Loftus v. Financial Industry Regulatory Authority

Background

A 2017 disciplinary proceeding by the Financial Industry Regulatory Authority, Inc. (FINRA) ended in an agreed disciplinary order. The order suspended Robert Loftus from practicing as a licensed stockbroker for three months, imposed a $5,000 fine, and found that he had engaged in check-kiting. It also stated that the order would become part of his permanent disciplinary record and would be publicly available. Loftus waived his right to appeal or otherwise challenge the order.

In an earlier decision, the court granted FINRA’s motion to dismiss Loftus’s claim that he was entitled to a hearing on the merits of his request to expunge, or remove, the disciplinary finding. The court dismissed for lack of subject-matter jurisdiction, finding that Loftus had not exhausted his administrative remedies and had no legal right to an expungement hearing.

Motions and arguments

Loftus filed the present motion nearly one year after judgment. He sought reconsideration under Federal Rule of Civil Procedure 59(e) and Local Civil Rule 6.3. He also sought relief from the judgment under Rule 60(b)(2), based on newly discovered evidence, and Rule 60(b)(6), which allows relief for another reason that justifies it. Finally, he asked the court to use its inherent power to revisit the earlier decision to prevent what he described as a manifest injustice.

Loftus identified the National Adjudicatory Council’s denial of his later appeal within FINRA as the new evidence supporting his request. He argued that this decision supported denying FINRA’s motion to dismiss rather than granting it.

Court’s analysis

The court denied relief under Rule 59(e) and Local Civil Rule 6.3 because the motion was filed after both rules’ deadlines. The judgment had been entered on February 2, 2021, but Loftus filed his motion on January 29, 2022.

The court also denied relief under Rule 60(b)(2). It explained that qualifying newly discovered evidence must involve facts that existed at the time of the earlier dispositive proceeding and could not have been discovered with reasonable diligence. Loftus’s internal appeal occurred after the court dismissed his suit, so the appeal decision did not meet that requirement.

The court denied relief under Rule 60(b)(6) because Loftus had not shown extraordinary circumstances or that refusing relief would cause extreme hardship. The court emphasized that Loftus had consented to FINRA’s disciplinary order.

The court likewise declined to use its inherent equitable power to revisit the earlier decision. It stated that FINRA is a private corporation and self-regulatory organization, not a state actor, and that courts have rejected due-process challenges to FINRA’s enforcement actions. The court found no manifest injustice because Loftus had agreed to the disciplinary order and waived his right to appeal it.

Disposition

The court denied Loftus’s motion for reconsideration and relief under Local Civil Rule 6.3 and Federal Rules of Civil Procedure 59(e), 60(b)(2), and 60(b)(6). The earlier dismissal therefore remained in place.