A group of New York City yellow taxi medallion owners and the credit unions that finance them filed a complaint yesterday against the New York City Taxi and Limousine Commission (TLC) over alleged disparate regulatory treatment of smartphone ride hailing apps, such as Uber.  The plaintiffs claim that the TLC’s decision to exempt Uber and its drivers from the requirements imposed on yellow cabs (including surcharges, mandatory vehicle requirements, and strict medallion leasing rules) rises to the level of a regulatory taking under the Fifth Amendment.

Continue Reading Medallion Owners and Credit Unions Bring Constitutional Claims Against TLC Over Uber Expansion

In an opinion dated Friday but released this morning, Judge Gardephe largely upheld subpoenas to a congressional committee and a staffer concerning allegedly unlawful stock trading under the STOCK Act, which essentially extended insider trading laws to Congress.  (See our previous coverage of the case here.)

Judge Gardephe found that the subpoenas were not barred by the doctrine of sovereign immunity and further found that any immunity was waived by the passage of the STOCK Act:

[An] aspect of not being “exempt from the insider trading prohibitions” [as provided in the STOCK Act] is that a person is subject to (1) investigation by the SEC for suspected insider trading pursuant to Section 21(a) of the Exchange Act; and (2) the investigative tools authorized in Section 21(b) of the Exchange Act, including depositions and document requests. Respondents’ interpretation of the STOCK Act – that it makes Members of Congress and their staff subject to SEC civil enforcement actions and criminal prosecutions regarding insider trading but not to SEC investigations of insider trading – is not a tenable reading of the STOCK Act and is not consistent with its plain language.

Nonetheless, Judge Gardephe ruled that the Speech and Debate Clause of the Constitution “provides a non-disclosure privilege for documents that fall within the ‘sphere of legitimate legislative activity.’”  This would not include “dissemination of information outside of Congress,” but would  include internal documents “to the extent that they include information concerning planned future legislative activity or relate to information-gathering relevant to such activity.”

In an opinion yesterday, Judge Pauley harshly criticized the SEC for obtaining an ex parte freeze on the assets of a Cayman bank premised on the bank’s participation in a pump-and-dump scheme for unregistered securities.  The SEC should have known or quickly discovered, according to Judge Pauley, that the bank was acting as a broker on the transactions, not as a principal.  The freeze caused a run on the bank, and led to its failure.  Judge Pauley was not pleased:

As the “statutory guardian, of the nation’s financial markets, the SEC is imbued with enormous powers to protect the investing public. It can halt securities trades and seek to freeze-through its representations to a court-the assets of any institution. However, the SEC’s canon of ethics cautions: “The power to investigate carries with it the power to defame and destroy.” 17 C.F.R. § 200.66. Judges rely on the SEC to deploy those powers conscientiously and provide accurate assessments regarding the evidence collected in their investigations. In that way, the integrity of the regulatory regime is preserved.

This case reveals the dire consequences that flow when the SEC fails to live up to its mandate and litigants yield to the Government’s onslaught. During an ex parte proceeding to freeze assets, where the adversary process is not in play, the SEC has an obligation to timely alert the court to foreseeable collateral damage. By overstating its case, the SEC can do great harm and undermine the public’s confidence in the administration of justice. And that damage can be compounded when financial institutions, anxious to appease a regulator, submit to unconscionable terms and permit their depositors’ assets to be held hostage without seeking immediate relief from a court. As this case demonstrates, these concerns are not hypothetical.

Judge Engelmayer denied yesterday a motion for class certification against a medical records copying firm accused of charging a price beyond the statutory limit.  HealthPort Technologies, LLC retrieved and photocopied patient records at the rate of 75 cents per page (the statutory limit set by New York Public Health Law § 18 for recovering “costs incurred”) but the its actual “costs incurred” allegedly fell far below that.

Judge Engelmeyer declined to certify a state-wide class of patients at the over 500 medical facilities where HealthPort operated, as the differences in determining the “costs incurred” for each location meant that common questions did not predominate as required by Rule 23(b)(3): Continue Reading Judge Engelmayer Denies Class Certification for Medical Record Copying Claims, But “Stands Ready” to Approve Narrower Class

Goldman Sachs today moved for summary judgment in a shareholder class action (covered previously here) accusing the firm of making various public statements about its business practices that were allegedly fraudulent in light of Goldman allegedly later structuring CDOs to fail.

For one of those CDOs, called ABACUS, Goldman settled with the SEC for $550 million and admitted it was a “mistake” to not disclose the role of a short investor, Paulson, in structuring the deal.  In the motion papers today, Goldman argued that this “mistake” did not render false various generalized claims about its business practices :

Although not disclosing Paulson’s involvement in selecting the ABACUS Reference Portfolio was a “mistake”—as Goldman Sachs conceded—that isolated “mistake” was not an intentional, much less widespread, failure to abide by Goldman Sachs’ conflicts controls or business principles, let alone sufficient to render false general statements about the Firm’s business principles and conflicts controls across a four-year period.

