SECURITIES AND EXCHANGE COMMISSION v. DURHAM et al
Filing
46
ORDER - The Court DENIES Mr. Durham's and Mr. Cochran's requests to dismiss this action with prejudice. [Filing No. 40 (Mr. Durham's "Status Report" requesting dismissal); Filing No. 43 (Mr. Cochran's Motion to Dis miss).] The Court requests that the assigned magistrate judge conduct a pre-trial conference to confirm whether Mr. Durham filed a petition for writ of certiorari from his second appeal. If he did not, the Court requests that the assigned magistr ate judge set a briefing schedule for the SEC's anticipated motion for summary judgment. The Clerk is directed to update the docket to reflect Mr. Durham's current address, as set forth in the distribution list below. Each Defendant is reminded that it is his obligation to update the Court with his current address at all times. (See Order.) Signed by Judge Jane Magnus-Stinson on 8/9/2016. Copies sent to Defendants via US Mail. (GSO)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
INDIANAPOLIS DIVISION
SECURITIES AND EXCHANGE
COMMISSION,
Plaintiff,
vs.
TIMOTHY S. DURHAM,
JAMES F. COCHRAN,
RICK D. SNOW,
Defendants.
______________________________________
UNITED STATES OF AMERICA,
Intervenor.
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No. 1:11-cv-00370-JMS-TAB
ORDER
Presently pending before the Court are separate requests filed by pro se Defendants
Timothy S. Durham and James F. Cochran to dismiss this civil securities action against them.1
[Filing No. 40; Filing No. 43.] Plaintiff Securities and Exchange Commission (the “SEC”) objects
to the Defendants’ requests. [Filing No. 42; Filing No. 45.] The Court will first set forth the
relevant background before considering the merits of the requests by Mr. Durham and Mr.
Cochran.
A. Relevant Background
On March 15, 2011, a grand jury indicted Mr. Durham, Mr. Cochran, and Mr. Snow for
multiple counts of wire fraud, one count of conspiracy to commit wire and securities fraud, and
1
Rick D. Snow is also a Defendant in this action, but he has not filed anything in support of or
against the pending requests.
one count of securities fraud. See Cause No. 1:11-cr-42-JMS-DML. The next day, the SEC filed
this civil securities fraud action against Mr. Durham, Mr. Cochran, and Mr. Snow. [Filing No. 1.]
On May 25, 2011, the United States of America moved to intervene and stay the civil
securities fraud action pending resolution of the criminal case against Mr. Durham, Mr. Cochran,
and Mr. Snow. [Filing No. 9.] The United States pointed out that the alleged facts underlying the
criminal action were “virtually identical” to the allegations underlying the civil action. [Filing No.
9 at 1.] Defendants did not object to the United States’ motion, and on July 14, 2011, the Court
stayed the civil action pending resolution of the criminal action. [Filing No. 18.]
On June 20, 2012, a jury in the criminal action returned guilty verdicts on various counts
with which the Defendants had been charged. [Cause No. 1:11-cr-42-JMS-DML, Filing No. 354.]
Sentencing was held in November 2012. [Cause No. 1:11-cr-42-JMS-DML, Filing No. 445.] Mr.
Durham, Mr. Cochran, and Mr. Snow were sentenced to 50, 25, and 10 years in prison,
respectively, and jointly and severally ordered to pay $208,830,082.27 in restitution. [Cause No.
1:11-cr-42-JMS-DML, Filing Nos. 456, 460, and 462.] Mr. Durham, Mr. Cochran, and Mr. Snow
appealed their convictions and sentences, and the Seventh Circuit Court of Appeals consolidated
the three appeals for purpose of briefing and disposition. [See, e.g., Seventh Circuit Cause No. 123819, Filing No. 3 (Order in Mr. Durham’s appeal, consolidating it with Cause Nos. 12-3833 and
12-3867).]
