Litigation Update: Powell v. SEC

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Welcome to fedsock Forums, a Federalist Society podcast. I'm Elizabeth Slattery,
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Vice President of Practice Groups. Be sure to subscribe wherever
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you get your podcasts so you won't miss an episode. Now,
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please enjoy today's conversation.
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Good afternoon, and welcome to fedsock Forums. I'm Alexinos practice
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Froops fellow at the Federal Society. Today's Litigation Update program
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will be a discussion of the recent developments in power
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v SEC.
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A couple of notes before we begin.
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As always, the Federal Society does not take policy positions,
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and all views express in this session belong to our speakers.
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Towards the end of the program, we'll take questions from
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the audience, So if you have any questions throughout the
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webinar that pertains the topic at hand, please sumit them
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from the zooms Q and a feature located at the
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bottom of your stream. Now, I'm pleased to introduce our moderator,
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Joe Jacobson, litigation associate at Wow Godshall and Mangi's LLP.
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She's a former law kirk to Judge Alien Cannon on
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the District Court for the Southern District of Florida, A
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fellow emeritus at the independent Woeos Law Center and its
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senior contributor at Young Voices.
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Jill, thank you for being here.
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A floor is yours.
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Thank you so much for that introduction, Alex. As Alex mentioned.
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We are lucky enough to have Gregory Gar and Peggy
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Little here with us to discuss Powell versus SEC, a
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pending petition for sert challenging the constitutionality of the SEC's
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very recently rescinded GAG rule. To briefly introduce our panelists.
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Gregory Gar is a partner at Laithman Watkins. Prior to
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joining Latham, he served as the forty fourth Solicitor General
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of the United States. Mister Gars argued more than fifty
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cases before the Supreme Court and has served as Council
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of record in hundreds.
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Of additional Supreme Court cases.
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Mister Gar received his jd from George Washington University Law
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School and served as a walker to Chief Justice Renquist
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and to Judge Sister Out in the Third Circuit. Peggy
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Little is a senior litigation council at the New Civil
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Liberties Alliance and has over four depth decades of experience
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as a trial and impellate litigator, including his council in
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many landmark administrative law and civil liberties cases. Ms Little
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has represented notable figures in the administrative low sphere such
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as Ray Lucia, Michelle Cochrane, and now the petitioners in
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this case. Peggy attended yel Law School and clerked for
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Judge Winter on the second Circuit. Both Peggy and Greg
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a council of record for petitioners in Powell. I won
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my introduction with a fun fact for the audience, which
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is the last time that Peggy and Greg teamed up
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was in the twenty twenty three Supreme Court case Axon
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Enterprise versus FTC consolidated with Cochran versus SEC, which was
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a unanimous victory that reversed or overruled precedents in six
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circuits which had previously denied federal jurisdiction for constitutional challenges
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to administrateive adjudication for more than a decade. With that,
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I'd love to begin our discussion for those news to
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this dispute, Can you all explain a little bit about
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the petitioners in this case and what the SEC's gag
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rule actually required.
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Sure started all this trouble in twenty nineteen. I'll give
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that procedural history. The SEC gag rule requires as a
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condition of settlement that anyone who wishes to settle with
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the agency must sign a consent, or, if it's an
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administrative proceeding, they must sign an offer of settlement, both
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of which are drafted entirely by the SEC, which may
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not be changed, in which they must agree that they
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will never contest or even create the impression of a
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denial of any of the allegations made against them by
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the SEC. And it is important to focus on just
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how draconian and shocking that is, because all you're doing
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is settling a case with an agency that is prosecuting you.
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These are mere allegations. There have been no findings whatsoever
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by anyone, whether it be in an administrative proceeding by
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the administrative, a law judge, or if you're in a
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district court, by any court of law. Nonetheless, you are
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put in the position that you cannot deny for the
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rest of your life any allegation they made against you.
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The SEC admits this is non negotiable, and worse, they
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also admit that whether you win or lose in their case,
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you can say whatever you want to about their case
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against you. You can lose your case, go to prison,
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and still criticize the SEC's case against you. It's only
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if you settle. Now, the SEC is a very powerful agency,
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and it can drag out proceedings, can and does drag
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out proceedings for sometimes up to a decade, and the
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costs of defense of an SEC proceeding goes into the
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millions of dollars. And we cited a lot of that
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very important material in not just our brief, but in
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amicus briefs that were submitted in some cases by former
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SEC officials as to the costs and delay. So what
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this does is it makes puts people in the position
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where they either have to be ultra wealthy or agree
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that they're never going to contest charges made against them
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as to which there have been no findings that should
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be and is deeply troubling to our First Amendment rights.
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So that was the rule that was put into place.
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Interestingly enough, in nineteen seventy two. Now you might say, well,
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you know, why didn't somebody make a big deal out
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of this, Well, that's because it was slipped into the
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federal register without notice and comment. So there it was
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in the Federal Register. It says we consider this a
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mere housekeeping rule. It is effective immediately, and there was
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no chance for anyone to object to that rule. And
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the other thing I think that's important for the public
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to understand is this is a complete outlier in terms
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of how the government treats resolving cases with people it charges.
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For the first I guess it would be twenty five
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years or so of its existence, the SEC was the
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only agency that does this. No other agency did it.
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Then in the late nineteen nineties, the CFTCS I think
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they looked over at the SEC and said, ooh, they
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got a gag rule. That's cool, we want one of those.
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So they then enacted by notice and comment rule. And
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so this has silenced generations of people for over five decades.
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Nobody else does this. The Department of Justice doesn't do it,
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and it's just an outlier rule. That is it's been
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NCLA where I work New Civil Liberties Alliance, it's been
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our goal to get rid of that rule since I
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started work. Here was one of the first things I did.
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We challenged it in the Second Circuit under a very
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fine and still valid president under Rule sixty before that
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got denied in an opinion that's been highly criticized in
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the literature, and we took that decision or tried to
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take that decision up on cert and Floyd Abrams, the
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renowned First Amendment lawyer, was our lead counsel on that petition,
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and at that point there wasn't a lot of law
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on the case, and so the core is it very
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often does did grant cert. But we kept swinging at
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the rule, and I brought two challenges in the Fifth
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Circuit Court of Appeals, one under Rule sixty before and
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the other a declaratory relief. Neither succeeded. But on the
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Rule sixty appeal judges Edith Jones and Kyle Duncan issued
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a very helpful and I think well informed concurrence that said,
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this is a plain prior restraint and in fact a
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more effective effective one is hard to imagine because the
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penalty if you speak in a way that the sec
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doesn't like it, they will reopen the case against you.
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So the penalty is very severe. And we had also
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at that in twenty nineteen, filed a petition to amend
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the rule to take away the gag. So what the
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judges on the Fifth Circuit Court of Appeals said, we
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note that you have this petition pending for at that
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time it was four years. We think it's time for
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the SEC to address this plane prior restraint. So with
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that in mind, we proceeded to do that. I should
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also add that a judge, several judges in the Southern
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District of New York, but especially Judge Ronnie Abrams, issued
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what's known as a decision dubitante. And what that means
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is a district judge who is writing a decision saying
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I have to follow the law of my circuit that
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I think it's wrong, and here's why. And it really
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was a very impassioned critique of the SEC gag rule
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and it said, effectively, this is it's an unconstitutional condition
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and a violation of the First Amendment. So by the
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time we then followed the Fifth Circuit suggestion of taking
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our administrative rule challenge to a Court of Appeals, we
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had the helpful decision from Judges Jones and Duncan, as
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well as the helpful decision from Judge Abrams to bring
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before the court to say, listen, respected judges have devoted
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a lot of time and thought to this and recognized
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there is a problem here. Now. The reason we brought
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it in the Ninth Circuit was they had two precedents
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that were very helpful. One was it called Davies and
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the other was called Richards, and in both of those
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cases the Ninth Circuit had held it was an unconstitutional
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condition to In the Davies case, what had happened if
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someone had settled with a school district, I think, and
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then they had to agree that they would not run
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for public office in the future, which is kind of shocking.
