State Nat'l Bank of Big Spring v. Lew, s. 13–5247

• Decision Date: 24 July 2015
• Docket Number: Nos. 13–5247,13–5248.,s. 13–5247
• Citation: 795 F.3d 48
• Parties: STATE NATIONAL BANK OF BIG SPRING, et al., Appellants v. Jacob J. LEW, in his Official Capacity as United States Secretary of the Treasury, et al., Appellees.
• Court: U.S. Court of Appeals — District of Columbia Circuit

795 F.3d 48

STATE NATIONAL BANK OF BIG SPRING, et al., Appellants

v.Jacob J. LEW, in his Official Capacity as United States Secretary of the Treasury, et al., Appellees.

Nos. 13–5247

13–5248.

United States Court of Appeals, District of Columbia Circuit.

Argued Nov. 19, 2014.

Decided July 24, 2015.

Gregory F. Jacob argued the cause for Private Appellants. With him on the briefs were Sam Kazman, Hans Bader, C. Boyden Gray, Adam J. White, and Adam R.F. Gustafson.

Patrick R. Wyrick, Attorney, Office of the Attorney General for the State of Oklahoma, argued the cause for State Appellants. With him on the briefs were E. Scott Pruitt, Attorney General, Alan Wilson, Attorney General, Office of the Attorney General for the State of South Carolina, James Emory Smith, Jr., Attorney, Samuel S. Olens, Attorney General, Office of the Attorney General for the State of Georgia, John E. Hennelly, Attorney, Bill Schuette, Attorney General, Office of the Attorney General of the State of Michigan, Neil D. Gordon, Attorney, Jon Bruning, Attorney General, Office of the Attorney General of the State of Nebraska, Katherine J. Spohn, Attorney, Luther Strange, Attorney General, Office of the Attorney General for the State of Alabama, Andrew L. Brasher, Deputy Solicitor, Derek Schmidt, Attorney General, Office of the Attorney General for the State of Kansas, Jeffrey A. Chanay, Deputy Attorney General, Timothy C. Fox, Attorney General, Office of the Attorney General for the State of Montana, Lawrence VanDyke, Attorney, Greg Abbott, Attorney General, Office of the Attorney General for the State of Texas, John Reed Clay, Jr., Attorney, Michael DeWine, Attorney General, Office of the Attorney General for the State of Ohio, Jennifer L. Pratt, Assistant Attorney General, Patrick Morrisey, Attorney General, Office of the Attorney General for the State of West Virginia, and Elbert Lin, Solicitor General. Matthew T. Cochenour, Assistant Attorney General, Office of the Attorney General for the State of Montana, and Aaron D. Lindstrom, Attorney, Office of the Attorney General for the State of Michigan, entered appearances.

Daniel Tenny, Attorney, U.S. Department of Justice, argued the cause for appellees. With him on the brief were Stuart F. Delery, Assistant Attorney General, Ronald C. Machen, Jr., U.S. Attorney, Mark B. Stern, Attorney, Meredith Fuchs, General Counsel, Consumer Financial Protection Bureau, John R. Coleman, Senior Counsel, Katherine H. Wheatley, Associate General Counsel, Board of Governors of the Federal Reserve System, Joshua P. Chadwick, Counsel, Colleen J. Boles, Assistant General Counsel, Federal Deposit Insurance Corporation, Kathryn R. Norcross, Senior Counsel, Jerome A. Madden, Counsel, Gregory F. Taylor, Douglas B. Jordan, and Gabriel Hindin, Attorneys, Office of the Comptroller of the Currency, Michael A. Conley, Deputy General Counsel, Securities and Exchange Commission, William K. Shirey, Assistant General Counsel, Ajay B. Sutaria, Counsel, Office of General Counsel, Commodity Futures Trading Commission, and John K. Ianno, Senior Associate General Counsel, National Credit Union Administration.

Before: ROGERS, KAVANAUGH, and PILLARD, Circuit Judges.

Opinion

Opinion for the Court filed by Circuit Judge KAVANAUGH.

KAVANAUGH, Circuit Judge:

In response to the financial crisis in 2008 and 2009, Congress passed and President Obama signed the Dodd–Frank Wall Street Reform and Consumer Protection Act. See Pub.L. No. 111–203, 124 Stat. 1376 (2010). State National Bank is a bank in Big Spring, Texas, between Midland and Abilene. In this case, the Bank and a group of States challenge the constitutionality of various provisions of the Dodd–Frank Act.

First, State National Bank challenges the constitutionality of the new Consumer Financial Protection Bureau created by the Dodd–Frank Act. The Bureau is an independent agency that regulates consumer financial products and services. The Bureau is headed by a single Director. According to the Bank, independent agencies must be headed by multiple members rather than by a single person. Cf. Humphrey's Executor v. United States, 295 U.S. 602, 624, 631–32, 55 S.Ct. 869, 79 L.Ed. 1611 (1935). For that reason, among others, the Bank claims that the Bureau is unconstitutional. The Bank also argues that Congress's broad delegation of authority to the Bureau violates the non-delegation doctrine. See J.W. Hampton, Jr., & Co. v. United States, 276 U.S. 394, 409, 48 S.Ct. 348, 72 L.Ed. 624 (1928).

