Young v. Sec. & Exch. Comm'n

• Decision Date: 28 April 2020
• Docket Number: No. 16-1149,16-1149
• Citation: 956 F.3d 650
• Parties: Bernerd E. YOUNG, Petitioner v. SECURITIES AND EXCHANGE COMMISSION, Respondent
• Court: U.S. Court of Appeals — District of Columbia Circuit

956 F.3d 650

Bernerd E. YOUNG, Petitioner

v.SECURITIES AND EXCHANGE COMMISSION, Respondent

No. 16-1149

United States Court of Appeals, District of Columbia Circuit.

Argued December 16, 2019

Decided April 28, 2020

Minh Nguyen-Dang, appointed by the court, argued the cause as amicus curiae for petitioner. On the brief was Brian D. Netter, Washington, DC, appointed by the court.

Bernerd E. Young, pro se, argued the cause and filed the briefs for petitioner.

Dina B. Mishra, Senior Counsel, U.S. Securities and Exchange Commission, argued the cause for respondent. With her on the brief were Mark R. Freeman, Mark B. Stern, Washington, DC, and Daniel Aguilar, Attorneys, U.S. Department of Justice, Michael A. Conley, Solicitor, U.S. Securities and Exchange Commission, and Dominick V. Freda, Assistant General Counsel. Lisa K. Helvin, Attorney, U.S. Securities and Exchange Commission, entered an appearance.

Before: Wilkins, Circuit Judge, and Williams and Sentelle, Senior Circuit Judges.

Opinion concurring in the judgment filed by Senior Circuit Judge Williams.

Wilkins, Circuit Judge:

In 2012 the Securities and Exchange Commission prosecuted Bernerd Young for multiple securities violations based on his participation in a multi-billion dollar Ponzi scheme between 2006 and 2009, during the height of the financial crisis. After a hearing, an administrative law judge (ALJ) found him liable on most of the charges and imposed various penalties, including disgorgement of nearly $600,000, which represented about half of the compensation he received between 2006 and 2009. The Commission affirmed the ALJ’s decision, and Young filed a petition for review. However, he filed his petition in the District of Columbia Court of Appeals, which is the wrong court. By the time he realized his mistake and filed the petition in our Court, the sixty-day deadline for filing had passed.

We do not pass upon whether the statutory time limit to file a petition for review is jurisdictional and subject to equitable tolling. Instead, we conclude that, even assuming it is a non-mandatory claims processing rule, Young has failed to demonstrate entitlement to equitable tolling. Filing a petition for review in a state court that clearly lacks jurisdiction over the petition does not toll the deadline for filing in our Court. And because no extraordinary circumstance beyond his control prevented him from timely filing in our Court, he is not entitled to equitable tolling, and we must dismiss his petition.

I.

From 2006 to 2009, Bernerd Young was the Chief Compliance Officer at Stanford Group Company ("SGC"). SGC was an affiliate of Stanford Financial Group ("SFG"), a network of companies controlled by Allen Stanford. Based in Houston, SGC was a dually registered investment adviser and broker-dealer that heavily marketed to U.S. investors so-called "certificates of deposit" ("CDs"). These CDs were issued by another SFG affiliate: Stanford International Bank Limited ("SIB"), an offshore Antiguan bank established by Allen Stanford. As Chief Compliance Officer, Young was responsible for ensuring the accuracy of SGC’s statements in promoting these CDs. The CDs, which accounted for 55.38% of SGC’s revenue between 2006 and 2009, purported to be "invested in diversified and liquid holdings" that generated "consistent above-market returns" for investors. J.A. 166. In fact, however, SIB was operating a Ponzi scheme.

SIB supported its CDs with "detailed marketing materials and annual reports showing steady growth." United States v. Stanford , 805 F.3d 557, 564 (5th Cir. 2015). Meanwhile, Allen Stanford "spent lavishly, purchasing boats, mansions, and personal aircraft and sponsoring high-dollar cricket tournaments." Id. The scheme collapsed in 2009, when new CD investments became insufficient to cover the interest and redemption payments owed to current SIB investors. Id. The Commission promptly instituted a civil action against Allen Stanford, SIB, and other companies and persons involved in the sale and promotion of the CDs, alleging an $8 billion fraudulent scheme. In March 2012, Stanford was convicted of numerous federal crimes and sentenced to 110 years in prison, id. at 565, and he was later ordered to disgorge $5.9 billion in ill-gotten gains, SEC v. Stanford Int’l Bank, Ltd., et al. , No. 3:09-CV-0298-N, 2013 WL 12360438, at *5 (N.D. Tex. Apr. 25, 2013).

