A Cyberattack Halts Bankruptcy Court Notices, a Judge Won’t Let the CFTC Undo Its Gemini Deal & Tesla Defeats Self-Driving Class Actions

This Day in Legal History: Black Monday

On October 19, 1987, the Dow Jones Industrial Average fell about 508 points, or 22.6 percent, in a single day. It is still the largest one-day percentage drop in the index’s history. Markets around the world fell with it. Trading systems were overwhelmed, order books backed up, and for hours many investors had no way to know what prices they were actually getting.

The legal and regulatory response shaped the markets we have today. A presidential task force known as the Brady Commission found that the stock market and the futures market, regulated by two different agencies, the SEC and the Commodity Futures Trading Commission, had acted as one market during the crash but were overseen as two. Computer-driven trading strategies in one had fed selling in the other. Among the reforms that followed were “circuit breakers,” coordinated trading halts that pause markets when prices fall too far too fast, along with closer coordination between the SEC and the CFTC.

The significance of October 19, 1987 is the idea that market regulation has to match how markets actually work, and that fragmented oversight can fail when stress hits. The CFTC, which grew in importance after the crash, is in our second story today, which is about whether a regulator can simply change its mind about a case it already settled.

A cybersecurity incident has halted the system that sends out notices for every federal bankruptcy court in the country. The federal judiciary disclosed the incident Thursday. It affects the Bankruptcy Noticing Center, which produces and mails or emails the official notices in bankruptcy cases, along with its website and the National Creditor Registration Service. The system is run for the judiciary by BAE Systems Inc., a U.S. subsidiary of the British defense contractor. BAE says the incident is isolated to that system and that it has taken immediate steps to address it. The Administrative Office of the U.S. Courts is coordinating with the affected courts. There’s no announced restoration date, and the reports so far don’t say what caused the incident or whether any data was accessed. Here’s why this matters more than it might sound. Bankruptcy runs on notice. When a debtor files, creditors must be told so they can file claims, object, and attend the meeting of creditors. The automatic stay that stops collection efforts, the deadlines to object to a discharge, and the bar dates for filing claims all depend on people receiving proper notice. Due process requires notice reasonably calculated to reach the people whose rights are affected; that’s the core holding of the Supreme Court’s 1950 decision in Mullane v. Central Hanover Bank. If notices aren’t going out, deadlines may need to be extended, and orders entered without proper notice could later be challenged. There’s also a privacy dimension. Bankruptcy filings contain sensitive personal and financial information, so if data was exposed, the harm could go beyond delay. This is the second time in recent weeks we’ve covered a cyber incident hitting the legal system, after the breaches at Quinn Emanuel and McDermott. Courts, like law firms, are attractive targets, and increasingly depend on outside contractors to keep critical systems running.

US federal bankruptcy court operations disrupted by cybersecurity incident | Reuters · U.S. Courts · Law.com

A federal judge in Manhattan has refused to undo a settlement that both sides now want to erase. In January 2025, the crypto exchange Gemini agreed to pay $5 million to settle a Commodity Futures Trading Commission lawsuit alleging it made misleading statements to the agency about a bitcoin futures product. In May of this year, after an internal review, the CFTC concluded the case should never have been brought, and the agency and Gemini jointly asked the court to vacate the settlement. U.S. District Judge Alvin Hellerstein said no. He held that the CFTC’s change of position wasn’t enough to undo a final judgment, and he rejected Gemini’s argument that regulators had pressured it into settling, noting that Gemini fought the case for more than three years before agreeing to it. So the penalty stays paid, and the permanent injunction barring Gemini from making false or misleading statements to the CFTC remains in place. Here’s the legal principle. A court-approved settlement becomes a judgment of the court, and the federal rules allow a judgment to be reopened only for specific reasons, like fraud, mistake, newly discovered evidence, or significantly changed circumstances, and courts apply those exceptions narrowly. The reason is finality. If a judgment could be wiped out whenever an agency’s leadership or priorities change, no settlement with the government would be reliable, and every new administration could revisit its predecessor’s cases. That’s the idea behind the Latin maxim in today’s opening quote: there must be an end to litigation. It’s also notable that a court is effectively protecting a judgment that neither party wants. The judge’s view is that once the court enters a judgment, it belongs to the court, not to the parties. With regulators changing direction on crypto enforcement, this ruling suggests that changing course on future cases is one thing, but undoing past judgments is another.

Judge rejects CFTC, Gemini bid to vacate $5 million settlement | Reuters · CoinDesk · CoinMarketCap

And finally, the Ninth Circuit has thrown out class certification in a lawsuit by California Tesla buyers who say the company misled them about its self-driving technology. The plaintiffs allege that Tesla falsely advertised that its cars had the hardware needed for full self-driving capability. U.S. District Judge Rita Lin had certified three classes of California buyers. A three-judge Ninth Circuit panel reversed, holding that there were too many individualized questions about what each buyer actually saw before buying. The case is LoSavio v. Tesla. Here’s the legal issue. To proceed as a class action, plaintiffs have to show that common questions predominate over individual ones. In a false-advertising case, that often comes down to exposure and reliance: did class members see the same misleading statement, and did it affect their decision to buy? If the advertising was uniform and widespread, a court may find that common questions predominate. If buyers encountered different statements in different places, or some saw none at all, the court may conclude it would need a mini-trial for each person, which defeats the purpose of a class. The panel found the second situation here. The plaintiffs’ lawyers argued the court didn’t appreciate how central the hardware claim was to Tesla’s entire marketing campaign. A few things to keep in mind. This doesn’t decide whether Tesla’s statements were false. The case goes back to Judge Lin, and individual buyers can still pursue their claims. The decision is also unpublished, so it isn’t binding precedent in other cases. But practically, class certification often decides whether a consumer case is worth bringing. Few buyers can afford to sue individually over the cost of a software package, so losing the class can end most of the case.

US appeals court blocks class actions over Tesla’s self-driving claims | Reuters · Bloomberg Law · US News