18 November 2013
Congressional deadlock means federal agencies and the U.S. Supreme Court will play prominent roles in shaping the nation's business environment next year.
New rules from the U.S. Environmental Protection Agency will prompt litigation, and the Supreme Court's review of greenhouse-gas regulations could significantly alter the shape and scope of the agency's authority, according to leading regulatory law attorneys and current and former members of Congress who spoke during The National Law Journal Regulatory Summit on Nov. 13.
Their consensus was that U.S. Securities and Exchange Commission (SEC) will continue to make rules under the Dodd-Frank Wall Street Reform and Consumer Protection Act. They also expect the agency to step up pressure on financial institutions to concede wrongdoing as a price of settling securities charges.
But election-year politics, and looming fights over the federal budget and the debt ceiling, will impede lawmakers on Capitol Hill from passing new, big-ticket legislation, panelists at the summit predicted. Still, Sen. Mike Lee (R-Utah) said, "I'm not sure that any of these upcoming battles will slow down the regulatory machine."
Bruce Fried, a health care attorney who is managing partner of Dentons' Washington office, said companies, frustrated with the gridlock in Congress, increasingly are turning to state agencies to resolve regulatory issues. "The country's never seen its government this dysfunctional," Fried said. "Part of what we're seeing for clients as they try to maneuver in these very uncertain waters is growing frustration on the regulatory side."
What follows are highlights from The NLJ Regulatory Summit.
Lee, along with former Sen. Norm Coleman and former Sen. Byron Dorgan, said environmental issues will likely dominate the regulatory landscape next year. The big issues include regulation of carbon emissions and new applications of the Clean Water Act. Carbon emission regulation is "going to be a very significant issue — I think a hard-fought issue," said Dorgan, a former Democratic senator from North Dakota who joined Arent Fox as a senior policy adviser in 2011.
Coleman said it was hard to look ahead when agencies are already behind when it comes to rulemaking. He noted that more than half of the regulations associated with the Dodd-Frank Act have not been issued yet and nearly three dozen rules related to the Affordable Care Act were still in the works. The Wall Street reform bill contains more than 90 SEC rulemaking provisions.
Coleman, a former Republican senator from Minnesota now of counsel to Hogan Lovells, said the surge in energy production in the United States would require a bipartisan effort in Congress to resolve.
Appellate advocates believe Supreme Court rulings on regulations of greenhouse-gas emissions could limit the scope of authority at the U.S. Environmental Protection Agency.
Rachel Brand, vice president and chief counsel for regulatory litigation for the National Chamber Litigation Center, called the EPA's planned regulations the "most expensive rule in American history." The estimated compliance cost of $300 billion to $400 billion has inspired a groundswell of opposition, she said, with at least 70 parties challenging the rules.
Andrew Pincus, a partner at Mayer Brown, noted that the federal government has been on the losing side of important regulatory cases more often under the Roberts court. The court's majority sees itself as protecting states and private-sector prerogatives from federal government overreach, Pincus said, which is "quite different from where the court was 20 or 30 years ago."
Andrea Field, managing partner of Hunton & Williams' Washington office, said lawsuits would likely greet any new EPA rules. But no new case would rival the pending greenhouse-gas litigation in terms of the sheer number of parties and lawyers involved, Field and other observers said at the conference.
One law that might attract congressional action is the Toxic Substances Control Act of 1976, according to Roger Martella, a partner in the environmental group at Sidley Austin. Environmental groups call the law — which oversees the safety of chemical products — "badly broken," he said. Business groups support reform in part because states have stepped in to create a patchwork of laws. Similarly, states have passed laws about the extraction of oil and natural gas through hydraulic fracturing, or "fracking."
END TO NO-ADMIT?
The SEC's long-standing no-admit, no-deny policy — which doesn't require companies to admit wrongdoing in legal settlements — could be coming to an end.
Robert Khuzami, the former director of SEC enforcement who recently joined Kirkland & Ellis as a partner, questioned the agency's recent policy shift to require companies in certain deals to admit wrongdoing. The move, which the SEC announced this summer, raises a myriad of questions and could pose significant challenges, Khuzami said.
The commission's existing practice, he said, allows financial institutions to forgo admissions of wrongdoing and permit quicker resolution of cases and puts money back in investors' pockets. Forcing an admission in some deals could spur companies to fight the SEC in court — taxing limited trial resources, Khuzami said.
"I didn't think there was much doubt in most cases that a defendant engaged in wrongdoing when you had a 20-page complaint, you had them writing a big check, you may well have prosecuted an individual in the wrongdoing," Khuzami said.
Reprinted with permission from the November 18, 2013 edition of The National Law Journal © 2013 ALM Properties, Inc. All rights reserved. Further duplication without permission is prohibited.