UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK x¶
GOVERNMENT OF THE UNITED STATES VIRGIN ISLANDS Plaintiffs¶
4 5 v. JPMORGAN CHASE BANK N.A., et a/, Defendants 22 Civ. 10904 (JSR)¶
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7 ORAL ARGUMENT New York, N.Y.¶
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9 August 31, 2023¶
10 4:00 p.m.¶
11 Before:¶
12 HON. JED S. RAKOFF¶
13 District Judge¶
14 APPEARANCES¶
15 16 17 OFFICE OF THE ATTORNEY GENERAL Attorneys for Plaintiff USVI MIMI LIU DAVID I. ACKERMAN LINDA¶
18 19 20 WILMER CUTLER PICKERING HALE & DORR LLP Attorneys for Defendant JPMorgan Chase Bank NA FELICIA ELLSWORTH ALAN SCHOENFELD JOHN BUTTS¶
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6 : Linda for the Virgin Islands.¶
7 MR. ACKERMAN: David Ackerman for the Virgin Islands.¶
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10 MR. SCHOENFELD: Alan Schoenfeld for JPMorgan Chase.¶
11 MR. BUTTS: John Butts for the JPMorgan Chase.¶
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(Case called)¶
THE DEPUTY CLERK: Will the parties please identify themselves for the record.¶
MS. LIU: Mimi Liu on behalf of plaintiff, the Government of the United States Virgin Islands.¶
MS. ELLSWORTH: Good afternoon, your Honor. Felicia Ellsworth for JPMorgan Chase.¶
THE COURT: Welcome. And I’m ready to hear argument on the cross-motions for summary judgment. Now to some extent they are two sides of the same coin, in some of the aspects, but not in all. Nevertheless, to maintain some sort of order, why don’t we start with the Virgin Islands’s motion, and then we’ll turn shortly thereafter to JPMorgan’s motions. I don’t want anyone to recite at any great length what’s in your briefs.¶
I thank you for their excellent briefs, but it was 80 pages and I did manage to read them all without falling asleep. And so really this is your opportunity to address matters and issues that were not fully addressed in your brief, either because they were raised in someone’s else reply papers or for whatever reason. Let me hear first from moving counsel.¶
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it please the Court. Mimi Liu on behalf of plaintiff, Government of the US virgin Islands. I will be arguing our motion for summary judgment on the Trafficking Victims Protection Act claims, and my colleague Mr. Ackerman will be arguing our motion on the affirmative defenses, your Honor.¶
THE COURT: Okay.¶
MS. LIU: In its order on the motion to dismiss, the Court said that the plaintiffs adequately allege knowledge, participation and benefit to show JPMorgan participated in Epstein’s sex trafficking venture in violation of 1591(a)(2).¶
THE COURT: So they dispute, among other things, knowledge and intent, and almost always those are jury questions. Why can they be disposed of on summary judgment here?¶
MS. LIU: Your Honor, no reasonable juror could find that JPMorgan did not know or did not recklessly disregard that its client Jeffrey Epstein was engaged in sex trafficking. In your motion to dismiss order, you said that it is sufficient that JPMorgan was aware of Epstein’s convictions for sex crimes and ignored numerous red flags associated with Epstein’s accounts.¶
The undisputed facts show that JPMorgan knew, not only at the time of his convictions in 2008, but two years earlier in 2006, that Epstein had engaged in sex crimes involving¶
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minors. The evidence shows that Epstein confessed all but the ages to Jes Staley, and Jes Staley turned around and reported it to Mary Erdoes, and that is corroborated in a written email.¶
The ages were undeniable from the reports that were based on police documents that JPMorgan reviewed in 2006. Compliance staff later acknowledged that Epstein was “known to pay cash for his massages, and minors aren’t the issue,” which is precisely what was reported in the news in 2006. And then when we get to the question of JPMorgan ignoring numerous red flags, they did more than that, your Honor.¶
In 2019, the filing with the department of treasury after Jeffrey Epstein was dead identifies more than $1 billion in transactions for Epstein that the bank says are related to human trafficking dating back to 2003, $1 billion in transactions related to human trafficking dating back to 2003. By 2006, the bank thus had reams of financial information related to Jeffrey Epstein that corroborated his sex crimes involving children.¶
THE COURT: So what about the argument that your adversary makes that, that doesn’t preclude them from offering ordinary banking services? Even convicted felons are entitled to avail themselves of ordinary business. They could buy groceries. They could buy land. And in this case, they can have bank accounts, so why isn’t that preclude summary judgment?¶
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MS. LIU: Well, again, in your motion to dismiss order, your Honor, you identified a number of categories where the Court said, these are sufficient to show that JPMorgan engaged in active non-routine or non-ordinary banking services.¶
THE COURT: Yes, and that was on motion to dismiss taking everything in your favor. But the question now is whether you have established that through undisputed evidence that no reasonable juror could find to the contrary.¶
MS. LIU: Yes. In addition, the New York banking regulator looked at a number of categories as well, and the New York banking regulator said vis-a-vis Deutsche Bank that these are examples of activity that fall outside ordinary banking services. And we have proven on summary judgment starting with the fact that JPMorgan has admitted that it handled more than $1 billion in suspicious transactions, again related to human trafficking for Epstein over a 16-year period from 2003 to 2019.¶
And just to put that $1 billion number in context, your Honor, in their counterstatement of undisputed material facts at paragraph 19, JPMorgan argues that $900 million of funds flowed through Epstein’s accounts at JPMorgan from 2003 to 2013. This means that Epstein’s entire business with JPMorgan and JPMorgan’s entire business with Jeffrey Epstein was human trafficking.¶
JPMorgan was a full service bank for Jeffrey Epstein’s¶
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sex trafficking. If you look at the Canosa case that we discussed at the motion to dismiss stage, it talks about facilitating sex trafficking on the front-end and then covering it up the back-end, which allows ongoing sex trafficking, that is precisely this case. On the front-end, JPMorgan after knowing that Jeffrey Epstein had engaged in felony sex crimes with children handled $4 million in payments to girls and women, many with Eastern European names, and over $5 million in cash withdrawals which it repeatedly tied to his felony sex crimes.¶
That’s $9 million in transactions which JPMorgan argues on reply is a drop in the bucket relative to the $900 million in funds that flowed through Epstein’s accounts at JPMorgan.¶
But if you take that $9 million — and this is a bank, and this is a bank reviewing as part of their due diligence all of the news reports and the police documents — if you take that $9 million, your Honor, and you divide it by the couple of hundred dollars that Epstein was known to pay a victim, and the couple of hundred dollars that Epstein was known to pay the young women who recruited that victim, you get more than 20,000 unlawful sex acts facilitated by JPMorgan.¶
Again, I would submit, no reasonable juror could find that JPMorgan did not participate in Jeffrey Epstein’s sex trafficking venture.¶
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THE COURT: Okay. Let me interrupt you. We’re going to sort of go back and forth just to try to keep aspects of these motions completed. So let me, just on what you’ve argued so far, let me hear from defense counsel, then we’ll come right back to you.¶
MS. ELLSWORTH: Thank you, your Honor, Felicia Ellsworth for JPMorgan. I’ll start where the Court did, knowledge is a key element of the US Virgin Islands claim here. Knowledge is almost never susceptible to disposition on summary judgment, and it certainly is not here. There’s sworn testimony from multiple JPMorgan current employees and former employees that the US Virgin Islands took testimony from, each of whom to a person testified they did not have knowledge.¶
