December 22, 2011
Judge Rakoff Rejects CitiGroup SEC Settlement
On November 28 2011, Judge Rakoff of the Southern District of New York, rejected a $285M settlement between Citigroup Global Markets, Inc. (Citigroup) and the Securities and Exchange Commission (SEC). This order intrigued me because of the strong sentiment expressed by Judge Rakoff in no uncertain terms. This order is available on Westlaw at 1:11CV07387 in the DOCK-NY-SDCT database. The SEC has filed a notice of appeal from this order to the United States Court of Appeals for the Second Circuit. See below for more background on this case.
SEARCHING FOR MAVERICK
Judge Rakoff has often been referred to as a Maverick Justice (See rakoff /10 maverick in ALLNEWSPLUS for several such reference). Does Judge Rakoff deserve this reputation? To find out, I went into the database PROFILER-WLD and in the name field typed in Rakoff and selected New York in the state selector drop down. Once you click into the link for Judge Rakoff, you will notice that there are multiple Profiler References on the left side followed by various types of reports.
Judicial Reversal Reports: A Judicial Reversal Report analyzes a judge’s appellate record. When the subject of the report is a trial court judge, the report analyzes the judge’s record of reversals, affirmances, and other dispositions on appeal. When the subject of the report is an appellate judge, the report analyzes the judge’s record in deciding cases appealed from lower courts and the judge’s own record on appeal.
Given the Judge’s maverick reputation, I was most interested in the Judicial Reversal Reports and found that over two-thirds of Judge Rakoff’s opinions appear to have been affirmed on appeal.
Judicial Motion Reports: A Judicial Motion Report analyzes a judge’s motion history. Judicial Motion Reports are useful to learn about a judge’s record in disposing of motions. This information is helpful to plan case strategy and make more informed decisions. It can also help with managing client expectations. Reports can be sorted by motion type:
Or, sort by any other number of criterion including time before deciding on motion, role of the filing party, and result of motions:
To determine whether one might properly lable Judge Rakoff, a ‘maverick,’ compare these reports with reports for other Southern District of New York Judges found in Profiler:
- Baer, Hon. Harold, District Judge
- Batts, Hon. Deborah A., District Judge
- Berman, Hon. Richard M., District Judge
- Buchwald, Hon. Naomi Reice, District Judge
- Castel, Hon. P. Kevin, District Judge
- Cedarbaum, Hon. Miriam Goldman, District Judge
- Cote, Hon. Denise L., District Judge
- Cott, Hon. James Lloyd, Magistrate Judge
- Crotty, Hon. Paul A., District Judge
- Daniels, Hon. George Benjamin, District Judge
- Dolinger, Hon. Michael H., Magistrate Judge
- Duffy, Hon. Kevin T., District Judge
- Ellis, Hon. Ronald L., Magistrate Judge
- Engelmayer, Hon. Paul A., District Judge
- Forrest, Hon. Katherine B., District Judge
- Fox, Hon. Kevin N., Magistrate Judge
- Francis, Hon. James C., Magistrate Judge
- Freeman, Hon. Debra Carol, Magistrate Judge
- Gardephe, Hon. Paul G., District Judge
- Goldberg, Hon. Martin R., Magistrate Judge
- Gorenstein, Hon. Gabriel W., Magistrate Judge
- Griesa, Hon. Thomas P., District Judge
- Hellerstein, Hon. Alvin K., Judge
- Holwell, Hon. Richard J., District Judge
- Jones, Hon. Barbara S., District Judge
- Kaplan, Hon. Lewis A., District Judge
- Katz, Hon. Theodore H., Magistrate Judge
- Keenan, Hon. John F., District Judge
- Koeltl, Hon. John G., District Judge
- Leisure, Hon. Peter Keeton, Senior District Judge
- Maas, Hon. Frank, Magistrate Judge
- Marrero, Hon. Victor, District Judge
- McKenna, Hon. Lawrence M., District Judge
- McMahon, Hon. Colleen, District Judge
- Oetken, Hon. James Paul, District Judge
- Owen, Hon. Richard, District Judge
- Patterson, Hon. Robert P., District Judge
- Pauley, Hon. William H., District Judge
- Peck, Hon. Andrew J., Magistrate Judge
- Pitman, Hon. Henry B., Magistrate Judge
- Preska, Hon. Loretta A., Chief Judge
- Rakoff, Hon. Jed S., District Judge
- Sand, Hon. Leonard B., District Judge
- Scheindlin, Hon. Shira A., Senior Judge
- Stanton, Hon. Louis L., District Judge
- Stein, Hon. Sidney H., District Judge
- Sullivan, Hon. Richard J., District Judge
- Swain, Hon. Laura Taylor, District Judge
- Sweet, Hon. Robert W., District Judge
- Wood, Hon. Kimba M., District Judge
OTHER AVAILABLE REPORTS
Litigation History Reports: Litigation History Reports for judges may include the following sections:
- Caseload shows the total number of litigated cases in which the judge has participated, based on docketed cases and case law.
