Reader Michael C. sent me a link to a story in the Wall Street Journal’s Law Blog which bugged him, and I can see why. It criticizes a brief written by an attorney for Judge Jed Rakoff in the pending appeal of his ruling involving Citigroup Capital Markets and the SEC over a proposed settlement of a toxic CDO. Readers may recall we applauded the Rakoff decision, since he took issue with the SEC’s pattern of entering into settlements without any presentation of facts to the court (a contrast, as Rakoff noted, with the SEC settlement of Goldman’s Abacus CDO) and ordered the parties to trial.
The Law Blog tries to make it sound out of line for a party to an appeals to argue that a court’s reading was in error. And the Journal also fails to note that the ruling that took a bit of a hectoring tone on the Rakoff ruling was a motions panel. The motions panel is a rotating responsibility, with three judges appointed to it at any one time. They don’t necessarily have to explain their reasoning (note they do have to assess the odds of success, but that does not necessarily mean committing it to writing).
These are the key sections of the post:
In March, the U.S. Court of Appeals for the Second Circuit got stern with Judge Jed Rakoff over his decision to reject a $285 million civil settlement between the SEC and Citigroup.
“The district court believed it was a bad policy, which disserved the public interest, for the S.E.C. to allow Citigroup to settle on terms that did not establish its liability. It is not, however, the proper function of federal courts to dictate policy to executive administrative agencies,” the appeals court said, in a ruling that temporarily suspended the case.
Wait, who said anything about liability?
A lawyer for Judge Rakoff, John “Rusty” Wing, said in a brief filed Monday that the Second Circuit misread Judge Rakoff’s ruling.
Mr. Wing said that Judge Rakoff (pictured) never sought definitive proof or an admission of the bank’s liability. The judge simply wanted to see some of the SEC’s evidence before rendering a decision on the proposed settlement, he said.
It’s rare, by the way, for a lawyer to tell federal appellate judges they have a reading comprehension problem. It’s even rarer when that lawyer is representing a federal district judge.
Really? That didn’t sound right to me, and I ran it by a law professor who earlier in his career had considerable litigation experience, both as a prosecutor and in private practice. His reaction:
The Journal is off base here in their post though. It’s normal practice for lawyers to try to get rulings changed by arguing that the court got it wrong–happens all the time (motions for rehearing, en banc, regular old appeals). Nothing weird or disrespectful about it. Wing has no choice but to go right at the motion panel’s decision, because Rakoff loses unless he can convince the court otherwise. Looks like Wing did a good job.
The flip side is the post linked to the filing, which is very readable. For instance:
Even if the case were to proceed to trial — a possibility the parties could easily avoid by coming forward with evidence —the SEC’s claim that it would suffer irreparable harm by being forced to expend resources to litigate the case borders on the absurd, given the fact that it has already expended those veryresources to litigate the same case against the former Citigroup employee, Stoker. Further still, the absence of any harm, much less irreparable harm, from the delay in obtaining injunctive relief seems self evident, given the SEC’s acknowledgement that Citigroup discontinued the alleged illegal activity at theoutset of the investigation five years ago and has already implemented some of the proposed remedial reforms.
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Judge Rakoff sounds like a Dickens character. Or maybe it isn’t pronounced Rake-off, although I imagine the guy who appointed him was pretty certain that it was.
wall street journal- dow jones–owned by murdoch–connect the dots
if a judge is to judge he or she needs to understand the balance of the evidence. That’s all Rakoff is asking for. The interests at stake go beyond Citi and the SEC all the way to shareholders and taxpayers. Rakoff is not the problem here, the SEC is the problem. They just keep refusing to seek justice.
The WS Journal has turned into a partisan rag, a snootier version of Fox News.
Rakoff’s ruling is on sound legal footing. That being said, his ruling is also contrary to the way these things usually work and the SEC and Citi are bent out of shape over someone calling them out over their charade. The SEC and its corporate partners usually settle these things with a wink and a nod. The shareholder’s bear the burden of some modest fine, the public gets duped into believing the SEC is looking out for the public interest and the individual malefactors walk away scott free unless you are a low level employee like Fabrice Tourre who the SEC goes after, big time. And the only reason the SEC goes after the Fabs of the world is to send a message to the little people warning them not to embarrass their bosses. Nothing really wrong with the wrotten conduct as far as the SEC is concerned but look out if you make the mistake of not covering your tacks adequately. Rakoff is one of the few honest actors fighting the good fight against the oligarchs and plutocrats.