United States Securities and Exchange Commission v. Alpine Securities Corporation

Filing 224

OPINION AND ORDER.....Alpines July 3 motion for reconsideration is denied. (Signed by Judge Denise L. Cote on 8/29/2019) (gr)

Case 1:17-cv-04179-DLC Document 224 Filed 08/29/19 Page 1 of 8

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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:
UNITED STATES SECURITIES AND EXCHANGE :
COMMISSION,
:
:
:
Plaintiff,
:
-v:
:
ALPINE SECURITIES CORPORATION,
:
:
Defendant.
:
:
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17cv4179(DLC)
OPINION AND ORDER

For the plaintiff:
Zachary T. Carlyle
Terry R. Miller
U.S. Securities and Exchange Commission
1961 Stout Street, 17th Floor
Denver, CO 80294
For the defendant:
Maranda E. Fritz
Thompson Hine LLP
335 Madison Avenue, 12th Floor
New York, NY 10017
Brent R. Baker
Aaron D. Lebenta
Jonathan D. Bletzacker
Clyde Snow & Sessions
One Utah Center, 201 South Main Street, Suite 1300
Salt Lake City, Utah 84111
DENISE COTE, District Judge:
On July 3, 2019, defendant Alpine Securities Corp.
(“Alpine”) filed a motion for reconsideration of two Opinions of
March 30 and December 11, 2018 in light of the Supreme Court’s
recent decision in Kisor v. Wilkie, 139 S. Ct. 2400 (2019).

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Kisor reaffirmed the doctrine of Auer deference for an agency’s
interpretation of its own regulations.

The March and December

Opinions are incorporated by reference and familiarity with them
is assumed.

See SEC v. Alpine Sec. Corp., 308 F. Supp. 3d 775

(S.D.N.Y. Mar. 30, 2018) (“March Opinion”); SEC v. Alpine Sec.
Corp., 354 F. Supp. 3d 396 (S.D.N.Y. Dec. 11, 2018) (“December
Opinion”).
Alpine argues that Kisor demonstrates that this Court’s
March and December Opinions deferred inappropriately to the
SEC’s views and failed to apply the limitations on Auer
deference described in Kisor.
August 9.

The motion was fully submitted on

For the reasons that follow, Alpine’s July 3 motion

for reconsideration is denied.

Discussion
The standard for granting a motion for reconsideration is
“strict.”

Analytical Surveys, Inc. v. Tonga Partners, L.P., 684

F.3d 36, 52 (2d Cir. 2012) (citation omitted).

Reconsideration

will generally be denied unless, as relevant here, the moving
party “identifies an intervening change of controlling law.”
Kolel Beth Yechiel Mechil of Tartikov, Inc. v. YLL Irrevocable
Tr., 729 F.3d 99, 104 (2d Cir. 2013) (citation omitted).

It is

not a vehicle “for relitigating old issues, presenting the case
under new theories, securing a rehearing on the merits, or
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otherwise taking a second bite at the apple.”

Analytical

Surveys, 684 F.3d at 52 (citation omitted).
Alpine argues that Kisor, which addressed the continued
viability of Auer deference, warrants reconsideration of the
March and December Opinions. 1

The “only question presented” in

Kisor was whether the Supreme Court would overrule Auer v.
Robbins, 519 U.S. 452 (1997) and Bowles v. Seminole Rock & Sand
Co., 325 U.S. 410 (1945) and discard the deference those cases
give to agency interpretations of ambiguous regulations.
Ct. at 2408.

139 S.

The decision in Kisor “answer[ed] that question

no,” affirming that “Auer deference retains an important role in
construing agency regulations.”

Id.

To the extent the decision

in Kisor “reinforc[ed] some of the limits inherent in the Auer
doctrine,” the Supreme Court’s analysis did not change the law.
Id. at 2415.

Instead, the Supreme Court “t[ook] the opportunity

to restate, and somewhat expand upon those principals” that have
governed Auer deference, noting that while “[y]ou might view
this [discussion] as ‘just background’ because we have made many
of its points in prior decisions . . . , it is background that
matters.”

Id. at 2410, 2414.

Because Kisor affirmed the

Many of Alpine’s arguments were also considered and rejected in
an Opinion of June 18, 2018, which denied Alpine’s April 20,
2018 motion for reconsideration of the March Opinion. See SEC
v. Alpine Sec. Corp., No. 17cv4179(DLC), 2018 WL 3198889
(S.D.N.Y. June 18, 2018).
1

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continued viability of Auer deference, it does not reflect a
change in controlling law that would permit the filing of an
otherwise untimely motion for reconsideration. 2
Even assuming Kisor reflects a change of emphasis in the
doctrine of Auer deference, Alpine’s motion must be denied.
Alpine’s principal complaint in its motion for reconsideration
is that the March and December Opinions erred by concluding that
the Securities and Exchange Commission (“SEC”) has the authority
to bring this action pursuant to Section 17(a) of the Exchange
Act.

Section 17(a) is, of course, a statute.

Therefore, it is

the application of Chevron deference, and not Auer deference,
that is potentially at issue in the construction of Section
17(a). 3

See March Opinion, 308 F. Supp. 3d at 797-79; December

Opinion, 354 F. Supp. 3d at 416-17.

Auer deference has no

application where an agency is interpreting a federal statute
rather than its own regulation.

