The Wall Street Legal & Regulatory Feed
Securities Industry Commentator by Bill Singer Esq
June 15, 2020
https://www.supremecourt.gov/opinions/19pdf/17-1618_hfci.pdfAs set forth in the Supreme Court's Syllabus:In each of these cases, an employer allegedly fired a long-time employee simply for being homosexual or transgender. Clayton County, Georgia, fired Gerald Bostock for conduct "unbecoming" a county employee shortly after he began participating in a gay recreational softball league. Altitude Express fired Donald Zarda days after he mentioned being gay. And R. G. & G. R. Harris Funeral Homes fired Aimee Stephens, who presented as a male when she was hired, after she informed her employer that she planned to "live and work full-time as a woman." Each employee sued, alleging sex discrimination under Title VII of the Civil Rights Act of 1964. The Eleventh Circuit held that Title VII does not prohibit employers from firing employees for being gay and so Mr. Bostock's suit could be dismissed as a matter of law. The Second and Sixth Circuits, however, allowed the claims of Mr. Zarda and Ms. Stephens, respectively, to proceed.Held: An employer who fires an individual merely for being gay or transgender violates Title VII. Pp. 4-33.(a) Title VII makes it "unlawful . . . for an employer to fail or refuse to hire or to discharge any individual, or otherwise to discriminate against any individual . . . because of such individual's race, color, religion, sex, or national origin." 42 U. S. C. §2000e-2(a)(1). The straightforward application of Title VII's terms interpreted in accord with their ordinary public meaning at the time of their enactment resolves these cases. Pp. 4-12.(1) The parties concede that the term "sex" in 1964 referred to the biological distinctions between male and female. And "the ordinary meaning of 'because of' is 'by reason of' or 'on account of,' " University of Tex. Southwestern Medical Center v. Nassar, 570 U. S. 338, 350. That term incorporates the but-for causation standard, id., at 346, 360, which, for Title VII, means that a defendant cannot avoid liability just by citing some other factor that contributed to its challenged employment action. The term "discriminate" meant "[t]o make a difference in treatment or favor (of one as compared with others)." Webster's New International Dictionary 745. In so-called "disparate treatment" cases, this Court has held that the difference in treatment based on sex must be intentional. See, e.g., Watson v. Fort Worth Bank & Trust, 487 U. S. 977, 986. And the statute's repeated use of the term "individual" means that the focus is on "[a] particular being as distinguished from a class." Webster's New International Dictionary, at 1267. Pp. 4-9.(2) These terms generate the following rule: An employer violates Title VII when it intentionally fires an individual employee based in part on sex. It makes no difference if other factors besides the plaintiff's sex contributed to the decision or that the employer treated women as a group the same when compared to men as a group. A statutory violation occurs if an employer intentionally relies in part on an individual employee's sex when deciding to discharge the employee. Because discrimination on the basis of homosexuality or transgender status requires an employer to intentionally treat individual employees differently because of their sex, an employer who intentionally penalizes an employee for being homosexual or transgender also violates Title VII. There is no escaping the role intent plays: Just as sex is necessarily a but-for cause when an employer discriminates against homosexual or transgender employees, an employer who discriminates on these grounds inescapably intends to rely on sex in its decisionmaking. Pp. 9-12.(b) Three leading precedents confirm what the statute's plain terms suggest. In Phillips v. Martin Marietta Corp., 400 U. S. 542, a company was held to have violated Title VII by refusing to hire women with young children, despite the fact that the discrimination also depended on being a parent of young children and the fact that the company favored hiring women over men. In Los Angeles Dept. of Water and Power v. Manhart, 435 U. S. 702, an employer's policy of requiring women to make larger pension fund contributions than men because women tend to live longer was held to violate Title VII, notwithstanding the policy's evenhandedness between men and women as groups.And in Oncale v. Sundowner Offshore Services, Inc., 523 U. S. 75, a male plaintiff alleged a triable Title VII claim for sexual harassment by co-workers who were members of the same sex.The lessons