THE COURT: Let me raise an issue that I don’t think was raised clearly by your adversary, but that won’t stop me. So if we look at section 1595(a) for lawsuits not brought by the state, but by individuals, civil lawsuits, the knowledge requirement there is knew or should have known, as opposed to the criminal section, which it’s knew or recklessly disregarded. Should have known sounds awfully much like negligence. So if all they have to show is negligence, are they not entitled to summary judgment?¶
MS. ELLSWORTH: That’s not all they have to show, your Honor. Parens patriae plaintiff under 1595(d) — and I don’t think the US Virgin Islands has disputed this fact —¶
THE COURT: No, they haven’t. You’re correct in that, but —¶
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MS. ELLSWORTH: It’s knowledge or reckless¶
THE COURT: — but I’m infamously activist judge, so I’m raising it independently.¶
MS. ELLSWORTH: When you look at 1595(d), it incorporates only the section 1591, the criminal provision. So what the 1595(d), which is the parens patriae action, it says that a state has reason to believe that an interest of the residents of the state is threatened or adversely effected by any person who violates section 1591, and that’s the criminal provision.¶
THE COURT: Yeah, but the question would be — and you may well be right on that. I’m not suggesting necessarily to the contrary. But since this is a civil action, why shouldn’t section (d) be read in the context of the primary civil action requirement set forth in (a)?¶
MS. ELLSWORTH: I don’t think it should be because I don’t think that’s what Congress set out. Congress set out and incorporated. Congress could have chosen to add a parens patriae cause of action to 1595(a), for example; but instead it quite explicitly added this section (d) separately and incorporated only the criminal underlying conduct which would be knowledge or reckless disregard. I think the statutory structure is fairly clear. I also don’t think it particularly¶
4 THE COURT: The statute is clear? This is the Congress of the United States, they never write clear statutes. We know that.¶
5 6 7 MS. ELLSWORTH: I think the construction that your Honor can make of the statute should not be difficult to understand that what Congress¶
8 9 10 THE COURT: Let’s assume you’re right about that. I just wanted to flag that issue. Go back to the point you wanted to make.¶
11 12 13 14 15 16 17 18 19 20 21 MS. ELLSWORTH: If I could raise one more point on the scienter standard. I just want to make clear. We point this out in our affirmative motion. I’m happy to address it then. But prior to 2008, the standard has to be just knowledge, not even reckless disregard given the timing when that was added to the statute. But in any event, I come back to the question that the Court ask my adversary to begin with, which is this is simply not an issue that is susceptible to determination on summary judgment. It is not the case that no reasonable juror could find that there wasn’t knowledge or reckless disregard depending on the timing here.¶
22 23 24 25 There is hotly disputed testimony and evidence. There is, as I said, testimony from JPMorgan current and former employees disclaiming knowledge. That testimony would be subject to a credibility determination by the jury as to¶
matters in purpose of your Honor deciding today’s motion.¶
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whether or not in fact the information that the US Virgin Islands has pointed to and that Ms. Liu pointed you to today was information that JPMorgan considered and found that there was some reason to even suspect that there was something that would be an actual violation of the TVPA.¶
THE COURT: Okay. Let me go back to plaintiff’s counsel. We’re going to go back and forth with apologies. Anything further before we turn to the other prong of your motion that your colleague is going to address, anything further you wanted to say on this prong?¶
MS. LIU: Only, Judge, to clarify in terms of your question about constructive knowledge in 1595. We did argue at the motion to dismiss stage at footnote one in our opposition brief, which is docket 49, that a constructive knowledge standard applies also to the government’s civil case under 1595.¶
THE COURT: This is not a question of constructive knowledge. That’s a different issue.¶
MS. LIU: Or knew or should have known.¶
THE COURT: Okay. So in your view you haven’t waived that argument?¶
MS. LIU: We have not waived that argument. And, in fact, the point that we made there is that if you look at the legislative history of 1595(d), it’s clear that Congress wanted to give extra litigation leverage to individuals and more¶
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resources to pursue civil prosecution against sex trafficking.¶
So obviously Congress did not intend to apply a higher scienter standard to a parens patriae action than it did to the original civil action.¶
THE COURT: That may or may not be, why shouldn’t Congress or why couldn’t Congress have rationally decided, if it’s an individual is a victim, we’re going to make it a negligent standard; but if it’s a state with all the force that a state brings and with assertion by the state that it’s bringing a, if you will, quasi-criminal case, we’re not going to apply that lower standard. Why wouldn’t that be a possible interpretation of what Congress did?¶
MS. LIU: I just don’t think that there’s anything including the legislative history would be to the contrary in 1595(d) to suggest that Congress wanted to apply a criminal scienter standard to a civil action by the government.¶
And if I could just clarify one point. Ms. Ellsworth mentioned the knowledge or reckless disregard pre-2008. That goes to a different point. That knowledge or reckless disregard goes to knowledge or reckless disregard of sex trafficking. This particular knew or should have known standard goes to the participation in the venture. These are two different scienter standards.¶
THE COURT: Let me hear from your colleague then on the next prong.¶
MR. ACKERMAN: Thank you, your Honor. May it please the Court. David Ackerman for the Virgin Islands. The Court expressed skepticism in denying JPMorgan’s motion to strike these affirmative defenses, and those concerns were well-founded. Despite having taken expansive discovery of the Virgin Islands, including the depositions of three current or former governors and three former Attorneys General and receiving nearly a hundred thousand pages in discovery, JPMorgan’s attempts to blame the USVI have no merit in law or in fact. The Court received voluminous briefing, but nowhere¶
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THE COURT: You needn’t remind me of that.¶
MR. ACKERMAN: I thought using the word “voluminous” may have triggered a memory, your Honor. But nowhere in these reams of documents are there facts that show any knowledge of human trafficking or red flags by any USVI government official.¶
Your Honor, this is an important moment for both this case and more fundamentally for the development of TVPA enforcement law. As the Court is aware, this is the first civil attorney general, civil enforcement action brought under the TVPA. The government of the Virgin Islands, not Florida, not New York, has stepped up to challenge the biggest bank in the world over its enforcement practices. And it has permitted through significant discovery calculated to test the government’s resolve and shift attention away from the bank’s¶
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own failings.¶
And the case law establishes, your Honor, that these affirmative defenses are not cognizable at law and JPMorgan’s briefing barely disputes that fact. The facts that JPMorgan attempt to stitch together lack any fact tying government action to Epstein’s trafficking.¶
THE COURT: Well, are you saying that even if JPMorgan is able to prove that the Virgin Islands were culpable initially in letting Mr. Epstein’s misconduct go forward to a certain point in time, that that is completely irrelevant to any of the issues in this case?¶
MR. ACKERMAN: What I’m saying, your Honor, is that the affirmative defenses that JPMorgan has asserted are not cognizable at law. Whether they may be relevant at some other stage could be a question, we don’t think they are. But the issue before the Court now is simply the affirmative defenses, and these affirmative defenses have no basis.¶
THE COURT: All right. Let me hear from again, with apologies for interrupting, let me hear from defendant’s counsel.¶
MR. SCHOENFELD: Thank you, your Honor. Alan Schoenfeld for JPMorgan Chase. USVI’s lead argument I think is one that the Court has already rejected cause the Court found in the bottom line order in the motion to strike that those claims were available, or those affirmative defenses were¶
