Securities & Exchange Commission v. Durante

14-4394-cv
SEC v. Durante
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A
SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED
BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1.
WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY
MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE
NOTATION “SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST SERVE A
COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.
At a stated term of the United States Court of Appeals for the Second Circuit, held
at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New
York, on the 8th day of March, two thousand sixteen.
PRESENT: JOHN M. WALKER, JR.,
REENA RAGGI,
PETER W. HALL,
Circuit Judges.
----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION,
Plaintiff-Appellee,
v. No. 14-4394-cv
EDWARD A. DURANTE, AKA “Ed Simmons,”
Defendant-Appellant,
WAMEX HOLDINGS, INC., BERKSHIRE CAPITAL
PARTNERS, INC., DOTTENHOFF FINANCIAL LTD.,
GALTON SCOTT & GOLETT INC.,
COMMONWEALTH ASSOCIATES, LTD.,
PROVIDENT PARTNERS, LTD., FAIRMONT
CONSULTING, INC., ZIMENN IMPORTING AND
EXPORTING, INC., RENAISSANCE GALLERY, INC.,
TREVOR KOENIG, ROGER M. DETRANO,
MITCHELL H. CUSHING, RUSSELL A. CHIMENTI,
JR., CHARLES R. EISENSTEIN, ALFRED PEEPER,
EUGENE C. GEIGER, HEARTLAND CAPITAL,
SCOTT CAMERON, ROGER H. CHLOWITZ, DAVID
1
WEISS, BRUCE M. MILLSTEIN, EXCHANGE BANK
& TRUST, INC., VJV INC., ORIENTAL NEW
INVESTMENTS, LTD., ORIENTSTAR FINANCE,
LTD., LAURA DETRANO, as the Administrator of the
Estate of Roger M. DeTrano,
Defendants.1
----------------------------------------------------------------------
APPEARING FOR APPELLANT: RICHARD D. WILLSTATTER (JaneAnne
Murray, Murray Law LLC, Minneapolis,
Minnesota, on the brief), Green & Willstatter,
White Plains, New York.
APPEARING FOR APPELLEE: TRACEY A. HARDIN, Assistant General
Counsel (Anne K. Small, General Counsel;
Michael A. Conley, Deputy General Counsel;
Jacob H. Stillman, Solicitor; Christopher Paik,
Special Counsel, on the brief), Securities and
Exchange Commission, Washington, D.C.
Appeal from a judgment of the United States District Court for the Southern
District of New York (Deborah A. Batts, Judge; Andrew J. Peck, Magistrate Judge).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED,
AND DECREED that the order entered on September 25, 2014, is AFFIRMED.
Defendant Edward A. Durante appeals from an order holding him in contempt for
failing to satisfy a 2002 default judgment (the “Judgment”) entered against him in a civil
enforcement action brought by the SEC and directing him, within 45 days of the order,
(1) to provide an accurate accounting of his income and assets and (2) to turn over all
assets listed in his plea agreement in a parallel criminal prosecution, or to be imprisoned
1
The Clerk of Court is directed to amend the caption as set forth above.
2
pending compliance.2 Because Durante is currently incarcerated in connection with
unrelated criminal charges, the incarceration ordered for contempt cannot be executed at
this time. Nevertheless, Durante challenges the contempt adjudication as: (1) based on
invalid findings; (2) equitably barred by laches, waiver, estoppel, and unclean hands; and
(3) violative of his Fifth Amendment right against self-incrimination. Durante also
appeals the denial of his motion to modify the Judgment under Fed. R. Civ. P. 60(b) as
time-barred, arguing that his delay was reasonable under the circumstances. We assume
the parties’ familiarity with the facts and record of prior proceedings, which we reference
only as necessary to explain our decision to affirm.3
1. Order of Contempt
Durante challenges the validity of the district court’s contempt finding as well as
its rejection of his equitable defenses. Both challenges fail.
a. Contempt Finding
A party may be held in civil contempt of a court order if (1) the order is clear and
unambiguous, (2) proof of noncompliance is also clear and convincing, and (3) the
contemnor has not diligently attempted to comply in a reasonable manner. See
Paramedics Electromedicina Comercial, Ltda. v. GE Med. Sys. Info. Techs., Inc., 369
2
Durante pleaded guilty to, inter alia, conspiracy to commit securities fraud and money
laundering in connection with a scheme to manipulate the market for shares of WAMEX
Holdings, Inc., and was sentenced principally to 121 months’ imprisonment.
