Securities and Exchange Commission v. Thurlow

Background

The Securities and Exchange Commission brought an enforcement action against Simon Piers Thurlow, Roger Leon Fidler, Richard Oravec, Bradley Fidler, Bryce Emory Boucher, Joseph D. Jordan, and Western Bankers Capital Inc. The complaint alleges that, during approximately 2016 and 2017, some defendants worked together to merge a shell company called DOLV with a company in China, issue allegedly backdated debt instruments convertible into DOLV shares, and sell the shares without registering them with the SEC. The complaint also alleges that defendants made false statements to obtain representation letters concerning the shares and that some sale proceeds were sent to other defendants.

The court had previously found a potential conflict in Roger Leon Fidler’s representation of Bradley Fidler, Boucher, and WBC and required briefing before discovery could begin. Fidler had previously withdrawn as counsel for Thurlow, Oravec, and Jordan, but continued representing Bradley Fidler, Boucher, and WBC. The court held a hearing on the conflict issue on December 10, 2024.

Legal Standard

The court explained that federal courts have inherent authority to disqualify attorneys to protect the integrity of the adversarial process. Disqualification is discretionary, and the court must balance a client’s choice of counsel against the need to maintain professional standards and avoid a significant risk that the proceeding will be tainted.

The court focused on whether an attorney in Fidler’s position could reasonably believe that he could provide competent and diligent representation to each client. Under the cited professional-conduct rule, a client’s consent does not resolve a conflict if the attorney could not reasonably provide competent and diligent representation to all affected clients.

Court’s Analysis

The court found that Fidler’s alleged involvement in the transactions created a significant risk that his personal interests would diverge from those of his clients. According to the complaint, Fidler allegedly helped conceive the DOLV merger and debt issuance, directed actions by Thurlow, drafted a press release affecting DOLV’s share price, and helped connect Boucher, WBC, and Bradley Fidler to the share sales. The complaint also alleges that proceeds from sales by Boucher and Bradley Fidler were funneled back to Fidler or others connected to him. The court emphasized that these allegations had not been proven, but had been found legally sufficient when the court denied the defendants’ motion to dismiss.

The court reasoned that Boucher, Bradley Fidler, or WBC representatives might testify about whether Fidler directed them to participate in the transactions. Fidler’s personal interest in avoiding liability could affect his advice about testimony, litigation strategy, cooperation, and settlement. The court also identified a potential settlement conflict because Fidler represented WBC in another action in which WBC allegedly took a position concerning a settlement with the SEC and the events leading to this enforcement action.

The defendants’ conflict waivers did not resolve the issue. Although Boucher and Jordan, acting for WBC, said at the hearing that they wanted Fidler to continue representing them, the court applied an objective standard and concluded that no attorney in Fidler’s position could reasonably believe that he could competently and diligently represent Bradley Fidler, Boucher, or WBC. The court also rejected Fidler’s argument that disqualification was premature because the complaint’s allegations had not yet been proven. Because discovery had not begun, the court found that changing counsel at that stage would cause little prejudice.

Disposition

The court DISQUALIFIED Roger Leon Fidler from representing Bryce Emory Boucher, Bradley Fidler, and Western Bankers Capital Inc. It ordered that Fidler be removed as counsel of record for those defendants. The court further ordered that Boucher, Bradley Fidler, and/or WBC could submit applications for permission to proceed without paying court fees and for the court to request free legal representation by January 20, 2025.

This order resolved the attorney-conflict and representation issue; it did not decide whether the defendants were liable for the SEC’s underlying claims.