Securtities & Exchange Comm'n v. Coldicutt

• Decision Date: 19 June 2001
• Docket Number: AND,No. 99-56169,PLAINTIFF-APPELLEE,DEFENDANT-APPELLAN,99-56169
• Citation: 258 F.3d 939
• Parties: (9th Cir. 2001) SECURITIES AND EXCHANGE COMMISSION,, v. ELIZABETH L. COLDICUTT,EDPOF CALIFORNIA INC.; WILLIAM L. WOSLOW; ANTHONY AJ WILLIAMS; FIONA C. WILLIAMS; BURNETT GREY & CO., INC.; FCN FINANCIAL SERVICES, INC.; THOMAS D. COLDICUTT; ELY J. MANDELL, DEFENDANTS
• Court: U.S. Court of Appeals — Ninth Circuit

Page 939

258 F.3d 939 (9th Cir. 2001)

SECURITIES AND EXCHANGE COMMISSION, PLAINTIFF-APPELLEE, v. ELIZABETH L. COLDICUTT, DEFENDANT-APPELLANT, AND EDPOF CALIFORNIA INC.; WILLIAM L. WOSLOW; ANTHONY AJ WILLIAMS; FIONA C. WILLIAMS; BURNETT GREY & CO., INC.; FCN FINANCIAL SERVICES, INC.; THOMAS D. COLDICUTT; ELY J. MANDELL, DEFENDANTS.

No. 99-56169

UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

Argued February 9, 2001

Submitted June 19, 2001--Pasadena, California

Filed August 2, 2001

Counsel Alexandra M. Kwoka, Law Office of Alexandra Kwoka, San Diego, California; James D. Henderson, Jr., Charles C. Wehner, Wehner & Perlman, Los Angeles, California, for the defendant-appellant.

Thomas Karr, Securities and Exchange Commission, Washington, D.C., for the plaintiff-appellee.

D.C. No. CV-91-01349-JSR(HRM) Appeal from the United States District Court for the Southern District of California John S. Rhodes, District Judge, Presiding

Before: Harry Pregerson, William C. Canby, Jr., and David R. Thompson, Circuit Judges.

Thompson, Circuit Judge

In 1992, the district court entered a permanent injunction by default against the appellant, Elizabeth L. Coldicutt, enjoining her from violating Sections 5(a) and 5(c) of the Securities Act, 15 U.S.C. §§§§ 77e(a) and 77e(c) (1994), by selling or offering to sell any securities unless and until a registration statement for such securities had been filed with the Securities and Exchange Commission. In March 1998, Coldicutt filed a motion under Federal Rule of Civil Procedure 60(b)(5) to terminate the permanent injunction. The district court denied the motion, holding that Coldicutt had failed to establish a sufficient change of circumstances. We have jurisdiction pursuant to 28 U.S.C. §§ 1291 (1994) and we affirm.

I.

In 1990, Coldicutt, a securities broker licensed by the National Association of Securities Dealers, was affiliated with two companies, FCN Financial Services and Burnett Grey & Co. These companies were approached by the principals of a company called EDP to help create a market for EDP stock. The stock was not registered with the SEC. The SEC alleges that EDP was a "sham" corporation, devoid of any substantial assets, and that EDP submitted fraudulent filings to the SEC, drastically misstating the value and nature of its assets. At the time, Coldicutt was President of Burnett Grey, a broker-dealer firm, and Secretary of FCN, a company that advised clients on taking private companies public, meeting regulatory and compliance requirements relating to such undertakings, and promoting such companies to brokerage firms. In these capacities, she became involved in marketing EDP stock. In 1990, Burnett Grey and FCN made four trades of unregistered EDP stock, in blocks ranging from 75 to 4200 shares.

In marketing the stock, Coldicutt failed to ensure that EDP had registered its offering with the SEC. She also failed to recognize that EDP was apparently a "sham" corporation, which had overstated the value of its assets and which had no real headquarters or employees.

The SEC filed a complaint against Coldicutt, FCN, and Burnett Grey, charging them with violating Sections 5(a) and 5(c) of the Securities Act. Coldicutt failed to respond to the complaint, and the district court entered a default judgment against her, permanently enjoining her from violating the registration requirements of Sections 5(a) and 5(c). Coldicutt subsequently appealed the entry of the default judgment and the accompanying injunction. We affirmed the district court. See SEC v. Burnett Grey & Co., Inc., No. 92-55361, 1993 WL 378756 (9th Cir. Sept. 24, 1993).

Since the permanent injunction was entered in 1992, Coldicutt has allowed her trading licenses to expire. She has no involvement in FCN, Burnett Grey, or any other securities enterprise and has become a documentary filmmaker. She has fully complied with the injunction and has stated in a declaration that she will not re-enter the securities field. Coldicutt asserts she wants to terminate the permanent injunction "because I would like to bring closure to this matter, which was extremely unsettling to me and has caused me to experience great personal anxiety and distress."

II.