3
We have jurisdiction because an order disposing of civil contempt proceedings is
appealable as a final decision under 28 U.S.C. § 1291 where, as here, those proceedings
are instituted after the conclusion of the principal action rather than during its pendency.
See Latino Officers Ass’n City of N.Y., Inc. v. City of New York, 558 F.3d 159, 163 (2d
Cir. 2009).
3
F.3d 645, 655 (2d Cir. 2004). In reviewing a contempt order, we examine legal
conclusions de novo and factual determinations for clear error, while applying an
abuse-of-discretion standard to the ultimate finding of contempt that is “more rigorous
than usual.” In re Grand Jury Subpoena Issued June 18, 2009, 593 F.3d 155, 157 (2d
Cir. 2010) (internal quotation marks omitted). Applying these principles here, we
affirm substantially for the reasons stated in the thorough and well-reasoned Report and
Recommendation (“R&R”) of Magistrate Judge Peck.
The Judgment ordered that Durante “shall pay $39,880,680.86, jointly and
severally with [his codefendants] . . . representing disgorgement of $33,783,565.26 and
pre-judgment interest in the amount of $6,097,115.60.” App’x 51 (emphasis added).
This was sufficiently clear and unambiguous to leave “no uncertainty in the minds of
those to whom [it was] addressed,” who could plainly “ascertain from the four corners of
the order” precisely which acts were required. Gucci Am., Inc. v. Weixing Li, 768 F.3d
122, 142–43 (2d Cir. 2014) (internal quotation marks omitted). Durante nevertheless
argues that the Judgment is “ambiguous” with respect to whether it (1) imposes liabilities
cumulative to those of other defendants, (2) deducts offsetting trading losses and
brokerage fees, or (3) includes amounts Durante never received. As the SEC points out,
this argument conflates two questions: (a) whether disgorgement was properly calculated,
which Durante never challenged at the appropriate stage of the litigation; and (b) whether
the Judgment was clear and unambiguous. The latter inquiry “‘does not open to
reconsideration the legal or factual basis of the order alleged to have been disobeyed.’”
4
Huber v. Marine Midland Bank, 51 F.3d 5, 8 (2d Cir. 1995) (quoting United States v.
Rylander, 460 U.S. 752, 756 (1983)).
Durante’s claim that the order is not supported by clear and convincing evidence
of his noncompliance is equally meritless. Unable to dispute that he has paid less than
half of the sum ordered by the Judgment, Durante argues that the district court ignored:
(1) evidence that he “disgorge[d]” his ill-gotten gains by turning over millions of dollars
of assets to his attorneys in 2002, and (2) “all evidence suggest[ing] that restitution was
made” in the parallel criminal case. Appellant Br. 28, 29. Neither argument persuades
us. Because the Judgment ordered that Durante “pay” the sum specified to the Clerk of
Court, his proffered “disgorgement” by assignment or transfer of assets to a third party is
irrelevant. The fact that the Judgment indicated that the amount to be paid “represent[s]
disgorgement” did not absolve Durante of his obligation to “pay” that particular amount
as ordered. App’x 51. Nor is there evidence—as both Durante and his attorney
acknowledge, see id. at 100, 111—that restitution was ever ordered in connection with
Durante’s criminal conviction, much less that such restitution was ever paid.
