Newcom v. U.S. Commodity Futures Trading Comm'n (In re Newcom)

• Decision Date: 16 July 2020
• Docket Number: Case No.: 2:19-cv-903-FtM-38
• Citation: 619 B.R. 758
• Parties: IN RE: Scott Glenn NEWCOM Scott Glenn Newcom, Appellant, v. U.S. Commodity Futures Trading Commission, Appellee.
• Court: U.S. District Court — Middle District of Florida

619 B.R. 758

IN RE: Scott Glenn NEWCOM

Scott Glenn Newcom, Appellant,

v.U.S. Commodity Futures Trading Commission, Appellee.

Case No.: 2:19-cv-903-FtM-38

United States District Court, M.D. Florida, Fort Myers Division.

Signed July 16, 2020

Mark F. Robens, Stichter, Riedel, Blain & Postler, P.A., Tampa, FL, William J. Nissen, Pro Hac Vice, Lake Forest, IL, for Appellant.

Melissa C. Chiang, Commodity Futures Trading Commission, Washington, DC, for Appellee.

OPINION AND ORDER ¹

SHERI POLSTER CHAPPELL, UNITED STATES DISTRICT JUDGE

Before the Court is Scott Glenn Newcom's appeal of the Bankruptcy Court's Order (1) Granting Plaintiff's Amended Renewed Motion for Summary Judgment and (2) Denying Defendant's Motion for Summary Judgment (Doc. 5-2).

Newcom filed a Chapter 7 bankruptcy petition on February 15, 2019. The U.S. Commodity Futures Trading Commission (CFTC) then filed an adversary complaint (Doc. 5-6) to establish the nondischargeability of a restitution debt established by a Sanctions Order (Doc. 5-7) the CFTC entered on March 27, 2013. The Sanctions Order resolved a CFTC administrative proceeding against Newcom, Anthony Pulieri, Joseph Glenn Commodities LLC, and JGCF LLC for selling illegal off-exchange futures contracts and defrauding investors. Newcom and the other respondents submitted an Offer of Settlement, consenting to entry of the Sanctions Order, which includes the following factual findings:

In November of 2010, Joseph Glenn Commodities LLC, Newcom, and Pulieri entered into an agreement with Hunter Wise [Commodities LLC] to act as one of Hunter Wise's dealers. Subsequently, the Respondents solicited retail customers, generally by telephone or through their website, to enter into Retail Commodity Transactions as part of a "leveraged program." Respondents represented to prospective customers that: (1) the customer could purchase physical commodities, including gold, silver, copper

, platinum, or palladium, by paying as little as 20% of the purchase price; (2) customers would receive a loan for the remaining portion of the purchase price on which the customer would be charged interest; and (3) upon confirmation of the customer's purchase, the physical commodity the customer purchased would be stored at an independent depository on the customer's behalf in an account in the customer's name These representations were based upon representations Hunter Wise made to Respondents

about Hunter Wise's operations. However, when retail customers placed orders to enter into Retail Commodity Transactions, the Respondents did not purchase physical commodities on the customers' behalf, provide loans to customers for the remaining portion of the purchase price, or store any physical commodities for customers. Instead, the Respondents simply passed all the details of the purchase, customer payments, and financing on to Hunter Wise, whose existence the Respondents did not disclose to retail customers...

The Respondents' retail customers never owned, possessed, or received title to the physical commodities that they believed they purchased, no funds were expended by Respondents or Hunter Wise to purchase physical commodities for the customers, and no physical commodities were stored for the customers.

The Respondents misrepresented the potential profits and past performance of the Retail Commodity Transactions. Respondents informed potential customers that they would achieve rates of return "far beyond" what they had ever seen before and that Respondents had always made money for their clients in the past, despite the fact that a majority of their customers lost money.

The Respondents also failed to disclose the commissions, service, and interest fees to potential customers. They also failed to inform potential customers that over 95% of their previous customers lost money after the assessment of commission, service, and interest fees, which sometimes totaled as much as 33% of the customers' initial investments.

(Doc. 5-7 at 3-4). Based on these facts and the Respondents' consent, the Sanctions Order imposed a restitution obligation of $635,457.44 jointly and severally on the Respondents. Schedule A of the Order listed the amounts of restitution owed to each customer. And the Order appointed the National Futures Association (NFA) to collect the restitution debt and distribute it to the Respondents' customers.

