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People in the know claim this is a huge ruling in New York, and it’s not hard to see why.
A decade after then Attorney General Eliot Spitzer dusted off the long dormant Martin Act and deployed it to become the “Sheriff of Wall Street,” the Court of Appeals has essentially deputized private citizens in holding for the first time that common-law tort claims are not pre-empted by the law.
In affirming the Appellate Division, First Department this morning, the Court of Appeals doused what had been conventional wisdom in other state and federal courts and handed a significant consumer victory to investors and current Attorney General Eric T. Schneiderman.
Mr. Schneiderman maintained that permitting private actions would not undercut his enforcement powers, as argued by the defendant, but on the contrary would assist him in preventing securities-related fraud. The Court of Appeals agreed.
Prior to this unanimous ruling, only the Attorney General could bring action under the Martin Act, a securities fraud law in New York State that is much more expansive than federal statutes. Typically the plaintiff must prove intent to commit fraud; under the Martin Act the plaintiff need only prove that fraud was committed. Now, as a result of this ruling, any aggrieved private actor can use the Martin Act as part of their lawsuit. This empowers a metric ton of investors of all sizes to go after the banks on securities fraud. It has the effect of lowering the burden of proof on those investors in those lawsuits.
Maybe this can explain why Bank of America stock dipped below $5 a share yesterday for the first time since 2009. (It’s since risen slightly.)
Consider one other thing. When environmental groups sued power companies in “public nuisance” lawsuits, saying that their rights were violated by polluting industries under the Clean Air Act, the Administration effectively sided with the polluters, in trying to block the lawsuit, saying that EPA regulations on greenhouse gas emissions displace common-law claims. Here, Attorney General Schneiderman – whose deputy solicitor general argued the case before the Court of Appeals – said the opposite, that private investors’ claims under the Martin Act only complemented his work. And the courts in New York agreed. I have more faith that Schneiderman will get his work done on financial fraud than the EPA on greenhouse gas regulations. And yet he still allowed private actions.
This will have a major impact over fraud cases in New York, and we’ll probably see a flowering of lawsuits in the aftermath.
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Woot! Woot! And we go all the way back to Spitzer for it, too.
Is “private actions” in effect a Private Prosecution and does it include criminal as well as civil action? Hope so.
Hopefully he cannot be bought & sold!!!!
and better be very clean
Woah. Obviously this will be appealed upward, but a huge victory for the time being. Now where are all the folks who had their 401ks gutted by MBSs and CDSs…?
I don’t buy the necessity to prove intent in a fraud case. If fraud was committed, it is by definition intentional. How can a person unintentionally defraud another out of hundreds of thousands of dollars? If the perpetrator is so incompetent in a business deal that he doesn’t realize he is defrauding someone, he’s too fucking stupid to be in business in the first place.
An army of Schneidermans certainly seems better than a battalion of Bernankes.
My daughter lost all her savings and her son’s college fund. I’d like to put my hands on the people responsible.
This is interesting, are there still glimmers of our democracy flickering in reality?
I’ll believe it all when I see people behind bars who did these things to we the people, and the government makes restitution to we the people.
I guess, till then, hope is a good thing . . . I’ve sure lost a lot of mine.
Thank you Mr. Dayen, for hope . . . and info, always the info, you hoss. ;-)
and Larue@9: IANAL, but from what I remember of paralegal school only governmental entities can bring complaints in criminal court. Private citizens can only bring civil complaints, while they can file a criminal complaint/report with the appropriate agency. But bleeding the scum dry through litigation would be a good first step, then the G-men/women can haul their empty husks off to the hoosegow.
I second that!!
Reason to be cheerful.
~or a brigade of baracks and a strikeforce of state AGs – who continue to attempt to ‘strike a deal’ with amoral and felonious bank-bagmen
~ u are right only poleece and DAs/AGs can indict criminally – but, I aver that a few wins by victims & remember we are talking Martin Act here, so litigants could be any securities firm that sold the crap MBSs – could have gigantic implications…i.e. insolvent banks being forced to buy back the crap. I always say, ‘when assholes start fighting, then shit happens’
And remember also that the brave AGs who demonstrate the concept of public service by filing lawsuits (Biden, Coakley and Masto) all filed consumer fraud actions, civil actions, that any other state AG can copy, change the statute citations and file tomorrow if they want to demonstrate which side they are on…guess they don’t want to demonstrate – so let’s demonstrate…to the streets!
Theoretically, this decision cannot be appealed. The New York “Court of Appeals” is really NY’s highest state court. Misnomers abound in the NY judicial system: there are a zillion NY “Supreme Courts,” which are their low level trial courts.
So, now that NY’s highest court has interpreted NY’s own Martin law to allow a private right of action (civil only, to be sure), that should be the end of the issue. Federal courts are supposed to defer to the interpretation of a State law by the State’s highest court.
But don’t be surprised or appalled if/when the banksters take this matter up in the Federal courts, arguing that the Martin Act impinges on some Federal securities law or other Federal statute, that the Federal statute “occupies the field,” and therefore the Martin Act is pre-empted by Federal law. And you can bet your last dollar that at least 5 of the Supremes will agree once the case gets there.
We better hurry up and get these lawsuits filed before Newt has a chance to arrest that NY judge and declare all his decisions null and void.
You got there ahead of me. I agree that a Federal appeal is certain, and a Federal win is possible, perhaps likely.
States get to enforce State Security Laws – and here the Appeals Court which is the NY highest court has spoken.
But this feels like a fishing expedition for a Federal suit – common-law tort claims and the Martin Act and Federal Securities Law may not mix very well. But there is a chance they will rule this is a NY only kind of thing that they do not want to review.