Nor can Durante fault the district court’s finding that he has not “diligently
attempted to comply” with the Judgment “in a reasonable manner.” Paramedics
Electromedicina Comercial, Ltda. v. GE Med. Sys. Info. Techs., Inc., 369 F.3d at 655
(internal quotation marks omitted). Magistrate Judge Peck detailed Durante’s long
history of deceit in concealing income and assets that might be used to satisfy the
Judgment. For example, substantial evidence of Durante’s access to nearly $1.7 million
between 2009 and 2011—which Durante does not dispute on appeal—together with his
5
failure to pay more than $20,000 toward the Judgment during that same period easily
supported the finding that he did not diligently attempt to comply in a reasonable manner.
Durante’s demonstrated and undisputed access to these funds also defeats his claim that
compliance was factually impossible. See Huber v. Marine Midland Bank, 51 F.3d at
10 (“burden of proving plainly and unmistakably that compliance is impossible rests with
the contemnor” (emphasis in original) (internal quotation marks omitted)); accord CFTC
v. Armstrong, 269 F.3d 109, 112 (2d Cir. 2001).
Accordingly, the district court committed no legal or factual error but, rather,
acted within its discretion in holding Durante in civil contempt of the Judgment.4
b. Equitable Defenses
Durante’s equitable defenses warrant no different conclusion. As this court has
held, laches is not available against the federal government where, as here, “it undertakes
to enforce a public right or protect the public interest,” Cayuga Indian Nation of N.Y. v.
Pataki, 413 F.3d 266, 279 n.8 (2d Cir. 2005) (internal quotation marks omitted); see
generally FTC v. Bronson Partners, LLC, 654 F.3d 359, 372 (2d Cir. 2011) (recognizing
disgorgement as “distinctly public-regarding remedy”). Durante urges otherwise,
arguing that funds paid in can be distributed to the injured victims of his fraud. The
argument is defeated by precedent. “While agencies may, as a matter of grace, attempt
to return as much of the disgorgement proceeds as possible, the remedy is not, strictly
4
Durante’s challenge to the adverse inferences drawn from his wife’s invocation of the
Fifth Amendment in response to questions regarding her assets fails for the reasons stated
in Magistrate Judge Peck’s R&R.
6
speaking, restitutionary at all, in that the award runs in favor of the Treasury, not of the
victims.” FTC v. Bronson Partners, LLC, 654 F.3d at 373.
Nor is there any merit to Durante’s claim of waiver. To support his waiver
defense, Durante points to his 2004 SEC deposition, at which he claimed to have already
transferred or abandoned ownership of certain assets. The argument fails because the
SEC’s follow-up questions—which relied on his responses as the premise of further
inquiry—provide no basis for concluding that the SEC adopted Durante’s testimony,
much less that it thereby “intentional[ly] relinquish[ed] a known right” to Durante’s
payment of the Judgment. Hamilton v. Atlas Turner, Inc., 197 F.3d 58, 61 (2d Cir.
1999). That Judgment obligated Durante to pay nearly $40 million; it did not invite
Durante to speculate as to the whereabouts of his assets and leave it to the SEC to find
them. Cf. EEOC v. Local 638, 753 F.2d 1172, 1179 (2d Cir. 1985) (observing that even
if plaintiffs may have been in best position to bring defendants’ noncompliance to court’s
attention, it was defendants who were charged with reasonable diligence and making
energetic efforts to comply with orders of court).5
In urging estoppel, Durante claims that the SEC acknowledged his compliance
with the Judgment in 2004. This mischaracterizes the record, which reflects no such
acknowledgment, much less one that is susceptible of justifiable reliance, see, e.g.,
OSRecovery, Inc. v. One Groupe Int’l, Inc., 462 F.3d 87, 93 n.3 (2d Cir. 2006) (stating
5
Accordingly, we need not address the R&R’s determination that Durante was, as a
general matter, barred by precedent from asserting a defense of waiver against the SEC.
See Crawford v. Franklin Credit Mgmt. Corp., 758 F.3d 473, 482 (2d Cir. 2014)
(approving affirmance on any basis supported by record).
7
that estoppel requires (1) misrepresentation of fact “with reason to believe that the other
party will rely on it,” and (2) reasonable reliance in fact, (3) to that party’s detriment), or
that is sufficient to render the district court’s contrary interpretation clearly erroneous.
