FMCC Federal Home Loan Mortgage Corporation (QB)

The U.S. government has moved to block the release of a batch of documents in a shareholder lawsuit involving Fannie Mae, and the next step is now up to a federal appeals court.

The government says the 56 documents in question are protected by various legal privileges, including rules that protect presidential communications.

Last month, U.S. Court of Federal Claims Judge Margaret Sweeney ordered the government to turn those documents over to lawyers representing Fairholme Funds Inc. and other investors in mortgage finance companies Fannie Mae and Freddie Mac.

Late on Wednesday, the government asked the U.S. Court of Appeals for the Federal Circuit to issue a writ of mandamus, a direct order to a lower court, directing Judge Sweeney to reverse her order. A mandamus is considered to be a drastic and extraordinary remedy reserved for circumstances where a judge has committed a clear abuse of discretion.

On Thursday, the appeals court agreed to consider the request, an unusually swift response.

Fairholme, a mutual fund run by stock picker Bruce Berkowitz, is one of a handful of Fannie and Freddie shareholders who have brought lawsuits against the government for a 2012 decision to sweep nearly all of Fannie's and Freddie's profit to the U.S. Treasury.

As they were nearing collapse in 2008, Fannie and Freddie were taken into conservatorship by the Federal Housing Finance Agency and received nearly $188 billion in aid.

In February 2014, Judge Sweeney granted Fairholme's motion to conduct discovery seeking evidence that could undermine arguments the government has made in its attempts to have the case dismissed.

The government has turned over thousands of documents but has resisted turning over others, saying they are shielded by legal privileges protecting presidential communications, government deliberations and sensitive bank-examination materials.

Last November, Fairholme asked the judge to compel the government to turn over 58 disputed documents. After reviewing the documents herself, on Sept. 20 Judge Sweeney ordered the government to release 56 of them to Fairholme's lawyers. The government had already agreed to give up its privilege claims on two of the documents.

The appeals court's order on Thursday means Fairholme now has seven days to respond. The order also directed the government to provide the appeals court with the disputed documents, something the government had offered to do in its petition on Wednesday.

Write to John Carney at john.carney@wsj.com

(END) Dow Jones Newswires

October 27, 2016 19:15 ET (23:15 GMT)

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