CDOs, CMOs, SIVs: The economic crash has littered the nation's courts with suits over these and other exotic financial instruments. Judges need a crash course to keep up.
Or so argues Josh Markus, a Florida lawyer who will urge delegates at the ABA's annual meeting in San Francisco this week to officially encourage financial products and practices education and training for judges in the U.S. and abroad. The proposal, one of 35 resolutions up for debate, is a complement to a resolution on financial market reform adopted by the ABA last August, Markus said.
"This is just another aspect of ensuring that the groundwork is laid for financial reform," Markus said. "You can't build a building on a shaky foundation ... and judges are the key to interpreting the intent of legislators and law makers."
Markus is slated to present the proposal to the ABA's House of Delegates at the Moscone Center on Aug. 9. He said there has been no announced opposition to the measure.
But San Francisco Superior Court Judge Richard Kramer, who was unfamiliar with the proposal, raised some concerns about the idea of providing information to judges outside actual evidence presented in trial. Kramer, who said he has several financial crisis-related cases on his docket, said it's enough to hear "good lawyers explain things to me." The broader question, he said, is whether the judicial system should be educating judges on any fundamental complicated topics, including DNA and electronic storage. "Who picks what the judge is taught and how do we know whether that's an accurate reflection of what the judge ought to know?" Kramer asked. He said if training was focused on rudimentary terms and rules -- issues that are not the subject of opinion -- then that would be less of a problem. But, he added, "world markets are subject to lots of interpretation. It's not a physical phenomenon. It's not like gravity. Anything that's being taught to a judge as to how world markets work is -- I would think by definition -- a subject of controversy and opinion."
Jeffrey Golden, a visiting professor at the London School of Economics who helped formulate the report, said the idea is to ensure training is available to every judge who would want it. The basics are a good start, he agreed, but pointed out that mistakes in case rulings can have global impact. "The global derivatives market, for example, trades off standard terms," he said. "If a judge misinterprets one of these terms, the consequences of that mistake can be felt literally around the world."
A flurry of cases stemming from the financial crisis has already found its way into court systems, Golden noted, with more to come. Sometimes, he said, the outcomes have been worrisome, as was the case in the handling of a Lehman Brothers bankruptcy trial. A U.K. court held that the trustee should enforce a contractual provision that favors Lehman's creditors, while a U.S. court ruled the trustee should ignore that same provision in favor of the Lehman estate. The amount at stake was in the billions of dollars, Golden said. "It could be that the courts have come out differently because the laws are different in different countries, but it may be that a shared understanding of relevant market practice and contractual terms would be helpful."
If passed, the proposal will become ABA policy and the organization's president would press it in front of congressional committees and on law school campuses, among other venues.
Also at the ABA conference this week, delegates will consider a same-sex marriage proposal that would urge state-level governments to eliminate all legal barriers to civil marriage between two persons of the same sex and oppose a federal constitutional amendment to define marriage as a union between a man and a woman. Another proposal would push to enable law enforcement to trace guns used in crime through the use of micro-stamping technology on all newly manufactured semiautomatic pistols. Delegates will also be asked to encourage the creation of a "safe harbor" provision in the Medicare, Medicaid and SCHIP Extension Act of 2007.
The convention, which runs Thursday to Monday, hosts scores of educational panels and sessions on topics ranging from capital litigation to legal fallout from social media.
ABA President Carolyn Lamm will present the ABA Medal, the association's highest recognition, to Supreme Court Justice Ruth Bader Ginsburg.
The house of delegates meets Aug. 9 and 10.