February 11, 2014
Better Markets v. USDOJ On The JPMorgan Settlement: Defining Frivolous Down
Posted by David Zaring

Better Markets is an advocacy group worried about the failure of the government to hold banks accountable for misdeeds that lead to the financial crisis.  No problem there, I'm mystified by it myself, though there might be a normative case to be made for the policy, depending on how you feel about how the government treated Arthur Andersen and varous Enron executives during the last crisis.

But the group's suit against the government for violating separation of powers principles and FIRREA for settling with JPMorgan without filing the settlement with a court must have made the lawyers who filed the complaint a little nervous, in the "is this frivolous and will I get sanctioned?" kind of way.

Are you depriving courts of their Article III jurisdiction if you settle a case, instead of trying it to completion (and presumably then filing an appeal)?  Owen Fiss thought so, in an article that I really love, but perhaps we should put the piece under the "seminal Yale thought experiment" rubric.  

Settlement isn't exactly unprecedented in our federal system.  Sometimes the government announces that it won't be defending a statute like DOMA in court, thereby depriving the judges of their Article III powers to assess the constitutionality of the law.  Sometimes it changes policies when a powerful senator complains, thereby depriving Congress of its Article I right to reverse the executive branch's overreaching through legislation.  And sometimes it enforces statutes - Title VII is an example - that deprive millions of potential plaintiffs of their right to file constitutional suits, in that case invoking the Equal Protection Clause.  Sometimes, it also just settles cases before they go to trial, just like every other institution in America.  

And yet somehow these dramatic examples of executive branch overreaching have never resulted in a colorable separation of powers claim.  Indeed, separation of powers claims are almost never colorable; as a rule of thumb, they are step one towards losing a lawsuit, because they can be made about all cases, which is basically the same thing as saying they can be made about no cases.  I'm generally not a fan of holding the government to particularly different standards than, say, Amnesty International, but even if you feel differently, you might do so because of the government's criminal powers, which the JPMorgan settlement doesn't involve.

The FIRREA count isn't a whit better, by the way.  FIRREA authorizes the Attorney General to file suits against banks who violate the substantive principles of that banking statute.  But just because a statute permits such litigation hardly means that it means that courts will be reviewing the AG's decisions as to whether to bring a case under it or not.  THAT would be a separation of powers problem; courts would get to micromanage every decision whether to prosecute a case, supposedly one of the most core executive branch functions there is.  Just ask Justice Scalia. 

And don't even get me started on whether Better Markets has standing to sue over a settlement between the government and some other party that has nothing to do with Better Markets.

Administrative Law, Finance, Financial Crisis, Financial Institutions | Bookmark

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