Sec. & Exch. Comm'n v. Goulding

SECURITIES AND EXCHANGE COMMISSION, Plaintiff, v. RANDALL GOULDING and DAVID GOULDING, Defendants.

No. 09-cv-1775

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

March 25, 2020

Jeffrey T. Gilbert Magistrate Judge

MEMORANDUM OPINION AND ORDER

On October 25, 2019, the Court entered its post-trial Findings of Fact and Conclusions of Law in this case. [ECF No. 1085]. On November 12, 2019, the Court entered Final Judgment as to Defendant Randall Goulding ("Randall") and ordered, among other things, that he disgorge $642,222 in ill-gotten gains as a result of multiple violations of the Investment Advisers Act ("Advisers Act"), 18 U.S.C. § 206. [ECF No. 1094]. On December 10, 2019, Randall filed a Motion for a Revised Finding of Fact, Revised Conclusions of Law, and an Amended Judgement, as well as a Memorandum in Support ("Randall's Motion"). [ECF Nos. 1096, 1097]. Shortly thereafter, Randall sua sponte filed a notice withdrawing one of the arguments made in his Motion. [ECF No. 1100]. The Securities and Exchange Commission ("SEC") responded to Randall's Motion, [ECF No. 1104], and the Motion is now fully briefed.

As explained below, the Court finds that as a matter of procedure, Randall's Motion is not proper under Rule 59(e) because Randall has not articulated any manifest error of law or fact, or cited to any newly discovered evidence, that would have prevented the Court from entering judgment on November 12, 2019. Randall simply rehashes arguments he made in his original post-trial briefs or presents slightly revised arguments not previously made in the way they are being made now but to the same effect as his earlier submissions. Randall's Motion also fails on the merits because his basic premise that he cannot be required to disgorge money Nutmeg paid him that might have come from management fees Nutmeg received from original securities offerings to investors in funds managed by Nutmeg is flawed on the facts and law applicable to this case. Further, Randall's attempt to reopen the record for a limited purpose is unsupportable and the Court again declines to accept his argument that the Supreme Court has foreclosed the SEC from seeking disgorgement of ill-gotten gains in a case like this. As a result, Randall's Motion is denied in its entirety.

I. Federal Rules of Civil Procedure 59(a)(2) and 59(e)

Randall cites Federal Rules of Civil Procedure 59(a)(2) and 59(e) in support of his Motion. [ECF No. 1097] at 5. Rule 59(a)(2) applies to a motion for a new trial: "[a]fter a nonjury trial, the court may, on motion for a new trial, open the judgment if one has been entered, take additional testimony, amend findings of fact and conclusions of law or make new ones, and direct the entry of a new judgment." FED.R.CIV.P 59(a)(2) (emphasis added). Rule 59(e), by contrast, simply states that "[a] motion to alter or amend a judgment must be filed no later than 28 days after the entry of the judgment." FED.R.CIV.P 59(e). As the added emphasis to the language of Rule 59(a)(2) should suggest, Randall's Motion is not well-taken under Rule 59(a)(2). Randall has not requested a new trial, either in form or in substance.¹ The Court therefore will consider the arguments advanced inRandall's Motion, both procedurally and substantively, only under the standard of review provided by Rule 59(e).²

A motion to alter or amend judgment under Rule 59(e) asks the Court to reconsider matters "properly encompassed in a decision on the merits." Osterneck v. Ernst & Whitney, 489 U.S. 169, 174 (1989). A party seeking an altered or amended judgment must "clearly establish" that the court committed a manifest error of law or fact or that newly discovered evidence precluded entry of judgment. Harrington v. City of Chi., 433 F.3d 542, 546 (7th Cir. 2006) (citing Bordelon v. Chicago Sch. Reform Bd. of Trs., 233 F.3d 524, 529 (7th Cir. 2000)). Manifest error is more than mere disappointment of the losing party: it is the "wholesale disregard, misapplication, or failure to recognize controlling precedent." Oto v. Metro. Life Ins. Co., 224 F.3d 601, 606 (7th Cir. 2000) (quoting Sedrak v. Callahan, 987 F. Supp. 1063, 1069 (N.D. Ill. 1997)). Newly discovered evidence is limited to evidence that, even with reasonable diligence, could not have been discovered and produced prior to the judgment. Caisse Nationale de Credit Agricole v. CBI Industries, Inc., 90 F.3d 1264, 1269 (7th Cir. 1996).

