With the re-election of President Barack Obama, lawyers are bracing for more vigorous enforcement activity and new policy initiatives at federal regulatory agencies.
Consumer protection and workplace rights are among the areas where historically it’s made a clear difference who occupies the White House. As Obama begins his second term, lawyers expect the Consumer Financial Protection Bureau and the Federal Trade Commission to be even more aggressive, although open-ended questions remain about agency leadership. Likewise, at two agencies that oversee the workplace—the U.S. Equal Employment Opportunity Commission and the National Labor Relations Board—lawyers anticipate a renewed sense of purpose as well as new policy initiatives.
The new Consumer Financial Protection Bureau was almost certainly the agency with the most on the line during the election—Mitt Romney had vowed, if elected president, to repeal the Dodd-Frank Act that created the CFPB.
“It would only be natural for the CFPB to be more aggressive now that the election has virtually eliminated any remaining threat to the bureau’s existence,” said Hunton & Williams partner Ronald Rubin. Venable of counsel Jonathan Pompan agreed. “By all appearances, it’s full steam ahead for the CFPB.”
The CFPB’s No. 2 official, Raj Date, announced last week he was leaving in January, but lawyers expect director Richard Cordray will remain at the helm at least until fall 2013, when some think he’ll quit to run for governor of Ohio. Cordray’s recess appointment—which was made when Republicans say the Senate was not technically in recess—expires at the end of 2013. On the CFPB’s short-term agenda is a sweeping set of rules dealing with mortgages, which will be released in final form in January.
Financial services litigator Robert Maddox, a partner at Bradley Arant Boult Cummings, said the regulations are likely to trigger a wave of consolidation in the mortgage-servicing market.
“Smaller entities will have to make a decision whether they can stay in the space and comply with the regulations when the cost of servicing a loan becomes so great,” he said. “If they can’t create economies of scale, they’ll get out of the business.”
The agency also is creating a national mortgage database with the Federal Housing Finance Agency, which Maddox fears could become “an enforcement nightmare” if CFPB lawyers use its statistics as a basis for bringing cases.
Another controversial rule makes debt-collection lawyers among the entities subject to CFPB supervision. To Alan Kaplinsky, who heads Ballard Spahr’s consumer financial-services practice, the CFPB has “put itself at risk” by including lawyers.
“The only thing that could really upset the apple cart is if the courts were to rule that Cordray’s appointment was invalid,” Kaplinsky said. He predicted that an individual debt-collection lawyer or trade group will sue over CFPB oversight.
“I doubt they’ll just challenge the validity of [the rule] but Cordray’s appointment as well,” he said.
While a coalition led by the Competitive Enterprise Institute filed suit in June alleging the CFPB is unconstitutional, it’s not clear that they have standing — but a debt-collection lawyer almost surely would. “There’s still a cloud hanging over the appointment,” Kaplinsky said.
At the FTC
As merger activity rebounds, Kelley Drye & Warren partner William MacLeod predicted that “on both the competition and consumer protection sides, we’re going to see an agency facing a great deal of enforcement imperatives.”
The key variable: Who will head the agency? Lawyers report that Chairman Jon Leibowitz has been talking to firms in Washington about moving to the private sector.
FTC spokeswoman Cecelia Prewett said via email that the chairman “has made no formal announcement on his plans.”
Many lawyers say they think Leibowitz will wait to announce his departure until the FTC makes a move in its biggest ongoing investigation: a probe of Google Inc.’s practices in the search and search-advertising markets.
Once Leibowitz departs, some lawyers think it’s likely Obama will name one of the current Democratic commissioners, Julie Brill or Edith Ramirez, to head the agency.
“Both Edith and Julie are aggressive but sensible,” said Hogan Lovells antitrust partner Janet McDavid. “They’ve been quite balanced.”
Also mentioned is Bureau of Economics head Howard Shelanski, O’Melveny & Myers partner Richard Parker and University of Colorado Law School dean Philip Weiser.
“My sense is that new leadership will be tempted to pick a few big merger and conduct cases to push the enforcement envelope even further,” said Jones Day antitrust partner David Wales. “Until the FTC gets its nose bloodied in court, which it probably will if it brings cases like that, clients will need to be prepared for more aggressive enforcement.”
