepted as true, that states a claim for relief that is plausible on its face, thereby surviving the threshold requirements of a motion to dismiss. See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). The Court notes multiple questions of fact that cannot be resolved without resort to full discovery. The nature, scope, and reasons behind Plaintiff’s termination, and her job expectations at either Fannie Mae or the Department of the Treasury, rely upon disputed facts that only can be distilled and processed after all the facts come to light. The question of whether Fannie Mae is a federal or non-federal entity is a question of law, the application of which can only be understood by discovery of its internal functions, processes, membership of the board, who is in control, and other factors that are used in determining whether an organization is a federal one or not. For these reasons, Defendants’ Motion to Dismiss will be denied without prejudice.”

The Center for Public Integrity posted an article on this decision.