Securities and Exchange Commission v Behrens, et al

Filing 420

MEMORANDUM AND ORDER - The plaintiff's Motion for Entry of a Final Judgment (filing 376 ) is granted in part, and denied in part. Behrens' motion to stay (filing 398 ) is denied. The defendants shall pay, jointly and severally, disgo rgement of $6,604,593, and prejudgment interest in the amount of $2,923,956, for a total of $9,528,549. Any amounts recovered by the plaintiff in satisfaction of this judgment shall be paid to the defendants' victims on a pro rata basis. Amounts recovered by the receiver appointed in this case, or paid toward Behrens' criminal restitution award, shall be credited toward the judgment in this case. The Court's Judgment as to Defendants and Appointment of Recei ver (filing 85 ) is adopted and incorporated herein. The Court shall retain jurisdiction of this matter for purposes of enforcing the terms of the final judgment. This case is closed. Pursuant to Fed. R. Civ. P. 59(a), a separate judgment will be entered. Ordered by Judge John M. Gerrard. (Copy mailed to pro se party; copy to finance)(GJG)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEBRASKA
SECURITIES AND EXCHANGE
COMMISSION,
8:08-CV-13
Plaintiff,
vs.

MEMORANDUM AND ORDER

BRYAN S. BEHRENS, et al.,
Defendants.
The Court is now in receipt of the plaintiff's Motion for Entry of a Final
Judgment (filing 376); a motion to stay entry of the final judgment (filing
398) filed by defendant Bryan S. Behrens; the briefs filed by interested
parties in response to the plaintiff's motion (filings 399 and 400); the
plaintiff's reply in support of its motion (filing 403); and the Receiver's Final
Report (filing 416), which the Court has already approved (filing 418). The
Court will grant the motion for entry of final judgment in part, but deny it
with respect to satisfaction of the judgment.
Behrens' opposition to the plaintiff's motion for final judgment—styled
as a motion containing a "request to stay"—is based on his appeal from Judge
Strom's denial of his 28 U.S.C. § 2255 motion to vacate his criminal
conviction. See filing 398. The Court has reviewed those proceedings and
finds that even if Behrens' appeal had some merit, it would have no bearing
on whether a final judgment should be entered in this case. (The plaintiff is,
in fact, asking for nothing that Behrens did not previously agree to. See filing
75.) The Court will, therefore, deny Behrens' motion.
The Court has also received a reply brief (filing 419) from Behrens in
support of a "Motion for Relief and Judicial Notice" (filing 414) that the Court
has already denied. See filing 417. For the most part, Behrens' arguments in
his reply brief were dealt with in the Court's order denying his motion, and
do not relate to the plaintiff's motion for final judgment.1 As relevant,
Behrens also reasserts several familiar grievances about the receivership stay in this case
and its purported effect on other cases, most pertinently his criminal conviction. The Court
will not revisit them. The Court has already explained to Behrens why it will not entertain
his efforts to assert the receivership stay as a collateral attack on other proceedings. See
Behrens v. GMAC Mortg., LLC, 2013 WL 6118415, at *2-4 (D. Neb. Nov. 21, 2013).
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however, Behrens questions the Court's jurisdiction in this proceeding. First,
he seems to suggest that because (in his view) the Court's previous orders are
being violated by others, the Court's own jurisdiction must somehow be
lacking. But he does not explain how, or present any colorable challenge to
the Court's jurisdiction, to which he has already agreed. Filing 75 at 1-2, 5.
Behrens also raises the specter of a bankruptcy stay. The Court previously
addressed that subject as well. Filing 417 at 3-4. But to be clear: a
bankruptcy stay does not preclude entry of a final judgment. See, In re
Commonwealth Cos., Inc., 913 F.2d 518, 521-27 (8th Cir. 1990); EEOC v.
Rath Packing Co., 787 F.2d 318, 326 (8th Cir. 1986); see also, NLRB v.
Edward Cooper Painting, Inc., 804 F.2d 934, 942-43 (6th Cir. 1986); SEC v.
Bilzerian, 131 F. Supp. 2d 10, 14 (D.D.C. 2001).
For their part, the interested parties do not oppose the entry of a final
judgment, or object to the plaintiff's calculation of the amount of that
judgment. See, filing 399 at 2; filing 400 at 1.2 The Court has reviewed the
plaintiff's documentation and finds that it supports the plaintiff's calculation.
See filing 378-1. In particular, the Court notes that using the rate of interest
applied by the IRS to the underpayment of federal income tax is well
understood to be within the Court's discretion. SEC v. Lauer, 478 Fed. Appx.
550, 557-58 (11th Cir. 2012); SEC v. Platforms Wireless Intern. Corp., 617
F.3d 1072, 1099 (9th Cir. 2010); SEC v. First Jersey Sec., Inc., 101 F.3d 1450,
1476-77 (2d Cir. 1996). Joint and several liability among the defendants is
also appropriate. SEC v. JT Wallenbrock & Assocs., 440 F.3d 1109, 1117 (9th
Cir. 2006); see, SEC v. Monterosso, 2014 WL 2922670, at *8 (11th Cir. June
30, 2014); SEC v. Pentagon Capital Mgmt. PLC, 725 F.3d 279, 288 (2d Cir.
2013); SEC v. Whittemore, 659 F.3d 1, 9-12 (D.C. Cir. 2011). The Court will,
therefore, enter a final judgment in the amount requested by the plaintiff.
What the interested parties dispute, however, is the plaintiff's
suggestion that the Court should find the judgment to have been satisfied by
the money already collected by the receiver. See filing 377 at 5. As the
interested parties point out, that would amount to satisfying the judgment at
pennies on the dollar. Filing 399 at 7.
The plaintiff replies by challenging the interested parties' standing to
object. Filing 403 at 2. Whether the interested parties have Article III
standing, however, is beside the point. It is within the Court's discretion to
direct disgorged money to victim compensation. SEC v. Cavanagh, 445 F.3d
105, 117 (2d Cir. 2006). It is therefore appropriate for the Court, in the

