September 14, 2009
And A Quick Note About Rakoff and the SEC
Posted by David Zaring

The good judge just turned down the plea deal between the SEC and BofA on its communications with shareholders on the Merrill deal.  And he set a trial date.  I of course think highly of Rakoff, and know that judges have to approve consent decrees that involve future judicial oversight (which makes for plenty of approvals, as they almost all do), but I've never understood this sort of posturing.  The parties aren't going to go to trial, and the fact that the SEC would like to come back to court if BofA fails to meet the terms of its deal is hardly a great way in to close judicial supervision of those terms.  After all, what else is the SEC supposed to do, throw up its hands?  What if divorce courts started doing something similar?

Rakoff himself observes that he owes the parties deference on their deal, and that "Society greatly benefits when lawsuits are amicably resolved, and, for that reason, an ordinary civil settlement that includes dismissal of the underlying action is close to unreviewable."

When I was a government lawyer and I ran into angry judges for this or that reason, I always wanted a showdown.  "Fine, judge, dismiss the case, because we aren't trying it," I dreamed myself saying, or "go ahead, hold the United States in contempt, I dare you, but we're doing things the way we want to, not they way you want to."  My superiors always overruled me, thankfully for the rule of law, but really, parsing deals like Rakoff is doing here does no one any good.  Even if he just wants to change the fine and get more disclosures out of it all.  I prefer our litigant-driven system of justice to what they have in, you know, France.

Anyway, if I were the SEC, I'd strip out the consent decree and just impose the fine; perhaps they should strike a blow for independent agencies, and concomitantly dependent courts.

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