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Argument preview: Justices to consider federal jurisdiction for suits against Fannie Mae

The issue in that case is whether the presence of the Federal National Mortgage Association, known as Fannie Mae, as a party to a lawsuit is itself sufficient to create federal jurisdiction over the suit.

Ordinarily, federal courts have jurisdiction over suits that “arise under” federal law, which generally means that the suits present a cause of action created by federal law as opposed to state law. In some cases, though, federal courts have jurisdiction based on the parties to the suit rather than the issues at stake. For example, federal courts always have jurisdiction over suits to which the United States is a party. This case is the latest in an extended line of decisions examining party-based jurisdiction over entities that the United States has created (ordinarily by act of Congress). In a series of cases dating back to the 1820s, the Supreme Court has held that federal party-based jurisdiction also extends to federally chartered entities. The underlying theory is that the cases fall within the constitutional grant of power to federal courts to hear cases that involve federal law because of the federal legal question inherent in the federal creation of the entity involved.

Opinion analysis: Unanimous court rejects federal jurisdiction for Fannie Mae

As the opinion explains, the Supreme Court has decided five earlier cases in which litigants claimed that a charter enacted by Congress granted “party-based” jurisdiction over all cases to which the entity was a party. Those charters typically contain a clause authorizing the entity to “sue and be sued,” confirming the status of the entity as a juridical person, but occasionally the sue-and-be-sued clause includes broader language that arguably includes a grant of federal jurisdiction as well. Two of those earlier cases held that the charters did not grant jurisdiction; three of the cases held that the charters did grant jurisdiction.

The opinion here starts from a summary of those cases in the most recent of the five opinions (a 1992 case involving the Red Cross), which explains that a charter “may be read to confer federal court jurisdiction if, but only if, it specifically mentions the federal courts.” In that case, the court discerned a grant of jurisdiction in a charter that authorized the Red Cross to “sue and be sued in courts of law and equity, State or Federal, within the jurisdiction of the United States.”