U.S. S.E.C. v. Vittor, 02-13876.

• Decision Date: 07 March 2003
• Docket Number: No. 02-13876.,02-13876.
• Citation: 323 F.3d 930
• Parties: UNITED STATES SECURITIES AND EXCHANGE COMMISSION, Plaintiff-Appellee, v. Glen T. VITTOR, Defendant-Appellant.
• Court: U.S. Court of Appeals — Eleventh Circuit

323 F.3d 930

UNITED STATES SECURITIES AND EXCHANGE COMMISSION, Plaintiff-Appellee, v. Glen T. VITTOR, Defendant-Appellant.

No. 02-13876.

United States Court of Appeals, Eleventh Circuit.

March 7, 2003.

James E. Felman, Kynes, Markman & Felman, P.A., Tampa, FL, for Defendant-Appellant.

Thomas J. Karr, Melinda Hardy, WM Smith Greig, SEC, Office of the Gen. Counsel, Washington, DC, for Plaintiff-Appellee.

Appeal from the United States District Court for the Southern District of Florida.

Before DUBINA and BLACK, Circuit Judges, and RYSKAMP^*, District Judge.

DUBINA, Circuit Judge:

This case presents several questions regarding statutory construction. Appellant Glen T. Vittor ("Vittor") appeals the district court's order directing him to comply with the Securities and Exchange Commission ("SEC") decision affirming the National Association of Securities Dealer's ("NASD") sanctions against him. For the reasons that follow, we affirm the district court's order.

I. BACKGROUND

The NASD, a private, non-profit corporation organized under Delaware law, is a self-regulatory organization. The NASD is registered as a "national securities association." 15 U.S.C. § 78o-3.

In May 1993, Vittor was the principal, managing partner, and trader for Falcon Trading Group, Ltd. ("Falcon"), which was then a registered broker-dealer and NASD member. On June 27, 1994, the NASD's Market Surveillance Committee ("MSC") took disciplinary action against Vittor and Falcon for failing to honor trades in securities of a company called Spectrum Information Technologies, Inc. ("Spectrum") and for associating with Philip Gurian ("Gurian"), an individual whose registration the NASD had previously revoked.¹ Specifically, the MSC ordered Vittor and Falcon to pay restitution to Paine Webber, Inc. and Lehman Brothers, Inc. and fined Vittor and Falcon for failing to honor these trades and for associating with Gurian.

Vittor appealed the MSC's decision to the NASD's appellate body, the National Business Conduct Committee ("NBCC"). In March 1994, the NBCC issued a decision reducing the fines against Vittor and Falcon and ruling that the amount of restitution Vittor and Falcon paid should be offset by any amounts paid to Paine Webber and Lehman Brothers pursuant to any arbitration order or settlement. Pursuant to 15 U.S.C. § 78s(d), Vittor and Falcon appealed the NASD decision to the SEC. In its opinion, the SEC stated that Vittor and Falcon's actions warranted the NASD's sanctions. Contemporaneous with its opinion, the SEC issued an "order" sustaining the NASD's disciplinary action and assessment of costs. Vittor and Falcon appealed the SEC's decision to the United States Court of Appeals for the District of Columbia. See 15 U.S.C. § 78y(a)(1). The circuit court denied the petition for review. The court determined that the SEC did not abuse its discretion in affirming the NASD's decision, which denied Vittor and Falcon's request for a continuance of the NASD hearing, and that a quorum of commissioners lawfully rendered the SEC's decision. Falcon Trading Group, Ltd. v. SEC, 102 F.3d 579 (D.C.Cir.1996).

In December 2000, the SEC filed an application in federal district court seeking enforcement of the SEC order affirming the NASD imposed sanctions. In its application, the SEC invoked only section 21(e)(1) of the Securities Exchange Act, 15 U.S.C. § 78u(e)(1). Vittor opposed the SEC's application, arguing that section 21(f) barred the relief the SEC sought under section 21(e)(1). He also argued that the SEC's order could not be enforced under section 21(e)(1) because it did not command Vittor to do anything — it simply sustained the NASD's sanctions against him. The district court entered a final order granting the SEC's application under section 21(e)(1). Recognizing that whether section 21(f) applied to the SEC's application was a close question, the district court concluded that section 21(f) barred the SEC from bringing an original action against Vittor for violations of NASD rules. The court concluded, however, that "once the SEC has affirmed an NASD decision regarding such violations, the SEC has the authority under [s]ection 21(e) to seek an order commanding compliance with the SEC affirmance, regardless of [s]ection 21(f)." Dist. Ct. Order at 3. The district court expressly declined to reach the issue of whether the SEC had met either exception to Section 21(f).