these cases hold are instructive here. First, it is irrelevant what an employer might call its discriminatory practice, how others might label it, or what else might motivate it. In Manhart, the employer might have called its rule a "life expectancy" adjustment, and in Phillips, the employer could have accurately spoken of its policy as one based on "motherhood." But such labels and additional intentions or motivations did not make a difference there, and they cannot make a difference here. When an employer fires an employee for being homosexual or transgender, it necessarily intentionally discriminates against that individual in part because of sex. Second, the plaintiff's sex need not be the sole or primary cause of the employer's adverse action. In Phillips, Manhart, and Oncale, the employer easily could have pointed to some other, nonprotected trait and insisted it was the more important factor in the adverse employment outcome. Here, too, it is of no significance if another factor, such as the plaintiff's attraction to the same sex or presentation as a different sex from the one assigned at birth, might also be at work, or even play a more important role in the employer's decision. Finally, an employer cannot escape liability by demonstrating that it treats males and females comparably as groups. Manhart is instructive here. An employer who intentionally fires an individual homosexual or transgender employee in part because of that individual's sex violates the law even if the employer is willing to subject all male and female homosexual or transgender employees to the same rule. Pp. 12-15.(c) The employers do not dispute that they fired their employees for being homosexual or transgender. Rather, they contend that even intentional discrimination against employees based on their homosexual or transgender status is not a basis for Title VII liability. But their statutory text arguments have already been rejected by this Court's precedents. And none of their other contentions about what they think the law was meant to do, or should do, allow for ignoring the law as it is. Pp. 15-33.(1) The employers assert that it should make a difference that plaintiffs would likely respond in conversation that they were fired for being gay or transgender and not because of sex. But conversational conventions do not control Title VII's legal analysis, which asks simply whether sex is a but-for cause. Nor is it a defense to insist that intentional discrimination based on homosexuality or transgender status is not intentional discrimination based on sex. An employer who discriminates against homosexual or transgender employees necessarily and intentionally applies sex-based rules. Nor does it make a difference that an employer could refuse to hire a gay or transgender individual without learning that person's sex. By intentionally setting out a rule that makes hiring turn on sex, the employer violates the law, whatever he might know or not know about individual applicants. The employers also stress that homosexuality and transgender status are distinct concepts from sex, and that if Congress wanted to address these matters in Title VII, it would have referenced them specifically. But when Congress chooses not to include any exceptions to a broad rule, this Court applies the broad rule. Finally, the employers suggest that because the policies at issue have the same adverse consequences for men and women, a stricter causation test should apply. That argument unavoidably comes down to a suggestion that sex must be the sole or primary cause of an adverse employment action under Title VII, a suggestion at odds with the statute. Pp. 16-23.(2) The employers contend that few in 1964 would have expected Title VII to apply to discrimination against homosexual and transgender persons. But legislative history has no bearing here, where no ambiguity exists about how Title VII's terms apply to the facts. See Milner v. Department of Navy, 562 U. S. 562, 574. While it is possible that a statutory term that means one thing today or in one context might have meant something else at the time of its adoption or might mean something different in another context, the employers do not seek to use historical sources to illustrate that the meaning of any of Title VII's language has changed since 1964 or that the statute's terms ordinarily carried some missed message. Instead, they seem to say when a new application is both unexpected and important, even if it is clearly commanded by existing law, the Court should merely point out the question, refer the subject back to Congress, and decline to enforce the law's plain