Cftc v. James Crombie

• Court: Court of Appeals for the Ninth Circuit
• Decided: September 21, 2021
• Docket: 19-16190
• Status: Unpublished

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS SEP 21 2021 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

U.S. COMMODITY FUTURES TRADING No. 19-16190 COMMISSION, D.C. No. 4:11-cv-04577-CW Plaintiff-Appellee,

v. MEMORANDUM*

JAMES DEVLIN CROMBIE,

Defendant-Appellant,

and

PARON CAPITAL MANAGEMENT, LLC,

Defendant,

TIMOTHY W. HOFFMAN,

Trustee.

Appeal from the United States District Court for the Northern District of California Claudia Wilken, District Judge, Presiding

Argued and Submitted September 1, 2021 Pasadena, California

Before: IKUTA, BENNETT, and R. NELSON, Circuit Judges.

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. Defendant-Appellant James Crombie appeals the reinstatement of two

provisions of a permanent injunction originally imposed in 2013 due to his violations

of the Commodity Exchange Act (“CEA”). The first provision, Section 5(b),

permanently enjoins Crombie from “[e]ntering into any transactions involving

commodity futures, options on commodity futures, commodity options . . . , security

futures products, swaps . . . , and/or foreign currency . . . for his own personal

account or for any account in which he has a direct or indirect interest.” The second

provision, Section 5(c), permanently enjoins Crombie from “[h]aving any

commodity futures, options on commodity futures, commodity options, security

futures products, swaps, and/or forex contracts traded on his behalf.” The district

court justified its imposition of these two provisions, after a prior panel of our court

remanded for further explanation of their connection “to preventing future violations

similar to those that Crombie has committed.” U.S. Commodity Futures Trading

Comm’n v. Crombie, 914 F.3d 1208, 1218 (9th Cir. 2019). We have jurisdiction

under 28 U.S.C. § 1291 and affirm.

“We review the remedies issued by a district court for an abuse of discretion.”

Id. at 1215. Although “[a]n overbroad injunction is an abuse of discretion,”

Stormans, Inc. v. Selecky, 586 F.3d 1109, 1140 (9th Cir. 2009) (citation omitted),

the district court adequately explained why Sections 5(b) and 5(c) are necessary to

2 prevent future violations almost identical to those that Crombie already committed.1

Crombie complains that the district court’s concerns are speculative, but the district

court could issue a permanent injunction “preventing future violations similar to

those that Crombie has committed”—not necessarily identical. Crombie, 914 F.3d

at 1218 (emphasis added).

Crombie also argues that Sections 5(b) and 5(c) are unnecessary because

Section 5(e) of the permanent injunction already “prohibits Crombie from doing

what the district court said it feared: ‘Soliciting, receiving or accepting any funds

from any person for the purpose of purchasing or selling any commodity futures[.]’”

But this argument wrongly assumes that Crombie will obey Section 5(e) or that the

Commission will immediately discover if he does not.

Crombie also insists that the district court could not impose a personal trading

ban like the one in Section 5(b) because he did not (1) misappropriate client funds,

(2) deceive clients directly, or (3) refuse to promise to abide by the law in the future.

But we have never held that those are the only three circumstances to warrant a

personal trading ban, and even if they were, a previous panel of our court has already

1 The parties agree that on remand, the district court explained that Sections 5(b) and 5(c) are necessary because without them, “Crombie could ‘create falsified documents to solicit funds from customers,’ take the money, put it into his trading account [or the account of a third party acting on Crombie’s behalf], and then execute trades for his customers.” Appellant’s Opening Br. at 30. With those concerns in mind, the district court reimposed Sections 5(b) and 5(c).

3 affirmed the district court’s finding that Crombie willfully deceived his clients, see

Crombie, 914 F.3d at 1213–15. Crombie’s attempt to distinguish his case from other

client deception cases because his deception was less direct was already rejected in

our prior decision affirming summary judgment and most of the permanent

injunction. See id. at 1215.

Finally, Crombie argues that the district court abused its discretion by

imposing Sections 5(b) and 5(c) for life. But he has failed to show that an injunction

will someday be unnecessary to ensure his compliance with the CEA. He notes that

the Commission has established a presumption that personal trading bans are

appropriate for felons convicted under 7 U.S.C. § 13 for a minimum period of five

years and argues that “[i]f the presumption for a felony conviction is a five-year

trading ban, . . . at the very least a lifetime ban should not be imposed lightly in a

civil case.” But administrative sanctions under § 13(b), like permanent injunctions

under § 13a-1, are remedial, not punitive. See Lawrence v. Commodity Futures

Trading Comm’n, 759 F.2d 767, 774 (9th Cir. 1985) (characterizing the CEA and

sanctions issued thereunder as “remedial”). Thus, there is no reason to impose

presumptively shorter trading bans on civil rather than criminal defendants, and just

as we may uphold permanent personal trading bans against felons, so too may we

uphold a permanent personal trading ban against a defendant in a civil enforcement

4 action when supported by the facts.2

AFFIRMED.3

2 Of course, if future circumstances no longer support a permanent personal trading ban against Crombie (or a permanent ban on third parties trading on his behalf), Crombie can move to lift or modify Sections 5(b) and 5(c) in the district court. See Clark v. Coye, 60 F.3d 600, 604 (9th Cir. 1995). 3 Crombie’s motion to compel the release of all grand jury materials is denied. See Dkt. No. 18.