{"id":1311,"date":"2018-10-10T19:02:21","date_gmt":"2018-10-10T19:02:21","guid":{"rendered":"https:\/\/albanknews.com\/?p=1311"},"modified":"2018-10-10T19:03:08","modified_gmt":"2018-10-10T19:03:08","slug":"supreme-court-update-for-banking-and-financial-services-professionals-6","status":"publish","type":"post","link":"https:\/\/albanknews.com\/?p=1311","title":{"rendered":"Supreme Court Update for Banking and Financial Services Professionals"},"content":{"rendered":"

by Charles W. Prueter <\/em><\/p>\n

In the last installment of the Update<\/em>, I wrote about then-Judge Brett Kavanaugh\u2019s commitment to textualism and the separation of powers. Suffice to say, nobody has thought much about any legal doctrines or methods over the month since. Nevertheless, here we are in October at the start of the new term \u2014 \u201cOctober Term 2018,\u201d as it is known at the Supreme Court \u2014 with the new Justice Brett Kavanaugh. While the Court will continue to be referred to as the \u201cRoberts Court,\u201d after the Chief Justice, in many ways it is now the \u201cKavanaugh Court,\u201d for the simple reason that he is the new variable. Just as Justice Neil Gorsuch and Justices Elena Kagan and Sonia Sotomayor before him brought new dynamics to the Court, Justice Kavanaugh will have a distinct voice, and the Court is now different with him on it. Some readers may find that notion to be revolting in light of the process that unfolded over the last month; some may be pleased with the ultimate confirmation vote; and some (most?) may be sick of Washington altogether. But all readers know that the Court will continue to hear and decide cases of national significance, including cases that will affect the banking and financial services industries. With that in mind, the Update looks at two key cases that will be decided by the \u201cKavanaugh Court\u201d over the next six months or so.<\/p>\n

The antifraud provisions of the Securities Act and the Exchange Act are at the core of most of the SEC\u2019s enforcement actions against individuals and companies, both in federal courts and in administrative proceedings governed by the SEC itself. When the SEC discovers what it thinks is a violation of the securities laws, it uses enforcement actions to seek monetary penalties, industry bars, and other orders prohibiting conduct it deems unlawful. One such action recently made its way to the Supreme Court \u2014 Lorenzo v. Securities and Exchange Commission<\/em>, No. 17-1077<\/strong>. This Court will hear oral argument in this case on December 3.<\/p>\n

Mr. Lorenzo is an investment banker who sent two emails to potential investors, at the direction of his superior at his firm, that contained misleading information about a potential investment opportunity. The SEC targeted not only Mr. Lorenzo\u2019s superior but also Mr. Lorenzo himself and handed him a lifetime ban from the securities industry.<\/p>\n

Mr. Lorenzo argues that he cannot be held liable for securities fraud because he did not \u201cmake\u201d the statements, and that much actually appears to be undisputed. Under federal law, in order to be responsible for \u201cmaking\u201d \u201cfalse statements,\u201d a person must have ultimate authority over the statement, including its content and whether and how to communicate it. A false statement can be the sole basis of liability, but the law strictly requires proof that the defendant was the \u201cmaker\u201d of the statement. As a matter of undisputed fact, Mr. Lorenzo did not have such authority \u2014 only his superior did with respect to the two emails in question \u2014 and therefore was not the \u201cmaker\u201d of the statement.<\/p>\n

But Mr. Lorenzo faces the SEC\u2019s catch-all argument, which is that, even if he did not \u201cmake\u201d the \u201cfalse statement,\u201d he can be liable for engaging in \u201cmanipulative or fraudulent conduct.\u201d This argument represents an improper attempt to circumvent the strict requirements placed on false statements cases, according to Mr. Lorenzo. Even assuming that the emails contained misrepresentations, Mr. Lorenzo says that, to prove a \u201cmanipulative or fraudulent conduct\u201d case, the SEC must show more than a mere misrepresentation. In other words, Mr. Lorenzo urges the Court to hold that the SEC may not repackage a dud \u201cfalse statement\u201d case as a \u201cmanipulative or fraudulent conduct\u201d case. On the ground, this case is about the fine details of highly sophisticated statutory and regulatory schemes. From 30,000 feet, however, this case about the authority of a federal agency to shape the law in\u00a0 a way that allows it to augment its own power and reach.<\/p>\n