terms in the meantime. This Court has long rejected that sort of reasoning. And the employers' new framing may only add new problems and leave the Court with more than a little law to overturn. Finally, the employers turn to naked policy appeals, suggesting that the Court proceed without the law's guidance to do what it thinks best. That is an invitation that no court should ever take up. Pp. 23-33.No. 17-1618, 723 Fed. Appx. 964, reversed and remanded; No. 17-1623, 883 F. 3d 100, and No. 18-107, 884 F. 3d 560, affirmed.GORSUCH, J., delivered the opinion of the Court, in which ROBERTS, C. J., and GINSBURG, BREYER, SOTOMAYOR, and KAGAN, JJ., joined. ALITO, J., filed a dissenting opinion, in which THOMAS, J., joined. KAVANAUGH, J., filed a dissenting opinion.Robinhood Market Made Bursting Bubbles Wall Street's Obsession (Bloomberg by Sarah Ponczek and Vildana Hajric)
https://www.bloomberg.com/news/articles/2020-06-13/robinhood-market-made-bursting-bubbles-wall-street-s-obsession?srnd=premiumOmigod -- here we go again. The Dotcom bubble. The SOES bandits. The Tech Wreck. Once again, day trading is all the rage! And soon we will witness the devastation. And the lawsuits. And the investigations. And the new wave of rules and regulations. And then, after a pause, it will all start up, yet again. As Bloomberg's POnczek and Hajric report in part:Newly minted equity experts in chat rooms, enticed by ever-falling fees, empower themselves and push shares of companies with not much profit into the stratosphere -- sound familiar? Comparisons between today and the dot-com bubble write themselves, in the era of the Robinhood market. Whether this episode ends like that one has become an obsession of Wall Street."Retail participation is at levels we haven't seen in 20 years," said Benn Eifert, managing partner of QVR Advisors. "In terms of the most dramatic rises in speculative behavior that's generating many of the strangest outcomes in markets right now, it's Robinhood-centric."Heartbreaking story of rookie trader who racked up $700K in debt: 'Finance isn't worth losing your life over'(Marketwatch by Shawn Langlois)https://www.marketwatch.com/story/finance-isnt-worth-losing-your-life-over-the-heartbreaking-story-of-a-rookie-trader-who-racked-up-700000-in-debt-2020-06-14Securities Industry Commentator and BrokeAndBroker.com Blog readers know that I've been warning for the last few months about just this type of horror: The use of "play" money by young kids trading from home during the COVID pandemic. It's not a game -- I have warned. History as shown us the newbie retail traders tend to over-trade, tend to over-leverage via margin, tend to get played by professionals who spoof and ladder and pump and dump. What once required you to go to a SOES firm or on-site prop trading firm, can now be accomplished via your smartphone. You don't even need to sit before a PC or laptop in the basement of your folks' home. It's gotten so much easier to commit economic suicide. Marketwatch's Shawn Langlois reports about another young trader who got in over his head with dire results.https://www.justice.gov/usao-wdnc/pr/charlotte-man-pleads-guilty-wire-fraud-investment-schemeJoseph Maurice Deberry, a/k/a Joseph Maurice Dewberry, 56, pled guilty to wire fraud in the United States District Court for the Western District of North Carolina. As alleged in part in the DOJ Release:[F]rom 2016 through June 2019, Deberry fraudulently obtained hundreds of thousands of dollars from more than a dozen investors. As part of the scheme, Deberry induced victims to invest in entities with which he was affiliated, such as Pinnacle Investment Properties, LLC and Place Capital Group LLC, among others. Deberry typically represented to investors that their money would be used to further projects related to the construction of student housing at certain colleges in the Carolinas and other ventures.To further promote the fraudulent scheme and to induce his victims to part with their money, Deberry lied about his education, employment background, involvement in prior lawsuits and regulatory actions, previous success in student housing projects, and about how he would use the victims' money. For example, Deberry falsely claimed that he studied at the London School of Economics when he had never studied there, and falsely claimed that he had a successful career as an investment banker at Goldman Sachs, when he had never worked there.As Deberry admitted in court yesterday and in related filings, rather than use the victims' money as he had represented, Deberry used a significant portion of their funds to pay for personal expenses like