Its apparently the same old song for companies that believe they been wronged by Freddie Macbecause of its unique immunity status, they simply cant get the courts to allow punitive damage claims against it.

And even when cases where it has previously defended itself as a private enterprise are brought up during litigation, it doesnt seem to carry much weight. Case in point: Ark Properties, a Philadelphia real estate firm, recently found itself unable to impose a punitive damage motion against Freddie after the GSE defended itself as an immune federal instrumentality during pretrial proceedings June 2.

The dispute, according to court records, arose after Freddie allegedly agreed to sell Ark a group of nine properties in Center City Philadelphia. When it later discovered that Freddie did not own one of the properties, it allegedly offered to purchase the property, which had $17,000 in back taxes due, then sell it to Ark with an appropriate price reduction.

Ark claims Freddie then purchased the property and paid the back taxes, but discontinued negotiations without resolving ownership of the property. Ark file suit against Freddie in the U.S. District Court for the Eastern District of Pennsylvania June 2, and although District Court Judge J. Clarence Newcomer permitted Ark to sue for equitable relief specifically, the $200,000 in compensatory damages it claims to have lost in the deal. He disallowed its motion for punitive damages.

The case, Jana Susan Paley, Ark Properties Inc., t/a Knockwood Properties vs. Federal Home Loan Mortgage Corp., Docket No. 93- 5801, is pending.

The gist of the case is not newgov-ernment-sponsored enterprises sometimes find themselves in unusual situations regarding ownership of propertiesbut Ark claims Freddies posture as an immune government agency is in direct conflict with stances it has taken in the past, including a successful case decided in the U.S. District Court of the Eastern District of New York in 1993. In that case, Liberty Mortgage Banking, Ltd. vs. Federal Home Loan Mortgage Corp., Freddie successfully argued it was a corporation governed by private people and the court found it was not a federal actor subject to the due process claims of the plaintiff.

Freddie Mac has defended itself as both a government instrumentality and a private enterprisedefenses that Fan-nie Mae could take as well. That defense comes up most often when Freddie is seeking to terminate a lender as a seller/servicer said Richard An-dreano, a partner with the Washington-based law firm of Weiner, Brodsky, Sidman & Kider.

Unless the court makes a rationale for dismissing [the Liberty case,] it may be worth [appealing], he said. [The court] might not have completely considered the issue [presented in Liberty]. If thats the case, Andreano said, Ark might still have a case.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.