GUEST BLOG [In]Securities: Oh No by Aegis Frumento Esq

May 21, 2021

a Guest Blog by

Oh No

Of all the dream jobs a securities litigator might dream on, none is dreamier than Director of Enforcement of the Securities Exchange Commission. From that high perch, not only would you participate in the most consequential securities cases around the country, but you would also control where the SEC's enforcement gaze happens to rest upon. To the extent that regulation is by enforcement, the Director of Enforcement is the de facto czar of securities regulation. 

Alex Oh stepped into that role on April 22. And she stepped out of it on April 28. As dream jobs go, it must have seemed a rude awakening indeed.

What happened? The stuff of litigators' nightmares.

Oh had been a partner at BigLaw firm Paul Weiss Rifkind Wharton & Garrison. Paul Weiss had been representing Exxon Mobil in a case having something to do with Exxon having allegedly violated the human rights of an entire Indonesian village by building a pipeline a long time ago. The case filed in 2001, and its docket entries now exceed 800 filings. At some point, Oh became Exxon's lead attorney.

I too was once enmeshed in a litigation that lasted decades, a corporate divorce involving blood brothers that one Appellate Court dubbed the Jarndyce and Jarndyce of New York jurisprudence. That bleak tale is for another day-perhaps a novel in the making. However, my takeaway from that experience is that any litigation that lasts that long makes everyone involved in it a little nuts, from the parties to the lawyers to the judges.

And that observation pertains here. This past February, Oh found herself defending a deposition. As best as we can tell from the heavily redacted court filings, the Plaintiff's counsel tried to question an Exxon employee, and that employee gave "scripted" answers allegedly read from a cheat sheet in front of him, which he admitted counsel helped him prepare. This being a time of COVID, the deposition was held over Zoom, so all the participants were well socially distanced. But not socially enough. It would seem the interrogating attorney was somewhat annoyed by the answers he was getting. This led Oh, defending her client, to call Plaintiff's lawyer several names that are literally unprintable because they are redacted in some of the court papers.

So, of course, Plaintiffs' counsel moved to compel proper deposition answers, Exxon cross-moved for a protective order, and each side moved for sanctions against the other side and its lawyers. On April 26 -- 2 days before Oh resigned from the SEC -- US District Judge Royce C. Lamberth issued a Memorandum Opinion in which he found that Exxon's witness obstructed the deposition by giving unresponsive speeches instead of answers. And then he found that Oh at various times in the deposition accused plaintiffs' counsel of being abusive and unprofessional-of having raised his voice, being agitated, lashing out at and browbeating the witness, of being aggressive and adversarial -- of being, in the Court's later-adopted shorthand, "agitated, disrespectful, and unhinged."

This is an old trick. In olden days, all the communications that came with tone of voice was lost in the cold words of the transcript. In those days, it was not uncommon to see colloquy like this: "Stop yelling at the witness!" "I am not yelling; you stop yelling at me." With nothing but a dead transcript, who could tell what really happened?

But today, attorneys in depositions work under the equivalent of body-cams. Judge Lamberth needed only to review the video of the deposition to hear that plaintiffs' counsel "maintained a calm demeanor throughout the deposition. That includes moments when Ms. Oh accused him on the record of being unprofessional or of shouting." The Judge thought that such baseless accusations needed to be sanctioned "because it recognizes the pernicious danger posed by attacks on an attorney's integrity.", at p. 30-33. He elaborated:

"The Court implores counsel to conduct themselves in a manner befitting their profession. For the law is a noble profession. 'With all their faults, [lawyers] stack up well against those in every other profession. They are better to work or play with or fight with or drink with than most other varieties of mankind.' Harrison Tweed, Address Accepting the Presidency of the New York City Bar Association (May 10, 1945)."

It's pleasant to think much of that is still true. Litigators were once held to an ideal of "zealous advocacy." Today, the emphasis in on competent and diligent representation, which takes a lot of the fight out of the profession. I also suspect there are better drinking companions. And yet, is it really out of bounds these days to play hardball in depositions?

Sort of. Judge Lamberth cited Rule 11(b)(3) against Alex Oh and Paul Weiss. But that Rule applies only to documents filed in court. So, it seems Oh's error was in trying to get sanctions against her adversary by making accusations against him and citing to the deposition for support. The Judge found that the deposition didn't support the allegations Oh had made, and that was the sanctionable conduct. Had she not played tit-for-tat -- had she turned the other cheek -- the Judge would not have had grounds to sanction her. We know that because, well, hindsight is always perfect.

Last week, the drama ended with Judge Lamberth ordering Oh to be "Admonished" for violating Rule 11(b)(3). But by then, Alex Oh's dream job had turned into a night terror before vanishing into air, into thin air. Such is the stuff as dreams, and dream jobs, are made on. 


Aegis J. Frumento

380 Lexington Avenue
New York, NY 10168

Aegis Frumento co-heads the Financial Markets Practice of Stern Tannenbaum & Bell, New York City.  He represents persons and businesses in all aspects of commercial, corporate and securities matters and dispute resolution (including trials and arbitrations).  He has decades of experience representing SEC, CFTC and FINRA regulated firms and persons in regulatory enforcement investigations, hearings and lawsuits.  Drawing on his five years managing the Executive Financial Services Department of Morgan Stanley Smith Barney, Aegis has rare depth of experience in the securities and corporate governance laws affecting senior executives of public corporations.  When not litigating, Aegis enjoys working with new and existing broker-dealers, registered investment advisers, and private equity funds, covering all legal aspects from formation to capital raising. Those clients now include industry professionals looking to adapt blockchain technologies to finance and financial market enterprises, including the use of cryptosecurities to represent equity and debt interests. 

Aegis's long and distinguished career includes having been a Managing Director of Citigroup and Morgan Stanley, a partner and the head of the financial markets group of Duane Morris LLP, and the managing partner of Singer Frumento LLP.  He graduated from Harvard College in 1976 and New York University School of Law in 1979.  Aegis is a frequent author and speaker on securities law issues, and is often quoted in the media on current securities law developments.  He is the current Chairman of the New York City Bar Association's standing Committee on Professional Responsibility.

NOTE: The views expressed in this Guest Blog are those of the author and do not necessarily reflect those of Blog.