Adams v. S.E.C.

• Decision Date: 19 April 2002
• Docket Number: No. 01-1221.,01-1221.
• Citation: 287 F.3d 183
• Parties: Richard J. ADAMS, Petitioner, v. SECURITIES AND EXCHANGE COMMISSION, Respondent.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 183

287 F.3d 183

Richard J. ADAMS, Petitioner, v. SECURITIES AND EXCHANGE COMMISSION, Respondent.

No. 01-1221.

United States Court of Appeals, District of Columbia Circuit.

Argued March 22, 2002.

Decided April 19, 2002.

On Petition for Review of an Order of the Securities and Exchange Commission.

Marc B. Dorfman argued the cause for petitioner. With him on the briefs was Arthur M. Schwartzstein.

Michele R. Vollmer, Senior Counsel, Securities and Exchange Commission, argued the cause for respondent. With her on the brief were David M. Becker, General Counsel, Richard M. Humes, Associate General Counsel, and Samuel M. Forstein, Assistant General Counsel.

Before: SENTELLE and ROGERS, Circuit Judges, and WILLIAMS, Senior Circuit Judge.

Opinion for the Court filed by Circuit Judge ROGERS.

ROGERS, Circuit Judge:

Richard J. Adams petitions for review of the denial of his application for attorneys' fees under the Equal Access to Justice Act ("EAJA"), 5 U.S.C. § 504. The Securities and Exchange Commission ruled that Adams's application was untimely because it was not filed within 30 days of the "final disposition" of his adversary adjudication as required by § 504(a)(2). The Commission reasoned that although its EAJA regulations define "final" to mean "final and unappealable," 17 C.F.R. § 201.44(b), because Adams was not aggrieved by the order of dismissal in his favor, the order was "unappealable" at its issuance; hence, there was no basis on which to conclude that the 30day filing deadline commenced only after the statutory 60-day period for appeal had expired rather than immediately upon the issuance of the order of dismissal. Adams contends that the Commission has confused the issue of appealability in the context of EAJA, with the underlying merits of an appeal. In other words, regardless of whether the disposition giving rise to the EAJA fee is specifically appealable, the EAJA filing deadline should not expire in any case until 30 days after the time for appeal under the relevant law of appealability, here 15 U.S.C. § 78y(a)(1), has expired or the appeal has been completed. We agree, for the Commission's position involves the awkward practice of requiring a case-by-case examination of appealability contrary to the purposes of EAJA. Accordingly, we grant the petition to the extent of reversing the denial of Adams's EAJA application; we remand the case to the Commission to determine Adams's eligibility for fees.

I.

The Division of Enforcement of the Commission has pursued both judicial and administrative proceedings against Adams. Beginning September 30, 1991, the Division filed a civil injunctive action in the United States District Court for the District of New Jersey alleging that Adams and others engaged in the fraudulent offer and sale at artificial prices of securities in initial public offerings and manipulated the after-markets in those securities from January 1, 1987 to December 20, 1988 in violation of §§ 5(a), 5(b), 5(c), and 17(a) of the Securities Act of 1933, §§ 10(b) and 15(c) of the Securities Exchange Act of 1934, and Rules 10b-5, 10b-6, and 15c1-2 thereunder. SEC v. Graystone Nash, Inc., 820 F.Supp. 863, 868 (D.N.J.1993), rev'd, 25 F.3d 187 (3d Cir.1994). Based on a record limited by an order precluding Adams from presenting certain evidence because of his initial invocation of the Fifth Amendment, the district court granted summary judgment to the Division and ordered both injunctive relief and disgorgement in the amount of $60,565,581. Id. at 869-76. The Third Circuit reversed on the ground that the district court failed to consider the relevant factors in concluding that preclusion was appropriate. SEC v. Graystone Nash, Inc., 25 F.3d 187, 193-94 (3d Cir.1994). On remand, the district court stayed the litigation pending resolution of the Division's administrative proceeding, which was commenced prior to the decision of the Third Circuit.

On April 21, 1994, the Commission instituted administrative proceedings against Adams, pursuant to §§ 15(b)(4) and (6) of the Exchange Act. In re Graystone Nash, Inc., Admin. Proc. File No. 3-8327, 1993 WL 152562, 1994 SEC LEXIS 1303 (Apr 21, 1994). The Commission denied Adams's motion to dismiss the administrative claims as time barred, but dismissed the proceedings based on the district court's entry of an injunction. In re Graystone Nash, Inc., Exchange Act Release No. 35907, Admin. Proc. File No. 3-8327, 1995 WL 399432, at, *1-*2, 1995 SEC LEXIS 1634, at *2-*3 (June 28, 1995). An administrative law judge ("ALJ") thereafter held an evidentiary hearing on the remaining, independently alleged violations by the Division. In re Graystone Nash, Inc., 62 SEC Docket 671, Admin. Proc. File No. 3-8327, 1996 WL 360258, at *1-*2, 1996 SEC LEXIS 3545, at *1-*3 (June 27, 1996). The ALJ dismissed the proceedings on two grounds: first, as time barred in light of an intervening decision by this court in Johnson v. SEC, 87 F.3d 484 (D.C.Cir.1996), holding that the five-year statute of limitations set forth in 28 U.S.C. § 2462 applied to such proceedings, and second, on the alternate ground that the Division failed to prove that Adams violated the securities laws. In re Graystone Nash, 1996 WL 360258, at *21, 1996 SEC LEXIS 3545, at *59. The Division appealed and the Commission, on February 11, 1998, dismissed the administrative proceeding. The full main text of the Commission's opinion stated:

