United States Securities & Exchange Commission v. Citigroup Global Markets Inc.
2012 U.S. App. LEXIS 5413
| 2d Cir. | 2012Background
- SEC sued Citigroup for negligent misrepresentation under 15 U.S.C. § 77q(a)(2)-(3).
- Simultaneously, SEC and Citigroup proposed a consent judgment: $285 million disgorgement, injunctive relief, and compliance procedures.
- District Court rejected the settlement as not reasonable, fair, adequate, or in the public interest because Citigroup did not admit liability.
- Court identified three grounds: lack of admission impairs collateral estoppel and public interest; settlement unfair to Citigroup; and lack of factual record to assess fairness.
- SEC and Citigroup sought a stay of district court proceedings; the panel granted a stay and appointed counsel to argue for the district court's position.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the district court erred in denying the settlement for lack of Citigroup admission of liability. | SEC argues the district court should defer to agency policy and that settlement need not include an admission. | Citigroup argues settlement requires liability admission and that the court cannot approve without proven/admitted facts. | Yes; the stay granted to challenge the district court's denial. |
| Whether the district court had proper deference to SEC's policy and public-interest determinations. | SEC contends the court should respect agency discretion in policy-driven settlements. | Citigroup contends judicial review should scrutinize agency settlement decisions. | Yes; the panel defers to agency discretion but notes limited review in this context. |
| Whether irreparable harm supports granting a stay to protect the settlement process. | SEC and Citigroup assert irreparable harm if stay is not granted to preserve the settlement. | Citigroup argues that the district court’s denial forecloses settlement, causing irreparable harm to defendants seeking resolution. | Yes; irreparable harm shown, warranting stay. |
| Whether the stay serves the public interest. | SEC argues public interest supports preserving the settlement terms. | Citigroup relies on deference to agency determinations of public interest. | Yes; public interest supports stay. |
Key Cases Cited
- Winter v. NRDC, 555 U.S. 7 (U.S. 2008) (injunctions; public-interest considerations in preliminary relief)
- eBay, Inc. v. MercExchange, 547 U.S. 388 (U.S. 2006) (injunction standards; equity discretion)
- Chevron U.S.A., Inc. v. NRDC, 467 U.S. 837 (U.S. 1984) (deference to agency policy choices in effecting public interest)
- Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29 (U.S. 1983) (agency action reviewed under arbitrary and capricious standard)
- Carson v. American Brands, Inc., 450 U.S. 79 (U.S. 1981) (interlocutory review when settlement lacks proven facts; injunctive relief context)
- Grant v. Local 638, 373 F.3d 104 (2d Cir. 2004) (irreparable harm in settlement denial; Carson distinction)
- New York v. Dairylea Coop., Inc., 698 F.2d 567 (2d Cir. 1983) (settlement review; antitrust context; irreparable harm considerations)