See Halo v. Yale Health Plan,

Director of Benefits & Records Yale University, 819 F.3d 42, 53
(2d Cir. 2016).
To support its claim that Kisor marks a change in controlling
law, Alpine principally cites to the concurring opinion of
Justice Gorsuch. The majority opinion notes that “[t]he proper
understanding of the scope of limits of the Auer doctrine is, of
course, not set out in any of the opinions that concur in the
judgment.” Kisor, 139 S. Ct. at 2415 n.4.
2

The March Opinion did not require the application of Chevron
deference to conclude that the SEC had authority to bring this
suit. See March Opinion, 308 F. Supp. 3d at 797-97.
3

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Alpine also argues that Kisor requires reconsideration of
this Court’s interpretation of Rule 17a-8, specifically the
holding that the rule encompasses the duty to file a suspicious
activity report (“SAR”) even though SAR regulations were not
enacted for another two decades.

17 C.F.R. § 240.17a-8.

This

argument is correctly addressed to the interpretation of a
regulation rather than a statute, but Alpine largely uses this
motion to rehash old arguments that were considered and rejected
in the March and December Opinions and not to suggest that those
decisions incorrectly applied Auer deference.

For several

reasons, Kisor has limited relevance to the Court’s application
of Rule 17a-8 to this action.
First, the conclusion that Rule 17a-8 authorizes the SEC to
enforce the SAR obligations described in 31 C.F.R. § 1023.320
(“Section 1023.320”) did not turn on the application of Auer
deference.

It was and remains principally based on the plain

text of Rule 17a-8, which “simply incorporates the entirety of
‘chapter X of title 31 of the Code of Federal Regulations.’”
March Opinion, 308 F. Supp. 3d at 797 (quoting 17 C.F.R.
§ 240.17a-8).

As the March Opinion explained, “the text of the

regulation itself, as well as the SEC’s 1981 notice of final
rule, unambiguously demonstrate the SEC’s intent for the nature
of the Rule 17a-8 reporting obligation to evolve over time

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through the Treasury’s regulations.”

Id. 4

Second, to the extent the March Opinion confirmed this
reading of Rule 17a-8 by reviewing interpretations of Rule 17a-8
by the Financial Crimes Enforcement Network (“FinCEN”) and the
SEC, 5 Alpine fails to address the most important aspects of that
review.

Cf. SEC v. Alpine Sec. Corp., No. 17cv4179(DLC), 2018

WL 3198889, at *2 (S.D.N.Y. June 18, 2018) (denying motion for
reconsideration of the March Opinion).

Alpine does not address,

for example, FinCEN’s acknowledgement that the SEC would be able
to bring actions such as this pursuant to Rule 17a-8.

See March

Opinion, 308 F. Supp. 3d at 797.
Alpine’s final contentions -- which do concern this Court’s
application of Auer deference -- fare no better.

Alpine appears

to argue that the March and December Opinions inappropriately
deferred to “the positions advanced by the SEC,” as opposed to
“‘[a]uthoritative’ statements of FinCEN,” when determining what

The SEC’s 1981 notice of final rule states that Rule 17a-8
“does not specify the required reports and records so as to
allow for any revisions the Treasury may adopt in the future.”
SEC, Recordkeeping by Brokers and Dealers, 46 Fed. Reg. 61,455
(Dec. 17, 1981). Moreover, in 2011, Rule 17a-8 was amended to
specifically refer to regulations of the Bank Secrecy Act
(“BSA”). See 76 Fed. Reg. 11,327-28 (Mar. 2, 2011).
4

After finding the text of Rule 17a-8 unambiguous, the March
Opinion reviewed a notice of final rule issued by FinCEN for the
original version of 31 C.F.R. § 1023.320 as well as a formal
adjudication and several settled orders issued by the SEC. See
March Opinion, 308 F. Supp. 3d at 797.
5

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information must be included in the narrative portion of a SAR
filed pursuant to Section 1023.320.

Alpine is incorrect.

As

explained in the December Opinion, this Court “principally
relie[d] on the instructions in the 2002 SAR Form, the 2012 SAR
Instructions, and the SAR Narrative Guidance issued [by FinCEN]
in 2003” to interpret the scope of Section 1023.320.

December

Opinion, 354 F. Supp. 3d at 414.
The December Opinion explained that the SAR Forms
themselves were of principal importance in its findings.

It

explained that,
while FinCEN guidance is informative and useful, its
role in this action can be overstated. The violations
that the SEC asserts occurred here arose from Alpine’s
failure to comply with Section 1023.320’s mandates and
the SAR Form’s instructions, including the requirement
that it provide in its SARs’ narratives a “clear,
complete and chronological description [of] what is
unusual, irregular or suspicious about the
transaction(s).” These instructions have the force of
law, having been issued as FinCEN regulations
following a notice and comment period.
Id. at 417 (quoting 2002 SAR Form at 3) (citation omitted).

The

FinCEN guidance documents cited by the SEC “respond[] to the
broad legal requirement contained in Section 1023.320 [and] give
content to a broker-dealer’s obligation to file SARs.”
418.

Id. at

Alpine has failed to show that Kisor warrants

reconsideration of this Court’s reliance on those documents.

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Conclusion
Alpine’s July 3 motion for reconsideration is denied.

Dated:

New York, New York
August 29, 2019
____________________________
DENISE COTE
United States District Judge

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