S.E.C. v. Stewart

Background

Mrs. Phyllis Gottlieb, a third party in the proceedings, moved for reconsideration of the court’s February 7, 2023 Opinion and Order. That earlier order denied her request to direct some or all of the proceeds from the sale of the Gottliebs’ former home in Aventura, Florida, to the Phyllis J. Gottlieb Living Trust; granted the Securities and Exchange Commission’s counter-motion for half of the sale proceeds; and reserved judgment on the remaining proceeds pending further briefing.

The SEC separately moved to strike Mrs. Gottlieb’s second amended motion for reconsideration and her reply as untimely. Alternatively, it asked the court to deny a retroactive extension of the reply deadline. Mrs. Gottlieb filed the reply one week late and filed the second amended motion after the SEC had identified procedural defects in her original motion.

Motion to Strike

The court applied Federal Rule of Civil Procedure 16(f), which permits sanctions for violating a scheduling order, including striking a filing. It also applied Rule 6(b), which allows a retroactive filing extension for good cause when the delay resulted from excusable neglect. The court considered prejudice, the length and effect of the delay, the reason for the delay, and whether the party acted in good faith.

The court granted in part and denied in part the SEC’s motion to strike. It struck the second amended motion because Mrs. Gottlieb’s counsel had repeatedly disregarded filing deadlines, page limits, and other procedural requirements. The court also found that counsel filed the amended motion after learning from the SEC’s opposition that the original motion did not satisfy Local Civil Rule 6.3, and that the amended filing largely copied and reformatted the original motion. Because striking the amended motion would not prevent the court from reviewing the original motion, the court granted the SEC’s request to strike docket entries 446 and 448.

The court declined to strike the reply and granted a retroactive extension for it. Although counsel had not planned for a reply and had not sought another extension before the deadline, the one-week delay did not affect the proceedings, caused minimal prejudice to the SEC, and was not shown to involve bad faith. The court warned that it would not grant additional retroactive extensions absent extraordinary circumstances.

Motion for Reconsideration

Reconsideration is an extraordinary remedy that may be granted when there is an intervening change in controlling law, new evidence, or a need to correct a clear error or prevent manifest injustice. The court held that Mrs. Gottlieb’s motion failed both procedurally and on the merits.

Procedurally, the motion did not include the concise memorandum required by Local Civil Rule 6.3 identifying matters or controlling decisions the court had overlooked. The court stated that the second amended motion would not have cured that defect even if it had been accepted.

On the merits, the court found that Mrs. Gottlieb identified no intervening change in controlling law or new evidence. It rejected her arguments that the court had ignored her testimony about the source of funds used to purchase the property, misapplied the relevant case law, or improperly treated her interest in the proceeds as nominal. The court stated that the motivations and timing of the 1994 quitclaim transfers did not affect its analysis under the factors it had previously applied.

The court also rejected Mrs. Gottlieb’s arguments concerning a jury trial and an evidentiary hearing. It explained that it was exercising equitable authority in a securities-enforcement proceeding and that she had already had ample opportunity to present her assertions. The court further rejected her renewed arguments based on Florida homestead law, relying on its earlier conclusion that federal equitable authority could reach assets otherwise protected by state law in the circumstances addressed by the proceeding.

Disposition

The court denied Mrs. Gottlieb’s motion for reconsideration. It granted in part and denied in part the SEC’s motion to strike: the second amended motion was struck, the late reply was not struck, and the reply deadline was extended retroactively. The Clerk was directed to close docket entries 440, 446, and 448. The court stated that briefing about the remaining funds would be scheduled after it decided Mr. Eisemann’s pending motion to withdraw as counsel to the Gottliebs.