Sec. & Exch. Comm'n v. Graham
Decision Date | 26 May 2016 |
Docket Number | No. 14-13562,14-13562 |
Citation | 823 F.3d 1357 |
Parties | Securities and Exchange Commission, Plaintiff–Appellant, v. Barry J. Graham, Fred Davis Clark, Jr., a.k.a. Dave Clark, Cristal R. Coleman, a.k.a. Cristal Clark, David W. Schwarz, Ricky Lynn Stokes, Defendants–Appellees. |
Court | U.S. Court of Appeals — Eleventh Circuit |
Theodore Weiman, David Lisitza, U.S. Securities & Exchange Commission, Office of the General Counsel, Washington, DC, Amie Berlin, Andrew O. Schiff, U.S. Securities & Exchange Commission, Wifredo A. Ferrer, Kathleen Mary Salyer, U.S. Attorney's Office, Miami, FL, for Plaintiff–Appellant.
Barry J. Graham, Myers, FL, Pro Se.
Kenneth Paul Hazouri, deBeaubien Knight Simmons Mantzaris & Neal, LLP, Orlando, FL, for Defendants–Appellees Fred Davis Clark, Jr., a.k.a. Dave Clark, Cristal R. Coleman, a.k.a. Cristal Clark, David W. Schwarz.
Neil Rose, Bernstein Chackman Liss & Rose, Hollywood, FL, Russell Cornelius Weigel, III, Russell C. Weigel, III, PA, Miami, FL, for Defendant–Appellee Ricky Lynn Stokes.
Mark Andrew Perry, Gibson Dunn & Crutcher, LLP, Washington, DC, for Amicus Curiae Securities Industry and Financial Markets Association.
Before MARCUS, JILL PRYOR and FAY, Circuit Judges.
JILL PRYOR
, Circuit Judge:
With few exceptions, 28 U.S.C. § 2462
bars the government from bringing suit to enforce “any civil fine, penalty, or forfeiture” after five years from when the claim first accrued. The Securities and Exchange Commission (the “SEC” or “Commission”) waited more than five years to commence an action for declaratory relief, injunctive relief, and disgorgement against the defendants, who allegedly violated federal securities law by selling unregistered securities. The defendants raised the five-year statute of limitations as an affirmative defense in their motions for summary judgment. The district court dismissed the case, ruling that the statute of limitations set out in § 2462 is jurisdictional and that every remedy the SEC requested was outside the court's jurisdiction. The SEC appealed, arguing that § 2462 is nonjurisdictional and that the injunctive and declaratory relief and disgorgement it sought were not subject to § 2462's time bar. After careful consideration of the briefs, and with the benefit of oral argument, we affirm in part, reverse in part, and remand for further proceedings.
On January 30, 2013, the SEC filed a civil enforcement action against Barry J. Graham, Fred Davis Clark, Jr., Cristal R. Coleman, David W. Schwarz, and Ricky Lynn Stokes (collectively, the “defendants”). The Second Amended Complaint (the “complaint”) alleged that, from at least November 2004 to July 2008, the defendants violated federal securities law by selling condominiums that were functioning, in reality, as unregistered securities. According to the complaint, the defendants raised more than $300 million from approximately 1,400 investors around the country but failed to pay out the returns they had guaranteed. The Commission requested that the district court (1) declare that the defendants had violated federal securities laws; (2) permanently enjoin the defendants from violating federal securities laws in the future; (3) direct the defendants to disgorge all profits from their illegal ventures, with prejudgment interest; (4) order the defendants to repatriate any funds held outside the district court's jurisdiction; and (5) require three defendants, Coleman, Clark, and Stokes, to pay civil money penalties.
Coleman, Clark, Stokes, and defendant Schwarz filed motions for summary judgment on two main grounds: (1) the sale of their condominiums were not investment contracts, and thus were not governed by securities laws; and (2) the statute of limitations under 28 U.S.C. § 2462
barred all of the SEC's requested forms of relief. The SEC filed a competing motion for summary judgment. The district court held a hearing on the defendants' statute of limitations defense.
Without reaching the merits of the cross-motions for summary judgment, the district court dismissed the SEC's complaint as time-barred. The court held that § 2462—which bars any action “for the enforcement of any civil fine, penalty, or forfeiture” if brought more than five years from the date the claim first accrued—is a “jurisdictional” statute of limitations; thus, if it applied, the court lacked subject matter jurisdiction. The court found that the defendants' alleged securities violations took place more than five years before the SEC filed suit. It further determined that § 2462
applied to all of the remedies the SEC sought, not just the civil money penalty. Specifically, the district court concluded that the injunctive and declaratory relief the SEC sought were penalties and that the disgorgement the SEC requested constituted forfeiture, all within the meaning of § 2462
. Accordingly, the court dismissed the action with prejudice.
