Securities and Exchange Commis v. Baron Kuipers

FILED
NOT FOR PUBLICATION SEP 21 2010
MOLLY C. DWYER, CLERK
UNITED STATES COURT OF APPEALS U .S. C O U R T OF APPE ALS
FOR THE NINTH CIRCUIT
SECURITIES AND EXCHANGE No. 09-36016
COMMISSION,
D.C. No. 2:00-cv-00823-JCC
Plaintiff - Appellee,
MICHAEL D. MCKAY, MEMORANDUM *
Receiver - Appellee.,
v.
BARON JOHN KUIPERS; et al.,
Claimants - Appellants,
v.
JOHN WAYNE ZIDAR,
Defendant.
Appeal from the United States District Court
for the Western District of Washington
John C. Coughenour, District Judge, Presiding
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
Submitted August 30, 2010 **
Seattle, Washington
Before: HAWKINS, McKEOWN and BEA, Circuit Judges.
Arising out of a receivership resulting from a Securities and Exchange
Commission (“SEC”) action against John Wayne Zidar (“Zidar”) after Zidar was
convicted of investment fraud, claimants appeal the grant of Receiver Michael
McKay’s (“Receiver”) motion for approval of supplemental distribution of the petition
for fees. We largely affirm, but remand for the district court to consider the claims of
Claimants Lynette D’Mello, Elizabeth Dobis, Tom Linardos, and Hugh McLeod,
(collectively “the Investors”).
Late Claims
The Investors claim abuse of discretion in the denial of their claims for
receivership assets. The original deadline for filing objections to the Receiver’s
proposed distribution plan and preserving claims was August 2, 2004, a deadline
subsequently extended to September 29, 2004. The Investors filed their claims after
the original deadline, but before the extended deadline. At the district court’s
direction, the Receiver considered the Investors’ showing of good cause for the timing
of the filing of these claims. The Receiver found good cause for late filings by two
**
The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
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of the Investors, found it difficult to make such a determination as to another, and
made no recommendation as to one other. The district court later rejected all these
claims without any explanation or reference to the Receiver’s recommendations.
While our review of a district court’s disallowance of a late claim is narrow in
scope, we have remanded where we simply could not conclude that there was no
abuse of discretion when no grounds were provided for disallowance. See Silber v.
Mabon, 18 F.3d 1449, 1455 (9th Cir. 1994).
Here, the denial states only that it “rejects the petitions filed by the following
individuals.” There is no acknowledgment or rejection of the Receiver’s
recommendation as to good cause and no discussion of why claims actually filed
within the final, extended deadline were deemed untimely. We intend no criticism of
the district court – we simply do not have enough information to determine whether
its fairly broad discretion was exercised appropriately here. Accordingly, we remand
to the district court to evaluate whether the Investors filed timely claims and, if they
did not, whether they had good cause for any untimely filing. Should the district court
conclude the claims were timely filed or good cause existed for late filing, it should
proceed to evaluate the Receiver’s recommendations as to the merits of those claims.
We express no view on either point.
Third Party Investment Claims and Motion for Reconsideration
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Investor Baron Kuipers (“Kuipers”) made claims for distribution on behalf of
third party investors Brent Brooks, Margo Shum, Ken Neal, and Beverly Wilson
(collectively “Third Party Investors”). The Third Party Investors made investments
through Kuipers’s corporation, Universal Synergy (“Universal”). The Receiver
recommended denial of these claims because: (1) the investment payments were made
by Universal on behalf of other investors, and were not made on behalf of Universal
itself; and (2) the claimed loss total for the three claims did not match the account
balance Kuipers claimed on his questionnaire.
A decision to defer to the expertise of a receiver does not automatically
constitute an abuse of discretion, especially given the deference accorded for the
supervision of a receivership. See SEC v. Hardy, 803 F.2d 1034, 1038 (9th Cir. 1986).
Here, there is no evidence that the court acted arbitrarily. Further, these Investors
were given an opportunity to show why a hearing on their claims was necessary, but
ultimately agreed with the Receiver that it was not. The district court was thus well
within its discretion to use summary proceedings to determine appropriate relief rather
than plenary proceedings. See id. at 1040.
