Collins v. Yellen, Explained

Collins v. Yellen (594 U.S. 220, 2021) is a U.S. Supreme Court decision handed down on June 23, 2021. The case began as Collins v. Mnuchin during the Trump administration; the caption changed when Janet Yellen became Treasury Secretary. Texas-based shareholders of Fannie Mae and Freddie Mac challenged both the constitutionality of FHFA's structure and the legality of the August 2012 Third Amendment to the Senior Preferred Stock Purchase Agreements (the 'Net Worth Sweep'). The Supreme Court ruled 7-2 that FHFA's structure was unconstitutional, but declined to invalidate the Net Worth Sweep itself.

Three holdings. First, FHFA's structure — a single director removable by the President only 'for cause' — violated the separation of powers under Article II of the Constitution, following the framework set in Seila Law v. CFPB (2020) and Free Enterprise Fund (2010). Second, the unconstitutional removal restriction is severable, so FHFA's other authority remains in place; only the for-cause limitation was struck. Third — and crucially for shareholders — the Court declined to find that the Third Amendment itself was unconstitutional or unauthorized, and remanded the question of whether the unconstitutional removal protection caused any compensable harm to the lower courts.

Because the Court applied the same logic it applied in Seila Law: the constitutional defect is the removal protection, not the agency's actions. The Court reasoned that the President at all relevant times retained the power to remove the FHFA Director if he wanted — even if for-cause language complicated it — so it would be wrong to assume the Third Amendment would not have been entered absent the removal protection. Justice Alito's majority opinion left damages and causation questions for the lower courts, where shareholders would have to prove that a President actually wanted to remove a Director and was deterred from doing so by the unconstitutional protection.

It depends on how you score it. On the constitutional question — clear win. On the financial-recovery question — no immediate win and a hard remand. The remand instructions made it very difficult to prove damages, because shareholders would essentially have to demonstrate that a specific President wanted to remove a specific Director who refused to undo the Net Worth Sweep, and was deterred by the for-cause language. Most observers concluded the remand framing made meaningful damages awards unlikely on the constitutional theory alone — pushing future shareholder recovery toward the contract-based theories that ultimately produced the August 2022 Berkley jury verdict.

President Biden removed Acting Director Mark Calabria within hours of the Collins decision and replaced him with Sandra Thompson. The Court's ruling effectively confirmed that the President now has at-will removal authority over the FHFA Director, which is how William Pulte was placed in the role under the second Trump administration. Calabria has since written that being removed in this way was the moment he understood the trade-off Collins represented — a structural fix without a substantive one.

Plaintiffs: a group of Fannie Mae and Freddie Mac junior preferred and common shareholders led by Patrick Collins (the named plaintiff at the Fifth Circuit). Defendants: Janet Yellen (Treasury Secretary), Mark Calabria (FHFA Director at the time of decision), and the United States. The Fifth Circuit had earlier ruled in plaintiffs' favor on the constitutional question; the Supreme Court took the case to resolve the constitutional question and the appropriate remedy — and reversed the Fifth Circuit on remedy.

Collins is the case that doctrinally cleared a path for state-law contract claims to keep going. With APA challenges defeated by Perry, takings claims defeated by Fairholme, and constitutional damages effectively closed off by the Collins remand framing, the only viable path to shareholder recovery was breach of state-law contract / implied covenant — which is exactly what the Berkley class action pursued and won at trial in August 2022. Joshua Angel's pro se cases relied on a different theory (federal-government implicit guaranty as implied-in-fact contract), which the Court of Federal Claims has rejected through Angel V (April 2026 dismissal with prejudice + anti-filing injunction).

Collins v. Yellen, 594 U.S. 220 (2021). The full opinion is available on the Supreme Court website (supremecourt.gov) and in standard legal databases (Westlaw, Lexis, CourtListener). The case number was 19-422 (consolidated with 19-563). Justice Alito wrote the majority. Justice Thomas concurred. Justice Kagan concurred in part and dissented in part. Justice Gorsuch concurred in part. Justice Sotomayor dissented in part.