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And the Ninth Circuit said, no, no, that's an unconstitutional condition.
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The government cannot not impose that on you. In the
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other case, Richards involved a settlement with the government in
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which the person settling with the government was required to
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agree that they will not criticize the county commissioner in
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the future, and again the Ninth Circuit said, no, no, no,
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that's an unconstitutional condition. So we thought we had two
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really good Law of the Circuit precedence. But disappointingly, the
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pal panel decision, uh just distinguished well, it didn't even
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address the Richard's decision. And then it distinguished Davies in
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what I think was a compellingly unconvincing way. Also in
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explaining who we are representing in this. We have, let's see,
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eight petitioners who are bound by either a court gag
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or an administrative gag. And then we have one petitioner
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who did not waive, did not sign a consent, but
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was concerned that he might have to, so he had
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a pre enforcement pre gag challenge in there. And we
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were trying to assemble a group of petitioners that were
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in different postures for precisely the reasons of making the
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application and the standing of everyone to bring these claims
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as solid as possible. And finally we had two media organizations.
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Reason magazine challenged the gag because it reports a lot
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on SEC settlements and was not able to talk to
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people who had actually settled the case about their side
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of the story. And then we had a really well
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own established claim by a Delaware newspaper called the Cape Gazette,
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and they had tried to interview one of our petitioners.
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They had actually done an article when she was first
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charged by the SEC and had reported and then when
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she settled, they called her up and said, well, what's
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your side of this story? And she said I can't
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talk to you. I'm gagged. So we had two media
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petitioners bringing the fact that the gag violates also the
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press is right to engage in news gathering that is
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not impeded by government restrictions on speech and prior restraints.
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The Ninth Circuit decision did not even acknowledge that there
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were press plaintiffs at all. That was never addressed. We
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did seek en banc review, which was not granted, and
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so we brought the certain petition, working with Greg, and
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we focused on the First Amendment. There are a lot
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of aspects to the rule, including some due process aspects
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the rights of the press, but we felt that we
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wanted to focus on the First Amendment violations here because
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they had been so well laid out by the various
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lower courts that I just described to you. Thank you, Peggy.
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I think you know, as you cover, you have brought
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this case in various permutations all over the country. But
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some procedural news I think that makes this very different,
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which is that the SEC just recently announced, you know,
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two days before it was set to respond to your petition,
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that it was actually we're sending the gag rule. Would
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you all like to talk a little bit about that
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and maybe what you know, does that mean this petition
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is different? Is there a better shop than perhaps in
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previous iterations.
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Yeah, I can jump in there, and maybe I can
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just pick up briefly on what Peggy said in outlining
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this case. You know, there are three things about the
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gag rule that really stood out to me as I
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got into it that make it truly remarkable that.
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The first is just its mandatory nature.
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You know, agencies can and do an individualized basis, enter
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into various consent orders and settling cases.
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But this rule is distinct, and then it applies to everyone.
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An agency cannot, the SEC cannot settle the case without
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imposing one.
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Of these gags.
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The second is just the nat sure of the process
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before the SEC. The SEC, you know, stands out among
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agencies in terms of the burdens process that it subjects
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individuals too. You know, for someone going through this process,
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it can take years. It almost certainly would bankrupt you
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from legal fees, and there's enormous reputational costs with just
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litigating against the SEC. So these individuals have virtually no
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choice but to throw in the towel. And in fact,
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ninety eight percent of them actually settle, are forced to
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settle with the sec even though you know, the vast
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majority of them vigorously can.
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Test the allegations.
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And then the third thing is that this gag applies
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for life. You know, thousands of individuals, you know, literally
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have to take their disagreement with the agency and denial
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their charges to their grace with them, which is, you know.
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Truly extraordinary.
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So in that respect, you know, it's not surprising that
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the administration acted to within this rule. And you know,
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just at a basic level, one kind of plow out
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the administration for taking that step.
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But the problem is that it doesn't.
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Really eliminate the legal harms that are our clients and
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thousands of others are gagged face and just in terms
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00:16:22.759 --> 00:16:26.200
of the decision of the rule and how it affects
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the pending case before the Supreme Court, you know, really
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it presents the question of mootness, which in turn sort
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of boils down to a question of voluntary cessation. Of course,
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if the rule didn't exist, the case would be moot,
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but the Supreme Court is recognized and often apply an
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exception called voluntary cessation, which says basically that you know,
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a party can't just sort of voluntarily cease this conduct,
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say the case is moot, and get out of court,
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because they can just you know, renew the conduct. And
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you know, we're not going to allow the manipulation of
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courts in that fashion. And so the SEC's decision of
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00:17:06.640 --> 00:17:11.160
the rule here presents a classic question of voluntary cessation.
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And when you sort of run through the factors that
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the court typically applies, it's very clear that this is
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a case where the exception would apply. And I would
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say that for a few reasons. The first is that
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the voluntary association doctrine looks at basically how easy it
277
00:17:29.960 --> 00:17:33.160
would be for the defendant to renew it is a
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00:17:33.279 --> 00:17:38.599
legal conduct, and context of government rules, it looks to,
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00:17:38.799 --> 00:17:41.000
you know, how difficult it would be for the government
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to reenact the rule. And here, because the agency essentially
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rescinded the rule overnight without notice, comment, or any process,
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00:17:49.759 --> 00:17:52.920
it's clear that it could reenact the rule overnight without
283
00:17:53.000 --> 00:17:56.559
any process. So that that factor, you know, points strongly
284
00:17:56.720 --> 00:18:02.920
to a finding of voluntaryation. Another problem for the government
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00:18:02.960 --> 00:18:06.480
here is although the government rescinded the rule, it didn't
286
00:18:06.519 --> 00:18:10.319
in any way acknowledge its illegality, and in fact, in
287
00:18:10.359 --> 00:18:12.799
its sur petition it continues to argue that the rule
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is constitutional under the Supreme Courts precedence, which we obviously
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00:18:16.640 --> 00:18:19.680
strongly agree with. But you have you have a rule
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00:18:19.720 --> 00:18:21.799
that you know, was rescinded over night, that the government
291
00:18:21.880 --> 00:18:24.400
is continuing to defend. It had been in place for
292
00:18:24.440 --> 00:18:28.240
fifty years. The SEC that rescinded this rule is made
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00:18:28.319 --> 00:18:31.799
up entirely of three Republican appointees. There are actually no
294
00:18:31.880 --> 00:18:35.359
Democratic seats that have been filled right now, so you know,
295
00:18:35.960 --> 00:18:39.799
it is very possible this rule could spring back into existence.