Moreover, Durante fails to make the showing of “affirmative misconduct” necessary to
succeed on this defense. O’Rourke v. United States, 587 F.3d 537, 542 (2d Cir. 2009)
(internal quotation marks omitted); see Rojas-Reyes v. INS, 235 F.3d 115, 126 (2d Cir.
2000) (stating that equitable estoppel is available against government only in “the most
serious of circumstances” and “is applied with the utmost caution and restraint” (internal
quotation marks omitted)).
To the extent Durante’s defense of unclean hands is even cognizable—for which
proposition he has cited no binding authority—it is meritless for many of the same
reasons. Moreover, in the context of Durante’s incarceration from 2002 to 2009, there
is nothing in the record to suggest that the SEC’s 2011 decision to enforce the 2002
default judgment—after evidence emerged of Durante’s access to large sums of money
between 2009 and 2011—represented “egregious” misconduct resulting in prejudice that
rises “to a constitutional level.” In re Beacon Assocs. Litig., Nos. 09 Civ.
777(LBS)(AJP), 10 Civ. 8000(LBS)(AJP), 2011 WL 3586129, at *3 (S.D.N.Y. Aug. 11,
2011) (internal quotation marks omitted).
In sum, the district court properly rejected each of Durante’s equitable defenses.
2. Rule 60 Motion
The dismissal on timeliness grounds of Durante’s motion to modify the Judgment
under Fed. R. Civ. P. 60(b)(5) or (b)(6) manifests no abuse of discretion. See, e.g.,
8
Maduakolam v. Columbia Univ., 866 F.2d 53, 55–56 (2d Cir. 1989) (reviewing denial of
Rule 60(b) motion as time-barred for abuse of discretion). The district court reasonably
concluded that Durante’s motion, filed more than 11 years after the Judgment issued, was
not made “within a reasonable time.” Fed. R. Civ. P. 60(c)(1). No different
conclusion is warranted by the circumstances identified by Durante as excusing his delay,
including his incarceration between 2002 and 2009. See PRC Harris, Inc. v. Boeing
Co., 700 F.2d 894, 897 (2d Cir. 1983) (“In considering whether a Rule 60(b)(6) motion is
timely, we must scrutinize the particular circumstances of the case, and balance the
interest in finality with the reasons for delay.”). Even if Durante believed in 2004 that
the SEC had deemed the Judgment satisfied, which belief—as we have already
explained—was unjustifiable, his more than 29-month delay in seeking Rule 60(b) relief
in response to the SEC’s June 2011 demand for payment was not only unreasonable, cf.,
e.g., Kellogg v. Strack, 269 F.3d 100, 104 (2d Cir. 2001) (ruling pro se prisoner’s
26-month delay unreasonable); Truskoski v. ESPN, Inc., 60 F.3d 74, 77 (2d Cir. 1995)
(ruling 18-month delay unreasonable), but also without explanation.
3. Fifth Amendment Violation
Durante argues that the contempt order violates the Fifth Amendment insofar as it
requires him to “provide the SEC with an accurate accounting of his income and assets,”
App’x 328. Durante asserts that use of the word “accurate” presumes the falsity of his
prior sworn statement as to his income and assets, and thus, effectively requires him to
admit perjury as a condition of his release. Because Durante did not raise this objection
in the district court, we deem it forfeited on appeal. See United States v. James, 712
9
F.3d 79, 105 (2d Cir. 2013). Durante has not, thus far, specifically invoked the Fifth
Amendment in the district court. To the extent he can raise a colorable claim of
self-incrimination in opposition to any part of the order, he may certainly do so, at which
point that court, with the benefit of such arguments as the parties may present, can decide
whether to modify its order in any respect.
4. Conclusion
We have considered Durante’s remaining arguments and conclude that they are
without merit. Accordingly, the judgment of the district court is AFFIRMED without
prejudice to Durante’s seeking further review from that court at such time as he is
imprisoned pursuant to the contempt order.
FOR THE COURT:
CATHERINE O’HAGAN WOLFE, Clerk of Court
10