S.E.C. v. Allaire

Background

The Securities and Exchange Commission (SEC) brought claims against Barry D. Romeril and other defendants concerning alleged accounting fraud at Xerox. Romeril, identified in the opinion as Xerox’s Chief Financial Officer and a central figure in the SEC’s complaint, settled promptly after the complaint was filed.

Romeril signed a consent agreement that was incorporated into a final judgment entered on June 13, 2003. Without admitting or denying the complaint’s allegations, except for jurisdiction, he agreed to pay more than $5 million in disgorgement, prejudgment interest, and civil penalties. He also agreed to an injunction against future violations of specified securities laws, waived findings of fact and conclusions of law, and waived any right to appeal the judgment. The agreement stated that he entered it voluntarily and that the SEC had made no threats, promises, or other inducements.

The agreement included a “no-deny” provision. It barred Romeril from taking action or making, or allowing others to make, public statements that directly or indirectly denied an allegation in the SEC complaint or created the impression that the complaint lacked a factual basis. The provision preserved testimonial obligations and the right to take legal or factual positions in litigation in which the SEC was not a party. If Romeril breached the provision, the SEC could ask the court to vacate the judgment and return the case to the active docket.

Motion and legal standard

On May 6, 2019, Romeril moved under Federal Rule of Civil Procedure 60(b)(4) to vacate the judgment to the extent it included the no-deny provision. Rule 60(b)(4) permits relief only when a final judgment is void. The court explained that this remedy is narrow and generally applies only when the issuing court lacked even an arguable basis for jurisdiction or when a party was denied notice or a meaningful opportunity to be heard. The motion also had to be filed within a reasonable time.

Romeril argued that the no-deny provision was an unconstitutional prior restraint—a court-ordered restriction on speech imposed before the speech occurs—and relied primarily on a prior appellate decision. He also mentioned in a reply footnote that the provision was unconstitutionally vague, but the court said that argument was not adequately raised and, in any event, did not identify the kind of due-process violation that could make the judgment void under Rule 60(b)(4).

Reasons for the ruling

The court gave two independent reasons for denying the motion.

First, the motion was untimely. Nearly sixteen years had passed since entry of the judgment. Romeril had received the benefits of the settlement throughout that period, did not seek a trial, and instead sought to keep the consent agreement while removing only the no-deny provision. He did not claim that he lacked notice of the agreement or judgment, and he did not identify any later SEC action that caused the delay. He had been represented by competent and experienced counsel when he entered the agreement. The court held that the sixteen-year delay was unreasonable.

Second, even if the motion had been timely, Romeril had not shown a jurisdictional defect or a denial of due process that would make the judgment void. He did not dispute personal jurisdiction. The court also held that it had subject-matter jurisdiction over the SEC’s securities claims under the federal securities laws and the federal-question statute, and that it had authority to enter the judgment. Romeril acknowledged that jurisdiction in both the original and proposed amended agreements.

The court further held that Romeril was not deprived of notice or an opportunity to be heard. He was represented by counsel, chose to sign the agreement, and waived his right to trial. The court noted that he could have contested the SEC’s claims before a jury and appealed an adverse verdict instead of settling.

The court rejected Romeril’s argument that the alleged First Amendment problem automatically made the judgment void under Rule 60(b)(4). It concluded that the no-deny provision did not affect the court’s jurisdiction to enter the securities judgment. The court did not need to decide whether the earlier appellate decision remained good law because, even assuming it did, the decision did not apply to the jurisdictional issue presented here.

Disposition

Judge Denise Cote denied Romeril’s May 6, 2019 motion for relief from the judgment. The opinion’s ruling was on the Rule 60(b)(4) request; it did not vacate the judgment or remove the no-deny provision.