April 20, 2024

Justices Reject a California Slaughterhouse Law

Justice Elena Kagan, writing for the court, said the Federal Meat Inspection Act, which regulates slaughterhouses, pre-empted the California law, which requires the immediate euthanasia of “downer” animals and bars their slaughter or sale.

The state law was enacted in response to undercover videos released in 2008 by the Humane Society of the United States. They showed, as Justice Kagan put it, “workers at a slaughterhouse in California dragging, kicking and electroshocking sick and disabled cows in an effort to move them.”

The federal law, enacted in 1906 in the wake of Upton Sinclair’s “The Jungle,” a book that exposed conditions in the meatpacking industry, allows federal meat inspectors to decide what is to be done with animals that cannot walk, and it says that states may not impose additional or different requirements. Federal inspectors sometimes determine that the animals may be revived and slaughtered, and they sometimes order animals to be kept alive long enough to inspect them for contagious diseases.

The federal law prohibits states from enforcing requirements concerning “premises, facilities and operations” that are “in addition to or different from” those in federal law. That provision, Justice Kagan wrote, doomed the state law.

“Where under federal law a slaughterhouse may take one course of action in handling a nonambulatory pig,” she wrote, “under state the law the slaughterhouse must take another.”

Justice Kagan calculated that 100,000 to one million pigs become unable to walk after they are delivered to slaughterhouses in the United States each year, based on statistics in a 2006 article in Pork Magazine called “Fatigued Pigs: The Final Link.”

The United States Court of Appeals for the Ninth Circuit, in San Francisco, ruled that there was no conflict between the California law and the federal one because the state had merely disqualified certain kinds of animals from being used for food. “States aren’t limited to excluding animals from slaughter on a species-wide basis,” Chief Judge Alex Kozinski wrote for a unanimous three-judge panel of the court. “States are free to decide which animals may be turned into meat.”

Justice Kagan briskly rejected that analysis. “We think not,” she wrote.

It is one thing to prohibit the slaughter of, say, horses generally, she reasoned, because such a ban “works at a remove from the sites and activities” that the federal law governs. The state law concerning animals that cannot walk, by contrast, she wrote, “reaches into the slaughterhouse’s facilities and affects its daily activities.”

The case, National Meat Association v. Harris, No. 10-224, was brought by a trade association, which was supported in the Supreme Court by the federal government.

Article source: http://feeds.nytimes.com/click.phdo?i=825ee93049ee689d3f4f4b37ca7ca8ee

Court Grants Delay in S.E.C.’s Case Against Citigroup

The United States Court of Appeals for the Second Circuit, based in New York, ruled that further action in the case would be delayed until at least Jan. 17, giving it time to rule on whether it would grant an expedited hearing of the appeal and whether the two sides should have to simultaneously prepare for a trial.

Judge Jed S. Rakoff of Federal District Court in Manhattan threw out the settlement in November and ordered the agency and Citigroup to prepare for a trial in July. Although Citigroup and the S.E.C. have jointly appealed Judge Rakoff’s decision, he said the underlying case should proceed, with the two sides continuing to prepare for court hearings in the case.

Citigroup had faced a Jan. 3 deadline to submit an answer to the S.E.C.’s fraud charges, initially filed in October. That requirement, the S.E.C. said, “threatens a central provision of the proposed consent judgment, namely that Citigroup would not deny the commission’s allegation.”

The S.E.C. and Citigroup entered the agreement to settle accusations that Citigroup had defrauded investors in a $1 billion fund invested in mortgage-related securities. The fund was sold by Citigroup in early 2007 as the housing market and mortgage securities were already showing signs of distress.

According to the S.E.C., Citigroup sold the securities without telling customers that it was stuffing the fund’s portfolio with mortgage investments that it thought would fail and that it was betting against the portfolio.

Citigroup agreed to pay $285 million in penalties and forfeited profits under the condition that it neither admit nor deny the S.E.C.’s accusations, a common settlement method used by the S.E.C. and other government enforcement agencies.

That provision, however, led Judge Rakoff to say that he had no agreed-upon facts by which to judge if the punishment was fair and adequate. Therefore, he rejected the settlement.

After it said it would appeal, the S.E.C. first asked Judge Rakoff himself to halt the proceedings temporarily. But on Tuesday he denied that request.

“In short, it seems patently clear that the parties have no basis for an appeal,” Judge Rakoff wrote.

