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Securities and Exchange Commission v. Bolla

May 6, 2008

SECURITIES AND EXCHANGE COMMISSION, PLAINTIFF,
v.
STEVEN M. BOLLA, WASHINGTON INVESTMENT NETWORK, SUSAN BOLLA, AND ROBERT RADANO, DEFENDANTS.



The opinion of the court was delivered by: Colleen Kollar-kotelly United States District Judge

MEMORANDUM OPINION

Currently pending before the Court is Defendant Robert Radano's Motion to Amend, Vacate, and Relieve Him From That Portion of the Final Judgment Imposing a Monetary Penalty Against Him. Plaintiff, the Securities and Exchange Commission ("SEC"), opposes Defendant Radano's Motion. After thoroughly reviewing Defendant Radano's Motion, the SEC's Opposition, Defendant Radano's Reply, and the statutes and case law cited therein, the Court issued a Minute Order requesting that both parties provide the Court with a list of any cases, reported or unreported, analyzing the availability of monetary penalties against those who commit aiding and abetting violations of the Investment Advisers Act of 1940 (the "Advisers Act"), 15 U.S.C. § 80b-1 et seq. The parties have now provided their submissions and Defendant Radano has, as permitted by the Court's April 22, 2008 Minute Order, responded to the SEC's supplemental Memorandum in Support of a Monetary Penalty Against Robert Radano. Upon searching consideration of the foregoing, the Court concludes that the SEC lacks authority to seek, and the Court lacks jurisdiction to impose, monetary penalties against Defendant Radano for his aiding and abetting violations of the Advisers Act. The Court shall therefore GRANT [88] Defendant Radano's Motion, and shall vacate that portion of the Court's October 29, 2007 Order imposing a monetary penalty upon Defendant Radano individually. The remainder of the October 29, 2007 Order shall remain in effect.

I. BACKGROUND

The Court presumes knowledge of the facts of this case, which are extensively addressed in both SEC v. Bolla, 401 F. Supp. 2d 43 (D.D.C. 2005) ("Liability Mem. Op.") and SEC v. WIN, 475 F.3d 392 (D.C. Cir. 2007) ("Appeal Mem. Op."), as well as this Court's October 29, 2007 Memorandum Opinion embodying its judgment following remand from the United States Court of Appeals for the District of Columbia Circuit, see SEC v. Bolla, 519 F. Supp. 2d 76 (D.D.C. 2007) ("Injunct. Mem. Op."). The Court therefore repeats herein only those facts necessary to resolve Defendant Radano's pending Motion. The Complaint in this action was filed on July 31, 2002, alleging violations of the Advisers Act. Thereafter, Defendants Steven M. Bolla and Susan Bolla entered into a settlement with the SEC, and a bench trial was held before this Court on July 26-28, 2004 to determine the liability of Defendants Radano and Washington Investment Network ("WIN"). On September 22, 2005, the Court issued a Memorandum Opinion finding Defendant WIN liable for violating Sections 203(f), 206(1) and 206(2) of the Advisers Act, 15 U.S.C. §§ 80b-3(f), 80b-6(1), and 80b-6(2) respectively, and finding that Defendant Radano aided and abetted WIN's violations. See generally Liability Mem. Op., 401 F. Supp. 2d 43. The Court imposed a civil monetary penalty of $15,000 against Defendant Radano, and imposed a $50,000 penalty against Defendant WIN. In addition, the Court enjoined both Defendants "from future violations of Sections 203(f), 206(1) and 206(2) of the Advisers Act." See id. at 74; see also Order, SEC v. Bolla, Civil Action No. 02-1506 (D.D.C. Sept. 22, 2005).

Defendants WIN and Radano appealed the issuance of the injunction, the form of the injunction, and the imposition of monetary penalties. On February 6, 2007, the D.C. Circuit issued an opinion affirming this Court's findings of violations, as well as the imposition of penalties. See generally Appeal Mem. Op., 475 F.3d 392. The D.C. Circuit also affirmed on the merits this Court's issuance of an injunction, but found the injunction to be "insufficiently specific." Id. at 407. The D.C. Circuit therefore remanded the case to this Court "to reform the injunction and to address the question of overbreadth." Id. Following remand, the parties were unable to agree upon mutually acceptable language to amend the injunction in compliance with the D.C. Circuit Mandate, and proceeded to file briefing regarding the scope of the injunction.

