On Wednesday, December 28, 2011, the Second Circuit Court of Appeals stayed the SEC’s case against Citigroup Global Markets, Inc. (which is before Judge Rakoff in New York). The appellate court received an emergency motion for a stay after Judge Rakoff denied the request made at the District Court level. That emergency motion is to be submitted to the Second Circuit’s motions panel on January 17, 2012. The appellate court ruled that "[i]n the interim, proceedings in the District Court are stayed until a ruling by the motions panel."
As previously discussed here, in a November 28, 2011 Opinion and Order, Judge Rakoff rejected the SEC’s proposed settlement with Citigroup for $285 million as "neither fair, nor reasonable, nor adequate, nor in the public interest." On December 15, 2011, the SEC appealed the Opinion and Order (discussed here). On Friday, December 16, 2011, the SEC filed a Motion in front of Judge Rakoff, asking him to stay to proceedings while the SEC’s appeal is pending before the Second Circuit (discussed here).
On December 27, 2011, Judge Rakoff denied the Motion for a Stay, referring to the SEC’s "purported appeal." Judge Rakoff found that neither the SEC, nor Citigroup Global Markets (who has also appealed) has a statutory basis for their appeals. The parties had cited 28 U.S.C. § 1292(a)(1), which, according to Judge Rakoff, "allows an interlocutory appeal from the rejection of a proposed consent decree only where injunctive relief is ‘at the very core of the disapproved settlement.’" The Court acknowledged that the proposed Consent Judgment’s injunctive provisions "were relevant and material to the scope and nature of the Court’s evaluation," but found that "the Court’s denial of injunctive relief is not the basis on which the parties premise their instant appeals." Instead, Judge Rakoff stated that "the alleged ‘legal error’ that the SEC, joined by Citigroup, seeks to correct by their appeals is this Court’s insistence that it be provided with proven or acknowledged facts in order to evaluate whether the proposed Consent Judgment, in any of its aspects, is fair, reasonable, adequate, and in the public interest."
Because Judge Rakoff has established a tight discovery schedule, with deadlines in early January, the SEC sought an emergency stay before the Second Circuit. The Appellate Court granted a temporary stay, but without discussing the merits. Instead, the Second Circuit stated in its order that the emergency motion for a stay will be submitted to the Court’s Motion Panel on January 17, 2012 and that the case before Judge Rakoff was stayed until that motions panel had ruled.