296
00:18:41.279 --> 00:18:44.000
And you know that's a big that's the major factor
297
00:18:44.079 --> 00:18:48.000
under the voluntary association precedent. And the third fact here,
298
00:18:48.000 --> 00:18:50.200
which is quite important and sort of comes up uniquely
299
00:18:50.279 --> 00:18:53.640
in First Amendment cases, is that, you know, the very
300
00:18:53.720 --> 00:18:56.559
uncertainty about when or whether the rules spring back to
301
00:18:56.599 --> 00:19:00.799
life continues. The chill that we're litigating in this for
302
00:19:00.920 --> 00:19:03.759
people who are subject to gags, like our clients and
303
00:19:03.839 --> 00:19:04.880
thousands of others.
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The mere possibility that the SEC.
305
00:19:07.559 --> 00:19:11.319
Tomorrow or at the very least in a future administration
306
00:19:11.920 --> 00:19:14.559
could sort of turn the switch back on and continue
307
00:19:14.640 --> 00:19:17.920
to enforce gags great and enormous chill for them to
308
00:19:17.960 --> 00:19:21.480
speak out even during this period that the gag is rescinded.
309
00:19:21.839 --> 00:19:25.440
And so for all those reasons, you know, while one
310
00:19:25.519 --> 00:19:27.799
might applaud the agency's decision.
311
00:19:27.440 --> 00:19:30.400
To resit in the rule, that recision in.
312
00:19:30.319 --> 00:19:33.839
No way moves the case before the Supreme Court or
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00:19:33.880 --> 00:19:35.799
the need for the Supreme Court to step in here
314
00:19:35.839 --> 00:19:38.640
and say that this kind of mandatory gag by an
315
00:19:38.640 --> 00:19:43.759
administrative agency is unconstitutional and you know, can't be reenacted
316
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for legal reasons.
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00:19:46.039 --> 00:19:49.799
Yeah, and I would add to that, six of our
318
00:19:49.880 --> 00:19:55.319
petitioners are under a court ordered gag. And in a
319
00:19:55.359 --> 00:20:02.880
case called Cato Institute versus the SEC in the DC Circuit,
320
00:20:04.079 --> 00:20:06.440
that was another challenge that was made to the gag
321
00:20:06.519 --> 00:20:11.440
rule that was dismissed on standing reasons. But in that case,
322
00:20:11.559 --> 00:20:14.000
the SEC had taken the position, oh, we don't really
323
00:20:14.119 --> 00:20:18.799
enforce it, which is also something they have stated in
324
00:20:18.839 --> 00:20:21.640
support of what they hope will be a moot case.
325
00:20:22.480 --> 00:20:26.400
We don't really enforce this rule. And the DC Circuit,
326
00:20:26.440 --> 00:20:33.319
which is the circuit that is probably most determinative in
327
00:20:33.400 --> 00:20:37.720
terms of administrative law case, is said, no, no, SEC.
328
00:20:38.319 --> 00:20:41.240
Whether or not you choose to enforce it, we course,
329
00:20:41.319 --> 00:20:45.240
have an independent ability and right and duty to enforce
330
00:20:45.319 --> 00:20:48.440
our own rules in our own court orders. So what
331
00:20:48.480 --> 00:20:51.519
the sec has done here in its attempt to moot
332
00:20:51.880 --> 00:20:54.200
by saying, well, we're we're sending the rule and we
333
00:20:54.240 --> 00:20:57.240
don't really enforce it or intend to enforce it, does
334
00:20:57.279 --> 00:20:59.559
not mean that these people are not under the sort
335
00:20:59.599 --> 00:21:03.079
of damag police in terms of a court enforcing that order.
336
00:21:03.160 --> 00:21:06.279
And as one of the recent decisions of the Supreme
337
00:21:06.319 --> 00:21:09.680
Court said, the threat of the sort of damacoies is
338
00:21:09.720 --> 00:21:12.799
not that it strikes, but that it hangs. So our
339
00:21:12.880 --> 00:21:17.640
clients are still under the threat of a gag. And
340
00:21:17.759 --> 00:21:22.559
it's not just these these six clients. These are thousands
341
00:21:22.599 --> 00:21:25.480
of people, as Greg has has pointed out, and that
342
00:21:25.599 --> 00:21:27.559
alone is a good reason for the Court to take
343
00:21:27.599 --> 00:21:33.000
the case because it has affected the firstmanent rights of
344
00:21:33.079 --> 00:21:35.279
thousands of people over many decades.
345
00:21:37.720 --> 00:21:40.240
I think, you know, as the Amikus briefs in this
346
00:21:40.359 --> 00:21:44.480
case so clearly highlight that threat of enforcement, you know,
347
00:21:44.640 --> 00:21:47.920
actual enforcement aside really does harm.
348
00:21:47.960 --> 00:21:50.720
Would you speak a little to what that harm is?
349
00:21:50.960 --> 00:21:54.160
I mean, I think in the abstract, it's hard to
350
00:21:54.240 --> 00:21:57.720
imagine that not being able to deny allegations which you
351
00:21:57.880 --> 00:22:00.000
readily that old would really risk.
352
00:22:00.400 --> 00:22:02.319
Intangible life changing harm.
353
00:22:02.680 --> 00:22:08.279
But what do the petitioners face, Well, they each submitted
354
00:22:08.319 --> 00:22:12.039
declarations that talk about the reputational harm. Once you have
355
00:22:12.200 --> 00:22:17.839
that sec settlement against you and the industry bans, you're
356
00:22:18.039 --> 00:22:24.920
basically it's really a life it's not an occupational death sentence.
357
00:22:25.759 --> 00:22:31.079
And if you want to get reinstated to the practice
358
00:22:32.079 --> 00:22:35.720
for the Securities and Exchange Commission, you've got to be
359
00:22:35.759 --> 00:22:38.640
able to explain to someone why they should trust you,
360
00:22:38.720 --> 00:22:41.599
why they should sponsor you. But you are not in
361
00:22:41.640 --> 00:22:44.480
the position to make that case for yourself because you
362
00:22:44.519 --> 00:22:48.359
were silenced for life. And this is so it is
363
00:22:48.440 --> 00:22:53.000
so draconian and unusual. Uh, they're the reputational harm. I mean,
364
00:22:53.039 --> 00:22:55.440
we've talked to the not just our petitioners but their
365
00:22:55.440 --> 00:23:00.920
families who you know every time. For example, one of
366
00:23:00.960 --> 00:23:06.480
our petitioners, his prospective son in law's family looked up
367
00:23:06.799 --> 00:23:10.519
his name and soft Securities fraudster and he can't defend
368
00:23:10.640 --> 00:23:14.039
himself and saying, well, you know, this was a paperwork violation,
369
00:23:15.039 --> 00:23:17.880
as had been the case in Michelle Cochran's case that
370
00:23:17.920 --> 00:23:22.000
Greg and I had worked on earlier, this was not fraud.
371
00:23:22.720 --> 00:23:25.759
She was the work she was accused of was failing
372
00:23:25.799 --> 00:23:29.359
to complete paperwork for an impossible boss, and so she quit.
373
00:23:30.000 --> 00:23:32.799
This is not the government is doing no on any
374
00:23:32.839 --> 00:23:37.240
favors by making that person permanently unemployable. And it's these
375
00:23:37.359 --> 00:23:41.160
kinds of stories of a lifetime. That is, there's a
376
00:23:41.559 --> 00:23:44.440
before and an after in your life when you've been
377
00:23:44.519 --> 00:23:48.720
charged by the sec and gagging you from defending yourself
378
00:23:49.680 --> 00:23:51.960
for the rest of your life is certainly not a
379
00:23:52.039 --> 00:23:54.440
power the government has or should have.
380
00:23:56.200 --> 00:23:58.279
Yeah, I mean, when you think about it, just in
381
00:23:58.359 --> 00:24:02.720
the ordinary criminal criminals sphere, these gaggs don't exist at all.
