Cftc v. James Crombie ( 2021 )

NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS SEP 21 2021
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
U.S. COMMODITY FUTURES TRADING No. 19-16190
COMMISSION,
D.C. No. 4:11-cv-04577-CW
Plaintiff-Appellee,
v. MEMORANDUM*
JAMES DEVLIN CROMBIE,
Defendant-Appellant,
and
PARON CAPITAL MANAGEMENT, LLC,
Defendant,
TIMOTHY W. HOFFMAN,
Trustee.
Appeal from the United States District Court
for the Northern District of California
Claudia Wilken, District Judge, Presiding
Argued and Submitted September 1, 2021
Pasadena, California
Before: IKUTA, BENNETT, and R. NELSON, Circuit Judges.
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
Defendant-Appellant James Crombie appeals the reinstatement of two
provisions of a permanent injunction originally imposed in 2013 due to his violations
of the Commodity Exchange Act (“CEA”). The first provision, Section 5(b),
permanently enjoins Crombie from “[e]ntering into any transactions involving
commodity futures, options on commodity futures, commodity options . . . , security
futures products, swaps . . . , and/or foreign currency . . . for his own personal
account or for any account in which he has a direct or indirect interest.” The second
provision, Section 5(c), permanently enjoins Crombie from “[h]aving any
commodity futures, options on commodity futures, commodity options, security
futures products, swaps, and/or forex contracts traded on his behalf.” The district
court justified its imposition of these two provisions, after a prior panel of our court
remanded for further explanation of their connection “to preventing future violations
similar to those that Crombie has committed.” U.S. Commodity Futures Trading
Comm’n v. Crombie, 914 F.3d 1208, 1218 (9th Cir. 2019). We have jurisdiction
under 28 U.S.C. § 1291 and affirm.
“We review the remedies issued by a district court for an abuse of discretion.”
Id. at 1215. Although “[a]n overbroad injunction is an abuse of discretion,”
Stormans, Inc. v. Selecky, 586 F.3d 1109, 1140 (9th Cir. 2009) (citation omitted),
the district court adequately explained why Sections 5(b) and 5(c) are necessary to
2
prevent future violations almost identical to those that Crombie already committed.1
Crombie complains that the district court’s concerns are speculative, but the district
court could issue a permanent injunction “preventing future violations similar to
those that Crombie has committed”—not necessarily identical. Crombie, 914 F.3d
at 1218 (emphasis added).
Crombie also argues that Sections 5(b) and 5(c) are unnecessary because
Section 5(e) of the permanent injunction already “prohibits Crombie from doing
what the district court said it feared: ‘Soliciting, receiving or accepting any funds
from any person for the purpose of purchasing or selling any commodity futures[.]’”
But this argument wrongly assumes that Crombie will obey Section 5(e) or that the
Commission will immediately discover if he does not.
Crombie also insists that the district court could not impose a personal trading
ban like the one in Section 5(b) because he did not (1) misappropriate client funds,
(2) deceive clients directly, or (3) refuse to promise to abide by the law in the future.
But we have never held that those are the only three circumstances to warrant a
personal trading ban, and even if they were, a previous panel of our court has already
1
The parties agree that on remand, the district court explained that Sections
5(b) and 5(c) are necessary because without them, “Crombie could ‘create falsified
documents to solicit funds from customers,’ take the money, put it into his trading
account [or the account of a third party acting on Crombie’s behalf], and then execute
trades for his customers.” Appellant’s Opening Br. at 30. With those concerns in
mind, the district court reimposed Sections 5(b) and 5(c).
3
affirmed the district court’s finding that Crombie willfully deceived his clients, see
Crombie, 914 F.3d at 1213–15. Crombie’s attempt to distinguish his case from other
client deception cases because his deception was less direct was already rejected in
our prior decision affirming summary judgment and most of the permanent
injunction. See id. at 1215.
Finally, Crombie argues that the district court abused its discretion by
imposing Sections 5(b) and 5(c) for life. But he has failed to show that an injunction
will someday be unnecessary to ensure his compliance with the CEA. He notes that
the Commission has established a presumption that personal trading bans are
appropriate for felons convicted under 7 U.S.C. § 13 for a minimum period of five
years and argues that “[i]f the presumption for a felony conviction is a five-year
trading ban, . . . at the very least a lifetime ban should not be imposed lightly in a
civil case.” But administrative sanctions under § 13(b), like permanent injunctions
under § 13a-1, are remedial, not punitive. See Lawrence v. Commodity Futures
Trading Comm’n, 759 F.2d 767, 774 (9th Cir. 1985) (characterizing the CEA and
sanctions issued thereunder as “remedial”). Thus, there is no reason to impose
presumptively shorter trading bans on civil rather than criminal defendants, and just
as we may uphold permanent personal trading bans against felons, so too may we
uphold a permanent personal trading ban against a defendant in a civil enforcement
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action when supported by the facts.2
AFFIRMED.3
2
Of course, if future circumstances no longer support a permanent personal
trading ban against Crombie (or a permanent ban on third parties trading on his
behalf), Crombie can move to lift or modify Sections 5(b) and 5(c) in the district
court. See Clark v. Coye, 60 F.3d 600, 604 (9th Cir. 1995).
3
Crombie’s motion to compel the release of all grand jury materials is
denied. See Dkt. No. 18.
5