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available as a matter of law. And the Court did express skepticism — and I’m happy to allay the Court’s skepticism today. But as a matter of law, in pari delicto and unclean hands are clearly available to JPMorgan Chase to assert its affirmative defenses to USVI’s two TVPA claims. That’s consistent with the Court’s holding in Google and Facebook, which USVI never addresses, and both of which make clear that a state government suing parens patriae under a federal statute is a private actor susceptible to equitable defenses.¶
So the only question on this motion for summary judgment is whether there’s any issue of disputed fact as to whether USVI’s misconduct precludes its claims that JPMC knowingly benefited from participation or obstructed a federal investigation into Epstein. And a jury could reasonably conclude that USVI’s decades-long entanglement with Epstein precludes judgment in USVI’s favor. I’m happy to start with knowledge. USVI claims that unlike JPMC, “There’s no evidence that any government official or employee had knowledge of what was occurring on Epstein’s private Island.” But in 2007 —¶
THE COURT: I guess what I’m having a little trouble is, it’s one thing to say that their alleged involved in complicity if you will, it effects the timeframe involved, it effects perhaps the extent of the relief they’re entitled to; but I’m not sure I’ve seen any case on facts similar to this where it’s a total bar of their bringing an action at all.¶
MR. SCHOENFELD: We’ve asked two sets of affirmative defenses. The first is in pari delicto and unclean hands, which I think would defeat the claims as a matter of law. And those are both well-established affirmative defenses that go to liability.¶
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THE COURT: I’m just putting this in the context of a state as opposed to an individual. A state fails to prosecute or take action against someone who’s committing a crime within their state, and they do that even though they knew or recklessly disregarded that that person was committing that misconduct. And then they wake up and they say, you know, this is really too much too far, and so they say we’re going to prosecute. I don’t know of any cases that says they can’t prosecute in that situation.¶
MR. SCHOENFELD: This is a critical distinction, and I’m glad your Honor raised it. And this is exactly what the Court held in both UPS and FedEx to mark the distinction between the enforcement actions that the City of New York was bringing under the CCTA, which is the something, something Tobacco Act, and RICO. And under the CCTA, the City had been delegated enforcement authority by Congress to bring these actions as a law enforcement authority.¶
And in those circumstances, the Court held that unclean hands was not available as an affirmative defense, including because the defendant couldn’t challenge the¶
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government’s discretionary law enforcement decision making.¶
That would apply if what we were talking about is USVI’s enforcement of the TVPA, but that’s not why they’re here. They have no authority to enforce the TVPA. They have the ability under 1595(d), which is what you were just discussing with Ms. Ellsworth, to bring a claim parens patriae to seek civil relief for injuries done to residents of the US Virgin Islands. That is not a law enforcement authority. That is a private claim brought parens patriae, and that’s precisely what the Court says in Google and Facebook.¶
In both of those cases, states were coming in to enforce the Clayton Act to stop a merger. And the Court said — it’s the SDNY in Google and the District of Columbia in Facebook — the Court said in both of those cases, Congress chose not to give enforcement authority under the United States Antitrust Laws to states and municipalities. It did decide to supplement the ability of private parties to enforce those laws through the Clayton Act. And in those cases, the states were bringing those actions parens patriae to enjoin mergers and to defeat other sorts of allegedly anti-competitive activity.¶
And the Court said, in those capacities where they are not enforcing the anti-trust law, but instead seeking civil relief against a merger, they are just as susceptible to a Laches defense as any private actor. So the distinction you’re drawing is absolutely right. You can’t bring a Laches claim,¶
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especially when there’s an applicable statute of limitations against the government to challenge its failure to prosecute, its selection among discretionary prosecutorial options. That is not why we’re here. That is not what the USVI is doing in this case. They are a private litigant, regardless of the fact that they are suing parens patriae.¶
There are special standing rules that apply under Article 3, and that’s the Snapp line of case law. But as far as the role that they are occupying here, it’s not a law enforcement role. So using UPS and FedEx as our models, the actions brought under the CCTA are not the relevant actions. It’s the actions brought under RICO that are the relevant actions, where they were suing as an aggrieved essentially private party, parens patriae, and there they were susceptible. The City in both cases were susceptible to the unclean hands and in pari delicto defenses that FedEx and UPS had advanced.¶
THE COURT: All right. Let me go back to plaintiff’s counsel to respond, and then we’ll go to the next issue.¶
MR. ACKERMAN: Couple of responses, your Honor. First of all with respect to UPS. What the UPS case says about enforcing statutes is, they initially quote the UPS case correctly. It says the case law in the area of executive discretion generally relates to a party’s attempt to require particular enforcement or hold a public entity responsible for lack of an adequate enforcement. But the case then observes¶
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courts have in numerous other instances declined to probe into government actor’s decision making in circumstances where the government was acting in the sphere of enforcing public rights in the public interest, and that is exactly what’s happening here.¶
THE COURT: They just said it again here, they don’t think you, in this situation, are really enforcing public rights. You are enforcing the private rights of your citizens that may not be enforceable by those citizens, and we’ll get later to the question of whether the settlement bears on that. But what is the public right you are enforcing by your action?¶
MR. ACKERMAN: This is a civil enforcement action, your Honor. And what Congress has given the USVI and all other states is the authority to enforce this statute specifically. And in these types of cases, such as Phillip Morris, when states are proceeding as a civil enforcement authority and Phillip Morris I think is very instructive because the defendant in that case, the tobacco company, argued in pari delicto defenses because the government failed to communicate to the public its knowledge of the properties of nicotine; or they relied on the conduct of government scientists; or the department of defense was subsidizing cigarette sales.¶
It relied on regulatory decisions concerning the creation of so-called safer cigarettes. And the Court rejected the unclean hands defense. It held, When as here, the¶
government acts in the public interest, the unclean hands doctrine is unavailable as a matter of law.¶
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THE COURT: So I understand that point, but I’m looking at subsection (d) of 1595, the section under which you sue “In any case in which the Attorney General of the state has reason to believe that an interest of the residents of that state has been or is threatened or adversely affected by any person who violates section 1591, the Attorney General of the state is parens patriae, may bring a civil action against such person on behalf of the residents of the state in an appropriate district court of the United States to obtain appropriate relief.”¶
