In an opinion today, Judge Berman denied a motion to enjoin an SEC administrative enforcement proceeding.  The proceeding was challenged on the ground that SEC administrative law judges are too insulated from executive oversight for purposes Article II of the Constitution, as interpreted by the Supreme Court in Free Enterprise Fund v. Pub. Co. Accounting Oversight Ed., 561 U.S. 477 (2010). Judge Berman agreed with the plaintiff on a threshold procedural point:  he ruled that the issues could be raised in district court, as opposed to raising them exclusively in the administrative proceeding itself (or on direct appeal to the Court of Appeals), because, absent a collateral challenge, the plaintiff would endure the very proceeding she was trying to block.  As Judge Berman observed: “The American Heritage New Dictionary of Cultural Literacy, 3d. Ed. (2005), defines the colloquial expression ‘you can’t unscramble an egg’ to mean ‘some processes are irreversible.’” But Judge Berman found the plaintiff was unlikely to succeed on the merits because he found that SEC ALJs’ insulation from removal was appropriate, given their adjudicatory (rather than policymaking) functions:

Continue Reading Judge Berman Refuses to Block SEC ALJ Proceeding; Finds ALJ Tenure Protections Likely Constitutional

In an opinion yesterday, Judge Rakoff denied a motion to dismiss an SEC complaint against two individuals who traded stocks after learning about an impending acquisition from a co-worker, Thomas Conradt, who, in turn, learned the information from his roommate Trent Martin.  The opinion begins by acknowledging the “difficulties” with having insider trading defined by case law instead of by statute:

Continue Reading Judge Rakoff, Acknowledging “Difficulties” In Defining Insider Trading, Upholds SEC Complaint Notwithstanding Newman Decision

In an opinion yesterday, Judge Presksa granted judgment to the creator of a play called “3C” that parodies the 70’s TV show “Three’s Company.”  She found that the play fell within the bounds of “fair use” because (among other reasons) it was “transformative”:

Continue Reading Judge Preska Rejects Copyright Challenge to Play Parodying “Three’s Company”

In an opinion yesterday, Judge Forrest denied (for the most part) various motions to dismiss the collection of cases alleging an antitrust conspiracy among commodity trading firms and their affiliated warehouse operators relating to the price of aluminum.  She had dismissed an earlier version of the case because it alleged only parallel (not conspiratorial) conduct (see here), but the updated pleadings, she ruled, are now sufficient:

Continue Reading Judge Forrest Allows Aluminum Warehouse Antitrust Case (As Amended) to Proceed

In an opinion issued today, Judge Pauley lamented the “troubling trend toward prolixity in pleading [that] is infecting court dockets in this district and elsewhere.”  Pointing to the 175-paragraph complaint, “larded with more than 1,400 pages of exhibits” and the 303-page, 1,263-paragraph counterclaim in a “relatively straightforward” case, Judge Pauley admonished both sides for their failure to adhere to Rule 8’s exhortation that a pleading contain a “short and plain statement of the claim.”

Continue Reading Judge Pauley Bemoans Needlessly Long and Complicated Pleadings

In an opinion today, Judge Swain ruled Section 13 of the Securities Act, which states that no action may be brought “more than three years after the security was bona fide offered to the public” was not extended by the so-called “FDIC Extender Provision” of the Financial Institutions Reform, Recovery, and Enforcement Act (or “FIRREA”) because, she concluded, the FDIC Extender Provision applied only to statutes of limitations, which are generally triggered from the time a claim accrues (or can be brought), as opposed to statutes of repose, which set forth an absolute end date for suit, regardless of equitable considerations and regardless of whether the harm necessary to sue even arisen. Judge Swain’s ruling was based on the Supreme Court’s decision CTS Corp. v. Waldburger, 134 S. Ct. 2175 (2014), which rejected the application of a similar extender law in the context of federal environmental law.  She went further and found that Waldburger “implicitly” overruled parts of a Second Circuit ruling in one of the FHFA cases, FHFA v. UBS, which, based on an extender law, found the claims at issue to be timely: “The analytical framework set out by the Supreme Court in Waldburger calls into question the Second Circuit’s analysis of the extender provision . . .  in its UBS decision, implicitly overruling material aspects of the UBS decision’s rationale.” Judge Swain also disagreed with the Tenth Circuit, which, after having been instructed to reconsider a ruling based on Waldburger, maintained its original conclusion that the extender law would apply. If Judge Swain’s ruling carries the day with the Second Circuit, it would be welcome news to Nomura and RBS, which are in the midst of a trial against the FHFA involving a substantially identical issue. Alison Frankel has been covering these issues in depth, see here, here and here.

