Altman v. Sec. & Exch. Comm'n

• Decision Date: 16 December 2011
• Docket Number: No. 11–1067.,11–1067.
• Citation: 666 F.3d 1322
• Parties: Steven ALTMAN, Petitioner v. SECURITIES AND EXCHANGE COMMISSION, Respondent.
• Court: U.S. Court of Appeals — District of Columbia Circuit

666 F.3d 1322

Steven ALTMAN, Petitioner

v.SECURITIES AND EXCHANGE COMMISSION, Respondent.

No. 11–1067.

United States Court of Appeals, District of Columbia Circuit.

Argued Nov. 10, 2011.Decided Dec. 16, 2011.

On Petition for Review of an Order of the Securities & Exchange Commission.Steven Altman, appearing pro se, argued the cause and filed the briefs for petitioner.

Christopher M. Bruckmann, Senior Counsel, Securities and Exchange Commission, argued the cause for respondent. With him on the brief were Mark D. Cahn, General Counsel, Richard M. Humes, Associate General Counsel, Melinda Hardy, Assistant General Counsel, and Donna S. McCaffrey, Special Trial Counsel.

Before: SENTELLE, Chief Judge, HENDERSON and ROGERS, Circuit Judges.

Opinion for the Court by Circuit Judge ROGERS.

ROGERS, Circuit Judge:

This case is before the court on a petition to review the opinion and order of the Securities and Exchange Commission permanently denying Steven Altman, an attorney admitted to practice in New York State, the privilege of appearing or practicing before the Commission, pursuant to Rule 102(e)(1)(ii) of the Commission's Rules of Practice, and Section 4C of the Securities Exchange Act of 1934 (“the Act”). The Commission found that Altman, in appearing before it, violated three Disciplinary Rules of the New York Bar Association Lawyer's Code of Professional Responsibility, and that the violations were “egregious, recurrent, and reflected a high degree of scienter.” Steven Altman, Esq., Exchange Act Release No. 63306, 2010 SEC LEXIS 3762, at *70 (Nov. 10, 2010). Altman also petitions for review of the Commission's denial of his motion for reconsideration and a stay. Steven Altman, Esq., Exchange Act Release No. 63665, 2011 SEC LEXIS 30 (Jan. 6, 2011).

Altman, now proceeding pro se, contends that the procedure employed by the Commission was unconstitutional, because (1) the Commission lacked authority to sanction him under Rule 102(e)(1)(ii) and Section 4C of the Act based on its determination of violations of the New York Bar disciplinary rules; (2) the Commission failed to provide notice that it could proceed against him in the absence of prior action by New York State and of the standard of conduct that could be found to violate Rule 102(e)(1)(ii) and Section 4C; and (3) the Commission's findings are not supported by substantial evidence. He also contends that the sanction was excessive. For the following reasons we deny the petition.

I.

Altman is a general commercial litigator who has rarely practiced before the Commission. In this instance, he represented a client who had been subpoenaed by the Division of Enforcement in a proceeding against a company. Altman's client had previously been employed by another company but occasionally performed secretarial tasks for the company under investigation. At the time of the subpoena, the client (through Altman) was involved in negotiations with the client's prior employer about a severance package. The Division learned the client could testify that a key defense of the company being investigated was false. After the Division contacted Altman to request an interview with his client, Altman engaged in a series of telephone conversations with the company's attorney, Irving Einhorn, who, unbeknownst to Altman, tape recorded five of the six conversations. The transcripts show that Altman encouraged Einhorn to convince the company to facilitate the payment of a severance package to Altman's client and to remove the client's name as a co-signer of two car leases held by the company's CEO. Among the various exchanges, in the final taped conversation of February 10, 2004, Einhorn asked Altman: “What is the bottom line? What is it going to take? What kind of package is this? ... What is the package that [the client] wants to, you know, not cooperate or whatever?” Altman responded: “Get [the client] off those leases and, you know, a year's salary....” Einhorn then asked: “What will we get if they do that, [the client] won't cooperate or [the client] won't remember?” Altman responded: “Uh, probably both.” SEC Off. of Gen. Counsel Ex. 18 at 1660.

On January 30, 2008, the Commission instituted proceedings against Altman for “engag[ing] in unethical or improper professional conduct” in violation of Rule 102(e)(1)(ii) and Section 4C of the Act. An administrative law judge found, after an evidentiary hearing at which Altman was represented by counsel, that Altman had violated three of the New York Bar disciplinary rules,¹ and suspended him from appearing before the Commission for nine months. Altman appealed to the Commission; the Office of General Counsel appealed the nine-month suspension. The Commission, upon reviewing the transcripts of the taped conversations, the judge's findings, and Altman's defenses, affirmed the factual findings that he had knowingly violated three New York Bar disciplinary rules, but concluded a permanent bar better “serves the public interest and is remedial because it will protect the integrity of [the Commission's] prosecutorial and adjudicatory processes, and thereby the investing public, from future harm by Altman.” Altman, 2010 SEC LEXIS, at *75. Upon the Commission's denial of his motion for reconsideration and a stay, Altman petitioned for review.

