Every Regulatory Attorney Always Has Standing to Challenge the Constitutional Design of Her Regulator
So would hold Judge Brett Kavanaugh of the U.S. Court of Appeals for the DC Circuit in a case challenging the constitutionality of the institutional design of the Consumer Financial Protection Bureau. Judge Kavanaugh has written some of the most provocative concurring and dissenting opinions about the constitutional limits and permissions of institutional design, including the view vindicated at the Supreme Court in Free Enterprise Fund v. PCAOB (see here for the Supreme Court’s opinion, here for Judge Kavanaugh’s dissenting opinion below).
The panel—Judges Rogers and Pillard—didn’t reach the merits, affirming instead the district court’s opinion that the regulated entity Morgan Drexen, Inc. can raise the constitutional defense in the enforcement proceeding currently pending in the Ninth Circuit (where, in fact, Morgan Drexen did raise the issue). The main justiciability question is whether the district court abused its discretion in concluding that a constitutional challenge in anticipation of an enforcement proceeding isn’t the appropriate place to litigate the question; the better procedure, concluded the district court, is as an affirmative when that enforcement proceeding actually occurs. There’s an intuitive logic to that rule—maybe the enforcement proceeding never occurs at all? But here, the enforcement proceeding was already pending when the district court reached its conclusion. There was no question about the likelihood of an injury in fact, given the enforcement proceeding. So why delay?
I think the district court’s opinion was a close one, but the DC Circuit’s affirmance was not. Whether the district court was right or wrong, it certainly wasn’t an abuse of discretion to tell the plaintiff that the litigation already under way was the better place to adjudicate the issues.
And Judge Kavanaugh didn’t disagree on that point. He disagreed with the much smaller—and I think more obviously correct—decision of the majority that a lawyer working in a regulated industry doesn’t always and forever have an injury that stems from the alleged constitutional defects of the industry’s primary regulator. In a one-paragraph dissent of short sentences, Kavanaugh writes (in its entirety):
Kimberly Pisinski is an attorney. She has brought a lawsuit challenging the constitutionality of the Consumer Financial Protection Bureau. The majority opinion holds that she lacks standing. I respectfully disagree. In my view, Pisinski has standing. She contracts with a company known as Morgan Drexen and works together with Morgan Drexen employees to provide debt settlement and bankruptcy services to consumers who are in debt. These services are intended to help people in debt negotiate better terms with their creditors. Consumers are charged a fee for some of these services. The Bureau claims that the kind of services in which Pisinski and Morgan Drexen engage – with an up-front fee paid by consumers – is illegal. The Bureau therefore is regulating a business that Pisinski engages in. That is enough for standing. We have a tendency to make standing law more complicated than it needs to be. When a regulated party such as Pisinski challenges the legality of the regulating agency or of a regulation issued by that agency, “there is ordinarily little question” that the party has standing, as the Supreme Court has indicated. Lujan v. Defenders of Wildlife, 504 U.S. 555, 561-62 (1992). So it is here.
This would be an extraordinary extension of standing doctrine. Any lawyer, working in any corner of a regulated industry, can insert the judiciary into the evaluation of the institutional design of the regulatory state. I’ll have to think more about the sweep of this doctrine, but it strikes me as both noteworthy and unusual.