Securities & Exchange Commission v. Smith
710 F.3d 87
2d Cir.2013Background
- Trust created August 2004 with donors David and Lynn Smith and beneficiaries including their children.
- Funding came from 100,000 Lynn Smith shares, structured via annuity that pays ~$490,000 annually.
- Asset freeze ordered in SEC action; Lynn Smith denied ownership in statements, later amended after discovery of annuity.
- Freeze lifted July 2010; Trust assets incurred expenditures including attorney fees and a New York vacation home purchase from Lynn Smith.
- SEC sought reconsideration after annuity documents surfaced; district court reinstated the freeze and sanctioned Lynn Smith, Dunn, and Wojeski; a receiver was authorized to dispose of the vacation property if sanctions were not repaid.
- Trust’s appeals were heard concerning interlocutory sanctions, the propriety of the sanctions, and whether the receiver could dispose of Trust assets without prior notice.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Jurisdiction to review sanctions orders | SEC argues interlocutory appeal permitted | Dunn/Wojeski contend collateral order relief applies | Appeals lack collateral-order jurisdiction for Dunn/Wojeski |
| Sanctions against Lynn Smith for false statements | Disgorgement appropriate; bad-faith misrepresentation shown | Smith challenges falsity and bad faith; disgorgement improper | Sanctions upheld; disgorgement affirmed; credibility findings supported |
| Disposition of Trust property without notice | Receiver authority proper to maximize return | Trust entitled to notice and opportunity to be heard; insufficient guidance | Remand to provide additional guidance to receiver; notice issue to be addressed |
Key Cases Cited
- Cunningham v. Hamilton Cnty., Ohio, 527 U.S. 198 (1999) (sanctions appeals not final; collateral order generally unavailable)
- Firestone Tire & Rubber Co. v. Risjord, 449 U.S. 368 (1981) (collateral order doctrine and final-judgment rationale context)
- Lamar Advertising of Penn, LLC v. Town of Orchard Park, 356 F.3d 365 (2d Cir. 2004) (injunction-related review and inextricable intertwining with appealable issues)
- Amador v. Andrews, 655 F.3d 89 (2d Cir. 2011) (limits on interlocutory review in certain contexts)