Second, the Bank contests the constitutionality of President Obama's recess appointment of the Bureau's head, Director Richard Cordray. On July 18, 2011, President Obama nominated Cordray as Director of the Bureau. As of January 4, 2012, the Senate had not acted on the nomination, so President Obama used his recess appointment power to appoint Cordray during a three-day intra-session Senate recess. On July 16, 2013, after Cordray had been serving under his recess appointment for 18 months, the Senate confirmed Cordray. The Bank alleges that Director Cordray's recess appointment (and the actions he took before he was confirmed) was unlawful because the appointment occurred during an intra-session recess of insufficient length. See NLRB v. Noel Canning, ––– U.S. ––––, 134 S.Ct. 2550, 2566–67, 189 L.Ed.2d 538 (2014) ; see also Mathew Enterprise, Inc. v. NLRB, 771 F.3d 812, 813–14 (D.C.Cir.2014).

Third, the Bank challenges the constitutionality of the new Financial Stability Oversight Council created by the Dodd–Frank Act. The Council monitors the stability of the U.S. financial system and responds to emerging threats to that system. The Council's voting members include, among others, the Secretary of the Treasury, the Chairman of the Federal Reserve, the Comptroller of the Currency, the Director of the Consumer Financial Protection Bureau, the Chairman of the Securities and Exchange Commission, and the Chair of the Federal Deposit Insurance Corporation (or FDIC). The Council possesses statutory authority to designate certain “too big to fail” (as they are colloquially known) financial companies for additional regulation in order to minimize the risk that such a company's financial distress will threaten the stability of the American economy. The Bank argues that the Council is unconstitutional under the non-delegation doctrine and related separation of powers principles because the Council has broad and unchecked power to decide which companies should face additional regulation.

Fourth, the State plaintiffs challenge the Dodd–Frank Act's grant of new liquidation authority to the U.S. Government. The Act gives the Treasury, the Federal Reserve, and the FDIC “the necessary authority to liquidate failing financial companies that pose a significant risk to the financial stability of the United States.” 12 U.S.C. § 5384(a). That is called “orderly liquidation authority.” The Government has broad power when exercising its orderly liquidation authority to alter the priority of a financial company's creditors. The State plaintiffs and their pension funds are investors in bonds issued by large financial institutions. The States say that their current investments are worth less because of how the Government might exercise its orderly liquidation authority in the future if those financial institutions were to run into significant financial difficulties and be liquidated or reorganized. The State plaintiffs argue that the orderly liquidation authority—because it grants the Government broad power to alter the priority of creditors—is unconstitutional under the Bankruptcy Clause's guarantee of uniform bankruptcy laws and under non-delegation and due process principles.

Plaintiffs filed suit in the U.S. District Court for the District of Columbia. The District Court concluded that the plaintiffs did not have standing and that their claims were not ripe. Plaintiffs appealed to this Court. Our review of the standing and ripeness determinations is de novo, and we consider plaintiffs' four challenges in turn.¹

I

First, State National Bank challenges the constitutionality of the new Consumer Financial Protection Bureau created by the Dodd–Frank Act. The question at this juncture is whether the Bank has standing to raise that claim and, if so, whether the claim is ripe for review now rather than in any later enforcement action against the Bank.

For standing, the question is whether State National Bank has suffered an injury in fact caused by the Bureau and redressable by the Court. See Lujan v. Defenders of Wildlife, 504 U.S. 555, 560–61, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992). The Supreme Court has stated that “there is ordinarily little question” that a regulated individual or entity has standing to challenge an allegedly illegal statute or rule under which it is regulated. Id. at 561–62, 112 S.Ct. 2130. So it is in this case.

State National Bank claims that the Bureau is unconstitutional. The Bank is not a mere outsider asserting a constitutional objection to the Bureau. The Bank is regulated by the Bureau. Under the Dodd–Frank Act, the Bureau “shall regulate the offering and provision of consumer financial products or services under the Federal consumer financial laws.” 12 U.S.C. § 5491(a). The Act authorizes the Bureau to implement those “Federal consumer financial laws through rules, orders, guidance, interpretations, statements of policy, examinations, and enforcement actions.” Id. § 5492(a)(10). State National Bank offers and provides consumer financial products and services. The Bureau has already exercised its broad regulatory authority to impose new obligations on banks, including State National Bank. For example, in 2012 the Bureau promulgated the Remittance Rule. See 12 C.F.R. §§ 1005.30 –1005.36. The Remittance Rule imposes disclosure requirements on institutions that offer international remittance transfers, which are electronic money transfers. The Rule also offers a safe harbor, but banks such as State National Bank must...