The S.E.C. and Citigroup told the appeals court that they would suffer irreparable harm if they were forced to prepare for trial while the appeal was pending. A motions panel of the appeals court will consider whether to further stay the proceedings beginning Jan. 17.

Article source: http://feeds.nytimes.com/click.phdo?i=8de4db1160d2941cda9dc3f01fe899d4

Economix: A Lie That Was ‘Literally True’

Remember market timing?

FLOYD NORRIS

FLOYD NORRIS

Notions on high and low finance.

That was a financial scandal before Wall Street brought on the collapse of the economy. Some mutual funds allowed favored customers to trade mutual funds based on stale prices. In many cases, this involved funds that invest in foreign securities, where a lot of news may have happened after the stocks stopped trading in their home countries but before the 4 p.m. New York deadline. The effect is to transfer money from other investors in the fund to the market timers.

One example was the Gabelli Global Growth Fund, known as GGGF, run by Marc Gabelli, the son of Mario Gabelli, the founder of the Gabelli Funds. He told the fund’s board that the fund was diligently seeking to stop investors from market timing, and that was true, with one not-so-minor exception. He allowed a favored hedge fund to do it hundreds of times. That fund made money in the fund; other investors lost money. The hedge fund effectively paid off Gabelli by investing in a Gabelli hedge fund.

When market timing became an issue in 2003, the fund reassured investors that management was on the case, in a memo signed by Bruce Alpert, the chief operating officer of Gabelli Funds, that said market timers were really scalpers:

For more than two years, scalpers have been identified and restricted or banned from making further trades. Purchases from accounts with a history of frequent trades were rejected. . . . While these procedures were in place they did not completely eliminate all timers.

The Securities and Exchange Commission filed a civil suit against Mr. Gabelli and Mr. Alpert, only to have a federal judge, Deborah Batts, dismiss the suit. That judge concluded the letter was “literally true,” and thus not misleading. After all, some market traders were blocked, and the funds admitted that some succeeded.

On Monday the United States Court of Appeals for the Second Circuit reversed that decision, in a ruling by another district judge, Ned Rakoff, who was temporarily sitting on the appellate court:

“The law is well settled, however, that so-called “half truths” — literally true statements that create a materially misleading impression — will support claims for securities fraud.”

Judge Rakoff concluded that “a reasonable investor reading the Memorandum would conclude that the Adviser had attempted in good faith to reduce or eliminate GGGF market timing across the board, whereas, as Alpert well knew but failed to disclose, the Adviser had expressly agreed to let one major investor . . . engage in a very large amount of GGGF market timing.”

The case will thus be able to go to trial. But I find it amazing that this appeal was necessary. Given the facts as alleged by the S.E.C. (and the judge has to assume they are accurate in considering a dismissal motion), it is hard to imagine a less absurd conclusion than the one reached by Judge Batts.

Article source: http://feeds.nytimes.com/click.phdo?i=b73fd24aa4cef2170c4b22d39efd8562

Bits: Winklevosses Drop Facebook Fight and Keep Settlement

If there is ever a sequel to the hit movie “The Social Network,” it is not likely to be set in the stately chambers of the United States Supreme Court.

Tyler and Cameron Winklevoss and their partner Divya Narendra on Wednesday dropped their efforts to undo their rich settlement with Facebook, a move that likely put an end to a legal feud that has lasted seven years.

The Winklevosses, identical twins and Olympic rowers who claimed they, and not Mark Zuckerberg, came up with the original idea for Facebook, settled their case against the company in 2008, in a deal valued at $65 million. Since then, they have been trying, unsuccessfully, to undo the settlement on the grounds that Facebook cheated them and that they should have received more. Meanwhile the settlement’s value has soared to more than $200 million.

Courts rejected their pleas time and again. After their most recent setback, the twins vowed to appeal to the United States Supreme Court.

On Wednesday, they told the United States Court of Appeals for the Ninth Circuit in San Francisco that they would not appeal that court’s decision to the Supreme Court, said Jerome B. Falk Jr., partner at Howard Rice and a lawyer for the brothers. Mr. Falk said his clients had made the decision but declined to comment further.

In a statement, Facebook said: “We’ve considered this case closed for a long time, and we’re pleased to see the other party now agrees.”

Article source: http://feeds.nytimes.com/click.phdo?i=c10d3ce9f312cc55f8656c00c4f3b263