- Mark Brnovich, Arizona Attorney General
Max Raskin, Research Fellow at the Institute for Judicial Administration at NYU Law, explains the theory and logic behind Bitcoin, what Bitcoins can be used for, and how Bitcoin has transformed our understanding of currency.
Future videos on this topic will discuss Bitcoin's mining process and various legal issues that surround the currency.
In April, the mortgage lender PHH Corporation challenged the constitutionality of the Consumer Financial Protection Bureau (CFPB) after being ordered by the CFPB to disgorge $109 million. PHH challenged the bureau’s legitimacy under Article II, and cited Free Enterprise Fund v. Public Company Accounting Oversight Board as relevant precedent, because PCA officers could be removed for cause, and then, only by officers of the SEC. Meanwhile, the CFPB cited Humphrey’s Executor v. United States, in which the Supreme Court upheld the constitutionality of the Federal Trade Commission Act, which allowed the president to remove an FTC commissioner only for cause. Professor Peter Conti-Brown of The Wharton School and Gregory Jacob, partner at O'Melveny & Myers LLP joined us to discuss the CFPB and the constitutionality of other independent agencies like it.
The Federal Arbitration Act (FAA), passed in 1925, generally requires courts to look favorably upon all arbitration agreements. In 2011, the Supreme Court upheld an arbitration agreement in a contract for mobile phone services that contained a class action ban. The court ruled that a state law that prevented the class action ban from being enforced was “an obstacle to the accomplishment of the FAA’s objectives.”
However, Congress passed the Dodd-Frank Act in 2010, which authorizes the Consumer Financial Protection Bureau (CFPB) to study arbitration agreements in consumer contracts and limit or prohibit them if doing so would be in the public interest and for the protection of consumers. In May 2016, the CFPB issued a proposed rule that would ban arbitration agreements that acted to prevent class action lawsuits and would further establish certain reporting requirements for other arbitrations that are filed between consumers and providers.
Our experts discussed this proposed rule, including the history that led us to this point and the potential impact it will have if it is finalized.
On June 13, 2016, the Supreme Court decided Puerto Rico v. Franklin California Tax-Free Trust (consolidated with its companion case, Acosta-Febo v. Franklin California Tax-Free Trust). Concerned that its public utilities were on the verge of insolvency but could not obtain Chapter 9 bankruptcy relief under federal law, the Commonwealth of Puerto Rico attempted to circumvent this obstacle by passing its own municipal bankruptcy law. This law, the Puerto Rico Public Corporation Debt Enforcement and Recovery Act expressly provides different protections for creditors than those in federal Chapter 9.
Investors who collectively hold nearly two billion dollars in bonds issued by one of Puerto Rico’s public utilities worried that it might seek relief under the new Puerto Rico law and sued in federal court, challenging the law’s validity and seeking injunctive relief. The district court enjoined the enforcement of the new law and the U.S. Court of Appeals for the First Circuit affirmed. Puerto Rico sought certiorari.
The question before the Supreme Court was whether Chapter 9 of the federal Bankruptcy Code preempts the Puerto Rico statute creating a mechanism for the Commonwealth’s public utilities to restructure their debts.
By a vote of 5-2, the Supreme Court affirmed the judgment of the First Circuit. Justice Thomas delivered the opinion of the Court, which held that in excluding Puerto Rico from the definition of a “state” for purposes of defining who may be a Chapter 9 debtor, Congress prevented Puerto Rico from authorizing its municipalities to seek Chapter 9 relief. But because Puerto Rico remains a “state” for other purposes of Chapter 9, the Court indicated, Chapter 9’s preemption provision still bars Puerto Rico from enacting its own municipal bankruptcy scheme to restructure the debt of its insolvent public utilities companies.
Justice Thomas’s majority opinion was joined by the Chief Justice and Justices Kennedy, Breyer, and Kagan. Justice Sotomayor filed a dissenting opinion, which was joined by Justice Ginsburg. Justice Alito took no part in the consideration or decision of the cases.
To discuss the case, we have David Skeel, who is the S. Samuel Arsht Professor of Corporate Law at the University of Pennsylvania Law School, and who submitted an amicus brief in support of the Commonwealth of Puerto Rico.