Opinion ID: 625397
Heading Depth: 3
Heading Rank: 3

Heading: Absence of basis to assess the fairness of the settlement

Text: The court's third ground for its refusal to accept the settlement was that it could not properly evaluate the fairness of the settlement unless the underlying facts were conclusively established either by a trial or by binding admission of liability. We doubt whether the absence of proven or admitted liability could justify the refusal to approve the settlement. In the first place, it is not correct that the court had no basis available to assess the underlying facts. The substantial evidentiary record amassed by the S.E.C. over its lengthy investigation was available to the court, and the S.E.C. did provide information to the court regarding how the evidence supported the proposed consent judgment. See SEC's Memorandum of Law in Response to Questions Posed by the Court Regarding Proposed Settlement, supra, at 16-22. Even assuming the doubtful proposition that a court has authority to demand assurance that a voluntary settlement reached between an administrative agency and a private party somehow reflects the facts that would be demonstrated at a trial, the court was free to assess the available evidence and to ask the parties for guidance as to how the evidence supported the proposed consent judgment. The district court's reasoning was that the settlement must be deemed to be either insufficiently onerous or excessively onerous unless the liability of Citigroup had been either proved or disproved at trial or one side or the other had conceded the issue. This is tantamount to ruling that in such circumstances, a court will not approve a settlement that represents a compromise. It is commonplace for settlements to include no binding admission of liability. A settlement is by definition a compromise. We know of no precedent that supports the proposition that a settlement will not be found to be fair, adequate, reasonable, or in the public interest unless liability has been conceded or proved and is embodied in the judgment. [5] We doubt whether it lies within a court's proper discretion to reject a settlement on the basis that liability has not been conclusively determined. Having considered the various explanations given by the district court for its refusal to permit the settlement, we conclude that the S.E.C. and Citigroup have a strong likelihood of success in their joint effort to overturn the district court's ruling. We turn to the other factors to be considered on the question of whether to grant a stay.