The Dodd-Frank Act and the regulations thereof continue unraveling before the federal courts. Rightfully so. And for that, much thanks goes to Eugene Scalia, a most capable attorney with Gibson, Dunn and Crutcher.
Scalia argued successfully for Business Roundtable and the U.S. Chamber of Commerce in our lawsuit against the Securities and Exchange Commission on proxy access. The U.S. Circuit Court for the District of Columbia struck down the capricious regulation last year. (BRT news release, ruling)
It's one of several major successes Scalia has recorded against the regulations stemming from the Dodd-Frank Act, which he summarized in a Wall Street Journal (subscription) op-ed Thursday, "Why Dodd-Frank Rules Keep Losing in Court." Here's what he had to say about proxy access:
I once debated a former SEC staffer who accused business of using procedural maneuvers to defeat salutary regulations. Yet proper procedure is one of Congress's principal means of ensuring regulatory quality. The law authorizing courts to review agency rules is the Administrative Procedure Act. In court, the ends don't justify the means.
The SEC (and, lately, the CFTC) often does a poor job with the hard work of the rule-making process. Under law, an agency must listen carefully to what the public says about a proposed regulation, reconsider its approach in light of that public input, and then cogently explain (not merely assert) why it made the regulatory choices it did in crafting the final rule.
Take the court of appeals' rejection last year of the SEC "proxy access" rule that made it easier for certain large shareholders to nominate corporate directors. That decision has become Exhibit A for the argument that the court has set too high a bar.
Yet in adopting the proxy rule, the commission ignored one of companies' main objections to it: that the proxy procedure would be used mostly by labor-union and government pension funds whose interests diverge sharply from those of other shareholders. The SEC's final rule never even mentioned labor unions or government pension funds. Under clear Supreme Court precedent, when an agency ignores the public's concerns on a central issue like that, the rule will be struck down.
Scalia's latest success, litigation that prompted a federal court to strike down a Commodity Futures Trading Commission rule attempting to restrict traders, has brought him much well-deserved news coverage.
- WSJ, "Another Scalia Vexes Regulators"
- Corporate Counsel, "Gibson Dunn & Crutcher's Scalia Strikes Again in Dodd-Frank Rule Challenge "
- ABA Journal, "Scalia’s Son Is a Go-To Lawyer in Challenges to Financial Regulations "