382
00:24:02.720 --> 00:24:05.640
I mean, the Department of Justice has never insisted on
383
00:24:05.680 --> 00:24:08.839
a wholesale basis for these kinds of gags. The sort
384
00:24:08.880 --> 00:24:13.839
of laws that come up involve criminal defendants, including the
385
00:24:13.839 --> 00:24:16.079
worst of the worst, who've tried to profit on their
386
00:24:16.559 --> 00:24:20.200
deeds by writing books and the like, and states that
387
00:24:20.319 --> 00:24:25.720
pushed back on laws restricting their ability to profit from that.
388
00:24:25.799 --> 00:24:29.000
But even there, the Supreme Court, in a case called
389
00:24:29.039 --> 00:24:33.000
Simon and Schuster, held that you know, these sorts of
390
00:24:33.079 --> 00:24:37.519
restrictions were started to First Amendment restraints and that states
391
00:24:37.519 --> 00:24:41.319
could not strip the worst of the worst, including the
392
00:24:41.359 --> 00:24:46.119
Sun Sam from you know, profiting on telling their stories,
393
00:24:46.240 --> 00:24:49.480
and here you have agencies which you know, on a
394
00:24:49.519 --> 00:24:53.559
wholesale basis, silence individuals from telling their side of the story.
395
00:24:53.559 --> 00:24:55.079
It's it's really quite extraordinary.
396
00:24:56.039 --> 00:24:59.119
One of our Amigas briefs really went into sometimes the
397
00:24:59.200 --> 00:25:06.839
historical ap importance. For example, civil disobedience persons who have
398
00:25:06.960 --> 00:25:10.039
been jailed, who you know, by being able to tell
399
00:25:10.079 --> 00:25:13.160
their story or write letters from jail, you know, going
400
00:25:13.160 --> 00:25:16.359
all the way back to you know, Saint Augustine and
401
00:25:17.039 --> 00:25:19.720
all the way up to Martin Luther King. The ability
402
00:25:19.759 --> 00:25:23.440
to speak about the government's prosecution against you is key
403
00:25:23.839 --> 00:25:27.480
to our liberty. And Greg had talked about the Son
404
00:25:27.519 --> 00:25:32.240
of Sam, and that's what the Simon and Schuster case involved.
405
00:25:32.279 --> 00:25:34.559
It was called the Son of Sam law. But the
406
00:25:34.599 --> 00:25:39.400
actual Simon and Schuster case involved Henry Hill. And those
407
00:25:39.440 --> 00:25:45.119
of you who have seen Goodfellas, the actual case involved
408
00:25:45.160 --> 00:25:48.160
his ability to tell his story, which was the book
409
00:25:48.200 --> 00:25:52.119
was named Wise Guy, and they made the movie Goodfellows
410
00:25:52.160 --> 00:25:54.920
out of that. And the point being you wouldn't have
411
00:25:55.000 --> 00:25:59.960
Goodfellas unless the sec the Supreme Court rather had unanimous
412
00:26:00.359 --> 00:26:04.079
ruled that Henry Hill could write his book and make
413
00:26:04.240 --> 00:26:07.160
an illuminating movie about what it's like to be a monster,
414
00:26:07.440 --> 00:26:09.039
and those are important things for us to know.
415
00:26:11.480 --> 00:26:16.160
Certainly, if the Court does find this case moot you
416
00:26:16.279 --> 00:26:20.799
all request monthslywear vakador of the Ninth Circuit's decision, and
417
00:26:20.920 --> 00:26:22.920
I think you know the harms that you both just
418
00:26:23.000 --> 00:26:26.599
discussed illustrate why that really is necessary if the case
419
00:26:26.799 --> 00:26:29.759
is mooted out for the audience, will you talk a
420
00:26:29.759 --> 00:26:32.839
little bit about what monthlywear vacador is and you know
421
00:26:32.880 --> 00:26:36.279
why is an equitable remedy particularly important in this case?
422
00:26:37.119 --> 00:26:37.440
Sure?
423
00:26:37.559 --> 00:26:42.759
So, Munsonware is named after Supreme Court decision, and you know,
424
00:26:42.880 --> 00:26:48.440
basically is a general rule that where a party moots
425
00:26:48.440 --> 00:26:52.200
the case through its own opportunistic actions, that it can't
426
00:26:52.240 --> 00:26:55.000
continue to benefit from the decision that it's seeking to
427
00:26:55.039 --> 00:26:58.440
shield from review. And so the Supreme Court, ordinarily, in
428
00:26:58.480 --> 00:27:01.519
a wide variety of contexts, if it concludes that a
429
00:27:01.640 --> 00:27:05.440
case is in mood and that mootness deprives a party
430
00:27:05.599 --> 00:27:08.960
from the opportunity to seek review in the court, instead
431
00:27:08.960 --> 00:27:12.000
of leaving the lower court decision in place, it would
432
00:27:12.240 --> 00:27:16.920
vacate that decision and dismiss the matter as mood.
433
00:27:17.160 --> 00:27:18.559
Here, one of the things.
434
00:27:18.599 --> 00:27:22.359
That's quite striking about the government's response is on the
435
00:27:22.359 --> 00:27:24.799
one hand, it's arguing that the Court shouldn't take the
436
00:27:24.839 --> 00:27:27.079
case because the case is mood on the ground that
437
00:27:27.119 --> 00:27:30.000
the agency has rescinded the rule.
438
00:27:30.960 --> 00:27:32.359
But on the other hand, it's.
439
00:27:32.160 --> 00:27:35.480
Saying that the Supreme Court should leave the Ninth Circuit's
440
00:27:35.680 --> 00:27:40.319
decision in place, you know, completely overlooking that if it
441
00:27:40.400 --> 00:27:43.440
succeeds on the first argument, it will prevented us from
442
00:27:43.759 --> 00:27:46.599
obtaining Supreme Court review of that decision. So it's really
443
00:27:46.680 --> 00:27:50.559
quite opportunistic. I'm not sure why the government wanted to
444
00:27:50.720 --> 00:27:55.319
reach that far here, but under normal circumstances, the Supreme Court,
445
00:27:55.480 --> 00:27:57.960
if it concluded that the case were mood, would the
446
00:27:58.079 --> 00:28:02.279
very least vacate the decision below. And that's important because
447
00:28:02.279 --> 00:28:05.440
it would be one less decision on the book, adopting
448
00:28:05.599 --> 00:28:08.880
sort of a fallacious conception of the First Amendment and
449
00:28:09.880 --> 00:28:15.559
unconstitutional conditions, doctrine and other legal principles in this context,
450
00:28:15.640 --> 00:28:19.279
So it would be important if the Supreme Court were
451
00:28:19.319 --> 00:28:22.000
to vacate the Ninth Circuit decision as opposed to leading
452
00:28:22.000 --> 00:28:25.039
it on the books. And I think, you know, under
453
00:28:25.039 --> 00:28:28.640
a normal application of Monsey more that's where the court
454
00:28:28.759 --> 00:28:31.839
should and if it concludes that, the case is moved.