One interested party did take issue with the entry of a final judgment before the receiver's
final report was approved, filing 400 at 1, but that has now been accomplished. Filing 418.
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exercise of that discretion, to solicit and consider the opinion of the
defendants' victims.
That having been said, the interested parties' arguments are also
somewhat off the mark, because they focus on whether they have been fully
compensated for their damages. Filing 399 at 6; filing 400 at 1. The remedy
at issue here, however, is disgorgement, which is not primarily intended to
compensate victims. SEC v. Contorinis, 743 F.3d 296, 301 (2d Cir. 2014);
Platforms Wireless, 617 F.3d at 1097; First Jersey, 101 F.3d at 1475. Unlike
compensatory damages, disgorgement is a method of forcing a defendant to
give up the amount by which he was unjustly enriched. Cavanagh, 445 F.3d
at 117; First Jersey, 101 F.3d at 1475. So, the Court is mindful of that
purpose in considering the plaintiff's motion. But that purpose is equally illserved by terminating the defendants' liability at a fraction of their illegally
obtained funds. The defendants should be held liable for the full amount of
their ill-gotten gains despite having dissipated the bulk of the money.
Platforms Wireless, 617 F.3d at 1098.
The Court can see no equitable basis to find that the judgment against
the defendants has been satisfied when it obviously has not. Although the
plaintiff does not cite authority discussing the Court's power to find that a
judgment has been satisfied, it is generally understood that Fed. R. Civ. P.
60(b)(5) is applicable. See, AIG Baker Sterling Heights, LLC v. Am. MultiCinema, Inc., 579 F.3d 1268, 1272 (11th Cir. 2009); Savitsky v. Mazzella, 318
Fed. Appx. 131, 132-33 (3d Cir. 2009); Kassman v. Am. Univ., 546 F.2d 1029,
1033 (D.C. Cir. 1976).3 And under Rule 60(b)(5), a judgment is ordinarily
satisfied by payment. See, Kurschinske v. Meadville Forging Co., 481 Fed.
Appx. 736, 737 (3d Cir. 2012); Hillman v. U.S. Postal Service, 257 F. Supp. 2d
1330, 1334 (D. Kan. 2003); cf. Tungseth v. Mut. of Omaha Ins. Co., 43 F.3d
406, 409 (8th Cir. 1994).
The plaintiff advances several arguments in favor of finding the
judgment satisfied. The first is a concern about "potential double-counting
issues" arising from continued efforts to collect this judgment and Behrens'
criminal restitution order. Filing 377 at 5. But that situation is not unique: it
is hardly unprecedented for a restitution award to coexist with a civil
judgment. The Court will resolve that tension by expressly providing that the
judgment in this case will be satisfied by the funds actually paid toward the
defendant's restitution. See SEC v. Palmisano, 135 F.3d 860, 863-64 (2d Cir.
1998); see also SEC v. Currency Trading Intern., Inc., 175 Fed. Appx. 934,
The Court acknowledges its broad equitable power to craft a remedy in cases of this kind,
see Cavanagh, 445 F.3d at 116-20, but finds in any event that the principles applied under
Rule 60(b)(5) comport with equity.
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935-36 (9th Cir. 2006). And should any dispute arise in the future, the Court
can employ Rule 60(b)(5) to resolve it. See Savitsky, 318 Fed. Appx. at 133
(Rule 60(b)(5) allows courts to mark judgments as partially satisfied).
The plaintiff also contends that the receiver could continue to collect
and distribute assets to the defendants' victims. Filing 403 at 3. The Court is
not convinced that is the case. The Court agrees that the receiver can, under
the Court's authority, continue to administer and distribute receivership
assets even if a final judgment is entered and this case is closed. But the
Court does not intend to maintain the receivership indefinitely. And more
