United States Of America v. Accolade Construction Group, Inc.

Filing 60

MEMORANDUM AND ORDER granting 54 Motion to Strike. For the reasons discussed, the Government's motion to strike the defendant's jury demand (Docket no. 54) is granted. SO ORDERED. (Signed by Magistrate Judge James C. Francis on 5/23/2017) Copies Transmitted this Date By Chambers. (anc)

Government seeks (1) an order restraining Accolade from performing
any renovation work until it can demonstrate compliance with the
TSCA and the RRP Rule, (2) an injunction compelling Accolade to
comply with the TSCA and the RRP Rule, and (3) an order requiring
Accolade

to

disgorge

together with interest.

all

proceeds

from

its

illegal

conduct,

(Compl. at 18, ii-iv).1

The Government now moves to strike Accolade’s demand that this
case be tried before a jury.

The motion is granted.

Discussion
This is a case of first impression, as the parties have
identified no case addressing the right to a jury trial in a TSCA
case, and I am aware of none.

The statute itself is silent on the

right to a jury, so if such a right exists, it must be derived from
the Seventh Amendment to the United States Constitution.

The

Seventh Amendment provides: “In Suits at common law, where the
value in controversy shall exceed twenty dollars, the right of
trial by jury shall be preserved . . . .”

This Amendment protects

the fundamental right to a jury trial for actions at law, not
actions in equity.

Granfinanciera, S.A. v. Nordberg, 492 U.S. 33,

41 (1989); Soley v. Wasserman, No. 08 Civ. 9262, 2013 WL 1655989,
at *1 (S.D.N.Y. April 17, 2013); Maersk, Inc. v. Neewra, Inc., 687

1

The parties consented to proceed before a United States
Magistrate Judge for all purposes pursuant to 28 U.S.C. § 636(c).
2

F. Supp. 2d 300, 338 (S.D.N.Y. 2009).

Therefore, a two-step

analysis is necessary to determine whether the jury right attaches.
First, “the court must consider whether the action would have been
deemed legal or equitable in 18th-century England before the merger
of courts of law and equity.”

Maersk, 687 F. Supp. 2d at 338.

Then, it must “examine the remedy sought and determine whether it
is legal or equitable in nature.”

Granfinanciera, 492 U.S. at 42

(quoting Tull v. United States, 481 U.S. 412, 417-18 (1987)).

The

second, functional prong of the test weighs more heavily than the
first, historical inquiry.

Id.; Tull, 481 U.S. at 421.

Actions under modern statutes often have no precise parallel
in 18th-century English law.

See Pernell v. Southall Realty, 416

U.S. 363, 375 (1974) (finding that Seventh Amendment may require
“trial

by

jury

in

actions

unheard

of

at

common

law”).

Nevertheless, the closest historical antecedent to an action under
the TSCA appears to be a suit to abate a public nuisance.

In

particular, in the 18th century, the sovereign could bring an
action in the English courts of equity “to enjoin ‘offensive trades
and manufactures’ that polluted the environment.”

Tull, 481 U.S.

at 420 (quoting 4 William Blackstone, Commentaries *167).

An

action by the Government under the TSCA to enjoin renovation work
that threatens the release of hazardous lead is a relatively close
analogy.
3

More importantly, the monetary remedy sought by the Government
-- disgorgement -- is equitable in nature.

The TSCA provides

district courts with jurisdiction over civil actions “to . . .
restrain any violation of” relevant provisions of the TSCA and
related regulations.

15 U.S.C. § 2616(a)(1).

When Congress thus

invokes the federal courts’ equity jurisdiction in a statute, “all
the inherent equitable powers of the [courts] are available for the
proper and complete exercise of that jurisdiction” except where the
statute restricts the forms of equitable relief by “clear and valid
legislative command” or “necessary and inescapable inference.”
Porter v. Warner Holding Co., 328 U.S. 395, 398 (1946).
Congress

entrusts

to

an

equity

court

the

“When

enforcement

of

prohibitions contained in a regulatory enactment, it must be taken
to have acted cognizant of the historic power of equity to provide
complete relief in the light of statutory purposes.”