These Investors also claim error in the denial of their motion for reconsideration
because the district court failed to address the merits of their arguments and instead
relied on Western District of Washington Local Rule CR 7(h) (“Local Rule 7(h)”).
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They argue that Local Rule 7(h) did not apply because they were not appealing a final
order, and Local Rule 7(h) codifies the requirements for a Federal Rule of Civil
Procedure 59(e) (“Rule 59(e)”) motion, which explicitly applies only to final
judgments.
While Rule 59(e) applies only to final judgments, Local Rule 7(h) does not
clearly track the language of Rule 59(e), and does not obligate us to interpret it under
the parameters of Rule 59(e). Rather, the Local Rule appears to track the language of
Federal Rule of Civil Procedure 7, which covers motions and pleadings more
generally, and does not limit its application to final judgments. Compare Fed. R. Civ.
P. 7 with Local Rule 7(h). Because Local Rule 7(h) does not apply solely to final
judgments, the order’s lack of finality did not preclude application of Local Rule 7(h)
to bar the motion for reconsideration.
We note these Investors also filed their motion well beyond the 14-day period
following the original order allowed under Local Rule 7(h). There was therefore no
abuse of discretion in denying the motion for reconsideration. We need not analyze
its merits.
Reduction of Kuipers’s Monetary Distribution
Kuipers argues that the district court abused its discretion by approving the
Receiver’s recommendation to reduce Kuipers’s pro rata monetary distribution by
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$30,045. The Receiver made this recommendation after receiving information from
the U.S. Attorney that Kuipers had not disclosed receipt of payment in that amount
from one criminal defendant.
Kuipers argues that the district court erred because the Receiver failed to meet
the manifest error burden under Local Rule 7(h), or the Federal Rule of Civil
Procedure 60(b)(2) (“Rule 60(b)(2)”) burden of a party seeking relief from a judgment
on the basis of newly discovered evidence. See Fed. R. Civ. P. 60(b)(2); Local Rule
7(h).
Because granting the Receiver’s motion to amend was entirely discretionary
and well within the court’s authority, there was no abuse of discretion.
Denial of Robsons’ Motion for Reconsideration
Claimants William and Evleen Robson (“Robsons”) challenge the denial of
their objection to the court’s February 8, 2005 order approving the Receiver’s
distribution plan in full. The Receiver had not approved one of the Robsons’
investment claims because the Robsons failed to provide proof of purchase
documenting their investment. On motion for reconsideration, the Robsons claimed
to have obtained confirmation from Suisse Security Bank & Trust (“SSB&T”) that
they transferred funds to member representatives for investment. In response, the
Receiver claimed that the SSB&T documentation was merely a letter expressing intent
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to invest, rather than a wire transfer form that affirmatively evidenced completion of
the investment. The district court found the document proffered by the Robsons
insufficient to support a finding that the investment transfer occurred. It also noted
that the Robsons’ motion, filed more than two months after the court’s February 14,
2005 order, was untimely.
The Robsons’ motion for reconsideration was plainly untimely under Local
Rule 7(h)(2), which requires that a “motion shall be filed within fourteen days after
the order to which it relates is filed.” Further, motions for reconsideration are
disfavored under Local Rule 7(h), and “[t]he court will ordinarily deny such motions
in the absence of a showing of manifest error in the prior ruling or a showing of new
facts or legal authority which could not have been brought to its attention earlier with
reasonable diligence.” Local Rule 7(h)(1). The district court did not abuse its
discretion in finding an inadequate “showing of new facts or legal authority.” Id. The
record supports the district court’s conclusion that the letter itself lacked reference to
a wire transfer or an explanation from SSB&T confirming the occurrence of a
completed investment transaction. Without such information, the district court was
well within its discretion in concluding that the letter could not serve as sufficient
proof of a transfer of funds.
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Nor could the Robsons’ motion have been treated as a timely Rule 60(b)(2)
motion. They were not appealing a final order, and as such, Rule 60(b)(2) does not
apply. See Fed. R. Civ. P. 60(b)(2).
AFFIRMED in part and REMANDED in part. Each party to bear its own costs
on appeal.
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