Monday, October 6, 2008
As readers well know, Congress recently passed what is colloquially known as the “Bailout Bill,” but officially known as the “Emergency Economic Stabilization Act of 2008.” While most of the discussion of EESA focused on the political wisdom of using public funds to ameliorate private debt, very little focused on the Constitutional issues raised by the bill.
The draft legislation proposed by Treasury Secretary Paulson on September 21 declared, “Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.” Of course, Congress has authority under the Exceptions and Regulations clause to strip the Supreme Court of its appellate jurisdiction. Moreover, as Dean Rod Smolla of Washington and Lee University School of Law reasoned in a piece for Slate.com, under the Constitution, Congress could likely pass a law that stripped all federal courts of any review. However, he also noted that such an action is “relatively rare” and that such a law would be “in powerful tension with our system of checks and balances and that its constitutionality would be subject to grave doubt.”
Congress apparently agreed. As enacted, EESA has an entire section on judicial review. The law states: “Actions by the Secretary pursuant to the authority of this Act shall be subject to chapter 7 of title 5, United States Code, including that such final actions shall be held unlawful and set aside if found to be arbitrary, capricious, an abuse of discretion, or not in accordance with law.” So, this pretty much solves the judicial review dilemma, right? Not quite, according to Professor David Zaring, a Professor of Law and Business Ethics at the Wharton School. He notes that there is a contradiction in the bill because it purportedly denies equitable relief, but “arbitrary and capricious review is equitable relief” under the APA. The professor further notes that the bill would seem to favor declaratory, as opposed to injunctive relief in any suits under the Act. (A more detailed description of this post can be found in this Network's Administrative Law Blog.)
I would add one additional point. Even if the Bill might provide for judicial review, the question is judicial review by whom? Standing would still be an issue. Under what circumstances will plaintiffs be allowed to bring suit under the act? Cases like Flast teach us that taxpayers qua taxpayers could not sue under these circumstances. But what about the bank that originally owned the mortgage? What about the private mortgagor that lives (or lived) in the mortgaged property? My thought is that while an actual or prospective economic injury might be shown in any number of scenarios, the courts will analyze the causation prong of the standing test in a very stringent manner – as in Allen v. Wright – to avoid the merits. I suppose the courts would say, “Yes, you suffered X harm, but this would have happened even without this legislation, so there is no causation.” In short, I’m guessing a very small class of claims under the Act will be litigated on the merits.
Final thought – how are you using the bailout in your classroom discussions? What do your students have to say?