NEW YORK (TheStreet) --Fairholme Funds is appealing a recent court decision that dismissed its lawsuit against the U.S. government over claims to the profits of Fannie Mae (FNMA) and Freddie Mac (FMCC) . Fairholme filed the appeal Friday morning in the U.S. Court of Appeals District of Columbia.

Fairholme, along with several well-known investors, including Perry Capital and Pershing Square Capital Management, owns a large stake in Fannie and Freddie Securities and holds the view that the government unjustly took the profits of the housing giants, in violation of the Fifth Amendment. The amendment prohibits the taking of private property for public use without just compensation.

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On Sept. 30, a U.S. district court judge dismissed four lawsuits, including ones from Fairholme and Perry. The decision shocked investors and sent shares down some 40%. Fannie shares closed Thursday at $1.76.Perry Capitalis also appealing the ruling.

At issue in many of the roughly 20 lawsuits filed by various investors is a 2012 third amendment to the government's 2008 conservatorship of Fannie and Freddie, known as a "net worth sweep," which sweeps all the profits into the Treasury, leaving private shareholders with nothing.

"Fairholme believes strongly that the Net Worth Sweep -- imposed four years after the financial crisis -- was not authorized by the Housing and Economic Recovery Act of 2008 ("HERA") and must be unwound. Fairholme also believes strongly that the Federal Housing Finance Agency ("FHFA") has contractual and fiduciary duties to the preferred shareholders of Fannie Mae and Freddie Mac, and that these duties can and will be enforced," Fairholme attorneys wrote in their appeal.

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Fairholme Funds Appeals Fannie Mae and Freddie Mac Verdict