In 2012 and 2013, when the 5th Circuit Court of Appeals was considering the question of whether Dodd-Frank’s anti-retaliation provisions protect whistleblowers who report their concerns internally, rather than to the Securities and Exchange Commission, the SEC stayed out of the fray. The case, Khaled Asadi v. G.E. Energy, centered on the tension between two sections of Dodd-Frank, one of which seemed to define whistleblowers only as those who tip the SEC about potential misconduct by their employers. In its Dodd-Frank implementation process, the SEC attempted to resolve the tension, issuing rules to clarify that whistleblowers are protected from retaliation regardless of whether they report concerns to the agency or up the chain of command through internal compliance programs, as the older Sarbanes-Oxley Act had encouraged. The SEC’s rules have convinced most of the federal trial judges who have considered the scope of Dodd-Frank whistleblower protections; courts have typically cited the deference due to the agency’s interpretation of a law it is responsible for enforcing.
A ruling Wednesday by a federal judge in Salt Lake City, prohibiting the television streaming service Aereo from transmitting intercepted broadcasts from its antennas in Utah to subscribers’ Internet devices, lays out precisely the question that the U.S. Supreme Court will confront in April in a separate challenge to Aereo’s business model. Are Aereo and similar services content hijackers taking advantage of the hard work of those who produce and transmit television shows? Or are they mere facilitators, providing the technical means for individual viewers to watch private transmissions of TV shows? The answer to that question will lie in how the Supreme Court interprets a single clause of the Copyright Act, in a case that will test Congress’s ability to write laws that anticipate technological change.
On Tuesday, the Republic of Argentina asked the justices of the U.S. Supreme Court to grant review of a pair of rulings by the 2nd Circuit Court of Appeals that, according to Argentina’s brief, have put millions of Argentineans on the brink of economic catastrophe. The 2nd Circuit decisions, as you may recall, held that under the pari passu, or equal footing, clauses of defaulted Argentine bonds, Argentina may not make payments to bondholders who participated in two rounds of restructuring before it pays more than $1 billion to holdout distressed debt investors that refused to exchange their defaulted bonds. In the cert petition, Argentina’s new Supreme Court counsel, Paul Clement of Bancroft, reprises arguments that failed to sway U.S. District Judge Thomas Griesa and the 2nd Circuit when Cleary Gottlieb Steen & Hamilton previously asserted them. But Argentina is counting on the Supreme Court’s proven interest in the boundaries of sovereign immunity, and, if that doesn’t do the trick, in the court’s federalism concerns.
During settlement talks in Abu Dhabi last month, lawyers for the Greek shipping tycoon Victor Restis once again extended an offer to United Against Nuclear Iran, a non-profit headed by former U.S. diplomat (and Miami lawyer) Mark Wallace. UANI has denounced Restis for violating international sanctions against Iran and facilitating Iran’s development of nuclear weapons by secretly exporting Iranian oil in his company’s tankers. To settle the litigation over UANI’s accusations, the Restis entities offered to pay UANI $400,000 and to appoint Wallace to the board of the Restis tanker management company, Golden Energy Management.
Israel’s Bank Hapoalim is going to have to do some explaining about 16 wire transfers that originated at Hapoalim branches in Israel and ended with $266,000 in the Bank of China accounts of the alleged leader of a group called the Palestinian Islamic Jihad. On Thursday, U.S. District Judge Shira Scheindlin of Manhattan ruled that Bank of China, as the defendant in a politically charged suit brought by the family of the victim of a 2006 bombing in Tel Aviv, is entitled to depose a witness from Bank Hapoalim, despite the Israeli bank’s arguments that the testimony would violate Israel’s bank secrecy laws.
There was a very interesting exchange of letters this week at the 2nd Circuit Court of Appeals, where former Diamondback Capital portfolio manager Todd Newman and his co-defendant, Level Global Investors co-founder Anthony Chiasson, are appealing their December 2012 convictions for insider trading in Dell and Nvidia stock. And after the 2nd Circuit Court addresses the issue highlighted in the letters, not only the Newman and Chiasson convictions but also the guilty verdict against SAC Capital portfolio manager Michael Steinberg and the government’s prosecution of Raj Rajaratnam’s brother Rengan could be imperiled.
At the end of 2013, five regulatory agencies finally managed to adopt the Volcker Rule, the Dodd-Frank mandated regulation that curbs risky proprietary trading by financial institutions. Regulators from the Office of the Comptroller of the Currency, the Federal Reserve, the Federal Deposit Insurance Corporation, the Commodity Futures Trading Commission and the Securities and Exchange Commission took more than two years to refine their original proposal, after taking into account the 18,000 comments they received on the trading bars. Now comes the really fun part for the government: defending the 900-page behemoth of a law against the sort of industry-mounted challenges that have already felled shareholder proxy access and resource extraction disclosure rules that the SEC adopted in response to Dodd-Frank.
Did you happen to see the complaint Better Markets filed yesterday in federal court in the District of Columbia, accusing the Department of Justice of obfuscating the facts behind its $13 billion settlement with JPMorgan Chase? I have some doubts about Better Markets’ standing to sue Justice but none at all about the central point of the suit: We the public are still trying to understand the magnitude of wrongdoing by financial institutions that profited from the boom in residential mortgage securitization. The oft-mangled George Santayana quote has it that “Those who cannot remember the past are condemned to repeat it.” I’m sure the same condemnation awaits those whose memories of the past are circumscribed by the efforts of excellent defense lawyers. There has been virtually no market for private residential mortgage-backed offerings since the economic crash, but as the economy recovers and banks finally resolve liability from their boom-era offerings, that will probably change – especially because of court rulings that have blessed the instruments of securitization.
Once again, we are reminded that defendants underestimate the creativity of the class action bar at their own peril.
You might have thought that after nearly 225 years of American jurisprudence, the law was clear on whether a defendant can avoid surrendering a final award while it seeks review from the U.S. Supreme Court. But based on a $44 million fight between the consulting company Accenture and a would-be oil and gas services software company called Wellogix, it isn’t at all.