A party has a heavy burden to show that a court should reverse its prior judgment. Scott v. Bender, 948 F.Supp.2d 859, 865 (N.D. Ill. 2013). Motions pursuant to Rule 59(e) are granted only in rare circumstances, as court rulings "are not intended as mere first drafts, subject to revision and reconsideration at a litigant's pleasure." Quaker Alloy Casting Co. v. Gulfco Industries, Inc., 123 F.R.D. 282, 288 (N.D. Ill. 1988). Nor does Rule 59(e) allow parties to relitigate previously rejected arguments or argue "matters that could have been heard during the pendency of the previous motion." Caisse Nationale de Credit Agricole, 90 F.3d at 1270; see also, Brown v. Univ. of Illinois, 2014 WL 1477412, at *1 (N.D. Ill. 2014) ("Plaintiff cannot seek to relitigate his disparate payclaim by now alleging a different theory for the same harm.") (emphasis original). Rather, motions for an altered or amended judgment are reserved for circumstances where the moving party has shown "good reason" to set the judgment aside in the interest of justice. Hecker v. Deere & Co., 556 F.3d 575 (7th Cir. 2009). As discussed below, Randall has not done so here.

II. Procedurally, Randall Merely Rehashes Previously Rejected Arguments or Makes Those Same Arguments in a Slightly Different Way, and He Therefore Fails to Demonstrate "Good Reason" to Set Aside the Court's Judgment Under Rule 59(e)

Randall's Motion raises three issues³ with the Court's Findings of Fact and Conclusions of Law. First, Randall urges the Court to conclude that because the management fees Nutmeg received from money it raised from investors in its investment funds was not tainted by any fraud in connection with those securities offerings and, in total, those management fees exceed the money or benefits the Court concluded Randall received from Nutmeg as ill-gotten gains, Randall cannot be required to disgorge any amount of money in this case. In other words, Randall's argument seems to be that since money is fungible and there was enough "clean" money in Nutmeg's coffers at some point in time to cover the total amount the Court has ordered him to disgorge, Randall is entitled to keep everything he was paid by Nutmeg and should disgorge nothing despite his violations of the Advisers Act. [ECF No. 1097] at 10-15. Second, Randall asks the Court to reopen the evidence so that two documents - PX 68 and Nutmeg's Statement from LaSalle Bank - may be added to the trial record, presumably pursuant to Rule 59(a)(2). [ECF No. 1097] at 17. Finally, Randall argues that the Supreme Court's decision in Kokesh v. SEC, 137 S. Ct. 1635 (2017), and grant of certiorari in SEC v. Liu, 754 Fed. Appx. 505 (9th Cir. 2018), shouldcause the Court to hold that disgorgement of ill-gotten gains is not a remedy available to the SEC in this case.

None of Randall's arguments demonstrate any mistake of law or fact, or present any newly discovered evidence, that would entitle him to an altered or amended judgment under Rule 59(e). Rather, Randall simply rehashes arguments that were previously raised and rejected at or after trial, or he repackages those arguments in slightly different wrapping paper, in an effort to convince the Court now to rule differently than it did earlier. In either case, the result is the same; Randall's Motion is not well-taken. Caisse Nationale de Credit Agricole, 90 F.3d at 1270 (Rule 59(e) does not permit parties to argue "matters that could have been heard during the pendency of the previous motion"); Brown, 2014 WL 1477412, at *1.

Randall argued at trial and in his original post-trial briefs that Nutmeg had enough money untainted by any wrongdoing to cover distributions it made to him or benefits it provided to him so that he received no ill-gotten gains. Randall's Second Amended Post-Trial Brief [ECF No. 1048] at 13-15; Randall's Post-Trial Reply [ECF No. 1058] at 10-12. At that time, Randall focused primarily on money he says was his own personal property from the so-called Morgan Wilbur deals that was deposited into Nutmeg's commingled accounts. But he also referenced money Nutmeg received in performance and management fees that he said was untainted by any wrongdoing and, therefore, was properly paid to him by Nutmeg. Id. Randall specifically mentioned management fees Nutmeg received from Mercury Fund offerings, [ECF No. 1058] at 12, an argument he repeats in his current Motion. While Randall earlier argued the Mercury management fees amounted to $369,002, based on less than all the securities offerings he focuses on in his current Motion, [ECF No. 1058] at 13, he now pegs that number at $568,139. [ECF No. 1097] at 8. Together with other management fees he did not focus on in his original post-trialbriefs, Randall now says the total amount of management fees Nutmeg received was $869,749.99, more than sufficient to cover the $642,422 he was required to disgorge. [ECF No. 1097] at 6. The Court previously rejected this argument, if not expressly, then certainly by implication.

Randall also argued previously that disgorgement is not an available remedy in SEC proceedings like this one after the Supreme Court's decision in Kokesh. Randall's Second Amended Post-Trial Brief [ECF No. 1048] at 27. Similarly, the Court implicitly rejected that argument, made in the last paragraph of Randall's post-trial brief and not at all in his post-trial reply brief, with its detailed ruling on why disgorgement is an appropriate remedy here. Conclusions of Law [ECF No. 1085] at ¶¶ 44-59.

Randall's current Motion...