On September 3, 2013, the Court ordered the parties in the civil action to submit a report
regarding the status of the case and to show cause why the previously entered stay should not be
lifted. [Filing No. 33.] In response, Mr. Durham and Mr. Cochran requested that the stay remain
in place “through the duration of the Appellate Process.” [Filing No. 34 at 3.] In its response, the
SEC “conced[ed] that there are certain efficiencies to be gained in waiting for the appeals process
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to conclude,” but it did not join in the Defendants’ request for the stay to continue. [Filing No. 35
at 2.] On September 27, 2013, the Court entered the following Order:
The Court considers it prudent to afford Defendants their appellate rights in full,
and for the Seventh Circuit to determine the validity of their convictions in the first
instance. Following that determination, the application of the doctrine of collateral
estoppel will be far clearer. The Court therefore ORDERS that this case be
administratively closed without prejudice to the right of either party to move to
reopen it within 30 days of the issuance of the mandate in the Defendants’ appeal.
[Filing No. 37 (original emphases).]
On appeal in the criminal action, the Seventh Circuit reversed two of Mr. Durham’s wire
fraud convictions but otherwise affirmed Defendants’ convictions and sentences in full. United
States v. Durham, 766 F.3d 672 (7th Cir. 2014). Mr. Durham’s criminal case was remanded for
resentencing. Id. at 688. The Seventh Circuit issued a mandate for Mr. Snow on September 29,
2014, [Cause No. 1:11-cr-42-JMS-DML, Filing No. 511], a mandate for Mr. Durham on December
15, 2014, [Cause No. 1:11-cr-42-JMS-DML, Filing No. 513], and a mandate for Mr. Cochran on
March 18, 2015, [Cause No. 1:11-cr-42-JMS-DML, Filing No. 537]. Mr. Durham and Mr.
Cochran both filed petitions for writs of certiorari, but the United States Supreme Court denied
their petitions on October 5, 2015, and May 16, 2016, respectively. [See Durham v. United States,
Supreme Court Cause No. 14-10076 (petition denied October 5, 2015); Cochran v. United States,
Supreme Court Cause No. 15-8858 (petition denied May 16, 2016).]
On remand from Mr. Durham’s first appeal, this Court reimposed the same sentence and
restitution amount that it had at the first sentencing. [See Cause No. 1:11-cr-42-JMS-DML, Filing
No. 551 (dated July 7, 2015).] Mr. Durham appealed the amended judgment, but the Seventh
Circuit affirmed the Court’s resentencing decision. United States v. Durham, 630 F. App’x 634
(7th Cir. 2016). The Seventh Circuit issued a mandate from Mr. Durham’s second appeal on
March 28, 2016. [Cause No. 1:11-cr-42-JMS-DML, Filing No. 573.] The Supreme Court granted
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Mr. Durham an extension of time to file a petition for a writ of certiorari until July 5, 2016.2 [See
Seventh Circuit Cause No. 15-2474, Filing No. 31; Supreme Court Cause No. 15A1047.] There
is no indication on the Seventh Circuit’s docket or on the Supreme Court’s docket that Mr. Durham
has filed a petition for a writ of certiorari.
On June 7, 2016, the SEC filed a Status Report in the civil securities action, informing the
Court that it had contacted the Defendants regarding the possibility of settlement, that Mr. Durham
and Mr. Cochran indicated that they are not interested in settlement, and that the SEC “respectfully
requests that the Court reinstate this matter to its active docket so the SEC may pursue a resolution
of this case.” [Filing No. 38.] On June 8, 2016, the Court granted the SEC’s motion and reopened
the civil action. [Filing No. 39.]
On June 9, 2016, Mr. Durham filed a “Status Report,” contending that the SEC’s thirty
days to reopen the civil action began when the mandate from his first criminal appeal issued on
December 15, 2014. [Filing No. 40.] Alternatively, Mr. Durham points out that the mandate from
his second criminal appeal was issued on March 28, 2016, but that the SEC did not move to reopen
the civil action until June 7, 2016. [Filing No. 40 at 2.] Thus, Mr. Durham argues that the SEC’s
request to reopen the civil action is untimely and that it “should remain dismissed, with prejudice.”
[Filing No. 40 at 2.]
