By Joe Light

Shareholders of Fannie Mae and Freddie Mac on Tuesday suffered another blow in their efforts to lay claim to the profits of mortgage-finance giants, though the more important court battles could be still to come.

A judge for the U.S. District Court in Iowa dismissed a case brought against the Federal Housing Finance Agency and the U.S. Treasury Department over the treatment of the profits of Fannie and Freddie.

The case had challenged the government's 2012 decision to sweep nearly all of the companies' profits to the U.S. Treasury and was one of several brought by Fannie and Freddie shareholders in recent years.

Last fall, a judge dismissed a similar suit in the U.S. District Court in Washington, D.C., sending shares of Fannie and Freddie tumbling. In writing his decision, Judge Robert Pratt, the judge in the Iowa case, said the D.C. decision was so similar to the Iowa case, brought by Continental Western Insurance Co., as to warrant its dismissal.

"The Court concludes that Continental Western cannot establish that either of the arguments are unique, because they are merely different bases for arguing the same claims that were already made" in the earlier-dismissed case, Judge Pratt wrote. The decision in that earlier case, brought by investors Perry Capital LLC and Fairholme Funds Inc., is being appealed.

A Treasury Department spokesman and FHFA spokeswoman declined to comment. A spokeswoman for W.R. Berkley Corp., the parent company of Continental Western, didn't have immediate comment.

Now, most investor attention is focused on a case being heard by Judge Margaret Sweeney in the U.S. Court of Federal Claims. Judge Sweeney last week said the discovery process in her case could continue despite the dismissal of the U.S. district court case.

Fannie and Freddie were placed into a conservatorship by the federal government in 2008 after financial-crisis era losses and ended up receiving $187.5 billion in aid. The government didn't wipe out shareholders but did receive warrants to acquire up to 80% of the companies' common stock.

The government also received a new class of "senior preferred" shares that initially paid a 10% dividend. But in August 2012, the FHFA and Treasury changed the terms of the agreement, eliminating the dividend and requiring the companies to send almost all of their profits to the U.S. Treasury. If the companies have losses, on the other hand, they don't pay a dividend.

Most of the shareholder lawsuits challenge that change in terms. Through the end of last year, Fannie and Freddie have paid the government dividends of $225.4 billion, and the White House budget estimates that they would pay another $153.3 billion in profits by the end of the 2025 fiscal year.

In a conference call with investors on Tuesday, Fairholme Funds manager Bruce Berkowitz reiterated his belief that Fannie and Freddie shareholders will eventually be compensated. "The companies are essential. There are no substitutes," Mr. Berkowitz said.

Write to Joe Light at joe.light@wsj.com

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