CRAIG R. JALBERT, in his capacity as Trustee of the F2 Liquidating Trust, on behalf of himself and all others similarly situated, Plaintiff, Appellant,
U.S. SECURITIES AND EXCHANGE COMMISSION, Defendant, Appellee.
FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF
MASSACHUSETTS [Hon. F. Dennis Saylor IV, U.S. District Judge]
Lipman, with whom William R. Baldiga, Justin S. Weddle,
Ashley L. Baynham, and Brown Rudnick LLP were on brief, for
B. Capehart, Senior Counsel, Securities and Exchange
Commission, with whom Robert B. Stebbins, General Counsel,
Michael A. Conley, Solicitor, and Daniel Staroselsky, Senior
Litigation Counsel, were on brief, for appellee.
Torruella, Thompson, and Kayatta, Circuit Judges.
TORRUELLA, CIRCUIT JUDGE.
Craig R. Jalbert ("Jalbert"), in his capacity as
trustee for the F2 Liquidating Trust, appeals the district
court's order granting the Securities and Exchange
Commission's ("SEC") motion to dismiss his
complaint for lack of subject matter jurisdiction and failure
to state a claim. The district court determined that the
right to judicial review of the SEC order at issue had been
waived as part of a settlement between the SEC and former
investment advisory firm F-Squared Investments, Inc.
("F-Squared"). The district court also held that,
in any event, Jalbert's claims were only reviewable
within the SEC's exclusive statutory review structure,
which does not involve the federal district courts. After
careful consideration, we affirm on the ground that F-Squared
failed to state a claim upon which relief could be granted
inasmuch as it waived judicial review by any court.
was an SEC-registered investment adviser firm headquartered
in Wellesley, Massachusetts. It served clients in the
advisor, institutional, retail, and retirement markets. At
some unspecified point, the SEC began investigating F-Squared
for violations of federal securities laws.
December 4, 2014, with the threat of administrative and
cease-and-desist proceedings looming, F-Squared executed an
Offer of Settlement pursuant to Rule 240(a) of the Rules of
Practice of the SEC, 17 C.F.R. § 201.240(a) (the
"Offer"). The Offer included the following
language: "By submitting this Offer, Respondent hereby
acknowledges its waiver of those rights specified in Rules
240(c)(4) and (5) [17 C.F.R. § 201.240(c)(4) and (5)] of
the Commission's Rules of Practice." Rule 240(c)(4)
provides, as relevant to this appeal, that "[b]y
submitting an offer of settlement, the person making the
offer waives, subject to acceptance of the offer . . .
[j]udicial review by any court." 17 C.F.R. §
accepted the Offer and settled with F-Squared on December 22,
2014, through the entry of an "Order Instituting
Administrative and Cease-and-Desist Proceedings" (the
"Order"), to which F-Squared consented. Under the
terms of the Order, F-Squared admitted that, between April
2001 and September 2008, advertising materials for one of its
investment strategies included statements based on the
inaccurate compilation of performance and historical data
which improved and inflated the strategy's historical
performance. That conduct, F-Squared accepted, violated
federal securities laws. F-Squared agreed to cease and desist
from committing further securities-laws violations and to
undertake certain compliance measures. The Order also
required F-Squared to pay $30 million in disgorgement and a
$5 million civil money penalty to the United States Treasury.
As agreed, F-Squared transferred $35 million directly into
2015, F-Squared filed for bankruptcy. The F2 Liquidating
Trust was established during the bankruptcy proceedings to
recover on behalf of F-Squared as its successor-in-interest.
The bankruptcy court appointed Jalbert as the trustee.
October 26, 2017, Jalbert filed a complaint in the U.S.
District Court for the District of Massachusetts against the
SEC purporting to represent the F2 Liquidating Trust and
"all other individuals and entities similarly
situated" who had "money collected from them by the
SEC as 'disgorgement' without statutory authority or
in excess of statutory authority" during the six years
prior to the filing of the complaint. Jalbert asserted two
claims under the Administrative Procedure Act
("APA"), 5 U.S.C. §§ 551 et
seq., alleging that: (1) in light of the then-recent
Supreme Court opinion in Kokeshv.SEC, 137 S.Ct. 1635 (2017),  the SEC "exceeded its
statutory authority by seeking and obtaining disgorgement
from F-Squared and the similarly situated members of the
Proposed Class as a separate monetary penalty" in both
administrative proceedings and federal court actions and (2)
the SEC "failed to observe the procedural
requirements" of federal securities law by not obtaining
an accounting of profits allegedly acquired as a result of
wrongdoing before ordering disgorgement. The complaint sought
a declaration that the ...