On June 24, 2016, the SEC responded to Mr. Durham’s report. [Filing No. 42.] It disputes
Mr. Durham’s assertion that this action was ever dismissed, emphasizing that Mr. Durham sought
to keep the stay in place throughout the appellate process and that his “complaint of untimeliness
Although the Supreme Court’s order gave Mr. Durham until July 2, 2016 to file a petition for
writ of certiorari, that day was a Saturday and the following Monday was a federal holiday. Thus,
pursuant to the Supreme Court’s rules, Mr. Durham’s deadline to file a petition for writ of certiorari
was July 5, 2016. See Sup. Ct. R. 30 (not including Saturdays, Sundays, or federal holidays in
computing deadlines); 5 U.S.C. § 6103 (listing July 4 as a federal holiday).
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makes little sense” because he continued to prosecute his criminal appeal by moving for an
extension of time to file a writ of certiorari. [Filing No. 42 at 2.] The SEC emphasizes that even
if its request to reopen the civil case was untimely, the Court’s Order of Administrative Closure
does not suggest that the failure to file a timely request would result in dismissal with prejudice,
as Mr. Durham now requests. [Filing No. 42 at 3-4.] Finally, because the SEC asserts that Mr.
Durham “cannot claim any prejudice flowing from the purported delay,” the Court should
“reinstate this matter to its active docket so that the [SEC] may pursue a resolution of this case.”
[Filing No. 42 at 4.]
On June 28, 2016, Mr. Cochran also filed a Motion to Dismiss in the civil action. [Filing
No. 43.] He makes similar arguments to those of Mr. Durham, emphasizing that the mandate from
Mr. Cochran’s direct appeal was issued in April 2015. [Filing No. 43 at 2.] Thus, Mr. Cochran
also contends that the SEC’s request to reopen the civil action was untimely and asks this Court to
dismiss it. [Filing No. 43 at 4.]
On June 30, 2016, the SEC filed its response opposing Mr. Cochran’s Motion to Dismiss.
[Filing No. 45.] The SEC emphasizes that the Court’s Order administratively closing the civil
action referenced “Defendants’ appeal,” which the SEC claims contemplated reopening the case
after all of the Defendants had fully prosecuted their appeals. [Filing No. 45 at 1-2.] The SEC
points out that Mr. Cochran’s petition for certiorari was denied on May 16, 2016, which it claims
makes its status report requesting to reopen the case timely. [Filing No. 45 at 2.] Lastly, the SEC
contends that Mr. Cochran cannot complain of any prejudice and emphasizes that he cites no
authority suggesting that dismissal with prejudice is appropriate in these circumstances. [Filing
No. 45 at 2-3.]
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B. Discussion
The parties’ arguments, as set forth above, require the Court to interpret when the Order of
Administrative Closure it issued on September 27, 2013 required the SEC to petition to reopen the
civil case. [Filing No. 37.] The Order of Administrative Closure specifically identifies the
Defendants’ “appellate rights in full” as the reason the Court administratively closed the civil
action. [Filing No. 37 (“The Court considers it prudent to afford Defendants their appellate rights
in full . . . .”).] The Court’s reference to the plural form of Defendants and to their full exhaustion
of appellate rights conveyed its intention that the civil securities action not be reopened until all of
the Defendants exhausted their appellate rights. To the extent that the Court’s subsequent
reference to the “issuance of the mandate” was unclear, the Court clarifies that it intended for the
administrative closure to remain in place until all of the Defendants fully exhausted their appellate
rights. This interpretation is consistent with the desires of Mr. Durham and Mr. Cochran at that
time, given that they specifically requested that the stay remain in place “through the duration of
the Appellate Process.” [Filing No. 34 at 3.]
The Court now turns to the timeliness of the SEC’s request to reopen the civil case, which
it filed on June 7, 2016. [Filing No. 38.] To determine the timeliness of that request, the Court
must first determine the latest day on which any Defendant exhausted his appellate rights. Mr.
Snow’s appellate rights were exhausted on September 29, 2014, when the Seventh Circuit issued
the mandate from his direct appeal.3 [Cause No. 1:11-cr-42-JMS-DML, Filing No. 511.] Mr.
