Denials and Admissions in Civil Enforcement – Looking Beyond the SEC

by Verity Winship and Jennifer K. Robbennolt

Should agencies require admissions of guilt from the targets of civil enforcement?  The SEC’s policy of letting enforcement targets settle while neither admitting nor denying allegations provoked judicial rebukes and a public debate. But the SEC is only the tip of the iceberg. Administrative agencies rely heavily on settlement as a key enforcement tool.  Admissions of guilt—or, more commonly, declarations that nothing is admitted—form part of these settlement agreements and the underlying negotiations.

Our recent article, Admissions of Guilt in Civil Enforcement, uses the explicit debate over the SEC’s practices to draw attention to the high (and mostly unexamined) stakes of admissions for civil enforcement throughout the administrative system. In addition to the SEC, we draw on examples from other financial regulators, the Environmental Protection Agency (EPA), the Federal Trade Commission (FTC), the Department of Justice’s (DOJ) Civil Division, and other agencies. Some agencies have formal policies that state whether and under what circumstances they will require admissions. But more of them simply go about the business of enforcement without a formal policy defining their approach to admissions. The resulting settlements, then, provide case-by-case examples of the agency’s admissions practices.

Taking our lead from judges, regulators, and commentators who have described agencies’ approaches to admissions with words like “truth,” “guilt,” “confession,” and “apology,” we link this discussion to empirical studies of the psychology of blame and responsibility-taking, acknowledgement, and apologies.  We use these studies to shed light on the function and value of admissions, with particular attention to the implications for agency settlement negotiations.

In doing so, we take a close look at what it means to make and require admissions. Although the policy choice is often portrayed as binary—either an agency requires admissions or it does not—the reality is more varied. We break down these two categories to identify nuances within each. What is the interaction between admissions and denials of guilt? What precisely is being admitted? Facts? Violation of a particular statute or rule? Intent? The article provides a framework based on the empirical literature and on concrete examples drawn from the experience of administrative agencies.

What is at stake?  Settlement—ordinarily occurring without admissions and sometimes even with explicit denials—is the engine for much of administrative enforcement. So policy choices about how to manage the interactions between admissions and settlement implicate one of the main enforcement mechanisms.  The stakes are also high because the choice of admissions policy goes to the heart of the nature of civil enforcement. Such enforcement operates at the intersection of two sets of norms: the criminal law enforcement model, in which admissions are required, and the private settlement model, in which disclaimers of liability are an ordinary part of settlements between private parties. Policies about whether to require admissions sit uneasily at this intersection. Which agencies and which cases provoke calls for targets to admit guilt may turn in part on their perceived relationship to these two poles.

Professor Verity Winship is a professor of law at University of Illinois College of Law.  Her academic interests are in the area of business law and complex litigation. Her research focuses on corporate litigation, securities enforcement, and disputes that cross legal systems. Professor Jennifer K. Robbennolt is also a professor of law at University of Illinois College of Law. She is an expert in the areas of psychology and law, torts, and dispute resolution. Her research integrates psychology into the study of law and legal institutions, focusing primarily on legal decision-making and the use of empirical research methodology in law.

The article in its entirety is available here:  Winship, Verity and Robbennolt, Jennifer K., Admissions of Guilt in Civil Enforcement (March 28, 2017). Minnesota Law Review, Vol. 101 (Forthcoming); University of Illinois College of Law Legal Studies Research Paper No. 17-21. Available at SSRN.

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