On June 4, 2014, after two-and-a-half years, the U.S. Court of Appeals for the Second Circuit finally ruled in favor of the SEC in its high-profile appeal involving a proposed settlement with Citigroup Global Markets. As discussed here in detail, the SEC's appeal followed U.S. District Judge Jed Rakoff’s November 2011 order in which he refused to approve a $285 million agreement between the SEC and Citigroup because the court had “not been provided with any proven or admitted facts upon which to exercise even a modest degree of independent judgment.” 

 

In its opinion, the Second Circuit held, among other things, that it was an abuse of discretion for Rakoff to require that the SEC establish the “truth” of the allegations against Citigroup as a condition for approving the consent decree. “Trials are primarily about the truth.  Consent decrees are primarily about pragmatism,” the Second Circuit wrote. The appellate court added that “the job of determining whether the proposed SEC consent decree best serves the public interest, however, rests squarely with the SEC, and its decision merits significant deference.”

 

Today, with the case returned to him on remand from the Second Circuit, Judge Rakoff reluctantly approved the settlement between the SEC and Citigroup. "They who must be obeyed have spoken," Judge Rakoff wrote, "and this Court's duty is to faithfully fulfill their mandate." 

 

Despite his well-known and thoroughly litigated disagreement with the Second Circuit, Judge Rakoff acknowledged that the fight was over. "[I]t would be a dereliction of duty for this Court to seek to evade the dictates of the Court of Appeals. That Court has now fixed the menu, leaving this Court with nothing but sour grapes."

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