So the statute seems to contemplate that you’re not acting in the same way, for example, that the SEC might in a civil action brought by the SEC; but rather more as, at least so far as compensatory damages and the like are concerned, as the representative of residence who for whatever reasons cannot or have not brought their own actions. Now it might be different to the extent that you’re seeking injunctive relief. But with respect to — and this unfortunately gets into the next motion — but as I said they are intertwined — with respect to the relief that is geared to compensating victims, in this case residents of the state, why aren’t you in that respect at least acting as the equivalent of a private representative?¶
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MR. ACKERMAN: Your Honor, you have hit the nail on the head, which is that there is overlap between these motions, and I believe Ms. Liu was handling this point. So what I would say is that for certain UPS —¶
THE COURT: Take a guess at what she would have said.¶
MR. ACKERMAN: That’s fair, your Honor.¶
THE COURT: Go ahead.¶
MR. ACKERMAN: I believe that was — and with respect to —¶
THE COURT: I’ll tell you what, I won’t put you on the hook. Ms. Liu, what did you want to say in that regard?¶
MS. LIU: So, Judge, you’ve already held at the motion to dismiss stage in the challenge to our parens patriae authority that the Virgin Islands has a quasi-sovereign interest in assuring its residents it will act to protect them from the harmful effects of criminal sex trafficking enterprises flourishing in the islands.¶
THE COURT: You correctly quoted me, and I thought it was a brilliant statement, but now we’re getting — and we are getting now into the next series of motions while we’re there, but that may have to be distinguished depending on which kind of relief you’re seeking.¶
I think there’s a strong argument that if you’re seeking injunctive and declaratory relief, you’re acting in the public interest, as well as in the interest of the residents¶
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individually. But when you’re seeking compensatory damages, I’m not sure why that’s so.¶
MS. LIU: So the case law, Judge, on this issue, including in the Second Circuit in the Purdue Pharma v. Kentucky case that is cited in I think both parties’ papers specifically says, If the Attorney General as parens patriae is the real party in interest, which is determined by assessing whether or not they have a quasi-sovereign interest, as this Court has held the Attorney General here does, then the question of what specific relief they’re seeking does not necessarily negate that parens patriae authority or interest.¶
So, for example, the Purdue Pharma v. Kentucky case, injunctive relief was sought, civil penalties were sought, and also damages to individual victims was sought. And the Court specifically said the fact that the primary purpose of this case is to pursue the public interest or to act in the public interest means that the add-on of additional request for compensatory damages does not negate the overall parens patriae nature of this matter.¶
That is a consistent holding in numerous cases that we cite in our papers, including the AU Optronics case, the Balderas case and other cases.¶
THE COURT: What about the argument — now we really are getting into the other motion, but I think I have no choice cause it logically follows. What about if you’re not entitled¶
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to compensatory damages cause they’re duplicative of the class action. Assuming for the sake of argument that I approve the class action settlement, what about that?¶
MS. LIU: I would submit, Judge, that Congress — so the Seneci case, the Second Circuit case in Seneci, what that case says is if all you’re seeking in an AG case, all you’re seeking. And the only thing sought there was compensatory damages for individuals. If that’s all the AG is seeking, we’re going to have to question parens patriae standing. And that’s not all we’re seeking. And our primary purpose is the quasi-sovereign interest of assuring residents that sex trafficking will not continue to flourish in the US virgin Islands. But even the Seneci case says —¶
THE COURT: Specifically — I hear what you’re saying, out tell me exactly specifically what relief you are seeking assuming for the sake of argument you’re entitled to any and all appropriate relief?¶
MS. LIU: We are seeking injunctive and declaratory relief.¶
THE COURT: Injunctive against who?¶
MS. LIU: We are seeking injunctive relief against JPMorgan.¶
THE COURT: To not do anymore banking with Mr. Epstein.¶
MS. LIU: No, Judge. Just as in the Snapp case where¶
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the action, the discriminate conduct occurred in 1978 ended. The case was brought a year later in 1979. The Supreme Court said you can seek injunctive relief against this actor to conform their conduct with the law. So our injunctive relief that we’re seeking is requiring that JPMorgan conform its conduct to the protections of the Trafficking Victims Protection Act, which is precisely what the Supreme Court occurred in the Alfred Snapp case.¶
THE COURT: I know what you say they didn’t do in the past, but then, for example, they have subsequently filed SARs and so forth. What is it you’re saying they’re not doing now that they need to be ordered to do?¶
MS. LIU: Well, exactly like in the Snapp case where the conduct had ended where the Court said, yes, but, in the future we are going to enjoin you from violating the statute. That is the same thing we are seeking here. There is nothing to suggest that short of Jeffrey Epstein’s death in 2019, JPMorgan would act in conformance with the Trafficking Victims Protection Act. Not vis-a-vis Jeffrey Epstein. Obviously he’s dead, but vis-a-vis other clients going forward in the future.¶
The only reason that JPMorgan finally after 16 years reported the billion dollars in suspicious transactions for Jeffrey Epstein is because he was arrested, and then he was dead. This was a CYA reporting after 16 years of all of the monies flowing in his JPMorgan accounts after he was dead.¶
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There is nothing — and JPMorgan, as we’ve argued to the Court in our letter brief, is a repeat offender. They have been fined countless times for violating the law. There is nothing to suggest that on its own JPMorgan is going to conform with the law absent an injunction from this Court, which is precisely what Alfred Snapp authorizes in terms of ongoing on future conduct.¶
In terms of past harm, which the statute clearly recognizes, the only forms of relief available are compensatory and punitive damages for individuals and civil penalties. Civil penalties is no doubt a traditional law enforcement remedy. And civil penalties was in fact, your Honor, a remedy at common law.¶
So I would submit that whether or not you read the statute to authorize civil penalties, which we believe it plainly does, civil penalties is a remedy at common law for civil law enforcement. And thus to the extent they say the statute merely codifies the common law parens patriae principles outlined in Alfred Snapp, it certainly codifies the common law authority of Attorneys General in civil law enforcement actions to seek civil penalties as we do here.¶
THE COURT: I know there’s more you want to say, and you will have that opportunity, but counsel. And at this point, you’re motions as well, because I think we let me turn free to get can’t avoid to defense into your the interplay¶
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of those motions.¶
MS. ELLSWORTH: Thank you, your Honor. Let me start where Ms. Liu just ended. This is not a law enforcement action. This is not the US Virgin Islands proceeding as a law enforcement entity enforcing its own law. If they were trying to enforce one of its territorial laws, then it could be a law enforcement action. It did try and bring such a case, and the Court dismissed it.¶
THE COURT: But the statute doesn’t limit them to that. The statute says that they can, when they have reason to believe that the interest of the residents of their state has been or is threatened, they can bring a civil action.¶
MS. ELLSWORTH: A parens patriae civil action, which means they need to show injury, and the Court found that at the motion to dismiss stage, they could survive a motion to dismiss based on the articulation of injury that Ms. Liu read to you, or maybe it was Mr. Ackerman, which was injury to the residents of the US Virgin Islands.¶
But what we come to the Court with a motion for summary judgment on the damages that they’re seeking. Let me put the injunction relief to the side for a moment, but I’d like to come back to it. The damages that US Virgin Islands purports to seek in this case are not damages that are tied to that injury that they asserted in the motion to dismiss.¶