455
00:28:32.839 --> 00:28:36.000
And to add to Greg's thought, he mentioned earlier too
456
00:28:36.440 --> 00:28:41.400
that when the sec rescinded the rule, it expressly defended
457
00:28:41.839 --> 00:28:44.359
the decisions below that had held that the rule was
458
00:28:44.400 --> 00:28:49.039
constitutional and that it was not an unconstitutional condition. And
459
00:28:48.680 --> 00:28:51.839
that shows the agency wants to have its cake and
460
00:28:51.880 --> 00:28:54.680
eat it too, because on the one hand, it's trying
461
00:28:54.680 --> 00:28:59.079
to evade review by rescinding the rule, but it's saying, well,
462
00:28:59.319 --> 00:29:02.440
this thing is perfectly legal, and that lays the groundwork
463
00:29:02.519 --> 00:29:04.759
for it to reenact the rule when the Commission is
464
00:29:04.799 --> 00:29:09.519
either just differently constituted or a future commission decides it
465
00:29:09.599 --> 00:29:12.920
wants to reinstate the gag. But I think it's particularly
466
00:29:13.680 --> 00:29:21.119
compelling that the agency argued against a Monsingware vacateur, because
467
00:29:21.279 --> 00:29:23.400
I think that really gives a way the game here.
468
00:29:23.559 --> 00:29:27.920
The Powell decision, if left to stand, is a license
469
00:29:27.960 --> 00:29:32.359
for agencies to gag people, and it's very important that
470
00:29:32.359 --> 00:29:36.279
that gets set aside. And if CEC was really sincere
471
00:29:36.319 --> 00:29:39.119
about this, I think they would not have opposed the
472
00:29:39.200 --> 00:29:42.279
vacateur of the Powell decisions, So I think it undermines
473
00:29:42.319 --> 00:29:45.279
their case for mootness to take that position.
474
00:29:47.079 --> 00:29:50.240
Certainly, I other just dot to follow that, Jill.
475
00:29:50.359 --> 00:29:54.839
I mean, the government's argument is that there's no reason
476
00:29:54.920 --> 00:29:58.799
for vacator because the Court wouldn't have granted certain in
477
00:29:58.799 --> 00:29:59.480
the first place.
478
00:30:00.200 --> 00:30:02.960
And you know, that argument, I.
479
00:30:02.880 --> 00:30:06.319
Think is pretty disingenuous, given that the agency has taken
480
00:30:06.319 --> 00:30:09.559
the extraordinary step of receiving the rule which has been
481
00:30:09.559 --> 00:30:12.000
on his book for books for fifty years, you know,
482
00:30:12.039 --> 00:30:13.240
only once this case.
483
00:30:13.079 --> 00:30:14.319
Has gotten to the Supreme Court.
484
00:30:14.480 --> 00:30:17.599
So you know, I think it's a little bit rich
485
00:30:17.680 --> 00:30:20.400
for the government to be arguing that this case wouldn't
486
00:30:20.400 --> 00:30:23.079
merige Supreme Court review given what it's already done to
487
00:30:23.119 --> 00:30:24.839
try to keep the case out of the Supreme Court.
488
00:30:25.480 --> 00:30:28.119
And one factor in terms of the court's willingness to
489
00:30:28.160 --> 00:30:30.839
grant review here that we haven't discussed is that there
490
00:30:30.960 --> 00:30:34.480
is a real circuit split on this issue in the
491
00:30:34.519 --> 00:30:38.640
Sixth Circuit, in the Fourth Circuit. The Fourth Circuit case
492
00:30:39.480 --> 00:30:43.119
is illustrative. It involved a policy by the City of
493
00:30:43.480 --> 00:30:48.119
Baltimore that if you settled a police brutality case and
494
00:30:48.160 --> 00:30:52.680
then violated your gag, you had to give back the money.
495
00:30:52.720 --> 00:30:56.079
And the Fourth Circuit said no, no, no, As an unconstitutional condition.
496
00:30:56.160 --> 00:30:59.519
It violates the First Amendment. The government cannot gag you
497
00:30:59.559 --> 00:31:02.839
as a can condition of settling a police brutality case.
498
00:31:03.200 --> 00:31:08.559
The Sixth Circuit has a similar precedent. Are Amiki talked
499
00:31:08.559 --> 00:31:15.119
about additional cases. I mentioned that when I first brought
500
00:31:15.200 --> 00:31:19.000
cases in both the Second Circuit and the Ninth Circuit,
501
00:31:19.079 --> 00:31:22.920
there were law of the Circuit precedents that held these
502
00:31:22.920 --> 00:31:28.720
were unconstitutional conditions. So the suggestion by the government that
503
00:31:28.839 --> 00:31:31.720
the court would not have granted certain in the first
504
00:31:31.720 --> 00:31:34.799
place when you do have these existing circuit splits, is
505
00:31:34.880 --> 00:31:36.160
I think disingenuous.
506
00:31:38.000 --> 00:31:42.200
Certainly, I for one, was very confused by the government's argument,
507
00:31:42.319 --> 00:31:44.200
and I think, you know, when you look at it
508
00:31:44.200 --> 00:31:48.160
in the context of recent Monthsingware cases, it makes even
509
00:31:48.279 --> 00:31:51.960
less sense. I might point to Acchison Hotels, the twenty
510
00:31:52.000 --> 00:31:56.599
twenty three case, where the court specifically discussed how the
511
00:31:56.640 --> 00:31:59.839
plaintiff in that case, which was an Ada tester, you know,
512
00:32:00.200 --> 00:32:03.160
lawyer being sanctioned, was utterly out of her control and
513
00:32:03.200 --> 00:32:05.640
that sort of lended in favor of months and weear
514
00:32:05.720 --> 00:32:11.000
and Justice Thomas specifically pointed out that the actress and hotels,
515
00:32:11.000 --> 00:32:14.960
the defendant had put immense time and money litigating all
516
00:32:15.000 --> 00:32:16.839
the way to the court and sort of the things
517
00:32:16.880 --> 00:32:20.039
that litigants go through to get to that position should
518
00:32:20.039 --> 00:32:25.599
be meaningfully considered before denying vacator. What have the petitioners
519
00:32:25.720 --> 00:32:28.920
in this case gone through and sort of how does
520
00:32:29.000 --> 00:32:34.680
that factor into the vacator analysis at all, if at all?
521
00:32:34.799 --> 00:32:38.119
Well, as I mentioned, six of our petitioners are bound
522
00:32:38.200 --> 00:32:41.599
by a court gig, so nothing the SEC has done
523
00:32:41.680 --> 00:32:45.759
or even can do changes that situation for them. So
524
00:32:45.880 --> 00:32:55.039
there is real existing standing harm that continues and threatens
525
00:32:55.160 --> 00:32:58.720
as the sort of sort of damically. As I said earlier,
526
00:32:59.200 --> 00:33:05.119
these folks are fearful rightly, so if they say something,
527
00:33:05.160 --> 00:33:08.160
a future SEC will go after them or a court
528
00:33:08.240 --> 00:33:12.240
could go after them for violating their court gag. And
529
00:33:12.319 --> 00:33:18.279
so I think, because there is just real actual injury
530
00:33:18.319 --> 00:33:22.559
and fact still before the court, that taking away the
531
00:33:22.640 --> 00:33:26.720
rule doesn't change should not lead to a decision that
532
00:33:26.799 --> 00:33:27.759
this case is moved.
533
00:33:28.519 --> 00:33:31.119
Yeah, and just to pick up on them, I found
534
00:33:31.119 --> 00:33:33.440
this a little bit confusing, and they've gotten into the case.
