Federal Preemption and State
Law Enforcement:
State Enforcement
Developments
Thomas P. Vartanian
Fried Frank Harris Shriver &
Jacobson
vartath@ffhsj.com
Pre-Modern History of
Preemption
ƒ US Consitution – Supremacy Clause – Article IV
– States have no power…to retard, impede, burden, or in
any other manner control, the operations of an entity
created by lawful exercise of Federal authority.
ƒ McCulloch v. Maryland, 17 U.S. 316 (1819)
ƒ Tiffany v. National bank of Missouri, 85 U.S. 409
(1874)
ƒ Farmers & Mechanics National Bank v. Dearing,
91 U.S. 29 (1875)
ƒ Easton v. Iowa, 188 U.S. 220 (1903)
ƒ Marquette National Bank v. First of Omaha
Service Corp., 439 U.S. 299 (1978)
Criminal Actions
ƒ Rarely a Direct Preemption Issue
ƒ Often a Conflict in the Resolution
Process
ƒ Increased Incidence of Criminal
Investigations
What Are the Issues in Joint
Criminal/Civil Actions?
ƒ Joint Federal/State Prosecution
Issues Will Arise
– Publicity
– Sharing of Information
– Constructing a Global Settlement
– Attorney/Client & Other Privileges
Publicity
ƒ May Be the Opposite of Federal
Proceedings
– PR Agents Hired
ƒ Dealing with Public Perception Before the
Investigation
ƒ Can Instigate Other Actions Prematurely
– Class Actions
– Shareholder Actions
Sharing of Information
ƒ Is it Lawful?
– Examination Material
– Criminal Violation
ƒ Is There a Rule 6e Analogue in State Law?
– Federal Bank Regulators Exempted from
Rule 6e by FIRREA
– State Prosecutors May Not Have the
Same Freedom
Constructing a Global
Settlement
ƒ Different Agencies Move at Different
Speeds
ƒ They Develop Different Information Based
on Different Focus and Powers
ƒ Will a Partial Settlement Hurt or Help?
– Regulators
– Prosecutors
– Civil Litigation
The Privilege Trap
ƒ Investigations
– External
– Internal
ƒ Use of Reports
– Counsel
– Consultants
ƒ Disclosure for Settlement Purposes
– Waiver in Other Contexts
Online Activities
ƒ Absence of Geographic Borders in
Cybespace Heightens the Tension
ƒ Application of Laws of State X
– To Online Customer in State X with
Bank in State Y
– To Online Bank in State Y with
Customer in State X
ƒ Fundamental Jurisdiction Question
ƒ Online CD Auction Decision by OCC