Rakoff Reversal Reflects Pragmatic Approach To Settlements

Emphasizing the substantial discretion district courts must give to federal agencies, on June 4, 2014, the Second Circuit held that U.S. District Judge Jed Rakoff had “abused [his] discretion” by applying an incorrect legal standard when rejecting a $285 million U.S. Securities and Exchange Commission settlement with Citigroup Global Markets, Inc. because the bank neither admitted nor denied wrongdoing. The appeals court found that Judge Rakoff committed “legal error” by requiring the SEC to establish the truth of the allegations against Citigroup as a condition to approval of the consent decree proposed by the parties. The court also found that the judge’s disagreement with the “SEC’s decisions on discretionary policy” — such as whether to settle complaints without forcing defendants to admit wrongdoing — was not sufficient to find that such a settlement rose to the level of being “against the public interest.” More on Law360 here.