• Wed. Mar 22nd, 2023


All content has been processed with publicly available content spinners. Not for human consumption.

Can the S.E.C. Require ‘Gag Orders’ When It Settles Cases?

The new case concerns Barry D. Romeril, a former Xerox executive whom the S.E.C. accused of participating in a scheme to mislead investors. He settled the case in 2003 without admitting or denying the accusations; paid more than $5 million, much of it reimbursed by Xerox; and agreed to the agency’s take-it-or-leave-it condition that he stay forever silent about any shortcomings in the government’s case.

In 2019, he sued the agency, seeking to be released from his promise. The S.E.C. responded that Mr. Romeril, represented by sophisticated lawyers, had intentionally given up his right to speak in a negotiated settlement. He had been free to go to trial, the agency said, and then to say whatever he liked whether he won or lost.

Instead, he made a deal, the agency said, “waiving any First Amendment rights.”

“He accepted silence as a condition of settlement rather than being forced into silence against his will,” the agency’s lawyers told the U. S. Court of Appeals for the Second Circuit, in New York.

A unanimous three-judge panel of the court ruled for the agency. “A defendant who is insistent on retaining the right to publicly deny the allegations against him has the right to litigate and defend against the charges,” Judge Denny Chin wrote for the panel. “Romeril elected not to litigate.”

Floyd Abrams, a noted First Amendment lawyer who represents Mr. Romeril in the Supreme Court, says there are some rights that cannot be bargained away.

“To impose a speech ban as an element of a settlement is, in my view, unconstitutional,” he said. “The idea that the government is demanding an enforceable promise not to speak ill of it is really troubling.”

The Supreme Court will decide whether to hear the case, Romeril v. Securities and Exchange Commission, No. 21-1284, in the coming months. The justices grant review in very few cases, but the question this one presents may intrigue them, as lower courts have adopted differing approaches to so-called gag orders in settlement agreements with the government.