II.

Altman's challenge to the Commission's authority to sanction him based on violations of the New York Bar disciplinary rules fails. Section 4C of the Act provides:

The Commission may censure any person, or deny, temporarily or permanently, to any person the privilege of appearing or practicing before the Commission in any way, if that person is found by the Commission, after notice and opportunity for hearing in the matter ... to be lacking in character or integrity, or to have engaged in unethical or improper professional conduct.

15 U.S.C. § 78d–3(a)(2). By its plain terms Section 4C authorizes the Commission to deny the privilege of appearance upon finding improper professional conduct. Because it does not unambiguously define “unethical or improper professional conduct,” the question is whether the Commission's interpretation of the statute to allow it to apply State Bar disciplinary rules to define the proscribed conduct is permissible. See Chevron U.S.A. Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 843, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). “In reviewing an agency's interpretation of its authority under a statute it administers, the court will uphold that interpretation so long as it is a reasonable interpretation of the statute.” Financial Planning Ass'n v. SEC, 482 F.3d 481, 487 (D.C.Cir.2007) (citing Village of Bergen v. FERC, 33 F.3d 1385, 1389 (D.C.Cir.1994)).

Rule 102(e)(1)(ii) of the Commission's Rules of Practice was codified as Section 4C of the Act as part of the Sarbanes–Oxley Act of 2002, Pub.L. 107–204, 116 Stat. 745 (2002) (codified as 15 U.S.C. § 78d–3(a)(2)). Prior to its codification the Commission stated that it “perceives no unfairness whatsoever in holding those professionals who practice before [the Commission] to generally recognized norms of professional conduct ... whether or not such norms had previously been explicitly adopted or endorsed by the Commission. To do so upsets no justifiable expectations, since the professional is already subject to those norms.” Carter and Johnson, 47 S.E.C. 471, 508 & n. 65 (Feb. 28, 1981) (referencing the American Bar Association (“ABA”) Code of Professional Responsibility Disciplinary Rules). The text of Section 4C is virtually identical to Rule 102(e)(1)(ii).² “It is well established that when Congress revisits a statute giving rise to a longstanding administrative interpretation without pertinent change, the ‘congressional failure to revise or repeal the agency's interpretation is persuasive evidence that the interpretation is the one intended by Congress.’ ” Commodity Futures Trading Comm'n v. Schor, 478 U.S. 833, 846, 106 S.Ct. 3245, 92 L.Ed.2d 675 (1986) (quoting NLRB v. Bell Aerospace Co., 416 U.S. 267, 274–75, 94 S.Ct. 1757, 40 L.Ed.2d 134 (1974)). In In re Snyder, 472 U.S. 634, 645 & n. 6, 105 S.Ct. 2874, 86 L.Ed.2d 504 (1985), the Supreme Court held that a federal court could charge an attorney appearing before it “with the knowledge of and the duty to conform to the state code of professional responsibility” and thus the court was “entitled to rely on the attorney's knowledge of the state code of professional conduct applicable in that state court....” Similarly, the Commission was entitled to rely on Altman's knowledge of and duty to conform to the New York Bar disciplinary rules. See Herman v. Dulles, 205 F.2d 715, 716 (D.C.Cir.1953).

Contrary to Altman's position, the Commission did not lack authority to act because of previous pronouncements that it would generally not do so without prior judicial or administrative findings of misconduct. Altman points to the Commission's statements of its general policy.³ Nothing in these statements suggested the Commission would not act in the appropriate circumstances. To the extent the Commission has for “nearly 20–year[s] stay [ed] [ ] its hand on attorney discipline,” Petr.'s Br. 18, the Commission's “powers ... are not lost by being allowed to lie dormant.” United States v. Morton Salt Co., 338 U.S. 632, 647, 70 S.Ct. 357, 94 L.Ed. 401 (1950).

Neither, as Altman contends, does the Commission's exercise of authority absent prior disciplinary proceedings against him by New York State implicate separation of powers or federalism concerns. The sanction imposed on Altman is limited to appearances before the Commission and has no effect either on his ability to practice law in New York State and to appear before any court, or on New York State's authority to discipline him. Cf. United States v. Cutler, 58 F.3d 825, 838 (2d Cir.1995). And Altman's contentions that the Commission could have taken a more limited approach under Rule 180 of its Rules of Practice, that...