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Media Alerts - State National Bank of Big Spring v. Lew - D.C. Circuit
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July 31, 2015
  State National Bank of Big Spring v. Lew - D.C. Circuit
Headline: D.C. Circuit permits constitutional challenges to the Dodd-Frank Act to proceed.

Area of Law: Dodd-Frank Act, Federal Courts

Issue Presented: Whether Plaintiffs had standing to bring constitutional challenges to various provisions of the Dodd-Frank Act and whether their pre-enforcement challenges were ripe.

Summary: Plaintiffs, State National Bank of Big Spring ("Bank") and various state creditors, brought suit in the United States District Court for the District of Columbia challenging various provisions of the Dodd-Frank Act. First, Plaintiff Bank challenged the Act's creation of the Consumer Financial Protection Bureau (CFPB) on the basis that, as an independent agency, it must be headed by multiple members rather than by a single person and that Congress's broad delegation of authority to the CFPB violated the non-delegation doctrine. Second, Plaintiff Bank claimed that President Obama's recess appointment of Director Richard Cordray violated the Constitution because it occurred during an intra-session recess of insufficient length. Third, Plaintiff Bank challenged the Financial Stability Oversight Council created by the Act as violative of separation of powers and the non-delegation doctrine. Finally, Plaintiff state creditors challenged the "orderly liquidation clause" as violative of the Bankruptcy Clause of the Constitution's guarantee of uniform bankruptcy laws and the non-delegation doctrine. The district court concluded that Plaintiffs lacked standing and that their claims were not ripe, dismissing all claims.

The D.C. Circuit reversed and remanded in part and affirmed in part. Beginning with the challenge to the CFPB, the court had little difficulty concluding that State National Bank, as a regulated entity, had standing to challenge its composition. Turning to the question of ripeness, the court cited Abbott Laboratories v. Gardner, 387 U.S. 136 (1967), for the proposition that regulated entities did not have to risk violating a law in order to challenge the constitutionality of the regulating agency. The court remanded these challenges to the district court for consideration of the merits. The court permitted the challenge to the recess appointment of Director Cordray to proceed on the same basis, remanding this claim to the district court for consideration under the Supreme Court's recent Noel Canning decision.

The court found that the Bank lacked standing to challenge the Financial Stability Oversight Council. The Council, which has power to designate businesses as "too big to fail" and subject them to additional regulation, had not so designated the Bank. The Bank's argument that the Council's designation of GE Capital, its competitor, gave GE Capital reputational benefits and subjected the Bank to competitive harm was too attenuated to satisfy the causation requirement outlined in Lujan. The court noted, moreover, that the Bank was not invoking competitor standing as traditionally conceived because here, GE Capital was subject to more, not less, regulation.

Finally, the court addressed the state creditors' challenge to the "orderly liquidation authority," under which the FDIC is authorized to treat similarly situated creditors differently if doing so would increase the value of assets or minimize losses. The state creditors argued that they might be investors in companies ultimately liquidated under this provision and might then be subject to disparate treatment as compared to similarly situated creditors. The court found this argument too speculative and premature. The court also rejected the state creditors' argument that uncertainty over the possibility of future proceedings under this provision affected the value of their investments now, noting that this novel argument lacked support in case law and would give rise to speculative suits by any and all creditors. The court concluded by rejecting the state creditors' argument that they had standing because the liquidation authority deprived them of a previously-conferred statutory right to uniform treatment under the Bankruptcy Code, noting that the Dodd-Frank Act created new statutory rights and superseded any prior statute on point.

To read the opinion in its entirety, please visit$file/13-5247.pdf.

Panel: Rogers, Kavanaugh, and Pillard

Argument Date: November 19, 2014

Date of Issued Opinion: July 24, 2015

Docket Number: No. 13-5247

Decided: Reversed and remanded in part, affirmed in part.

Case Alert Author: Elizabeth Earle Beske

Counsel: Gregory F. Jacob for private appellants; Patrick R. Wyrick for state appellants; Daniel Tenney for appellees.

Author of Opinion: Kavanaugh

Case Alert Circuit Supervisor: Elizabeth Earle Beske, Ripple Weistling

    Posted By: Ripple Weistling @ 07/31/2015 01:25 PM     DC Circuit  

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