- Case Types displays dockets and opinions by practice area.
- Parties lists the names of each party in the cases over which a judge has presided.
- Industries identifies industries associated with the companies that are parties to litigation. Click an industry to filter the report on that industry.
- Law Firms lists law firms involved in the cases over which a judge has presided.
- Attorneys displays the attorneys of record in proceedings before a judge. Click an attorney’s name to filter the report on that attorney.
Expert Challenge Report: Another type of report that is available is an Expert Challenge report which tracks challenges to an expert witness testimony. It provides the names and citations of cases in which the expert’s testimony was challenged; the result of the challenge; whether the expert was retained by the plaintiff or the defendant; the attorney for the party for whom the expert testified; the type of case; the jurisdiction; the judge who heard the expert’s testimony; and links to court documents relating to the expert’s testimony. Expert Challenge reports are available for both experts and judges.
Profiler References: Westlaw Profiler provides a direct link between a case, a jury verdict or settlement summary, or an article you are viewing and profiles of the attorneys, judges, and expert witnesses who appeared in the case or authored the article.
On October 19 2011, the SEC filed a suit accusing Citigroup of securities fraud. Simultaneously, Citigroup presented the Court a consent judgment whish stated that Citigroup consents to the entry of the Consent Judgment without admitting or denying the allegations of the complaint. The Court did not approve the Consent Judgment stating that, “it cannot approve it, because the Court has not been provided with any proven or admitted facts upon which to exercise even a modest degree of independent judgment.” See the Court order dated November 28, 2011 in the above linked docket. Court further expressed its disapproval of being used as a mere rubber stamping tool and stated that, “it is clear that before a court may employ its injunctive and contempt powers in support of an administrative settlement, it is required, even after giving substantial deference to the views of the administrative agency, to be satisfied that it is not being used as a tool to enforce an agreement that is unfair, unreasonable, inadequate, or in contravention of the public interest.” The Court further stated that, “[a]pplying these standards to the case in hand, the Court concludes, regretfully, that the proposed Consent Judgment is neither fair, nor reasonable, nor adequate, nor in the public interest… when a public agency asks a court to become its partner in enforcement by imposing wide-ranging injunctive remedies on a defendant, enforced by the formidable judicial power of contempt, the court, and the public, need some knowledge of what the underlying facts are: for otherwise, the court becomes a mere handmaiden to a settlement privately negotiated on the basis of unknown facts, while the public is deprived of ever knowing the truth in a matter of obvious public importance.” Judge Rakoff went on to say that, “[a]n application of judicial power that does not rest on facts is worse than mindless, it is inherently dangerous. The injunctive power of the judiciary is not a free roving remedy to be invoked at the whim of a regulatory agency, even with the consent of the regulated.” I could go on quoting from Judge Rakoff’s opinion, each and every sentence in the opinion expresses the Court’s dissatisfaction with the process of such settlements and consent judgments. An opinion, in my opinion, certainly worth a read! In the last paragraph of the opinion, Judge Rakoff stated that, “[a]ccordingly, the Court refuses to approve the proposed Consent Judgment…and directs the parties to be ready to try this case on July 16, 2012.”
In an attempt to defend itself, the SEC Enforcement Director Robert Khuzami said in a statement that, “Judge Jed Rakoff made too much in a ruling Monday out of the fact that Citigroup was not required to admit any wrongful conduct in the deal… forcing Citigroup to give up its profits and the imposition of financial penalties and mandatory business reforms outweigh the absence of an admission.” See, 11/29/11 APLALERTNY 02:00:05. Following Judge Rakoff’s opinion, SEC Chairperson Mary Shapiro “sent a letter to a senator asking for Congress to expand the agency’s authority to fine companies and individuals. She is seeking to raise the limits on fines under current law and make other changes.” See 11/29/11 APALERTLEGAL 03:47:50. Given the current economic times, the global financial melt downs, the Wall Street Protests and now judicial expression of discontent on behalf of the public, it will be interesting to see how the legal processes and regulations alter and adapt to alleviate the current levels of dissatisfaction with the financial industry and its regulation.