Sixth Circuit Rules Plaintiff Lacks Standing to Challenge Government’s Bailout of Firm Selling Sharia-Compliant Financial Products

In a recent contribution for a symposium CLR hosted here at St. John’s, Steve Smith argued that the Supreme Court’s restrictive standing doctrine in Establishment Clause cases has helpfully kept many disputes out of court. A Sixth Circuit case handed down on Friday provides a good example. Plaintiff challenged the U.S. Treasury’s provision of $70 billion to American International Group (AIG), which, through its subsidiaries, sells Sharia-compliant financial products, for example, products that avoid returns from “pork, alcohol, interest, gambling, or pornography.” Treasury disbursed the money pursuant to TARP, the Troubled Asset Relief Program, which Treasury established pursuant to the Emergency Economic Stabilization Act of 2008 (EESA). Plaintiff argued that the disbursement amounted to a promotion of Islam in violation of the Establishment Clause and claimed standing as a federal taxpayer.

The Sixth Circuit disagreed. Relying principally on the  Supreme Court’s 2007 holding in Hein v. Freedom from Religion Foundation, the court held that plaintiff lacked standing. Under Hein, the court explained, “a taxpayer-plaintiff has standing to challenge an executive-branch disbursement of funds only if the appropriating statute expressly contemplates the disbursement of federal funds to support religious groups or activities.” EESA did not; Treasury had made the decision to fund AIG on its own. “Neither . . . EESA nor any reasonable inference from its historical context suggest that Congress knew, or much less intended, that TARP funds might support the marketing and sale of” Sharia-compliant products, the court wrote. “It was only through executive discretion that TARP funds were transferred to AIG.”  The case is Murray v. U.S. Dept. of Treasury (6th Cir., June 1, 2012).

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