Cochran’s appellate rights were exhausted on May 16, 2016, when the Supreme Court denied his
Petition for Writ of Certiorari. [Seventh Circuit Cause No. 12-3833, Filing No. 78.] Mr. Durham
continued to exercise his appellate rights after that date by seeking an extension from the Supreme
3
Mr. Snow did not file a petition for writ of certiorari.
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Court to file a petition for writ of certiorari from his second appeal, and he was granted until July
5, 2016 to do so. Neither the Supreme Court’s docket nor the Seventh Circuit’s docket indicate
that Mr. Durham actually filed a petition for writ of certiorari. Thus, Mr. Durham either exhausted
his appellate rights on July 5, 2016 when he failed to file such a petition or, if he did file a petition,
he is continuing to exercise them at this time. Either way, the SEC’s request to reopen the civil
securities case on June 7, 2016, was not untimely; it was actually premature.
Even if the SEC’s request to reopen the civil was somehow untimely, the Court agrees with
the SEC that Defendants have not been prejudiced because they wanted the stay to remain in place
during the appellate process. [Filing No. 34.] The Court also agrees with the SEC that the
authority on which Mr. Cochran relies to support dismissal with prejudice—Dukes v. Cox, 2015
WL 2338664 (S.D. Ind. 2015), pending on appeal—is distinguishable. [Filing No. 43 at 3-4.]
This Court is very familiar with Dukes, given that it made the decision on which Mr. Cochran
relies. Dukes is distinguishable because the Court gave that plaintiff multiple chances and warned
her many times that failure to comply with the Court’s orders would result in dismissal with
prejudice. Nothing of the sort happened here. Not only has the Court found that the SEC did not
fail to obey a scheduling order, even if it did, the Court’s Order of Administrative Closure did not
warn the SEC that failing to timely reopen this case would result in a dismissal with prejudice.
[See Filing No. 37.] Thus, the Court concludes that even if the SEC’s request was untimely, the
draconian sanction of dismissal with prejudice would not be warranted. See Dotson v. Bravo, 321
F.3d 663, 667 (7th Cir. 2003) (holding that dismissal is a draconian sanction that “should be
employed sparingly and only when there is a record of delay, contumacious conduct, or when
other, less drastic sanctions prove unavailing”).
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C. Conclusion
For the reasons set forth herein, the Court DENIES Mr. Durham’s and Mr. Cochran’s
requests to dismiss this action with prejudice. [Filing No. 40 (Mr. Durham’s “Status Report”
requesting dismissal); Filing No. 43 (Mr. Cochran’s Motion to Dismiss).] The Court requests that
the assigned magistrate judge conduct a pre-trial conference to confirm whether Mr. Durham filed
a petition for writ of certiorari from his second appeal. If he did not, the Court requests that the
assigned magistrate judge set a briefing schedule for the SEC’s anticipated motion for summary
judgment.
The Clerk is directed to update the docket to reflect Mr. Durham’s current address, as
set forth in the distribution list below. Each Defendant is reminded that it is his obligation to
update the Court with his current address at all times.
_______________________________
Date: 8/9/2016
Hon. Jane Magnus-Stinson, Judge
United States District Court
Southern District of Indiana
Distribution via US Mail:
RICK D. SNOW
Reg. #09969-028
FCI PEKIN
Federal Correctional Institution
P O Box 5000
Pekin, IL 61555
TIMOTHY S. DURHAM
Reg. #60452-112
USP McCreary
US Penitentiary
PO Box 3000
Pine Knot, KY 42635
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JAMES F. COCHRAN
Reg. #09970-028
GREENVILLE - FCI
GREENVILLE FEDERAL CORRECTIONAL
INSTITUTION Inmate Mail/Parcels
P.O. BOX 5000
GREENVILLE, IL 62246
Electronic Distribution via CM/ECF:
Mark Raymond Sylvester
U.S. SECURITIES AND EXCHANGE COMMISSION
sylvesterm@sec.gov
Scott Alexander Thompson
U.S. SECURITIES AND EXCHANGE COMMISSION
thompsons@sec.gov
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