What the Fokker?

by Brandon L. Garrett

The standards for judicial review of corporate settlements have entered a period of ferment.  As Alan Morrison and I have just described in the National Law Journal, the U.S. Court of Appeals for the D.C. Circuit erred in its much-anticipated ruling in Fokker Services, holding that judicial approval of a corporate deferred prosecution agreement should be de rigueur, absent indicia of illegality.  The result may have been correct, given the terms of the deal at issue, but the reasoning was quite overblown and unsupported.

To the D.C. Circuit, a federal judge serves as little more than a potted plant, as Judge John Gleeson put it, when insisting in the HSBC case (PDF: 139KB), that judicial supervision is crucial in complex corporate matters on a federal judge’s docket.  The Speedy Trial Act, which permits a judge to approve (or not) a deferred prosecution agreement could not be clearer in its language.  It states that such a deferred, to permit a defendant to “demonstrate good conduct,” shall be permitted only “with the approval of the court.”  The D.C. Circuit transformed that simple provision, designed to protect the defendant’s right to a Speedy Trial, to ensure careful and voluntary waiver, and to ensure judicial supervision over programs designed to divert criminal cases to avoid the need for prosecution, into something else: a rubber stamp.

As federal courts for good reason expand the use of deferred prosecution and diversion for individual defendants and not just the largest corporations, careful judicial oversight will be quite important; no district court would adopt such a program without judicial attention and supervision.  The largest corporate settlements deserve such attention and more, and not just because of the text and purpose of the statute in question.

A family of related statutes and areas in which corporate settlements occur, both civil and criminal, implicate similar concerns.  The D.C. Circuit, as Alan Morrison and I describe, did something similar in the 1990s when narrowly interpreting Tunney Act language in which Congress clearly stated that it wanted judges to examine antitrust settlements to ascertain the public interest.

How clear must Congress be that judges must exercise independent review before approving deals that implicate the public interest?  Judges have correctly intervened in rare cases in which plea bargains implicated the interests of justice.  Judges have correctly exercised discretion when deciding whether to approve consent decrees, including where statutes call for public participation and consideration of the public interest.  Why the Department of Justice continues to try to evade judicial review, which in criminal cases they can do entirely by entering non-prosecution agreements not filed in court, suggests something still more troubling about a desire to have the public interest sidelines through inside deals.

Brandon L. Garrett is the Justice Thurgood Marshall Distinguished Professor of Law at
University of Virginia School of Law and author of Too Big to Jail: How Prosecutors Compromise with Corporations, published in 2014.

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