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Legal News for Mon 4/15- Changes to Underwriting Processes on Wall Street Coming (?), Divided SCOTUS Debates Jan 6. Capitol Riot Statute, and Trump Stumps in Pennsylvania
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Legal News for Mon 4/15- Changes to Underwriting Processes on Wall Street Coming (?), Divided SCOTUS Debates Jan 6. Capitol Riot Statute, and Trump Stumps in Pennsylvania

A pivotal New York court decision threatening Wall Street's underwriting processes, Supreme Court debates on the Jan. 6 Capitol riot statute, and Trump's contentious remarks in Pennsylvania.
Abraham Lincoln escapes the sinking Titanic.

This Day in Legal History: Unsinkable Sinks

On this day in legal history, April 15 marks the sinking of the RMS Titanic in 1912, a maritime disaster that led to significant legal repercussions. After striking an iceberg in the North Atlantic, the Titanic sank, resulting in the loss of over 1,500 lives out of the 2,228 passengers and crew aboard. This tragedy not only devastated families but also precipitated a flurry of lawsuits against the White Star Line, the ship's owners. 

The legal battles focused on issues of negligence and inadequate safety measures, such as the insufficient number of lifeboats on board. These lawsuits were filed in multiple jurisdictions, including the United States and Britain, challenging the existing maritime laws and pushing for reforms. The aftermath of the Titanic disaster significantly influenced maritime safety regulations, leading to the establishment of the International Convention for the Safety of Life at Sea (SOLAS) in 1914. This pivotal moment in legal history underscored the necessity for stringent safety standards and legal accountability in maritime operations.


A recent court decision in New York has raised concerns among Wall Street's major players, suggesting that this ruling could dramatically alter the process of underwriting stock offerings. The appeals court has permitted ViacomCBS Inc. investors to proceed with their lawsuit against prominent banks like Morgan Stanley, Goldman Sachs Group Inc., and Wells Fargo & Co. This legal action challenges the banks on the grounds of alleged undisclosed conflicts of interest during the media company’s stock offerings, specifically scrutinizing the internal firewalls that should prevent the exchange of sensitive information between different divisions within the banks.

Legal experts, including Andrew Vollmer of the Mercatus Center, argue that this case may blur the banks' obligations to disclose potential conflicts, particularly their own trading activities during such offerings. The traditional focus of offering documents might shift, increasing the burden on banks to disclose more about their activities rather than just the issuer's details. The litigation stems from the banks' actions surrounding the Archegos Capital Management collapse, where they allegedly sold off Viacom stock to mitigate losses, directly impacting the stock's value and causing significant investor losses.

The banks are now positioned to further appeal the decision, which upheld the initial ruling allowing the case to proceed. The lawsuit claims that the banks failed to disclose that their investment bankers were preparing to sell off Viacom stock even as they helped launch the stock on the market. The court's recent acknowledgment doesn’t dismiss the possibility of existing ethical barriers, suggesting that the banks might have a defense if they can demonstrate that these firewalls were effective.

Legal scholars and industry groups, including the American Bankers Association, express concern that the ruling imposes new disclosure obligations that exceed current SEC requirements, potentially disrupting established legal and regulatory frameworks. They fear that this could lead to a significant shift in how underwriters manage and disclose potential conflicts of interest. However, others, like Columbia Law School professor John Coffee, believe the ruling aligns with the essence of underwriters' responsibilities and does not foresee the drastic changes that some predict.

Overall, the unfolding legal battle could redefine the transparency required in stock offerings and test the robustness of internal controls within banks, with far-reaching implications for the financial industry’s operation and regulatory landscape.

Big Banks’ Underwriting Firewalls at Risk in Archegos-Tied Suit


The Supreme Court is set to deliberate on the implications of using a post-Enron statute, originally intended to curb evidence destruction, against defendants from the January 6th Capitol riot. This legal examination stems from concerns that the Justice Department may have stretched the statute’s application, applying it to actions such as the Capitol breach, which resulted in a potential 20-year sentence for some. Critics, including those defending the accused, argue that this statute is being misapplied, citing past cases where the Supreme Court has sided against overextended prosecutorial interpretations, notably in cases unrelated to financial crimes.

The law under scrutiny was designed to prevent obstruction of "official proceedings" and was enacted following financial scandals to discourage the destruction of corporate evidence. However, approximately one-quarter of the January 6 defendants were charged under this provision, sparking debate over its relevance to the riot’s context. Proponents of the defendants argue that the law’s origins tied to financial misconduct make its application to the Capitol riot inappropriate and overly punitive.

On the other hand, supporters of the prosecution contend that the statute’s broad wording intentionally encompasses a wide range of obstructive actions, including those committed during the Capitol riot. They emphasize that the statute’s language about corruptly obstructing or impeding any official proceeding should be taken at face value, aligning with textualist judicial philosophy, which prioritizes the statute's text over the legislative history or intent.

The case, which involves former Boston police officer Joseph Fischer among others, has attracted considerable attention, with various legal scholars and groups submitting amicus briefs. These briefs reflect the deep divide over the interpretation of federal laws and the scope of prosecutorial discretion. The upcoming arguments in the Supreme Court will likely focus on whether the actions of January 6 defendants fall within the intended scope of the law and the broader implications of this interpretation on legal standards for obstructing official proceedings.

The decision could have significant implications for how broadly laws are interpreted and applied, especially in cases of national significance involving public and political actions. The Supreme Court's ruling will also test the balance between preventing prosecutorial overreach and ensuring accountability for acts that threaten governmental processes.

Jan. 6 Case Pulls Conservative Supreme Court in Two Directions


At a rally in Schnecksville, Pennsylvania, former President Donald Trump criticized the judge presiding over his upcoming criminal trial, which is set to begin in Manhattan. This trial involves allegations related to hush money payments to Stormy Daniels. Trump accused Justice Juan Merchan and Manhattan District Attorney Alvin Bragg of political bias, a sentiment he has expressed previously. He referred to Judge Merchan as "crooked" and complained about a gag order that restricts his public statements about the case, extending even to comments about Merchan's family.

Trump's remarks came during a campaign stop in Pennsylvania, a crucial battleground state in the upcoming presidential election. He also briefly mentioned international issues, claiming that the recent Iranian drone and missile attacks on Israel would not have occurred under his presidency. The timing of his Pennsylvania rally aligns with President Joe Biden's planned visits to the state, highlighting its significance in the 2024 election. Biden, who narrowly won Pennsylvania in 2020, will be speaking about tax reform in his hometown of Scranton and other locations.

The former president's visit targeted key areas in Pennsylvania, including Northampton County, a critical bellwether that Biden flipped in the previous election. Trump also attended a fundraiser in Bucks County, another pivotal region, before his rally. During his speech, he endorsed Republican Dave McCormick for the U.S. Senate, despite their occasionally complex relationship. The state's changing demographics and voter registration trends, particularly among rural and blue-collar voters, may influence upcoming electoral outcomes.

Trump, in Pennsylvania, attacks judge as first criminal trial looms | Reuters

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Minimum Competence - Daily Legal News Podcast
Minimum Competence
The idea is that this podcast can accompany you on your commute home and will render you minimally competent on the major legal news stories of the day. The transcript is available in the form of a newsletter at www.minimumcomp.com.