On October 29, 2007, the Court issued a Memorandum Opinion and Order regarding the parties' briefing on the scope of the injunction, as well as Defendant Radano's efforts to expand that briefing beyond the narrow issue delineated in the D.C. Circuit's Mandate. See generally Injunct. Mem. Op., 519 F. Supp. 2d 76. The Court's Memorandum Opinion rejected Defendant Radano's efforts in that respect, declining to reconsider its previous factual findings and legal conclusions, and also declining to reconsider Defendant Radano's arguments regarding the availability of civil monetary penalties for aiding and abetting liability under the Advisers Act. See id. at 79-80. Specifically, the Court noted that the D.C. Circuit refused to consider Defendant Radano's arguments regarding monetary penalties because he failed to raise them before this Court, but nevertheless affirmed this Court's "imposition of penalties on WIN and Radano, as set forth [in the Liability Mem. Op. and] judgment." Id. at 79 (quoting Appeal Mem. Op., 475 F.3d at 407). The Court therefore declined to consider Defendant Radano's arguments in that vein on remand, and simply clarified "that the statutory basis for civil penalties imposed in this case is Section 209(e) of the Investment Advisers Act of 1940, 15 U.S.C. § 80b-9(e)." Id. at 79 n.1. The Court continued to revise the injunction in order to comply with the D.C. Circuit's Mandate, see generally id., and neither party has challenged the revised injunction.

On November 13, 2007, Defendant Radano filed his Motion to Amend, Vacate, and Relieve Him From That Portion of the Final Judgment Imposing a Monetary Penalty Against Him. The SEC moved to strike Defendant Radano's motion on November 14, 2007, arguing that it constituted an improper attempt to re-litigate the scope of the injunction. The Court denied the SEC's Motion to Strike by Minute Order dated February 7, 2008, noting that Defendant Radano's motion was filed pursuant to Federal Rules of Civil Procedure 59(e) and 60(b), and set a schedule for substantive briefing on Defendant Radano's Motion. Pursuant to the schedule entered by the Court, the SEC filed its Opposition to Defendant Radano's Motion on February 21, 2008, and Defendant Radano filed his Reply on March 6, 2008. Thereafter, the Court reviewed the parties' briefs and the case law and statutes cited therein, and on April 22, 2008 issued a Minute Order requesting that each party provide a list of any cases, reported or unreported, analyzing the availability of monetary penalties under Section 209(e) of the Advisers Act. The parties filed their responses to the Court's request on April 29, 2008, and on May 2, 2008, Defendant Radano--as permitted by the Court's April 22, 2008 Minute Order--filed an additional response to the SEC's April 29, 2008 submission.

II. LEGAL STANDARDS

Defendant Radano brings his Motion pursuant to Federal Rules of Civil Procedure 59(e) and 60(b). Generally speaking, a motion for reconsideration is treated as a "[Federal Rule of Civil Procedure] 59(e) motion if filed within 10 days of entry of the challenged order and as a Rule 60(b) motion if filed thereafter." United States v. Pollard, 290 F. Supp. 2d 153, 156 (D.D.C. 2003)(quoting United States v. Clark, 984 F.2d 31, 32 (2d Cir. 1993)). Defendant Radano filed his Motion on November 13, 2007, ten days after the Court's October 29, 2007 Memorandum Opinion and Order, as counted under Rule 6 of the Federal Rules of Civil Procedure.*fn1 Nevertheless, the Court concludes that Defendant Radano's Motion is properly considered pursuant to Rule 60(b). The Court's October 29, 2007 Memorandum Opinion and Order simply clarified the basis for the Court's September 22, 2005 imposition of monetary penalties upon Defendant Radano. Defendant Radano's Motion argues that Section 209(e) has never provided authority for the SEC to seek, or jurisdiction for the Court to impose, monetary penalties for aiding and abetting violations of the Advisers Act, and thus actually challenges the original imposition of monetary penalties against Defendant Radano in the Court's September 22, 2005 Order. As Defendant Radano filed his Motion well outside the ten-day period following that Order, the Court considers it pursuant to Rule 60(b).