importantly—on what authority could the receiver continue to possess and
distribute assets if the judgment has been "satisfied?" The receiver's power is
premised on the fact that the defendants owe money. If the Court were to find
that the judgment in this case had been satisfied, then (for purposes of this
case at least), the defendants would no longer owe anyone anything. The
plaintiff cites no authority suggesting that the receiver could continue to
recover and administer assets in satisfaction of a judgment that has already
been discharged.
Finally, the plaintiff complains that it should not be "charged with
administering a collection action for years into the future, when the chances
of recovering additional assets, overlooked by both the receiver and criminal
authorities, are highly unlikely."4 Filing 403 at 4. The Court—which is
charged with administering collection of the restitution award for years into
the future—is not sympathetic. The Court obviously cannot force the plaintiff
into actively pursuing collection of the judgment. But it does not have to abet
inactivity by making a factual finding that is demonstrably false.5
The Court will, therefore, enter a final judgment in the amount sought
by the plaintiff, but will deny the plaintiff's motion for final judgment to the
extent that the plaintiff has requested satisfaction of the judgment. Instead,
the Court will order that the judgment is partially satisfied by any amounts
recovered by the receiver or paid on Behrens' restitution award. And to be
clear: nothing about the final judgment shall affect the receiver's authority to
The Court notes some degree of contradiction in the plaintiff's argument: on the one hand,
the plaintiff is concerned about double-counting, but on the other hand, the plaintiff
suggests that there is no real point to the judgment in this case because it is "highly
unlikely" that additional assets will be recovered. If it is unlikely that either this judgment
or the restitution award will ever be fully satisfied, then double-counting is no more than a
hypothetical problem, and does not warrant discharging the judgment in this case.
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And, the Court notes, Rule 60(b)(5) is always there for the plaintiff too. Should
circumstances down the road provide a basis for the Court to revisit whether the judgment
should be found satisfied, the plaintiff can always file a post-judgment motion to that effect.
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continue administering and distributing receivership assets and to wind up
the receivership.
IT IS ORDERED:
1.

The plaintiff's Motion for Entry of a Final Judgment (filing
376) is granted in part, and denied in part.

2.

Behrens' motion to stay (filing 398) is denied.

3.

The defendants shall pay, jointly and severally,
disgorgement of $6,604,593, and prejudgment interest in
the amount of $2,923,956, for a total of $9,528,549.

4.

Any amounts recovered by the plaintiff in satisfaction of
this judgment shall be paid to the defendants' victims on a
pro rata basis.

5.

Amounts recovered by the receiver appointed in this case,
or paid toward Behrens' criminal restitution award, shall
be credited toward the judgment in this case.

6.

The Court's Judgment as to Defendants and Appointment
of Receiver (filing 85) is adopted and incorporated herein.

7.

The Court shall retain jurisdiction of this matter for
purposes of enforcing the terms of the final judgment.

8.

This case is closed.

9.

Pursuant to Fed. R. Civ. P. 59(a), a separate judgment will
be entered.

Dated this 17th day of July, 2014.
BY THE COURT:

John M. Gerrard
United States District Judge
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