In August 2012, after a lengthy investigation, the Commission instituted proceedings against Young and two other former officers of SGC, charging them with various violations of federal securities laws. Young was represented by counsel before an ALJ.¹ Following a fifteen-day hearing, at which 26 witnesses testified and over 350 exhibits were presented, the ALJ issued an initial decision in August 2013, which found Young and the other two respondents liable on most of the charges.

Specifically, the ALJ concluded that Young and the other two respondents negligently failed to conduct reasonable diligence in investigating the CDs. Despite this lack of diligence, Young and the respondents approved SGC’s use of materials that misrepresented material facts to investors about the liquidity of SIB’s underlying investment portfolio. Later, clients and potential clients began expressing concerns that SIB’s model was indicative of a Ponzi scheme akin to the one Bernie Madoff had recently been caught orchestrating, and that Antiguan regulators were being corruptly influenced by Allen Stanford.² The ALJ concluded that, after hearing these concerns, Young and the other respondents "decided that SGC should ‘attack’ with talking points," rather than "investigate the[ir] possible truthfulness." J.A. 51. As the ALJ explained, they "went on a damage control road show," J.A. 52, designed to "lull customers so as to forestall redemptions and continue sales of the SIB CD." J.A. 51.

The ALJ imposed multiple sanctions against Young and the other two respondents. The ALJ (1) ordered them to cease and desist from committing or causing any future violations of the securities laws at issue; (2) imposed a civil penalty of $260,000; and (3) permanently barred them from working in the securities industry. In addition, the ALJ ordered Young to disgorge $591,992.46, or 55.38% of the $1,068,964.36 in payroll compensation he received from SGC between 2006 and 2009.

The other two respondents did not seek Commission review of the ALJ’s decision, but Young did. Now proceeding pro se , Young timely petitioned the Commission for review in September 2013. On March 24, 2016, the Commission issued a unanimous opinion and order affirming the ALJ’s decision and the penalties.

Young had sixty days to seek review of the Commission’s decision, either from our Circuit or the circuit in which he resides or maintains his principal place of business. See 15 U.S.C. §§ 77i(a), 78y(a)(1), 80b-13(a), and 80a-42(a). On May 23, 2016, the last day to file, he filed a petition for review, but filed it with the wrong court – the District of Columbia Court of Appeals (DCCA). Young had previously contacted the DCCA and received instructions on how to file a petition there. On May 24, the DCCA contacted Young and informed him of his error. Young, who happened to be in Washington, D.C. at the time, retrieved his petition from the DCCA and refiled it in our Court later that same day – one day too late. Young’s petition was docketed, and we issued an order to show cause why the petition should not be dismissed for lack of jurisdiction. After Young explained the circumstances, we discharged the order to show cause and directed the parties to address our jurisdiction in their merits briefs.

During briefing, we granted the Commission’s motion to hold the case in abeyance pending the resolution of Lucia v. SEC , in which the Supreme Court ultimately held that SEC ALJs are "Officers of the United States" under the Appointments Clause, and that ALJs not appointed by the President were thus unconstitutionally appointed. 138 S. Ct. at 2053. Thereafter, the parties filed motions to govern further proceedings. In his motion, Young sought leave to file a supplemental brief addressing both Lucia and Kokesh v. SEC , in which the Supreme Court held that the five-year statute of limitations for any "action, suit or proceeding for the enforcement of any civil fine, penalty, or forfeiture, pecuniary or otherwise" applies to disgorgement imposed as a sanction for violating a federal securities law. ––– U.S. ––––, 137 S. Ct. 1635, 1643, 198 L.Ed.2d 86 (2017) (interpreting 28 U.S.C. § 2462 ). Given the new complexity of the case, we appointed amicus curiae on March 4, 2019 to present arguments in support of Young’s position, and we entered a new briefing schedule. The case is now ready for our consideration.

II.

Before we may consider the merits of Young’s petition, we must determine whether a basis exists to excuse his petition’s untimeliness.

As an initial matter, Amicus argues that because Young’s petition complied with every requirement except for the place of filing, his petition was, in effect, in compliance with the sixty-day deadline. We disagree.

Amicus relies on Torres v. Oakland Scavenger Company , 487 U.S. 312, 316-17, 108 S.Ct. 2405, 101 L.Ed.2d 285 (1988), and Anderson v. District of Columbia , 72 F.3d 166, 167 (D.C. Cir. 1995) (per curiam), but these cases speak to petitions that are timely filed in the correct court but contain some technical defect. In Torres , the Supreme Court explained that where "a litigant files papers in a fashion that is technically at variance with the letter of a procedural rule, a court may nonetheless find that the litigant has complied with the rule if the litigant’s action is the functional equivalent of what the rule requires." 487 U.S. at 316-17, 108 S.Ct. 2405 (citations omitted). Relying on this principle, our Court later held that an appellant who had "timely filed a notice of appeal in the district court but improperly designated the United States Supreme...