rent, entertainment and travel. Further, Deberry actively concealed from his victims the fact that he was under a Cease and Desist Order from the state of North Carolina, which prohibited him from offering for sale, soliciting offers to purchase, or selling any securities in North Carolina. Deberry concealed this information from victims by, among other things, telling them that his name was Maurice Dewberry.https://www.justice.gov/usao-edva/pr/businessman-sentenced-prison-14-million-fraud-schemeAfter a five-day jury trial, Anthony Eric Mitchell was convicted in the United States District Court for the Eastern District of Virginia on wire fraud and conspiracy to commit wire fraud. Mitchell's business partner/Co-conspirator Armando Almirall pled guilty to conspiracy to commit wire fraud. Mitchell was sentenced to over six years in federal prison, and Almirall was sentenced to five year in federal prison. As alleged in part in the DOJ Release, Mitchell and Almirall were the managing principals of Aura Exchange LLC, through which they:promised their clients that they could help obtain funding for a host of business purposes, such as real estate transactions and television projects. Instead, Mitchell and Almirall spent large portions of their clients' funds on personal expenses, including trips to casinos, concert tickets, stays at beach resorts, cash withdrawals, and wire transfers overseas on speculative investments.In order to induce the victims to provide AURA with money, Mitchell and Almirall made numerous fraudulent misrepresentations. The two promised clients that they were guaranteed to receive their initial equity deposits back when, in fact, none of the victims ever received any money from AURA. Mitchell and Almirall claimed that AURA had offices in Zurich, London, and New York when no such offices existed. Mitchell and Almirall also falsely claimed that AURA controlled valuable precious metals, such as nickel wire, that could be "monetized" in order to generate huge profits.Mitchell and Almirall also maintained a website for AURA that contained a number of misrepresentations, including claims that AURA was an industry leader in a number of fields, that AURA was an international business with access to hundreds of financiers, and that AURA could turn around funding to its clients in as little as 24 hours. AURA never made any money for any of its clients, and in fact, victims of the fraud suffered losses of at least $1.6 million.https://www.sec.gov/news/press-release/2020-132In a Complaint filed in the United States District Court for the Middle District of Tennessee
https://www.sec.gov/litigation/complaints/2020/comp-pr2020-132.pdf, the SEC alleged that Frederick Stow violated the antifraud provisions of the federal securities laws; and, additionally, Stow was charged in a parallel federal criminal case. As alleged in part in the SEC Release:[S]tow acted as the veteran's registered representative for more than three decades and inserted himself over time into the veteran's personal and financial affairs. The complaint alleges that in October 2015, Stow began making unauthorized sales of securities from the veteran's individual retirement account. Stow allegedly transferred the proceeds of those sales to his own bank account on 74 occasions using falsified wire transfer forms. The complaint further alleges that approximately one month after the veteran's death in March 2019 at the age of 98, Stow stole money from another senior by wiring money from the senior's brokerage account to Stow's own bank account without authorization. In total, Stow stole $933,500 from the seniors.http://www.brokeandbroker.com/5271/sequeria-wells-fargo-promissory-note/Among the more common questions asked of me as a Wall Street lawyer is the one that starts with something along the lines of: so, you're like a lawyer-lawyer, right? I mean what I tell you is confidential, right? So . . . just between us, like, you know, just askin' and all, but, what's the worst that could happen to me if I tell my former employer to shove the balance due on my promissory note? This is a free country, right? I mean if I don't got the bucks to repay the balance, they can't prevent me from working, right? Today's featured FINRA Arbitration becomes a New Jersey Court case, which becomes a FINRA Office of Hearing Officers Decision, which becomes an SEC appeal, which becomes, yet again, a FINRA Office of Hearing Officers Decision, which becomes, yet again, an SEC appeal. And finally, as if there is any meaning to "finally" in relation to this matter, we wind up in the United States Court of Appeals for the Third Circuit.