Kokesh v. Sec. & Exch. Comm'n
137 S. Ct. 1635
SCOTUS
2017

Background

  • SEC sued Charles Kokesh for misappropriating ~$34.9 million (1995–2009) and for filing false SEC reports; jury found multiple securities-law violations.
  • District Court applied § 2462 to civil penalties (limiting penalties to 5 years) but held disgorgement was not a "penalty," awarded full disgorgement plus prejudgment interest.
  • Tenth Circuit affirmed the district court, creating circuit split with other courts that treated disgorgement as time-barred under § 2462.
  • Question presented: whether the 5-year statute of limitations in 28 U.S.C. § 2462 applies to SEC disgorgement claims (i.e., whether disgorgement is a "penalty").
  • Supreme Court held that SEC disgorgement, as applied, is a "penalty" within § 2462 and thus subject to the 5-year limitations period.

Issues

Issue Plaintiff's Argument Defendant's Argument Held
Whether § 2462's 5-year limitations period applies to SEC disgorgement claims Kokesh: disgorgement is remedial/compensatory, not punitive, so § 2462 does not bar disgorgement U.S./SEC: disgorgement functions as a penalty (deterrent/public remedy) and thus falls within § 2462 Court: disgorgement in SEC enforcement is a penalty and § 2462 applies; disgorgement claims must be brought within 5 years of accrual

Key Cases Cited

  • Gabelli v. SEC, 568 U.S. 442 (penalties under § 2462 are subject to a 5-year limitations period)
  • Huntington v. Attrill, 146 U.S. 657 (distinguishing public penal wrongs from private compensatory liabilities)
  • Meeker v. Lehigh Valley R. Co., 236 U.S. 412 (statutory "penalty or forfeiture" refers to punitive obligations for public law infractions)
  • Brady v. Daly, 175 U.S. 148 (private compensatory damages are not "penalties")
  • Austin v. United States, 509 U.S. 602 (civil sanctions serving retributive or deterrent ends are punishment)
  • United States v. Bajakajian, 524 U.S. 321 (deterrence is a traditional goal of punishment)
  • Porter v. Warner Holding Co., 328 U.S. 395 (distinguishing restitution to victims from penalties paid to government)
  • SEC v. Fischbach Corp., 133 F.3d 170 (disgorgement primarily serves to deprive violators of ill-gotten gains and deter violations)
  • SEC v. First Jersey Securities, Inc., 101 F.3d 1450 (disgorgement's primary purpose is deterrence)
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