WASHINGTON -- A warning by the Municipal Securities Rulemaking Board that its rules are not subject to the First Amendment and cannot be struck down is "patently incorrect," lawyers for Alabama bond dealer William B. Blount charged Monday.
Williams & Connolly made that argument and other statements in a 26-page brief filed with the U.S. Court of Appeals for the District of Columbia on behalf of Blount, who filed a lawsuit April 26 challenging the constitutionality of the MSRB's controversial Rule G-37.
"The MSRB argues that the First Amendment has no application to Rule G-37 because the MSRB is a self-regulatory organization, not a government actor," the brief says. The argument is wrong, Blount's lawyers charged, because the lawsuit is not about Rule G-37 per se, but the SEC's order approving that rule.
And regardless of whether the MSRB is a full government agency, it is "certainly exercising delegated governmental authority" when it issues rules, the brief argues.
Monday's filing is the last of four briefs to be filed in the case, Blount v. SEC, in which arguments are scheduled to be held on Dec. 9.
Lawyers for Blount, who chairs the Alabama Democratic Party, filed the first brief in the case June 1. The SEC responded July 1, followed by the MSRB July 18. This week's brief is Blount's reply to the SEC and MSRB briefs.
The SEC argued in its 50-page brief that the MSRB's rule imposes only a minimal restraint on dealers' right to express themselves. But Blount's lawyers wrote Monday that G-37 imposes restrictions on free speech that are "unlike any that have been attempted by any agency of the federal government."
The commission presents a record that is "utterly devoid" of evidence or findings that come close to establishing a "compelling need" for the restrictions, the lawyers charged.