535
00:33:33.480 --> 00:33:36.880
But basically you have the gag rule which requires that
536
00:33:37.039 --> 00:33:41.960
the SEC can only settle cases if the defendants agree
537
00:33:42.000 --> 00:33:44.680
to the gag and then in settling those cases. In
538
00:33:44.720 --> 00:33:49.519
many instances you have court orders that implement the gag rule,
539
00:33:50.160 --> 00:33:56.720
and so you know, the problem here is because the
540
00:33:57.279 --> 00:33:59.680
SEC has rescinded the rule, if it succeeds in keeping
541
00:33:59.839 --> 00:34:01.319
the case out of the Supreme.
542
00:34:01.000 --> 00:34:03.920
Court, than any court in enforcing.
543
00:34:03.519 --> 00:34:06.480
Those gags can exercise its own judgment and say, well,
544
00:34:06.480 --> 00:34:09.639
the gag. You know, the SEC might have rescinded the rule,
545
00:34:09.719 --> 00:34:11.960
but there's no constitutional problem with this.
546
00:34:12.000 --> 00:34:14.199
Gag, so I can enforce this gag.
547
00:34:14.559 --> 00:34:17.920
By contrast, if we were to prevail in security of
548
00:34:18.000 --> 00:34:19.199
ruling from the Supreme.
549
00:34:18.880 --> 00:34:21.000
Court holding that the gag rule is.
550
00:34:21.000 --> 00:34:24.920
Unconstitutional because this is a blatant and constitutional condition or
551
00:34:25.000 --> 00:34:28.440
prior restraint, pick your first Amendment doctrine, then it's clear
552
00:34:28.519 --> 00:34:31.440
that none of those gags could ever be enforced by
553
00:34:31.480 --> 00:34:35.039
a court or the SEC. So it's really important for
554
00:34:35.199 --> 00:34:38.119
the Supreme Court issue a ruling in this case in
555
00:34:38.239 --> 00:34:40.719
order to make sure that none of those gags can
556
00:34:40.840 --> 00:34:44.639
ever be enforced and to remove the chill that thousands
557
00:34:44.639 --> 00:34:46.119
of individuals face today.
558
00:34:47.360 --> 00:34:50.760
And I think the fact that we've mentioned that, I
559
00:34:50.800 --> 00:34:54.320
do think the SEC was very concerned that the Court
560
00:34:54.360 --> 00:34:58.199
would grant sert I don't think. I don't think that's credible.
561
00:34:58.199 --> 00:35:03.400
And one thing that shows that is not probably maybe
562
00:35:03.440 --> 00:35:08.239
a week after the sec rescinded its rule, Lo and behold,
563
00:35:08.480 --> 00:35:12.760
the Commodity's Futures Trading Commission resented its rule. So the
564
00:35:12.840 --> 00:35:15.920
agencies are getting together in a concerted effort to move
565
00:35:16.039 --> 00:35:21.760
this and it's hard to believe that they're offhand a
566
00:35:21.800 --> 00:35:24.400
suggestion that the Court would never grant certain this case
567
00:35:25.719 --> 00:35:28.639
is even credible if the agencies are rescinding the rule,
568
00:35:31.519 --> 00:35:36.400
where the timing is just unmistakable that they are trying
569
00:35:36.400 --> 00:35:37.719
to evade review.
570
00:35:40.960 --> 00:35:43.320
Before we get to questions, which you all are welcome
571
00:35:43.360 --> 00:35:45.159
to type in the chat and I can read them
572
00:35:45.159 --> 00:35:48.480
aloud to our panelists, let's end on what comes next?
573
00:35:48.639 --> 00:35:50.960
When will the Court consider this issue?
574
00:35:51.639 --> 00:35:54.760
Yeah, so the case is set for the Court's conference
575
00:35:54.760 --> 00:35:58.599
on June twenty fifth, which is the last schedule conference
576
00:35:58.679 --> 00:36:02.039
before the justices take the summer recess. So we would
577
00:36:02.079 --> 00:36:07.840
expect to hear within a few days after that, probably
578
00:36:07.880 --> 00:36:08.800
the following week.
579
00:36:11.159 --> 00:36:14.760
Okay, we have some questions from our audience members too,
580
00:36:14.920 --> 00:36:18.280
are related, so I will ask them together. The first
581
00:36:18.599 --> 00:36:21.920
is what was the reasoning back in nineteen seventy two
582
00:36:22.039 --> 00:36:26.679
when the SEC originally implemented the guid rule, and relatedly,
583
00:36:27.199 --> 00:36:31.119
what rationale has the SEC given now for rescinding it.
584
00:36:33.880 --> 00:36:38.599
The original reason was they decided they would adopt again
585
00:36:38.679 --> 00:36:43.079
without noticing common a policy that they didn't want the
586
00:36:43.320 --> 00:36:47.679
public to think that the SEC was settling cases where
587
00:36:47.719 --> 00:36:52.960
there was no merit to them. And if you boil
588
00:36:53.039 --> 00:36:56.920
that analysis down, it really means the agency doesn't like
589
00:36:56.960 --> 00:37:03.119
to be criticized. And you have to understand too that
590
00:37:03.480 --> 00:37:07.840
the way that rule is framed, you can speak about
591
00:37:07.840 --> 00:37:10.679
your case as long as you say, hey, the SE's
592
00:37:10.719 --> 00:37:13.239
case against me was a good one. It's just that
593
00:37:13.280 --> 00:37:16.960
you can't be critical. And that's both a content and
594
00:37:17.000 --> 00:37:23.960
a viewpoint discriminating gag that violates yet another First Amendment doctrine.
595
00:37:24.400 --> 00:37:29.880
So the fact that it's a government suppressing criticism of
596
00:37:29.960 --> 00:37:34.519
the government, using the very force of their enforcement action
597
00:37:34.719 --> 00:37:39.760
against you to keep that gag in place is deeply disturbing.
598
00:37:39.880 --> 00:37:43.920
It goes against the core purpose of the First Amendment. Now,
599
00:37:43.960 --> 00:37:46.760
over the years and in the various circuits side I
600
00:37:46.800 --> 00:37:49.760
thought this, the government never really came up with a
601
00:37:49.800 --> 00:37:54.679
better rationale than that. It was basically, we don't want
602
00:37:54.719 --> 00:37:59.159
to be criticized and think it's important. If people want
603
00:37:59.199 --> 00:38:02.039
to settle, they have to accept that they have to
604
00:38:02.039 --> 00:38:05.079
be silent about their case for the rest of their life. Now.
605
00:38:05.119 --> 00:38:12.039
In the release that they issued, they gave four reasons,
606
00:38:12.199 --> 00:38:18.840
all of them prudential. They defended the underlying decisions that
607
00:38:18.920 --> 00:38:23.039
had held that the gag was constitutional, and they amounted to,
608
00:38:23.920 --> 00:38:27.519
I think, pretty unconvinced, except for one of the reasons,
609
00:38:27.599 --> 00:38:31.719
very unconvincing. One was, well, we don't really enforce it anyway.
610
00:38:32.599 --> 00:38:35.840
That's just not true. And to show you how er
611
00:38:36.000 --> 00:38:39.119
that is, I got an enquiry from the press asking
612
00:38:39.119 --> 00:38:43.159
me about the SEC's big whopper, because the fact is
613
00:38:43.519 --> 00:38:46.880
they have and do enforce it. And I won't go
614
00:38:46.920 --> 00:38:50.039
into all the instances of it, but our Amikas race
615
00:38:50.119 --> 00:38:53.800
are full of them, as were our record in all
616
00:38:53.840 --> 00:38:57.239
of those various circuits in which we had challenged the rules.
