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Judge Lifland's Opinion On Net Equity.

By       Message Lawrence Velvel     Permalink
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March 15, 2010

Judge Lifland's Opinion On Net Equity.

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Having spent time assessing Judge Lifland's opinion of March 1st, I shall set forth some impressions of it. I shall not deal with the entire opinion, especially since so much of it is taken from the briefs of the Trustee and SIPC. Such points have thus been discussed here before. For the most part. I shall focus on points of especial import or importance (there can be a difference), on points I think should be given far more emphasis in our side's appellate briefs than was given them in our briefs before Lifland, and on the question of whether it would be wiser to have taken an ordinary appeal to the District Court rather than have sought an appeal directly to the Court of Appeals for the Second Circuit, as the trustee and several of the victims' lawyers have now done at the suggestion of Judge Lifland. (One knows that, because so many people are hurting badly, it seems to have always been assumed that our side will seek an immediate appeal to the Second Circuit. But the wisdom of that automatically assumed course is subject to debate; one thinks it at least possible that, for reasons I shall discuss, it might be better for our side if an appeal went first to the District Court.)

* * * * *

Judge Lifland paid very little attention to the legislative history of SIPA (while claiming -- wrongly, to be polite about it -- that he was considering the legislative history). His opinion -- in reality one could rightly say his brief supporting all relevant positions of SIPC and the Trustee while denying all relevant positions of the victims -- contains only a few widely scattered lines regarding the legislative history. Instead, his opinion, or brief, extensively parrots the non-legislative-history arguments of SIPC and the Trustee.

Laymen may not understand that it is hardly rare for judges to simply crib the arguments of the side they choose, as Lifland did. (He even admits explicitly that much of his description of the facts is taken from the Trustee. Humorously, even if perversely, he also admits to cribbing from the allocations of Madoff and DiPascali, two notorious liars.)

When cribbing from and deciding entirely for one side, as Lifland did here, it also is not unheard of for judges to simultaneously claim, quite disingenuously, that they think both sides have done an excellent job and both have advanced "compelling arguments" (Op. p. 6), both of which are exactly what Lifland said here while accepting no argument made by the victims. And it has been known for decades that the opinions of most judges, except rare ones like Richard Posner (who has himself written on the subject) (as have I), are written not by the judges but by their young clerks who usually come straight out of law school. For various reasons, this would seem to be the case here -- although one of course cannot be certain -- so that an opinion sealing the fate of thousands of oft-elderly victims of fraud has likely been written -- unless and until this is specifically denied -- by people who are probably barely into adulthood, albeit they wrote it at Lifland's order.

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Here the Trustee and SIPC rarely mentioned the legislative history because it is very adverse to them. They focused instead on other arguments they had made up, or cribbed, which support them. Parroting the Trustee and SIPC, Lifland did the same. He basically ignored the legislative history, though under our form of government the Congressional intent reflected in the legislative history is supposed to govern (except in the eyes of a few outliers like Antonin Scalia).

There is a sense in which one could perhaps argue that this ignoring of legislative history is not all Lifland's fault. It is a matter on which my own feelings are engaged. Because of the press of work which I had to do later in November 2009, I submitted my brief on November 6, 2009, seven days before the due date of November 13th . My brief was thus the first major one submitted on our side. It began with points that fifty years in the legal profession have taught me are of the essence in this society, even if not in others: it began with the intent of Congress and the results for Congressional intent of the other side's position:

"The Securities Investor Protection Act of 1970 (SIPA) was enacted to provide to customers of securities broker-dealers protection against losses which might occur as a result of the financial failure of broker-dealers." This is the very first substantive statement in the Senate Report on the 1978 amendments to SIPA. S. Rep. No. 95-763, at 1 (1978), reprinted in 1978 U.S.C.C.A.N. 764, 764. The House Report on the 1978 amendments says, "The bill would make SIPA more responsive to the reasonable expectations of public investors and would provide investors with greater protection against the financial failure of stockbrokers, thereby enhancing investor confidence in the securities markets." H. Rep. No. 95-746, at 21 (1977).

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Lawrence R. Velvel is a cofounder and the Dean of the Massachusetts School of Law, and is the founder of the American College of History and Legal Studies.

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