Judge Rakoff Strikes Back: US v. Salman (Part 1)

Judge Rakoff is a high profile federal district court judge in the Souther District of New York.  He has had a habit of overturning the status quo in securities cases, particularly those brought by the SEC.  Back in 2009, he rejected a high profile settlement between the SEC and Bank of America.  

A few years later, he did the same in connection with a settlement involving Citigroup.  In that instance, he essentially rejected the settlement because of the absence of admissions. His opinion is here. The decision set off a serious debate about the need for admissions when the SEC settled cases and likely contributed to a shift in policy in that regard at the SEC. 

But with respect to the decision itself, the Second Circuit ultimately issued a fairly sharp rebuke to Judge Rakoff, vacating his order and remanding the case.  See SEC v. Citigroup Global Markets, Inc., 752 F.3d 285 (2nd Cir. 2014).  Judge Rakoff presumably disagreed with the decision but in the federal courts, district court judges must follow the mandates of the appellate court.  He was stuck with the reasoning.

Yet despite this clear hierarchy, Judge Rakoff has found another way to disagree with the reasoning of the Second Circuit and this time there is no opportunity for that circuit court to reverse his analysis.  In US v. Salman, Judge Rakoff sat by designation in the 9th Circuit.  District court judges are allowed to sit at the appellate level by designation (essentially permission of the circuit court).  

The circuit courts benefit because they obtain an extra judge to help with the caseload.  They also can promote other, more intangible, benefits.  Some circuits have a practice of encouraging all district court judges within their boundaries to sit at the appellate court.  This presumably builds collegiality and provides insight into the types of issues of particular concern in appeals.  

Circuit courts also routinely accept appellate judges from other circuits, particularly senior judges who can largely control their schedule.  Retired Supreme Court justices may also sit by designation.  Indeed, Justice Souter, sitting by designation, recently wrote an opinion in a securities case.  See US v. Reda, 787 F.3d 625 (1st Cir. 2015).   

The situation with Judge Rakoff is a bit more unusual.  He is not a senior judge and he does not decide cases in the 9th Circuit.  Nonetheless, the 9th Circuit allowed him to set by designation.  Coincidentally, one of the cases heard by his panel, US v. Salman, involved an issue recently addressed by the Second Circuit in US v. Newman.  We will discuss his approach in the next post. 

J Robert Brown Jr.