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Dodd-Frank's Constitutionality

posted by Adam Levitin

I'm testifying tomorrow before Senate Judiciary Committee's Subcommittee on The Constitution (yes, that's the official capitalization), about the constitutionality of the Dodd-Frank Act.  

Short version: nothing to see here folks.

Slightly longer version: really nothing to see here.

Even longer version:  the plaintiffs in State National Bank of Big Spring v. Lew have a totally non-Originalist interpretation of the Bankruptcy Clause, namely that "uniform laws" apparently requires equal treatment of all similar creditors, so title II Orderly Liquidation Authority is unconstitutional.  Yes, that's the sound of me shaking my head.

My written testimony is available  here.  


Professor Levitin,

I enjoyed reading your testimony - mostly about OLA as it mimics the constitutionality of the Bankruptcy Code, especially your “uniform laws ” on the subject of bankruptcy analysis.

The Founding Fathers could have chosen a clearer phrase than “uniform laws on the subject of bankruptcies” to denote the scope of bankruptcy law to apply “uniform[ly]” - nationally.

How about “national laws on the subject of bankruptcies” if the intent was to prevent being “home towned” by state bankruptcy law.

“Uniform” means more than applying bankruptcy laws nationally as opposed to locally.

“Uniform” at least means to unify the Bankruptcy Code with itself (harmonize) and with the Constitution (5th Amendment) and within the Nation - like the UCC.

So it is not “uniform” to approve a non-plan sale order in chapter 11 which disregards the protections of 11 USC 1129, which the ABI Commission to Study Reform of Chapter 11 points out.

I was very interested in your comment that bankruptcy amendments work retroactively, at least for unsecured creditors - citing U.S. v. Sec. Indus. Bank, 459 U.S. 70 (1982).

Does that mean an unsecured creditor in a pending open case initiated prior to the 2005 amendments could request to take a direct appeal of a final bankruptcy decision to the Circuit Court?

My favorite comment was “the Constitution should not be abused as a tool to achieve policy goals lest its principles begin to be seen as nothing more than what is politically convenient.”

This is dangerously close to saying “the Constitution should not be used to set policy goals”.

But I get it - the Constitution is not a statute. The Constitution can not be interpreted or applied unconstitutionally.

Thanks for sharing.

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