Securities and Exchange Commission v. Small Business Capital Corp.
- Edward Davila
- 5:12-cv-03237
- U.S. District Court · Northern District of California
- 5
In Securities and Exchange Commission v. Small Business Capital Corp., Judge Davila denied Feathers’s requests to undo judgment, stop payments, restrict the agency, and notice documents.
Mark Feathers’s requests were denied, leaving the prior judgment and disgorgement-payment obligations in place; the court also denied relief directed at the Securities and Exchange Commission.
What happened
Securities and Exchange Commission v. Small Business Capital Corp. began as an enforcement case against Mark Feathers and three entities. The court granted summary judgment for the Securities and Exchange Commission on its claims against Feathers in 2013, and the Ninth Circuit affirmed in 2019. Feathers, representing himself, then filed motions seeking relief from the judgment, an injunction against the Commission, and judicial notice of documents.
Feathers argued that alleged fraud, a forensic accounting report, and concerns about the receiver’s expenses justified undoing the judgment. He also cited difficulties finding work, bankruptcies, physical conditions, and problems supporting his minor sons as reasons to stop disgorgement payments. The court found that his arguments had already been made or could have been made earlier and that they did not show the extraordinary circumstances required for relief.
Judge Edward J. Davila denied the motions for relief from judgment and discontinuance of disgorgement payments, denied the request to bar the Commission from using the phrase “Ponzi-like,” and denied the request for judicial notice. He also declined to recommend relief from a restitution order in the related criminal case, explaining that request belonged in the court that issued that judgment.
The detailed version
- Securities and Exchange Commission v. Small Business Capital Corp. · No. 5:12-cv-03237
- Edward Davila
- Mar. 18, 2021
Background
The Securities and Exchange Commission brought a civil enforcement action against Mark Feathers, Small Business Capital Corp., Investors Prime Fund, LLC, and SBC Portfolio Fund, LLC. In 2013, the court granted summary judgment for the Commission on its claims against Feathers and denied Feathers’s own summary-judgment motion. The Ninth Circuit affirmed that ruling in 2019.
In 2020, Feathers, acting without a lawyer, filed a document containing two motions for relief from judgment under Rule 60 of the Federal Rules of Civil Procedure, a motion seeking an injunction against the Commission, and a motion asking the court to take judicial notice of specified documents. Judicial notice is a procedure by which a court accepts certain facts or materials without requiring ordinary proof.
Relief from the Summary-Judgment Ruling
Feathers did not identify which parts of Rule 60 supported his request to reverse the summary-judgment ruling. The court explained that requests based on mistake, newly discovered evidence, or opposing-party misconduct were untimely because they were filed more than one year after the Ninth Circuit’s ruling. The court found no indication that the earlier judgment was void and concluded that other specified grounds did not apply.
The court therefore analyzed the request under Rule 60(b)(6), which permits relief for another reason that justifies it. The court explained that this provision is used sparingly and requires extraordinary circumstances to prevent manifest injustice. Feathers’s arguments concerned alleged fraud by the Small Business Administration in a receivership claim, a preliminary report prepared for his criminal defense, and the receiver’s expenses compared with the reported recovery to investors. The court agreed that Feathers had previously made, or had the opportunity to make, all of these arguments. It found no extraordinary circumstances that prevented him from raising them in his appeal and denied Feathers’s Rule 60 motion to reverse the summary-judgment ruling.
Disgorgement Payments and Criminal Restitution
Feathers separately sought a discontinuance of previously ordered disgorgement payments. He cited difficulty obtaining employment after his release from the U.S. Bureau of Prisons, two bankruptcies that he attributed to the Commission’s proceedings, physical conditions, and the judgment’s effect on his ability to support his minor sons.
The court treated this request as another Rule 60(b)(6) motion. Although it acknowledged the seriousness of the hardships Feathers described, the court found that the motion did not show that stopping the payments was necessary to prevent manifest injustice or that extraordinary circumstances had prevented timely action to correct an erroneous judgment. The court denied the motion for a discontinuance of disgorgement payments.
Feathers also asked the court to recommend that Judge Lucy Koh relieve him from a restitution order in a related criminal proceeding. The court declined to make that recommendation, stating that a request concerning the criminal judgment should be made to the court that issued it.
Request for an Injunction
Feathers asked the court to prohibit the Commission from using the phrase “Ponzi-like.” The court found that this request duplicated an earlier motion for injunctive relief, which it had denied, and denied the motion for an injunction.
Request for Judicial Notice and Disposition
Feathers asked the court to take judicial notice of a forensic accounting report prepared for his defense and the receiver’s final forensic accounting and final reports to the court. After denying the other motions, the court declined the request for judicial notice.
In its conclusion, the court stated that the motions for relief from judgment, the motion for injunctive relief, and the motion for judicial notice were denied.
Read the full 5-page opinion on CourtListener, the free public archive maintained by the Free Law Project.