Securities & Exchange Commission v. Warren

76 F.R.D. 405, 1977 U.S. Dist. LEXIS 14262
CourtDistrict Court, W.D. Pennsylvania
DecidedAugust 29, 1977
DocketCiv. A. No. 73-980
StatusPublished
Cited by2 cases

This text of 76 F.R.D. 405 (Securities & Exchange Commission v. Warren) is published on Counsel Stack Legal Research, covering District Court, W.D. Pennsylvania primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Securities & Exchange Commission v. Warren, 76 F.R.D. 405, 1977 U.S. Dist. LEXIS 14262 (W.D. Pa. 1977).

Opinion

OPINION

SNYDER, District Judge.

This matter came on for hearing on Defendants’ Motion to Dissolve, Suspend or Modify Permanent Injunction under Rules 60(b)(5) and (6) of the Federal Rules of Civil Procedure1 seeking relief from prospective application of the Injunction previously issued out of this Court. The Motion will be granted.

On November 5,1973, the Plaintiff filed a Complaint essentially alleging that on or about October 1,1968 and January 20,1969, William K. Warren, Jr. caused a company which he controlled to borrow $1,00,000 from a bank; that security for the two loans were through margin securities; and even though William K. Warren, Jr. executed Federal Reserve Form U-l (Statement of Purpose of a Stock-Secured Extension of Credit by a Bank) stating that the loan proceeds were to be used for “corporate purposes”, he transferred them to the Warren Fund which, in turn, at his direction, used the proceeds to purchase margin securities in excess of amounts allowable under Federal securities laws pertaining to margin restrictions. Warren’s conduct was alleged to be aiding and abetting violations of Section 7(d) of the Exchange Act and Regulation U promulgated thereunder by the Federal Reserve Board.

On November 15, 1973, Warren and the Warren Fund filed Consents to the Final Judgment of Permanent Injunction which, with the exception of jurisdictional questions, constituted neither an admission nor denial of the allegations of the Complaint. The Consents specifically provided that they were not to “. . . constitute any evidence nor any admission . . . with respect to any such issue or of any wrongdoing or liability for any purpose.” This Court, without a hearing, entered its Final Judgment of Permanent Injunction on November 15, 1973, based upon the Defendants’ Consents which had been presented to it.

On January 27, 1977, Defendants filed their Motion to Dissolve, Suspend or Modify Permanent Injunction. Thereafter, the Securities and Exchange Commission filed a [407]*407Motion to Dismiss the Motion to Dissolve, etc., a Motion to Strike and Require Defendants to Specify Facts, and an Amended Motion to Strike. These were denied on May 16, 1977, and a hearing on the Motion presently before the Court was set for May 23, 1977.

In essence, the Defendants contend that the continued existence of prospective application of the Permanent Injunction constitutes an extreme hardship and an unreasonable burden, and is a grievous and serious impediment to Warren’s lawful activities. They further contend that the continued application of the Injunction serves no useful or meaningful public purpose, especially when measured or weighed against the inequities resulting from its continuation. Extensive testimony was taken at the hearing and the matter was thoroughly briefed by the parties.

I. THE APPLICABLE LAW.

The Securities and Exchange Commission has urged upon us certain factors or standards from various appellate decisions, such as United States v. Swift & Co., 286 U.S. 106, 52 S.Ct. 460, 76 L.Ed. 999 (1932); Securities and Exchange Commission v. Advance Growth Capital Corporation, 539 F.2d 649 (7th Cir. 1976); Securities and Exchange Commission v. Jan-Dal Oil & Gas, Inc., 433 F.2d 304 (10th Cir. 1970); and Humble Oil & Refining Co. v. American Oil Company, 405 F.2d 803 (8th Cir.), cert. den. 395 U.S. 905, 89 S.Ct. 1745, 23 L.Ed.2d 218 (1969). An examination of these cases, however, does not bear out the automatic application of these standards.

In United States v. Swift & Co., supra, after years of litigation, the Court refused to modify a decree which enjoined five leading meat packers without a “clear showing of grievous wrong evoked by new and unforeseen conditions” (Id. 286 U.S. at p. 119, 52 S.Ct. at p. 464). But the Supreme Court itself has taken a very strong stand in limiting the application of Swift in United States v. United Shoe Machinery Corp., 391 U.S. 244, at 248, 88 S.Ct. 1496, at 1499, 20 L.Ed.2d 562 (1968), when it said:

“Swift teaches that a decree may be changed upon an appropriate showing, and it holds that it may not be changed in the interests of the defendants if the purposes of the litigation as incorporated in the decree (the elimination of monopoly and restrictive practices) have not been fully achieved.”

Securities and Exchange Commission v. Advance Growth Capital Corporation, supra, firmly supports the proposition that the plaintiff failed to make an appropriate showing of a grievous wrong or extraordinary circumstances such as would permit the court to find that the prospective application of that final decree was no longer applicable. In that case, there was a suggestion of the possible danger of recurrent violations. It is reasonable then to infer that the Seventh Circuit’s holding may well have been otherwise if the parties had demonstrated an elimination of the original danger.

In Securities and Exchange Commission v. Jan-Dal Oil & Gas, Inc., supra, the Tenth Circuit was limited to a consideration of the underlying danger which a final decree was designed to foreclose and which was still in existence, and whether the moving party was exposed to severe and extreme hardship when it showed only compliance with a decree in effect some eight months and a contention that the injunction might cause a problem with a registration statement and a proposed sale of oil and gas interests.

And in Humble Oil & Refining Company v. American Oil Company, supra, the Eighth Circuit, purportedly following United States v. Swift & Co., stated (405 F.2d at 813):

“To repeat: caution, substantial change, unforeseenness, oppressive hardship, and a clear showing are the requirements.”

The Court there recognized “ ‘significant changes in condition not foreseeable at the time the injunction was granted,’ thus emphasizing change and unforeseeability.” Id., quoting Bowdil Co. v. Central Mine Equip. Co., 216 F.2d 156, 160 (8th Cir. 1954), cert. den. 348 U.S. 936, 75 S.Ct. 356, 99 [408]*408L.Ed. 734; and Hygrade Food Products Corp. v. United States, 160 F.2d 816, 819 (8th Cir. 1947). An examination of the Bowdil and Hygrade cases, however, support the proposition that usually the courts are involved in situations where rights have not accrued upon facts which are stable, permanent, and impervious to change, but with those involving supervision of changing conduct or condition. Particularly appropriate is Judge Friendly’s comment in

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76 F.R.D. 405, 1977 U.S. Dist. LEXIS 14262, Counsel Stack Legal Research, https://law.counselstack.com/opinion/securities-exchange-commission-v-warren-pawd-1977.