S.E.C. v. Independence Drilling Corp.
| Decision Date | 22 May 1979 |
| Docket Number | No. 77-1472,77-1472 |
| Citation | 595 F.2d 1006 |
| Parties | Fed. Sec. L. Rep. P 96,878 SECURITIES AND EXCHANGE COMMISSION, Plaintiff-Appellant, v. INDEPENDENCE DRILLING CORPORATION et al., Defendants-Appellees. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Kathryn B. McGrath, Assoc. Gen. Counsel, Harvey L. Pitt, Gen. Counsel, Paul Gonson, Assoc. Gen. Counsel, James H. Schropp, Asst. Gen. Counsel, Sammy S. Knight, Atty., Securities & Exchange Comm., Washington, D. C., for plaintiff-appellant.
Lee M. Simpson, Dallas, Tex., John E. Skogland, Jr., San Antonio, Tex., for Temp., Continental, & Div.
Appeal from the United States District Court for the Western District of Texas.
Before AINSWORTH and VANCE, Circuit Judges, and BOOTLE, * District Judge.
This appeal involves review of an order entered by the district court directing the Securities and Exchange Commission to pay the fees and expenses of a receivership initiated on the SEC's motion where assets of the corporate defendants were insufficient to defray the costs of the receivership. Since an award of costs against an agency of the United States is contrary to the doctrine of sovereign immunity and to express statutory command, we reverse.
On September 10, 1976 the SEC instituted an action under various provisions of the securities laws against several individual and corporate defendants alleging fraud in the sale of interests in oil- and gas-producing properties in Texas. The Commission sought an injunction and the immediate appointment of a receiver to preserve the remaining assets of the corporate defendants for the benefit of defrauded investors. In response to the district court's inquiries concerning the availability of assets to support the receivership the SEC indicated its belief that there were adequate assets and revenues to cover the costs of a receivership. With some misgivings in that regard the district court appointed a receiver on October 12, 1976.
About six weeks later, on November 30, the district court held a hearing at which the receiver reported that there were few available assets and that the corporate defendants currently had no rights to income from the properties they had formerly operated. The court decided to terminate the receivership as of December 10, 1976. On December 16, without notice to the SEC or an opportunity to be heard, the district court Sua sponte entered an "Order Imposing Sanctions" directing the SEC to pay the fees and expenses incurred by the receiver and his employees. The court based this order on its inherent equitable powers concluding that an award of costs against the SEC was appropriate because the receiver had been appointed on the SEC's motion and pursuant to the SEC's estimation concerning the availability of funds. The order directed that "the receiver, and such employees who choose to do so, shall submit their fees and expenses to the Commission and they shall be paid immediately." The order provided, however, that the SEC could within ten days request a hearing on the reasonableness of the fees and expenses submitted. The receiver and his employees subsequently submitted bills totaling $29,000 to the SEC, while two of the law firms that had done work for the receivership informed the SEC that they would not seek payment for $14,000 in services supplied by them. Thus the total expenses of the receivership amounted to at least $43,000.
On January 5, 1977 the SEC filed a motion to vacate the December 16 order or for an evidentiary hearing and an opportunity to conduct discovery. In an order dated February 17, 1977 the district court denied the motion to vacate and directed the SEC to pay the submitted fees and expenses within ten days. The SEC filed notice of appeal on February 25.
On appeal the Commission challenges the authority of the district court to impose the costs of a receivership on an agency of the United States in the absence of statutory...
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