"But the ground is shaking. There are tremors." So said a New York federal judge (Victor Marrero) during a motion hearing in which the parties were talking about a possible change in the law related to settlements in SEC cases.
The importance of changes in law goes beyond SEC settlements. Repeat players in litigation occasionally make decisions based on "right or wrong" or reputation risk. More often, they make decisions based on expected outcomes, or a range of expected outcomes. The most effective repeat players therefore anticipate – or cause – changes in law.
A sometimes overlooked point is that the repeat players causing changes in law sometimes are one judge, or various judges who comprise a court. Consider, for example, Delaware’s Chancellors and the various venues around the world that have become magnets for various forms of litigation. Or the California Supreme Court back in the day that it frequently made new law.
Against that background, it’s particularly interesting to watch the dance on Wall Street as financial houses decide whether to settle or fight claims by the SEC, and whether to admit or deny fault or wrongdoing. Likewise, prosecutors and agencies balance the other side of the issues. Meanwhile, everyone waits to see how the Second Circuit will rule on Judge Rakoff’s questioning of the absence of evidence to support the request for a judicial blessing on SEC settlements. Plainly the possible changes started by Judge Rakoff are closely watched by both parties and judges, including Judge Marrero.