Whether or not the Federal Reserve can or will appeal the July 31 court decision that overturned two-thirds of its debit interchange regulation hinges on several unresolved legal questions.
Primarily, it’s unclear if the agency can launch an appeal on its own, or if it must first gain the approval of the Department of Justice. The question is a good deal more complicated than one might suppose.
First, Federal Reserve Spokesman Eric Kollig said he was uncertain about the Fed’s level of independent litigation authority and, as of press time, had not yet received a firm answer.
Legal experts say that a number of independent federal agencies have independent litigation authority, but that authority does not cover every circumstance.
Neal Devins and Michael Herz, writing in the legal journal Law and Contemporary Problems, said the question of when and how independent agencies can represent themselves in court has been a long-debated topic.
“To be sure, Congress has carved out a variety of exceptions to DOJ control,” the pair wrote. “However, these exceptions have been anything but systematic. A slight pattern can be found: Congress grants litigating authority more often to independent agencies than to executive agencies, but it does not grant such authority to all such agencies, to all the litigation of any such agencies, or only to such agencies.”
Devins is a professor of law and lecturer at the College of William and Mary, and Herz is professor of law at the Benjamin N. Cardozo School of Law, Yeshiva University.
An agency like the Federal Reserve might have the authority to defend itself if sued at the District Court level, for example, but may still need approval of the Department of Justice to appeal a loss there, according to experts in administrative law.
One source that has experience working with federal agencies, speaking on background, summed the topic up as a bundle of tangled questions.
If the Federal Reserve has to win the approval of the Justice Department to appeal, it is unclear whether or not that would happen, the source said. Or, the source added, if DOJ approval is not needed, the Fed might not even attempt to appeal such a toughly worded opinion.
Despite the legal hurdles, both CUNA and NAFCU are urging the Federal Reserve to file the appeal.
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“CUNA was extremely disappointed with the District Court’s ruling last week regarding debit interchange,” said CUNA Associate General Counsel Mary Dunn. “While it is inappropriate to lobby the Fed to encourage it to file an appeal, CUNA is working hard to reinforce its view that the Fed should appeal, including ensuring that any senior Fed staff are aware of credit unions’ concerns.”
NAFCU General Counsel Carrie Hunt said her trade group had also been working to make sure the Federal Reserve understood credit union interest in the case, particularly the payment network provisions that she said represent a credit union’s biggest compliance headache from the rule.
Meanwhile, others acknowledge that they had not expected the Federal Reserve to lose the decision; or, if it did, that that loss would be such an emphatic one.
“I don’t think anyone in the courtroom in October could have heard the questions from the bench and forecast this decision,” said CUNA General Counsel Eric Richard, who was present in the courtroom for those oral presentations and questions.
Richard said U.S. District Court Judge Richard Leon’s questions from the bench were much more undecided than his decision, which he handed down months later than when he said he would.
“I believe in the courtroom he said he looked for a decision before the end of the year , and of course the decision came much later,” Richard said.
CUNA and NAFCU joined other debit issuers in filing an amicus brief on the case at that time.
Other legal sources said the final decision bore little resemblance to anything they had heard in arguments before from Leon, with one source observing that some of the questions which appeared to preoccupy Leon in October were on topics he did not include in the final opinion.
“This decision just illustrated that one never can really know” when it comes to court decisions, said Sam Febens, spokesman for the Electronic Payments Coalition, the group of issuers, networks and card brands that banded together to defend card interchange.
Mallory Duncan, general counsel for the National Retail Federation, reported that his organization had been guardedly optimistic about the decision since the oral argument, contending that while Leon’s questions had been fair and probing, they had also appeared to have been leaning in the retailers’ direction.
“There was a slight sense that he got it,” Duncan said. “That he understood how the system worked.”
Duncan called the decision fair and good, and said his organization hoped the Fed and Justice Department will let it stand.