Goldman’s motion liberally cites a decision by Judge Marrero in a case (covered here) raising similar theories.  In that case, brought by a CDO investor, Judge Marrero found that Goldman had no duty to disclose its internal strategy and that the risks of conflicts were adequately disclosed.

The case is before Judge Crotty.

As part of the ongoing LIBOR litigation (previous coverage here), Judge Buchwald dismissed yesterday claims brought by student loan borrowers claiming that LIBOR manipulation both constituted fraud and ran afoul of state laws preventing banks from controlling a floating interest rate.  Judge Buchwald held that the student loan plaintiffs could not show that lenders had made any representation regarding LIBOR, or that the manipulation had increased their interest rates:

The Student Loan Plaintiffs’ complaint fails to allege with particularity any representation by the issuers regarding the nature of LIBOR. Likewise, the loan documents submitted by plaintiffs do not make any representation regarding LIBOR. Under Rule 9(b), this is enough to warrant dismissal of the fraud claim. Furthermore, the complaint fails to allege that any manipulation increased plaintiffs’ loan payments. Persistent suppression (which the complaint actually fails to allege) would not have increased plaintiffs’ payments, and no incident of trader based inflation is offered as a source of damages.

Judge Buchwald also dismissed claims by a putative new class of lending institutions, who held loans with interest rates tied to LIBOR.

In a decision yesterday, Judge Furman declined to certify an interlocutory appeal on the question of whether an individual employee can force his former employer to waive privilege so the employee can assert an advice-of-counsel defense.  Judge Furman had previously found that the employer cannot be forced to waive the privilege, and noted that an interlocutory appeal would only serve to further delay the litigation:

[T]he Court cannot find that an immediate appeal would materially advance the ultimate termination of the litigation.  This case was filed over three years ago, and discovery – which has been contentious and protracted – is due to close in only eighteen days . . . . Put simply, an interlocutory appeal would not promote the efficient administration of justice, as the risk of having to retry the case against [the former employee defendant] after final judgment is much smaller than the near certainty of multiple trials and multiple appeals that would follow from allowing an interlocutory appeal.

The decision is part of the government’s FIRREA case against Wells Fargo (previous coverage here).

On Friday, as part of the long-running litigation against Argentina concerning its bond defaults, Judge Griesa granted injunctive relief to a series of follow-on (or “me too”) plaintiffs, along the same lines as the injunction entered for the lead plaintiffs in 2013.  The injunction requires Argentina to treat the bondholders equally, or parri passu, with other external debt.  According to Bloomberg, this adds $6 billion in additional claims.  Judge Griesa rejected Argentina’s argument that the relief “would subject the Republic to an unacceptable degree of catastrophic risk”: Continue Reading In Argentina Bond Litigation, Judge Griesa Grants Injunction to “Me Too” Plaintiffs

The NFL yesterday filed its opening brief in the “Deflategate” appeal.  The introduction claims that Judge Berman did not give Commissioner Goodell appropriate deference when he reversed Tom Brady’s four-game suspension:

[T]his should not have been a close case. The Commissioner exercised the precise authority that the CBA grants him when considering allegations of conduct detrimental to the game. He authorized an exhaustive investigation of the underlying conduct, which was limited only by Brady’s failure to cooperate. He conducted an extensive arbitration proceeding that conformed to the rules that govern those proceedings under the CBA. Not every evidentiary or procedural ruling went in Brady’s favor, but the CBA gives the Commissioner the authority to make those determinations and he reasonably resolved every contested issue. The Commissioner’s ultimate determination was elaborately reasoned and thoroughly grounded in the CBA. The district court’s decision vacating the Commissioner’s arbitration award cannot begin to be reconciled with the appropriate judicial standards for evaluating a collateral attack on such an action.

The NFL complained in particular that Judge Berman was wrong to evaluate Commissioner Goodell’s decision by reference to the “law of the shop”:

The court began by quoting this Court’s statement that an arbitrator “‘must interpret and apply [the collective bargaining] agreement in accordance with the ‘industrial common law of the shop.”” But whatever that statement may say about the role of an arbitrator, it in no way supports the conclusion the district court drew from it—namely, that courts are entitled to conduct a plenary review of whether the arbitrator followed the “law of the shop.”  To the contrary, this Court has expressly rejected the “argument that an arbitrator has a duty to follow arbitral precedent and that failure to do so is reason to vacate an award.”  What matters is whether the arbitrator’s decision is “grounded in the collective bargaining agreement,” not whether it is grounded in “arbitral precedent.” “[A]s long as the arbitrator is even arguably construing or applying the contract and acting within the scope of his authority,” the court must enforce his decision—even if it is “convinced he committed serious error” or that arbitral precedent supports a different result.

In a wide-ranging 433-page ruling yesterday, Judge Buchwald concluded (among many other things) that certain individual plaintiffs could bring fraud claims against banks they accuse of manipulating LIBOR.

The introduction of the opinion notes that the fraud claims present the plaintiffs, after four years of litigation, with a potential “comprehensive remedy”:

Continue Reading Judge Buchwald Issues 433-Page Ruling Largely Allowing Individual LIBOR Fraud Cases to Proceed