884 F.3d 979
10th Cir.2018Background
- Defendant Charles Kokesh controlled two SEC-registered adviser firms (TFL and TFI) that managed several BDCs and took funds from those BDCs in violation of contracts.
- Some payments (salaries, bonuses, office rent) were explicitly prohibited; a 2000 contract amendment purported to authorize some reimbursements but was approved via misleading proxy statements.
- The SEC sued Kokesh on October 27, 2009, alleging misappropriation of over $34.9 million from 1995–2006; a jury found fraud and the district court ordered disgorgement and penalties.
- The Tenth Circuit previously affirmed, but the Supreme Court held in Kokesh v. SEC that disgorgement is a “penalty” under 28 U.S.C. § 2462 and subject to a five-year statute of limitations.
- On remand, the SEC sought disgorgement of $5,004,773 that it says was converted after October 27, 2004; Kokesh argued the SEC’s claims accrued at the start of his scheme and thus are time-barred.
- The Tenth Circuit held the misappropriations were discrete conversion events (not a single continuing violation) and reversed to require disgorgement of $5,004,773.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether § 2462’s five-year limitations period begins once when the claim "first accrued" or resets for each wrongful taking | SEC: Each improper conversion restarts a limitations period; disgorgement for conversions within five years is timely | Kokesh: The claim first accrued when the fraudulent scheme began, so later conversions fall outside § 2462 | Court: Each unauthorized taking is a discrete accrual; § 2462 runs from each conversion, so $5,004,773 is disgorgeable |
Key Cases Cited
- Sierra Club v. Oklahoma Gas & Electric Co., 816 F.3d 666 (10th Cir. 2016) (interpreting § 2462 and distinguishing continuing violations from discrete accruals)
- Kokesh v. SEC, 137 S. Ct. 1635 (2017) (held disgorgement is a "penalty" under § 2462)
- Nat’l R.R. Passenger Corp. v. Morgan, 536 U.S. 101 (2002) (hostile-work-environment claims are continuing violations that accrue with any timely act)
- Figueroa v. District of Columbia Metro. Police Dep’t, 633 F.3d 1129 (D.C. Cir. 2011) (each pay period can create a new, separately accruing claim)
- Birkelbach v. SEC, 751 F.3d 472 (7th Cir. 2014) (failure-to-supervise creates recurring independently actionable violations)
- Rodrigue v. Olin Employees Credit Union, 406 F.3d 434 (7th Cir. 2005) (each negotiated check constituted a separate conversion accrual)
- Poster Exchange, Inc. v. Nat’l Screen Serv. Corp., 517 F.2d 117 (5th Cir. 1975) (conspiracy/refusal-to-deal can give rise to successive causes of action for each injuring act)
- Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321 (1971) (each act in a continuing conspiracy can start a new limitations period)