Mitchell v.

Robert DeMario Jewelry, Inc., 361 U.S. 288, 291–92 (1960).

Relief

ancillary to the equitable power to enjoin statutory and regulatory
violations includes the remedy of disgorgement. See FTC v. Bronson
Partners, LLC, 654 F.3d 359, 365-66 (2d Cir. 2011) (finding
disgorgement available as ancillary relief under Federal Trade
Commission Act); United States v. Rx Depot, Inc., 438 F.3d 1052,
1058 (10th Cir. 2006) (same as to Food, Drug, and Cosmetic Act);
SEC v. Materia, 745 F.2d 197, 200-01 (2d Cir. 1984) (same as to
4

Securities Exchange Act of 1934).
Thus, although disgorgement of profits under the TSCA involves
the payment of money, it is nevertheless equitable in nature.

See

SEC v. Cavanagh, 445 F.3d 105, 117 (2d Cir. 2006) (“The emphasis
[of disgorgement] on public protection, as opposed to simple
compensatory

relief,

illustrates

the

equitable

nature

of

the

remedy.”). Accordingly, the Seventh Amendment does not provide for
the right to a jury trial.

See Bronson Partners, 654 F.3d at 374

(finding disgorgement remedy “permissible without a jury trial”);
SEC v. Tome, 833 F.2d 1086, 1096 n.7 (2d Cir. 1987) (“[T]he Seventh
Amendment right to a jury trial does not apply to [] equitable
actions for disgorgement.”); SEC v. Amerindo Investment Advisors
Inc., No. 05 Civ. 5231, 2014 WL 2112032, at *8 (S.D.N.Y. May 6,
2014) (“Disgorgement is an equitable remedy and the findings
underlying a disgorgement order are made by a court, not a jury.”);
Chevron Corp. v. Donziger, No. 11 Civ. 691, 2013 WL 5526287, at *3
(S.D.N.Y.

Oct.

7,

2013)

(“Cases

seeking

only

injunctions,

imposition of constructive trusts, and disgorgement . . . are
purely equitable and carry no right to trial by jury.”).2

2

In SEC v. Kokesh, 834 F.3d 1158 (10th Cir. 2016), the Tenth
Circuit held that disgorgement is not a “civil fine, penalty, or
forfeiture” in relation to the statute of limitations for suits
seeking such remedies. Id. at 1164-67. That case is now under
review by the Supreme Court. Kokesh v. SEC, 137 S. Ct. 810 (2017)
(mem.) (granting certiorari). Were the Supreme Court to render a
5

Of course, if the Government were seeking legal as well as
equitable relief in this case, the calculus might be different.
The TSCA does provide for the award of civil penalties in an
administrative proceeding. 15 U.S.C. § 2615. However, whether the
jury

right

litigation,

attaches
where

turns

the

injunctive remedies.

on

the

Government

claims
seeks

asserted

only

in

equitable

this
and

Indeed, even a party that has once asserted

legal claims in a lawsuit can avoid a jury trial by abandoning
those claims and seeking only equitable relief.

See Chevron, 2013

WL 5526287, at *1-2.
Accolade does not seriously dispute any of these principles.
Rather, it argues that, as a practical matter, the Government is
seeking extensive monetary relief that can only be characterized as
damages or as a civil penalty, thus triggering the right to a jury
trial.

(Memorandum in Opposition to Plaintiff’s Motion to Strike

Defendant’s
particular,

Jury

Demand

Accolade

(“Def.

contends

Memo.”)
that

at

the

2-3,

10).3

Government

In
seeks

disgorgement not only of those profits attributable to work that
might have been done in violation of the TSCA and the RRP Rule but

decision that casts doubt on the reasoning here, I would entertain
an application for reconsideration.
3

Because Accolade’s brief is not paginated, all references
are to the page numbers assigned by the Court’s Electronic Case
Filing system.
6