In a motion for summary judgment, Newcom challenged the existence of an underlying debt because any action to collect restitution is barred by a state or federal statute of limitations. CFTC also moved for summary judgment, arguing the Sanctions Order conclusively established that the restitution debt is nondischargeable because it is for money obtained by false pretenses, false representations, or actual fraud. The Bankruptcy Court held (1) enforcement of the sanctions order is not barred by a limitations period, (2) the Sanctions Order has collateral estoppel effect, and (3) the restitution debt is nondischargeable.

Discussion

"Like a district court, a bankruptcy court may only grant summary judgment where there is no genuine issue of material fact." In re Optical Techs., Inc. , 246 F.3d 1332, 1334 (11th Cir. 2001). This Court reviews the Bankruptcy Court's grant of summary judgment de novo. Id.

A. Statute of limitations

Newcom raises two challenges to the timeliness of CFTC's adversary complaint: (1) the complaint itself is barred by the statute of limitations, and (2) an action to enforce the debt is barred by the statute of limitations, so there is no debt to declare nondischargeable.

The only statute of limitations on the adversary complaint itself is Federal Rule of Bankruptcy Procedure 4007(c), which required CFTC to file its complaint no later than sixty days after the first date set for the meeting of creditors. See In re McKendry , 40 F.3d 331, 336 (10th Cir. 1994). The meeting of creditors in this case was set for March 26, 2019, so CFTC's complaint—filed on March 25, 2019—was timely.

Newcom next argues that despite the timeliness of the complaint itself, he is entitled to summary judgment because the statute of limitations ran on the underlying debt. This is Newcom's theory: (1) CFTC can only enforce the restitution debt by suing him in federal court, and (2) an action to enforce the debt is barred by either (a) Florida's four- or five-year statute of limitation or (b) a federal five-years statute of limitation, so (3) the nondischargeability claim must be summarily dismissed. CFTC counters that the Sanctions Order is a valid and enforceable judgment not subject to any statute of limitations.

The Bankruptcy Court agreed with CFTC for three reasons:

First, it is not clear that any state or federal statute of limitations applies to an action to collect a federal administrative judgment, and Debtor has not provided any case authority in which such a limitations period has been applied to an order imposing sanctions for violating the Act.

Second, 31 U.S.C. § 3716, part of the Federal Debt Collection Act, provides that a federal agency may collect a claim from a person by administrative offset, such as by offsetting a tax refund owed to a debtor against the amount due from the debtor. A "claim" is an amount that has been determined by a government official to be owed to the United States, and includes "any amount the United States is authorized by statute to collect for the benefit of any person."

And third, 31 U.S.C. § 3716(e) provides that, notwithstanding any other state law, "no limitation on the period within which an offset may be initiated or taken pursuant to this section shall be effective."

(Doc. 5-2 at 11) (footnotes omitted).

Newcom remains unable to show that any Florida or federal statute terminates CFTC's ability to enforce the Sanctions Order. Applying the Florida statutes of limitations is a non-starter. "It is well settled that the United States is not bound by state statutes of limitation or subject to the defense or laches in enforcing its rights." United States v. Summerlin , 310 U.S. 414, 416, 60 S.Ct. 1019, 84 L.Ed. 1283 (1940). The federal statute of limitations Newcom cites— 28 U.S.C. § 2462 —is trickier. It requires "an action, suit or proceeding for the enforcement of any civil fine, penalty, or forfeiture" to be "commenced within five years from the date when the claim first accrued[.]" 28 U.S.C. § 2462. The applicability of § 2462 is questionable for two reasons. First, it is not clear whether the restitution debt is a "penalty" under § 2462.² Second, it is not clear whether the deadline applies to the start of the administrative proceeding, an action to enforce the administrative order, or both. The Court need not decide these issues because even if CFTC cannot sue Newcom, it can enforce the restitution debt through other means.

The Debt Collection Improvement Act of 1982, 31 U.S.C. § 3701 et seq ., allows federal agencies like CFTC to collect claims with non-litigation tools like administrative offset—the practice of withholding federal payments (like tax refunds) in satisfaction of a debt. Administrative offsets are not subject to statutes of limitation. 31 U.S.C. § 3716(e)(1). Newcom argues CFTC cannot use administrative offsets to collect the restitution debt because it falls outside the statutory definition of "claim." 31 U.S.C. § 3701(b)(1) defines "claim" and provides a non-exhaustive list of examples:

any amount of funds or property that has been determined by an appropriate official of the Federal Government to be owed to the United States by a person, organization, or entity other than another Federal agency. A claim includes, without limitation...(D) any amount the United States is authorized by statute to collect for the benefit of any person,...(F) any fines or penalties assessed by an agency; and (G) other amounts of money or property owed to the Government.

Newcom argues the restitution debt is not "owed to the United States" because it is owed to his customers, not to CTFC, and...