Gibson Dunn & Crutcher's Scalia Strikes Again in Dodd-Frank Rule Challenge
Eugene Scalia of Gibson Dunn & Crutcher has notched another victory against Wall Street regulation, strengthening a record that was already notably one-sided.
On Friday U.S. District Judge Robert Wilkins in Washington, D.C., vacated a rule adopted by the Commodity Futures Trading Commission last year to restrict speculative trading. The rule, based on the CFTC's interpretation of the Dodd-Frank Act, capped the number of derivatives contracts individual traders could hold in certain commodities in an effort to curb inflated commodity prices.
Two Wall Street trade groups, the Securities Industry and Financial Markets Association and the International Swaps and Derivatives Association, hired Scalia and his partner Miguel Estrada to challenge the position limits rule in a December 2011 lawsuit. The Gibson Dunn lawyers moved for summary judgment in March, arguing that the CFTC had overstepped its rule-making authority in establishing the restriction.
SIFMA and ISDA argued in the motion that the CFTC may only impose position limits after establishing that they're necessary to combat the negative effects of excessive speculation--which the agency did not do. "The commission's view that this rule, apart from all others, was exempt from the core tenets of administrative law tainted the rule making process and led it to adopt a regulation that is replete with error," the motion asserted.
The CFTC countered that Dodd-Frank required it to establish the rule no matter what, but Wilkins wasn't persuaded. The judge remanded the rule to the agency for further proceedings after determining that Dodd-Frank is ambiguous on whether the CFTC is required to find that position limits are necessary and appropriate prior to imposing them. (Here's the judge's 50-page decision.)
Scalia declined to comment on the decision. In a joint statement, SIFMA and ISDA said they were pleased that the court had vacated the CFTC rule, which threatened to "adversely impact commodities markets and market participants, including end-users, by reducing liquidity and increasing price volatility."
The graveyard of financial regulations dispatched by Scalia is getting awfully crowded, thanks to his perfect record in a string of recent cases. In July, litigating on behalf of the the Business Roundtable and the U.S. Chamber of Commerce in another Dodd-Frank challenge, he convinced the U.S. Court of Appeals for the D.C. Circuit to knock out a Securities and Exchange Commission rule that would have made it easier for shareholders to nominate candidates for the corporate boards, as we reported here.
In 2010, six insurance companies represented by Scalia persuaded the D.C. Circuit to overturn an SEC rule regulating fixed indexed annuities. The year prior, on behalf of the U.S. Chamber of Commerce, Scalia waged two successful objections to an SEC rule on mutual fund governance. And in 2007, Scalia led the Retail Industry Leaders to a Fourth Circuit victory in a case challenging a Maryland law that would have required some employers to pay more for employee health care.
Scalia's streak will be put to the test again soon. On Friday the Gibson Dunn partner is set to argue yet another challenge to a Wall Street regulation in D.C. federal district court, this time brought on behalf of the Chamber of Commerce and the Investment Company Institute. The two groups are seeking to overturn a CFTC rule requiring mutual funds with commodities investments to register with the agency.
This article originally appeared in The AmLaw Ligitation Daily.