Denny Chin, Jed Rakoff, Loretta Preska, Securities Law, Wall Street

Who’s Afraid of the Big Bad Rakoff?

Judge Jed Rakoff: A bank's nightmare?

Since Judge Denny Chin is moving on up to the Second Circuit, the S.D.N.Y. cases pending before him have to be redistributed. Lawyers for Bank of America, which has 15 civil shareholder lawsuits on Chin’s docket, sent the chief judge a letter requesting that the cases be reassigned using a lottery system. As we mentioned in Morning Docket, Cleary Gottlieb, Davis Polk, and Wachtell Lipton all signed the letter.

Why did they need to send this special letter? Because they were scared of B of A landing again in the lap of Judge Jed Rakoff, says the Wall Street Journal:

Judge Rakoff disappointed bank executives last year when he rejected a $30 million settlement with the Securities and Exchange Commission, which had charged the bank with misleading shareholders about bonuses paid prior to the Merrill merger. The New York judge reluctantly approved a new $150 million agreement in February but called it “half-baked justice at best.”

One of the pending shareholder cases accuses the bank of failing to “disclose billions in Merrill losses before shareholders approved the deal in December 2008.”

Apparently, the lawyers debated whether or not to name Judge Rakoff in their letter, thus making it clear that he was the particular judge they hoped to avoid. They ultimately decided to name names.

They were successful in steering their cases clear of Rakoff, though the chief judge claims the letter wasn’t a factor in her decision to assign the cases to Judge Kevin Castel (aka the John Gotti judge). How did she decide?

From the WSJ:

In the end, random assignment wasn’t used. Rather, Loretta Preska, chief judge of the U.S. district court, decided to give the cases to U.S. District Judge Kevin Castel, she said in an interview. The decision was hers to make, versus random assignment, because the matter involves several cases transferred from different districts, she said.

The April 22 letter to Judge Chin, she added, didn’t influence her decision. “I don’t recall seeing it; I don’t recall hearing of it,” she said.

The lawyers’ desperate plea came because they feel Rakoff has already raked BofA over the coals, and fear he would do it again:

“The subtext of this letter clearly is Judge Rakoff has already made up his mind about Bank of America’s conduct here and therefore he is not the appropriate judge because he can’t be fair” to Bank of America said Samuel Buell, a law professor at Duke University.

The attempt to avoid Judge Rakoff comes amid a larger push by new Bank of America Chief Executive Officer Brian Moynihan to resolve the many legal entanglements resulting from the bank’s behavior during the U.S. financial crisis.

The plaintiffs in the suits were pissed, calling the letter “wholly improper,” and sending their own letter to Judge Chin saying that BofA’s lawyers should not attempt to influence the selection of the judge.

We’re not sure how Judge Chin responded, as he did not comment to the Wall Street Journal. We imagine he wrote back, “Good luck. See you on the Second Circuit, suckas.”

Bank of America Manages to Avoid Judge Rakoff [Wall Street Journal]

Earlier: Congratulations to Judge Denny Chin!

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