II. ISSUES

1. Whether, under section 21(e)(1) of the Securities Exchange Act, 15 U.S.C. § 78u(e)(1), the SEC may enforce an SEC order affirming sanctions that the NASD imposed for violation of NASD rules.

2. If the SEC may enforce its order affirming sanctions imposed by the NASD, whether the SEC must satisfy one of the statutory exceptions of section 21(f) of the Securities Exchange Act, 15 U.S.C. § 78u(f), to bring an action to enforce such an order in federal district court.

III. STANDARD OF REVIEW

This court reviews de novo the district court's order discussing the scope of sections 21(e)(1) and (f) because it involves pure legal questions of statutory construction. See Estate of Shelfer v. C.I.R., 86 F.3d 1045, 1046 (11th Cir.1996).

IV. ANALYSIS

A. Statutory background

The statutes at issue are set forth below.

Section 21(d) permits the SEC to sue for injunctive relief in federal court and to obtain civil money penalties. 15 U.S.C. § 78u(d)(1), (2). The section provides in pertinent part that

(1) Whenever it shall appear to the Commission that any person is engaged or is about to engage in acts or practices constituting a violation of any provision of this chapter, the rules or regulations thereunder, [or] the rules of a national securities exchange or registered securities association of which such person is a member or a person associated with a member, ... it may in its discretion bring an action in the proper district court of the United States ... to enjoin such acts or practices....

15 U.S.C. § 78u(d)(1). Subsection (2) provides for civil money penalties and describes the procedure that the SEC can use to collect them. Thus, because the NASD is a "registered securities association of which [Vittor was] a member," section 21(d) permits the SEC to commence its own action against Vittor for violating NASD rules, unless the limitation of 21(f), discussed infra, applies.

Section 21(e)(1), the provision under which the SEC proceeded in this case, provides federal district courts with jurisdiction over certain SEC actions.

(e) Mandamus

Upon application of the Commission the district courts of the United States ... shall have jurisdiction to issue writs of mandamus, injunctions, and orders commanding (1) any person to comply with the provisions of this chapter, the rules, regulations, and orders thereunder, [or] the rules of a national securities exchange or registered securities association of which such person is a member or person associated with a member....

15 U.S.C. § 78u(e).

Section 21(f) expressly limits the SEC's authority to sue under sections 21(d) and (e) for violations of NASD rules.

(f) Rules of self-regulatory organizations

Notwithstanding any other provision of this chapter, the Commission shall not bring any action pursuant to subsection (d) or (e) of this section against any person for violation of, or to command... compliance with, the rules of a self-regulatory organization unless it appears to the Commission that (1) such self-regulatory organization ... is unable or unwilling to take appropriate action against such person in the public interest and for the protection of investors, or (2) such action is otherwise necessary or appropriate in the public interest or for the protection of investors.

15 U.S.C. § 78u(f).

B. Issues

1. Application for District Court Enforcement

Vittor contends that section 21(e)(1) does not permit the SEC to apply to the federal district court for enforcement of an SEC order affirming NASD sanctions. To support his contention, Vittor argues that the SEC's affirmance of NASD sanctions is not an "order" within the meaning of section 21(e)(1). Vittor asserts that the district court failed to consider the ordinary meaning of the word "order." Moreover, Vittor contends that the SEC's "order" simply sustains the NASD's disciplinary action; the "order" does not command, direct, or instruct Vittor to do anything.

Vittor also argues that when the words of section 21(e)(1) are considered in context, that section clearly does not permit the SEC to file an application with the district court for enforcement of an SEC order affirming NASD sanctions. Section 21(e)(1) provides federal district courts with jurisdiction over SEC applications to enforce "the provisions of this chapter, the rules, regulations, and orders thereunder, [or] the rules of a national securities exchange or registered securities association...." 15 U.S.C. § 78u(e)(1). In construing the term "order," Vittor contends that the district court should have considered the phrase in which it appears. He argues that each term refers to statutes or rules of widespread applicability; they do not refer to a single decision in a specific case. Thus, the word "order" in this context has a meaning akin to "rule" or "regulation."

Vittor urges us to decline to follow Lang v. French, 154 F.3d 217 (5th Cir.1998), upon which the district court relied, in construing the word "order" in section 21(e)(1).

After reviewing the record, and contrary to Vittor's arguments, we conclude that the SEC's order sustaining the NASD's disciplinary sanctions was unquestionably an order. An "order" is defined as "[a] command, direction, or instruction;" or "[a] written direction or command delivered by a court or judge." Black's Law Dictionary (7th ed.1999). Section 19(e) requires the SEC to issue an "order" when it affirms a final disciplinary sanction imposed by a self-regulatory organization ("SRO") such as the NASD. 15 U.S.C. § 78s(e) (stating that if, upon review of an SRO's "final...