The U.S. Securities and Exchange Commission’s use of administrative law judges, greatly expanded following the enactment of the Dodd-Frank law, has received a setback.
U.S. District Judge Richard Berman in Manhattan Wednesday ruled that the agency’s method for appointing its in-house judges “is likely unconstitutional.”
Berman held that because of the power they wield in overseeing internal cases, administrative judges probably should be appointed by the president or SEC commissioners. They’re now named through the agency’s normal hiring procedures.
Last week, the judge said the agency could adopt an “easy fix” and change its appointment process. The SEC has so far refused.
Berman’s decision, along with two that reached a similar conclusion in Atlanta in June, poses a dilemma for the SEC. The agency’s options include routing fewer cases to in-house judges or trying to challenge the ruling on appeal.
The regulator has been holding administrative hearings for decades. Dodd-Frank, enacted in 2010, expanded the agency’s jurisdiction beyond brokers and investment advisers and empowered its judges to issue orders and levy fines that previously had been available only in federal court.
But the controversy extends well beyond the SEC. Other government agencies also use administrative law judges for disputes. Because the issue has potentially wide ramifications, the U.S. Justice Department is handling the SEC’s appeal in the litigation pending in Georgia.
Kevin Callahan, an SEC spokesman, declined to comment on the decision.
The case is Duka v. SEC, 15-cv-00357, U.S. District Court, Southern District of New York (Manhattan).
‘Deflategate’ Talks in Manhattan Court End Without Settlement
The judge who pressed the New England Patriots’ Tom Brady and NFL Commissioner Roger Goodell to resolve a fight over the quarterback’s “Deflategate” suspension will have to keep playing referee.
Following separate, private sessions with Brady, Goodell and their lawyers Wednesday, U.S. District Judge Richard Berman said in court that the positions of both sides have strengths and weaknesses and it would make sense to resolve the fight with a settlement.
It takes, on average, two years to resolve a civil case through litigation, according to the judge.
“Nobody here wants to wait that long,” Berman said.
Both sides asked the judge to rule before the Patriots’ Sept. 10 season opener. Brady, Goodell and their lawyers met again privately with Berman to discuss a settlement following the court hearing.
Brady was suspended for four games after an investigation determined he probably knew that team employees deflated game balls below the minimum required by National Football League rules before last season’s conference championship game. The Patriots beat the Indianapolis Colts 45-7.
Goodell rejected Brady’s appeal of the suspension.
The league sued the union to confirm Goodell’s decision, while the union countersued to reverse it.
The NFL said it abided by the collective-bargaining agreement, which sets out the disciplinary process and lets Goodell, or someone designated by him, hear appeals.
Brady, who denied any wrongdoing, has said he prefers to throw softer footballs, which are easier to grip when passing.
The case is National Football League Management Council v. National Football League Players Association, 15-cv-05916, U.S. District Court, Southern District of New York (Manhattan).
Simpson, Shearman and Willkie Advise on SunGard-FIS Deal
SunGard Data Systems Inc. relied on Simpson Thacher & Bartlett LLP as its principal deal counsel, along with Shearman & Sterling LLP for tax and other matters, in its sale to Fidelity National Information Services Inc., the banking and payment-technology company known as FIS.
Willkie Farr & Gallagher LLP represented FIS in the deal, which is valued at $9.1 billion including the assumption of debt. The Willkie deal team was led by partners Robert Rachofsky and Adam Turteltaub.
The lead partners from Simpson were Bill Dougherty and Elizabeth Cooper.
The Shearman & Sterling team was led by partners Laurence Bambino, tax, and Clare O’Brien, M&A; and included partners Ethan Harris, tax; and counsel Nathan Sawyer, M&A, and Jordan Altman, intellectual property transactions.
For more on the deal, click here.
Exelon Judge Rejects Maryland’s Bid to Block Pepco Takeover
Exelon Corp. can push ahead with its $6.8 billion takeover of Pepco Holdings Inc. after a judge rejected arguments by Maryland officials that the deal gives the power company too much control over the state’s energy markets.
Judge Thomas Ross in Centreville, Maryland, on Wednesday rebuffed efforts by consumer advocates and Attorney General Brian Frosh to block the Maryland Public Service Commission’s 3-2 approval of the buyout.
The deal gives Chicago-based Exelon control of three utilities that provide service to about 2 million customers in the state, the District of Columbia, Delaware and New Jersey.
“Four state commissions and the Federal Energy Regulatory Commission have already approved the merger, and we look forward to completing our transaction as we await a decision from the Public Service Commission of the District of Columbia,” Judith Rader, an Exelon spokeswoman, said in an e-mailed statement.
Paula Carmody, a lawyer for the state’s Office of People’s Counsel, which serves as a consumer advocate for energy customers, didn’t immediately return a call seeking comment on the judge’s ruling.
For more, click here.
Bank of America Criticizes Legal Fees in Chapter 11 Case
Bank of America NA describes Akin Gump Strauss Hauer & Feld LLP as one of the “preeminent” U.S. bankruptcy law firms, but is nonetheless complaining that the firm is charging “excessive and unreasonable” fees for representing the official creditors’ committee in Cal Dive International Inc.’s Chapter 11 case.
According to the bank, a secured lender to Cal Dive, the law firm ran up $994,000 in fees and expenses during its first 10 weeks on the job. Only $1 million in total had been set aside to pay the committee’s lawyers throughout the bankruptcy.
The bank said it will not increase the legal budget, which was set as part of the bankruptcy financing. A bankruptcy judge in Delaware will hold a hearing on Aug. 20 to consider approving fees.
M. Scott Barnard of Akin Gump, one of the committee’s lawyers, didn’t immediately return a call seeking comment on the lender’s complaint.
Cal Dive, a provider of manned diving services for the offshore oil and gas industry, didn’t join the bank in objecting, but did say it was “concerned” and expressed hope that the “committee’s professionals will reduce their fees.”
For more, click here.
Comings and Goings
King & Spalding LLP is adding four new partners. Stephen Goff, Marcia Augsburger, John Barnes and Leslie Murphy, who focus on health-care litigation, investigations and regulation, will join the firm’s health-care practice group in early September. The four lawyers, who previously practiced at DLA Piper LLP, will be based in Sacramento, California, and will also be affiliated with the firm’s San Francisco office.