THE COURT: What about your adversary mentioned what¶
4 5 6 7 she called civil penalties. In some of the briefing it’s referred to as punitive damages, but what about that? In other words, can’t they — even if they, for the sake of argument, the victims were all totally compensated by the settlements that are before me, their argument is, civil penalties still need to be imposed. Those have a quasi-punitive purpose that is not served by mere compensatory damages.¶
8 9 10 11 12 You say, among other things in your papers, well, there’s a lot of law that says that if you can’t show compensatory damages, you can’t get punitive damages; but I wonder if that’s really analogous to a situation where it’s the state suing parens patriae.¶
13 14 15 16 17 18 19 20 21 MS. ELLSWORTH: I think it is. On the compensatory damages, just briefly, the compensatory damages that the US Virgin Islands now seeks are the very type of damages that they cannot seek as parens patriae. They are individual victim damages. They call them victim damages. It’s simply not cognizable under the parens patriae law, and that’s Seneci and that’s the Vacco case. I didn’t hear Ms. Liu argue it. It really is not available to them under Snapp or under any parens patriae doctrine.¶
22 23 24 25 Under civil penalties, again, Ms. Liu just said, civil penalties are a traditional law enforcement mechanism, but this is not law enforcement. The TVPA section 1595(d) allows them to bring a civil action, parens patriae, and allows them to¶
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seek appropriate relief. That’s not defined in the statute.¶
THE COURT: I must say, I think that’s — of all the questions, very interesting questions that you folks have presented me with, one of the most interesting is, there’s not much indication, as near as I can tell from your briefs, as to what Congress meant by appropriate relief.¶
MS. ELLSWORTH: I’m not sure Congress elucidated at much beyond putting those words into the statute, so that’s the job for the Court. But I do think what the Court can look at are a few different things. The first is, parens patriae is different than law enforcement. And Mr. Schoenfeld spoke about the UPS and the FedEx cases that draw the distinction between the state acting as an enforcement agency when it is delegated that authority by a federal statute, versus a state acting as essentially a civil plaintiff when the only right of action that it’s given by a federal statute is as a civil plaintiff.¶
The TVPA does not delegate enforcement authority to any state attorney general or the USVI. What the TVPA allows is a civil action that allows them to try and seek some from of relief, whether it’s injunctive or damages if they could show them. They have not articulated any damages that map onto the interest to the territory that was articulated at the motion to dismiss.¶
THE COURT: Maybe I misunderstood their argument, but I think the argument goes, at least in part, we want injunctive¶
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relief to make sure the bank doesn’t undertake this alleged misconduct in the future. And we think under their interpretation of the statute and the law that we can add on to that civil penalties for the prior misconduct. What about that?¶
MS. ELLSWORTH: Again, it’s not contemplated by the statute that they would have civil penalties.¶
THE COURT: The question is, what is meant by appropriate?¶
MS. ELLSWORTH: Well, then I think appropriate relief could be injunctive relief. It could be some form of damages if there were damages that actually mapped onto the parens patriae interest. To allow them, particularly in the facts in this case, to assert civil penalties or to award civil penalties would be, as you just indicated, those are essentially like punitive damages, that would be a retroactive application of some sort of penalty to a provision that was added in 2018. And the conduct of course that the US Virgin Islands challenges here is conduct that dates back to the late ’90s.¶
So I don’t think that — putting aside whether that’s actually even contemplated in the TVPA sort of writ large in this case. To have civil penalties applied for conduct that predates the right of action under which the US Virgin Islands precedes would be an improper retroactive penalty.¶
But I also think it’s not sort of what the statute set¶
out. What the statute set out was to allow an Attorney General to try and bring some form of civil action to the extent that they had some separate form of damage to the territory, to the quasi-sovereign interest.¶
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And that form of theories and the US Virgin Islands could have tried to prove damage. And they had at various different points dollar amounts that were disclosed as being those potential damages. They have withdrawn all that. They seeking relief for the actual injury that allowed them this suit as parens patriae, and that’s why no form of damages is available to them in this case. are not to bring monetary¶
I talked about compensatory damages briefly. We talked about civil penalties. I do want to just note the US Virgin Islands suggest that even if they can’t get compensatory damages, somehow maybe punitive damages would still be appropriate. That’s frankly just incorrect, under both the common law availability of punitive damages, which are only when there is something compensatory, and under the constitutional sort of ratio due process clause. So I don’t think punitive damages could possibly be on the table either.¶
Restitution and discouragement are two other forms of damages that they have articulated. Restitution would have to be for some harm to the US Virgin Islands. That’s what restitution is. Of course they have not articulated that. And discouragement is only available to victims, and they don’t¶
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claim to be a victim of anything either. They claim to proceed on behalf of the interest of the territory to try and vindicate this quasi-sovereign interest.¶
Let me turn to the injunctive relief request because you discussed that at some length with Ms. Liu. I think the Court’s questions are the right ones which is, What is the US Virgin Islands seeking to enjoin? And what basis does it have to believe that there is a need to enjoin anything? The US Virgin Islands has listed no evidence that sitting here today JPMorgan Chase is not conducting itself in compliance with the TVPA or with any of the federal anti-money laundering statutes or any of the other sort of bank regulations that have form the basis of some of their claims.¶
There’s not a scintilla of evidence in the record that suggest that there is lack of compliance today — and I would argue lack of compliance historically, but putting that to the side. There’s no suggestion that there would be any need that they could possibly make out the showing required for injunctive relief, either balance of harms for some of the reasons Mr. Schoenfeld was discussing relating to some of the affirmative defense.¶
But more importantly, there is no suggestion that there is a need to have an injunction from a court that says follow the law when they haven’t elucidated any evidence that JPMorgan is not following the law.¶
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THE COURT: I think their argument at least in part as I understood from what Ms. Liu just had to say was, you didn’t file SARs in her view purposely because you were accommodating Mr. Epstein’s misconduct, because it was lucrative for you to do so.¶
Then when finally things just got impossibly out of hand, the publicity was too bad or whatever, you, in her view, belatedly filed those SARs almost — she would argue admitting thereby that you should have filed them sooner. And that that shows a pattern of behavior that needs to be enjoined going forward. Those are not the Court’s arguments one way or the other. I’m just trying to articulate what I understood her to be saying.¶
MS. ELLSWORTH: I think that that argument as articulated by US Virgin Islands is simply contravened by the facts. There are six filings made with the treasury department during the course of the relationship between JPMorgan and Jeffrey Epstein that predate that final post-death filing that Ms. Liu was talking about.¶
