A Federal Judge is required as a matter of law to label certain settlements as being "fair, reasonable, adequate and in the public interest." One such settlement was reached recently by the Securities and Exchange Commission with Citigroup over charges filed by the S.E.C. in which, among other things the S.E.C. did not require, there was no requirement placed upon Citigroup to admit any liability. The Federal Judge refused to find that the settlement in that case meets legal standards of being fair, or reasonable, or adequate, and especially that the parties -- neither Citigroup nor the S.E.C. -- were able to show that their settlement is in the public interest.
That decision is now on appeal to the Second Circuit Court of Appeals. The Second Circuit will decide whether Federal Trial Judges have any power in applying the legal standards which govern such settlements, or whether instead Federal Trial Judges are merely rubber stamps by another name in such settlements.
There can be no doubt that this is a well-known feature constantly on display in the contemporary settlement conduct of commissions, departments, and agencies of the Federal Government. "Other government bodies [besides the S.E.C.] like the Federal Trade Commission and the Justice Department's antitrust division also routinely use the 'neither admit nor deny wrongdoing' language in settling enforcement cases with corporate defendants." Peter Lattman, "Judge's Rejection of Citigroup Deal Is Heard on Appeal" p.B2, col. 1 (New York Times Nat'l ed., "Business" Section, Saturday, February 9, 2013).
There can also be no doubt that even if this settlement behavior is approved in a particular case, taken as a rule it is behavior in Bad Faith. And with bad results ultimately visited upon Mortgage Insurance Carriers and Title Insurance Carriers -- and upon all the rest of us as well. See "Institutional Bad Faith Will Show Up If It Is There," posted here on Sunday, February 10, 2013.
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