617
00:38:57.280 --> 00:39:02.920
So that's just not true, they said. And the good
618
00:39:03.000 --> 00:39:05.760
reason they gave, the one good reason they gave, is
619
00:39:05.800 --> 00:39:08.719
that nobody else does this or seems to need it.
620
00:39:09.000 --> 00:39:11.599
And one of the things I would like to for
621
00:39:11.719 --> 00:39:17.039
the public and courts to understand is all other agencies
622
00:39:17.119 --> 00:39:21.599
are able to robustly regulate Americans without gagging them for
623
00:39:21.679 --> 00:39:26.000
life when they settle. This is not going to lead
624
00:39:26.039 --> 00:39:30.079
to opening the floodgates of you know, fraudsters going out
625
00:39:30.119 --> 00:39:35.440
and engaging in new fraud. It's it's the It's just
626
00:39:35.599 --> 00:39:38.800
not a threat in the way I think that some
627
00:39:38.880 --> 00:39:44.480
courts or people have thought it is. They also suggested that, well,
628
00:39:44.480 --> 00:39:47.760
in the age of the Internet, maybe it's just really
629
00:39:47.800 --> 00:39:51.800
harder to police people's speech. Well that's kind of bogus,
630
00:39:51.800 --> 00:39:55.119
because it's actually easier to police people's speech to do
631
00:39:55.159 --> 00:39:59.880
an online search, and so the policy reasons that gay
632
00:40:00.000 --> 00:40:03.159
if we're not very convincing, except for the fact that
633
00:40:02.639 --> 00:40:06.599
this is out of alignment with what every other government
634
00:40:06.639 --> 00:40:10.920
agency does. So I think that's a good reason to
635
00:40:11.000 --> 00:40:14.199
change the rule. I think they should be commended for
636
00:40:14.239 --> 00:40:21.920
rescinding it. But there's still actual, imminent and real injury
637
00:40:21.920 --> 00:40:24.599
in fact to our clients that is not mooted by
638
00:40:24.599 --> 00:40:25.039
that action.
639
00:40:27.920 --> 00:40:31.480
Our next question is does the rescinding of the SEC's
640
00:40:31.559 --> 00:40:34.719
god rule apply to FINRA settlements as well.
641
00:40:38.480 --> 00:40:41.320
Well, I don't think the gag applied to settlements in
642
00:40:41.400 --> 00:40:48.199
the first place, at least I'm unaware that it did.
643
00:40:47.199 --> 00:40:51.599
I don't think FINRA can take advantage of the SEC
644
00:40:51.760 --> 00:40:54.920
gag rule and its consent to orders. And maybe if
645
00:40:54.960 --> 00:40:59.719
it has, I would love to know that, because perhaps
646
00:41:00.119 --> 00:41:01.840
case is brewing exactly.
647
00:41:03.039 --> 00:41:08.360
Our next question is what about the injury to democracy?
648
00:41:09.000 --> 00:41:13.159
How will people be able to speak about the agency's
649
00:41:13.239 --> 00:41:15.199
prosecutorial misdeeds.
650
00:41:17.000 --> 00:41:19.800
Yeah, I think that's the whole whole point right there.
651
00:41:20.360 --> 00:41:22.960
You know, the First Amendment protects against that injury, and
652
00:41:23.000 --> 00:41:26.840
that's why Peggy and NCLI have been living these cases,
653
00:41:26.880 --> 00:41:30.159
and that's why we're urging the Supreme Court strongly to
654
00:41:30.440 --> 00:41:31.039
review it.
655
00:41:32.400 --> 00:41:35.400
Yeah, And that's an excellent question, and it goes to
656
00:41:35.679 --> 00:41:37.840
the reason why this is a core interest of the
657
00:41:37.840 --> 00:41:41.159
First Amendment. But one of the things that Greg and
658
00:41:41.199 --> 00:41:45.639
I cited in the third petition is a situation where
659
00:41:45.639 --> 00:41:50.800
the SEC tried to pin it's the own hack of
660
00:41:51.000 --> 00:41:56.440
its Edgar system on some day traders in Los Angeles,
661
00:41:56.480 --> 00:41:58.800
and then when it came out that those day traders
662
00:41:58.800 --> 00:42:01.360
had not been involved in that hack at all, the
663
00:42:01.400 --> 00:42:03.760
SEC wouldn't just give up its case at all. It
664
00:42:03.920 --> 00:42:07.119
still insisted on settling with the people and they are gagged.
665
00:42:07.800 --> 00:42:11.280
And Bloomberg did a really great reporter this is a
666
00:42:11.599 --> 00:42:16.239
very long article about the actual hackers of the SEC's
667
00:42:17.320 --> 00:42:23.360
system had been some Ukrainians and the SEC knew that. Nonetheless,
668
00:42:23.360 --> 00:42:25.039
it tried to pin the hack on a couple of
669
00:42:25.079 --> 00:42:27.679
people and wouldn't let them out of the case even
670
00:42:27.679 --> 00:42:29.960
though they knew they didn't have a case against them
671
00:42:30.719 --> 00:42:33.760
settled and they were gagged. That's an abuse of power,
672
00:42:34.079 --> 00:42:36.920
and that's the kind of thing that the GAG could hide.
673
00:42:37.480 --> 00:42:41.840
And that's a pretty shocking example. But the problem is
674
00:42:41.840 --> 00:42:45.440
when an agency has power for fifty years to manipulate
675
00:42:46.559 --> 00:42:49.920
its prosecution in that fashion, you're going to have to
676
00:42:49.960 --> 00:42:52.679
expect there's going to be some misconduct and that's what
677
00:42:52.800 --> 00:42:55.559
needs to come to light if the First Amendment is
678
00:42:55.599 --> 00:42:56.400
to be respected.
679
00:42:57.119 --> 00:42:58.639
Yeah, and I think that one of the things that's
680
00:42:58.679 --> 00:43:02.760
important about this case is it is ensuring that the
681
00:43:02.800 --> 00:43:06.119
First Amendment is protected when it comes to administrative overreach.
682
00:43:06.880 --> 00:43:09.400
I mean, obviously we're all familiar with examples of the
683
00:43:09.400 --> 00:43:15.880
administrative overreach and this kind of waiver coerced waiver could
684
00:43:15.880 --> 00:43:21.000
be upheld. You know, it basically silences the people in
685
00:43:21.000 --> 00:43:24.760
the best position to speak out about administrative overreach. The
686
00:43:24.960 --> 00:43:29.760
thousands of individuals have been subjected to these investigations and
687
00:43:29.800 --> 00:43:33.280
the like. So the for the agency, the ability to
688
00:43:33.599 --> 00:43:36.960
squelch any criticism for those people is a great way
689
00:43:37.079 --> 00:43:42.320
to insulate its practices from challenge. And that's why it's
690
00:43:42.320 --> 00:43:45.119
so important that the Supreme Court step in here to
691
00:43:45.239 --> 00:43:48.480
ensure that the First Amendment is enforced so that these
692
00:43:48.880 --> 00:43:52.440
abuses are not kept from the live day.