We review for abuse of discretion a district court's denial of a Rule 60(b)(5) motion. SEC v. Worthen, 98 F.3d 480, 482 (9th Cir. 1996). We may not reverse a district court's exercise of its discretion unless we have a definite and firm conviction that the district court committed a clear error of judgment in the conclusion it reached upon weighing the relevant factors. See Valley Eng'rs, Inc. v. Electric Eng'g Co., 158 F.3d 1051, 1057 (9th Cir. 1998). A district court abuses its discretion if it does not apply the correct law or if it rests its decision on a clearly erroneous finding of material fact. Bogovich v. Sandoval, 189 F.3d 999, 1001 (9th Cir. 1999).

III.

A. Rule 60(b)(5) Requirements

Federal Rule of Civil Procedure 60(b)(5) provides, "On motion and upon such terms as are just, the court may relieve a party or a party's legal representative from a final judgment, order, or proceeding for the following reasons: . . . (5) the judgment has been satisfied, released, or discharged, or a prior judgment upon which it is based has been reversed or otherwise vacated, or it is no longer equitable that the judgment should have prospective application."

Rufo v. Inmates of Suffolk County Jail, 502 U.S. 367

L.Ed.2d 867 (1992), sets forth "a general, flexible standard for all petitions brought under the equity provision of Rule 60(b)(5). " Bellevue Manor Associates v. United States, 165 F.3d 1249, 1255 (9th Cir. 1999). Under Rufo, in order to grant a Rule 60(b)(5) motion to modify a court order, a district court must find "a significant change either in factual conditions or in law." 502 U.S. at 384. Modification "may be warranted when changed factual conditions make compliance with the decree substantially more onerous . . . . Modification is also appropriate when a decree proves to be unworkable because of unforeseen obstacles, or when enforcement of the decree without modification would be detrimental to the public interest. " Id. (citations omitted). In addition, an order must be modified if compliance becomes legally impermissible. Id. at 388. Relief from a court order should not be granted, however, simply because a party finds "it is no longer convenient to live with the terms" of the order. Id. at 383.

B. Coldicutt's Changed Circumstances

Coldicutt argues that her circumstances have changed so substantially since the injunction was entered that the district court abused its discretion when it denied her motion. She points out that at the time of the 1992 injunction, she was the president and majority owner of a registered broker-dealer firm and had four trading licenses. Now, nine years later, she is no longer involved in brokerage or securities work, has resigned from FCN and Burnett Grey, has allowed her trading licenses to expire, has taken up a new profession, and has declared she will never seek to regain her trading licenses.

She has never violated the injunction. Therefore, she argues, there is "simply no danger" that she will violate the injunction in the future.

The SEC responds that the district court properly denied the motion to vacate, on the basis of Rufo, because there has been no change in circumstances warranting modification of the injunction. We agree. Coldicutt has failed to demonstrate that, under Rufo, changed circumstances have made her compliance substantially more onerous, unworkable because of unforeseen obstacles, detrimental to the public interest, or legally impermissible. See id. at 384.

Coldicutt points out that nine years have passed since the injunction was entered, and that she has fully complied during that time. She argues that an extended period of compliance is sufficient to justify terminating an "obey the law" injunction, and cites SEC v. Warren, 583 F.2d 115 (3rd Cir. 1978), in support of this argument. Warren, however, is distinguishable. Unlike the movant in Warren, Coldicutt violated a fundamental requirement of the Securities Act -the requirement that stock offerings be registered with the SEC -as opposed to a "technical violation" in "an esoteric area of the law." See id. at 120-21. Moreover, in Warren, the Third Circuit found it important that subsequent regulations made administrative enforcement by contempt less necessary; here, no such change in regulations has occurred. The procedural posture of Warren was also significantly different: there, the Third Circuit affirmed, holding that the district court acted within its discretion. Here, Coldicutt contends the district court abused its discretion, a far greater appellate burden than that borne by the appellee in Warren.

The SEC contends Coldicutt has not carried her burden. Focusing on Coldicutt's nine-year period of compliance, the SEC argues that the mere passage of time does not provide a sufficient reason to terminate the injunction. We agree. As we stated in SEC v. Worthen, 98 F.3d 480 (9th Circ. 1996), obedience to a mandate "provides no justification for dissolving the injunction. Compliance is just what the law expects." Id. at 482 (quoting SEC v. Advance Growth Capital Corp., 539 F.2d 649, 652 (7th Cir. 1976)). This is not to say, however, that a lengthy period of compliance should be given no consideration. Indeed, in Worthen, we held that"Worthen had not shown that the mere passage of time constituted a significant change in circumstances justifying relief." Id. (emphasis added). We did not foreclose consideration of the passage of time in combination with other relevant factors.

This seems to be the view of a majority of our sister circuits. The Third Circuit in Building and Constr. Trades Council v. NLRB, 64 F.3d 880 (3rd Cir. 1995), held that relevant factors to consider in ruling upon a Rule 60(b)(5) motion include, among others, the...