Although it accepts that § 2462
expressly bars its claim for civil money penalties, the SEC appeals the district court's ruling that § 2462 applies to the remaining remedies it sought: injunctive relief, declaratory relief, and disgorgement.1 We review de novo issues of law, including questions of statutory interpretation. De Sandoval v. U.S. Att'y Gen. , 440 F.3d 1276, 1278 (11th Cir. 2006). “[A]ny statute of limitations sought to be applied against the United States must receive a strict construction in favor of the Government.” United States v. Banks , 115 F.3d 916, 919 (11th Cir. 1997) (internal quotation marks omitted). We consider in turn the applicability of § 2462 to the SEC's request for injunctive relief, declaratory relief, and disgorgement.
The district court held that § 2462
applied here because the injunction the SEC requested was “nothing short of a penalty” and therefore covered by § 2462's plain language. SEC v. Graham , 21 F.Supp.3d 1300, 1310 (S.D. Fla. 2014). We cannot agree.
Our precedent forecloses the argument that § 2462
applies to injunctions, which are equitable remedies. See
Nat'l Parks & Conservation Ass'n v. Tenn. Valley Auth. , 502 F.3d 1316, 1326 (11th Cir. 2007) ( ); Banks , 115 F.3d at 919 (). In Banks, the government obtained an injunction against a landowner requiring that he stop discharging materials into the wetlands on his property and take steps to restore the wetlands to their undisturbed condition before he began discharging the materials. 115 F.3d at 918. Despite Banks's claim that the action was barred by § 2462, we upheld the injunction, observing that it was an equitable remedy and thus beyond the reach of that statute. Id. at 919. An injunction requiring (or forbidding) future conduct is not subject to § 2462's statute of limitations.
Even if we were not bound by Banks
, still we would conclude that § 2462 does not apply to injunctions like the one in this case. Section 2462 does not define the term “penalty”; we therefore look to the term's ordinary meaning. See
Taniguchi v. Kan Pac. Saipan, Ltd. , ––– U.S. ––––, 132 S.Ct. 1997, 2002, 182 L.Ed.2d 903 (2012) (); Consol. Bank, N.A. v. U.S. Dep't of Treasury , 118 F.3d 1461, 1463–66 (11th Cir. 1997)
. Definitions of the term “penalty” abound. The Supreme Court has defined a penalty as “something imposed in a punitive way for an infraction of a public law.” Meeker v. Lehigh Valley R.R. Co. , 236 U.S. 412, 423, 35 S.Ct. 328, 59 L.Ed. 644 (1915). Similarly, the Oxford English Dictionary says a penalty is “[a] punishment imposed for breach of law, rule, or contract.” Penalty , Oxford English Dictionary (2d ed. 1989). Black's Law Dictionary defines the term as “[p]unishment imposed on a wrongdoer, [usually] in the form of imprisonment or fine; [especially,] a sum of money exacted as punishment for either a wrong to the state or a civil wrong (as distinguished from compensation for the injured party's loss).” Penalty , Black's Law Dictionary (10th ed. 2014).
Each of these definitions has the common element of looking backward in time. That is, a penalty addresses a wrong done in the past. See, e.g. , Reich v. Occupational Safety & Health Review Comm'n , 102 F.3d 1200, 1202 (11th Cir. 1997)
(. )
Injunctions, by contrast, typically look forward in time. See United States v. W. T. Grant Co. , 345 U.S. 629, 633, 73 S.Ct. 894, 97 L.Ed. 1303 (1953)
(); Strickland v. Alexander , 772 F.3d 876, 883 (11th Cir. 2014) (). An injunction therefore is not a penalty within the meaning of § 2462. See
United States v. Or. State Med. Soc'y , 343 U.S. 326, 333, 72 S.Ct. 690, 96 L.Ed. 978 (1952) () . If imposed, the injunction in this case would only prevent the defendants from violating securities laws in the future.
Giving the term “penalty” its ordinary meaning, as we must, the purpose and effect of the SEC's claim for injunctive relief are nonpunitive, and § 2462
' s time bar is inapplicable. Because the ordinary meaning of “penalty” is unambiguous, our analysis ends here. See
Conn. Nat'l Bank v. Germain , 503 U.S. 249, 254, 112 S.Ct. 1146, 117 L.Ed.2d 391 (1992) ...
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