345 F. Supp. 3d 682
E.D. Va.2018Background
- Respondents (Chen, Powhatan, HEEP Fund, CU Fund) are accused of a two‑month (June–Aug 2010) scheme to execute wash trades in PJM to obtain excessive MLSA payments.
- FERC opened an investigation in Aug 2010, issued preliminary findings in Aug 2013, issued a Notice and then an Order to Show Cause (OSC) in Dec 2014, and Respondents elected the § 823b(d)(3)(A) "Alternate Option" (district‑court de novo review) in Jan 2015.
- FERC issued a Penalty Order in May 2015 assessing civil penalties and ordering disgorgement totaling millions; Respondents did not pay within 60 days.
- Pursuant to 16 U.S.C. § 823b(d)(3)(B), FERC filed this enforcement action in district court on July 31, 2015 seeking affirmance of the Penalty Order.
- Respondents moved to dismiss, arguing (1) the suit is time‑barred under the general penalty statute of limitations (28 U.S.C. § 2462), (2) FERC lacked authority to seek disgorgement as a civil penalty, and (3) disgorgement (if available) is time‑barred. The Court denied the motion.
Issues
| Issue | Plaintiff's Argument (FERC) | Defendant's Argument (Respondents) | Held |
|---|---|---|---|
| When did the enforcement claim "first accrue" under 28 U.S.C. § 2462? | Accrual occurred when Respondents failed to pay the Penalty Order 60 days after assessment (so the suit is timely). | Accrual occurred at the time of the alleged violations (June–Aug 2010), so the § 2462 period has run. | Accrual occurred when Respondents failed to pay within 60 days of the assessment; FERC's suit was timely. |
| Does § 2462 apply to disgorgement ordered by FERC? | Disgorgement is remedial (restitution) and thus not necessarily a § 2462 "penalty;" alternatively, fact‑specific. | Disgorgement functions as a punitive penalty/forfeiture and is therefore subject to § 2462. | Whether disgorgement is a § 2462 "penalty" is fact‑intensive; cannot be resolved on motion to dismiss. |
| Does the district court have authority to order disgorgement in de novo review of the Penalty Order? | Yes; § 823b(d)(3)(B) authorizes the court to "enforce, modify, and enforce as so modified, or set aside" the order, and federal courts possess equitable power to grant restitutionary relief. | § 823b is limited to civil penalty assessment; there is no express statutory grant for disgorgement here. | Court has authority to order (or modify) disgorgement under § 823b(d)(3)(B) and its equitable powers. |
| Can disgorgement be dismissed now as time‑barred under § 2462? | Even if disgorgement were a penalty, FERC brought suit within five years of accrual (nonpayment date). | Disgorgement is a penalty and accrued at time of violation, so it is time‑barred. | Denied: cannot dismiss disgorgement on statute grounds at this stage because the record is insufficient to determine whether disgorgement is punitive (and thus governed by § 2462). |
Key Cases Cited
- Gabelli v. SEC, 568 U.S. 442 (statute‑of‑limitations accrual principles)
- Meyer v. United States, 808 F.2d 912 (1st Cir.) (administrative adjudication accrual rule discussed)
- Crown Coat Front Co. v. United States, 386 U.S. 503 (statute‑of‑limitations accrual after required administrative proceedings)
- Ali v. Federal Bureau of Prisons, 552 U.S. 214 (courts must give effect to statutory text)
- Kokesh v. SEC, 137 S. Ct. 1635 (disgorgement can be a penalty depending on purpose)
- Tull v. United States, 481 U.S. 412 (disgorgement characterized as restitutionary equitable relief)
- Porter v. Warner Holding Co., 328 U.S. 395 (scope of federal courts' equitable powers)
- Meeker v. Lehigh Valley R.R. Co., 236 U.S. 412 (distinguishing penalties/forfeitures from remedial liabilities)
- 3M Co. v. Browner, 17 F.3d 1453 (§ 2462 as the general limitation for civil fines/penalties)
- Arch Mineral Corp. v. Babbitt, 104 F.3d 660 (reading "enforcement" to include administrative imposition)