Interesting side note: Then-Judge Kavanaugh sided with Mr. Lorenzo in the decision below at the D.C. Circuit Court of Appeals, which means that Justice Kavanaugh may recuse himself from this case. Justice Kavanaugh\u2019s views in that decision below are in line with the judicial philosophy discussed in last month\u2019s Update. <\/em><\/p>\n

In recent years, the Fair Debt Collection Practices Act has created a high volume of significant litigation for financial services firms engaged in debt buying, servicing, and collecting. As its title suggests, the FDCPA generally prohibits abusive, deceptive, and unfair debt collection practices, and the facts surrounding the particular practices at issue typically determine whether a debt collector will be liable under the statute. Certain methods of \u201cdebt collection\u201d are categorically excluded as a matter of law, however. One such method is at issue in a case now before the Court \u2014 Obduskey v. McCarthy & Holthus, LLP<\/em>, No. 17-1307<\/strong>.<\/p>\n

In this case, the holder of a note on a home sought to move forward with a non-judicial foreclosure, which is a widely recognized remedy available to a lender when a debtor defaults on a loan secured by property. As the term itself indicates, the right to a non-judicial foreclosure means that a lender need not go to court to foreclose on and sell a home secured by a defaulted loan. Here, the homeowner accuses the law firm that handled the non-judicial foreclosure of violating the FDCPA, relying on a number of disclosure and validation requirements imposed on debt collectors.<\/p>\n

But the question before the Court is whether pursuing non-judicial foreclosure falls under the FDCPA in the first place. Indeed, non-judicial foreclosure does not require the debtor to pay money<\/em>, which is the essence of the debt collection activities that do fall under the FDCPA. Various lower federal courts are split \u2014 some have adopted this view and have held that non-judicial foreclosures are not governed by the FDCPA, but some have held that non-judicial foreclosures in fact are debt collection activities and therefore are subject to the disclosure and validation requirements imposed by the FDCPA.<\/p>\n

The Court\u2019s decision undoubtedly will have an impact on the way in which firms with interests in home mortgages, and other loans secured by property, decide to exercise non-judicial foreclosure rights. Argument in this case will be held after the New Year.<\/p>\n

Charles W. Prueter<\/a> is a trial and appellate lawyer at Waller Lansden Dortch & Davis, LLP, in Birmingham. He can be reached by email at charles.prueter@wallerlaw.com. <\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

by Charles W. Prueter In the last installment of the Update, I wrote about then-Judge Brett Kavanaugh\u2019s commitment to textualism and the separation of powers. Suffice to say, nobody has thought much about any legal doctrines or methods over the month since. Nevertheless, here we are in October at the start of the new term \u2014 \u201cOctober Term 2018,\u201d as it is known at the Supreme Court \u2014 with the new Justice Brett Kavanaugh. While the Court will continue to be referred to as the \u201cRoberts Court,\u201d after the Chief Justice, in many ways it is now the \u201cKavanaugh Court,\u201d […]<\/p>\n","protected":false},"author":1,"featured_media":1151,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":true,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[19,25,28,3,23],"tags":[],"class_list":["post-1311","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-breaking","category-industry-reports","category-legal","category-politics","category-publications","has_thumb"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"https:\/\/i0.wp.com\/albanknews.com\/wp-content\/uploads\/2018\/03\/scotus-graphic.jpg?fit=100%2C100&ssl=1","jetpack_shortlink":"https:\/\/wp.me\/p4Y3P2-l9","jetpack_sharing_enabled":true,"jetpack-related-posts":[],"_links":{"self":[{"href":"https:\/\/albanknews.com\/index.php?rest_route=\/wp\/v2\/posts\/1311","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/albanknews.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/albanknews.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/albanknews.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/albanknews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1311"}],"version-history":[{"count":1,"href":"https:\/\/albanknews.com\/index.php?rest_route=\/wp\/v2\/posts\/1311\/revisions"}],"predecessor-version":[{"id":1312,"href":"https:\/\/albanknews.com\/index.php?rest_route=\/wp\/v2\/posts\/1311\/revisions\/1312"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/albanknews.com\/index.php?rest_route=\/wp\/v2\/media\/1151"}],"wp:attachment":[{"href":"https:\/\/albanknews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1311"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/albanknews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1311"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/albanknews.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1311"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}