693
00:43:53.440 --> 00:43:56.920
And we had some really good amicist briefing on not
694
00:43:57.239 --> 00:44:02.880
just overreach overcharging as well, but the Chamber of Commerce
695
00:44:02.960 --> 00:44:07.079
also included an example where it used to be a
696
00:44:07.159 --> 00:44:10.599
ten to B five violation for a company to engage
697
00:44:10.599 --> 00:44:15.119
in forecasting and people were charged. Ninety eight percent of
698
00:44:15.159 --> 00:44:18.639
them settled, and they have this black mark against them
699
00:44:18.679 --> 00:44:23.000
and they can't talk about what they did with the forecasting. Well,
700
00:44:23.039 --> 00:44:27.800
it turns out that now, some twenty years later, forecasting
701
00:44:27.880 --> 00:44:31.800
is not only permitted, it's encouraged. So someone who had
702
00:44:31.840 --> 00:44:38.719
a forecasting settlement for something that's now perfectly legal practice,
703
00:44:39.320 --> 00:44:42.719
you're not able to understand how the agency's new theories
704
00:44:42.960 --> 00:44:47.679
or flawed theories of enforcement evolve over time unless these
705
00:44:47.719 --> 00:44:50.440
people can talk about that. And that's a key issue,
706
00:44:50.440 --> 00:44:53.519
and we were delighted that the Chamber of Commerce came
707
00:44:53.559 --> 00:44:55.880
in and presented that side of the story, which is
708
00:44:56.519 --> 00:45:00.039
you have to understand the shifting sands of what the
709
00:45:00.119 --> 00:45:04.800
agency thinks is securities law violation in what may turn
710
00:45:04.840 --> 00:45:08.199
out later to not really be one.
711
00:45:10.039 --> 00:45:12.599
I will say the showing of amicus briefs in this
712
00:45:12.679 --> 00:45:16.320
case is very impressive and compelling. I would encourage the
713
00:45:16.360 --> 00:45:19.000
audience to go open a few of them because there's
714
00:45:19.079 --> 00:45:22.079
quite a torrent of briefing and each one is better
715
00:45:22.119 --> 00:45:23.880
than the last.
716
00:45:24.480 --> 00:45:27.320
I'm going to call out yours Jill for because it
717
00:45:27.360 --> 00:45:32.440
has such a compelling story to tell. Jill author one
718
00:45:32.480 --> 00:45:35.679
of the amiga's briefs, and that involves what I like
719
00:45:35.760 --> 00:45:39.400
to call the brothers Roger Notrum and yes I am
720
00:45:39.400 --> 00:45:44.119
evoking the brothers Caramutsov. And this involved a very famous
721
00:45:44.159 --> 00:45:48.719
prosecution of rog Roger Notrum back with the Galleon scandal
722
00:45:48.760 --> 00:45:52.840
in Goldman Sachs. Gosh, it was a long time ago anyway,
723
00:45:52.920 --> 00:45:56.280
Rog Roger Notrum and his brother were both charged and
724
00:45:56.599 --> 00:46:00.480
rog was convicted, went to prison, did time, and he
725
00:46:00.599 --> 00:46:06.599
is now out talking on Andrew Warross Sorkin's CNBC squock
726
00:46:06.639 --> 00:46:09.440
Box about how the SEC got it wrong, The jury
727
00:46:09.440 --> 00:46:14.719
got it wrong. He is very polite about it, and
728
00:46:14.960 --> 00:46:18.679
he said he respects the jury decision, but this is
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00:46:18.719 --> 00:46:22.599
why the SEC's case against him was wrong. So he
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00:46:22.639 --> 00:46:25.199
can talk about this even though he was convicted and
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00:46:25.239 --> 00:46:28.000
did time. And one of the things he says right
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00:46:28.039 --> 00:46:31.119
at the end of his interview is so compelling. He says,
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00:46:31.440 --> 00:46:34.320
even though I disagree with the jury's verdict, I am
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00:46:34.360 --> 00:46:39.000
so happy to be a first generation citizen of America
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00:46:39.079 --> 00:46:44.800
because in America you can speak freely and tell your story. Now,
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00:46:45.239 --> 00:46:50.400
Roger's brother was acquitted in the same proceeding by the jury,
737
00:46:51.480 --> 00:46:54.960
but because he had follow on enforcement issues, he had
738
00:46:54.960 --> 00:46:58.039
to settle with the SEC. And he can't talk about
739
00:46:58.159 --> 00:47:03.280
his case at all. So the acquitted brother is silenced.
740
00:47:03.559 --> 00:47:06.719
He's unable to re enter the securities industry because he
741
00:47:06.800 --> 00:47:11.320
can't explain the anomalies of his conviction, whereas his brother
742
00:47:11.440 --> 00:47:15.360
is out there quite the media star, saying exactly what
743
00:47:15.440 --> 00:47:19.119
he thinks the SEC got wrong. There's something deeply troubling
744
00:47:19.599 --> 00:47:22.639
about the two brothers, and it's a compelling story. And
745
00:47:22.679 --> 00:47:25.119
when we were very grateful that you put together to
746
00:47:25.320 --> 00:47:27.480
present to the court, well.
747
00:47:27.320 --> 00:47:29.719
I can assure you I wasn't including my own brief
748
00:47:29.760 --> 00:47:32.840
in that compliment before, but I will say it's a
749
00:47:32.840 --> 00:47:34.639
compelling story and.
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00:47:34.360 --> 00:47:37.280
The two brothers really do illustrate.
751
00:47:37.039 --> 00:47:40.000
The stark dichotomy of when you are subject to this.
752
00:47:39.960 --> 00:47:43.800
Rule and when you're not. That's the extent of our questions.
753
00:47:43.960 --> 00:47:45.920
But I would love to thank you too, and if
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00:47:45.920 --> 00:47:48.400
you'd each like to give a concluding remark, and then
755
00:47:48.440 --> 00:47:49.760
I will turn it back to Alex.
756
00:47:52.199 --> 00:47:53.360
Well, I mean I can start.
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00:47:53.440 --> 00:47:56.119
I just want to thank you in the Federal Study
758
00:47:56.760 --> 00:48:00.480
for shining the light on this important question. You know,
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00:48:00.760 --> 00:48:03.320
we hope the Supreme Court will take it as seriously
760
00:48:03.320 --> 00:48:04.239
as it deserves.
761
00:48:05.920 --> 00:48:08.199
And I would just say that this case is clearly
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00:48:08.239 --> 00:48:11.960
not moved. It affects thousands of people, which is an
763
00:48:12.000 --> 00:48:16.079
independent reason for granting sert. It involves a circuit split
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00:48:16.119 --> 00:48:20.079
that should be resolved, and we just think that SEC
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00:48:20.159 --> 00:48:22.239
has not made a case for remoteness. So we are
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00:48:22.280 --> 00:48:26.400
hoping the Supreme Court recognizes that it makes the right decision.
767
00:48:26.440 --> 00:48:32.159
Unswered, all right, I will turn it over to Alex.
768
00:48:32.239 --> 00:48:37.719
Now, thank you, Thank you on behalf of the Federal Society.
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00:48:37.840 --> 00:48:39.639
I want to thank our panel for sharing their time
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00:48:39.679 --> 00:48:41.639
and expertise with us, and I want to thank our
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00:48:41.679 --> 00:48:45.320
audience for joining and participating. We welcome listener feedback by
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00:48:45.320 --> 00:48:48.519
email at fedsock Forums at fedsock dot org, and with
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00:48:48.639 --> 00:48:49.480
that we are.
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00:48:49.400 --> 00:48:54.280
Joarned thanks for listening to fedsoc Forums, a Federalist Society podcast.
775
00:48:54.639 --> 00:48:57.199
Be sure to subscribe wherever you get your podcasts so
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00:48:57.239 --> 00:49:00.239
you won't miss an episode. To learn more, visit our
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00:49:00.239 --> 00:49:02.039
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