David Balto, a senior FTC official during the Clinton administration, noted that “antitrust enforcement actions take a long time to develop. That’s why we see much stronger enforcement in a second term,” he said. “For example, in Clinton’s second term the [Justice Department] and the FTC brought their most important cases against Microsoft, Intel, Visa and Mastercard.”
Dechert partner Paul Denis said he expects the FTC “to ramp up its efforts to find viable legal theories to protect potential or future competition—competition that has yet to emerge but the FTC believes will emerge in the future.”
The U.S. Equal Employment Opportunity Commission (EEOC) during the next four years is likely to focus increasingly on employer hiring practices, reasonable accommodations for disabled workers and protecting “vulnerable” workers such as immigrants.
“It’s my impression that they’re very much pushing the envelope, and trying to broaden protections, sometimes beyond the scope of what the statute seems to provide,” said J. Randall Coffey, a partner at Fisher & Phillips.
EEOC chair Jacqueline Berrien is widely expected to remain on the job until her term expires in July 2014.
Obama in August nominated Cohen Milstein Sellers & Toll partner Jenny Yang as a commissioner—a controversial pick, given Yang’s central role representing 1.5 million women in the Wal-Mart Stores Inc. v. Dukes sex-discrimination class action.
Indeed, Marta Fernandez, a partner at Jeffer, Mangels, Butler & Mitchell, predicts the EEOC will focus more on “aggressive prosecution of discrimination charges particularly against ‘high profile’ employers with a national presence.”
Jones Day partner Eric Dreiband flagged “the use of criminal history to make employment decisions, the use of tests to screen out applicants for employment [and] the use of credit history to deny employment opportunities” as areas of EEOC interest.
The EEOC also is focusing on systemic cases involving widespread discrimination, said Proskauer Rose partner Leslie Silverman.
“In theory, they provide the most bang for the buck, but in reality, they are time consuming and expensive, so EEOC can only litigate so many.”
Seyfarth Shaw partner Christopher DeGroff calculated that the EEOC brought just 122 cases in fiscal year 2012, compared with 261 in 2011.
After several high-profile losses this year, he said, “I think they realize they need to do a better job litigating the cases they have.”
The National Labor Relations Board during Obama’s first term was like a scrappy boxer: Knock it down, it gets back up fighting. The agency has been plagued by a shortage of leaders confirmed by the U.S. Senate.
When Republican Brian Hayes’ term ends in December, the board will be down to just one: Chairman Mark Gaston Pearce. Two Democrats, Sharon Block and Richard Griffin, are serving under recess appointments that—like the CFPB’s Cordray—were made when Republicans claim the Senate was not in recess. (A third NLRB recess appointee, Republican Terence Flynn, subsequently resigned.)
On Dec. 5, the U.S. Court of Appeals for the D.C. Circuit will hear oral arguments in Noel Canning v. NLRB, challenging the appointments as unconstitutional. A case in the Seventh Circuit is pending as well.
“Probably the two circuit courts will issue decisions close to the same time,” said Ronald Meisburg, a partner at Proskauer Rose. “If they split, it may go to the Supreme Court. Even if they don’t, it may still go because of the importance of the issue.”
If the appointments are invalidated, the board will not have a three-member quorum required to take action. Nonetheless, it’s moving ahead with its agenda.
“The common theme is to make it easier for unions to organize or for employees who don’t have unions to challenge employer actions,” said Nelson Cary, a partner at Vorys, Sater, Seymour and Pease.
For example, NLRB acting general counsel Lafe Solomon has moved to protect nonunionized workers who criticize their employers via social media.
The agency faces two court challenges to recent rulemakings—one that requires employers to post a notice of employee rights under the National Labor Relations Act, and another that speeds up the process for conducting workplace elections when employees vote on unionizing.
The elections rule was struck down by U.S. District Court for the District of Columbia in May on procedural grounds and is now on appeal, said Morgan, Lewis & Bockius partner Jonathan Fritts, who represents intervenor the U.S. Chamber of Commerce.
“I don’t expect the board to pursue a lot of further rulemakings” in Obama’s second term, Fritts said. “I think they’ll try to rehabilitate what they’ve done on these two.”
Added Cary, “It should be a fascinating four more years.”
Jenna Greene writes for The National Law Journal, a Daily Report affiliate.