Judge Rakoff

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In an opinion today, Judge Rakoff explained why he would decline to refer Darlyl Payton, a defendant who was recently found liable an SEC insider trading case, to the U.S. Attorney’s Office for a perjury prosecution related to Mr. Payton’s testimony in the SEC case.  Mr. Payton had pleaded guilty to criminal insider trading charges but later was allowed to withdraw the appeal in light of the Second Circuit’s decision in United States v. Newman, which held that insider trading required the recipient of a stock tip to have “knowledge that the insider disclosed confidential information in exchange for personal benefit.”  Judge Rakoff concluded that Mr. Payton testified at the SEC trial in a manner that was materially different than his earlier plea allocution, but nonetheless found that a criminal referral was not warranted for four reasons:
Continue Reading Judge Rakoff Reluctantly Declines to Refer Defendant in SEC Civil Case for Criminal Perjury Prosecution

In an opinion yesterday, Judge Rakoff denied a motion to dismiss a class action against Uber CEO Travis Kalanick alleging that he and Uber drivers had entered into an illegal conspiracy to fix Uber prices at those set by Uber’s algorithm. According to the complaint, this arrangement guarantees that the drivers will not be competing…

Last week, Judge Rakoff granted Pricewaterhouse Coopers’ motion to dismiss Section 10(b) claims brought as part of the ongoing class action over an alleged bribery and kickback scheme at Brazilian oil giant Petrobras.  PwC’s Brazilian member firm had served as Petrobras’ independent auditor.  PwC argued that the fourth amended complaint had failed to properly allege scienter, and Judge Rakoff agreed, noting that “mere receipt of compensation and the maintenance of a profitable professional business relationship for auditing services does not constitute a sufficient motive for purposes of pleading scienter.”  Plaintiffs also failed to allege any facts connecting PwC’s auditing services to “red flags” of fraud at Petrobras.
Continue Reading Judge Rakoff Dismisses 10(b) Claims Against PwC for Alleged Petrobras Bribery Scheme, But Allows Section 11 Claims to Proceed Despite Omnicare

In an opinion today, Judge Rakoff dismissed a case in which a company holding a perpetual license to the “Del Monte” trademarks for fresh fruits a vegetables alleged that the nominal owner had abandoned all foreign trademarks, so as to render them invalid under the Lanham Act.  Although there are various instances in which the Lanham Act can apply outside the U.S., Judge Rakoff ruled that it would be “grossly intrusive” for the Lanham Act to go so far as to render foreign trademarks invalid:
Continue Reading Judge Rakoff: Lanham Act Cannot Be Used to Deem Foreign Trademarks Abandoned

In an opinion yesterday, Judge Rakoff denied a summary judgment motion brought by two SEC defendants who traded on a tip that IBM was about to acquire a company called SPSS.  The tip passed from a lawyer working on the deal (Dallas) to his friend (Martin), then to Martin’s roommate (Conradt) and, ultimately, to the two defendants.

The SEC ‘s theory was that Martin and Dallas had an understanding that the information would not be used for trading, and that Martin breached that duty by telling his roommate Conradt in exchange for various miscellaneous benefits from Conradt, such as his taking the lead on dealing with issues at their apartment.  The defendants acted with the required knowledge, according to the SEC, because they consciously avoided learning anything about the source of the tip.Continue Reading Judge Rakoff : “Conscious Avoidance” of Source of Stock Tip Can Result in Liability, Even After Newman Decision

The Second Circuit this morning upheld New York State’s ban on credit card “surcharges.” Judge Rakoff had earlier found (see our coverage here) that the law, § 518 of the General Business Law, likely violated the First Amendment because it imposed criminal penalties for calling extra credit card fees “surcharges” but allowed merchants to offer the equivalent price via a “discount.”  The plaintiffs argued that the term “surcharge” was a more effective way to discourage credit card use by conveying the real costs they impose on businesses and customers.

The Second Circuit rejected this argument because it construed the law as applying  to conduct — charging more than the sticker price — not to labels:
Continue Reading Second Circuit Upholds New York’s Credit Card Surcharge Ban

The SDNY Blog is relaunching as a publication of Steptoe & Johnson LLP.  We expect to post several times a week on decisions and other developments in the Southern District of New York.  You can find us right here at www.sdnyblog.com, or follow us on Twitter or Facebook.

Here’s a quick summary of what’s been happening in the Southern District while we were away:

  • Judge Berman vacated the NFL’s four-game suspension of New England Patriots quarterback Tom Brady for his alleged role in deflating footballs used during the 2015 AFC Championship Game.  Judge Berman concluded that “Brady had no notice that he could receive a four-game suspension for general awareness of ball deflation by others or participation in any scheme to deflate footballs, and non-cooperation with the ensuing Investigation.”

Continue Reading SDNY Blog Returns as Steptoe Blog

In an opinion today allowing a securities class action to be dismissed without prejudice, Judge Engelmayer expressed concern about the lawyers using confidential witnesses in complaint without confirming the accuracy of the statements attributed to them or warning the witnesses that their identity might have to be revealed. On the first point, the complaint’s 11 confidential witnesses were not given the chance to confirm the statements attributed to them and at least four believed they were misquoted or misleadingly quoted.  This risk of error, Judge Engelmayer concluded, counsels in favor of better diligence before filing a complaint. On the second point, Judge Engelmayer concluded that it was a matter of “decency” to alert confidential witnesses that their identities might eventually be revealed:
Continue Reading Judge Engelmayer: Lawyers Using Confidential Witnesses in Complaints Should Confirm Their Testimony and Warn of Risks of Being Outed

In an opinion yesterday, Judge Rakoff denied a motion to dismiss an SEC complaint against two individuals who traded stocks after learning about an impending acquisition from a co-worker, Thomas Conradt, who, in turn, learned the information from his roommate Trent Martin.  The opinion begins by acknowledging the “difficulties” with having insider trading defined by case law instead of by statute:
Continue Reading Judge Rakoff, Acknowledging “Difficulties” In Defining Insider Trading, Upholds SEC Complaint Notwithstanding Newman Decision

In an opinion Friday, Judge Rakoff denied class certification in an class action accusing various defendants connected to a hedge fund of trading on insider information to the detriment of investors who traded around the same time. Judge Rakoff disqualified one of two proposed class representatives because he had an undisclosed arrangement for an attorney…