In an opinion Friday, Judge Rakoff denied class certification in an class action accusing various defendants connected to a hedge fund of trading on insider information to the detriment of investors who traded around the same time. Judge Rakoff disqualified one of two proposed class representatives because he had an undisclosed arrangement for an attorney related by marriage to receive a 5 percent referral fee, and because his “difficulties with recollection and lack of familiarity with the litigation indicate[d] that he [was] wholly dependent on counsel to make crucial decisions affecting the interests of absent class members.” Judge Rakoff disqualified the other because he was “subject to the potentially meritorious defense that he suffered no economic loss attributable to defendants’ alleged wrongdoing,” on the theory that his winning trades could “net” against his losing ones.  This was disqualifying, Judge Rakoff concluded, because:

For most class members, the netting question is of only secondary importance, as the more pressing issue for those who are net losers is establishing liability. For [the plaintiff], by contrast, the netting issue is paramount, since for him it means the difference between a substantial recovery and no recovery at all. He is therefore highly likely to focus on this issue to the detriment of the class.

This is an issue the SDNY Blog flagged in this case almost three years ago in a post stating: “being the victim of securities fraud seems to have worked out all right in this case.”

In an order issued today, Judge Torres granted the motion of two police unions to participate in what Judge Torres described as “the difficult process of bringing the NYPD’s stop-and-frisk policies and practices into compliance with federal and state law.”  After having previously denied the unions’ motion to intervene in the case — a ruling that was upheld by the Second Circuit — Judge Torres agreed to permit the unions to provide their views to the Monitor appointed to oversee reforms. Judge Torres explained:

By letters dated March 4 and 6, 2015, the Patrolmen’s Benevolent Association and the Sergeants Benevolent Association ask to participate in the reform process by presenting their views after the Monitor submits his Final Recommendations. The Court believes the unions’ “important perspective on these matters” should be heard earlier. By letter dated March 18, 2015, the City suggests a way for all five police unions to participate in the remedial process now. Under the City’s approach, the City will share proposals with the unions before providing them to the Monitor and the Plaintiffs. The unions may then offer their comments, which the City will convey to the Monitor. The City will continue to confer with the unions about substantial revisions proposed by the Monitor and the Plaintiffs.  This approach affords the unions “a practical opportunity” to inform the Monitor of their viewpoints before the Monitor reaches conclusions and submits Final Recommendations to the Court.

Our prior coverage of this case can be found here.

In an opinion yesterday, Judge Hellerstein emphatically rejected the arguments of a Spanish bank, Banco Bilbao Vizcaya Argentina (S.A.) (“BBVA”), that, under the recent Supreme Court decision in Daimler v. Bauman and the Second Circuit’s recent ruling in Gucci v. Li, the Court lacked jurisdiction to enforce a subpoena seeking information that related to judgment collection and that was located outside the New York branch:

Continue Reading Judge Hellerstein Rules That Spanish Bank With New York Branch Must Gather Information Globally for Judgment Collection Subpoena

In an opinion yesterday, Judge Hellerstein emphatically rejected the arguments of a Spanish bank, Banco Bilbao Vizcaya Argentina (S.A.) (“BBVA”) that, under the recent Supreme Court decision in Daimler v. Bauman and the Second Circuit’s recent, ruling in Gucci v. Li, the Court lacked jurisdiction to enforce subpoenas seeking information related to judgment collection, at least insofar as the subpoenas would require BBVA to gather information located outside the New York branch:

The state of New York in general, and New York City in particular, is a leading world financial center. In order to benefit from the advantages of transacting business in this forum, a foreign bank must register with and obtain a license from the Superintendent of the Department of Financial Services (“DFS”), and file a written instrument “appointing the superintendent and his or her successors its true and lawful attorney, upon whom all process in any action or proceeding against it on a cause of action arising out of a transaction with its New York agency or agencies or branch or branches”. N. Y. Bnk. Law § 200( a). BBV A is registered with the DFS as a foreign branch. The Second Circuit recognized that the privileges and benefits associated with a foreign bank operating a branch in New York give rise to commensurate, reciprocal obligations. Foreign corporations which do business in New York are bound by the laws of both the state of New York and the United States, and are bound by the same judicial constraints as domestic corporations. Under New York Banking Law, foreign banks operating local branches in New York can both sue and be sued. See, e.g., Greenbaum v. Handlesbanken, 26 F.Supp.2d 649 (S.D.N.Y. 1998). This legal status also confers obligations to participate as third-parties in lawsuits which involve assets under their management Contrary to BBVA’s suggestions, Daimler and Gucci should not be read so broadly as to eliminate the necessary regulatory oversight into foreign entities that operate within the boundaries of the United States. There is no reason to give advantage to a foreign bank with a branch in New York, over a domestic bank. I cannot espouse a notion of jurisdiction that allows banks to hide information concerning assets connected to terrorism in other countries. When corporations receive the benefits of operating in this forum, it is critical that regulators and courts continue to have the power to compel information concerning their activities. Foreign banks should not be permitted to promote the legitimacy of their business by registering to do business in New York, and then hide illicit activity by ‘keeping’ information concerning assets related to terrorism in other countries. Such action is akin to a legitimate business storefront which launders money from illegal operations in the back room, and does not comport with the legal system of the United States. The information requested by the Information Subpoena can be found via electronic searches performed in BBVA’s New York office, and are within this jurisdiction.