Suing your Regulators: A Case Study from a General Counsel’s Perspective

Abstract

On February 9, 2018, the United States Court of Appeals for the District of Columbia Circuit (the Circuit Court) reversed a decision by the District Court and ruled in favor of my organization, the Loan Syndications and Trading Association (“LSTA), a financial trade association, in its lawsuit against the Securities and Exchange Commission (“SEC”) and Federal Reserve Board (the “Fed”; and collectively, the “agencies”). The decision voided the agencies’ aggressive interpretation of the “risk retention rule” that they had imposed on many of the LSTA’s members in 2014 and brought to an end an eight year saga on an issue of critical importance. As the LSTA’s general counsel, I was charged with navigating the association through this difficult, but ultimately successful, chapter. Litigating against one’s primary regulators is not a tactic to be taken lightly or used frequently but sometimes it is the best, or only, option. For a general counsel, the decision to litigate, and the implementation and conduct of the litigation, is fraught with risks and challenges. This article will examine some of the difficult issues I faced as general counsel in (i) deciding to sue the very regulatory agencies that supervise our members, (ii) convincing our board to support the litigation, (iii) hiring the right counsel, (iv) managing the litigation, (v) dealing with interim setbacks, (vi) maintaining good relations with the regulators while litigating, and (vii) winning with grace. I hope that my experience can serve as a road map for those faced with similar situations.