After getting a chance to actually read the majority and dissenting opinions in Cumo v. Clearing House Association, rather than merely press reports of the same, I find the opinions themselves only mildly surprising, for reasons that don't have to do with the reasoning employed by Scalia and Thomas in their opposing opinions, but because Thomas confounded his condescending left-leaning critics by refusing to fulfill his assigned role as Nino's "sock puppet." Who knew he had a mind of his own?
To the pinheads who post here, it appears simply that Scalia and the majority refused to accord Chevron deference to the OCC's interpretation of the admitedly ambiguous term "visitorial powers" as including enforcement of state laws against national banks because (1) "Nino Knows Best" what's a reasonable interpretation of "vistorial powers" and (2) extending that definition to enforcement actions is not reasonable. To the contrary, The Sock Puppet thought that inclusion of enforcement actions within the scope of "vistorial powers" was a reasonable interpretation of that ambiguous term in the National Bank Act and that the Court should have deferred to the OCC's interpretation. It was a close call, reasonable (and unreasonable) people can disagree, and among this august body five thought one way and four the other. Game over, unless you "say you want a revolution, well you know, we all want to change the world." National banks will just have to learn to live with it. Until the composition of the Court changes or Nino gets hit by a bus.
The trade press and popular press were full of dire predictions, such as that by Cheyenne Hopkins in the American Banker, warning that the decision "could open the floodgates for lawsuits from state attorneys general..."
"Most attorney generals were waiting until this case was decided," said Arthur Wilmarth, a professor at George Washington Law School. "Given the amount of private litigation we've seen, it certainly wouldn't surprise me to see some state enforcement actions."
Yes, that may be correct. There may be an increased number of enforcement actions by state attorneys general against national banks. However, the rub is that both the majority and dissenters agreed that Eliot Spitzer, Cumo's predecessor who commenced the tussle by issuing correspondence to national banks in lieu of administrative supoenas, had no power to compel national banks to deliver documents or to allow inspection of their records pursuant to anything other than a judicial subpoena, issued by a judge and based upon a finding that there is probable cause to believe that state laws (that have not otherwise been preempted by federal law) have been violated by the national bank. As Scalia put it in the majority opinion:
If a State chooses to pursue enforcement of its laws in court, then it is not exercising its power of visitation and will be treated like a litigant. An attorney general acting as a civil litigant must file a lawsuit, survive a motion to dismiss, endure the rules of procedure and discovery, and risk sanctions if his claim is frivolous or his discovery tactics abusive. Judges are trusted to prevent “fishing expeditions” or an undirected rummaging through bank books and records for evidence of some unknown wrongdoing. In New York, civil discovery is far more limited than the full range of “visitorial powers” that may be exercised by a sovereign. Courts may enter protective orders to prevent “unreasonable annoyance, expense, embarrassment, disadvantage, or other prejudice,” N. Y. Civ. Prac. Law Ann. §3103(a) (West 2005), and may supervise discovery sua sponte, §3104(a).
An attorney for a state regulatory agency (not in Texas) who prefers anonymity professed a glass-half-empty view of Cuomo's "victory" in an e-mail to me last week.
In a fine example of Scalia's sick, twisted sense of humor, he tells the states you can bring lawsuits against national banks to enforce your nonpre-empted consumer protection laws, but you can't issue subpoenas to get the information you need to file those lawsuits. (Oh, and Rule 11 sanctions apply to state attorneys so don't try filing that lawsuit and getting the information supporting the lawsuit thru discovery. No sovereign immunity from Rule 11.) I can just hear Scalia saying nanner nanner. This case does nothing for the states as far as I can see. I seriously think he must have meant this decision as a joke directed at all of the states' attorneys sitting down with their cup of joe in the morning to read a new SCOTUS case that is supposedly good for states. And the punchline is the last paragraph.
Actually, I think the last two paragraphs of Scalia's opinion are a telling "punchline." From those paragraphs:
Here the threatened action was not the bringing of a civil suit, or the obtaining of a judicial search warrant based on probable cause, but rather the Attorney General’s issuance of subpoena on his own authority under New York Executive Law, which permits such subpoenas in connection with his investigation of “repeated fraudulent or illegal acts . . . in the carrying on, conducting or §63(12) (West 2002). That is not the exercise of the power of law enforcement “vested in the courts of justice” which12 U. S. C. §484(a) exempts from the ban on exercise of supervisory power.
Accordingly, the injunction below is affirmed as applied to the threatened issuance of executive subpoenas by the Attorney General for the State of New York, but vacated insofar as it prohibits the Attorney General from bringing judicial enforcement actions.
In a long discussion with a reporter from the National Law Journal prior to oral argument in this case, I told her that Spitzer's letter clearly sought to exercise a visitorial power. Unfortunately for the State of New York, without the exercise of such powers, the states will be hamstrung in determining whether or not violations of state laws of the kind in question in this case (fair lending laws) have occurred. That's why, although it's reasonable to assume that some states will be more active in this area, I'm as skeptical as my state regulator correspondent at this juncture that this will "open the floodgates" of litigation. If it does, expect the push-back by targeted banks to be furious, including nasty battles to impose sanctions on state attorneys general who do attempt to "game" the system in order to go fishing.
This issue will be affected by the proposed federal consumer protection agency, if that monster is ever created by Congress. Bank trade associations appear to be on their heels at this point in opposing it, but if the proposal gains traction (which appears likely), bankers and their lobbyists will wage a long, protracted battle to make the federal agency the exclusive agency over such matters, and to gut the present proposal to make the federal standard a "floor" and to allow the states to impose and enforce higher consumer protection standards. No matter how wounded the banking business appears to be politically at the moment, I don't see it rolling over. Instead, I expect blood on the floor and mounds of cash burned before the commercial banking business lets that type of system come to pass. Expect the banks to be supported by their primary regulators (other than Sheila Bair, of course). Neither the OCC nor the Fed has any interest in losing turf to a new "consumer products" regulator. Neither does the OTS, although they don't, at this point, appear to be a long-term player.
Of course, all of this is premature gas-baggery. If any of the pundits who've been blabbing about the future could actually predict the future, they'd be taxing the limits of their livers' ability to process Mai-Tai's on the verandas of their multi-million dollar homes on Hapuna Beach on the Big Island of Hawaii, instead of billing by the hour or the piece, being quoted in newspapers, or writing blogs. The only thing that can be predicted with certainty is that this will be a most interesting federal legislative session for those of us nerds who follow this stuff.