So the suggestion that there were no filings at all is imply incorrect. And the suggestion that there is a need to have some kind of follow the law injunction from this Court for the bank to have an adequate compliance program, again there have been no facts adduced to suggest that sitting here today in 2023, the compliance program is not squeaky clean.¶
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So I don’t think that you can just say, well, I think you did something not as well as you should have 20 years ago, and so today the Court’s going to enter an injunction without knowing that you’re not doing things perfectly appropriately today. The time for facts is now, and they have not elucidated them. If I could just be heard briefly, we also moved on the obstruction claim.¶
THE COURT: Yes, and we need to hear from your adversary on that as well, but go ahead.¶
MS. ELLSWORTH: Indeed, but since I have the microphone, I’ll start. We moved that summary judgment should enter in JPMorgan’s favor on the obstruction claim. Let me give a few different reasons why I think that is.¶
THE COURT: Possession of the microphone is a weapon not to be lightly disregarded.¶
MS. ELLSWORTH: And not to be abused, so I’ll be brief. The US Virgin Islands does not have standing for an obstruction claim. The Court allowed the Doe class obstruction claim to proceed pass the motion to dismiss stage because the Doe class claim to be victims of the alleged obstruction of a federal TVPA investigation. Virgin Islands hasn’t claim nor could it that it was a victim of an alleged obstruction of a TVPA investigation.¶
It hasn’t argued any harm, but more importantly it hasn’t suggested that somehow it was a victim. And it’s only a¶
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victim of obstruction that can in fact bring a claim under the TVPA for that obstruction. The harm, to the extent that there was a harm beyond the individual victims, it would be to the federal government to the extent there was an obstruction. So I think there’s sort of threshold standing problem with the US Virgin Islands obstruction claim.¶
The second point I would make is, they have not put forth any evidence that there was in fact a federal investigation to obstruct. They have not identified, II, there was an investigation in 2010, and somehow that was obstructed or impeded by conduct or lack of conduct by JPMorgan Chase. They haven’t met that second predicate act.¶
And then even more easily on the summary judgment standard, they have not and cannot —¶
THE COURT: What about the arguments — this goes back to the SARs — that there would or a reasonable jury could conclude that there would have been an investigation had they timely filed the SARs that she says you didn’t file in a timely fashion; and that therefore the effect of the failure to make timely filings was an obstruction in the same way that, say, destroying evidence before the government knows about the underlying crime constitutes obstruction.¶
MS. ELLSWORTH: Again, it’s a counterfactual argument, and that’s the problem with the argument. There were failings made with the treasury department, and there was no response or¶
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action taken by the federal government in response to filings made in 2002, 2003, 2008, 2013, 2015 and 2016. So the suggestion that filing more than those particular reports would have somehow spurred an investigation is I think contravened by the fact that the things that were filed did not spur an investigation.¶
I would also point out that the obstruction count requires an intentional act. It requires an intent to impede an investigation. We again have the opposite here. What the testimony and the evidence in the record before you shows is that JPMorgan Chase employees made inquiries of the federal government about whether or not an investigation was ongoing against Mr. Epstein.¶
And they were either told Can’t confirm or deny, or they were told by lawyers for Epstein that no investigation was ongoing. So inquiring about the existence of an investigation is the polar opposite of trying to obstruct.¶
THE COURT: I’m not sure that I need to or should give any weight to the inquiries of Epstein’s lawyers. When you say the bank says to a crook, Are you under investigation, Mr. Crook. Not me. The inquiries of the government are typically responded to as you indicated with, We’re not going to comment one way or the other.¶
MS. ELLSWORTH: But again, what this all goes to is whether there was intentional conduct. It doesn’t matter¶
whether it was right or wrong if an investigation was ongoing or not.¶
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THE COURT: My point is couldn’t a reasonable jury determine that the inquiries of Mr. Epstein’s lawyers in that regard was simply, to use plaintiff’s counsel colorful phrase, as CYA —¶
approach. THE COURT: — approach as opposed to a sincere¶
MS. ELLSWORTH: With apologies, your Honor.¶
MS. ELLSWORTH: I don’t think sincerity matters for purposes of obstruction. They need to show an intentional attempt to impede an investigation, and the conduct that I’ve just described is the opposite of that. It’s an attempt to determine if there’s an investigation ongoing, as opposed to an attempt to hide evidence, destroy evidence, sort of all the typical obstruction type conduct.¶
The last point I would make on the obstruction claim is just to point out that again we have a 2008 retroactivity problem. So the obstruction cause of action was added to the TVPA in December of 2008, so any conduct that predates that on which the US Virgin Islands would seek to rely cannot be a basis for a liability under obstruction. Anything after 2008, that could potentially be a basis, but pre-2008 conduct is off the table for that purpose.¶
THE COURT: Thank you very much. Let me hear now¶
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again from the Virgin Islands.¶
MS. LIU: Thank you, your Honor. I just want to be clear on this issue about parens patriae being essentially the government acting as a private actor is completely contrary to all of the case law and the common law as it relates to parens patriae authority which is specifically the language used in 1595(d).¶
Parens patriae means parent of the country or parent of the state. The Attorney General is the one who can act as parens patriae because they can act in a law enforcement capacity to prosecute crimes civilly and criminally, but civilly here including crimes as heinous as child sex trafficking.¶
The very nature of parens patriae is the state acting as a civil law enforcer. Otherwise, it is not the real party and interest for purposes of a parens patriae’s action, and that’s where you get into a number of these¶
THE COURT: Well, that may be true as to parens patriae actions generally, but here of course the statute speaks of the interest of the residents, not the interest of the state independent of the interest of the residents. So I’m not totally sure whether there’s a distinction to be made there or not.¶
MS. LIU: There absolutely is because if you look at Alfred Snapp, it distinguishes between three layers. One, the¶
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state acting in its pure sovereign capacity while the parens patriae case. The state acting in its quasi-sovereign capacity protecting the general interest of a substantial segment of its population, that is the interest of its residents. And here the Court has said, assuring its residents that it will be protected from ongoing sex trafficking flourishing in the Virgin Islands is exactly a quasi-sovereign interest residents. of the¶
THE COURT: If that’s so, accepting that for the moment, that gets you to injunctive relief. It doesn’t get you to damages.¶
MS. LIU: That gets us, we submit, your Honor, not only to injunctive relief under the common law, but also declaratory relief and civil penalties.¶
Now when you get to the question of, Can you also authorize in a parens patriae case compensatory and punitive damages to individuals, the answer is yes. The Second Circuit in Seneci said under common law parens patriae, we are not going to determine their standing when you’re seeking merely damages on behalf of individuals. But, the Court said, citing to the Frito Lay case, the legislature can authorize under parens patriae authority compensatory or punitive the additional remedy of pursuing damages.¶
THE COURT: But here we have all the injured members of the class settled. They of course could have sought — and¶
