This month, the U.S. Court of Appeals for the Second Circuit reversed Judge Jed Rakoff’s order refusing to approve a proposed consent decree that would have settled a regulatory enforcement action the U.S. Securities and Exchange Commission (SEC) had brought against Citigroup Global Markets, Inc. See U.S. Sec. and Exch. Comm’n v. Citigroup Global Markets, 11-5227-cv (L) (2d Cir. June 4, 2014). In doing so, the Second Circuit seemed to articulate a narrow and highly deferential standard for district courts to follow when reviewing settlement agreements between government regulatory enforcement agencies and private parties.
The Second Circuit found Judge Rakoff’s approach to reviewing the proposed consent decree between the SEC and Citigroup was more probing than permitted and that he failed to provide the SEC the deference it was owed. Whether or not the Second Circuit’s decision makes sense in the context of the facts and the parties before it, the highly deferential standard of district court review of such consent decrees articulated by the Second Circuit may prove to be overly restrictive when applied in other settings.
