The federal government said recently in its motion to dismiss a case pertaining to the constitutionality of the Dodd-Frank Act that eight of the plaintiffs, which include 11 state attorneys general, “lack standing to assert their challenges.”
The plaintiffs, which include AGs from Alabama, Georgia, Kansas, Michigan, Montana, Nebraska, Ohio, Oklahoma, South Carolina, Texas and West Virginia, maintain that Title II of Dodd-Frank violates the Constitution’s Fifth Amendment right to due process, separation of powers and the requirement that national bankruptcy laws be “uniform,” The West Virginia Record reports.
“The Government Defendants stress the benefits that Title II was intended to promote,” the states said in opposition to the government’s motion, according to The West Virginia Record. “But they fail to acknowledge the corresponding costs that Title II imposed upon creditors, including the State Plaintiffs, who have been deprived of the Bankruptcy Code’s long-guaranteed protections. Title II abrogated their statutory right to equal treatment among similarly situated creditors. The State Plaintiffs’ purely legal claims are ripe, and they can be litigated only in the current pre-liquidation posture.”
The states are also challenging Title X of Dodd-Frank, which created the CFPB, as well as the orderly liquidation authority, which allows the government to wind down a failing financial institution. The AGs said that the orderly liquidation authority hurts the states because it puts the interests of creditors before state pension funds.