Sec. & Exch. Comm'n v. Altahawi

Citation Codes

Equivalent Citations

citation codes

Docket Number

20-2751-cv

Attorney(S)

FOR DEFENDANT-APPELLANT: ROBERT G. HEIM, Tarter Krinsky & Drogin LLP, New York, NY FOR PLAINTIFF-APPELLEE: BROOKE WILLIG (Jeffrey A. Berger, Senior Litigation Counsel, on the brief), for Michael A. Conley, Acting General Counsel, Securities and Exchange Commission, Washington, D.C.

Judges

FOR THE COURT: Catherine O'Hagan Wolfe, Clerk of Court

Acts

—Title 28 APPENDIXFEDERAL RULES OF APPELLATE PROCEDURE — Citing Judicial Dispositions
Commerce And Trade — Public Company Accounting Reform And Corporate Responsibility — Corporate Responsibility — Fair Funds For Investors

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Smart Summary

Factual and Procedural Background

Andy Altahawi appealed the July 21, 2020 order of the United States District Court for the Southern District of New York, which denied his motion under Federal Rules of Civil Procedure 60(b)(5) and 60(b)(6) to modify a June 7, 2019 consent judgment between Altahawi and the Securities and Exchange Commission (SEC). The consent judgment had anticipated the possibility that the SEC might establish a Fair Fund pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002. The appeal challenges the denial of relief based on potential adverse tax consequences associated with the consent judgment and the Fair Fund.

Legal Issues Presented

Whether the District Court abused its discretion in denying Altahawi’s motion to modify the consent judgment under Rule 60(b)(5) on the basis of potential tax consequences related to the Fair Fund.
Whether the District Court abused its discretion in denying Altahawi’s motion under Rule 60(b)(6) to modify the consent judgment for similar reasons.

Arguments of the Parties

The opinion does not contain a detailed account of the parties' legal arguments.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Barcia v. Sitkin, 367 F.3d 87, 99 (2d Cir. 2004)	Standards for modification of consent decrees under Rule 60(b)(5)	Referenced to support the principle that modification is not warranted when the event relied upon was anticipated at the time of the decree.
Rufo v. Inmates of Suffolk Cnty. Jail, 502 U.S. 367, 385 (1992)	Guidance on modification of consent decrees under Rule 60(b)(5)	Cited for the proposition that modification should not be granted based on events anticipated when the decree was entered.

Court's Reasoning and Analysis

The court applied the standard under Rule 60(b)(5) that modification of a consent judgment requires a significant change in circumstances. It found that the potential tax consequences related to the creation of a Fair Fund under the Sarbanes-Oxley Act were anticipated at the time the consent judgment was entered. The consent judgment explicitly allowed for the SEC to propose a plan to distribute such a fund, thus the tax treatment complained of by Altahawi did not constitute a significant, unforeseen change. Accordingly, the District Court did not abuse its discretion in denying the motion to modify under Rules 60(b)(5) and 60(b)(6). The court also considered and rejected Altahawi’s other arguments as without merit.

Holding and Implications

The order of the District Court is AFFIRMED.

The direct effect of this decision is to uphold the denial of Altahawi’s motion to modify the consent judgment. The ruling confirms that anticipated consequences, including those related to the creation and distribution of a Fair Fund, do not justify modification under Rule 60(b). No new precedent was established by this summary order, which does not have precedential effect.

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SECURITIES AND EXCHANGE COMMISSION, Plaintiff-Appellee, v. ANDY ALTAHAWI, Defendant-Appellant.

FOR THE COURT: Catherine O'Hagan Wolfe, Clerk of Court

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 TO 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 8^th day of June, two thousand twenty-one. PRESENT: RAYMOND J. LOHIER, JR., WILLIAM J. NARDINI, Circuit Judges, JOHN P. CRONAN, Judge. FOR DEFENDANT-APPELLANT: ROBERT G. HEIM, Tarter Krinsky & Drogin LLP, New York, NY FOR PLAINTIFF-APPELLEE: BROOKE WILLIG (Jeffrey A. Berger, Senior Litigation Counsel, on the brief), for Michael A. Conley, Acting General Counsel, Securities and Exchange Commission, Washington, D.C.

Judge John P. Cronan, of the United States District Court for the Southern District of New York, sitting by designation.

Appeal from an order of the United States District Court for the Southern District of New York (Denise L. Cote, Judge).

UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that the order of the District Court is AFFIRMED.

Andy Altahawi appeals from the July 21, 2020 order of the United States District Court for the Southern District of New York (Cote, J.), denying his motion under Rule 60(b)(5) and Rule 60(b)(6) of the Federal Rules of Civil Procedure to modify the District Court's June 7, 2019 consent judgment between Altahawi and the Securities and Exchange Commission (SEC). We assume the parties' familiarity with the underlying facts and prior record of proceedings, to which we refer only as necessary to explain our decision to affirm.

For substantially the reasons stated in the District Court's July 21, 2020 opinion and order, we conclude that the District Court did not abuse its discretion in concluding that Altahawi failed to establish that the potential tax consequences under the consent judgment provide a basis for relief in this case under Rule 60(b)(5) or Rule 60(b)(6). In particular, we see no abuse of discretion in the District Court's determination that the potentially unfavorable tax treatment about which Altahawi complains, including the creation of a Fair Fund pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002, 15 U.S.C. § 7246, did not constitute a significant change in circumstances under Rule 60(b)(5) warranting an alteration of the consent judgment, which specifically anticipated that the SEC might establish such a fund. App'x 117 (the SEC "may propose a plan to distribute the Fund subject to the Court's approval"); see Barcia v. Sitkin, 367 F.3d 87, 99 (2d Cir. 2004); Rufo v. Inmates of Suffolk Cnty. Jail, 502 U.S. 367, 385 (1992) ("Ordinarily . . . modification [of a consent decree] should not be granted where a party relies upon events that actually were anticipated at the time it entered into a decree.").

We have considered Altahawi's remaining arguments and conclude that they are without merit. For the foregoing reasons, the order of the District Court is AFFIRMED.

FOR THE COURT:

Catherine O'Hagan Wolfe, Clerk of Court