State National Bank of Big Spring v. Lew

Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) in response to the 2008 to 2009 financial crisis. The Dodd-Frank Act granted the treasury, the federal reserve, and the Federal Deposit Insurance Corporation (FDIC) the authority to liquidate failing financial companies that posed a risk to the financial stability of the United States. This was called orderly liquidation authority. The government had the power to use its orderly liquidation authority to change the priority of a financial company’s creditors to increase the company’s assets or minimize its losses. State National Bank of Big Spring, Texas, and a group of states (the states) (plaintiffs) challenged the constitutionality of the orderly liquidation authority in district court and argued that the government’s power to alter the priority of creditors was unconstitutional under the Bankruptcy Clause’s guarantee of uniform bankruptcy laws and nondelegation and due process. The states claimed to have standing because they had invested in financial companies and were, therefore, potential creditors in possible future liquidations or reorganizations of those financial companies and, because the government’s orderly liquidation authority could deprive the states of the uniform treatment they were entitled to, the states’ current assets were worth less than they otherwise would have been. The district court disagreed with the states, finding that the states lacked standing to challenge the government’s orderly liquidation authority and that the claim was not ripe.