Yesterday, Judge Victoria A. Graffeo, New York Court of Appeals, returned a decision that could have broad impact on the enforcement of federal consumer protection and securities laws.
In her conclusion, “an injured investor may bring a common-law claim (for fraud or otherwise) that is not entirely dependent on the Martin Act for its viability. Mere overlap between the common law and the Martin Act is not enough to extinguish common-law remedies.”
From FDL, David Dayen:
“Until now, only the State Attorney General could bring action under the Martin Act, a securities fraud law in New York State that is much more expansive than federal statutes. Typically the plaintiff must prove intent to commit fraud; under the Martin Act the plaintiff need only prove that fraud was committed. Now, as a result of a new ruling, any aggrieved private actor can use the Martin Act as part of their lawsuit. This empowers investors of all sizes to go after the banks on securities fraud.”
Though commenter, Sanctimonious Purist, foresees some complication down the road, for now this appears to be a significant consumer victory.
“Theoretically, this decision cannot be appealed. The New York “Court of Appeals” is really NY’s highest state court. Misnomers abound in the NY judicial system: there are a zillion NY “Supreme Courts,” which are their low level trial courts.
So, now that NY’s highest court has interpreted NY’s own Martin law to allow a private right of action (civil only, to be sure), that should be the end of the issue. Federal courts are supposed to defer to the interpretation of a State law by the State’s highest court.
But don’t be surprised or appalled if/when the banksters take this matter up in the Federal courts, arguing that the Martin Act impinges on some Federal securities law or other Federal statute, that the Federal statute “occupies the field,” and therefore the Martin Act is pre-empted by Federal law. And you can bet your last dollar that at least 5 of the Supremes will agree once the case gets there.” ~Sanctimonious Purist