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undoubtedly would have sought if the case had gone forward punitive damages. They accepted a settlement that, if I approve it, will very fully compensate the whole class of victims. So what’s left for you to seek in that regard?¶
MS. LIU: Before I answer that question, Judge, just two more quick points on the parens patriae issue. I would submit to the Court in the AU Optronics case. In that case the Court I think summarized it nicely by saying parens patriae representation is analogous to, for example, the role of the EEOC. I think you asked about the SEC.¶
But what the Court says and what many of these cases say is parens patriae authority is the state Attorney General or state law enforcer acting in the role of a civil law enforcement agency. And or other regulator, when segment of the public or in fact in that case the Court said, it brings a case on behalf of a in the interest of its residents.¶
So parens patriae is recognized as a civil law enforcement or regulatory action, and we thus submit, for example, as the New York banking regulator issued $150 million civil penalty against Deutsche Bank for its relationship with Epstein, such a similar civil penalty can be awarded here.¶
But to answer your question, Judge, as to individual victim damages. First of all, Congress has in numerous examples that we cite, and also cited by defendants, authorized under parens patriae authority for State Attorneys General the¶
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ability to seek money damages for individuals, in addition to injunctive relief civil penalties and other forms of relief.¶
As far as I know, not a single one of those statutes has been struck down as improperly allowing the Attorney General in its parens patriae authority to seek civil damages on behalf of individuals.¶
Going back to the Seneci case, citing to Frito Lay.¶
What Frito Lay says — and this is the Second Circuit in Seneci citing to the Ninth Circuit. What Frito Lay says is, State legislatures or Congress can use its legislative power and determine that within parens patriae authority one form of relief that can be sought is compensatory or punitive damages for victims. And that is one of form of relief we are seeking here under the statute.¶
In terms of your questions about double recovery or duplicative relief, that does not go to the question of whether or not in the first instance Attorneys General under 1595(d) have the authority to seek that relief. That is what happened in this particular case. What happens in any particular case cannot determine whether or not the authority existed. So these are two different questions.¶
And in fact in their reply brief, JPMorgan argues the question of parens patriae authority is analytically distinct from what relief can be sought in a particular action. So I would submit, we can seek it. The plain language of the¶
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statute allows it. The legislative history supports it. And then when it comes before your Honor in the situation that’s present here, which may not be present in every case, there could be an example where the Doe victims did not come forward. They did not seek their own relief. And then what would the Court say. You can’t interpret 1595(d) differently in terms of authority based on what happens in any particular case.¶
So the only question becomes, Can you seek it? Yes, you can. And to what extent would a jury after a trial, if there is a trial in this case, award in terms of compensatory and punitive damages. They may award $280 million, in which case it then falls to the Court — you can look at EEOC v. Waffle House before the Supreme Court to decide what’s the offset.¶
THE COURT: Again, just for the sake of argument, if the only relief you can seek is injunctive relief, declaratory relief and civil penalties, is it a jury trial?¶
MS. LIU: I believe that civil penalties, your Honor, as I mentioned — and there’s a Supreme Court case from 1987 called Tull. I think it’s Tull v. United States. I think what that case says is that a civil penalty was a remedy at common law. And because it’s a remedy at common law, I believe liability can be determined by a jury. I don’t want to get ahead of myself here, but I think it’s the case that perhaps the judge can determine the amount of the civil penalty, but¶
that a jury can hear the case and assess liability in that context.¶
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THE COURT: All right. Well, we don’t need to reach perhaps that issue on these motions. Only in my nightmares do I see this as a bench trial. So, anyway, let me hear from defense counsel.¶
MS. ELLSWORTH: So, your Honor, just to make a few points in response to Ms. Liu’s argument. The first is that the cases where parens patriae actions were viewed more akin to law enforcement actions that Ms. Liu was citing to, the Purdue case, the AU Optronics. Those are all cases where there were states pursuing under their own state laws.¶
THE COURT: You made that point before, and I think it’s an important point, but I understand that point.¶
MS. ELLSWORTH: So when they’re enforcing their own state law, it’s just a different in kind. On the question of injunctive relief — and I do think the Court needs to think about, again, what is the interest that is being articulated here. And in particular, Does the US Virgin Islands even have standing to seen an injunction here.¶
So the interest that’s been articulated is protecting the residents from the harm of potential sex trafficking. They have not identified any actual concrete or particularized injury that such future harm might befall the residents of the US Virgin Islands or any territory; nor that that potential¶
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harm might be redressed by the injunction that apparently they would be seeking. And although I don’t think it’s before you on summary judgment as to the form of injunctive relief, if any, of course liability would need to be established first.¶
But what I’ve heard articulated is, comply with the law. Comply with the TVPA. And there’s no suggestion that that would redress whatever harm it is that they articulated at the motion to dismiss stage, and they purport to continue to articulate here.¶
I do want to go back to the civil penalties point because I think it’s important, and I hear the Court sort of grappling with whether or not that’s available here. It is a traditional law enforcement penalty. It’s called a civil penalty, right, or a fine. That’s by its nature punitive.¶
I’ll point out the retroactivity point again, but again that is not what Congress authorized State Attorneys General to do here, didn’t authorize State Attorney General to enforce the TVPA as some law enforcement entity.¶
Congress knows how to do that. It has done that in other federal statutes where it delegates some enforcement authority to a State Attorney General. That is not what Congress did in the TVPA. It knows how to do it, and it didn’t do it here. And so for the Court to interpret the 1595(d) to allow that type of punitive action by a non-law enforcement entity would, I think, be both improper under the TVPA, but¶
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would also be impermissibly retroactive for any conduct that predates 2018.¶
On the question of compensatory damages to victims. That’s just flatly unavailable to a parens patriae plaintiff. It cannot be individual damages. And Ms. Liu has said a few different times that Seneci said, well, if that’s all you’re seeking, then that’s the problem. But whether or not that’s all that the US Virgin Islands is seeking, it is still unavailable as a form of relief under parens patriae.¶
And the Court said it itself in the motion to dismiss ruling, which is that the interest that allows the US Virginia Islands to proceed forward here is an interest that cannot be redressed by an individual plaintiff, and that’s not what the compensatory damages that they purport to seek here would be.¶
And again I point out as the Court has, to the extent that they had some right to seek those damages, which they do not, those victims have been fully compensated by the two settlements.¶
THE COURT: Although theoretically, I doubt this will occur, theoretically if 50 people opted out on those settlements, and they were all residents of the Virgin Islands, we might have an interesting issue, but I think that’s an unlikely scenario.¶
MS. ELLSWORTH: I think it is too, your Honor. I think that is an entirely theoretical question, but the¶