Rule 60(b) provides that "[o]n motion and just terms, the court may relieve a party or its legal representative from a final judgment, order, or proceeding for the following reasons . . . (1) mistake . . . (4) the judgment is void; (5) . . . applying [the judgment] prospectively is no longer equitable; or (6) any other reason that justifies relief." Fed. R. Civ. P. 60(b). The Rule was intended to preserve "the delicate balance between the sanctity of final judgments . . . and the incessant command of the court's conscience that justice be done in light of all the facts." Bankers Mortgage Co. v. United States, 423 F.2d 73, 77 (5th Cir.), cert. denied, 399 U.S. 927 [](1970) (emphasis in original); accord, Compton v. Alton Steamship Co., 608 F.2d 96, 102 (4th Cir. 1979); Boughner v. Secretary of HEW, 572 F.2d 976, 977 (3d Cir. 1978); Clarke v. Burkle, 570 F.2d 824, 830 (8th Cir. 1978). But as the Supreme Court has said, "There must be an end to litigation someday, and free, calculated, deliberate choices are not to be relieved from." Ackermann v. United States, 340 U.S. 193, 198 [] (1950). Rule 60(b) cannot, therefore, be employed simply to rescue a litigant from strategic choices that later turn out to be improvident. See Marshall v. Board of Educ., 575 F.2d 417, 424 (3d Cir. 1978); Federal's, Inc. v. Edmonton Investment Co., 555 F.2d 577, 583 (6th Cir. 1977); Lubben v. Selective Serv. Sys. Local Bd. No. 27, 453 F.2d 645, 651-52 (1st Cir. 1972).

Good Luck Nursing Home, Inc. v. Harris, 636 F.2d 572, 577 (D.C. Cir. 1980). Rule 60(b) "gives the district judge broad latitude to relieve a party from a judgment," Richardson v. Nat'l R.R. Passenger Corp., 49 F.3d 760, 765 (D.C. Cir. 1995), but "should be only sparingly used," Good Luck Nursing Home, 636 F.2d at 577, and relief under Rule 60(b)(6) is granted in only "extraordinary circumstances," Ackerman, 340 U.S. at 199.

Defendant Radano stresses Rule 60(b)(4), arguing that the judgment imposing monetary penalties upon him is void.*fn2 Rule 60(b)(4) does not provide an avenue for relief from an erroneous disposition, "[r]ather, before a judgment may be deemed void within the meaning of the rule, 'it must be determined that the rendering court was powerless to enter it.'" Combs v. Nick Garin Trucking, 825 F.2d 437, 442 (D.C. Cir. 1987) (quoting V.T.A., Inc. v. Airco, Inc., 597 F.2d 220, 224 (10th Cir. 1979)). Moreover, while a motion pursuant to Rule 60(b)(1) "'is committed to the discretion of the trial court' . . . 'there is no question of discretion on the part of the court when a motion is under Rule 60(b)(4).'" Id. at 441 (quoting Jackson v. Beech, 636 F.2d 821, 835 (D.C. Cir. 1980) and 11 Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 2862, at 197 (1973)). "[A] party attacking a judgment as void need show no meritorious claim or defense or other equities on his behalf; he is entitled to have the judgment treated for what it is, a legal nullity." Id. at 441-42 (internal quotations and citations omitted). Further, while Rule 60(c) provides that "[a] motion under Rule 60(b) must be made within a reasonable time-and for reasons (1), (2), and (3) no more than a year after the entry of the judgment or order," Fed. R. Civ. P. 60(c), "the Rule places no time limit on an attack upon a void judgment, nor can such a judgment acquire validity because of laches on the part of him who applies for relief from it." Austin v. Smith, 312 F.2d 337, 343 (D.C. Cir. 1962); Wright & Miller, supra, at 324-35.

III. DISCUSSION

The Court has not previously had the chance to consider Defendant Radano's argument that Section 209(e) of the Advisers Act, 15 U.S.C. ยง 80b-9(e) does not authorize the SEC to seek, nor provide the Court with jurisdiction to impose, monetary penalties for aiding and abetting violations of the Act. As the Court noted in its September 22, 2005 Memorandum Opinion, the SEC requested that the Court impose a civil monetary penalty upon Defendant Radano for each aiding and abetting violation of the Advisers Act via its Amended Trial Brief. See Liability Mem. Op., 401 F. Supp. 2d at 74-75. Defendant Radano admits that he did not challenge the availability of such penalties under Section 209(e) at that time. See Radano Mot. at 6 n.4 ("neither party gave more than perfunctory attention to the statutory basis or appropriateness of monetary penalties either before, during, or after trial. . . ."). Because Defendant Radano did not raise the issue, the Court's September 22, 2005 Memorandum Opinion and Order imposing monetary penalties on Defendant Radano did not consider it, and the Court made no ruling on ...


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