Volume 58, Issue 4

On October 31, 2023, the Second Circuit dealt a major blow to the disgorgement remedy, holding in SEC v. Govil that courts cannot order securities law violators to cough up their ill-gotten gains unless the SEC can point to a victim who has lost money.  In other words, fraudsters get to keep ill-gotten gains if their victims are difficult to identify or losses are difficult to calculate.  This was the culmination of three years of jurisprudence weakening disgorgement based on the premise that as an equitable remedy, it cannot be punitive.  The Supreme Court in 2020 had placed two limitations on the remedy: disgorgement must be limited to the net profits of fraud, and it must be awarded for victims.  What the Govil court failed to recognize is that Congress overrode Liu when it authorized disgorgement separate from the SEC’s equitable authority in its 2021 amendments to the Exchange Act.  This Note argues that the amendments authorized legal disgorgement, removing the remedy’s equitable limitations.  These limitations are free passes to get away with fraud, and by removing them, Congress solved a deterrence problem in SEC enforcement.

By Malik Morris-Sammons

Since the Supreme Court decided its landmark fair housing case, Texas Department of Housing and Community Affairs v. Inclusive Communities, the federal judiciary has proven a formidable battleground for communities of color seeking to enforce their civil rights under the Fair Housing Act (FHA).  The opinion created a “robust causal connection” requirement that forces plaintiffs to establish a direct link between an enacted policy and its disparate impact on a racial minority group.  This Note highlights how this requirement has led the courts to take on a disparate impact analysis that is devoid of history when assessing how segregation continues to harm communities today.  In addition to analyzing historical policy missteps, this Note further discusses the obstacles imposed by circuit and district courts’ interpretations of Inclusive Communities, which make it nearly impossible to succeed on a racial disparate impact claim under the FHA.  Drawing upon federal housing policy, jurisprudence, and comparative property-related provisions of South Africa’s post-apartheid Constitution, this Note suggests ways to restructure the disparate impact analysis to account for the tragic history of racial segregation when assessing claims brought by communities of color.

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While 42 U.S.C. § 1983 is one of the most commonly utilized statutes in federal civil litigation, federal prosecutors hardly afford the statute’s criminal counterpart, 18 U.S.C. § 242, the same attention.  Since the volume of federal rights–vindicating cases under Section 1983 far outstrips that under Section 242, the people are largely left to enforce their own rights.  But this regime of federal rights enforcement has several costs, both practical and expressive.  Practically, a host of socioeconomically dependent factors—from fear of retaliation to distrust of the legal system—renders private plaintiffs especially poorly suited to stand as the primary enforcers of civil rights.  And expressively, the fact that nearly all litigated federal rights violations are at most met with merely civil fines, rather than the opprobrium accompanying criminal punishment, communicates to the public that federal rights violations are not prohibited but priced.  This Note argues that federal prosecutors could alleviate the costs of a primarily civil, rather than criminal, federal rights–enforcement apparatus by reviving an old but underutilized tool: the Section 242 misdemeanor prosecution.

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