Securities and Exchange Commission v. Small Business Capital Corp.

Background

The Securities and Exchange Commission brought this civil enforcement action against Mark Feathers, Small Business Capital Corp., Investors Prime Fund, LLC, and SBC Portfolio Fund, LLC. The court previously granted summary judgment for the Commission. The Ninth Circuit affirmed that ruling on May 14, 2019. The Ninth Circuit also affirmed the court’s decisions denying Feathers’s requests to use frozen assets from the funds and Small Business Capital Corp. to support his defense.

Feathers, acting without a lawyer, filed a motion under Federal Rule of Civil Procedure 60(b)(1), (b)(2), and (b)(6). Rule 60 allows a court, in specified circumstances, to provide relief from a final judgment or order. Feathers sought reversal of several earlier rulings, including the temporary restraining order, preliminary injunction, summary judgment order, orders denying legal expenses, an order denying his request to join additional parties, and an order denying his request to appoint an expert witness. He also filed three related requests asking the court to take judicial notice of materials.

Rule 60(b)(1) and (b)(2)

Rule 60(b)(1) covers mistake, inadvertence, surprise, or excusable neglect. Rule 60(b)(2) covers newly discovered evidence that could not have been discovered in time to seek a new trial. Under Rule 60(c)(1), motions under those provisions must be filed within one year after the relevant judgment, order, or proceeding.

The court found that much of Feathers’s motion was filed more than one year after the rulings he challenged. Although one referenced order had been issued within the preceding year, the court concluded that the order did not reopen Feathers’s ability to raise arguments under Rule 60(b)(1) or (b)(2). The court therefore denied relief under those provisions.

Rule 60(b)(6)

Rule 60(b)(6) permits relief for another reason that justifies it. The court explained that this provision is used sparingly and requires extraordinary circumstances that prevented a party from taking timely action to prevent or correct an erroneous judgment.

Feathers argued that the court had relied on false, distorted, or incomplete evidence; had relied on an agreement made without appropriate counsel or consent; had relied on prejudicial statements by the receiver; had made an incorrect statement about the auditors’ financial statement; and should have allowed him to join auditors as additional parties. He also argued that the Commission’s actions amounted to vindictive prosecution. The court found that Feathers had already made, or had the opportunity to make, these arguments and that none showed grounds satisfying Rule 60(b)(6). The court denied relief under that provision as well.

Requests for judicial notice and disposition

Because the court denied the motion for relief from judgment, it declined the related requests for judicial notice. The court’s final order states that the motion for relief from judgment and the motions for judicial notice are denied.