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question did embed an important point, which is residents of the Virgin Islands would be the only types of potential victims that the US Virgin Islands might be able to seek compensatory damages for.¶
Again, those damages aren’t available, but even if they were. And they have not articulated or identified who those individuals might be.¶
But more importantly, it’s both categorically unavailable released by the settlement if it is ultimately approved and unnecessary. Those damages have been fully compensated by the settlements reached that the Court is currently considering.¶
THE COURT: Okay. I want to hear both from plaintiff’s counsel on what we’ve just been discussing, but also on anything else you want to raise because in a moment of foolishness I scheduled another matter to follow this matter, and I don’t want to keep the lawyers in that matter waiting too long.¶
Let me hear from plaintiff’s counsel, and then we’ll give defense counsel a final say as well.¶
MS. LIU: Thank you, your Honor, just a few points. If you look at the legislative history of 1595(d), it’s clear that Congress was contemplating that State Attorneys General would act as civil law enforcement in this case.¶
The language in one section allege history that we¶
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cite in the briefing, We have begun to change the issue of resources to go after the perpetrators of these heinous crimes in a much better way by allowing State Attorneys General to actually prosecute these crimes. “Prosecute” that is not a word that is used, except when you are referring to the State Attorneys General’s law enforcement powers. We are doing something in the law that says we need more prosecutes. We need more investigators.¶
Again, those are terms used when Congress is intending that Attorneys General are acting in their civil law enforcement capacity. “Let’s unleash those in the states to help us address this growing problem throughout our country. A problem that they previously referred to as these heinous crimes.”¶
Clearly the intent of Congress was to have State Attorneys General, the law enforcement entities in state —¶
THE COURT: You’re saying that, as to your adversary’s argument, that this would only apply if they were enforcing state laws, that the statute on its face in effect says they are enforcing federal law?¶
MS. LIU: Right. And Congress has done this numerous times where they’ve invoked State Attorneys General parens patriae authority to enforce a federal law civilly, and for this precise reason, to allow more prosecutes to go after these type of crimes.¶
And in the briefing we talk about other congressional enactments that protect children; for example, where Congress has specifically sought the help of state law enforcement to enforce and prosecute these type of heinous crimes against perpetrators like JPMorgan.¶
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I will also provide to you, your Honor —¶
THE COURT: And you might along the same lines say or argue perhaps that this made special sense in a situation where victims who are residents of a particular state or territory are often, by the nature of these crimes, people who are hesitant to come forward have many impediments to bearing their souls so to speak; and so that it would be particularly appropriate to have the state as a quasi-prosecutor through civil action in those situations.¶
MS. LIU: Absolutely, Judge. And that’s precisely what has happened here. If you look at the statements of undisputed facts, I believe it’s in JPMorgan’s facts, it is noted by one of the parties that the EDCP identified, for example, a certain number of victims that it could identify.¶
Of course it’s very hard to ensure that you’ve identified all of the victims in this kind of case, particularly as you said, where Jeffrey Epstein really was able to hide out on these two Islands that were miles off the shore of St.¶
But the EDCP identified a certain number of victims.¶
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And, in fact, not all those victims came forward. There may be a number of absent class members who did not fall within the class period whose claims are released. And that is precisely, even in this particular case, the reason that state AGs are here. We can get those damages for those victims, put them in a fund. And if at some point years down the road those victims come forward, they can still claim those funds as opposed to having them released.¶
I would also note that there is a long line of cases, Judge, where the situation that’s happened here has happened in cases involving government enforcement actions; namely, private party settlements seeking to release government claims. And the Third Circuit, the Eighth Circuit, the Seventh Circuit, the Eleventh Circuit, have all said that is not permitted.¶
In the Kwasny case, 853 F.3d 87; the Kratville case, 796 F.3d 873; the Hartigan case, 816 F.2d, 1177. Those cases say — and I’m quoting, That private settlements cannot preclude the government “From later seeking additional or more full restitution or any other remedy. Private settlements cannot release the claims of government.”¶
Again, your Honor can determine at a later stage, if there’s an offset merited here. We are not arguing for double recovery. But to the extent, again, there are absent class members, or a jury decides that punitive damages should be awarded, which are not included in the proposed settlement, why¶
shouldn’t the victims benefit from those awards? Why should JPMorgan get the windfall of not having to pay those punitive damages or those absent class members or those additional compensatory damages that a jury decides is properly awarded to the hundreds of victims at issue in this case particular case?¶
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THE COURT: Okay. Thank you so much. Let me hear from defense counsel.¶
MS. ELLSWORTH: Just a few things, and I’ll bring that last point up first. The claims the government is asserting here are not the claims of victims for their own damages. What the government is trying to assert here is a quasi-sovereign interest in protecting the residents of the territory, so nothing that would be released by the settlement should effect the government’s claims.¶
The government has different claims, and I think that’s some of what the Court and the parties have been grappling with here is trying to define what in fact is the government claiming, and is there any injury in fact that they can claim based on that articulation.¶
As to whether the TVPA should be read to infer some power for a state Attorney General to actually act as a prosecutor, as an enforcing entry. Congress knows how to do that explicitly.¶
When it wants to do that, it does so explicitly using that language. That is not what it did in the TVPA. And I¶
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don’t think that a snippet of either a floor statement or a Senate report can change the plain language of the statute which does not delegate any enforcement authority. It doesn’t amend the criminal provision of the TVPA that only the federal government can enforce. It adds a civil parens patriae right of action for State Attorneys General, and that’s it.¶
And the last point I would make is that, the governor of the Virgin Islands here has to identify what interest it is that it’s trying to vindicate. And it identified that interest as the harm to residents from sex trafficking.¶
Now before the Court it needs to come forward with some evidence that there is in fact harm in the future to residents from sex trafficking, or that there is some cognizable compensatory harm in the past to its residents, its quasi-sovereign interest. And it’s come forth with neither at this last stage in the litigation, and that’s what I think is the important factual point for the Court to focus on.¶
THE COURT: All right. So I thank all counsel for this excellent and very helpful argument. I remind everyone that if the case goes forward to trial, he trial is set for October 23rd, and that is a firm fixed final and unmoveable date, so you need to know the results of these motions substantially before that.¶
I will undertake worst case to get you my rulings on¶
these motions by the end of September, but I’m going to try to do much better than that. At least maybe I’ll get you a bottom line order to be followed by an opinion. Meanwhile, I’ll take everything under advisement, and my thanks again to the excellent counsel in this case. That concludes this proceeding.¶
a¶
(Adjourned)¶