Thursday, March 15, 2012
The Second Circuit issued a per curiam opinion today in SEC v. Citigroup Global Markets. Technically the court granted the SEC's and Citigroup's request for a stay of the district court proceedings, refused to expedite the appeal and directed appointment of counsel to represent the "other side" of this appeal (since both parties want to reverse the district court's order). Untechnically, the SEC and Citigroup won, and Judge Rakoff lost.
The court's views on the merits are made clear in its discussion of why the parties have a strong likelihood of success on the merits. The court noted a number of problems with Judge Rakoff's determination that a consent judgment without Citigroup's admission of liability is bad policy, including:
The district court prejudges that Citigroup had misled investors and assumes the SEC would prevail at trial;
In addition, (and most important) the district court did not appear to give deference to the SEC's judgment on wholly discretionary matters of policy. The scope of the district court's authority to second-guess an agency's discretionary and policy-based decision to settle is "at best minimal."
The Second Circuit did take care to emphasize that its discussion of the merits was solely for the purpose of establishing that the parties have a "strong likelihood" of success on the merits and that the "other side" was not represented.
We recognize that, because both parties to the litigation are united in seeking the stay and opposing the district court’s order, this panel has not had the benefit of adversarial briefing. In order to ensure that the panel which determines the merits receives briefing on both sides, counsel will be appointed to argue in support of the district court’s position.
The merits panel is, of course, free to resolve all issues without preclusive effect from this ruling. In addition to the fact that our ruling is made without benefit of briefing in support of the district court’s position, our ruling, to the extent it addresses the merits, finds only that the movant has shown a likelihood of success and does not address the ultimate question to be resolved by the merits panel – whether the district court’s order should in fact be overturned.
Neverthless, unless this panel is an outlier, the opinion is a good prediction of the merits determination.
SEC v. Citigroup Global Markets (2d Cir. Mar. 15, 2012)(Download SECvCitigroup.2dCir)