602 F.Supp.3d 599
S.D.N.Y.2022Background
- Bronson and his firm E‑Lionheart ran a scheme buying penny‑stock shares at steep discounts and immediately reselling to the public without proper registration; FCI received transferred proceeds. The SEC sued in 2012.
- The Court granted summary judgment for the SEC (2017), entered a Final and then Amended Final Judgment (disgorgement, prejudgment interest, and civil penalties), and the Second Circuit affirmed.
- Bronson refused to pay the judgment, failed to produce ordered financial records, and the SEC moved to hold him in contempt; the Court issued multiple contempt orders (2021–2022), set a detailed payment plan, and ordered incarceration for repeated payment failures.
- Parties negotiated a so‑ordered settlement in July 2021 requiring an initial $1.1M payment and monthly $1.1M installments; Bronson missed, delayed, or submitted insufficient payments, triggering further contempt proceedings and brief incarceration.
- Bronson moved under Fed. R. Civ. P. 60(b) to vacate the Amended Final Judgment and the contempt orders, relying principally on intervening Supreme Court decisions in Kokesh and Liu; the Court denied relief as untimely and on the merits.
Issues
| Issue | Plaintiff's Argument (SEC) | Defendant's Argument (Bronson) | Held |
|---|---|---|---|
| Timeliness of Rule 60(b) motions | Motions filed years after judgment and after relevant Supreme Court decisions; delay unreasonable | Motions timely given changing law (Kokesh, Liu) | Denied as untimely (53–57 month delays; no adequate justification) |
| Rule 60(b)(4): Judgment void for lack of equitable jurisdiction after Kokesh/Liu | Court had subject‑matter jurisdiction to award equitable relief under securities statutes; Kokesh/Liu do not make judgment void | Disgorgement is not equitable under Kokesh/Liu, so judgment is void | Denied: judgment not void; Liu confirms disgorgement can be equitable if limited to net profits for victims |
| Rule 60(b)(5): Changed law makes prospective enforcement inequitable | Injunctive relief and disgorgement remain valid post‑Liu; money judgments are not prospective | Liu changed legal landscape such that continued enforcement (including injunctions/penny‑stock bar) is inequitable | Denied: disgorgement is a money judgment (not prospective); Liu did not eliminate injunctions or penny‑stock bars |
| Rule 60(b)(6): Extraordinary circumstances warrant relief based on Kokesh/Liu | Intervening Supreme Court decisions justify reopening judgment | Kokesh/Liu create grounds for relief because they changed governing law | Denied: change in decisional law alone is not the extraordinary circumstance required; court’s orders comport with Liu/Kokesh |
Key Cases Cited
- Kokesh v. SEC, 137 S. Ct. 1635 (2017) (held disgorgement is a "penalty" for purposes of the limitations statute)
- Liu v. SEC, 140 S. Ct. 1936 (2020) (held disgorgement may be equitable only to the extent of a wrongdoer’s net profits and must be for victims)
- United Student Aid Funds, Inc. v. Espinosa, 559 U.S. 260 (2010) (Rule 60(b)(4) relief is limited to judgments with jurisdictional infirmities)
- S.E.C. v. Romeril, 15 F.4th 166 (2d Cir. 2021) (post‑Espinosa denial of Rule 60(b)(4) where error was non‑jurisdictional)
- DeWeerth v. Baldinger, 38 F.3d 1266 (2d Cir. 1994) (Rule 60(b)(5) applies only to orders with prospective or supervisory application)
- Shillitani v. United States, 384 U.S. 364 (1966) (courts have inherent power to punish contempt to enforce lawful orders)
- First Jersey Securities, Inc. v. S.E.C., 101 F.3d 1450 (2d Cir. 1996) (permitting disgorgement from individuals for profits that inured to entities where defendants were primary wrongdoers)