High Court to Hear Case on Banks, Lending Practices

The justices are stepping into a fight between New York Attorney General Andrew Cuomo and the federal Office of the Comptroller of the Currency.
The justices are stepping into a fight between New York Attorney General Andrew Cuomo and the federal Office of the Comptroller of the Currency. (By Stephanie Kuykendal -- Bloomberg News)
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By Robert Barnes
Washington Post Staff Writer
Saturday, January 17, 2009

The Supreme Court yesterday said it would decide whether states have the power to enforce their own anti-discrimination lending laws against national banks, and also accepted two important education cases, one involving the strip-search of a middle-school student.

The court accepted six new cases as it began to put the finishing touches on this term's docket. Besides considering the constitutionality of the search of a 13-year-old suspected of distributing prescription-strength ibuprofen at school, the court will consider if school districts must provide private schooling for students with disabilities even if their parents have never enrolled them in public school.

In accepting the case involving banks and their lending practices, the court is stepping into a fight between New York Attorney General Andrew Cuomo and the federal Office of the Comptroller of the Currency, which says only federal regulators have the power to investigate national banks.

Lower courts have agreed with the OCC, which went to court to stop a nascent investigation of several national banks -- including J.P. Morgan Chase, Wells Fargo and Citigroup -- that was launched in 2005 by Cuomo's predecessor, Eliot L. Spitzer.

The federal government had told the justices there was no reason to review the case. Solicitor General Gregory G. Garre said OCC had properly asserted its responsibility for such investigations, and said New York had not shown that federal regulators would not "vigorously enforce fair lending laws against national banks."

Cuomo argued that since states are allowed to have their own anti-discrimination laws, they must be able to enforce them against all banks. The OCC regulation, he wrote the court, "prohibits states from bringing even the same kinds of judicial actions against national banks that can be brought by a private party."

The case has received added attention and urgency because of the nation's mortgage crisis. The other 49 states filed a brief urging the court to take the case.

The appeals court decision "undermines core principles of federalism and interferes with the states' ability to enforce their own laws and to protect their own citizens," the attorneys general wrote.

"Moreover, the current economic crisis, caused in large part by reckless subprime mortgage lending, has demonstrated the need for consumer protection and regulatory oversight in the area of mortgage lending."

The case is Cuomo v. Clearing House Association.

The strip-search case involved Savana Redding, who was pulled from class at Safford Middle School in Arizona after another student was found with 400 mg ibuprofen pills, equivalent to two over-the-counter Advils. The girl said she had received the pills from Redding.

Redding denied it, but vice principal Kerry Wilson instructed a female nurse to see if Redding was hiding the medicine in her clothes. In a private room, Redding disrobed and was instructed to move her bra to the side and pull out her underwear. No drugs were found.

Redding described the search as "the most humiliating experience" of her life, and the American Civil Liberties Union sued on her behalf. She lost before a federal district judge and a three-member panel of the U.S. Court of Appeals for the 9th Circuit.

But the full court reheard the case and ruled 8 to 3 for Redding. It said the school district and vice principal acted contrary "to all reason and common sense" in authorizing such an invasive search.

It also said vice principal Wilson could be held liable for the decision.

The school district asked the court to take the case and reverse the appeals court. "Both aspects of the Ninth Circuit's decision are deeply troubling and have school administrators and teachers across the country understandably alarmed," the district's brief said.

It said the 9th Circuit had disregarded an earlier Supreme Court decision that gave school administrators more leeway in searching students. It said school officials needed only a reasonable explanation for searches, rather than an expectation of probable cause.

The National School Boards Association told the court that the decision had the "undesirable effect of holding school administrators personally liable for making decisions of constitutional import on which experienced jurists cannot agree," alluding to the earlier court decisions that the search was constitutional.

But the ACLU's brief said the decision "follows clearly established law in finding that a school official cannot strip search a thirteen-year-old girl based on unreliable information that she might have possessed ibuprofen at an unspecified earlier time and in an unknown location."

The case is Safford Unified School District 1 v. Redding.

The other case involves one of the most contentious issues facing public school systems: whether they must reimburse parents for private schooling for disabled students if the children have never been enrolled in public school.

Courts across the country have been split over what the federal Individuals with Disabilities Education Act requires; school systems believe they should first be able to prove to parents they can provide the special education the children need.

The Supreme Court split 4 to 4 on the issue last year, when Justice Anthony M. Kennedy recused himself from the case. There was no indication he would do so now when the court considers the new case from Oregon, Forest Grove School District v. T. A.


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