United States Securities and Exchange Commission v. David L. Smith ( 2023 )

22-746-cv
United States Securities and Exchange Commission v. David L. Smith
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A
SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY
FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT=S LOCAL RULE 32.1.1.
WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST
CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION
“SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON
ANY PARTY NOT REPRESENTED BY COUNSEL.
At a stated term of the United States Court of Appeals for the Second Circuit, held at the
Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the
7th day of April. two thousand twenty-three.
Present:
DEBRA ANN LIVINGSTON,
Chief Judge,
ROSEMARY S. POOLER,
ROBERT D. SACK,
Circuit Judges.
_____________________________________
UNITED STATES SECURITIES AND EXCHANGE
COMMISSION,
Plaintiff-Appellee,
v. 22-746-cv
DAVID L. SMITH,
Defendant-Appellant. *
_____________________________________
For Plaintiff-Appellee: ARCHITH RAMKUMAR, Attorney (Dan M. Berkovitz,
General Counsel, Michael A. Conley, Solicitor, Daniel
Staroselsky, Senior Appellate Counsel, on the brief),
United States Securities and Exchange Commission,
Washington, D.C.
*
The Clerk is respectfully directed to amend the caption as above.
1
For Defendant-Appellant: JUSTIN S. WEDDLE (Brian Witthuhn, on the briefs),
Weddle Law PLLC, New York, N.Y.; Alex Lipman, on
the briefs, Lipman Law PLLC, New York, N.Y.
Appeal from a judgment of the U.S. District Court for the Northern District of New York
(Sharpe, J.).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND
DECREED that the order of the district court is AFFIRMED.
Defendant-Appellant David L. Smith (“Smith”) appeals from a February 10, 2022, final
order of the U.S. District Court for the Northern District of New York (Sharpe, J.) denying his
motion pursuant to Federal Rule of Civil Procedure 60(b)(4) for relief from a 2015 disgorgement
order, which this Court upheld on appeal in 2016. See S.E.C. v. Smith, 646 F. App’x 42 (2d Cir.
2016) (summary order). The district court entered the disgorgement order jointly and severally
against Smith and his co-defendant Timothy McGinn (“McGinn”), as part of a civil enforcement
action brought by Plaintiff-Appellee the Securities and Exchange Commission. For the reasons
set forth below, we affirm the district court’s February 10, 2022 order. We assume the parties’
familiarity with the underlying facts, the procedural history of the case, and the issues on appeal.
* * *
In 2015, the district court ordered Smith, jointly and severally with McGinn, to disgorge
the amount obtained from investors, minus the amount returned to investors via interest and other
payments, for a total of $87,433,218. S.E.C. v. McGinn, Smith & Co., 98 F. Supp. 3d 506, 519–
21 (N.D.N.Y. 2015). In our 2016 decision, we affirmed the disgorgement award, finding (1) that
Smith had waived the argument that disgorgement in the civil case must take into account the
expenses of operating the illegal scheme, such that Smith could only be ordered to disgorge an
amount that equaled his net profit; and (2) that collateral estoppel did not limit the disgorgement
2
amount in the civil action to the amount awarded in restitution in the criminal action. Smith, 646
F. App’x at 44. On June 3, 2021, Smith moved pursuant to Federal Rule of Civil Procedure
60(b)(4) for relief from the disgorgement order. He argues that the order was “void” under that
rule because it exceeded the limits of equitable relief and was an unauthorized penalty.
“We review de novo a district court’s denial of a Rule 60(b)(4) motion.” S.E.C. v.
Romeril, 15 F.4th 166, 170–71 (2d Cir. 2021) (quoting City of New York v. Mickalis Pawn Shop,
LLC, 645 F.3d 114, 138 (2d Cir. 2011)). Rule 60(b)(4) provides that a “court may relieve a party
. . . from a final judgment” when “the judgment is void.” Fed. R. Civ. P. 60(b)(4). “[A] void
judgment is one so affected by a fundamental infirmity that the infirmity may be raised even after
the judgment becomes final.” United Student Aid Funds, Inc. v. Espinosa, 559 U.S. 260, 270
(2010). “The list of such infirmities is exceedingly short; otherwise, Rule 60(b)(4)’s exception
to finality would swallow the rule.” Id. “Rule 60(b)(4) applies only in two situations: ‘where a
judgment is premised either on a certain type of jurisdictional error or on a violation of due process
that deprives a party of notice or the opportunity to be heard.’” Romeril, 15 F.4th at 171 (quoting
Espinosa, 559 U.S. at 271).
Relief is not available to Smith under Rule 60(b)(4) because he has not alleged that the
judgment is “void” within the meaning of the rule. Our settled precedent in Romeril makes clear
that “[a] judgment is not void . . . simply because it is or may have been erroneous.” 15 F.4th at
171 (quoting Espinosa, 559 U.S. at 270).
Smith has failed to allege a jurisdictional error or a due process violation that would render
the judgment void within the meaning of Rule 60(b)(4). A judgment is void under Rule 60(b)(4)
for lack of jurisdiction “only if the court that rendered it lacked jurisdiction of the subject matter,
or of the parties.” Grace v. Bank Leumi Tr. Co., 443 F.3d 180, 193 (2d Cir. 2006) (citation
3
omitted). Smith does not dispute the existence of subject matter jurisdiction or personal
jurisdiction.
In addition, Smith’s theory of a due process violation premised on an alleged separation of
powers issue is unavailing. “The due process right implicated by Rule 60(b)(4) is the right to
‘notice reasonably calculated, under all the circumstances, to apprise interested parties of the
pendency of the action and afford them an opportunity to present their objections.’” Romeril, 15
F.4th at 174 (quoting Espinosa, 559 U.S. at 272) (internal quotation marks omitted). “As a
general matter, there is no ‘denial of due process for purposes of Rule 60(b)(4) if the party seeking
relief received actual notice of the proceedings and had a full and fair opportunity to litigate the
merits.’” Id. (quoting 12 Moore’s Federal Practice Civil § 60.44[4]). Smith does not dispute
that he had actual notice of the proceedings and a full and fair opportunity to litigate the merits,
with representation by competent counsel. Accordingly, the district court correctly found that
relief is not available to Smith under Rule 60(b)(4).
* * *
We have considered Smith’s remaining arguments and find them to be without merit.
Accordingly, we AFFIRM the order of the district court.
FOR THE COURT:
Catherine O’Hagan Wolfe, Clerk
4