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SEC vs. Ripple: Pre-Trial Conference Explained

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TRANSCRIPT FROM VLOG:

Hello and welcome to Legal Briefs (Crypto edition).  In the SEC vs. Ripple litigation we have the pre-trial conference scheduled for February 22 but this hearing is NOT what you think.  Today we talk about what’s going to happen at the conference and show you exactly what the timeframes will be and the 4 different settlement scenarios.

Welcome back and join me in a legal analysis of the scheduled pre-trial conference by the famous law journal …

…Coingeek?  “Ripples trial begins February 22nd?”  Nice headline Coingeek (sarcastic).

So, there’s a lot of confusion out there about what is happening Feb 22, no, its not anywhere near to the trial, and a lot of confusion as to  how and WHEN this case will play out.  Stay away from the interwebs on this subject and give me 5 minutes – I am going to tell you EXACTLY what’s going to happen and how this case settles or resolves at each step.

This February 22nd hearing is a standard Federal Court initial hearing and here’s the actual Order from Judge Torres.  First note in paragraph #1 that is a telephonic hearing which is standard in Court nowadays.  So ALL 21 of Ripple’s lawyers will NOT be allowed to bill for this hearing – sorry Law Firm.  Only one attorney on the phone call for each side.

In Paragraph 4 you see that the parties are required to file a proposed Case Management Order before February 15 and it’s actually the Case Management Order that will give you all the deadlines and tell you when the actual trial will be held.  We won’t see the timeframes for about ten more days but – because I can see the future I can give us a very good idea.

How do I know?  Because I have recently completed a Case Management Order on my OWN case which happened to be filed very close in time to the Ripple case.  I redacted the case name and # so we can take a look at it.  My case is a Trademark violation case and the Judge allowed us to push everything back about Six months for various reasons so I will adjust for that.

Okay, so a Case Management Order essentially tells you what has to be done and by when.  In my case you can see that I have something due on February 15 (someone please remind me on the 15th so I don’t forget .. just kidding).  Now, look down to the first important date which is the Discovery Deadline.  Discovery are written questions and depositions and production of documents and those are the backbone of your case.  The SEC will be seeking boxes of documents from Ripple regarding its coin offerings, sales material, etc.  Everything they can get.  There will be fights over what information is discoverable and that can get very involved but here you can see it all must be completed by March 7, 2022.  So going back 6 months, I would say that date in the Ripple case is going to be around September of this year – about 8-9 months away.

Remember in a prior video when pressed on what the most likely result of the case would be and I said I believed a settlement would be reached in 6-9 months?  This deadline is where that timeframe comes from and I believe lawyer John Deaton also gave the same timeframe and he was probably also thinking of this date as well.

Because until OFFICIAL discovery is completed, neither side REALLY knows how strong the other’s case is.  Repeat: only after OFFICIAL discovery is completed with testimony under OATH can you know who will win and who will lose.  THEREFORE, it is only towards the conclusion of discovery that a settlement is likely.  The lawyers look at the EVIDENCE and draw legal conclusions on how likely they are to win and BASED ON THAT CONCLUSION they approach an offer of settlement. Up until then you’d be settling based on guesses and this is a billion dollar issue – Ripple does NOT want to guess-settle.

Now, can the Ripple case settle before then?  Yes. Absolutely.  How can that happen?  Well, I settled a case today – a lawyer called me and said he wanted to discuss a settlement and 30 minutes later it was done. Boom.  And that could absolutely happen with Ripple – just not in a 30 minute phone call – but it COULD happen tomorrow.  And I would suggest to you that this scenario of a quick settlement is more likely after Gensler is confirmed as head of the SEC because this was a battle started, to an extent, by the previous administration and the new head of the SEC might decide this is not the right time for this battle.   This is scenario #1 and it occurs anytime between now and 6 months from now.

 Scenario #2 is that the parties take depositions, fight over documents, and then, once they can look at the true strength of their case they reach a settlement.  And when exactly do most cases in this posture settle?  Let’s go back to my Case Management Order and on page #2 look at Mediation – scheduled in my case for March 2022 which for the Ripple case would be around September or October of this year.  There I am below that listed as Designated Lead Counsel by the way.

Mediation is a process where the parties agree to have third-party lawyer, usually an older experienced lawyer in that area of law, work with the parties to try and reach a settlement agreement.  Mediation works – more than 50% of the time, and that’s why Federal Courts REQUIRE it for every case.  The Ripple case will have a full day mediation where the parties will try to work out a settlement and THAT IS WHERE THE CASE IS MOST LIKELY TO RESOLVE.

Once the Case Management Order comes out and there is a scheduled mediation, you might want to pick up a few more XRP the DAY BEFORE THE MEDIATION (wink).  I shouldn’t have said that – you will now forget what I just said.

In any case, let’s move on.  The next date to look at is the deadline for Dispositive Motions which in my case is April 2022 which equates to around October 2021 for Ripple.  A dispositive motion is one that decides the entire case and the Ripple case will likely be decided at Summary Judgment if it hasn’t settled before then.  I initially thought there was enough here for a jury trial but I changed my mind after seeing the Kik Interactive case proceedings which were decided 100% at summary judgment.  Summary judgment means the parties essentially agree on the facts and its up to the Judge to determine as a matter of law what the outcome of the case is.

So If the Motions have to be filed by October, the hearing will probably be a month or two after October 2021 and this is our 3rd situation.  SO the case could be resolved at Summary Judgment for Ripple or the SEC around  the end of the year if it hasn’t settled yet.

Going back to page 2 of my Order – we have a trial date of September 20022 which for Ripple would equate to February or March 2022 but, honestly, I don’t think we reach a jury trial in the Ripple case.

So, what is scenario #4?  Scenario #4 is that the case proceeds to Summary Judgment (or maybe a trial) and the losing side appeals to appeals to the 2nd Circuit.  If you are excited about getting the “Howey Test” changed to the “Ripple Test” then this is the timeframe.  https://www.uscourts.gov/sites/default/files/data_tables/fcms_na_appsumary1231.2016.pdf

Hang onto your hats and take a look at the Courts own statistics.  Looking at the median time from notice to disposition, we see that for the 2nd circuit it’s 10.6 months. 

Yep, our 4th scenario  takes us all the way out to early 2023!  Sorry to be the bearer of bad news but that’s how long this could go if one party decides to appeal.

So those are our 4 scenarios – a quick settlement based on the new head of the SEC getting onboard, a settlement at the end of discovery around September, a result at summary judgment around the end of 2021, and a result after an appeal in late 2022 or early 2023

We’ll know much more on the 15th when the actual Case Management is filed but I’m pretty confident I am pretty close on the timeline.  I will pull it up the actual Case Management Order and post it on Twitter if anyone wants to see it when it’s filed by the parties.

Until next time, I pray for your health and remember,  if you are watching this in 2021, you were born at a time of extraordinary time of wealth, knowledge and health.  Make use of it.

Jeremy Hogan
Jeremy Hogan
Attorney Jeremy Hogan is a partner at Hogan & Hogan.