On June 27, 1996, an administrative law judge dismissed proceedings that had been brought by our Division of Enforcement against Richard J. Adams. The law judge based her dismissal on the decision in Johnson v. SEC, 87 F.3d 484 (D.C.Cir.1996), which held that 28 U.S.C. Section 2462 prohibited this Commission from imposing a censure and a supervisory suspension in an administrative proceeding because the proceeding had been initiated more than five years after the conduct at issue. It is undisputed that all of the conduct at issue here occurred more than five years before the institution of proceedings. The law judge further found that the Division had not proved that Adams violated any section of the securities laws, and used that finding as an alternative basis for her decision to dismiss. On July 30, 1997, we granted the Division's petition for review.

Although the Division vigorously disputes the law judge's factual conclusions, it has decided not to seek reversal of her decision in light of the Johnson decision and the "current procedural posture of this case." In a parallel proceeding in federal district court, the Division is currently seeking an injunction against Adams based on the same allegations as in this proceeding. We have determined that, given the age of this case and that the Division does not oppose dismissal, it is appropriate to dismiss this matter. We intimate no view on the merits.

Accordingly, IT IS ORDERED that this proceeding be, and it hereby is, dismissed.

In re Adams, Exchange Act Release No. 39645, 1998 WL 52044, Admin. Proc. File No. 3-8327, 1998 SEC LEXIS 208 (Feb. 11, 1998) (footnotes omitted). No appeal was filed.

On May 8, 1998, eighty-six days after the Commission dismissed the administrative proceedings, Adams filed an application for attorneys' fees pursuant to EAJA. The ALJ rejected the Division's position that the fee application was untimely, and found that Adams was entitled to attorneys' fees because the Division's position at the hearing was not substantially justified. In re Adams, Initial Decision Release No. 176, Admin. Proc. File No. 3-8327, 2000 WL 1759456 (Nov. 30, 2000). The Division appealed and the Commission reversed, denying the fee application as untimely because it was filed more than thirty days after the final disposition of the agency adjudication, citing 5 U.S.C. § 504(a)(2) and the Commission's EAJA regulations, 17 C.F.R. § 201.44(b). In re Adams, Exchange Act Release No. 44205, Admin. Proc. File No. 3-8327, 2001 SEC LEXIS 736, at *3-*5 (Apr. 19, 2001). The Commission noted that under § 25(a)(1) of the Securities Exchange Act, 15 U.S.C. § 78y(a)(1), only "a person aggrieved by a final order of the Commission" has a right to appeal, and that Adams had no standing to appeal because he was not aggrieved by the Commission's order of dismissal. In re Adams, 2001 SEC LEXIS 736, at *5. Hence, in the Commission's view, the order of dismissal of February 11, 1998 constituted a final disposition under EAJA because it was both final and unappealable, giving Adams only 30 days thereafter to file an EAJA application. Concluding that Adams's application was untimely, the Commission did not reach the merits of Adams's entitlement to fees. Id. at *10 n. 19.

II.

Under § 504 of EAJA, an agency shall award attorneys' fees and costs to a prevailing party (other than the United States) unless the agency's position was "substantially justified" if the requesting party submits an application "within thirty days of a final disposition in the adversary adjudication." 5 U.S.C. § 504(a). An "adversary adjudication" is defined to mean (i) a formal agency adjudication in which the position of the United States is represented by counsel, excluding adjudications as to rate making and licensing, (ii) proceedings before agency boards of contract appeals, (iii) agency hearings under the Program Fraud Civil Remedies Act of 1986, 31 U.S.C. §§ 3801-3812 (an administrative scheme similar to the False Claims Act, 31 U.S.C. §§ 3729-3733), and (iv) agency hearings under the Religious Freedom Restoration Act of 1993, 42 U.S.C. §§ 2000bb-2000bb-4. Id. § 504(b)(1)(C). Section 504 does not define "final disposition." The Commission's EAJA regulations, however, provide that a fee application must be filed within 30 days of the Commission's "final disposition," which it defines as the date a decision or order becomes "final and unappealable, both within the Commission and to the courts." 17 C.F.R. § 201.44.

Adams's counsel, presumably...